Core text books.1. Production & Operation Management by S.N. Chary2. World Class manufacturing B.S SahayReference Book : Operation Management Jay Heizer & B.Render 8th Edn National Manufacturing Competitiveness council report. 2009 2
World Class Manufacturing is a set of concepts,principles, policies and techniques for managingand operating a manufacturing company. It isdriven by the results achieved by the Japanesemanufacturing resurgence following World War II,and adapts many of the ideas used by theJapanese in automotive, electronics and steelcompanies to gain a competitive edge. It primarilyfocuses on continual improvement in quality, cost,lead time, flexibility and customer service. 3
WORLD CLASS MANUFACTUING CONCEPT DRIVES : QUALITY LEADHIGH MORAL & SAFETY TIME CONTINUAL REDUCTION IMPROVEMENT COST FLEXIBILITY REDUCTION IN OPERATION & PROCESS
Framework for Continuous ImprovementCompanies that are pursuing world-class status may follows four dominantprinciples of which these companies may choose one or more.1.Just-in-Time (JIT) - The JIT principle focuses on the elimination of waste, withwaste defined as anything other than the minimum amount of equipment,materials, parts, space, and workers time, that are absolutely essential to addvalue to the product.2. Total Quality Control (TQC) Under the TQC principle, everyone in theorganization must be involved in improving the products quality to meetcustomer needs. The emphasis is placed on defect prevention rather thandefect detection and development of an attitude of "do it right the first time."3. Total Preventive Maintenance (TPM) - With the TPM principle, machines andequipment are maintained so often and so thoroughly that they rarely everbreak down, jam, or misperform during a production run.4. Computer Integrated Manufacturing (CIM) - CIM involves the integration ofthe companys operations from design, production, and distribution to after-sales service and support in the field through the use of computer and 5information technologies."
Transition of manufacturing Sector High Acceptance issue WCM Image & quality Global Issue. Competitiveness Lean manufacturingConsumer Uncontested marketExpectation .Manufacturing Traditional Process Excellence Manufacturing for cost competitiveness Practices & innovation Low Local Global Competition 6
Time to Market is shortening : Rapid introduction ofnew products puts pressure on manufacturing facilitiesto profitably produce a larger variety in smallervolumes. Manufacturing firms have to adopt to newprocesses, new materials, new vendors, new shopfloor layouts, new ways of reducing cycle times,new designs etc. to deliver these products .The real challenge is therefore to improve substantiallyon several dimensions viz : quality, technology, shopfloor practices, supply chain coordination, and newproduct introduction over a short period of time. 7
Manufacturing shiftMass Production lean Production Mass CustomizationScientific CAD/CAM ERPmanagement EDI/ TQM Lean SCMProcess KAIZAN Agile manufacturingMRP Six Sigma Build to orderPERT/CPM SCM Lean Cost Focus manufacturing Quality focus Customization focus 8
MANTRA FOR GLOBAL COMPETITIVENESS IN MANAUFACTURING FIRMS ARE :•Product mix change•Conformance to quality•Volume change•Product customization•On time delivery•Research on New product development•Quick design changes•Price competitiveness 9
A Perspective of Indian Manufacturing sectorExtract of Report submitted to NMCC by IIM BangaloreMarch 2009.The Indian Manufacturing sector has traversed a diversifiedpath to industrial development within the country. While itsshare in the GDP has declined over the years, its growth ratein recent years has been impressive (a CAGR of close to 8percent in the last eight years). Very few countries in theworld can boast of such a diversified industrial base ofsignificance: from textiles & apparel to steel, from chemicalsto machine tools, from consumer goods to avionics. And thenthere is the automobile and the auto-component industry withengineering & service design that has created an industrialdynamics that only a few countries in the world have beenable to achieve. 10
Concerns of Indian manufacturing sector 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 –1. Use of primitive technology or under utilization of technology.2. Poor infrastructure.3. Over staffed operations & high operation cost4. Low flexibility in manufacturing process5. Expensive financing and bureaucracy 11
New Competitive ChallengesToday, Indian firms are facing a very different competitive scenario ascompared to the past. They are facing competition from imports and fromMNCs in the domestic markets. Firms also have to compete as newentrants in global markets. Earlier, firms would segregate these twomarkets 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 likelyto succeed in the future.The cost structure of Indian manufacturing plants shows that materialsconstitute 66 percent of total costs, direct labour 10 percent andoverheads 24 percent.This implies that management initiatives to control manufacturing costsneed to be focussed to reduce material costs and overheads. 12
Efforts to control material related costs may need to address severalissues including rejects and rework on the shop floor, identifyingalternative materials, and better materials management andsourcing.The new competition is in terms of reduced cost, improved quality,products with higher performance, a wider range of products, andbetter service - all delivered simultaneously. Indian firms have quite often followed an opportunistic approach togrowth as opposed to a capability driven approach that seeks tostrengthen key aspects of manufacturing 13
Traditional Manufacturing Process.Causal Diagram. 14
Logistics were organized around the principle of massproduction.Low cost was to be achieved through high volume. This ledfirms to hold large inventories of incoming materials, work-in-progress and finished products, just-in-case anything mightgo wrong and interrupt the flow of production. Machinery wasdesigned to produce one type of products, and machinechangeovers were to minimum.Quality procedures were designed so as not to get in the wayof production-flow. So quality inspection was placed at theend of the production line, and faulty products were reworkedbefore delivery.These principles of mass production were appropriate as longas markets were stable and undemanding. As marketsbecame more heterogeneous and changeable, new principles 15of production had to be established.
