Operations Management

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Business Organizations'

Marketi ng

Organizatio n Vision, Mission,Goa l

Financ e

Operatio ns

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Food Processor
Input s Processin g
Cleaning Making cans Cutting Cooking Packing Labeling

Raw Vegetables Metal Sheets Water Energy Labor Building Equipment

Output s

Canned vegetables

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Hospital Process
Input s
Doctors, nurses Hospital Medical Supplies Equipment Laboratories

Processin g
Examination Surgery Monitoring Medication Therapy

Output s
Healthy patients

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Value-Added Process
The operations function involves the conversion of inputs into outputs
Value added
Inputs Land Labor Capital Transformation/ Conversion process
Feedback

Outputs Goods Services

Control
Feedback
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Feedback

Operation SERVICE OPERATION

INPUTS Materials Equipmen t Customer s Staff Technolog y Facilities

PROCESS EXPERIENCE

OUTCOMES Value Emotions Judgement s

Managing service and service operations

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SERVICE PRODUCT Customer

Service Operations
Salient Features

Intangible : Services are performances and

actions rather than objects, therefore having poor tangibility

Heterogeneity/ Dynamism : High variability in the operation system performance

Customer Orientation : Degree of customer

contact is very high

Perish ability: Services cannot be inventoried as in the case of manufactured products.

Inseparable
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Characteristic Customer contact Uniformity of input Labor content Uniformity of output Output Measurement of productivity Opportunity to correct problems Inventory Evaluation Patentable
July - Nov 2010 Operations

Goods v/s Service

Goods Low High Low High Tangible Easy High Much Easier Usually

Service High Low High Low Intangible Difficult Low Little Difficult Not usual

Operations Management
Definition

An operations system is defined as one in which

several activities are performed to transform a set of inputs into useful output using a transformation process.

Operations Management is

a systematic approach to address all the issues pertaining to the transformation process that converts some inputs into output that are useful, and could fetch revenue to the operations system

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Operations
A key functional area in an Organisation
Finance

Operations

Marketing
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HRM

Operations Management
A systems Perspective
Forecasting

Labour Material Capital

IN P U T

PROCESSING
Process & Product Design Operations Planning & Control Purchasing & Inventory Control Material & Capacity Planning

O U TP U T

Goods

Services

Quality Management

Maintenance Management

Process Improvement

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Feedback

Historical Evolution of Operations Management

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Production Era

Emphasised high volume and low cost.

Used Scientific Management techniques with task specialisation as developed by F. W Taylor, Henry Ford and others.

Existed at a time when demand exceeded 5/17/12

The Sales Era

As supply increased, the emphasis was on selling more and getting rid of the product.

Mathematical modelling and related

techniques began to become popular.

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PERT / CPM

The Marketing Era.

The emphasis changed progressively to

the customer as supply continued to grow.

Intense Competition Rampant use of newer and newer Technology Influence of Japanese manufacturers
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Operations Management
Process Involved / Scope of Operations Management

Designing Operations Planning and Control of Operations Operations and Value Chain

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Understanding Operations Management

Understanding Operations Designing Operations Planning & Control of Operations Operations & the value chain Supply Chain Management Purchasing & Supply Management Inventory Planning & Control

1
Operations Management: Trends & Issues

3 Process
Design

15 6 13

Project Management

16 17

Product Development

Statistical Quality Control

Just in Time Manufacturing

5 Total Quality
Management

14
Scheduling

18

12
Resources Planning

Facilities Location Plant Layout

11
Aggregate Production Planning

19 20

2
Operations Strategy

Maintenance Management Continuous Improvement Improving Operations

9 Capacity
Planning

10
Demand Forecasting

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Process Design
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Design: To design refers to the process of originating and developing a plan for a product, service or process.

Process: Is any part of an organization which takes a set of input resources which are then used to transform 5/17/12

Process design

The activity of determining the workflow, equipment needs, and implementation requirements for a particular process. Process design typically uses a number of tools including flowcharting, process simulation software etc.

