CENTRE FOR CONTINUING EDUCATION

EXECUTE MBA

(OIL AND GAS MANAGEMENT)
ASSIGNMENT - 1

BATCH: 2011 JAN
SEMESTER: 2
ND
SEMESTER
NAME: K.Solairaj
ROLL NO: 500013919

ASSIGNMENT
FOR
OPERATIONS & MATERIAL MANAGEMENT -MBCQ722




SECTION A
1. Which of the following is not an objective of production planning?
Minimizing the inventory cost for producing goods and services
2. Which of the following is not true about productivity?
Increase in production leads to increase in productivity
3. Which of the following is not a synonym for process-focused production?
Intermittent production
4. Which of the following layout planning tools uses two-dimensional cut-outs and temples of
equipment drawn to scale?
CRAFT model
5. To attain profit maximization, an organization decided to expand its ownership towards
the sources of its material supplies. What is this process of expanding ownership called?
Lateral integration

6. An objective of the process planning design is to produce products

i and ii

7. Which of the following departments directly deals with other companies that supply the
services,components, materials and supplies to an organization?

Purchase department

8. Which of the following is not an argument in the favor of buy decision?

Have a control over the supply chain activities

9. Value analysis is an organized effort to control the costs of

New product development

10. Which of the following does not help in managing the purchase process?

Purchase indents

SECTION B

11. Write a brief note on demand forecasting techniques?

There are two approaches to demand forecasting- one is to obtain information about the likely
purchase behavior of the buyer through collecting experts opinion or by conducting interviews with
consumers, the other is to use past experience as a guide through a set of statistical techniques. Both
these methods rely on varying degrees of judgment. The first method is usually found suitable for
short-term forecasting, the latter for long-term forecasting. There are specific techniques which fall
under each of these broad methods.
Simple Survey Method:
For forecasting the demand for existing product, such survey methods are often employed. In this set
of methods, we may undertake the following exercise.
1) Experts Opinion Poll: In this method, the experts on the particular product whose demand is
under study are requested to give their opinion or feel about the product. These experts, dealing in
the same or similar product, are able to predict the likely sales of a given product in future periods
under different conditions based on their experience. If the number of such experts is large and their
experience-based reactions are different, then an average-simple or weighted is found to lead to
unique forecasts. Sometimes this method is also called the hunch method but it replaces analysis by
opinions and it can thus turn out to be highly subjective in nature.
2) Reasoned Opinion-Delphi Technique: This is a variant of the opinion poll method. Here is an
attempt to arrive at a consensus in an uncertain area by questioning a group of experts repeatedly until
the responses appear to converge along a single line. The participants are supplied with responses to
previous questions (including seasonings from others in the group by a coordinator or a leader or
operator of some sort). Such feedback may result in an expert revising his earlier opinion. This may
lead to a narrowing down of the divergent views (of the experts) expressed earlier. The Delphi
Techniques, followed by the Greeks earlier, thus generates reasoned opinion in place of
unstructured opinion; but this is still a poor proxy for market behavior of economic variables.
3) Consumers Survey- Complete Enumeration Method: Under this, the forecaster undertakes a
complete survey of all consumers whose demand he intends to forecast, Once this information is
collected, the sales forecasts are obtained by simply adding the probable demands of all consumers.
The principle merit of this method is that the forecaster does not introduce any bias or value judgment
of his own. He simply records the data and aggregates. But it is a very tedious and cumbersome
process; it is not feasible where a large number of consumers are involved. Moreover if the data are
wrongly recorded, this method will be totally useless.
4) Consumer Survey-Sample Survey Method: Under this method, the forecaster selects a few
consuming units out of the relevant population and then collects data on their probable demands for
the product during the forecast period. The total demand of sample units is finally blown up to
generate the total demand forecast. Compared to the former survey, this method is less tedious and
less costly, and subject to less data error; but the choice of sample is very critical. If the sample is
properly chosen, then it will yield dependable results; otherwise there may be sampling error. The
sampling error can decrease with every increase in sample size
5) End-user Method of Consumers Survey: Under this method, the sales of a product are projected
through a survey of its end-users. A product is used for final consumption or as an intermediate
product in the production of other goods in the domestic market, or it may be exported as well as
imported. The demands for final consumption and exports net of imports are estimated through some
other forecasting method, and its demand for intermediate use is estimated through a survey of its
user industries.
Complex Statistical Methods:
We shall now move from simple to complex set of methods of demand forecasting. Such methods are
taken usually from statistics. As such, you may be quite familiar with some the statistical tools and
techniques, as a part of quantitative methods for business decisions.
(1) Time series analysis or trend method: Under this method, the time series data on the under
forecast are used to fit a trend line or curve either graphically or through statistical method of Least
Squares. The trend line is worked out by fitting a trend equation to time series data with the aid of an
estimation method. The trend equation could take either a linear or any kind of non-linear form. The
trend method outlined above often yields a dependable forecast. The advantage in this method is that
it does not require the formal knowledge of economic theory and the market, it only needs the time
series data. The only limitation in this method is that it assumes that the past is repeated in future.
Also, it is an appropriate method for long-run forecasts, but inappropriate for short-run forecasts.
Sometimes the time series analysis may not reveal a significant trend of any kind. In that case, the
moving average method or exponentially weighted moving average method is used to smoothen the
series.
(2) Barometric Techniques or Lead-Lag indicators method: This consists in discovering a set of
series of some variables which exhibit a close association in their movement over a period or time.
For example, it shows the movement of agricultural income (AY series) and the sale of tractors (ST
series). The movement of AY is similar to that of ST, but the movement in ST takes place after a
years time lag compared to the movement in AY. Thus if one knows the direction of the movement
in agriculture income (AY), one can predict the direction of movement of tractors sale (ST) for the
next year. Thus agricultural income (AY) may be used as a barometer (a leading indicator) to help the
short-term forecast for the sale of tractors.
Generally, this barometric method has been used in some of the developed countries for predicting
business cycles situation. For this purpose, some countries construct what are known as diffusion
indices by combining the movement of a number of leading series in the economy so that turning
points in business activity could be discovered well in advance. Some of the limitations of this
method may be noted however. The leading indicator method does not tell you anything about the
magnitude of the change that can be expected in the lagging series, but only the direction of change.
Also, the lead period itself may change overtime. Through our estimation we may find out the best-
fitted lag period on the past data, but the same may not be true for the future. Finally, it may not be
always possible to find out the leading, lagging or coincident indicators of the variable for which a
demand forecast is being attempted.
3) Correlation and Regression: These involve the use of econometric methods to determine the
nature and degree of association between/among a set of variables. Econometrics, you may recall, is
the use of economic theory, statistical analysis and mathematical functions to determine the
relationship between a dependent variable (say, sales) and one or more independent variables (like
price, income, advertisement etc.). The relationship may be expressed in the form of a demand
function, as we have seen earlier. Such relationships, based on past data can be used for forecasting.
The analysis can be carried with varying degrees of complexity. Here we shall not get into the
methods of finding out correlation coefficient or regression equation; you must have covered those
statistical techniques as a part of quantitative methods. Similarly, we shall not go into the question of
economic theory. We shall concentrate simply on the use of these econometric techniques in
forecasting.
We are on the realm of multiple regression and multiple correlation. The form of the equation may be:
D
X
= a + b
1
A + b
2
P
X
+ b
3
P
y

