ASSIGNMENT 1

PRODUCTION AND OPERATION MANAGEMENT

1. Define layout. Discuss objectives, principles and factor affecting layout decisions.

Ans. For an organization to have an effective and efficient manufacturing unit, it is

important that special attention is given to facility layout. Facility layout is an
arrangement of different aspects of manufacturing in an appropriate manner as to achieve
desired production results. Facility layout considers available space, final product, safety
of users and facility and convenience of operations.

An effective facility layout ensures that there is a smooth and steady flow of production
material, equipment and manpower at minimum cost. Facility layout looks at physical
allocation of space for economic activity in the plant. Therefore, main objective of the
facility layout planning is to design effective workflow as to make equipment and
workers more productive.

Objectives of a good plant layout are

1. Providing comfort to the workers and catering to workers taste and liking.
2. Giving good and improved working conditions.
3. Minimizing delays in production and making efficient use of the space that is available.
4. Having better control over the production cycle by having greater flexibility for
changes in the design of the product.

Principles of a good plant layout are

1. A good plant layout is the one which is able to integrate its workmen, materials,
machines in the best possible way.
2. A good plant layout is the one which sees very little or minimum possible movement of
the materials during the operations.
3. A good layout is the one that is able to make effective and proper use of the space that
is available for use.
4. A good layout is the one which involves unidirectional flow of the materials during
operations without involving any back tracking.
5. A good plant layout is the one which ensures proper security with maximum flexibility.
6. Maximum visibility, minimum handling and maximum accessibility, all form other
important features of a good plant layout. .

1|Page
Some of the major factors which affect plant layout are:

(1) Policies of management:

It is important to keep in mind various managerial policies and plans before deciding plant
layout. Various managerial policies relate to future volume of production and expansion, size
of the plant, integration of production processes; facilities to employees, sales and marketing
policies and purchasing policies etc. These policies and plans have positive impact in
deciding plant layout.

(2) Plant location:

Location of a plant greatly influences the layout of the plant. Topography, shape, climate
conditions, and size of the site selected will influence the general arrangement of the layout
and the flow of work in and out of the building.

(3) Nature of the product:

Nature of the commodity or article to be produced greatly affects the type of layout to be
adopted. In case of process industries, where the production is carried in a sequence, product
layout is suitable. For example, soap manufacturing, sugar producing units and breweries
apply product type of layout. On the other hand in case of intermittent or assembly industries,
process type of layout best suited. For example, in case of industries manufacturing cycles,
typewriters, sewing machines and refrigerators etc., process layout method is best suited.

Production of heavy and bulky items need different layout as compared to small and light
items. Similarly products with complex and dangerous operations would require isolation
instead of integration of processes.

(4) Volume of production:

Plant layout is generally determined by taking into consideration the quantum of production
to be produced. There are three systems of production they are:

a) Job production:

Under this method peculiar, special or non- standardized products are produced in accordance
with the orders received from the customers. As each product is non- standardized varying in

2|Page
size and nature, it requires separate job for production. The machines and equipments are
adjusted in such a manner so as to suit the requirements of a particular job. Job production
involves intermittent process as the work is carried as and when the order is received. Ship
building is an appropriate example of this kind. This method of plant layout viz., Stationery
Material Layout is suitable for job production.

(b) Mass production:

This method involves a continuous production of standardized products on large scale. Under
this method, production remains continuous in anticipation of future demand. Standardization
is the basis of mass production. Standardized products are produced under this method by
using standardized materials and equipment. There is a continuous or uninterrupted flow of
production obtained by arranging the machines in a proper sequence of operations. Product
layout is best suited for mass production units.

(c) Batch production:

It is that form of production where identical products are produced in batches on the basis of
demand of customers or of expected demand for products. This method is generally similar to
job production except the quality of production.Instead of making one single product as in
case of job production a batch or group of products is produced at one time, It should be
remembered here that one batch of products has no resemblance with the next batch. This
method is generally adopted in case of biscuit and confectionary manufacturing, medicines,
tinned food and hardwares like nuts and bolts etc.

(5) Availability of floor space:

Availability of floor space can be other decisive factor in adopting a particular mode of
layout. If there is a scarcity of space, product layout may be undertaken. On the other hand
more space may lead to the adoption of process layout.