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Product & services design are interrelated to its process design

Designing the Product or Service Designing the Processes that Produce the Product or Service Processes should be designed so they can create all products and services which the operation is likely to introduce

Products and services should be designed in such a way that they can be created effectively

Decisions taken during the design of the product or service will have an impact on the process that produces them and vice versa 5/17/12

Important aspects of Process Design

Layout Process technology Capacity Planning

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Designing processes

Process mapping Process mapping symbols Process performance

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Process mapping

Used to identify different types of activities. Shows the flow of material, people or information.
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Process mapping symbols

Operation (an activity that directly adds value) Inspection (a check of some sort) Transport (a movement of some thing) Delay (a wait, e.g. for materials) Storage (deliberate storage, as opposed to a delay) / Feeding of Raw materials Beginning or end of process Activity

Input or Output from the process Direction of flow Decision (exercising discretion)

Process mapping symbols derived from Scientific Management

Process mapping symbols derived from Systems Analysis

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Raw Materials

Assembly

Stored Sandwiches

Move to Outlets

Stored Sandwiches

Sell

Take Payment

Standard sandwich process Customer Request Raw Materials Assembly Take Payment

Customer Request

Customized sandwich old process

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Customized sandwich improved new process

Assemble whole sandwich

Assembly of sandwich bases

Use standard base?

No

Take Payment Fillings

Bread and Base filling

Customer Request

Yes

Stored Bases

Assemble from standard base

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Process performance

Process performance can be judge against the five key performance objective:

Quality Speed Dependability Flexibility Cost

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Design according to Production

Project Processes Jobbing Processes Batch Processes Mass (Line) Processes Continuous Process

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Project Processes

One-off, complex, large scale, high work content products Specially made, every one customized Defined start and finish: time, quality and cost objectives Many different skills have to be coordinated Fixed position layout
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Project Process

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Jobbing Processes

Very small quantities: one-offs, or only a few required Specially made. High variety, low repetition. Skill requirements are usually very broad Skilled jobber, or team of jobbers complete whole product Fixed position or process layout (routing 5/17/12 decided by jobbers)

Batch Processes

Higher volumes and lower variety than for jobbing Standard products, repeating demand. But can make specials Specialized, narrower skills Process or cellular layout

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Batch Process

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Mass (Line) Processes

Higher volumes than Batch Standard, repeat products Low and/or narrow skills Cell or product layout

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Mass Process

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Continuous Process

Extremely high volumes and low variety: often single product Standard, repeat products Highly capital-intensive and automated Few changeovers required Difficult and expensive to start and stop the process Product layout: usually flow along conveyors or pipes
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Continuous Process

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Manufacturing process types

High
Variety Low

Service process types

High
Professional service

Project Jobbing

Batch

Mass Continuous Low Volume High Mass service Low

Variety

Service shop

Low

Volume

High

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Plant Layout
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Definition

Plant layout refers to the arrangement of physical facilities such as machines, equipment, tools, furniture etc. in such a manner so as to have quickest flow of material at the lowest cost and with the least amount of handling in processing the product from the receipt of raw material to the delivery of the final product.
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Objectives

Proper and efficient utilization of available floor space. Reduce material handling costs Provide ease of supervision and control. Allow easy maintenance of machines and plant.
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TYPES OF LAYOUT
A layout essentially refers to the arranging & grouping of machines which are meant to produce goods. The methods of grouping or types of layout are:
1.

Process layout, functional layout or job shop layout.

2. Product layout, line processing layout or flow line layout. 3. Fixed position layout or static layout. 4. Cellular manufacturing layout
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PROCESS LAYOUT
It involves grouping together like machines in one department based upon their operational characteristics. E.g.. Machines performing drilling operations are installed in the drilling dept, machines performing casting operations are grouped in casting dept, and so on.. Machines in each dept attend to any product that is taken to them. These machines are therefore called as General purpose machines.
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Work has to be allotted in each department in such a way that no machines in any dept should be ideal. In a batch production layout machines are chosen to do as many different as jobs possible. While grouping the machines according to the process type, certain principals have to be fallowed: > the distance b/w depts must be shorter so as to avoid long distance movement of materials. > The departments should be located in accordance with the series of operations. 5/17/12

PROCESS LAYOUT FOR MEDICAL CLINIC neurology gynecology Labarotary test

Rest room Reception room

Patient waiting hall

X-ray

Plastic & Reconstructive surgery

pediatrics

pediatrics pharmac y Patient exit clinic Patient entrance clinic

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ADVANTAGES

Reduced investments on machines as they are general purpose machines. Greater flexibility in the production. Better & more efficient supervision is possible through specialization. There are greater scope for expansion as the capacities of different lines can be easily increased. This type of layout results in better utilization of men & machines.
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It is easier to handle breakdown of equipment by transferring work to another machines. There is full utilization of equipment. The investment on equipment would be comparatively lower. There is greater incentive to te individual worker to increase his performance. There is difficulty in the in movement of materials. This type of layout requires more floor 5/17/12 space.