Principles of World Class Manufacturing : WCM is a processdriven approach where implementations usually involve thefollowing philosophies and techniques:1. Make-to-order2. Streamlined flow3. Small lot sizes4. Families of parts5. Doing it right the first time6. Cellular manufacturing7. Total preventive maintenance8. Quick changeover 16
9. Zero Defects 10. Just-in-time 11. Variability reduction 12. High employee involvement 13. Cross functional teams 14. Multi-skilled employees 15. Visual signaling 16. Statistical process controlThese sixteen practices helps an organization to achievea position of world class manufacturing. 17
World class manufacturing 18
WCM has following inherent advantage•Logistics are designed so that flexibility can be ensured.•Producing in small batches to satisfy varied and volatilemarkets.•Inventories are organized on a "just-in-time" basis, andproduction flows through the plant as single units ratherthan in large batches.•Attention is paid to rapid changeover and simpler andmore flexible machinery is often used.•Instead of checking quality at the end of the line, quality isassured at each stage of the production process, so that nodefects are allowed to pass through the plant. 19
Lean manufacturing Model ( TPS House )Integrated SCM People & Team Work Self triggered stopsJust In Time Common Goal , Cross Process drivenContinuous flow Trained high morale Error proofingPull system In station qualityQuick change Continuous Improvement Controlover Waste reduction Problem solving 5 Why;s Leveled production Standard manufacturing process Visual Management 23
Lean Manufacturing & Toyota Production System.Lean manufacturing practices works on the premise ofeliminating waste and being flexible and open tochange . It is a team based approach to identifying andeliminating waste (non-value adding activities) throughcontinuous improvement by flowing the product at the pull ofthe customer in pursuit of perfection.The Toyota Production System is a philosophy ofmanufacturing that was created by the Toyota Corporation.TPS, has become synonymous with Lean Manufacturing.TPS defined three types of waste: “Muda“( non value-addedwork), “Muri" (overburden) and “Mura“( unevenness). Byeliminating waste, overall quality can be improved andproduction time as well as cost can be reduced. 24
TPS defined three types of waste known as 3 M’s ofTPS.“Muda“( non value-added work),“Muri" (overburden)“Mura“( unevenness).By eliminating waste, overall quality can be improvedand production time as well as cost can be reduced. 25
Toyota Production System ( TPS) & 3 M’sThe Toyota seven wastes are as follows:The TPS identifies seven wastes specifically and collectivelycalled as “wastes”.1. Over-production2. Motion (of operator or machine)3. Waiting (of operator or machine)4. Conveyance,5. Processing itself6 .Inventory (raw material)7. Correction (rework and scrap).Lean manufacturing aims to improve the manufacturingprocess by eliminating seven wastes in all their forms. 26
TPS approach to reduce waste.1. Reduce setup times - Employees at Toyota were made responsible for their own setups thus reducing the wastefulness of this process .2. Small-lot production - The process of economically producing a variety of things in small quantities rather than producing things in large batches.3. 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.4. Quality at the source - Product defects are identified and corrected as soon as they occur or at the source. 29
5. Equipment maintenance - Operators of the equipmentare also assigned to take care of their maintenance sincethese should be the individuals who know the equipmentbest.6. Pull production - The work performed at each stage ofthe process is dictated solely by demand for materialsfrom the immediate next stage (also known as "Just inTime").7. Supplier involvement - Suppliers are treated as partnersand are also trained in the TPS methods. 30
Factors affecting Lean Manufacturing 31
Theory of ConstraintsEli 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.1) The management thinking processes and their implication to execution and human behavior .2) 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) . 32
Theory of Constraints is based on the premise that the rate ofrevenue generation is limited by constraining process (i.e. abottleneck).Only by increasing throughput (flow) at the bottleneck process orelminating the bottleneck , can overall throughput be increased. The key steps to overcome constraint are:1. Articulate the goal of the organization.2. Identify the constraint (the thing that prevents the organization from obtaining more of the goal. 33
3. Decide how to exploit the constraint.Subordinate all other processes to above decision (alignall other processes to the decision made above)The primary methodology used to overcome constraintsis refered as Drum-Buffer-Rope (DBR) approach. 34
1. The drum is the physical constraint of the plant: the workcenter or machine or operation that limits the ability of theentire system to produce more. The rest of the plant followsthe beat of the drum.2.The buffer protects the drum, so that it always has workflowing to it. Buffers in DBR methodology advocates time asthe unit of measure, rather than quantity of material. Thismakes the priority system operate strictly based on the time .3. The rope is the work release mechanism for the plant.( Trigger ). It Pulls work into the system just when requiredrather than earlier than a buffer time which creates highwork-in-process and slows down the entire system. 35
Marching to the Drum Beat of the Drummer Constraint linked to Inventory available to Buffer time Market demand Overcome the constraint Drum Beat Proactive Virtual stock Process Of the plant buffer 36
Traditional system calls for buffers at several points inthe system. Simplified DBR requires only a singlebuffer at shipping point.Drum - The constraints, linked to market demand, is thedrumbeat for the entire plant.Buffer - Time/inventory that ensures that the constraintis protected from disturbances occurring in the system.Rope - Material release is "tied" to the rate of theconstraint. 37
The Simplified- Drum, Buffer Rope ( S-DBR)provide the basis for building a productionschedule that is highly immune to disruption,avoids creating excess inventory, and usessmall batches to minimize overall lead time.Thus S-DBR is used to mitigate and oftenprevent those disruption which happens inProduction process. 38
Lean Manufacturing ModelIntegrated SCM Self triggered stops People & Team WorkJust In Time Process driven Common Goal , CrossContinuous flow Error proofing Trained high moralePull system In station qualityQuick change Controlover Continuous Improvement Waste reduction Problem solving 5 Why;s Leveled production Standard manufacturing process Visual Management 39
7 Essential principles of Lean manufacturing1. Pull Inventory Control. Work moves based on the needs of the downstream operation starting from the customer need.2. Automation: Equipment intelligently recognizes & eliminates process variation with human like intervention. Technology support from ERP, CAD/CAM etc3. JIT Inventory : WIP & supplies arrive at the process location as they are needed. 40
5. Visual control. : Management by sight of equipment & process Variation.6. Standardized work process & procedures. All activities are defined in advance & characterizes by process consistency.7. Pursuit of perfection. There is no end to the process of reducing , waste , time cost & mistake.8. Continuous work flow : Alignment of machines are such that it drives continuous work flow without interruption. 41
A flexible manufacturing system (FMS) is a group of numerically-controlledmachine tools, interconnected by a central control system. The variousmachining cells are interconnected, via loading and unloading stations, byan automated transport system. Operational flexibility is enhanced by theability to execute all manufacturing tasks on numerous product designs insmall quantities and with faster delivery.It has been described as an automated job shop and as a miniatureautomated factory. It is an automated production system that produces oneor more families of parts in a flexible manner. Automation and flexibilitypresents the possibility of producing nonstandard parts to create acompetitive advantage.
