wcm-world cllass manufacturing practices

Practices for world class organizations

1. World Class M a n u fa ctu r ing 1

2. Core text books. 2 Production & Operation Management by S.N. Chary World Class manufacturing B.S Sahay Reference Book : Operation Management Jay Heizer & B.Render 8 th Edn National Manufacturing Competitiveness council report. 2009

3. 3 World Class Manufacturing is a set of concepts, principles, policies and techniques for managing and operating a manufacturing company. It is driven by the results achieved by the Japanese manufacturing resurgence following World War II, and adapts many of the ideas used by the Japanese in automotive, electronics and steel companies to gain a competitive edge . It primarily focuses on continual improvement in quality, cost, lead time, flexibility and customer service.

4. Industrialization history

5. Aspects of WCM

6. HIGH MORAL & SAFETY COST R E DUC T I ON FLEXIBILITY IN OPERATION & PROCESS L E AD TIME REDUCTION Q U A L I TY CONTINUAL I M PRO VE M E N T WORLD CLASS MANUFACTUING CONCEPT DRIVES :

7. 5 Companies that are pursuing world-class status may follows four dominant principles of which these companies may choose one or more. Just-in-Time (JIT) - The JIT principle focuses on the elimination of waste, with waste defined as anything other than the minimum amount of equipment, materials, parts, space, and workers' time, that are absolutely essential to add value to the product. Total Quality Control (TQC) Under the TQC principle, everyone in the organization must be involved in improving the product's quality to meet customer needs. The emphasis is placed on defect prevention rather than defect detection and development of an attitude of "do it right the first time." Total Preventive Maintenance (TPM) - With the TPM principle, machines and equipment are maintained so often and so thoroughly that they rarely ever break down, jam, or misperform during a production run. Computer Integrated Manufacturing (CIM) - CIM involves the integration of the company's operations from design, production, and distribution to after- sales service and support in the field through the use of computer and information technologies ." Framework for Continuous Improvement

8. 6 Transition of manufacturing Sector Consumer E x p e ctation Competition Lo c al Global Acceptance issue Image & quality Issue. WCM Global Competitiveness Lean manufactur Traditional Man u f a cturi n g Practices Uncontested market .Manufacturing Process Excellence for cost competitivene & innovation L ow Hi g h i n g ss

9. 9 Time to Market is shortening : Rapid introduction of new products puts pressure on manufacturing facilities to profitably produce a larger variety in smaller vo l u m es. Ma nu f ac t u ri n g fir m s ha ve t o a d o pt to n e w processes, new materials, new vendors, new shop floor layouts, new ways of reducing cycle times, new designs etc. to deliver these products . The real challenge is therefore to improve substantially on several dimensions viz : quality, technology, shop floor practices, supply chain coordination, and new product introduction over a short period of time.

10. 10 Manufacturing shift Cost Focus Quality focus Customization focus Mass Production lean Production Mass Customization Scientific m a n a gem e nt Process MRP PERT/CPM CA D / C AM EDI/ TQM KAIZAN Six Sigma SCM Lean m a n u f a c tur i ng ERP Lean SCM Agile manufacturing Build to order

11. 11 Product mix change Conformance to quality Volume change Product customization On time delivery Research on New product development Quick design changes Price competitiveness MANTRA FOR GLOBAL COMPETITIVENESS IN MANUFACTURING FIRMS ARE :

12. 12 A Perspective of Indian Manufacturing sector Extract of Report submitted to NMCC by IIM Bangalore March 2009. The Indian Manufacturing sector has traversed a diversified path to industrial development within the country. While its share in the GDP has declined over the years, its growth rate in recent years has been impressive (a CAGR of close to 8 percent in the last eight years). Very few countries in the world can boast of such a diversified industrial base of significance: from textiles & apparel to steel, from chemicals to machine tools, from consumer goods to avionics. And then there is the automobile and the auto-component industry with engineering & service design that has created an industrial dynamics that only a few countries in the world have been able to achieve .

13. 11 Studies have indicated that the productivity of the manufacturing industry in India is approximately 1/5th of the productivity in the manufacturing industry of United States Of America. It is about ½ as compared to the productivity levels in South Korea as well as Taiwan. Labor productivity has escalated only to a small extent in case of India in comparison to United States Of America, on the contrary, labor productivity has increased manifold in Taiwan & Korea . • While ' Indian Manufacturing Industry ' is competing in the global marketplace and registering growth on YoY basis, in sector areas , large sections of ' Indian manufacturing' sector still suffers from bottlenecks like – Use of primitive technology or under utilization of technology. Poor infrastructure. Over staffed operations & high operation cost Low flexibility in manufacturing process Expensive financing and bureaucracy Concerns of Indian manufacturing sector

14. 14 New Competitive Challenges Today, Indian firms are facing a very different competitive scenario as compared to the past. They are facing competition from imports and from MNCs in the domestic markets. Firms also have to compete as new entrants in global markets. Earlier, firms would segregate these two markets and serve them with different quality products and services, compromising on quality in the home market. This is no longer possible. Therefore, many strategies that may have worked in the past are not likely to succeed in the future. The cost structure of Indian manufacturing plants shows that materials constitute 66 percent of total costs, direct labour 10 percent and overheads 24 percent. This implies that management initiatives to control manufacturing costs need to be focussed to reduce material costs and overheads.

15. 15 Efforts to control material related costs may need to address several issues including rejects and rework on the shop floor, identifying alternative materials, and better materials management and sourcing. The new competition is in terms of reduced cost, improved quality, products with higher performance, a wider range of products, and better service - all delivered simultaneously. Indian firms have quite often followed an opportunistic approach to growth as opposed to a capability driven approach that seeks to strengthen key aspects of manufacturing

16. 14 Traditional Manufacturing Process. Causal Diagram.

17. 15 Logistics were organized around the principle of mass production. Low cost was to be achieved through high volume . This led firms to hold large inventories of incoming materials, work-in- progress and finished products, just-in-case anything might go wrong and interrupt the flow of production. Machinery was designed to produce one type of products, and machine changeovers were to minimum. Quality procedures were designed so as not to get in the way of production-flow. So quality inspection was placed at the end of the production line, and faulty products were reworked before delivery. These principles of mass production were appropriate as long as markets were stable and undemanding. As markets became more heterogeneous and changeable, new principles of production had to be established.

18. 18 Principles of World Class Manufacturing : WCM is a process driven approach where implementations usually involve the following philosophies and techniques: Make-to-order Streamlined flow Small lot sizes Families of parts Doing it right the first time Cellular manufacturing Total preventive maintenance Quick changeover

19. 19 Zero Defects Just-in-time Variability reduction High employee involvement Cross functional teams Multi-skilled employees Visual signaling Statistical process control These sixteen practices helps an organization to achieve a position of world class manufacturing.

20. 18 World class manufacturing

21. 19 Logistics are designed so that flexibility can be ensured. Producing in small batches to satisfy varied and volatile markets. Inventories are organized on a "just-in-time" basis, and production flows through the plant as single units rather than in large batches. Attention is paid to rapid changeover and simpler and more flexible machinery is often used. Instead of checking quality at the end of the line, quality is assured at each stage of the production process, so that no defects are allowed to pass through the plant. WCM has following inherent advantage s

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25. 25 Lean manufacturing Model ( TPS House ) Integrated SCM Just In Time Continuous flow Pull system Quick change over People & Team Work Common Goal , Cross Trained high morale Waste reduction Problem solving 5 Why;s Continuous Improvement Leveled production Standard manufacturing process Visual Management Self triggered stops Process driven Error proofing In station quality Control

26. 24 Lean manufacturing practices works on the premise of eliminating waste and being flexible and open to change . It is a team based approach to identifying and eliminating waste (non-value adding activities) through continuous improvement by flowing the product at the pull of the customer in pursuit of perfection. The Toyota Production System is a philosophy of manufacturing that was created by the Toyota Corporation. TPS, has become synonymous with Lean Manufacturing. TPS defined three types of waste: “Muda“( non value-added work) , “Muri" (overburden) and “Mura“( unevenness) . By eliminating waste, overall quality can be improved and production time as well as cost can be reduced. Lean Manufacturing & Toyota Production System.

27. 27 TPS defined three types of waste known as 3 M’s of TPS. “Muda“( non value-added work) , “Muri" (overburden) “Mura“( unevenness) . By eliminating waste, overall quality can be improved and production time as well as cost can be reduced.

28. 28 Toyota Production System ( TPS) & 3 M’s The Toyota seven wastes are as follows: The TPS identifies seven wastes specifically and collectively called as “wastes”. Over-production Motion (of operator or machine) Waiting (of operator or machine) Conveyance, Processing itself 6 .Inventory (raw material) 7. Correction (rework and scrap). Lean manufacturing aims to improve the manufacturing process by eliminating seven wastes in all their forms.

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31. 31 TPS approach to reduce waste. Reduce setup times - Employees at Toyota were made responsible for their own setups thus reducing the wastefulness of this process . Small-lot production - The process of economically producing a variety of things in small quantities rather than producing things in large batches. Employee involvement and empowerment - Employee are divided into teams and even those in supervisory positions work along side other employees on the production line as part of the team. Quality at the source - Product defects are identified and corrected as soon as they occur or at the source.

32. 32 Equipment maintenance - Operators of the equipment are also assigned to take care of their maintenance since these should be the individuals who know the equipment best. Pull production - The work performed at each stage of the process is dictated solely by demand for materials from the immediate next stage (also known as "Just in Time"). Supplier involvement - Suppliers are treated as partners and are also trained in the TPS methods.

33. 31 Factors affecting Lean Manufacturing

34. 34 Theory of Constraints Eli Goldratt is the creator of the Theory of Constraints (TOC) Theory of Constraints (TOC) is an overall management philosophy that aims to achieve goal of a system by eliminating bottle neck in the process. TOC focuses on critcal areas which influence the system’s efficency and productivity . The management thinking processes and their implication to execution and human behavior . The constraints in critical business activity & its implication to processes flow in the service operation. The constraints can be broadly classified as either an internal constraint or a market constraint ( suppler constraint) .

35. 35 Theory of Constraints is based on the premise that the rate of revenue generation is limited by constraining process (i.e. a bottleneck). Only by increasing throughput (flow) at the bottleneck process or elminating the bottleneck , can overall throughput be increased. The key steps to overcome constraint are: Articulate the goal of the organization. Identify the constraint (the thing that prevents the organization from obtaining more of the goal.

36. 36 3. Decide how to exploit the constraint. Subordinate all other processes to above decision (align all other processes to the decision made above) The primary methodology used to overcome constraints is refered as Drum-Buffer-Rope (DBR) approach.

37. 37 The drum is the physical constraint of the plant: the work center or machine or operation that limits the ability of the entire system to produce more. The rest of the plant follows the beat of the drum. The buffer protects the drum, so that it always has work flowing to it. Buffers in DBR methodology advocates time as the unit of measure, rather than quantity of material. This makes the priority system operate strictly based on the time . The rope is the work release mechanism for the plant. ( Trigger ). It Pulls work into the system just when required rather than earlier than a buffer time which creates high work-in-process and slows down the entire system.