DISADVANTAGES:

Production time is more as WIP has to travel from place to place in search of machines. There is accumulation of WIP at different places.

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PRODUCT LAYOUT
It involves the arrangements of machines in one line, depending upon sequence of operations. In product layout, if there is a more than one line of production, there are as many lines of machines. The emphasis here, therfore,is on special purpose machines in contrast to the general purpose machines which are installed in the process layout. The investment on straight line layout is higher than in the functional layout. The product layout is followed in plants manufacturing standardized products on a mass scale such as chemical, paper, sugar, 5/17/12 rubber, refineries & cement industries.

STARTS PRODUCTIO N

LATHE

DRILL PRESS #2

PACKAGING MACHINE DRILL PRESS #1

PAINTING MACINE FINISH PRODUCTION

PRODUCT LAYOUT IN MANUFACTURING PRODUCT 5/17/12

The grouping of m/cs should be done by keeping in mind the fallowing principals:

All the m/c tools or other items of equipment must be placed at a point demanded by the sequence of operations. There should be no points where one line crosses another line. Materials may be fed where they are required for assembly, but not necessarily all at one point. All the operations should be included in the line.

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ADVANTAGES There is mechanization of materials handling a & consequently reduction in materials handling cost. This type of layout avoids production bottlenecks. There is economy in manufacturing time. The layout facilitates better production control. It requires less floor area per unit of production. WIP is reduced & investment thereon, minimized. Early detection of mistakes.

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DISADVANTAGES

Product layout is known for its inflexibility. This type of layout is also expensive. There is difficulty of supervision. Expansion is also difficult. Any breakdown of equipment along the production line can be disturpt the whole system.

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FIXED LAYOUT
Fixed position layout involves the movement of men & machines to the product which remains stationary. In this type of layout, the materials or major components remains in a fixed ocation, & tools, machinery & men as well as other pieces of material are brought to this location. The movement of men & machines is advisable as the cost of moving them would be lesser. This is fallowed in manufacturing of bulky & heavy products, such as, construction of 5/17/12 buildings, locomotives, ships, boilers, aircraft

FIXED POSITION LAYOUT

AR CRAFT ASSEMBLY Raw materials

m/cs & equipments

Finished product (air craft)

labour

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ADVANTAGES

Men & machines can be used for a wide varity of operations producing different types of products. The investment on lyout is very small The worker identifies himself with the products & takes pride in it when the work is complete. The high cost of & difficulty in transporting a bulky product is avoided.
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CELLULR MANUFACTURING (CM) LAYOUT In CM, machines are grouped in to a cells & cells function somewhat like product layout within a larger shop or process layout. Each cell in the CM layout is formed to produce a single part family- a few parts all with a common charecterestics, which usually means that they require the same machines & have similar machine 5/17/12 settings.

ADVANTAGES

Lower WIP inventories. Reduced materials handling cost. Shorter flow times in production. Simplified production planning ( mtrls & labour). Increased operators responsibilities. Improved visual control & fewer tooling changes, therefore facilitating quicker set ups. Overall performance often increases by lowering production costs & improving on 5/17/12 time delivery.

DISADVANTAGES

Reduced manufacturing flexibility & potentially increased machine- down time

( since machines are contained to cells & may not be used all the time) & finally dublicate pieces of equipment may be needed so that parts need not be transported b/w cells.