Flexible Manufacturing System Batch Production or Job productionDedicated machinery or General-purpose toolsCost savings but Costly, and may notlacks flexibility reach full capacity
FMS is limited to firms involved in batch production or job shopenvironments. Normally, batch producers have two kinds of equipmentfrom which to choose: dedicated machinery or general-purpose tools.Dedicated machinery results in cost savings but lacks flexibility. Generalpurpose machines such as lathes, milling machines, or drill presses are allcostly, and may not reach full capacity.Flexible manufacturing systems provide the batch manufacturer with anotheroption that can make batch manufacturing just as efficient and productive asmass production.Two kinds of manufacturing systems fall within the FMS spectrum. Theseare assembly systems, which assemble components into final products andforming 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 significantset-up time or change-over between successive jobs. Typically, thesemachines perform milling, boring, drilling, tapping, reaming, turning, andgrooving operations.
An automated and flexible material-handling system ( Guided vehicle )permits jobs to move between any pair of machines so that any job routingcan be done more efficiently .A network of supervisory computers that perform some or all of thefollowing tasks:1. Directs the routing of jobs through the system2. Tracks the status of all jobs in progress so it is known where each job is to go next.3. Passes the instructions for the processing of each operation to each station and ensures that the right tools are available for the job.4. Provides essential monitoring of the correct performance of operations and signals problems requiring attention.5. 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 workerenters the job to be run at the supervisory computer, which then downloadsthe part programs to the cell control or NC controller.
Benefits•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
LIMITATIONS OF FMSIt can handle a relatively-narrow range of partvarieties, so it must be used for similar parts (familyof parts) that require similar processing.Due to increased complexity and cost, an FMS alsorequires a longer planning and development periodthan traditional manufacturing equipment.Equipment utilization for the FMS always is not ashigh as one would expect.
Lack of technical literacy, managementincompetence, and poor implementation of the FMSprocess.If products change ( variation is high ) rapidly, andperformance of the firm is measured on the ability tointroduce new products fast than minimizing cost, insuch scenario, scale is no longer the main concernand size is no longer a barrier to entry.
Traditional FMSThe traditional flexible manufacturing system (FMS) is based onnumerically controlled machines in addition to other value-added,automatic, material handling facilities. A degree of flexibility within FMSserves to satisfy demands for a relatively diverse range of products witha small to medium batch size production.
Flexible Manufacturing SystemMass production Mass Customization
When customer orders come through more randomly with different deliverydates, product mix changes irregularly and drastically, or the productdiversification increases, downstream processes require randomlycustomized parts on flexible schedules to be supplied to their matchingpredecessor processes on short notice, extra inventory, equipment, andlabor are needed to meet order variations. In such a case , traditionalFMS is challenged to meet these rapid changes with minimum productioncost and satisfaction. This leads to a new concept called MassCustomization . A process which delivers sufficient flexibility and rapidresponse capability to deal with complex manufacturing situations.Mass customization system demands a higher degree of flexibility thantraditional FMS. It is highly desirable that each component demonstratesprompt response capability in managing demand changes in a FMS withparallel considerations in product costs, quality and reliability to formthe flexibility in an agile mass manufacturing system,
Agile Mass Customized Manufacturing SystemManufacturing process focused on the ability to flexibly and rapidlyrespond to changing market conditions. As product life cycles getshortened significantly , manufacturers have found that they can nolonger capture market share and gain higher profits by producing largevolumes of a standard product for a mass market. Success inmanufacturing requires the adoption of methods in customer-acquisitionand order-fulfillment processes that can manage anticipated changewith precision while providing a fast and flexible response tounanticipated changes .
Goal of MCM is to produce and deliver customized products rapidlywhile keeping costs at the mass-production level. MCM implementation strategies can be divided into three differentcategories according to the different stages when customization isintroduced in the value-chain: (1) form MCM, (2) optional MCM, (3) core MCMForm MCM is the simplest MCM implementation strategy, wherecustomization is introduced at the delivery stage.Optional MCM allows customization to take place at themanufacturing stage. The essential point of this implementationstrategy is to provide a large number of pre-designed, standard options tocustomers. It produces the configured products. Customers can onlyselect options from a predetermined list and request them to beassembled. ( Dell manufacturing Model )Core customization integrates customers with the design process.