38. 38 Marching to the Drum Beat of the Drummer Constraint linked to Market demand Drum Beat Of the plant Inventory available to Overcome the constraint Virtual stock buffer Buffer time Proa c t i v e Process

39. 39 Traditional system calls for buffers at several points in the system. Simplified DBR requires only a single buffer at shipping point. Drum - The constraints, linked to market demand, is the drumbeat for the entire plant. Buffer - Time/inventory that ensures that the constraint is protected from disturbances occurring in the system. Rope - Material release is "tied" to the rate of the constraint.

40. 40 The Simplified- Drum, Buffer Rope ( S-DBR) provide the basis for building a production schedule that is highly immune to disruption, avoids creating excess inventory, and uses small batches to minimize overall lead time. Thus S-DBR is used to mitigate and often prevent those disruption which happens in Production process.

41. 41 Lean Manufacturing Model Integrated SCM Just In Time C o n t i n u ou s fl o w Pull system Quick change over People & Team Work Common Goal , Cross Trained high morale Waste reduction Problem solving 5 Why;s Continuous Improvement Leveled production Standard manufacturing process Visual Management Self triggered stops Process driven Error proofing In station quality Control

42. 42 7 Essential principles of Lean manufacturing Pull Inventory Control. Work moves based on the needs of the downstream operation starting from the customer need. Automation: Equipment intelligently recognizes & eliminates process variation with human like intervention. Technology support from ERP, CAD/CAM etc JIT Inventory : WIP & supplies arrive at the process location as they are needed.

43. 43 Visual control. : Management by sight of equipment & process Variation. S t a nd a r d ized w o r k p roces s & pr o ced u res . A ll activities are defined in advance & characterizes by process consistency. Pursuit of perfection. There is no end to the process of reducing , waste , time cost & mistake. Continuous work flow : Alignment of m ach i n e s ar e suc h t h a t it dr i ve s c o n t i n u o u s work flow without interruption.

44. A flexible manufacturing system (FMS) is a group of numerically-controlled machine tools, interconnected by a central control system. The various machining cells are interconnected, via loading and unloading stations, by an automated transport system. Operational flexibility is enhanced by the ability to execute all manufacturing tasks on numerous product designs in small quantities and with faster delivery. It has been described as an automated job shop and as a miniature automated factory. It is an automated production system that produces one or more families of parts in a flexible manner. Automation and flexibility presents the possibility of producing nonstandard parts to create a competitive advantage.

45. Flexible Manufacturing System B a t c h P r o d u c tion or Job production Dedicated machinery or General-purpose tools Cost savings but lacks flexibility Costly, and may not reach full capacity

46. FMS is limited to firms involved in batch production or job shop environments. Normally, batch producers have two kinds of equipment from which to choose: dedicated machinery or general-purpose tools. Dedicated machinery results in cost savings but lacks flexibility. General purpose machines such as lathes, milling machines, or drill presses are all costly, and may not reach full capacity. Flexible manufacturing systems provide the batch manufacturer with another option that can make batch manufacturing just as efficient and productive as mass production. Two kinds of manufacturing systems fall within the FMS spectrum. These are assembly systems , which assemble components into final products and forming systems , which actually form components or final products. A generic FMS is said to consist of the following components: A set of work stations containing machine tools that do not require significant set-up time or change-over between successive jobs. Typically, these machines perform milling, boring, drilling, tapping, reaming, turning, and grooving operations.

47. An automated and flexible material-handling system ( Guided vehicle ) permits jobs to move between any pair of machines so that any job routing can be done more efficiently . A network of supervisory computers that perform some or all of the following tasks: Directs the routing of jobs through the system Tracks the status of all jobs in progress so it is known where each job is to go next. Passes the instructions for the processing of each operation to each station and ensures that the right tools are available for the job. Provides essential monitoring of the correct performance of operations and signals problems requiring attention. Storage, locally at the work stations, and/or centrally at the system level. The jobs to be processed by the system. In operating an FMS, the worker enters the job to be run at the supervisory computer, which then downloads the part programs to the cell control or NC controller.

48. B en e f i t s Less waste fewer workstations quicker changes of tools, dies, and stamping machinery reduced downtime better control over quality reduced labor more efficient use of machinery work-in-process inventory reduced increased capacity increased production flexibility

49. LIMITATIONS OF FMS It can handle a relatively-narrow range of part varieties, so it must be used for similar parts (family of parts) that require similar processing. Due to increased complexity and cost, an FMS also requires a longer planning and development period than traditional manufacturing equipment. Equipment utilization for the FMS always is not as high as one would expect.

50. Lack of technical literacy, management incompetence, and poor implementation of the FMS process. If products change ( variation is high ) rapidly, and performance of the firm is measured on the ability to introduce new products fast than minimizing cost, in such scenario, scale is no longer the main concern and size is no longer a barrier to entry.

51. Traditional FMS The traditional flexible manufacturing system (FMS) is based on numerically controlled machines in addition to other value-added, automatic, material handling facilities. A degree of flexibility within FMS serves to satisfy demands for a relatively diverse range of products with a small to medium batch size production.

52. Flexible Manufacturing System Mass Customization Mass production

53. When customer orders come through more randomly with different delivery dates, product mix changes irregularly and drastically, or the product diversification increases, downstream processes require randomly customized parts on flexible schedules to be supplied to their matching predecessor processes on short notice, extra inventory, equipment, and labor are needed to meet order variations. In such a case , traditional FMS is challenged to meet these rapid changes with minimum production cost and satisfaction. This leads to a new concept called Mass Customization . A process which delivers sufficient flexibility and rapid response capability to deal with complex manufacturing situations. Mass customization system demands a higher degree of flexibility than traditional FMS. It is highly desirable that each component demonstrates prompt response capability in managing demand changes in a FMS with parallel considerations in product costs, quality and reliability to form the flexibility in an agile mass manufacturing system,

54. Agile Mass Customized Manufacturing System Manufacturing process focused on the ability to flexibly and rapidly respond to changing market conditions. As product life cycles get shortened significantly , manufacturers have found that they can no longer capture market share and gain higher profits by producing large volumes of a standard product for a mass market. Success in manufacturing requires the adoption of methods in customer-acquisition and order-fulfillment processes that can manage anticipated change with precision while providing a fast and flexible response to unanticipated changes .

55. MCM implementation strategies can be divided into three different categories according to the different stages when customization is introduced in the value-chain: (1) form MCM, (2) optional MCM, (3) core MCM Form MCM is the simplest MCM implementation strategy, where customization is introduced at the delivery stage. Optional MCM allows customization to take place at the manufacturing stage. The essential point of this implementation strategy is to provide a large number of pre-designed, standard options to customers. It produces the configured products. Customers can only select options from a predetermined list and request them to be assembled. ( Dell manufacturing Model ) Core customization integrates customers with the design process . Goal of MCM is to produce and deliver customized products rapidly while keeping costs at the mass-production level.

56. Mass Customized Manufacturing ( MCM ) Steps for mass customization lie in two areas: 1 . D e si g n F or M a s s C u s t o m i z a t i o n （ D F M C ） 2 Mass Customization Manufacturing (MCM) system. DFMC emphasizes decoupling of the design and manufacturing process to reduce costs. In developing MCM, it is important to take DFMC into consideration in order to reduce the setup time and other volume-related costs drivers. Modification of product shape and size are limited to guarantee that fabrication can be performed on the same production line. Product design for mass customization ( DFMC) calls for Parameterized products : Parameterized products possess a series of attributes called parameters. These parameters allow customers to change the actual design of the product, for example, by creating new sizes, or modifying performance characteristics. Each parameter can be chosen by customers within a certain scope, and the scope itself can also be defined as one of the parameters

57. Success in mass customization manufacturing( MCM) is achieved by swiftly reconfiguring operations, processes, and business relationships with respect to customers’ individual needs and dynamic manufacturing requirements. MCM system is characterized by four challenging characteristics: Degrees of flexibility, Production capability adjustments, Modularization methods Dynamic network-control system structure Modularization methods : Modularization methods in traditional manufacturing systems are often product-oriented, where modules are grouped in teams with intercross functions . In an MCM system, categorization of modules is based on their functionalities: the greater the diversity of module classifications, the better the system’s potential to satisfy different customized demands

58. Dynamic-network-control system structure: Control system structures in FMS are often constructed in a hierarchical mode. Modules assigned at various closely interactive layers result in the limitation of the capability for system reconfiguration, reliability, and system expandability. Because of the complexity in ever-changing manufacturing requirements and flexible process routing, fixed and centralized control is almost impossible in a MCM system. Dynamic and flexible network utilizations in MCM functional modules can maximize the strength of each empowered resource, and hence, the overall risk and costs are reduced. The dynamic network connections among functional modules are characterized as : Instantaneous: Accessing valid resources and reconfiguring functional modules should be instantaneous. Low cost: Besides the initial capital investment, it is better to reduce the recurring system costs.

59. Seamless: A set of system mechanisms needs to be established to ensure seamless data exchange among customized orders, suppliers, services, and production controls. Frictionless: There should be no resource conflicts when a new network is created. Success in this feature promotes better cost controls and dynamic network operations.

60. Integrated design and simulation system to enable MCM

61. Evolving of Supply Chain practices for competitive advantage 2001: CPFR 1996: ECR 1992: VMI/Co-Managed 1986: Quick Response (QR) 1960s: Just-In-Time/Total Quality

62. The goal of JIT in manufacturing organization is to continuously reduce the cost associated with requirement material resource. Its objective is to achieve cost efficiency through zero inventory. The goal of JIT process is to reduce excess working capital held-up on account of material & minimal inventory at WIP . The constraints of managing RM inventory are due to : Unpredictable quality of supply of material Inability to hold tolerances. Shortcoming in lead time. ( Erratic delivery ) Short supply of quantity of material Inaccurate forecasting Non standard materials being used ( Increased variety ) Last minute product changes.

63. Steps for implementing JIT in an organization. Do detailed analysis of inventory requirement of all types at every stage of production process. Estimate the market fluctuations on account of price, supply , quality demand etc. Identify reliable source of suppliers who are capable of supplying material as when required. Take supplier in to confidence & sensitize them the importance of JIT inventory & build healthy business relationship with suppliers to have high commitment & ownership . Use Value engineering approach.

64. Conduct periodic vendor appraisal & follow vendor rating system of evaluation . Give instant feed back on the supply & suggest improvement steps. Sign rate contract . Use IT enabled ordering system , ERP .

65. Inventory Control Techniques Inventory control techniques are used to prevent : 1 financial leakage due o excessive stock & poor demand , 2 2shortage of inventory 3. Inventory Obsolescence Plan safety stock for critical & essential items Build selective control on fast & slow moving inventory . Various Inventory control technique used are : ABC : Always Better Control VED : Vital Essential & Desirable SDE : Scarce Difficulty & Easy FNSD Fast moving , Normal , Slow moving , Dead

66. % i t e ms 30 1 1 ABC Classification Usage % 100 CLASS B CLASS C 70 (Inventory Value ) CLASS A High annual consumption value items Moderate annual Consumption value Low annual consumption value 90

67. VED analysis : Vital : Without which production process will come to halt. Essential : Non availability of such item will affect the efficiency . Desirable : It is good if it is available , however alternate option can be done. SDE : Scarce ( Short supply ) Difficult ( Imported components ) easily ( Short lead time )

68. Purchase Inventory review system : Review process is administered on the basis of Fixed o r de r q ua nti t y ( Q s y s t e m ) a n d fi xe d p e r iod qu a n t i ty system . ( P system ) In Q system , whenever the stock level reaches the RoL , order is placed for a fixed quantity of material . RoL is calculated as a sum of demand during the lead time & variation in demand during lead time ( safety stock ) and average demand during delivery delays. ( reserve stock ) In p system , stock position is reviewed after every fixed period & order is placed according to stock position & demand .