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COMBINED LAYOUT
A combination of process & product layout is known as combined layout. It is possible to have both types of layout in an efficiently combined form if the products manufactured are some what similar & not complex. E.g.. In soap mfg plant, the machinery mfg soap is arranged on the product line principle; but ancillary services, such as heating, the mfg of glycerin, the power house, the water treatment plant are arranged on a functional basis.
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Materials Management
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Materials management

function of business that is responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide service to the customer, at a pre-decided level at a minimum cost.
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The fundamental objectives of the Materials Management function ,often called the famous 4 Rs of Materials Management, are acquisition of materials and services : of the right quality in the right quantity at the right time from the right source
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objectives of MM

To buy at the lowest price , consistent with desired quality and service To maintain a high inventory turnover , by reducing excess storage , carrying costs and inventory losses occurring due to deteriorations , obsolescence and pilferage 5/17/12

To minimize the overall cost of acquisition by improving the efficiency of operations and procedures To develop and maintain good supplier relationships in order to create a supplier attitude
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To participate in Make or Buy

Materials management functions

1.

Material planning Purchasing Inventory control Storekeeping and warehousing Quality control

2.

3.

4.

5.

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Inventory Control
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May be defined as a scientific method of finding out how much stock should be maintained in order to meet the production demands and be able to provide right type of material at right time in right quantities and at competitive prices.

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Functions
q

To keep the inventories as low as possible consistent with the market condition To minimize out of stock danger which results in crash purchase on an uneconomical rate To maintain sufficient stock of finished good to meet the reasonable expectation of the customer for prompt delivery of goods

To maintain proper record so as to supply accurate & regular material report to the 5/17/12

Types of Inventory:

Raw material

Purchased but not processed Undergone some change but not completed A function of cycle time for a product Necessary to keep machinery and processes productive

Work-in-process

Maintenance/repair/operating (MRO)

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Finished goods

Examples:

Raw material

Work-in-process

Iron ore steel mill Flour bakery Radiator auto manufacturer Draft contract attorney

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 Examples:
o Maintenance / repair / operating supplies

(MRO)
n n n n

Lubricating oil machine shop Soap and shampoo hotel Automobiles Policy insurance company

o Finished goods

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Inventory
Transformation Process
Raw Materials Vendors Work in process Finished goods Customers

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Components of Total cost in Inventory

1. 2. 3.

Cost of items Cost of ordering Cost of carrying or holding inventory Cost of stock outs Cost of safety stock (extra inventory held to help avoid stock outs)

4. 5.

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Holding Costs

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Obsolescence Insurance Extra staffing Pilferage Damage Warehousing

Setup Cost

Requisitioning Order placing Transportation Receiving, inspecting and storing Clerical and staff

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Techniques
q q q q

ABC Analysis Economic order quantity VED Analysis JIT ( Just In Time)

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ABC Analysis

Always Better control Stock Control according to value method Divides inventory into three classes based on annual dollar volume

Class A - high annual dollar volume Class B - medium annual dollar volume Class C - low annual dollar volume

Used to establish policies that focus 5/17/12 the few critical parts and not the on

ABC Analysis
% Annual $ Usage
1 0 8 0 0 6 0 4 0 2 0 0

Cla ss A B C

A B
0

%$ Vol 8 0 1 5 5

% Item 1 s 5 3 0 5 5

C
5 1 0 0 % of Inventory Items 0

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ABC Analysis
Item Stock Number #10286 #11526 #12760 #10867 #10500 30% Percent of Number of Items Stocked 20% Annual Volume (units) 1,000 500 1,550 350 1,000 x Unit Cost = Annual Dollar Volume $ 90,000 77,000 26,350 15,001 12,500 Percent of Annual Dollar Volume 38.8% 33.2% 11.3% 6.4% 5.4% 23% 72% Class

$ 90.00 154.00 17.00 42.86 12.50

A A B B B

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ABC Analysis
Item Stock Number #12572 #14075 #01036 #01307 #10572 50% Percent of Number of Items Stocked Annual Volume (units) 600 2,000 100 1,200 250 x Unit Cost = Annual Dollar Volume $ 8,502 1,200 850 504 150 Percent of Annual Dollar Volume 3.7% .5% .4% .2% .1% 5% Class

$ 14.17 .60 8.50 .42 .60

C C C C C

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ABC Analysis
A Items 80 70 60 50 B Items 40 C Items | | | | | | | | 30 10 20 30 40 50 60 90 100 Percent of inventory 20 items 10