Mass Customized Manufacturing ( MCM ) Steps for mass customization lie in two areas:1. Design For Mass Customization （ DFMC ）2 Mass Customization Manufacturing (MCM) system.DFMC emphasizes decoupling of the design and manufacturing processto reduce costs. In developing MCM, it is important to take DFMC intoconsideration in order to reduce the setup time and other volume-relatedcosts drivers. Modification of product shape and size are limited toguarantee that fabrication can be performed on the same production line.Product design for mass customization ( DFMC) calls for Parameterizedproducts: Parameterized products possess a series of attributes calledparameters. These parameters allow customers to change the actualdesign of the product, for example, by creating new sizes, or modifyingperformance characteristics. Each parameter can be chosen bycustomers within a certain scope, and the scope itself can also bedefined as one of the parameters
Success in mass customization manufacturing( MCM) is achieved byswiftly reconfiguring operations, processes, and business relationshipswith respect to customers’ individual needs and dynamic manufacturingrequirements.MCM system is characterized by four challenging characteristics: Degrees of flexibility, Production capability adjustments, Modularization methods Dynamic network-control system structureModularization methods : Modularization methods in traditionalmanufacturing systems are often product-oriented, where modules aregrouped in teams with intercross functions . In an MCM system,categorization of modules is based on their functionalities: the greaterthe diversity of module classifications, the better the system’s potential tosatisfy different customized demands
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 functionalmodules should be instantaneous.Low cost: Besides the initial capital investment, it is better to reduce therecurring system costs.
Seamless: A set of system mechanisms needs to be established to ensureseamless data exchange among customized orders, suppliers, services,and production controls.Frictionless: There should be no resource conflicts when a new network iscreated. Success in this feature promotes better cost controls and dynamicnetwork operations.
Integrated design and simulation system to enable MCM
The goal of JIT in manufacturing organization is to continuouslyreduce the cost associated with requirement material resource.Its objective is to achieve cost efficiency through zeroinventory. The goal of JIT process is to reduce excess workingcapital 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.
Steps for implementing JIT in an organization.1. Do detailed analysis of inventory requirement of all types at every stage of production process.2. Estimate the market fluctuations on account of price, supply , quality demand etc.3. Identify reliable source of suppliers who are capable of supplying material as when required.4. 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.
5. Conduct periodic vendor appraisal & follow vendor rating system of evaluation .6. Give instant feed back on the supply & suggest improvement steps.7. Sign rate contract .8. Use IT enabled ordering system , ERP .
Inventory Control TechniquesInventory control techniques are used to prevent :1 financial leakage due o excessive stock & poordemand , 2 2shortage of inventory3. Inventory Obsolescence Plan safety stock for critical & essential itemsBuild selective control on fast & slow movinginventory .Various Inventory control technique used are :ABC : Always Better ControlVED : Vital Essential & DesirableSDE : Scarce Difficulty & EasyFNSD Fast moving , Normal , Slow moving , Dead
ABC Classification 100 CLASS C 90 Low annual consumption value CLASS BUsage % Moderate annual Consumption value 70(InventoryValue ) CLASS A High annual consumption value items 0 10 30 100 % items
VED analysis : Vital : Without which production processwill come to halt. Essential : Non availability of such item will affectthe efficiency .Desirable : It is good if it is available , howeveralternate option can be done.SDE : Scarce ( Short supply ) Difficult ( Imported components ) easily ( Short lead time )
Purchase Inventory review system :Review process is administered on the basis of Fixedorder quantity ( Q system ) and fixed period quantitysystem . ( 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 leadtime & variation in demand during lead time ( safetystock ) and average demand during delivery delays.( reserve stock )In p system , stock position is reviewed after every fixedperiod & order is placed according to stock position &demand .
Value Engineering or Value AnalysisIt is a technique of cost reduction and costprevention. It focuses on building necessaryfunctions at minimum cost with outcompromising on quality, reliability ,performance& appearance. It helps in identifying unnecessarycosts associated with any material , partcomponents or service by analysis of functionand efficiently eliminating them with outimpairing the quality functional reliability or itscapacity to provide service. It is a preventiveprocess.
When to apply VE1. Raw material cost increases suddenly .2. Vendors are unreliable & organization is highly dependent on a few select vendor .3. 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 )
Value = Performance ( Utility) CostVendor analysis is done to minimize the cost incurred dueto 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
Value engineering procedure:Constantly evaluate the inventory costs associated &benchmark against the best in practice.As & when the cost of manufacturing increasesdisproportionately, identify an alternate source for contractmanufacturing & monitor the quality & standards.Use more standard parts which can be sourced easilyDevelop more suppliers ( at least 4 to5 for one part.) &minimize dependency on one supplier.Audit the supplier’s work premise & rate them on theperformance . Conduct quarterly vendor meet & share the highlights &concerns .
Manufacturing Requirement Planning
MRP MRP1 ERPMaterial requirement planning Manufacturing resource Enterprise resourcein manufacturing organization. Planning in manufacturing Planning organization Inventory planning Production planning Business planning & control & control Material planning Material, Machine Man Machine Method Man Material, Method & Money 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.
MRP vs. ERP — Manufacturing management systems haveevolved in stages over the past three plus decades, from a simplemeans of calculating materials requirements to the automation ofan entire enterprise.As frequent changes in sales forecasts happened entailingcontinual readjustments in production, as well as inflexible fixedsystem parameters, MRP (Material Requirement Planning)evolved into a new concept : Manufacturing Resource Planning(or MRPII ) and finally the generic concept Enterprise ResourcePlanning (ERP)Prior to the concept of ERP systems, a manufacturing organizationfaced tremendous difficulty in planning & controlling of resourceslike people , finance WIP inventory at plant , machine status etcdue to lack of integrated & updated information about resources.