69. Value Engineering or Value Analysis It is a technique of cost reduction and cost prevention. It focuses on building necessary functions at minimum cost with out compromising on quality, reliability ,performance & appearance. It helps in identifying unnecessary costs associated with any material , part components or service by analysis of function and efficiently eliminating them with out impairing the quality functional reliability or its capacity to provide service. It is a preventive process.

70. When to apply VE Raw material cost increases suddenly . V e n d o r s ar e un r e li a b le & org a n iza t i o n is h i g h ly dependent on a few select vendor . Cost of manufacturing is disproportionate to volume of production . Value analysis is done w.r.t cost associated at: • • • • Cost Value (Labour , Material & overhead). Use Value Esteem Value ( Look & finish ) Performance Value ( Reliability , Safety , Service & Maintenance )

71. Value = Performance ( Utility) Cost Vendor analysis is done to minimize the cost incurred due to a supplier Inefficiency or inability . Vendor cost to be considered are : Opportunity loss due to poor quality ( High rejection cost ) leading to machine & labour idle time. High re-work cost Inconsistent lead time Inability to meet the demand of the manufacturer Poor Credit terms

72. Value engineering procedure: C o n s t a ntly e va lu a te the in ven t o ry c o s ts a sso ci a t e d & benchmark against the best in practice. As & when the cost of manufacturing increases disproportionately, identify an alternate source for contract manufacturing & monitor the quality & standards. Use more standard parts which can be sourced easily Develop more suppliers ( at least 4 to5 for one part.) & minimize dependency on one supplier. Audit the supplier’s work premise & rate them on the performance . Conduct quarterly vendor meet & share the highlights & concerns .

73. Manufacturing Requirement Planning

74. M R P -1 M RP -II E R P Material requirement planning in m an uf a c tur i n g o rg an i z a ti on . Manufacturing resource Planning in manufacturing organization Enterprise resource Planning Inventory planning Production planning & control Material, Machine Method Man Business planning & control Man Machine Material, Method & Money Material planning The essence of the progress was based on seamless integration and analysis of information on various resources required by a manager to make an effective decision.

75. MRP vs. ERP — Manufacturing management systems have evolved in stages over the past three plus decades, from a simple means of calculating materials requirements to the automation of an entire enterprise. As frequent changes in sales forecasts happened entailing continual readjustments in production, as well as inflexible fixed system parameters, MRP (Material Requirement Planning) evolved into a new concept : Manufacturing Resource Planning (or MRPII ) and finally the generic concept Enterprise Resource Planning (ERP) Prior to the concept of ERP systems, a manufacturing organization faced tremendous difficulty in planning & controlling of resources like people , finance WIP inventory at plant , machine status etc due to lack of integrated & updated information about resources.

76. Advantage of ERP in a manufacturing organization . Integration among different functional areas to ensure proper communication, productivity and efficiency Integration of Design engineering & collaboration. (CAD & CAM ) Order tracking, from acceptance through fulfillment The revenue cycle, from invoice through cash receipt Managing inter-dependencies of complex processes BOM . Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) The accounting for all of these tasks: tracking the revenue , cost and profit at a granular level.

77. Disadvantages Customization of the ERP software is limited. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive (This has led to a new category of "ERP light" solutions) ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies, cited as one of the main causes of their failure. Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.

78. The Next Competitive Advantage: Collaborative Commerce 2004: Collaborative Commerce 2001: CPFR 1996: ECR 1992: VMI/Co-Managed 1986: Quick Response (QR) 1960s: Just-In-Time/Total Quality

79. Software solution for collaborative commerce SAP/R3 manugistics leveraged Intelligence i2 LOGILITY VOYAGER S O L U T I ONS Eqos

80. A shared process of creation between two or more parties with diverse skills and knowledge delivering a unified approach that provides the optimal framework for customer satisfaction . Voluntary Inter Industry Commercial Standards (VICS ) A set of guidelines supported and published by the Voluntary Inter industry Commerce Standards (VICS) Association ,Trading partners to share their plans for future events, and then use an exception-based process to deal with changes or deviations from plans. The CPFR® ( Collaborative planning , forecasting & replenishment

81. CPFR is a business practice that combines the intelligence of multiple trading partners in the planning and fulfillment of customer demand. CPFR is a strategy for improving supply chain efficiency and effectiveness by making demand transparency, drive the execution of the supply chain participants to maximize value for the end-customer. Fundamentally, the aim of CPFR is to convert the supply chain from a disjointed, ineffective and inefficient “push” system to a coordinated “pull” system based upon end customer demand.

82. CPFR Process Model. The driving premise of CPFR is that all supply chain participants develop a synchronized forecast. Every participant in a CPFR process — supplier, manufacturer, distributor, retailer — can view and amend forecast data to optimize the process from end to end. Essentially, CPFR puts an end to guesswork in forecasting. It means that manufacturers and retailers share their plans, with detailed knowledge of each others’ assumptions and constraints. The target objectives for CPFR process include the following: Increased in-stock at shelf Reduce average transit inventory Increased sales Reduce operating expense Reduce cost of goods Reduced lead time/cycle time Decreased account receivables Reduced forecast error +/- 10% (Source: University of Denver Supply Chain Round table: “CPFR Overview.” Value Chain Collaboration Associates, Inc

83. FRONT END AGREEMENT JOINT BUSINESS PLAN Collaborative Planning CREATE SALES FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Collaborative Forecasting CREATE ORDER FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS GENERATE ORDER B uy e r The CPFR ® Process Model Seller

84. Phase I — Planning This phase relates to people, processes, and developing of trust. Partners must break down cultural barriers and company-centric perceptions so they can view the bigger picture. Partners have to share a unified vision to make the process work. First, partners must define their relationships and identify what processes need to be changed to allow stronger collaboration. Next, “trigger” points for alerts must be identified and assignment charts developed that designate who responds to the alerts and in what time frame. Overall, suppliers may have to change compensation plans and move away from “push” plans, so that shared forecasts can “pull” information through the processes. Specific benchmarks and key performance indicators (KPIs) must then be established to determine the efficacy of the shared plan. The two major steps in this plan are : Developing a front-end agreement Creating a joint business plan.

85. Phase II — Forecasting Collaborative forecast of end-user demand continues through all aspects of supply chain planning, providing support for both long-term and day-to-day decisions. Analysis like “what-if ” , forecasting planners can quickly and easily determine the financial and operational effects of any action throughout the supply chain. In Phase II, an organization creates the sales forecast, which then feeds into the order forecast. A large quantity of information rapidly permeates the entire process. A single, collaborative forecast is created with dynamic capability to address the complexities in the business environment. Using advanced demand planner ( software modules ) , organizations can build multi-dimensional models, which may include product hierarchies, geographies, channels, and specific customers. Causal variables such as pricing, promotions, and new store openings can also be completely integrated. In addition, historical data can be combined with near real-time variations in the channel to get the most accurate forecast.

86. Phase III — Executing During 3 rd phase of CPFR , front-end planning and forecasting come together with supply chain execution. Using Order Promising software module , companies can instantly determine where orders can best be satisfied — from inventory at any location, planned production orders, or purchase receipts. When there is a promotion (such as a new store opening or product launch), Order Promising allows companies to quote future delivery dates or other key information related to the event. Order Promising provides the real-time information essential to good customer service. Manufacturing, warehousing, order fulfillment, and transportation plans are completely synchronized into an integrated package to monitor and ensure on-time execution of the order delivery process.

87. Collaborative commerce in Retail PL A N S O U R C E D E L I VE R SUPPLY CHAIN SUPPLIER C A TEG O RY Man a g e m e nt Procurement In sourcing/out sourcing Relationship Management Supply chain design Demand forecasting Inventory planning Distribution planning Allocation Transportation Planning ➢ ➢ ➢ D el iv e r y sche d u l ing & coordination Warehouse Management Inventory Management Transportation management Order Fulfillment Visibility, Event Management & Track & Trace Reverse Logistics Trade Management Process view of Supply Chain in collaborative commerce . Customer

88. Managing Manufacturing Lead time ( MLT ) is an essential task in any organization to deliver the goods as per the customer order lead time. MLT depends on the nature of manufacturing process. The four types of manufacturing process are : Design Procure Manufacture Assemble Ship ETO ( Engineer to Order) MTO ( Manufacture to Order ) ATO ( Assemble to Order ) MTS (Made to Stock ) ETO Lead Time 92

89. 93 Types of Production System

90. Production Process. Standardization Non standardization Flow (Mass) Production Batch production Job production Project/ Turn key production MTS ETO Plant Layout Standard parts & Hi gh Volume 94 Non standard low volume Plant location Production process V a riati o n

91. 95 Flow or mass production employs special types of machines specially designed for mass scale productions . It involves decomposition of the production task in to minute details & are grouped them according to the norms of production. An assembly line consisting of workstations in a sequence meant to do a portion of the work , feed the parts and components machined to assembly line .Material moves continuously at a uniform average rate through the sequence of workstations . When to deploy mass production . When production quantities are large & variations are small . Demand for a single product is very high . It must justify economy of scale. Mass or Flow production

92. 96 Advantages of Flow production : Smooth flow of material from one station to next in a logical order. Result in small WIP inventory due to well connected process. Effective production time can be short if the processes in the production is not in efficient . Low labour skill is required and can be automated easily . Low labour training is required. M a t e r i al m o v e m e n t i s l e ss & l e s s W IP i nve nt o ry st o r ag e space required.

93. Disadvantages : Complete line stoppage if a machine breakdown. High preventive maintenance cost Plant layout is dictated by the product . Any change in the product design will call for a major change in plant layout . 4.Line balancing is essential in the assembly line to attain line efficiency . ( Grouping of task to ensure that sum of the time of the work elements performed at a work station ( station time ) does not exceed the cycle time LE = ST 97 i K x ( CT) ST = Station time for i station K = total no of work station CT= cycle time 5.Low degree of manual supervision .