Percent of annual dollar usage

70

80

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Policies employed may include

More emphasis on supplier development for A items Tighter physical inventory control for A items More care in forecasting A items

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Economic Order Quantity (EOQ): Determining How Much to Order One of the oldest and most well
known inventory control techniques Easy to use Based on a number of assumptions

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EOQ Model
EOQ assumptions:

Known and constant demand Known and constant lead time Instantaneous receipt of material No quantity discounts

Only order (setup) cost and holding cost 5/17/12

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Tabular Determination Of EOQ

Per ordering cost = 4 10 % is invested for the inventory carrying cost 1000 is the Annual Usage Value
Annual Carrying Cost = 10 X 1000 X 100
1 Or no.

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Calculate the EOQ in the case if the Company is placing 12,6, 5, 4, 3, 2 and 1 order annually ?

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SL NO.

ORDERING NO

ANNUAL ORDERING COST

ANNUAL CARRYING COST

TOTAL INVENTORY COST

1 2 3 4 5 6

12 6 4 3 2 1

12 X 4 = 48 6 X 4 = 24 4 X 4 = 16 3 X 4 = 12 2X4=8 1X4=4

8.33 16.66 25 33.33 50 100

56.33 40.66 41 45.33 58 104

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EOQ Model ( Graphical Representation)

EOQ Order Quantity:
Annual Cost Minim um total cost
t Cos l ota ve st T ur g Co C in old urve H C

Order (Setup) Cost Curve Optimal Order Quantity (EOQ)

Order quantity

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Algebraic EOQ

Annual setup cost D Q Model= S

Q = Number of pieces per order D = Annual demand in units for the Inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit per year Annual setup cost = (Number of orders placed per year) x (Setup or order cost per Annual demand order) Setup or order = Number of units in each cost per order order = D (S) Q
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Algebraic EOQ

Annual setup cost =D Q Model S Q Annual holding cost = 2 H

Q = Number of pieces per order D = Annual demand in units for the Inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit Annual per year holding cost = (Average inventory level) x (Holding cost per unit Order quantity per=year) (Holding cost per unit per year) 2 = Q (H) 2
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Q = Number of pieces per order D = Annual demand in units for the Inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit per year

Optimal order quantity is found when annual setup cost equals annual holding cost
D S = Q H Solving for Q* Q 2

2DS = Q2H Q2 = 2DS/H Q* = 2DS/H

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EOQ Model - Example

Determine optimal number of needles to order D = 1,000 units S = Rs 10 per order H = Rs .50 per unit per year

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VED Analysis
Vital, Essential & Desirable analysis is done mainly for control of spare parts keeping in view the criticality to production. The spare parts can be divided into three categories VITAL, ESSENTIAL, DESIRABLE. VITAL Absence of such item may lead to stop production. ESSENTIAL Absence of which cannot be tolerated for more than a few hours or for a day DESIRABLE Their absence for even a week or so will not lead to stoppage of production.
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Material Requirement Planning

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MRP

Material requirements planning (MRP): Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

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Independent and Dependent Demand Independent Demand

A Dependent Demand

B(4 ) D(2 ) E(1 ) D(3 )

C(2 )

F( 2)

Independent demand is uncertain. Dependent demand is certain.

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Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods. Independent demand exists where the rate of use for an item does not relate directly to the use of another item

Once the independent demand is known, the dependent demand 5/17/12 can be determined.

MRP System
MRP system has three major input components:

Master Production Schedule (MPS): MPS is designed to meet the market demand (both the

firm orders and forecasted demand) in future in the taken planning horizon. MPS mainly depicts the detailed delivery schedule of the 5/17/12 end products.

Bill of Materials (BOM): BOM represents the product structure. It encompasses information about all sub components needed, their quantity, and their sequence of buildup in the end product Inventory Status File: Inventory status file keeps an up-to-date record of each item in the inventory. Information such as quantity on hand, safety stock level, quantity already allocated and the 5/17/12 procurement lead time of each item

MRP Outputs

Manufacturing Orders Purchasing Orders Various Reports

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The Manufacturing Schedule which lays out a detailed schedule of the required minimum start and completion dates, with quantities, for each step of the routing and Bill Of Material required to satisfy the demand from the Master Production Schedule (MPS).
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The Purchasing Schedule lays out both the dates that the purchased items should be received into the facility and the dates that the Purchase should happen to match the production schedules.

