This page intentionally left blank Copyright © 2008, 2006 New Age International (P) Ltd., Publishers Published by New Age International (P) Ltd., Publishers All rights reserved. No part of this ebook may be reproduced in any form, by photostat, microfilm, xerography, or any other means, or incorporated into any information retrieval system, electronic or mechanical, without the written permission of the publisher. All inquiries should be emailed to [email protected] ISBN : 978-81-224-2425-6 PUBLISHING FOR ONE WORLD NEW AGE INTERNATIONAL (P) LIMITED, PUBLISHERS 4835/24, Ansari Road, Daryaganj, New Delhi - 110002 Visit us at www.newagepublishers.com PREFACE TO THE SECOND EDITION The second edition of the book Production and Operations Management incorporates several suggestions offered by our colleagues and students all over the country. In this edition we have endeavored to strengthen the basic characteristics of the book. The subject matter has been presented systematically in ten chapters, which can enable the reader to master the topics covered without any additional guidance. In keeping with the basic objective of making the learning of the ‘Concept and Principles in Production and Operations Management’, the following chapters have been revised as per the suggestions. Chapter 1 on Introduction to POM was revised with the addition of Managing Global Operations with the concept of globalization. Chapter 2 on Plant Location and Layout was revised with locational models and the design of product and process layout. Service layout was also included. Chapter 4 on Materials Management was revised with the addition of special purchasing system. Chapter 6 on Quality Control was revised with the addition of ISO 14000 series along with the recognized bodies for ISO certification. Chapter 8 on Maintenance Management was revised with the concept of Total Preventive Maintenance. The revised edition also contains Caselets which provides additional input to understand the subject with practical application of the techniques used in each chapter. For the development of application skill of the theoretical knowledge of production and operation management, it is necessary to arrange for a visit or conduct the project work either by individual or group of students in a manufacturing or service organisation. In this context the revised edition contains skill development/practicals in each chapter. For this purpose the students are adviced to visit a Fast Food Restaurant like Pizza Hut or Pizza Corner for getting the information for the questions given under skill development in each chapter. In addition to the caselet, cases are given to understand the entire concept of production and operations management at the end of the book. Complete care has been taken to make the book error free. However, mistakes might have crept inadvertently. Readers finding any error are requested to bring it to our notice, for enabling us to rectify them in our future editions. We are grateful to New Age International (P) Limited, Publishers, and the editorial department for their untiring effort to publish the book within a short span of time with a nice get up. Our acknowledgements are also due to Dr. Poornima Anil Kumar and Mrs. Bharathi Suresh, without whose support and sacrifice this work would not have been completed by the deadline. Finally, our acknowledgement is due to the Almighty who has blessed us with the knowledge, required for writing this book. AUTHORS PREFACE TO THE FIRST EDITION Production and Operations Management has been recognised as an important factor in a country’s economic growth. The traditional view of manufacturing management is the concept of Production Management with the focus on economic efficiency in manufacturing. Later the new name Operations Management was identified, as service sector became more prominent. Rapid changes in technology has posed numerous opportunities and challenges which have resulted in enhancement of manufacturing capabilities through new materials, facilities, techniques and proce- dures. Hence, managing a service/production system has become a major challenge in the global competitive environment. Production and Operations Management leads the way for the organisa- tions to achieve its goals with minimum effort. Hence the study of the subject at undergraduate and postgraduate level has more significance. This book on ‘Production and Operations Management’ covers the complete syllabus of Bachelor of Business Management of Bangalore University, however the coverage is wide enough to include the requirements of the other Indian Universities and professional courses like MBA and Engineering. Being student-friendly is the unique feature of this book. The subject matter has been presented systematically in ten chapters, which can enable the reader master the topics covered without any additional guidance. Complete care has been taken to make the book error free. However, mistakes might have crept