You know that the regression coefficients b
1
, b
2
, b
3
and b
4
are the components of relevant elasticity of
demand. For example, b
1
is a component of price elasticity of demand. The reflect the direction as
well as proportion of change in demand for x as a result of a change in any of its explanatory
variables. For example, b
2
< 0 suggest that D
X
and P
X
are inversely related; b
4
> 0 suggest that x and y
are substitutes; b
3
> 0 suggest that x is a normal commodity with commodity with positive income-
effect.
Given the estimated value of and b
i
, you may forecast the expected sales (D
X
), if you know the future
values of explanatory variables like own price (P
X
), related price (P
y
), income (B) and advertisement
(A). Lastly, you may also recall that the statistics R2 (Co-efficient of determination) gives the
measure of goodness of fit. The closer it is to unity, the better is the fit, and that way you get a more
reliable forecast.
The principle advantage of this method is that it is prescriptive as well descriptive. That is, besides
generating demand forecast, it explains why the demand is what it is. In other words, this technique
has got both explanatory and predictive value. The regression method is neither mechanistic like the
trend method nor subjective like the opinion poll method. In this method of forecasting, you may use
not only time-series data but also cross section data. The only precaution you need to take is that data
analysis should be based on the logic of economic theory.
(4) Simultaneous Equations Method: Here is a very sophisticated method of forecasting. It is also
known as the complete system approach or econometric model building. In your earlier units, we
have made reference to such econometric models. Presently we do not intend to get into the details of
this method because it is a subject by itself. Moreover, this method is normally used in macro-level
forecasting for the economy as a whole; in this course, our focus is limited to micro elements only. Of
course, you, as corporate managers, should know the basic elements in such an approach.
The method is indeed very complicated. However, in the days of computer, when package
programmes are available, this method can be used easily to derive meaningful forecasts. The
principle advantage in this method is that the forecaster needs to estimate the future values of only the
exogenous variables unlike the regression method where he has to predict the future values of all,
endogenous and exogenous variables affecting the variable under forecast. The values of exogenous
variables are easier to predict than those of the endogenous variables. However, such econometric
models have limitations, similar to that of regression method.








12. Differentiate between aggregate capacity planning and master production schedule?

- It is about to translating demand forecasts into production and capacity levels over a fixed
planning horizon.
- Assumes the demand forecast is fairly accurate.
- It generally uses an aggregate unit of production.