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Various Reports include: Purchase orders . An order to a supplier to provide materials. Reschedule notices. These recommend cancelling, increasing, delaying or speeding up existing orders.

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MRP Inputs Master schedule

MRP Processing

MRP Outputs Manufactu ring orders

Bill of material s

MRP computer programs

Purchasin g orders

Invento ry records 5/17/12

Vario us Repo

Just In Time ( JIT)

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Mass Production v/s Lean Production

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Traditional Mass Production

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What is Mass Production System Mass production is the name given to the method of producing goods in large quantities at low cost per unit. This system of production is also known as Push System or Just-inCase System. To make it worthwhile, mass production requires mass consumption. With precision equipment, large numbers of identical parts could be produced at low cost and with a small work force.
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Lean Production
Tighter coordination along the supply chain Goods are pulled along only make and ship what is needed

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What is Lean Production System? Lean Production System is the system designed and evolved in Toyota Motor Corporation. It is the modified form of Henry Fords Mass Production System. This system of production is also known as Pull System or Just-in-Time System This system is generally known as JIT system, which in fact is an important pillar of Lean Production System. The slogan of Lean Production is Less is best

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JIT- A philosophy of continuous improvement that puts emphasis on prevention rather than correction, and demands a company wide focus on quality. JIT- operational management approach to achieve world class manufacturing.
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Just-in-Time (JIT) System Just-in-Time means PRODUCING: a) Only what is needed b) in necessary quantity
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Main Components of JIT

Leveled Production Pull System Continuous Flow Processing

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Leveled Production
Leveled Production means producing various model variations on the same line to cater the customer demand

Conveyer Belt 5/17/12

Pull System (Dont Push)

Produce only when your customer demands the product in the required quantity. Run the production according to this demand
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Continuous Flow Production

In JIT, it means arranging work inside each process to flow smoothly from one step to other One cannot maintain buffer or safety stocks in JIT system if it is to run efficiently. Keeping buffer or safety stock in between production process is the part of Just-in-Case system.
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Just-in-Case (JIC) Involves the use of buffer or safety stock Process A

Buffer or Safety Stock

Process B

Process C
Buffer or Safety Stock 5/17/12

Process A

Process B

Process C

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Process A

Process B

Process C

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Process A

Process B

Process C

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Process A

Process B

Process C

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Process A

Process B

Defect detected at Process B that actually occurred at Process A

Process C

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Smooth Flow Processing

Process A

Process B

Process C

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Smooth Flow Processing

Process A

Process B

Process C

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Defect is detected and countermeasure s are taken immediately

Takt Time
Takt Time: Takt is a German word meaning meter. It is the time to finish a given amount of workdoing a single operation, making one component, or Total assembling Takt an entire car. daily operating time time =
Takt time = Total production requirement 48 0 10 0

= 4.8 min/ vehicle

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Using the above formula the pace of work is set according to the market demand. For example there is a pull or market demand of 100 vehicles per day, this demand if divided by 480 minutes available in a day, will give you the number of units you can produce to serve your customers. This means that time available to produce parts or sub-assemblies of partson each station or each assembly process is 5/17/12

Flexible Workforce (Shojinka)

Flexible workforce or shojinka means to alter (decrease or increase) the number of operators within a shop, to equip with demand changes.

Flexible workforce can be developed through continuous training and development. The training should be imparted in a manner that itcould develop an employee as a multi-process handler rather than multi-machine handler.

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Multi-machine Handling
A D
Type of Part

C
Unfinished Parts

Machine (Lathing) 1 Machine (Milling) 2

Machine (Drilling) Finished 3 Products One person handles one process, four machines 5/17/12 Machine (Tapping)

Multi-process Handling
A D
Type of Part

Machine (Lathing) 1 Machine (Milling) 2

Machine (Drilling) 3 One person handles four processes, four machines 5/17/12 Machine (Tapping)

3 Ms ( Three types of Waste)

MUDA = NonValue Added MURA =
5/17/12 Overburden

MUDA

Any Element in manufacturing process which does not add value to Finished product