(6) Nature of manufacturing process:

The type of manufacturing process undertaken by a business enterprise will greatly affect the
type of layout to be undertaken.

3|Page
2. Explain the ABC inventory classification system and indicate its advantages.

Ans. ABC analysis is a way of categorizing the material on the basis of the quantity of
consumption and their relative values. Some material might be consumed in lower quantities
but their period may be very high. Such materials are kept in group "A". Similarly, some
material may be consumed in large quantities but their values may be lower. Such materials
are kept in group 'C'. In between these two, some materials may be consumption in moderate
quantity with the moderated price. Such materials are kept in group 'B' under ABC analysis
very close control is exercised over the material in group 'A' whereas a very little control is
exercise is exercised over the material in group 'C'.

The advantages of ABC analysis are as follows:

a. Reduction in investment: under ABC analysis, the materials from group 'A' are
purchase in lower quantities as much as possible. With this, the effort to reduce the
delivery period is also made. These in turn help to reduce the investment in material.

b. Strict control: under ABC analysis, strict control can be exercised to the materials in
group 'A' that have higher value.

c. Minimum storage cost: since, the ,material from group 'A' are purchase in lower
quantities as much as possible, it reduce the storage cost as well.

d. Saving in time: since a signification effort is made for management of the material
from group 'A', it helps to save time as well.

e. Economy: This method is economical, since equal time and labor is not needed for all
types of materials.

3. The Stone River Textile Mill was inspected by OSHA and found to be in violation of a
number of safety regulations. The OSHA inspectors ordered the mill to alter some existing
machinery to make it safer (e.g., add safety guards); purchase some new machinery to replace
older, dangerous machinery; and relocate some machinery to make safer passages and
unobstructed entrances and exits. OSHA gave the mill only 35 weeks to make the changes; if
the changes were not made by then, the mill would be fined $300,000. The mill determined
the activities in a PERT network that would have to be completed and then estimated the

4|Page
indicated activity times, as shown in the table below. Construct the PERT network for this
project and determine the following:

Activity Time Estimates (in weeks)

Activity Description
Predecessor to tm tp
A Order new machinery 1 2 3
B Plan new physical layout 2 5 8
Determine safety changes in
C 1 3 5
existing machinery
D Receive equipment A 4 10 25
E Hire new employees A 3 7 12
F Make plant alterations B 10 15 25
Make Changes in existing
G C 5 9 14
machinery
H Train new employees D,E 2 3 7
I Install new machinery D,E,F 1 4 6
J Relocate old machinery D,E,F,G 2 5 10
Conduct employee safety
K H,I,J 2 2 2
orientation

a. Expected activity times

b. Earliest and latest activity times and activity slack
c. Critical path
d. Expected project duration and variance
e. The probability that the mill will be fined $300,000

5|Page
 Ans. Let te= (to+4tm+tp /6)

Variance=Q= (tp-to/6)^2

Activity Activity To Tm Tp Te
Predecessor Variance(Q)
A - 1 2 3 2 0.111

B - 2 5 8 5 1

C - 1 3 5 3 0.444

D A 4 10 25 11.50 12.25

E A 3 7 12 7.17 2.25

F B 10 15 25 15.83 6.25

G C 5 9 14 9.17 2.25

H D,E 2 3 7 3.5 0.644

I D,E,F 1 4 6 3.84 0.64

J D,E,F,G 2 5 10 5.33 1.78

K H,I,J 2 2 2 2 0

6|Page
Activity ES EF LS LF
A 0 2 9.33 7.33
B 0 5 0 5
C 0 3 8.66 11.66
D 2 13.5 9.35 20.83
E 2 9.17 15.44 20.83
F 5 20.83 5 20.83
G 3 12.17 11.66 20.23
H 13.5 17 22.66 26.16
I 20.83 24.67 22.32 26.16
J 20.83 26.16 20.83 26.16
K 26.16 28.16 26.16 28.16

7|Page
Activity ES LS Float (ES-LS)
A 0 9.33 9.33
B 0 0 0
C 0 8.66 8.66
D 2 9.35 7.35
E 2 15.44 13.44
F 5 5 0
G 3 11.66 8.66
H 13.5 22.66 9.16
I 20.83 22.32 1.49
J 20.83 20.83 0
K 26.16 26.16 0

Therefore, the critical path is as follows:

B-F-J-K = Time taken= 5+15.83+3.84+2 =26.67

Variance = (B-F-J-K)^1/2
= (26.27)^1/2

=5.12

8|Page
 D

E H

B F I K

G J

3. WEGMANS FOOD MARKETS

Wegmans Food Markets, Inc., is one of the premier grocery chains in the United States.
Headquartered in Rochester, NY, Wegmans operates over 70 stores. The company employs
over 23,000 people, and has annual sales of over Rs. 2.0 billion.