inadvertently. Readers finding any error are requested to bring it to our notice, for enabling us to rectify them in our future editions. We are grateful to Mr. Saumya Gupta, Managing Director and Mr. Babu V.R. of New Age International (P) Ltd., for providing us this opportunity to share our knowledge with you. Our acknowledgements are also due to Dr. Poornima Anil Kumar and Mrs. Bharathi Suresh, Mr. K. Raghavendra and M.N. Ramachandra without whose support and sacrifice this work would not have been completed by the deadline. Finally, our acknowledgement is due to the Almighty who has blessed us with the knowledge, required for writing this book. AUTHORS CONTENTS Preface to the Second Edition v Preface to the First Edition vi 1 I P O M 1–21 NTRODUCTION TO RODUCTION AND PERATION ANAGEMENT 1.1 Introduction 1 1.2 Historical Evolution of Production and Operations Management 1 1.3 Concept of Production 3 1.4 Production System 3 1.4.1 Classification of Production System 4 1.5 Production Management 7 1.5.1 Objectives of Production Management 7 1.6 Operating System 8 1.6.1 Concept of Operations 8 1.6.2 Distinction between Manufacturing Operations and Service Operations 8 1.7 Operations Management 9 1.7.1 A Framework for Managing Operations 9 1.7.2 Objectives of Operations Management 11 1.8 Managing Global Operations 12 1.9 Scope of Production and Operations Management 13 Exercises 17 Skill Development 18 Caselet 18 2 P L L 22–64 LANT OCATION AND AYOUT 2.1 Introduction and Meaning 22 2.2 Need for Selecting a Suitable Location 22 2.3 Factors Influencing Plant Location/Facility Location 27 2.3.1 General Locational Factors 27 2.3.2 Specific Locational Factors for Manufacturing Organisation 31 2.3.3 Specific Locational Factors for Service Organisation 32 2.4 Location Theories 33 2.5 Location Models 34 2.5.1 Factor Rating Method 34 2.5.2 Weighted Factor Rating Method 35 2.5.3 Load-distance Method 36 2.5.4 Centre of Gravity 38 2.5.5 Break Even Analysis 39 (cid:1)(cid:2)(cid:2)(cid:2) (cid:1)(cid:2)(cid:3)(cid:4)(cid:5)(cid:3)(cid:4)(cid:6) 2.6 Locational Economics 41 2.7 Plant Layout 42 2.7.1 Objectives of Plant Layout 42 2.7.2 Principles of Plant Layout 43 2.8 Classification of Layout 43 2.8.1 Process Layout 43 2.8.2 Product Layout 44 2.8.3 Combination Layout 45 2.8.4 Fixed Position Layout 46 2.8.5 Group Layout (or Cellular Layout) 46 2.9 Design of Product Layout 48 2.10 Design of Process Layout 52 2.11 Service Layout 55 2.12 Organisation of Physical Facilities 56 Exercises 63 Skill Development 64 3 M H 65–74 ATERIAL ANDLING 3.1 Introduction and Meaning 65 3.2 Objectives of Material Handling 66 3.3 Principles of Material Handling 66 3.4 Selection of Material Handling Equipments 67 3.5 Evaluation of Material Handling System 68 3.6 Material Handing Equipments 69 3.7 Guidelines for Effective Utilisation of Material Handling Equipments 73 3.8 Relationship Between Plant Layout and Material Handling 73 Exercises 74 Skill Development 74 4 M M 75–106 ATERIALS ANAGEMENT 4.1 Introduction and Meaning 75 4.2 Scope or Functions of Materials Management 75 4.3 Material Planning and Control 77 4.3.1 Techniques of Material Planning 78 4.4 Purchasing 78 4.4.1 Objectives of Purchasing 79 4.4.2 Parameters of Purchasing 79 4.4.3 Purchasing Procedure 82 4.4.4 Selection of Suppliers 84 4.4.5 Special Purchasing Systems 88 4.5 Stores Management 89 4.5.1 Codification 90 4.6 Inventory Control or Management 91 4.6.1 Meaning of Inventory 91 (cid:1)(cid:2)(cid:3)(cid:4)(cid:5)(cid:3)(cid:4)(cid:6) (cid:2)(cid:3) 4.6.2 Reasons for Keeping Inventories 91 4.6.3 Meaning of Inventory Control 92 4.6.4 Objectives of Inventory Control 92 4.6.5 Benefits of Inventory Control 92 4.6.6 Techniques of Inventory Control 93 4.6.7 Inventory Model 94 4.7 Standardization 98 4.7.1 Advantages of Standardization 99 4.7.2 Disadvantages of Standardization 100 4.8 Simplification 100 4.8.1 Advantages of Simplification 100 4.9 Value Analysis 101 4.9.1 Value Analysis Framework 101 4.9.2 Steps in Value Analysis 101 4.10 Ergonomics (Human Engineering) 102 4.10.1 Objectives of Human Engineering 103 4.11 Just-In-Time (JIT) Manufacturing 103 4.11.1 Seven Wastes 103 4.11.2 Benefits of JIT 104 Exercises 105 Skill Development 105 Caselet 106 5 P P C 107–130 RODUCTION LANNING AND ONTROL 5.1 Introduction and Meaning 107 5.2 Need for Production Planning and Control 108 5.3 Objectives of Production Planning and Control 109 5.4 Phases of Production Planning and Control 109 5.4.1 Planning Phase 110 5.4.2 Action Phase 111 5.4.3 Control Phase 111 5.5 Functions of Production Planning and Control 112 5.5.1 Parameters for PPC 113 5.6 Operations Planning and Scheduling Systems 114 5.7 Aggregate Planning 118 5.8 Master Production Schedule (MPS) 119 5.9 Material Requirement Planning (MRP) 120 5.9.1 Objectives of MRP 120 5.9.2 MRP System 120 5.10 Capacity Planning 121 5.10.1 Measurement of Capacity Planning 122 5.10.2 Process of Capacity Planning 123 5.11 Routing 124 5.11.1 Techniques of Routing 125