Advantage of ERP in a manufacturing organization.Integration among different functional areas to ensureproper communication, productivity and efficiencyIntegration of Design engineering & collaboration.(CAD & CAM )Order tracking, from acceptance through fulfillmentThe revenue cycle, from invoice through cash receiptManaging inter-dependencies of complex processesBOM .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 therevenue , cost and profit at a granular level.
DisadvantagesCustomization of the ERP software is limited.Re-engineering of business processes to fit the "industrystandard" prescribed by the ERP system may lead to aloss of competitive advantage.ERP systems can be very expensive (This has led to anew category of "ERP light" solutions)ERPs are often seen as too rigid and too difficult to adaptto the specific workflow and business process of somecompanies, cited as one of the main causes of their failure.Many of the integrated links need high accuracy in otherapplications to work effectively. A company can achieveminimum standards, then over time "dirty data" will reducethe reliability of some applications.
The CPFR® ( Collaborative planning , forecasting& replenishmentA shared process of creation between two or moreparties with diverse skills and knowledge deliveringa unified approach that provides the optimalframework for customer satisfaction. Voluntary Inter Industry Commercial Standards (VICS)•A set of guidelines supported and publishedby the Voluntary Inter industry CommerceStandards (VICS) Association ,Trading partners to share their plans for future events, and thenuse an exception-based process to deal withchanges or deviations from plans.
CPFR is a business practice that combines theintelligence of multiple trading partners in the planning andfulfillment of customer demand.CPFR is a strategy for improving supply chain efficiencyand effectiveness by making demand transparency, drivethe execution of the supply chain participants to maximizevalue for the end-customer. Fundamentally, the aim of CPFR is to convert the supplychain from a disjointed, ineffective and inefficient “push”system to a coordinated “pull” system based upon endcustomer demand.
CPFR Process Model.The driving premise of CPFR is that all supply chain participants develop asynchronized forecast. Every participant in a CPFR process — supplier,manufacturer, distributor, retailer — can view and amend forecast data tooptimize the process from end to end. Essentially, CPFR puts an end toguesswork in forecasting. It means that manufacturers and retailers sharetheir plans, with detailed knowledge of each others’ assumptions andconstraints.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.” ValueChain Collaboration Associates, Inc
The CPFR® Process Model Seller FRONT END AGREEMENT Collaborative Planning JOINT BUSINESS PLAN CREATE SALES FORECAST Collaborative IDENTIFY EXCEPTIONS Forecasting RESOLVE EXCEPTIONS CREATE ORDER FORECASTBuyer IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS GENERATE ORDER
Phase I — PlanningThis 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 :1. Developing a front-end agreement2. Creating a joint business plan.
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 buildmulti-dimensional models, which may include product hierarchies, geographies,channels, and specific customers. Causal variables such as pricing, promotions, andnew store openings can also be completely integrated. In addition, historical data can becombined with near real-time variations in the channel to get the most accurate forecast.
Phase III — ExecutingDuring 3rd phase of CPFR , front-end planning and forecasting cometogether with supply chain execution. Using Order Promising softwaremodule , companies can instantly determine where orders can best besatisfied — from inventory at any location, planned production orders, orpurchase receipts. When there is a promotion (such as a new storeopening or product launch), Order Promising allows companies to quotefuture delivery dates or other key information related to the event. OrderPromising provides the real-time information essential to good customerservice.Manufacturing, warehousing, order fulfillment, and transportation plansare completely synchronized into an integrated package to monitor andensure on-time execution of the order delivery process.
Collaborative commerce in RetailProcess view of Supply Chain in collaborativecommerce . SUPPLIER SUPPLY CHAIN Supply chain design Demand forecasting PLAN Inventory planning SOURCE Retail Store CUSTOMER DELIVER Distribution planning Allocation Transportation Planning Order Fulfillment Delivery scheduling Visibility, Event Management CATEGORY & coordination & Track & Trace Management Warehouse Management Reverse Logistics Procurement Inventory Management Trade Management In sourcing/out sourcing Transportation management Relationship Management
Managing Manufacturing Lead time ( MLT ) is an essentialtask in any organization to deliver the goods as per thecustomer order lead time.MLT depends on the nature of manufacturing process. Thefour types of manufacturing process are :ETO ( Engineer to Order)MTO ( Manufacture to Order )ATO ( Assemble to Order )MTS (Made to Stock )Design Procure Manufacture Assemble Ship ETO Lead Time 90
Types of Production System 91
Production Process. Standardization Non standardization Variation Flow (Mass) Batch Job Project/ Turn Production production production key production MTS ETOStandard parts & Non standard low volumeHigh Volume Plant location Plant Layout Production process 92
Mass or Flow productionFlow or mass production employs special types of machines speciallydesigned for mass scale productions . It involves decomposition of theproduction task in to minute details & are grouped them according to thenorms of production.An assembly line consisting of workstations in a sequence meant to do aportion of the work , feed the parts and components machined toassembly line .Material moves continuously at a uniform average ratethrough 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. 93
Advantages of Flow production :•Smooth flow of material from one station to next in a logicalorder.•Result in small WIP inventory due to well connected process.•Effective production time can be short if the processes in theproduction is not in efficient .•Low labour skill is required and can be automated easily .•Low labour training is required.•Material movement is less & less WIP inventory storagespace required. 94
Disadvantages :1.Complete line stoppage if a machine breakdown.2.High preventive maintenance cost3.Plant layout is dictated by the product . Any change in the product designwill 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 elementsperformed at a work station ( station time ) does not exceed the cycle time LE = STi ST = Station time for i station K x ( CT) K = total no of work station CT= cycle time5.Low degree of manual supervision . 95