Steps of Aggregate Production Planning:

1. Forecast of aggregate demand for t period Planning horizon.

2. Aggregate production plan: Production and workforce levels for each period.

3. Master Production Schedule: Production levels by item by period.


Master Production Schedule:

A Master Production Schedule or MPS is the plan that a company has developed for production,
inventory, staffing, etc. It sets the quantity of each end item to be completed in each week of a short-
range planning horizon. A Master Production Schedule is the master of all schedules. It is a plan for
future production of end items. MPS INPUTS: --> Forecast Demand --> Production Costs -->
Inventory Costs --> Customer Orders --> Inventory Levels --> Supply --> Lot Size --> Production
Lead Time --> Capacity MPS OUTPUT (production plan): --> Amounts to be Produced --> Staffing
Levels --> Quantity Available to Promise --> Projected Available Balance

The Master Production Schedule gives production, planning, purchasing, and top management the
information needed to plan and control the manufacturing operation. The application ties overall
business planning and forecasting to detail operations through the Master Production Schedule.
The Master Production Schedule will drive detailed material and production requirements in the
Material Requirements Planning module.

Due to software limitations, but especially the intense work required by the "master production
schedulers", schedules do not include every aspect of production, but only key elements that have
proven their control effectivity, such as forecast demand, production costs, inventory costs, lead
time, working hours, capacity, inventory levels, available storage, and parts supply. The choice of
what to model varies among companies and factories. The MPS is a statement of what the company
expects to produce and purchase (i.e. quantity to be produced, staffing levels, dates, available to
promise, projected balance).
The MPS translates the business plan, including forecast demand, into a production plan using
planned orders in a true multi-level optional component scheduling environment. Using MPS helps
avoid shortages, costly expediting, last minute scheduling, and inefficient allocation of resources.
Working with MPS allows businesses to consolidate planned parts, produce master schedules and
forecasts for any level of the Bill of Material (BOM) for any type of part.
13. Explain the role of operations manager in managerial decision making? Briefly explain the
relationship between operations research and operations management?

Operational manager plays an vital role for the successful completion of the project. He has to
make a most of the decision, from day one of the project he has to follow and he has to give the
schedule and main decisions according to his future operational convenience.
He only know the difficulties and important of the execution of the project. For Ex. For
Commissioning of a any plant, he only know the what are the criteria and steps has to taken for
the successful completion of the project.
For Safety aspects and construction and quality aspects ,he only have a broad knowledge and
problem solver.
Operational Research:
Operational Research (OR) is the use of advanced analytical techniques to improve decision
making. It is sometimes known as Operations Research, Management Science or Industrial
Engineering. People with skills in OR hold jobs in decision support, business analytics,
marketing analysis and logistics planning as well as jobs with OR in the title.

Examples of OR in action:
Scheduling: of aircrews and the fleet for airlines, of vehicles in supply chains, of orders in a
factory and of operating theatres in a hospital.
Facility planning: computer simulations of airports for the rapid and safe processing of
travellers, improving appointments systems for medical practice.
Planning and forecasting: identifying possible future developments in telecommunications,
deciding how much capacity is needed in a holiday business.
Yield management: setting the prices of airline seats and hotel rooms to reflect changing
demand and the risk of no shows.
Credit scoring: deciding which customers offer the best prospects for credit companies.
Marketing: evaluating the value of sale promotions, developing customer profiles and
computing the life-time value of a customer.
Defence and peace keeping: finding ways to deploy troops rapidly.
Some OR methods and techniques:

Computer simulation: allowing you to try out approaches and test ideas for improvement.
Optimisation: narrowing your choices to the very best when there are so many feasible options
that comparing them one by one is difficult.
Probability and statistics: helping you measure risk, mine data to find valuable connections and
insights in business analytics, test conclusions, and make reliable forecasts.
Problem structuring: helpful when complex decisions are needed in situations with many
stakeholders and competing interests.

Operations Management:
Operations management is an area of management concerned with overseeing, designing, and
redesigning business operations in the production of goods and/or services. It involves the
responsibility of ensuring that business operations are efficient in terms of using as little
resources as needed, and effective in terms of meeting customer requirements. It is concerned
with managing the process that converts inputs (in the forms of materials, labor, and energy) into
outputs (in the form of goods and/or services). The relationship of operations management to
senior management in commercial contexts can be compared to the relationship of line officers to
the highest-level senior officers in military science. The highest-level officers shape the strategy
and revise it over time, while the line officers make tactical decisions in support of carrying out
the strategy. In business as in military affairs, the boundaries between levels are not always
distinct; tactical information dynamically informs strategy, and individual people often move
between roles over time.
According to the U.S. Department of Education, operations management is the field concerned
with managing and directing the physical and/or technical functions of a firm or organization,
particularly those relating to development, production, and manufacturing. Operations
management programs typically include instruction in principles of general management,
manufacturing and production systems, plant management, equipment maintenance management,
production control, industrial labor relations and skilled trades supervision, strategic
manufacturing policy, systems analysis, productivity analysis and cost control, and materials
planning. Management, including operations management, is like engineering in that it blends art
with applied science. People skills, creativity, rational analysis, and knowledge of technology are
all required for success.




