94. 98 Batch production : When a variety of products to be made & volumes are not large , batch production is followed. It uses general purpose machines or flexible machine system which can be used to produce variety of products. Material flow is more complex than mass production. Plant Layout is designed keeping in mind the variety & their flow pattern . Production cycle time are larger as compared to mass production. Production scheduling follows a particular sequence in which jobs should be done at the work center. Optimal batch size determination for economy is essential. Batch production

95. Manufacturing Economic batch Quantity Items are produced & consumed simultaneously for a portion o f t h e cyc l e t i m e. T h e r a te o f c o n s u m p t i o n i s u n i f o rm t h ro ug h out the year & cost of production remains same irrespective of production lot . t p p rate Q 2 DXC s C i EBQ = max = t p x ( P-D) P D Q = Pxtp , tp = Q/P P = production rate D= consumption rate P – D = inventory build u Q = Inventory at t 1 C y c l e P 99 ( P-D )

96. I max = t p x ( P- D ) = Q/P x ( P-D) = Q x (1- D/P) Av annual Inv = Q/2 x ( 1- D/P) Av Annual Inv Cost = Q/2 x (1- D/P) C i Annual set up cost = D/Q x C s Q/2 x(1-D/P) C i = D/Q x C s Q 2 = 2 x D x C s ( P - D ) C i P Q = 2 x D x C s x P C i P-D E c o n o mic Batch Qty 100

97. A manufacturing unit has annual demand of 10000 valves. Each valve costs Rs 32. The product engineering department estimates the setup cost as Rs 55 & holding cost as 12.5 % of the valve. The production rate is uniform at 120 valve/day. Production happens for 250 days in a year. Calculate optimal batch size & total inventory cost on the basis of optimal policy. Find the number of set ups on the basis of optimal batch . Ci= 12.5% of 32 = Rs 4 , D= 10000/250 = 40 units /day EBQ = 2 x 10000 x 55 ( 120/120-40) = 642 valves. 4 (10000/642)x 55 + 642/2 ( 120-40/120) x 4 856.8 + 856.35 = Rs 1713.15 /yr No of setups = 10000/ 642= 16 Approx 101

98. 100 Disadvantages : Longer and irregular flow lines result in expensive material handling process. L a r g e r WI P i n v en t o ry H ig h g r a d e sk il l e d w o r k e rs & o p e r a t o rs a re required. Total production time required is relatively larger. Job Production : In job production, similar machines are used to produce variety of jobs of smaller quantity . As nature of demand is unpredictable, & each job order being unique, it requires varying processing time & distinct routing process through a number of machines in the factory. Job shop consists of general purpose machine clubbed in different production centers. Each job requires a unique scheduling as there are n jobs to be processed by m machines so as to meet the due date.

99. 103 Managing total processing time ( make Span) Minimizing idle machine time The make span depends on number of jobs to be processed & number of machine available, their due date, job shop layout , the manner in which the jobs arrive at the factory. Planning for the job shop involves deciding the order of priority for the jobs waiting to be processed in a queue to achieve the desired objective. Attaining Shortest processing time( SPT sequencing rule ) is key to job work. It helps to minimize lateness of the job . ( Job completion time - Due date) Other approaches are first come first serve ( FCFS) Prioritize the job with earliest due date.

100. 104 Managing Large & complex production work Project Work ) . A large complex task comprising of multiple activities to be performed from manufacturing to delivery, installation & co m m i ss i on i n g r e q u i r e s t i g h t sch edu li n g c o o r d i na t i o n & monitoring of activities from start to end for timely completion of work to avoid monetary loss & high customer satisfaction. Cost ,Time & Performance are the basis of such project activity. Interrelationships between the activities need to be understood by the operation team. Erection of a manufacturing plant. Manufacturing of ships , airbus etc.

101. 103 It requires a specific layout ( project layout ) to handle each part of the project. Heavy machinery and material handling equipments are required to manage the projects. Tight control and monitoring of resource are the essence of the project. All such production activities are done using project techniques called CPM ( Critical Path Method ) & PERT ( Project Evaluation & Review Technique) CPM deals with project management involving deterministic time estimates . When activity durations of the project are not deterministic & probabilistic, PERT is used.

102. 106

103. 107 PLANT LAYOUT Plant layout is a floor plan of the physical facilities used for ease in production system. It is an spatial arrangement of physical facilities to increase the productivity in the shop floor. An economic layout decision helps to achieve long run efficiency in operation . It creates competitive advantageous in terms of capacity, processes , flexibility, cost and quality of work life

104. 108 If the operational system suffers from : Poor on-time performance Long production lead-times High WIP and/or finished goods inventory High overtime Lots of expediting and rescheduling Wandering or stationary bottlenecks Reluctance to take on new business . . . the n it i m p l i e s t ha t or g an iza t i on ' s production layout has constraints.

105. 109 Layout decisions . . Key benefits are : Higher utilization of people , equipment and space, Improved flow of information , & material Improved Employee morale & safer working condition, Minimize material handling cost . Types of layout are : • • • • Fixed position layout Process layout, Work cell layout, ( Group Layout ) Product layout.

106. 108 Fully automated Plant layout WIP Inventory

107. 109 Assembly Line in a Car Factory

108. 112

109. 113

110. Product layout : Machines & auxiliary service are located according to the processing sequence of the product . This is also called line layout. Material flows in a uniform rate & operations are carried out in a balanced way. Sawing Turing bending drilling Grinding Packing Quality a p pr o v a l Inspection Painting RM 114 F G

111. 115

112. 116 Advantages product layout Simple production Planning & control . For high volume standard outputs, machine & work force utilization is high. Operator skill can be relatively low as he is trained for one kind of operation. Limitation : Breakdown of one machine will cause stoppage of work in down /up stream level. La st m i n u te c h a ng e i n p r o d u ct d e s i gn w il l r e q u i r e m aj o r alteration in layout . Heavy investment is required in material handling equipments , machinery etc.

113. 115 Process layout : Deals with low volume high variety production activity ( intermittent production ) . The product manufactured undergoes different sequence of operation. It provides flexibility in equipment and labour assignments . The break down of one machine will not halt the processes. It is good for wide variety of product production in different s i ze. Sub As s e m b ly Grinding Milling Bending Wi e l d ing shop Drilling Dispatch Turning Sawing & Shearing Job Process Heat T r e a t m ent R M

114. 118 A h i g h de g re e o f f l ex ibility in t e r m s o f t a s k a l l oc ation to machines exists. Relatively low investment in machines . Operators are multi skilled. Handles diversity in task better. Limitation High care in PP&C required. WIP inventory will be large. High grades of skilled work force will be required. Material handling cost will be high Process layout

115. 119 Manufacturing system based on Cellular layout A manufacturing system wherein the equipment and workstations are arranged in an efficient sequence that allows a continuous and smooth movement of inventories and materials to produce products from start to finish in a single process flow , while incurring minimal transport or waiting time . In order to set up a single process flow (or single product flow) line, it is necessary to locate all the different equipment needed to manufacture the product together in the same production area. This calls for a improved production layout.

116. 120 A work cell is defined as a collection of equipment and workstations arranged in a single area that allows a product or group of similar products to be processed completely from start to finish. It is, in essence, a self-contained mini- production line that caters to a group of products that undergo the same production process. Cellular manufacturing involves the use of work 'cells.

117. Work cell layout : A combination of product & process layout. It provides the benefits of both layout to the bu s i ne ss. Unit 1 Unit II Unit iii Unit IV Unit V Job A Job B Work cell Assembly line 121

118. 122 Work Cell layout will provide standardization & rationalization of products , good estimates , effective machine operation , high productivity , reduce set up time, less down time , better through put etc. Work cell / Group layout will not be feasible for all kinds of operations. However the layout can meet the requirements of batch production system . When the product mix manufactured is very dissimilar it will not be advisable to have group layout.

119. 123 Benefits of Cellular layout Cellular layout helps to eliminate over production and reduce waste. Cellular manufacturing helps reduce waste by reducing defects that result from processing and product changeovers. Since products or components move through a cell one piece at a time, operators can quickly identify and address defects. Allowing operators to stop production when defects occur prevents wasted material and time.

120. 124 In a conventional queue process, it is difficult to identify and respond to defects until the entire batch is produced or numerous pieces are processed. Reducing defects has several benefits such as : Fewer defects decreases the number of products that must be scrapped. Fewer defects also means that the raw materials, energy, and resulting waste associated with the scrap are eliminated. Fewer defects decreases the amount of energy, raw material, and waste used or generated to fix defective products that can be re-worked.

121. 125 Cellular layouts typically require less floor space for equal levels of production. Reductions in square footage can reduce energy use for heating, air conditioning and lighting. It can also reduce the resource consumption and waste associated with maintaining the unneeded space (e.g., fluorescent bulbs, cleaning supplies). Cellular manufacturing layouts and automation can free workers to focus more closely on equipment maintenance and pollution prevention, reducing the likelihood of spills and accidents.

122. 124 Fixed position layout : The space required is very large , meant for large bulky products . Heavy engineering equipments. Ship yard , Air repair base. Equipment and people are fixed to an operation area. Ship Repair base Boiler manufacturing

123. 127 Layout Design tools. Manual Method : 1.Travel chart 2. Systematic Layout planning Computerized Method. ( Using algorithms ) 1Automated Layout Design Algorithm ( ALDEP) Computerized Relationship Layout Planning (CORELAP) Computerized Relative Allocation of Facilities Technique.( CRAFT)

124. Plant layout variables 1.Flow of material 2.Process flow R e lat i ons h i p o f 1 &2 Space Re qu ireme n t Space Avai l a b le Practical Constraints Develop layout alternatives 128

125. 127 Production Planning & Control Sales & M a r ket i ng Physical Pr o du cti o n work Production Planning & control function Staff function Line function Planning, coordinating and controlling fulfillment or OTD cycle. Plan & control material , material cost & Vendor Plan & control machine schedule, maintenance &productivity. Plan & control plant productivity, safety , hygiene Production incentive etc. Set quality standard .

126. 128 Production Planning and Control (PPC) is a process that comprises of managing the performance of critical functions during planning as well as control of production a ct i v i ty to de l i ve r q u a l i ty ou tp u t w i t h i n the st i pu l at e d t i m e frame at minimum cost of production. Production Planning & Control

127. 129 Production Planning & Control Production planning function is responsible for planning of resources like Material , Machine , Manpower , Method & Money for production activity. Production planning function deals with two levels of planning : Prior Planning : All activities such as product development & design , production cost estimation , vendor identification , sourcing mechanism , Material planning , Order writing etc. Active planning includes Process scheduling , & routing, work force allocation , machine scheduling , Capacity scheduling, Finite capacity scheduling , Tool planning Material handling & movement etc.

128. 132 PP&C function is responsible for managing the overall cycle time during production process since Cycle time is directly related to production rate . C T ( C y cle T i m e ) = P ro d u cti v e time / Demand per period If the output per day from a manufacturing shop is 24 cylinders operatin g in a single shift , = 8 X60/24 = 20 Min is cycle time for one cylinder. Since the actual time available would be less than the ideal time ie 8hrs on account of various delays viz operator efficiency , break etc, set up , the effective cycle time would be less than 20 min . As demand increases & lead time need to be minimized to be competitive in the market , PP&C has to manage Effective cycle time.

129. 133 O T D c y c l e t i me = pr o d u c t i o n tim e + d el i very tim e ( M T S) = order time + Production time + delivery time ( MTO) = order time + Supplier lead time + integration time + d e l i very tim e ( A T O ) = Order time + Supplier lead time + subcontractor’s lead time + Production time + Delivery time + Installation &commissioning time ( ETO) PP&C owns the prime responsibility in a manufacturing organization to ensure that OTD cycle is in accordance with the realistic customer’s acceptation of delivery time.