Batch productionBatch production : When a variety of products to be made & volumesare not large , batch production is followed.•It uses general purpose machines or flexible machine system whichcan 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 flowpattern .•Production cycle time are larger as compared to mass production.•Production scheduling follows a particular sequence in which jobsshould be done at the work center.•Optimal batch size determination for economy is essential. 96
Manufacturing Economic batch Quantity Items are produced & consumed simultaneously for a portion of the cycle time. The rate of consumption is uniform through out the year & cost of production remains same irrespective of production lot . I max = t p x ( P-D)Q Q = Pxtp , tp = Q/P P = production rate D D= consumption rate P P – D = inventory build up rate Q = Inventory at t1 tp Cycle 2 DXCs P EBQ = Ci ( P-D ) 97
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) Ci Annual set up cost = D/Q x C s Q/2 x(1-D/P) Ci = D/Q x Cs Q2 = 2 x D x Cs (P-D )Ci PEconomic 2x Dx C x P Q= sBatch Qty C i P-D 98
A manufacturing unit has annual demand of 10000 valves.Each valve costs Rs 32. The product engineeringdepartment estimates the setup cost as Rs 55 & holdingcost as 12.5 % of the valve. The production rate is uniformat 120 valve/day. Production happens for 250 days in ayear. 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 99
Disadvantages :Longer and irregular flow lines result in expensive material handlingprocess.Larger WIP inventory High grade skilled workers & operators arerequired.Total production time required is relatively larger. Job Production :In job production, similar machines are used to produce variety ofjobs 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 differentproduction centers.Each job requires a unique scheduling as there are n jobs to be 100processed by m machines so as to meet the due date.
•Managing total processing time ( make Span)•Minimizing idle machine time•The make span depends on number of jobs to be processed & number ofmachine available, their due date, job shop layout , the manner in which thejobs arrive at the factory.•Planning for the job shop involves deciding the order of priority for the jobswaiting 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. 101
Managing Large & complex production work Project Work ).A large complex task comprising of multiple activities tobe performed from manufacturing to delivery, installation& commissioning requires tight scheduling coordination& monitoring of activities from start to end for timelycompletion of work to avoid monetary loss & highcustomer satisfaction.Cost ,Time & Performance are the basis of such projectactivity.Interrelationships between the activities need to beunderstood by the operation team.Erection of a manufacturing plant. Manufacturing ofships , airbus etc. 102
•It requires a specific layout ( project layout ) to handle eachpart of the project.•Heavy machinery and material handling equipments arerequired to manage the projects.•Tight control and monitoring of resource are the essence ofthe project.•All such production activities are done using projecttechniques called CPM ( Critical Path Method ) & PERT( Project Evaluation & Review Technique)CPM deals with project management involving deterministictime estimates .When activity durations of the project are not deterministic &probabilistic, PERT is used. 103
PLANT LAYOUTPlant layout is a floor plan of the physical facilities used forease in production system. It is an spatial arrangement ofphysical facilities to increase the productivity in the shopfloor.An economic layout decision helps to achieve long runefficiency in operation . It creates competitiveadvantageous in terms of capacity, processes , flexibility,cost and quality of work life 105
If the operational system suffers from :1. Poor on-time performance2. Long production lead-times3. High WIP and/or finished goods inventory4. High overtime5. Lots of expediting and rescheduling6. Wandering or stationary bottlenecks7. Reluctance to take on new business. . . then it implies that organizations production layout has constraints. 106
Layout decisions ..Key benefits are : Higher utilization of people , equipmentand space, Improved flow of information , & materialImproved 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. 107
Fully automated Plant layoutWIP Inventory 108
Assembly Line in a Car Factory 109
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.RM Sawing Turing bending drilling GrindingFG Packing Quality Inspection Painting approval 112
Advantages product layout1.Simple production Planning & control .2.For high volume standard outputs, machine & work force utilization is high.3.Operator skill can be relatively low as he is trained for one kind of operation.1. Limitation : Breakdown of one machine will cause stoppage of work in down /up stream level.2. Last minute change in product design will require major alteration in layout .3. Heavy investment is required in material handling equipments , machinery etc. 114
Process layout : Deals with low volume high varietyproduction activity ( intermittent production ) . The productmanufactured undergoes different sequence of operation. Itprovides 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 differentsize. RM SubJob Process Assembly Dispatch Heat Sawing & Treatment Shearing Grinding Turning Milling Drilling Bending Wielding 115 shop
Process layout1. A high degree of flexibility in terms of task allocation to machines exists.2. Relatively low investment in machines .3. Operators are multi skilled.4. Handles diversity in task better.Limitation1. High care in PP&C required.2. WIP inventory will be large.3. High grades of skilled work force will be required.4. Material handling cost will be high 116
Manufacturing system based on Cellular layoutA manufacturing system wherein the equipment andworkstations are arranged in an efficient sequence thatallows a continuous and smooth movement of inventoriesand materials to produce products from start to finish in asingle process flow, while incurring minimal transport orwaiting time .In order to set up a single process flow (or single productflow) line, it is necessary to locate all the different equipmentneeded to manufacture the product together in the sameproduction area. This calls for a improved production layout. 117