14. Difference between a prototype and a production design?

A prototype is an early sample or model built to test a concept or process or to act as a thing to be
replicated or learned from.
Categories of Prototype:
Proof-of-Principle Prototype (Model) (in electronics sometimes built on a breadboard). A Proof of
concept prototype is used to test some aspect of the intended design without attempting to exactly
simulate the visual appearance, choice of materials or intended manufacturing process. Such
prototypes can be used to "prove" out a potential design approach such as range of motion,
mechanics, sensors, architecture, etc. These types of models are often used to identify which design
options will not work, or where further development and testing is necessary.
Form Study Prototype (Model). This type of prototype will allow designers to explore the basic
size, look and feel of a product without simulating the actual function or exact visual appearance of
the product. They can help assess ergonomic factors and provide insight into visual aspects of the
product's final form. Form Study Prototypes are often hand-carved or machined models from easily
sculpted, inexpensive materials (e.g., urethane foam), without representing the intended color, finish,
or texture. Due to the materials used, these models are intended for internal decision making and are
generally not durable enough or suitable for use by representative users or consumers.
User Experience Prototype (Model). A User Experience Model invites active human interaction
and is primarily used to support user focused research. While intentionally not addressing possible
aesthetic treatments, this type of model does more accurately represent the overall size, proportions,
interfaces, and articulation of a promising concept. This type of model allows early assessment of
how a potential user interacts with various elements, motions, and actions of a concept which define
the initial use scenario and overall user experience. As these models are fully intended to be used and
handled, more robust construction is key. Materials typically include plywood, REN shape, RP
processes and CNC machined components. Construction of user experience models is typically
driven by preliminary CAID/CAD which may be contructed from scratch or with methods such as
industrial CT scanning.
Visual Prototype (Model) will capture the intended design aesthetic and simulate the appearance,
color and surface textures of the intended product but will not actually embody the function(s) of the
final product. These models will be suitable for use in market research, executive reviews and
approval, packaging mock-ups, and photo shoots for sales literature.
Functional Prototype (Model) (also called a working prototype) will, to the greatest extent
practical, attempt to simulate the final design, aesthetics, materials and functionality of the intended
design. The functional prototype may be reduced in size (scaled down) in order to reduce costs. The
construction of a fully working full-scale prototype and the ultimate test of concept, is the engineers'
final check for design flaws and allows last-minute improvements to be made before larger
production runs are ordered.

Production Design:
In many fields, there is great uncertainty as to whether a new design will actually do what is desired.
New designs often have unexpected problems. A prototype is often used as part of the product design
process to allow engineers and designers the ability to explore design alternatives, test theories and
confirm performance prior to starting production of a new product. Engineers use their experience to
tailor the prototype according to the specific unknowns still present in the intended design. For
example, some prototypes are used to confirm and verify consumer interest in a proposed design
whereas other prototypes will attempt to verify the performance or suitability of a specific design
approach.
In general, an iterative series of prototypes will be designed, constructed and tested as the final
design emerges and is prepared for production. With rare exceptions, multiple iterations of
prototypes are used to progressively refine the design. A common strategy is to design, test, evaluate
and then modify the design based on analysis of the prototype.
In many products it is common to assign the prototype iterations Greek letters. For example, a first
iteration prototype may be called an "Alpha" prototype. Often this iteration is not expected to
perform as intended and some amount of failures or issues are anticipated. Subsequent prototyping
iterations (Beta, Gamma, etc.) will be expected to resolve issues and perform closer to the final
production intent.
In many product development organizations, prototyping specialists are employed - individuals with
specialized skills and training in general fabrication techniques that can help bridge between
theoretical designs and the fabrication of prototypes.
Difference Between Prototype and Production Design:
In general, prototypes will differ from the final production variant in three fundamental ways:
Materials. Production materials may require manufacturing processes involving higher capital costs
than what is practical for prototyping. Instead, engineers or prototyping specialists will attempt to
substitute materials with properties that simulate the intended final material.
Processes. Often expensive and time consuming unique tooling is required to fabricate a custom
design. Prototypes will often compromise by using more variable processes, repeatable or controlled
methods; substandard, inefficient, or substandard technology sources; or insufficient testing for
technology maturity.
Lower fidelity. Final production designs often require extensive effort to capture high volume
manufacturing detail. Such detail is generally unwarranted for prototypes as some refinement to the
design is to be expected. Often prototypes are built using very limited engineering detail as
compared to final production intent, which often uses statistical process controls and rigorous testing.











SECTION C

17. Define facility layout? Describe the various types of layouts for manufacturing and
serviceoperations with suitable examples?