130. 132 Responsibilities of PP&C function 1.Material Planning Forecasting inventory Preparing material budget Make or buy decision analysis Estimating individual requirements of parts ( BOM ) Raising material indent 2.Inventory Control ABC analysis SDE& VED inventory analysis Fix Economic Batch Order Building safety stock & re-order level. 3.Subcontract Activity Vendor evaluation ( value engineering ) Monitor out source activity Outsource to subcontractors Make vendor inspection schedules Handling & movement of materials Disposal of scrap inventory

131. 133 4.Maintenance Planning & Scheduling Preventive & corrective maintenance schedule Spares planning 5 Machine scheduling Job Scheduling Work Scheduling ( Loading ) Progress reporting Productivity study ( Method study ) 6. Quality control Inspection schedule TQM Kaizan Kanban 7 .Work & Job Design Method study Productivity norms Work environment

132. 134 RM demand estimation According to sales order Develop Aggregate Production plan Master P r o d uc t i o n Schedule C re ate MRP/ BOM Capacity r e q u ir e m e n t plan Execution Inform sales Sales dept. the expected delivery schedule Material Requirement Planning process : When a production system operates through dependent demand , technique used to determine the requirement of RM for production is called MRP. Machine & operator schedule Raise work o r de r Monitor Sche d u l e & take corrective Ac t i on

133. 135 Material requirement planning MRP process. Demand a ggr e g a t i on Explode Demand into bill of material ( BOM) Check Inventory Stock (Stocking Policy ) Raise production . work order Raise subcontract contract Analyze Make or Buy decision M a ke Buy Stock av a il a b i l i t y Y N Raise Pu r c h ase Indent

134. 136 Q/2 Q T i m e EOQ Assumption : Demand Constant & No lead time Lead time D Lt = Av demand x LT Stock level = EOQ + D Lt ROP ( When supplier lead time not constant ) S t o ck l e v el = E OQ + D lt + va r i a t i o n i n de m a n d ( w he n demand fluctuates )

135. 137 Make or Buy decision . Criteria of make : 1. Finished goods can be made cheaper by the firm. 2.Quality standardization can not be met by out side party. ( strict quality control. ) 3.Supply of the parts are unsteady ( Long lead time) 4.Capacity of production can be used for manufacturing some other part. ( Fixed cost) Buy : 1.Heavy investment in the facility 2.Parts are standard and available easily. 3.Demand of the components are seasonal . 4.Patent of some legal implications exists. 5.Cost of buying is less than manufacturing.

136. 138 A firm has extra capacity which can be used for production of gears, which they have been buying form the market at Rs 300 per unit. If the firm makes gears , it incurs the following cost. Mat cost Rs 90/unit. Lab cost 120/unit Overhead Rs 30/unit . The annual fixed cost of production estimated is Rs 240,000. Projected demand for next 24 months is 4000 units. Will it be profitable for the firm to manufacturer? The same capacity can be utilized for producing agri-equipment. In such case there will be a saving of s 90,000. What should be the decision. Making /Buying gears V C / u ni t = Total VC = ( Rs 90 + 120+ 30) = Rs 240 4000 X 240 = 9,60,000 Fixed cost = 2,40,000 T ota l co s t = 12,0 , 00 Purchase cost = ( 4000 x Rs 300/unit ) = 12,00,000 2,40,000 Fi x e d c os t = Total cost = 14,40,000 Make gears Rs 12,00,000 Make Gears and Agri Equipment 12,00,000 – 90,000 = 11,10,000

137. There are two processes to manufacture a particular product in a firm . Alternatively , they can also buy it from local market. The cost associated areas follows. The annual demand for the product is 10000 units. When would it be feasible for the firm to use process A & B . Cost ( Rs ) process A Processes B Buy FC/ Year 1,00,000 3,00,000 ----- VC/ unit Buy price / unit 75 70 ----- 80 Cost of Process A = 1,00,000 + 75 x 10000 = Rs 8,50,000 Cost of process B = 3,00,000 + 70 Cost of buying = 80 x 10000 = x 10000 = 8,00,000 Rs 10,00,000 Le t Q be the vol of production. For Process A 100000 + 75 Q =< 80 Q 100000 =< 5 Q 20000 units TC A >= TC B 100000 +75Q >= 300000 + 70Q Q>= 40000 When demand exceeds 20000 units , use process A & beyond 40000, use proc 1 e 3 s 9 s B

138. 140 Determining Economic production quantity ( batch size ) As volume reduces , the total cost of production becomes unviable unless the optimum batch quantity is not produced. Total cost comprises of two conflicting costs Setup cost ( favors large batch size ) and inventory holding cost ( favors small batch size ) There are three possible situations Demand rate > production rate ( shortage will occur ) Demand rate = production rate ( N need of holding inventory ) Demand rate < production rate ( Inventory stock will go on increasing )

139. 141 Cost trade off. When orders are placed more frequently, the ordering cost is high but carrying cost lost is low , on the other hand if less frequent orders are placed ordering cost will be low but carrying cost will be high. C o s t O r d er Qty Total cost Total cost Ordering cost Carrying cost

140. An item has yearly consumption of 1000 units . The cost related to sourcing & Making are as under: Decide which option would be better for the organization. Source Make Item cost /unit Rs 6.00 Rs 5.9 Ordering cost 10.00 -- Set up cost -- 50.00 Annual ICC/item 1.32 1.3 Production rate ---- 6000 BUY : EOQ = 123 units TC = 1000 x 6 + 1000 x 10 + 123 X1.32 123 2 = 6162.48 Make : EBQ = 304 units . TC = 6229.14 144

141. 145 Inventory Control Techniques Inventory control techniques are used to prevent : 1 financial leakage due o excessive stock & poor demand , 2 2shortage of inventory 3. Inventory Obsolescence Plan safety stock for critical & essential items Build selective control on fast & slow moving inventory . Various Inventory control technique used are : ABC : Always Better Control VED : Vital Essential & Desirable SDE : Scarce Difficulty & Easy F N S D Fas t m o v i n g , N o rma l , S l o w m o v i n g , Dead

142. % i t e ms 30 146 1 1 ABC Classification Usage % 100 CLASS B CLASS C 70 (Inventory Value ) CLASS A High annual consumption value items Moderate annual Consumption value Low annual consumption value 90

143. 147 VED analysis : Vital : Without which production process will come to halt. Essential : Non availability of such item will affect the efficiency . Desirable : It is good if it is available , however alternate option can be done. SDE : Scarce ( Short supply ) Difficult ( Imported components ) easily ( Short lead time )

144. 148 Purchase Inventory review system : Review process is administered on the basis of Fixed o r de r q ua nti t y ( Q s y s t e m ) a n d fi xe d p e r iod qu a n t i ty system . ( P system ) In Q system , whenever the stock level reaches the RoL , order is placed for a fixed quantity of material . RoL is calculated as a sum of demand during the lead time & variation in demand during lead time ( safety stock ) and average demand during delivery delays. ( reserve stock ) In p system , stock position is reviewed after every fixed period & order is placed according to stock position .

145. 147 The goal of JIT in manufacturing organization is to continuously reduce the cost associated with requirement material resource. Its objective is to achieve zero ( minimal ) inventory through out the supply chain, hence implement good material control. The goal of JIT process is to reduce excess working capital held-up on account of material , minimal inventory at WIP . The constraints for implementing JIT are : Unpredictable quality of supply of material Inability to hold tolerances. Shortcoming in lead time. ( Erratic delivery ) Short supply of quantity of material Inaccurate forecasting Non standard materials being used ( Increased variety ) Last minute product changes.

146. 150 Steps for implementing JIT in an organization. Symptoms : Identify the symptoms leading to inventory issue. Frequent Stock out Causes : Poor demand forecast & inconsistent supply Schedule by supplier . Remedy Pull inventory system . Do detailed analysis of inventory requirement of all types at every stage of production process. Estimate the market fluctuations on account of price, supply , quality demand etc. I den t i fy r eli a b l e s o u r ce o f s u pp li e rs w h o a r e ca pab l e o f supplying material as when required.

147. 151 Take supplier in to confidence & sensitize them the importance of JIT inventory & build healthy business relationship with suppliers to have high commitment & ownership . Use Value engineering approach. Conduct periodic vendor appraisal & follow vendor rating system of evaluation . Give instant feed back on the supply & suggest improvement steps. Sign rate contract . Use IT enabled ordering system , ERP .

148. 152 Value Engineering or Value Analysis It is a technique of cost reduction and cost prevention. It focuses on building necessary functions at minimum cost with out compromising on quality, reliability ,performance & appearance. It helps in identifying unnecessary costs associated with any material , part components or service by analysis of function and efficiently eliminating them with out impairing the quality functional reliability or its capacity to provide service. It is a preventive process.

149. 151 When to apply VE Raw material cost increases suddenly . V e n d o r s ar e un r e li a b le & org a n iza t i o n is h i g h ly dependent on a few select vendor . Cost of manufacturing is disproportionate to volume of production . Value analysis is done w.r.t cost associated at: • • • • Cost Value (Labour , Material & overhead). Use Value Esteem Value ( Look & finish ) Performance Value ( Reliability , Safety , Service & Maintenance )

150. 152 Value = Performance ( Utility) Cost Vendor analysis is done to minimize the cost incurred due to a supplier Inefficiency or inability . Vendor cost to be considered are : Opportunity loss due to poor quality ( High rejection cost ) leading to machine & labour idle time. High re-work cost Inconsistent lead time Inability to meet the demand of the manufacturer Poor Credit terms

151. 153 Value engineering procedure: C o n s t a ntly e va lu a te the in ven t o ry c o s ts a sso ci a t e d & benchmark against the best in practice. As & when the cost of manufacturing increases disproportionately, identify an alternate source for contract manufacturing & monitor the quality & standards. Use more standard parts which can be sourced easily Develop more suppliers ( atleast 4 to5 for one part.) & minimize dependency on one supplier. Audit the supplier’s work premise & rate them on the performance . Conduct quarterly vendor meet & share the highlights & concerns .

152. 156 MRP vs. ERP — Manufacturing management systems have evolved in stages over the past three plus decades, from a simple means of calculating materials requirements to the automation of an entire enterprise. As frequent changes in sales forecasts happened entailing continual readjustments in production, as well as inflexible fixed system parameters, MRP (Material Requirement Planning) evolved into a new concept : Manufacturing Resource Planning (or MRPII ) and finally the generic concept Enterprise Resource Planning (ERP) Prior to the concept of ERP systems, a manufacturing organization faced tremendous difficulty in planning & controlling of resources like people , finance WIP inventory at plant , machine status etc due to lack of integrated & updated information about resources.

153. M R P M RP1 E R P Material requirement planning in m an uf a c tur i n g o rg an i z a ti on . Manufacturing resource Planning in manufacturing organization Enterprise resource Planning Inventory planning 157 Production planning & control Material, Machine Method Man Business planning & control Man Machine Material, Method & Money Material planning The essence of the progress was based on seamless integration and analysis of information on various resources required by a manager to make an effective decision.