A work cell is defined as a collection ofequipment and workstations arranged in asingle area that allows a product or group ofsimilar products to be processed completelyfrom start to finish.It is, in essence, a self-contained mini-production line that caters to a group ofproducts that undergo the same productionprocess. Cellular manufacturing involves theuse of work cells. 118
Work cell layout : A combination of product & processlayout. It provides the benefits of both layout to thebusiness. Work cell Unit 1 Unit II Job A Job B Assembly line Unit iii Unit V Unit IV 119
Work Cell layout will provide standardization &rationalization of products , good estimates , effectivemachine 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 ofoperations. However the layout can meet the requirementsof batch production system . When the product mixmanufactured is very dissimilar it will not be advisable tohave group layout. 120
Benefits of Cellular layout1. Cellular layout helps to eliminate over production and reduce waste.2. 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.3. Allowing operators to stop production when defects occur prevents wasted material and time. 121
4. In a conventional queue process, it is difficult toidentify and respond to defects until the entire batch isproduced or numerous pieces are processed.5.Reducing defects has several benefits such as :•Fewer defects decreases the number of products thatmust be scrapped.•Fewer defects also means that the raw materials,energy, and resulting waste associated with the scrapare eliminated.•Fewer defects decreases the amount of energy, rawmaterial, and waste used or generated to fix defectiveproducts that can be re-worked. 122
6.Cellular layouts typically require less floor space for equallevels of production. Reductions in square footage canreduce energy use for heating, air conditioning and lighting.It can also reduce the resource consumption and wasteassociated with maintaining the unneeded space (e.g.,fluorescent bulbs, cleaning supplies).7.Cellular manufacturing layouts and automation can freeworkers to focus more closely on equipment maintenanceand pollution prevention, reducing the likelihood of spills andaccidents. 123
Fixed position layout : The space required isvery large , meant for large bulky products .Heavy engineering equipments. Ship yard , Airrepair base. Equipment and people are fixed toan operation area. Ship Repair base Boiler manufacturing 124
Plant layout variables1.Flow of material 2.Process flow Relationship of 1&2 Space Space Requirement Available Practical Constraints Develop layout alternatives 126
Production Planning & control function Staff function Line function Production PhysicalSales & Planning & ProductionMarketing Control work•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. 127•Set quality standard .
Production Planning & ControlProduction Planning and Control (PPC) is a process thatcomprises of managing the performance of criticalfunctions during planning as well as control of productionactivity to deliver quality output within the stipulated timeframe at minimum cost of production. 128
Production Planning & ControlProduction planning function is responsible for planning ofresources like Material , Machine , Manpower , Method &Money for production activity. Production planningfunction deals with two levels of planning :Prior Planning : All activities such as product development& design , production cost estimation , vendoridentification , sourcing mechanism , Material planning ,Order writing etc.Active planning includes Process scheduling , & routing,work force allocation , machine scheduling , Capacityscheduling, Finite capacity scheduling , Tool planningMaterial handling & movement etc. 129
PP&C function is responsible for managing the overallcycle time during production process sinceCycle time is directly related to production rate .CT ( Cycle Time ) = Productive time / Demand per periodIf the output per day from a manufacturing shop is 24cylinders operatign 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 idealtime ie 8hrs on account of various delays viz operatorefficiency , break etc, set up , the effective cycle timewould be less than 20 min .As demand increases & lead time need to be minimizedto be competitive in the market , PP&C has to manageEffective cycle time. 130
OTD cycle time = production time + delivery time (MTS) = order time + Production time + delivery time ( MTO) = order time + Supplier lead time + integration time + delivery time ( ATO ) = Order time + Supplier lead time ( ETO) + subcontractor’s lead time + Production time + Delivery time + Installation &commissioning timePP&C owns the prime responsibility in a manufacturing organization to ensure thatOTD cycle is in accordance with the realistic customer’s acceptation of delivery time. 131
Responsibilities of PP&C function1.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 ActivityVendor evaluation ( value engineering )Monitor out source activityOutsource to subcontractorsMake vendor inspection schedulesHandling & movement of materialsDisposal of scrap inventory 132
RM demand estimation Inform sales Sales dept. According to sales order the expected delivery scheduleRaise Develop Aggregatework Masterorder Production plan Production Schedule Create Capacity Monitor MRP/ requirement Schedule & take corrective BOM plan Action Execution Machine & operator 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. 134
Material requirement planning MRP process. Explode Demand into Analyze bill of material ( BOM) Make or Buy decisionDemandaggregation Check Inventory Stock (Stocking Policy ) Make Buy N YRaise Stock Raise production . Raise subcontractPurchase availability work order contractIndent 135
EOQ Assumption : Demand Constant & No lead time Q Q/2ROP Time Lead time D Lt = Av demand x LT Stock level = EOQ + DLt ( When supplier lead time not constant ) Stock level = EOQ + Dlt + variation in demand ( when 136 demand fluctuates )
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. 137
A firm has extra capacity which can be used for production of gears, whichthey have been buying form the market at Rs 300 per unit. If the firm makesgears , it incurs the following cost.Mat cost Rs 90/unit.Lab cost 120/unitOverhead Rs 30/unit . The annual fixed cost of production estimated is Rs240,000. 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 casethere will be a saving of s 90,000. What should be the decision. Making /Buying gears VC/unit = ( Rs 90 + 120+ 30) = Rs 240 Total VC = 4000 X 240 = 9,60,000 Fixed cost = 2,40,000 Total cost = 12,00,000 Purchase cost = ( 4000 x Rs 300/unit ) = 12,00,000 Fixed cost = 2,40,000 Total cost = 14,40,000 Make gears Make Gears and Agri Equipment 138 Rs 12,00,000 12,00,000 – 90,000 = 11,10,000