Wegmans has a strong reputation for offering its customers high product quality and
excellent service. Through a combination of market research, trial and error, and listening to
its customers, Wegmans has evolved into a very successful organization. In fact, Wegmans is
so good at what it does that grocery chains all over the country send representatives to
Wegmans for a firsthand look at operations.

SUPERSTORES

Many of the companys stores are giant 100,000 square foot superstores, double or triple the
size of average supermarkets. A superstore typically employs from 500 to 600 people.

Individual stores differ somewhat in terms of actual size and some special features. Aside
from the features normally found in supermarkets, they generally have a large bakery Section
(each store bakes its own bread, rolls, cakes, pies, and pastries), and extra large produce
sections. They also offer film processing a complete pharmacy, a card shop and video rentals.

9|Page
In-store floral shops range in size up to 800 square feet of space, and offer a wide variety of
fresh-cut flowers, flower arrangements, varies and plants. In-store card shops covers over
1000 square feet of floor of floor space. The bulk foods department provides customers with
the opportunity to select what quantities they desire from a vast array of foodstuffs and some
nonfood items.

Each store is a little different. Among the special features in some stores are a dry cleaning
department, a wokery, and a salad bar. Some feature a Market Cafe that has different food
stations, each devoted to preparing and serving a certain type of food. For example, one
station has pizza and other Italian specialties, and another oriental food. There are also being
a sandwich bar, a salad bar and a dessert station. Customers often wander among stations as
they decide what to order. In several affluent locations, customers can stop in on their way
home from work and choose from a selection of freshly prepared dinner entrees. Some stores
have a coffee shop section with tables and chairs where shoppers can enjoy regular or
specialty coffees and variety of tempting pastries.

PRODUCE DEPARTMENT

The company prides itself on fresh produce. Produce is replenished as often as 12 times a
day.

The larger stores have produce sections that are four to five times the size of a produce
section of an average supermarket. Wegmans offers locally grown produce a season.
Wegmans uses a farm to market system whereby some local growers deliver their produce
directly to individual stores, bypassing the main warehouse. That reduces the companys
inventory holding costs and gets the produce into the stores as quickly as possible. Growers
may use specially designed containers that go right onto the store floor instead of large bins.
This avoids the bruising that often occurs when fruits and vegetables are transferred from
bins to display shelves and the need to devote labor to transfer the produce to shelves.

MEAT DEPARTMENT

In addition to large display cases of both fresh and frozen meat products, many stores have a
full-service butcher shop that offers a variety of fresh meat products and where butchers are
available to provide customized cuts of meat for customers.

ORDERING

10 | P a g e
Each department handles its own ordering. Although sales records are available from records
of items scanned at the checkouts, they are not used directly for replenishing stock. Other
factors, such as pricing, special promotions, local circumstances must all be taken into
account. However, for seasonal periods, such as holidays, managers often check scanner
records to learn what past demand was during a comparable period.

The superstores typically receive one truckload of goods per day from the main warehouse.
During peak periods, a store may receive two truckloads from the main warehouse. The short
lead-time greatly reduce the length of the time an item might be out of stock, unless the main
warehouse is also out of stock.

The company exercises strict control over suppliers, insisting on product quality and on-time
deliveries.

EMPLOYEES

The company recognises the value of good employees. It typically invests an average of
Rs.7000 to train each new employee. In addition to learning about stores operations, new
employees learn the importance of good customer service and how to provide it. The
employees are helpful, cheerfully answering customer questions or handling complaints.
Employees are motivated through a combination of compensation, profit sharing, and
benefits.