154. 156 Advantage of ERP in a manufacturing organization . Integration among different functional areas to ensure proper communication, productivity and efficiency Integration of Design engineering & collaboration. (CAD & CAM ) Order tracking, from acceptance through fulfillment The revenue cycle, from invoice through cash receipt Managing inter-dependencies of complex processes BOM . Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) The accounting for all of these tasks: tracking the revenue , cost and profit at a granular level.

155. 159 Disadvantages Customization of the ERP software is limited. Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive (This has led to a new category of "ERP light" solutions) ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies, cited as one of the main causes of their failure. Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications.

156. 160

157. Production Control . It involves work scheduling Reporting & corrective action. Production Planning  Work order  Scheduling Reporting Corrective Action 161 Objective : Manufacture & deliver the work order within the committed time within the resource constraints provided. Effective utilization of time . Eliminate stress during the production activity Cent percent plant capacity utilization Minimize cost on waste like overtime, scrap , down time etc. Proactive reporting of issues at shop floor , like absenteeism of workers , non availability of material on account of rejection , unplanned breakdown , daily reporting of production status as per the target plan.

158. 162 Scheduling: It deals with working out of optimal time required to perform each operation and also the time necessary to perform the entire series as routed, making allowances for all factors concerned. It mainly concerns with time element and priorities of a job. The pattern of scheduling differs from one job to another . Master Schedule : Weekly or monthly Schedule prepared by breaking -down of the production requirement for each product for a definite time period. By having this as a running record of total production requirements, production manager is in better position to shift the production from one product to another as per the changed production requirements. This forms a base for all subsequent scheduling activities.

159. 163 Master schedule Chart Master schedule chart communicates the following information related to production schedule. Operator schedule : This schedule informs the shop manager about the operator detail who is supposed be reporting for the work in a given shift. Machine schedule : This schedule informs the shop manager about the type of machine to be used for doing a job in a given time.

160. 164 Reporting of the production progress in the plant. Load chart Gantt Chart Process Chart

161. 163 Work order Product A Work order Product B Work order Product C G a nt t c h art

162. Date & shift 19. 3 S1 1 9 . 3 S2 19.03 S3 20.03 20.03 20.03 21.03 S1 S2 S3 S1 Type of Work Sawing M/c Type: A Bending M/c Type: B Grinding M/c Type: C Wielding M/c Type: D 166

163. 167 A master schedule is followed by operator schedule which fixes total time required to do a piece of work with a given machine or which shows the time required to do each detailed operation of a given job with a given machine or process.

164. 168 1 a ) Machine scheduling : A process created for effective utilization of machine in the shop floor on the basis of actual available time for processing . It involves Set up time required . Startup time Routine maintenance time ( Cooling time, Tool trail ) Operator efficiency Total Machine Hr – Delay = Actual Hrs 1 b ) Process scheduling : A method of establishing most economic & shortest path for production . Process scheduling requires an understanding the flow of the work process & create a process sheet or route sheet to optimize the time.

165. 169 Process sheet : It gives the optimum method to do a job , thereby fixing the sequence of the operation , link the ancillary or parallel process to be accomplished . It gives the details & specification of the machines tools , operator to be deployed for the job. Delays on account of set up maintenance etc is communicated to the operator. Routing: Under this, the operations, their path and sequence are established. To perform these operations, the proper class of machines and personnel required are also worked out. The main aim of routing is to determine the best and cheapest sequence of operations and to ensure that this sequence is strictly followed.

166. 170 P r epa r i ng p r o c e ss s h e e t ( R o u t i n g pr o c e d u r e ) i nvo l ve s following activities. An analysis of the article to determine what to make and what to buy. To determine the quality and type of material Determining the manufacturing operations and their sequence. A determination of lot sizes Determination of scrap factors An analysis of cost of the article Organization of production control forms.

167. 171 Process sheet includes the following details of a process. Part name to be machined & its engineering drawing & specification . Sequence of the operation to be performed . Specify the the machine & tools to be used. ( cutting tools ,jigs, fixtures ) Operating machine details like Speed , ,load , cooling time set up time ) Operating skill required Productivity norm Maintenance schedule of the machine Subsequent operations

168. Process scheduling differs depending upon the nature of production . Continuous or mass production : It is done by industrial engineers at the plant layout stage. It is difficult to alter the plan & incurs heavy expenditure. Batch production : In this case a master process sheet is created & is communicated to the shop floor . As & when the product line changes it is altered. Job order. In this case the process sheet is created more often as the nature of operation varies . Process schedule acts as a standard operating manual for process engineers to refer incase of any emergency or accide 17 n ts.

169. Managing project based manufacturing work. A large complex manufacturing task comprising of multiple activities to be performed from design to manufacture, deliver, installation & commissioning r e qu i r e s t i gh t sc h e d u l i n g c oo r di n at i o n & m on i tor i n g o f activities from start to end for timely completion of work to avoid monetary loss & have high customer satisfaction. Tight cost control ,Timely completion of work & Performance are the basis of such manufacturing project. An understanding of Interrelationships between the activities of task is essential by the operation team. 173

170. 174 Steps involved in managing manufacturing projects. Project planning ( Drawing the network ) Time estimation of the project ( Network analysis . Identifying activity time and critical path) Scheduling : ( identifying the amount of slack in the activities and in the project ) Time- cost trade off : ( Arriving at a time where the overall cost of executing the project is minimum with out compromising on any activity. Resource allocation : ( Checking the feasibility for doing each activity at most optimistic schedule )

171. 173 Guide lines for managing project based network manufacturing work. • B r ea k the t a sk i nto de t a il e d a ct i v i t i es. • Identify the start & end of each activity. (Node ). • Estimate the time required to perform each activity. Establish dummy activities to show logical relationship between the activities . • • All activities of the network should terminate in to final destination . • Establish relationship between activities such as preceding , concurrent , succeeding etc.

172. 176 Critical Path of a Project : Critical path of a project network is the longest path in the network . It is identified by listing all possible path of the network & selecting the path having maximum sum of the critical activity time. Total Floats of the project: Total time that a project completion time of an activity can be delayed without affecting the actual project completion time. Free Floats : Total time that an activity can be delayed with out affecting earliest start time o f immediate successor activity . When time of the activities are given in three different time estimates like a = Pessimistic time m= Most likely time b = Optimistic Time mean time has to be calculated.

173. 177 Optimistic time is the time when the execution goes extremely good. Pessimistic time is when the execution goes very badly. Most likely time is when execution is with in normal expectation. µ = Mean time = ( a+ 4m+b) / 6 ² ² (Variance ) = [(b-a)/6]

174. Following activities are involved in doing a production work. Activity time & relation ship is indicated. Draw a network Sr no 1 Activity A Time 2 days Predecessor _ 2 B 5 A 3 C 3 A 4 D 4 A 5 E 6 B,C, 6 F 7 E,D B A D C 178 E F

175. Project Flow St a rt Task T a s k Precedence relationship Task 2 Task 4 End Activities Relationship Time A - 2day B - 3 C A 5 D B 3 E F C,B D 5 4 179 2 A B 3 5 C D E 5 F Task 1 3 Task 3 4 0/0 2 /2 3/5 7 / 7 6/8 Critical path = Longest path which accommodates all critical activities. Task 1 & 3 are non critical . CP = A-C-E = 12 days 12/12

176. Objective : Less than Manu f a c t uring time Customer Required Lead Time Efficiency, Effectiveness, Cycle time reduction in manufacturing operation Key Drivers Minimal Inventory Faster R e s ponse Time High Q uality Reduced over head O utco m e Low Faster High No waste , sustained High cost delivery f lexibil i ty quali t y m orale Exceed customer expectation Increase market share & profitability 180

177. 181 In today’s business world, competitiveness defines an industry leader. The drive toward maximum efficiency is constantly at the forefront of all organization. Global competitiveness is key success factor . Organizations across the country are striving to adopt lean manufacturing practices to help address worries about their bottom line. Cellular Manufacturing is one staple of lean manufacturing.

178. 182 In a lean manufacturing processes all non value adding processes are squeezed out. In a lean manufacturing process a cell consists of close arrangements of people, machines , or workstation in a processing sequence. A one piece flow of product or service through various operations with a least amount of delay & waste.

179. 183 Toyota, the foremost lean manufacturer in business today (Toyota Production System –TPS ) views value as a combination of cost; quality, and time. Cost is the total expense involved in the delivery of the product. Quality is any deviation from standard. Time is best captured as the total elapsed process time from the start of a part, or transaction, to its delivery. (If this process is the order fulfillment process or cash- to-cash process then executives have a complete picture of where time is being effectively spent, or wasted, in the organization) . It is the key fundamental differentiator between lean and traditional practices.

180. 184 Waste caused in Manufacturing Process. According to Toyota ‘s production system , seven important causes of waste in manufacturing are : The Process : Wrong process create high quantity of scrap . Wrong type or size of the machines are used or if the process is not being operated correctly it causes waste. Methods : Unnecessary motions of operator, machine & tool or material creates in efficiency & leads to waste . M ov e m e n t. P o o rly p la nn ed pr o d u c tion pl a n l a y o ut cr e a tes back tracking of the process looses efficiency.

181. 186 4. Re work due to product defect , sorting process due to scrap not being identified, leads to interruption in the smooth flow of work leading to waste. Waiting Time: Operator waiting & material waiting time in the shop floor / work center on account of no material , no work etc is a waste. Over Production : It increases the cost of carrying inventory , locks the capital creates quality problem. Inventory : Excess stocking of RM & WIP inventory brings down cost efficiency of the organization thereby reducing its competitive bargaining power . Puts the organization in stress to liquidate the inventory at lower price .

182. 186 Continuous production : - It refers to the production of standardized products with a standard set of process and operation sequence in anticipation of demand. It is also known as mass flow production or assembly line production. This system ensures less work in process inventory and high product quality but involves large investment in machinery and equipment. The system is suitable in plants involving large volume and small variety of output e.g. oil refineries reform cement manufacturing etc. Job or batch production: - It involves production as per customer's specification each batch or order consists of a small lot of identical products and is different from other batches. The system requires comparatively smaller investment in machines and equipment. It is flexible and can be adapted to changes in product design and order size without much inconvenience. This system is most suitable where heterogeneous products are produced against specific orders.

183. 187

184. Production Process. Standardization Variation M P ass r o ducti o n Batch p r o du Job c t i o n prod uction P r o j e c t / ke MTS ATO MTO/ BTO ETO Turn y production Pla n t La y out 188

185. Managing Manufacturing Lead time ( MLT ) is an essential task in any organization to deliver the goods as per the customer order lead time. MLT depends on the nature of manufacturing process. The four types of manufacturing process are : Design Procure Manufacture Assemble Ship ETO ( Engineer to Order) MTO ( Manufacture to Order ) ATO ( Assemble to Order ) MTS (Made to Stock ) E T O Lead Time 189

186. M T O 191 Inv e ntory (RM) WIP inventory Ship Shorter delivery Lead Time A T O Inventory as Per order No WIP Inventory Stock as per demand No MLT, more variety High RM Inv e ntory High WIP Inventory High FG Stock Long MLT no variety Shorter delivery Lead Time M T S Short MLT & variety Longer delivery Lead Time

187. CRANKSHAFT MANUFACTURING PROCESS 191

188. 192

189. 194 PRODUCTION PROCESS OF CRANK SHAFT

190. H E AT T RE A T ME N T P L A N T 194

191. 195 M a i n ten a nc e P la n n i ng & Control

192. 197 Continuous use of machinery causes wear & tear leading to disruption production process. Maintenance function’s objective is to keep the machines in best operating conditions with economical cost. Maintenance function has to take a timely decision to re p a ir o r r ep l ac e t h e eq ui p m en t to av oid t h e exc e ss i v e cos t in cu r r ed in the m a i n t en a nc e. ( M a int e n anc e P l a n & cos t co ntr o l ) Overcome accidents & unsafe work conditions in the shop floor. Enhance machine utilization & productivity . 5 . M a x i m m u m a v a il a bili t y o f m a ch i ne s ( U P T I M E ) for production.