Plant layout is defined as the most effective physical arrangements of the facilities (machines,
processing equipments and service departments, etc. ) of a plant and its various parts in order to
achieve the best co-ordination and efficiency in the usage of the man, machine and materials
resulting in the quickest and smoothest production activities.
From the point of view of plant layout, we can classify small business or unit into
three categories:
1. Manufacturing units
2. Traders
3. Service Establishments

1. Manufacturing units:
In case of manufacturing unit, plant layout may be of four types:
(a) Product or line layout
(b) Process or functional layout
(c) Fixed position or location layout
(d) Combined or group layout
(a) Product or line layout:
Under this, machines and equipments are arranged in one line depending upon the
sequence of operations required for the product. The materials move form one
workstation to another sequentially without any backtracking or deviation. Under
this, machines are grouped in one sequence. Therefore materials are fed into the
first machine and finished goods travel automatically from machine to machine,
the output of one machine becoming input of the next, e.g. in a paper mill,
bamboos are fed into the machine at one end and paper comes out at the other end.
The raw material moves very fast from one workstation to other stations with a
minimum work in progress storage and material handling.
The grouping of machines should be done keeping in mind the following general
principles.
a) All the machine tools or other items of equipments must be placed at the point
demanded by the sequence of operations
b) There should no points where one line crossed another line.
c) Materials may be fed where they are required for assembly but not necessarily
at one point.
d) All the operations including assembly, testing packing must be included in the
line
A line layout for two products is given below.
Product A
Product B
Advantages: Product layout provides the following benefits:
a) Low cost of material handling, due to straight and short route and absence of
backtracking
b) Smooth and uninterrupted operations
c) Continuous flow of work
d) Lesser investment in inventory and work in progress
e) Optimum use of floor space
f) Shorter processing time or quicker output
g) Less congestion of work in the process
h) Simple and effective inspection of work and simplified production control
i) Lower cost of manufacturing per unit
Disadvantages: Product layout suffers from following drawbacks:
a. High initial capital investment in special purpose machine
b. Heavy overhead charges
c. Breakdown of one machine will hamper the whole production process
d. Lesser flexibility as specially laid out for particular product.
Suitability: Product layout is useful under following conditions:
1) Mass production of standardized products
2) Simple and repetitive manufacturing process
3) Operation time for different process is more or less equal
4) Reasonably stable demand for the product
5) Continuous supply of materials
Therefore, the manufacturing units involving continuous manufacturing process,
producing few standardized products continuously on the firms own
specifications and in anticipation of sales would prefer product layout e.g.
chemicals, sugar, paper, rubber, refineries, cement, automobiles, food processing
and electronics etc.
(b) Process layout:
In this type of layout machines of a similar type are arranged together at one place.
E.g. Machines performing drilling operations are arranged in the drilling
department, machines performing casting operations be grouped in the casting
department. Therefore the machines are installed in the plants, which follow the
process layout.
Hence, such layouts typically have drilling department, milling department,
welding department, heating department and painting department etc. The process
or functional layout is followed from historical period. It evolved from the
handicraft method of production. The work has to be allocated to each
department in such a way that no machines are chosen to do as many different job
as possible i.e. the emphasis is on general purpose machine.
Process layout showing movement of two products
The grouping of machines according to the process has to be done keeping in
mind the following principles
a) The distance between departments should be as short as possible for avoiding
long distance movement of materials
b) The departments should be in sequence of operations
c) The arrangement should be convenient for inspection and supervision
Advantages: Process layout provides the following benefits
a) Lower initial capital investment in machines and equipments. There is high
degree of machine utilization, as a machine is not blocked for a single product
b) The overhead costs are relatively low
c) Change in output design and volume can be more easily adapted to the output
of variety of products
d) Breakdown of one machine does not result in complete work stoppage
e) Supervision can be more effective and specialized
f) There is a greater flexibility of scope for expansion.
Disadvantages: Product layout suffers from following drawbacks
a. Material handling costs are high due to backtracking
b. More skilled labour is required resulting in higher cost.
c. Time gap or lag in production is higher
d. Work in progress inventory is high needing greater storage space
e. More frequent inspection is needed which results in costly supervision
Suitability: Process layout is adopted when
1. Products are not standardized
2. Quantity produced is small
3. There are frequent changes in design and style of product
4. Job shop type of work is done
5. Machines are very expensive
Thus, process layout or functional layout is suitable for job order production
involving non-repetitive processes and customer specifications and nonstandardized
products, e.g. tailoring, light and heavy engineering products, made
to order furniture industries, jewelry.
(c) Fixed Position or Location Layout
In this type of layout, the major product being produced is fixed at one location.
Equipment labour and components are moved to that location. All facilities are
brought and arranged around one work center. This type of layout is not relevant
for small scale entrepreneur. The following figure shows a fixed position layout
regarding shipbuilding.
Material
Labour
Equipment
Ship building yard
Finished
Products (ship)
Advantages: Fixed position layout provides the following benefits
a) It saves time and cost involved on the movement of work from one
workstation to another.
b) The layout is flexible as change in job design and operation sequence can be
easily incorporated.
c) It is more economical when several orders in different stages of progress are
being executed simultaneously.
d) Adjustments can be made to meet shortage of materials or absence of workers
by changing the sequence of operations.
Disadvantages: Fixed position layout has the following drawbacks
a. Production period being very long, capital investment is very heavy
b. Very large space is required for storage of material and equipment near the
product.
c. As several operations are often carried out simultaneously, there is possibility
of confusion and conflicts among different workgroups.
Suitability: The fixed position layout is followed in following conditions
1. Manufacture of bulky and heavy products such as locomotives, ships, boilers,
generators, wagon building, aircraft manufacturing, etc.
2. Construction of building, flyovers, dams.
3. Hospital, the medicines, doctors and nurses are taken to the patient (product).
(d) Combined layout
Certain manufacturing units may require all three processes namely intermittent
process (job shops), the continuous process (mass production shops) and the
representative process combined process [i.e. miscellaneous shops].
In most of industries, only a product layout or process layout or fixed location
layout does not exist. Thus, in manufacturing concerns where several products
are produced in repeated numbers with no likelihood of continuous production,
combined layout is followed. Generally, a combination of the product and
process layout or other combination are found, in practice, e.g. for industries
involving the fabrication of parts and assembly, fabrication tends to employ the
process layout, while the assembly areas often employ the product layout. In soap,
manufacturing plant, the machinery manufacturing soap is arranged on the
product line principle, but ancillary services such as heating, the manufacturing of
glycerin, the power house, the water treatment plant etc. are arranged on a
functional basis.
2. Traders:
When two outlets carry almost same merchandise, customers usually buy in the
one that is more appealing to them. Thus, customers are attracted and kept by
good layout i.e. good lighting, attractive colours, good ventilation, air
conditioning, modern design and arrangement and even music. All of these things
mean customer convenience, customer appeal and greater business volume.
The customer is always impressed by service, efficiency and quality. Hence, the
layout is essential for handling merchandise, which is arranged as per the space
available and the type and magnitude of goods to be sold keeping in mind the
convenience of customers.
There are three kinds of layouts in retail operations today.
1. Self service or modified self service layout
2. Full service layout
3. Special layouts
The self-service layouts, cuts down on sales clerks time and allow customers to
select merchandise for themselves. Customers should be led through the store in
a way that will expose them to as much display area as possible, e.g. Grocery
Stores or department stores. In those stores, necessities or convenience goods
should be placed at the rear of the store. The use of color and lighting is very
important to direct attention to interior displays and to make the most of the stores
layout.
All operations are not self-service. Certain specialty enterprises sell to fewer
numbers of customers or higher priced product, e.g. Apparel, office machines,
sporting goods, fashion items, hardware, good quality shoes, jewelry, luggage and
accessories, furniture and appliances are all examples of products that require
time and personal attention to be sold. These full service layouts provide area and
equipment necessary in such cases.
Some layouts depend strictly on the type of special store to be set up, e.g. TV
repair shop, soft ice cream store, and drive-in soft drink stores are all examples of
business requiring special design. Thus, good retail layout should be the one,
which saves rent, time and labour.
3. Services centers and establishment
Services establishments such as motels, hotels, restaurants, must give due
attention to client convenience, quality of service, efficiency in delivering services
and pleasing office ambience. In todays environment, the clients look for ease in
approaching different departments of a service organization and hence the layout should be
designed in a fashion, which allows clients quick and convenient access
to the facilities offered by a service establishment





