QUALITY

Quality and Customer satisfaction are utmost in the minds of Wegmans management and its
employees. Private label food items as well as name brands are regularly evaluated in test
kitchens, along with the potential new products. Managers are responsible for checking and
maintaining products and service quality in their departments. Moreover, employees are
encouraged to report problems to their managers.

If a customer is dissatisfied with an item and returns it, or even a portion of the item, the
customer is offered a choice of a replacement or a refund. If the item is a Wegmans brand
food item, it is then sent to the test kitchen to determine the cause of the problem. If the cause
can be determined, corrective action is taken.

Questions

11 | P a g e
1. How do customers judge the quality of a supermarket?
Ans. Different customer will judge the quality of a supermarket in different perspective
and in varied ways. The customer may judge upon the terms of their needs and wants, the
customer service that they get and even the quality of the product sold in the supermarket.
They can also judge the supermarket upon the quality brand. To make sure that the
customer to have good perspective towards the supermarket, the market should make sure
that their supermarket have a wide range of products that provide different choices to be
chosen by customers. Location is also a very important issue for customer to judge the
supermarket. If the supermarket is at a convenient location it will be easy for the customer
to shop there. The operation hour of the supermarket will be another consideration for
customers. The supermarket should start its business hour early in the morning and close
at midnight. Another point is competitive price. As a consumer, they will look at a
cheaper price of the product that they want to buy. The supermarket that offer the
cheapest price for the same product compared to another supermarket will always be
preferred by customer due to which also consumer can judge the quality of supermarket.

2. Indicate how and why each of these factors is important to the successful operation of a
supermarket:
(a) Customer satisfaction.

Customer is the king and he should not only be satisfied but delighted by offering the
products and services that he desires. Customer loyalty is crucial for the very survival
of the supermarket as profitability is a function of customer satisfaction.
A single happy and satisfied customer can create a lot of customers for a supermarket by
the sheer word of mouth marketing.

(b) Forecasting.

The store should forecast correctly what are going to be the fast moving items for the
coming month/ fortnight and shall plan for the merchandise availability
accordingly. Forecasting helps a supermarket maintain optimum inventory levels. It
reduces company inventory holding costs and also saves it from the situation of a stock
out, which may annoy the customers Sales forecast
would help a supermarket plan its finances well. Forecast with respect to the festivals,
weather conditions and changing taste and preferences of customers would help
a supermarket plan its merchandise accordingly and will also provide it with a
competitive edge over its competitors

(c) Capacity planning.

12 | P a g e
 To know how much stock can be maintained in the supermarket. To plan the floor area
allocation to different departments and product categories depending upon the customers
demand for different products. To make sure that there exists a comfortable ratio of sales
staff per customer in every department. Capacity planning also helps in
managing the peak hour rush in the store and parking.

(d) Location

Before finalizing the location of a supermarket it must be seen what the level of
competition in the local area is. If already two or three stores are operating in that locality
it might not be a wise move to open a store on such locations. A supermarket
must analyze how much rent it would require to pay and whether the business would be
generated in the same proportion. Stock can be easily transferred from the
warehouse to the store. Cultural and local sentiments of the customers need to be taken
note of by the management of a superstore and therefore location of the superstore
becomes important Accessibility to the customer becomes important

(e) Inventory management

Inventory required for the supermarkets should be maintained in timely order so as to

meet the day to day operation and create successive operation of the supermarket. The
planning of materials requirements must be made for the efficiency in operation of the
supermarket as well
(f) Layout of the store

A stores layout is one of the key strategies in its success. layout of the store helps to
predict consumer behavior, maximize square footage, provoke additional sales, deter
shoplifters and foster positive attitudes.

(g) Scheduling

HR scheduling will be necessary for the store so that it can be made sure that enough
customer care staffs are available during the store operations. Employee work
scheduling will make sure that during peak hours when there is maximum foot fall in the
supermarket, staffs can be made available in adequate
numbers. HR scheduling makes sure that employees are not over burdened and their
productivity levels can be increased by such measures.

13 | P a g e
 1. Transport scheduling to plan in advance when the trucks are going to come into the
superstore and what merchandise they are going to bring in. If there is an item which a
store needs urgently, rescheduling of trucks can be done.

2. Inventory scheduling to plan the floor space in advance.

14 | P a g e