193. 198 Impact of poor maintenance function in a manufacturing organization. High down time cost. Incurred loss due to the inability of the machine to produce the goods. Down time cost = cost /unit X no. of units X total idle Hrs If the manufacturing processes are interdependent activities , the financial loss goes exponential as all other dependent activities come to a halt. Idle wage : Wages to be paid to the work force & loss of productivity , leading to the in efficiencies of the machine shop . High wastage & scrap due to poor performance of the m ach i n e le ad i n g to h igh in p ut m a te r ial c o s t.

194. 198 6 . H i g h co st of r e w o rk d u e t o i n f er i o r q u a li t y o f fini s h . Loss of customer confidence. Expediting cost to meet the dead line in the form of overtime, hiring of equipment , shifting of work to another plant. etc. A cc id en t c o s t in cu rr e d d u e to pa rtial di sab i lity o r o r loss of life. Opportunity cost of the business

195. Performance measure of machines for maintenance decision Overall Equipment Efficiency ( OEE) : It is the combination of uptime ( availability of the machine for production ) , cycle time efficiency ( production efficiency ) & quality of the equipment. OEE% = Uptime % X Speed % X Quality % ( MTBF – MTTR ) MTBF Where Uptime % = X 100 MTBF= Meantime between Failure MTTR = Mean time to repair MTBF = Total Running Time Number of Failure Actual Cycle Time Speed % ( Efficiency) = Design Cycle Time X 100 199

196. 200 Good Parts Produced Quality ( %) efficiency = Total parts produced X 100

197. R eli a bili t y of M a c hi n es . Reliability is the probability that an equipment will satisfactorily perform the function for which it is des ig n ed w he n o p e r a t e d u n de r a spe cif i e d c o n dit i o n for a given period. Reliability is a function of time . It is function of condition of use . λ = Failure rate is defined as the number of times a part fails in a given interval of time. No of Failures λ = Total units of Operating Hours 201

198. EOL Zone ( Aging out of Machinery) 203 Reliability of Machines. Weibull Distribution Graph It helps to decide an appropriate maintenance strategy for high productivity in the shop floor. Rate Of F a i lure T i m e Reliability Zone Infant Morality Zone

199. 203 Reliability of the equipments depends on the design parameters , operating conditions , Probability of performance ( Mean time between failure MTBF & MTTR ( Mean time to repair ) Infant mortality : failure rate at the beginning is high & reduces with passage of time exponentially . Reliability zone : Failure rate reduces drastically & predictable to some extend EOL : Failure rate increases due to aging of the equipments & increases un predictability .

200. 204 Maintenance required at infant mortality stage is high due to poor set-up of the machine , idea ling of the machine, non trained users etc even tough the machine is new. During the reliability stage, the failure rate is minimum as the workers are now trained to operate it efficiently, machine set up issues & idea ling problems have been handled by the maintenance team. As the machine starts aging , the failure rate increases due to high failure rate of the parts & components. At this stage, the reliability of the machine is low.

201. 205 R = e Reliability of an equipment under infant mortality stage can be measured as: _ T/ MTBF Where T = Length of service before failure , e = Natural log value ( 2.71 ) MTBF = Mean time between failure λ = 1/ M T B F, H enc e R = e -T λ Substituting Product will last for a period of time “T” with out break down .

202. 206 Types of Maintenance followed in a plant 1. Preventive maintenance( PM) : It involves cleaning , inspection, oiling & retightening of parts after equal interval of time in anticipation of the condition of the machine , irrespective of the problem. Hence PM is fu r t he r c l ass i f i e d in t o P r ed i c ti v e( C o n d i t i o n b a se d ) & periodic ( Time based ) maintenance. 2 Corrective Maintenance (CM) . Two types of corrective maintenance are : Design in maintenance , where Equipment with design weakness are redesigned to improve reliability & maintainability .

203. 207 Design out maintenance to install new equipments of su p e ri o r te ch n o lo g y or s cr a pp i n g o f age d o ut m a c h in es , replacing manual to fully automatic machines. 3 . Break Down Maintenance : Repair of machines due to sudden or unforeseen breakdown. 4. Total Productive Maintenance( TPM ) : Systematic equipment maintenance process in the shop floor for high productivity , High employee morale & high job satisfaction. It is based on the premise that maintenance is not just the responsibility of a single department but a collective responsibility of top management to lower level operators.

204. Objectives of TPM : Make the plant operation maintenance- free , working on maintainability & improvement . TPM P re v en t i v e Maint P r ed i c ti v e Maint M a i n t a in ab i lity Improvement Mai n t ena n c e Free Service 208

205. 209 The objectives of TPM are to: Maximize equipment effectiveness and productivity and eliminate all machine losses Create a sense of ownership in equipment operators through a program of training and involvement Promote continuous improvement through small- group activities involving production, engineering, and maintenance personnel The definition and vision for TPM, in most cases there are common elements in any organization. These have been summarized in the TPM wheel.

206. 211 T he m e s Training Decentralization M a i n t e n a nce prevention Multi-skilling Elements Figure 8-1 The TPM Wheel Asset St ra t e g y Continuous I m p r ov e m e n t Team P r o c e ss e s Resources P l a nnin g a n d Scheduling S y s t e m s a n d Procedures E m p o w e rm en t Measurement

207. 211

208. 212 Objective of TPM : Build a collective culture of maintenance to attain maximum efficiency through out the production process. Create Zero accident , Zero defect & Zero Breakdown manufacturing process. Make Problems visible Benefits : Increased equipment productivity • Lower Maintenance cost • Reduced accident & waste • High employee commitments

209. 214 Pillars of TPM to enhance the success are : 5 S strategy of maintenance : Seri ( Sort ) Seiton ( Systematic ) Seiso ( Sweep. Keep the place clean ) Seiketsu ( Standardize ) Shitsuke ( Self Discipline ) Kaizan [ Plan, Do Check , Act ] ( PDCA ) Autonomous Maintenance : Prepare operators for routine maintenance so that core maintenance team can focus on High end maintenance activities. It aims to achieve OEE & OPE ( Overall production efficiency ) . Planned & Quality maintenance Training , Safety & Environment

210. 214 Tradeoff Between Repairs and PM At minimum level of PM, it is a remedial policy fix machines only when they break the cost of breakdowns, interruptions to production, and repairs is high As the PM effort is increased, breakdown and repair cost is reduced At some point, the total maintenance cost (PM, breakdown, and repair) reach a minimum

211. Tradeoff Between Repairs and PM Annual Cost (Rs) Degree of Preventive Maintenance Minimum Total Maintenance Cost Total Maintenance Costs Preventive M a i n ten a nce Cost B r e a k d o w n and Repair Cost Minimum Level of Preventive M a inte n an c e 215

212. How Speedy Should Repairs Be Cost (Rs) Speed of Making Repairs Minimum Total Cost of Repairs 216 Interruptions to Production Total Costs of Repairs Cost of Repair Crews & Shops, Spare Parts, and Standby Machines Cost of S low F ast

213. 218 Determining the Number of Spares Machines requirement . In a shop floor a stock of standard parts are available to replace parts that malfunction .If a standby part is not available when needed, it costs Rs300 for employee idle time and subsequent overtime. An idle standby part costs Rs 180 per week (opportunity, obsolescence, and storage costs). Determine the number of parts to be stocked based on the past data given to minimize total spare stocking costs? .

214. 218 Based on the last 25 weeks, the demand pattern for standby parts are : Weekly Demand Occurrence 5 15 10 25 15 35 20 30

215. 219 Step -1 First, compute the probability of occurrence for each level of demand. Weekly Demand Occurrence Probability 5 15 15/105 = .143 10 25 .238 15 35 .333 20 30 .286 105 1.000

216. 220 Determining the Number of Spare parts Step –II Create Payoff Table (C ij values in box) SN i Standby parts Needed EC= S j 5 10 15 20  P(SN i )(C ij )] 5 10 15 20 P(SN i ) .143 .238 .333 .286 S tandby Parts stocked

217. 221 Determining the Number of Spare parts Step –II Create Payoff Table (C ij values in box) SN i Standby Computers Needed EC= S j 5 10 15 20  P(SN i )(C ij )] 5 0 1500 3000 4500 10 900 0 1500 3000 15 1800 900 1500 20 2700 1800 900 P(SN i ) .143 .238 .333 .286 S tandby Parts stocked

218. 222 Determining the Number of Spare parts Step –II Create Payoff Table (C ij values in box) SN i Standby Computers Needed EC= S j 5 10 15 20  P(SN i )(C ij )] 5 0 1500 3000 4500 Rs2,643.00 10 900 0 1500 3000 Rs1,486.20 15 1800 900 1500 Rs 900.60 20 2700 1800 900 Rs1,114.20 P(SN i ) .143 .238 .333 .286 S tandby Parts stocked

219. 223 • Determining the Size of Repair Crews. A machines break down at an average rate of 12 per hour and the average repair time is .75 hours. The plant policy specifies that a malfunctioning machine should be out of production for no more than 2 hours as an average. How many maintenance staff should the plant have on duty? (Assume that the breakdown rate is Poisson distributed and the repair times are exponentially distributed.) T s = 2 Hrs MTTR = .75 Hrs Breakdown rate = 12 machine /hr

220. Step -1 1) Compute the necessary average service r  ate for the s 2 = 1/(  –  )  = 12.5 machines per hour 224 p l an t ( e n t i r e c r e w). t  1 (    )   12 G i v en

221. 225 2) Compute the implied average service rate per repair specialist. = 1/(Hours per machine per engineer ) = 1/.75 = 1.333 machines per hour/ engineer 3) Compute the necessary number of maintenance specialists. =  /(Machines per hour per engineer) = 12.5/1.333 = 9.375 or 10 specialists

222. 226 Optimum cost decision needs to be achieved if the maintenance function has to be profitable to the organization. In other words it is an optimum mix of planed & un planned maintenance decision . Beyond the optimum cost a machine replacement decisions have to be taken. Replacement decisions are to be taken when the parts are deteriorating at the faster rate leading to poor efficiency , high frequency of failure , high maintenance cost etc. Deteriorating efficiency of the machine can be either gradual ( mechanical parts) or abrupt ( Electrical & electronic parts.) Economic replacement policy decision: deteriorate with time & fail suddenly. when equipment

223. 227 Let C = Capital cost of equipment , n = No of years equipment is in use. S= Scrap value f(t) = Maint cost function A(n) = Average total annual cost When time is a continuous variable , Total cost = Cap cost – Scrap value + Maintenance cost Prob;1 A firm is considering of replacement of machine whose cost is Rs 1750& the scrap value is negligible. The running maint cost is as follow: Yr - 1 2 3 4 5 6 7 8 R cost 100 200 300 400 500 600 700 800 When should the equipment be replaced ?