18. Explain the necessity of materials management, functions of material management? Also
highlight the importance of different MM technologies and techniques?
Material Management is all about purchashing mix. It involves the the procurment of material of
in store and and the ability to know the total number of available goods that are to be issued out
on request. All the functions are primarily carried out by the store manager whose mission is to
ensure that goods are not below average as to satisfy the demands of customers.
The primary and general importance of material management is to ensure that he/she streamlined
the issues/demand/sales of the company as to enable him/her to be aware of when the
management is short goods and will not go to the extemt of making use of their buffer stock.
Functions of Material Management:
Materials Management strives to ensure that the material cost component of the total
product cost be the least. In order to achieve this, the control is exercised in the
following fields.
1. Materials Planning.
2. Purchasing.
3. Store Keeping.
4. Inventory Control.
5. Receiving, Inspection and Despatching.
6. Value Analysis, Standardization and Variety Reduction.
7. Materials Handling & Traffic.
8. Disposal of Scrap and Surplus, Material Preservation.
The function of material planning department is to plan for the future procurement of all
the required materials as per the production schedule. At the time of material planning,
the budget allocated for the materials will also be critically reviewed, for better control.
After material planning, purchasing is to be done. Purchasing department buys material
based on the purchase requisitions from user departments and stores departments and
annual production plan. There are four basic purchasing activities.
a) Selecting suppliers, negotiating and issuing purchase orders.
b) Expediting delivery from suppliers.
c) Acting as liaison between suppliers and other company departments.
d) Looking for new products, materials, and suppliers that can contribute to
company objectiveness.
At the time of purchase, right quantity and quality of materials must be purchased at
right time, at the lowest possible cost and select the efficient purchasing system, to derive
maximum benefit. Purchasing is done based on make or buy decisions and also using
PERT / CPM effectively.
When the items are purchased, proper storage facilities must be provided so that, the
wastage is reduced to a minimum. Sometimes to protect the quality, greater care must be
taken during storage.
The duties of the inventory control department is to decide about the types of ordering
system, fixing the safety stock limits, fixing up the reorder level & maximum / minimum
stock level.
The responsibility of Receiving, inspection and despatching department is to receive the
materials when delivered by the suppliers. After receiving it, the quantity and quality
must be checked. Production parts and materials are checked against blueprints and
specifications. Non-production items are also reviewed. When once it is as per the
specifications given, the goods will be accepted.
The Value Analysis and Standardization offer greatest scope, in reducing the materials
cost. It also reduce the number of varieties and also helps in finding the substitute for
the materials at lesser cost.
Materials handling section is responsible for the transport of materials to various
departments. There are four basic traffic activities.
a) Selecting common or charter carriers and routings for despatch /
shipments as required.
b) Tracing in-bound shipments of material in short supply as requested by
production control or purchasing. Assisting customers in tracing outbound
shipments when asked.
c) Auditing invoices from carriers and filing claims for refunds of excess
charges or for damaged shipments when required.
d) Developing techniques to reduce transportation cost. This may involve
negotiation with competing shippers, special studies n selecting the most
advantageous plant location for new products, analysis of tariffs, and
negotiation of any number of special arrangements for handling certain
traffic.
e) The activity includes packaging of finished product, labeling and loading
of end products in the trades.
Finally the disposal of scrap and surplus must be done periodically to release the capital
locked in those items.
NON-PRODUCTION STORES :
Techniques and procedures used to control non-production material (office supplies,
perishable tools, and maintenance, repair, and operating supplies) resemble those used for
production material, although they are usually less elaborate. Specifically, the stores
department.
a) Maintains physical stocks of non-production items to be drawn on as
needed for operations or maintenance.
b) Manages inventories of non-production materials and prepares purchase
requisitions for needed material when stocks drop to the re-order point.
c) Keeps records and maintains controls to prevent duplication of
inventories, minimize lossesrom pilferage and spoilage and prevent