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Seven Types of MUDA 1. MUDA of Over-Production producing too much or too soon 2. MUDA of Waiting waiting for parts to arrive of machine to finish cycle 3. MUDA of Conveyance any conveyance should be kept to minimum
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4. MUDA of Processing

5. MUDA of Inventory any more than the minimum to get the job done 6. MUDA of Motion any motion that does not contribute to adding value 7. MUDA of Correction any repair or rework is Muda
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MURI (overburden)

pushing machine or person beyond natural limits Overburdening people leads to safety & quality problems Overburdening of machine is a direct cause of breakdowns & defects MURA (unevenness)

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Muda . Mura . Muri

12 TONS 4 ton Capacity : 4 tons
1 TON

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2 =

MURI (OVERBURDEN)

6=

MUDA (NON-VALUE ADDED)

= MURA (UNEVENNESS)

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The most efficient way to deliver 12 tons of good to the destination is:
NO MURI X = 3 (OVERBURDEN) NO MUDA (NO WASTAGE) NO MURA (NO UNEVENNESS)

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Supplier Management

Establish Long Term Relationships with few suppliers. Delivery of Parts = 100% Defect Free

Where they are needed When they are needed The exact quantity

Work Together
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Toyota communicates their damand

5s
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Life without 5s

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5s
1. SORT -Seiri(Sorting): Going through all the tools, materials, etc., in the plant and work area and keeping only essential items (what needed). Everything else is stored or discarded.

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SEIRI = SORTING
Get rid off unwanted stuff from the workplace
Unwa nted

TRAS H
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2. SET-IN-ORDER -Seiton/ Straighten or Set in Order

Focuses on efficiency.

Arranging wanted items in proper order, which means place for every thing and every thing in its place For example, tools and equipment should be kept where they will be used (i.e. straighten the flow path), and the process should be set in an order that maximizes efficiency. For every thing there should be place and 5/17/12 every thing should be in its place (labeling of

SET-IN-ORDER -Seiton Straighten or Set in Order:

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3. SHINE -Seis Sweeping or Shining or Cleanliness:

Systematic Cleaning or the need to keep the workplace clean as well as neat. At the end of each shift, the work area is cleaned up and everything is restored to its place.

This makes it easy to know what goes where and have confidence that everything is where it should be.

The key point is that maintaining cleanliness 5/17/12 should be part of the daily work - not an

SHINE -Seis Sweeping or Shining or Cleanliness:

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4. STANDARDIZE -SeiketsuStandardizing:

Standardized work practices or operating in a consistent and standardized fashion.

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Standardize means visible neatness. A nice, clean and tidy workplace Affects directly to the performance and quality of workforce.

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5. SUSTAIN -Shitsuke Sustaining the discipline:

Refers to maintaining and reviewing standards! Once the previous 4S's have been established, they become the new way to operate. Maintain the focus on this new way

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Toyota engine assembling line

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VW assembling plant

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Unilever

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Purchase Management
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Purchase Management is a function of materials management in a company. Their basic function is procuring the inputs for production function.

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Objectives of Purchase Management

Right Price Right Quantity Right Quality Right Place Right time

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ORGANISING PURCHASING

Centralized purchasing system Decentralized Purchasing system

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Vendor Development

FUNCTIONS OF PURCHASING DEPARTMENT

Selection of Suppliers Contract Negotiations and Communication Interface Value Analysis

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PURCHASE SYSTEMS

Purchase organization consists of systems

established for smooth running of purchasing function.

These systems are pre purchase

system, ordering system, post purchase system.

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1. Pre Purchase System

The activities controlled by this system are

Requisitioning, Selection of suppliers and Obtaining & evaluating quotations.

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2. Ordering System

Purchase order is the most important element in ordering system. Contents of the purchase order are:Purchase order reference number Description of materials and specifications Quantity required and delivery schedule Price and discounts

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3. Post Purchase System

This system includes:

Follow up procedures, Receipt and Checking invoices.

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Stores Management
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Introduction
store is a place where excess material is kept which will be used as and when required. Loss of items, deterioration, obsolescence and inadequacy [of what is stored to what is needed], damage, pilferage are treated as costs associated with store

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1. 2. 3. 4. 5. 6. 7. 8. 9.