224. 229 Yr Maint Cost Cumm Av Maint Av M/c Av Total maint Cost cost cost cost 1 o 1750 1750 2 100 100 50 875 925 3 200 300 100 583 683 4 300 600 150 438 588 5 400 1000 200 350 550 6 500 1500 250 292 542 7 600 2100 300 250 550 8 700 2800 350 219 569 9 800 3600 400 194 10 900 4500 450 175

225. 229 In case of probabilistic model replacement policy used are : Individual replacement Policy & Group replacement policy

226. 230 Spares Management Spares management has to be done by the organization to ensure that maintenance job can be conducted smoothly with out any down time on the machine on account of spares non availability. However the challenge is to ensure that the maintenance department keeps minimum level of spares so that the holding cost, obsolesce cost etc can be reduced . In order to decide the spares requirement planning , organization should know the reliability factor of the installed machine( failure rate of the components of the machine. )

227. 231 Classification of Spares Parts Maintenance & breakdown spares ( Critical spares parts ) Insurance Spares Capital investment spares ( High value spares) Rotable spares ( Reusable & standard parts ) 5 Consumable spares

228. Factors used to decide the criticality of spares in an organization are : Availability of Spares in the shortest possible of time. Cost of spares Failure rate . Stock on the Basis of failure Rate. Stock sufficient qty Buy as when required Build relationship With supplier to Provide as when Necessary. Availability L ow Hi g h L ow H i gh C o st F a il u re Rate L ow 232 Hi g h

229. 233 Quality Management Quality is a measure of how closely a goods or service confirms to specified standards. The standards can be a combinations of one or more attributes or variables of product or service being manufacture delivered .

230. 234 Qu a li t y M a n ag e m e nt Variable data are continuous in nature are measured on a sliding scale , ie deviation from standard. The data can have range in terms of upper & lower limit within which the samples of acceptance are supposed to be lying. Attributes : Attributes are the data discrete in nature & are binary . Attribute data samples are accepted or rejected.

231. November 13, 2012 235 Types of Measures Measures where the metric is composed of a classification in one of two (or more) categories is called Attribute data . _ Good/Bad Yes/No Measures where the metric consists of a number which indicates a precise value is called Variable data . Time Miles/Hr

232. 237 Strategic Areas of Quality Control in manufacturing Area Quality Control Material P l a n n ing Procurement SUPPLIER In co ming Material M an uf a ct u ring Process Final Assembly , Testing & dispatch Incoming RM Inspection P r o ces s Control Final In sp e c tion

233. 237 Quality Assurance : Design optimum quality standards, which a manufacturing function at design stage , incoming material stage production stage , FG dispatch stage after sales are to be followed in a manufacturing firm. Quality Control: The process of measuring defects ( quality ) in the product & process beyond acceptable level of defined standard. Statistical Quality control technique. Acceptance sampling Control charts

234. 238 Acceptance Sampling: Objective of Acceptance sampling is to accept or reject a lot on the basis of sample characteristics. Accurate method is 100% inspection. However in large manufacturing firms this approach could lead to time consumption, delay, money ( Destructive testing methods ) , manpower etc. Hence it is necessary to take decision based on the characteristics of a sample size picked from a given lot of material . This is known as acceptance sampling . In this process there are chances of two types of error. Type 1 Error( α) . ( Supplier or producer risk) : If the lot sample picked is bad ,but the lot size is good , it get rejected.

235. 240 Type II Error ( β ) or manufacturer’s/ buyer’s risk : If the lot sample picked is good , but the lot size is bad , when such lot is accepted , then manufacturer incurs great loss . Hence both parties are expected to jointly agree at a level where the risk level is minimal . This is explained using Operating Characteristic Curve . α P r o b a b il i t y o f Acceptance Of a lot for a given percent defective . The value for percent defective Indicates the quality level of the lot inspected . AQL = Accepted Quality Level . LTPD: Lot tolerance percent defective (Quality level of the lot submitted for inspection) β AQL L T PD Bad lot G ood lot Indifference zone Percent defective

236. 240 If the quality level is equal to or less than AQL , it is considered to be good quality. On the other hand , if the quality level is more than AQL , it is considered to be inferior. The probability of getting defective or good part from a large lot follows binomial distribution model. In order to design a acceptance plan , quality team should decide AQL , LTPD . Based on this data , one can determine the value of C( acceptable no to consider the lot is good ) from the number of sample taken .

237. 241 Functions of a Process Control System are To signal the presence of assignable causes of variation To give evidence if a process is operating in a state of statistical control CON T RO L CH A R T

238. Essential features of a control chart Upper Control Limit Central Line Lower Control Limit T ime 242 Variable Values C O N TRO L C H A R T

239. C o nt r o l C h a r t s R Chart V a r i a b l e s Charts A t t r i but e s Charts ` X Chart P Chart C Chart Control Chart Types 243

240. 244 Control charts show the performance of a process from two pints of view . Overall process variation & process trend as time progress. It helps to identify the out of control status within the process & variation outside the operational limits to identify the cause of variation. Mean chart gives the idea of the central tendency of the observations . It gives the Variation between the sample observations. Range Chart : It gives the spread ( dispersion ) of observation . It shows variation within the samples.

241. To make control charts, data required are control limits A) For X Chart UCL = X + 3 σ LCL = X - 3 σ X Where X = Mean of the sample X = Mean of the sample means σ = s a mple s ta n d a rd erro r = σ / M e a n L CL U C L Time/ Sample No. Variable X n 245

242. 247 In practical situation , calculation of standard deviation are tedious process ,hence they are found from standard tables. T hu s the f o r m u l a c a n b e : UC L X = X + AR LCL x = X - AR C on t r o l L i m i t s f o r R C ha rt U C L R = R + 3 σ R L CL R = R - 3 σ R W he r e R = R a ng e o f s a m p l e ob s e r va t i o n σ R = Standard deviation of R In practical situation , calculation of standard deviation are tedious process ,hence they are found from standard tables. Thus the formula for control limits for R = UCL = BR LCL = CR

243. From T ables X Chart Control Limits 2 2 LCL x  x  A R UCL x  x  A R Sub group average X = x 1 + x 2 + x 3 +x 4 +x 5 / 5 Sub group range R = Max Value – Min value 247

244. From Tables R Chart Control Limits LCL R  C 3 R U C L R  B 4 R 248

245. The following data were obtained over a five day period from a single machine to study the process variations & take necessary control. Two samples were taken per day . Comment on the process variation. Sample 1 2 Observation 3 4 5 No 1 10 12 13 8 9 2 7 10 8 11 9 3 11 12 9 12 10 4 10 9 8 13 11 5 8 11 11 7 7 6 11 8 8 11 10 7 10 12 13 13 9 8 10 12 12 10 12 9 12 13 11 12 10 10 10 13 7 9 12 X 10.4 9.0 R 5 4 X 103.2/10 = 10.32 39 /10 R =3.9

246. 251 From standard table , For Sample size = 5 Given the values of Mean factor A = .58 Upper range factor B = 2.11 Lower range C = 0 factor UCL x = 10.32 + .58X 3.9 = 12.586 LCL x = 10.32 - .58X 3.9 = 8.058 UC L R = 2.11 X 3.98 = 8 .229 L C L R = X 3 .9 9 = 0

247. 252 Me a n C ha rt 8 . 5 1 0.32 1 2.58 x x x x x x x 9 8.8 1 1 . 6 x 0 1 2 3 4 5 6 7 8 9 10 R -Chart U C L 3 . 9 8 . 2 2 While process is under control, there is a dominant up trend towards the end of the Process. Hence the cause f o r s u c h v a ri a t io n n L e C e L d t o b e t r a ce d . Reasons could be due to tool wear, over heating etc. The variation with in the sample are fairly in control. LCL U C L 0 1 2 3 4 5 6 7 8 9 10

248. 252 Total Quality Management Total Quality is a description of the culture & attitude of an organization that strives to provide customers with products and services that delight them. The culture requires quality in all aspects of the company's operations, with processes being done right the first time and defects and waste eradicated from operations. TQM is a management philosophy that seeks to integrate all organizational functions (marketing, finance, design, engineering, and production, customer service, etc.) to focus on meeting customer needs and organizational objectives. The objective of TQM is "Do the right things, right the first time, every time".

249. 253 . TQM activities include: Commitment by senior management and all employees Meeting customer requirements Reducing development cycle times Just In Time/Demand Flow Manufacturing Improvement teams Reducing product and service costs Systems to facilitate improvement Line Management ownership Employee involvement and empowerment Recognition and celebration Challenging quantified goals and benchmarking Focus on processes / improvement plans Specific incorporation in strategic planning

250. 254 Principles of TQM Plan (drive, direct) Do (deploy, support, participate) Check (review) 4. Act (recognize, communicate, revise) Employee Empowerment • • • • Training Suggestion scheme Measurement and recognition 5. Create Excellence teams 6 Make Fact Based Decision 7. Use SPC (statistical process control)

251. 256 8. TOPS (FORD 8D - Team Oriented Problem Solving) 9. Continuous Improvement 10 Systematic measurement 11. Excellence teams Cross-functional process management Attain, maintain, improve standards 14 Customer Focus Supplier partnership Service relationship with internal customers Never compromise quality Customer driven standards

252. 257 TQM en c o u r age s p a rt i c i pa t i o n a m ong st s h o p f l o or workers and managers. There is no single theoretical formalization of total quality, but Deming, Juran and Ishikawa provide the core assumptions, as a "...discipline and philosophy of management which institutionalizes planned and continuous... improvement ... and assumes that quality is the outcome of all activities that take place within an organization; that all functions and all employees have to participate in the improvement process; that organizations need both quality systems and a quality culture.".

253. 258 A ttrib u tes Percent Defective Chart P- Chart Defective p e r sa m p le a r e a C - Chart To identify the average proportion of non confirming part submitted for inspection Over a period of time. ( P Chart )

254. 258 It identifies the number of non confirming parts in a given sample of constant size. C – Chart It is used to control the final defects in a final assembly . Acceptance sampling is used for taking decision to accept or reject a lot on the basis of a lot’s sample characteristics. Identify the supplier’s risk or customer’s risk in acceptance sampling & decide the mutually acceptable level . Sampling technique can be single sampling , double sampling.

255. Factors need to be considered before making a choice of manufacturing process. a) Effect of volume/variety: This is one of the major considerations in selection of manufacturing process. When the volume is low and variety is high, intermittent process is most suitable and with increase in volume and reduction in variety continuous process become suitable. Manufacturing Process Continuous Production Intermittent Production Mass or flow Production Batch production Job Production Project / Turnkey production High volume & Low variety 259 Low volume and high variety