19. Describe the process of SQC? Highlight the importance of different quality control charts
in process control?
Statistical Quality Control(SQC) is the application of statistical techniques to determine how far
the product confers to the standards of quality & precision and to what extent its quality deviates
form the standard quality.
The Standard quality is determined through careful research & investigation.It is quite
impracticle to adhere strictly to the standards of precision,especially in cases where human factor
dominates over the machine factor.Some deviation is therefore,allowed or tolerated.They are
referred to as tolerances.Within the Limits ,set by these tolerances,the product is considered to be
of standard quality.SQC brings to light the deviations outside these limits,i.e.the purpose of
statistical quality control is to discover and correct only those factors which are also responsible
for variations outside the suitable pattern through SQC techniques.
While acceptance through sampling is used for controlling the materials input to the process,the
process itself may be controlled by statistical sampling procedures i.e. by taking samples from
the output of the process.The samples may be checked for
1.Their measurable characteristics such as length,diameter,hardness,tensile strength etc.
2.Fraction defectivesP,when the characteristics cannot or need not to be measured.
3.Numbers of defects in the sample (c).
The process is said to be within control if the sample points fall within the pre-established control
limits.The crux of the process control lies in establishing the appropriate control limits.The charts
showing these control limits are called Process Control Charts.
Importance of different quality control charts in process control:
If analysis of the control chart indicates that the process is currently under control (i.e. is stable,
with variation only coming from sources common to the process) then no corrections or changes
to process control parameters are needed or desirable. In addition, data from the process can be
used to predict the future performance of the process. If the chart indicates that the process being
monitored is not in control, analysis of the chart can help determine the sources of variation,
which can then be eliminated to bring the process back into control. A control chart is a specific
kind of run chart that allows significant change to be differentiated from the natural variability of
the process.
The control chart can be seen as part of an objective and disciplined approach that enables
correct decisions regarding control of the process, including whether or not to change process
control parameters. Process parameters should never be adjusted for a process that is in control, as
this will result in degraded process performance
.
A process that is stable but operating outside of
desired limits (e.g. scrap rates may be in statistical control but above desired limits) needs to be
improved through a deliberate effort to understand the causes of current performance and
fundamentally improve the process.
The control chart is one of the seven basic tools of quality control
Points representing a statistic (e.g., a mean, range, proportion) of measurements of a
quality characteristic in samples taken from the process at different times [the data]
The mean of this statistic using all the samples is calculated (e.g., the mean of the means,
mean of the ranges, mean of the proportions)
A center line is drawn at the value of the mean of the statistic
The standard error (e.g., standard deviation/sqrt(n) for the mean) of the statistic is also
calculated using all the samples
Upper and lower control limits (sometimes called "natural process limits") that indicate
the threshold at which the process output is considered statistically 'unlikely' are drawn typically
at 3 standard errors from the center line
The chart may have other optional features, including:
Upper and lower warning limits, drawn as separate lines, typically two standard errors
above and below the center line
Division into zones, with the addition of rules governing frequencies of observations in
each zone
Annotation with events of interest, as determined by the Quality Engineer in charge of the
process's quality