Receipt

Functions of Stores

Storage Retrieval Issue Records Housekeeping Control Surplus management Verification

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Receipt

Any item of goods or material that enters the organization always enters through the stores. Similarly, every item unless specifically excluded, has to leave through the store. Stores is the final account keeper of all materials. Material sent by any supplier after the security clearance comes to the stores. Stores check the document carried by the carrier, known as Delivery Challan, against the copy of the Purchase Order placed on the supplier by the organization. 5/17/12

Receipt

Once the adequacy is established and quantity is verified the material is sent for testing for quality parameters. Some times quality control teats are elaborate and time consuming. If the policy of receipt is to unload the material subject to quality control acceptance, it is cleared for unloading.
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material is kept on the hold if it not

Once the unloaded material is approved by the quality control department, as per the quality plan in the quality system, it is moved to a specific place in the stores layout. The material is so stored that it becomes easy to retrieve and issue subsequently. Storage should also ensure protection against deterioration, damage and 5/17/12 pilferage.

Storage

Storage

Detailed system is adopted for location and labeling of items while in storage. Storage plan is made keeping in mind,
1.

nature of the product- physical state, toxicity, inflammability and other hazards volume and weight- heavy or light movement frequency- fast moving or slow moving point of use

2.

3.

4.

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Retrieval

Easy and quick retrievability of items that are demanded by the internal customers. Easy identification, maximum space utilization and minimum handling are key factors to retrieval functions. It is common knowledge in many of the companies that after hours of searching for the item is declared to be out of stock. This causes hold up of production process and avoidable urgent purchase of out of 5/17/12 stock material. This function takes place

Issue

Fulfilling customer demand for the item in minimum time, keeping quality high and cost minimum is issue. An internal customer doesnt pay the price but he has to fulfill requirement of authorization for the demand. A duly authorized indent or requisition for the item is the key

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Records

Maintaining records of receipt and issue. Updating the stock levels as per movement of materials. Basic records of store are bin card and stock register.

Bin card is placed on the bin in which items are stored. This gives information about receipt, issue and balance. stock register gives all the information in the bin card and also the value.

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Maintaining cleanliness in the store and ensuring principle of Place for Everything and Everything in its place is fully implemented. Good housekeeping ensures satisfactory work practices

Housekeeping

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Taking measures to ensure material plan is being adhered to. Any changes in consumption pattern or replenishment pattern are closely monitored for corrective action. Material movement is watched to identify nonmoving material for disposal. Effective control puts into effect management 5/17/12 objective of no shortage and no excess.

Control

Effective disposal system for unneeded material to reduce inventory cost and proactive measures to eliminate deterioration and obsolescence. Obsolete items are good in all respect but have no useful role in the company due to changes that have occurred in the course of time.
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Surplus management

Surplus items are those that have accumulated due to faulty planning, forecasting and purchasing. Hence a usage value is associated with these items.

Surplus management

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Scrap is wastage generated due to processes like turning, boring drilling etc. and also due to bad manufacturing. it is said that in India nearly Rs. 2500 crores are tied up as obsolete, surplus and scrap items.

Stock verification to eliminate gap between information and physical stock. In stores some items are maintained as stock items. The stores triggers the procurement cycle for such items when a predetermined reorder level is reached. Hence correct stock position through verification is critical to ensure no shortage and no excess for the item.

Verification

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Interaction & coordination

Very close interaction between Purchasing, production, quality control and engineering functions is obviously needed in the discharge of the functions discussed so far. It also becomes necessary to coordinate the flow of material samples and information through a network of departments for performance of stores functions. Besides, every management function being an internal customer interaction is very important.
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Centralized or decentralized stores organization

Centralized stores concept is to store all items at a central place and control materials movement from this central place. Whereas decentralization concept is moving the material to the respective consumer function or directly to the points of use.
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Stores record system

In stores management two types of records are fundamental one is called bin card or stock card and the other is stores ledger.

Stock card or bin card: bin card, fixed on the bin shows the quantity received, issued and balances. Copy of this record is maintained for reference by the stores in charge. This record also triggers purchase activity when ROL of an item is reached store ledger, contains value in addition to the physical stock which is also shown on 5/17/12 bin card. the