Types of charts
Chart
Process
observation
Process
observations
relationships
Process
observations
type
Size
of
shift
to
detect
and R
chart
Quality
characteristic
measurement within
one subgroup
Independent Variables
Large
(
1.5)
and s
chart
Quality
characteristic
measurement within
one subgroup
Independent Variables
Large
(
1.5)
Shewhart
individuals
control
chart (ImR
chart or
XmR chart)
Quality
characteristic
measurement for
one observation
Independent Variables

Large
(
1.5)
Three-way Quality Independent Variables Large
chart characteristic
measurement within
one subgroup
(
1.5)
p-chart
Fraction
nonconforming
within one subgroup
Independent Attributes

Large
(
1.5)
np-chart
Number
nonconforming
within one subgroup
Independent Attributes

Large
(
1.5)
c-chart
Number of
nonconformances
within one subgroup
Independent Attributes

Large
(
1.5)
u-chart
Nonconformances
per unit within one
subgroup
Independent Attributes

Large
(
1.5)
EWMA
chart
Exponentially
weighted moving
average of quality
characteristic
measurement within
one subgroup
Independent
Attributes or
variables
Small
(<
1.5)
CUSUM
chart
Cumulative sum of
quality
characteristic
measurement within
one subgroup
Independent
Attributes or
variables
Small
(<
1.5)
Time series
model
Quality
characteristic
measurement within
one subgroup
Autocorrelate
d
Attributes or
variables
N/A
Regression
control
chart
Quality
characteristic
measurement within
one subgroup
Dependent of
process control
variables
Variables
Large
(
1.5)
Real-time
contrasts
chart
Sliding window of
quality
characteristic
measurement within
one subgroup
Independent
Attributes or
variables
Small
(<
1.5)

Some practitioners also recommend the use of Individuals charts for attribute data, particularly
when the assumptions of either binomially-distributed data (p- and np-charts) or Poisson-
distributed data (u- and c-charts) are violated. Two primary justifications are given for this
practice. First, normality is not necessary for statistical control, so the Individuals chart may be
used with non-normal data.Second, attribute charts derive the measure of dispersion directly from
the mean proportion (by assuming a probability distribution), while Individuals charts derive the
measure of dispersion from the data, independent of the mean, making Individuals charts more
robust than attributes charts to violations of the assumptions about the distribution of the
underlying population. It is sometimes noted that the substitution of the Individuals chart works
best for large counts, when the binomial and Poisson distributions approximate a normal
distribution. i.e. when the number of trials n > 1000 for p- and np-charts or > 500 for u- and c-
charts.
Critics of this approach argue that control charts should not be used then their underlying
assumptions are violated, such as when process data is neither normally distributed nor binomially
(or Poisson) distributed. Such processes are not in control and should be improved before the
application of control charts. Additionally, application of the charts in the presence of such
deviations increases the type I and type II error rates of the control charts, and may make the chart
of little practical use.
SECTION D
Phelps Petroleum Refining Corporation converts crude oil to refined petroleum products. The key
process in its refinery is the cracking unit. This process heats the crude, drives off the refined products at
different temperatures, and collects and cools the refined products. The present cracking unit is about 20
years old, is relatively inefficient, and costs much to maintain each year. Two competing proposals are
being considered for its replacement.
The first proposal is for a low-cost economy cracking unit. This unit will produce refined products at 94
percent yield; in other words, 94 percent of the crude actually ends up in refined products and 6 percent is
lost. The unit has semiautomatic controls and requires some degree of worker monitoring. The unit must
be shut down, flushed out, and its controls calibrated before it can be changed to crudes with vastly
different characteristics; thus the amount of refined products that can be produced each year is reduced.
The type of construction used in the unit will require a moderate amount of annual maintenance.
The second proposal is for a high-cost quality cracking unit with 98 percent yield. The unit has fully
automatic controls and requires only a small amount of worker monitoring. Because of its control
system and type of holding vessels, the unit can easily be shifted to crudes with other characteristics. The
construction used in manufacturing the unit minimizes the amount of annual maintenance.
These estimates have been developed for the two units:
Annual volume (millions of gallons) Economy
Quality
First year Second Cracking Cracking

Later years 70 80
Annual fixed costs $140,000 $1,650,000
Average variable cost per gallon $.372 $.360
Questions for Discussion:
If the sales price of the refined products averages $ 0.425 per gallon at the cracking unit, which
process would be preferred in each year?
At what annual volume of refined products would Phelps be indifferent between the two
processes if the only consideration were economic analysis?
What other considerations would affect this decision?