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 75 70 ----- Buy price / unit 80 Cost of Process A = 1,00,000 + 75 x 10000 = Rs 8,50,000 Cost of process B = 3,00,000 + 70 x 10000 = Rs 10,00,000 Cost of buying = 80 x 10000 = 8,00,000 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>= 40000When demand exceeds 20000 units , use process A & beyond 40000, use process B 139
Determining Economic production quantity ( batch size )As volume reduces , the total cost of production becomes unviableunless the optimum batch quantity is not produced.Total cost comprises of two conflicting costs Setup cost ( favors largebatch size )and inventory holding cost ( favors small batch size )There are three possible situationsDemand 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 ) 140
Cost trade off.When orders are placed more frequently, the ordering cost is high butcarrying cost lost is low , on the other hand if less frequent orders are placedordering cost will be low but carrying cost will be high. Total costCost Carrying cost Total cost Ordering cost Order Qty 141
An item has yearly consumption of 1000 units . The cost related tosourcing & Making are as under: Decide which option would be betterfor the organization. Source MakeItem cost /unit Rs 6.00 Rs 5.9Ordering cost 10.00 --Set up cost -- 50.00Annual ICC/item 1.32 1.3Production 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 = 6229.14 142
Inventory Control TechniquesInventory control techniques are used to prevent :1 financial leakage due o excessive stock & poordemand , 2 2shortage of inventory3. Inventory Obsolescence Plan safety stock for critical & essential itemsBuild selective control on fast & slow movinginventory .Various Inventory control technique used are :ABC : Always Better ControlVED : Vital Essential & DesirableSDE : Scarce Difficulty & EasyFNSD Fast moving , Normal , Slow moving , Dead 143
ABC Classification 100 CLASS C 90 Low annual consumption value CLASS BUsage % Moderate annual Consumption value 70(InventoryValue ) CLASS A High annual consumption value items 0 10 30 100 % items 144
VED analysis : Vital : Without which production processwill come to halt. Essential : Non availability of such item will affectthe efficiency .Desirable : It is good if it is available , howeveralternate option can be done.SDE : Scarce ( Short supply ) Difficult ( Imported components ) easily ( Short lead time ) 145
Purchase Inventory review system :Review process is administered on the basis of Fixedorder quantity ( Q system ) and fixed period quantitysystem . ( 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 leadtime & variation in demand during lead time ( safetystock ) and average demand during delivery delays.( reserve stock )In p system , stock position is reviewed after every fixedperiod & order is placed according to stock position . 146
The goal of JIT in manufacturing organization is tocontinuously reduce the cost associated with requirementmaterial resource. Its objective is to achieve zero ( minimal )inventory through out the supply chain, hence implementgood material control. The goal of JIT process is to reduceexcess 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 ) 147•Last minute product changes.
Steps for implementing JIT in an organization.1.Symptoms : Identify the symptoms leading to inventory issue. Frequent Stock out2.Causes : Poor demand forecast & inconsistent supply Schedule by supplier .3.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.•Identify reliable source of suppliers who are capable ofsupplying material as when required. 148
•Take supplier in to confidence & sensitize them theimportance of JIT inventory & build healthy businessrelationship with suppliers to have high commitment &ownership . Use Value engineering approach.•Conduct periodic vendor appraisal & follow vendorrating system of evaluation .•Give instant feed back on the supply & suggestimprovement steps.•Sign rate contract .• Use IT enabled ordering system , ERP . 149
Value Engineering or Value AnalysisIt is a technique of cost reduction and costprevention. It focuses on building necessaryfunctions at minimum cost with outcompromising on quality, reliability ,performance& appearance. It helps in identifying unnecessarycosts associated with any material , partcomponents or service by analysis of functionand efficiently eliminating them with outimpairing the quality functional reliability or itscapacity to provide service. It is a preventiveprocess. 150
When to apply VE1. Raw material cost increases suddenly .2. Vendors are unreliable & organization is highly dependent on a few select vendor .3. 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 ) 151
Value = Performance ( Utility) CostVendor analysis is done to minimize the cost incurred dueto 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 152
Value engineering procedure:Constantly evaluate the inventory costs associated &benchmark against the best in practice.As & when the cost of manufacturing increasesdisproportionately, identify an alternate source for contractmanufacturing & monitor the quality & standards.Use more standard parts which can be sourced easilyDevelop more suppliers ( atleast 4 to5 for one part.) &minimize dependency on one supplier.Audit the supplier’s work premise & rate them on theperformance . Conduct quarterly vendor meet & share the highlights &concerns . 153
MRP vs. ERP — Manufacturing management systems haveevolved in stages over the past three plus decades, from a simplemeans of calculating materials requirements to the automation ofan entire enterprise.As frequent changes in sales forecasts happened entailingcontinual readjustments in production, as well as inflexible fixedsystem parameters, MRP (Material Requirement Planning)evolved into a new concept : Manufacturing Resource Planning(or MRPII ) and finally the generic concept Enterprise ResourcePlanning (ERP)Prior to the concept of ERP systems, a manufacturing organizationfaced tremendous difficulty in planning & controlling of resourceslike people , finance WIP inventory at plant , machine status etcdue to lack of integrated & updated information about resources. 154
MRP MRP1 ERPMaterial requirement planning Manufacturing resource Enterprise resourcein manufacturing organization. Planning in manufacturing Planning organization Inventory planning Production planning Business planning & control & control Material planning Material, Machine Man Machine Method Man Material, Method & Money 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. 155
Advantage of ERP in a manufacturing organization.Integration among different functional areas to ensureproper communication, productivity and efficiencyIntegration of Design engineering & collaboration.(CAD & CAM )Order tracking, from acceptance through fulfillmentThe revenue cycle, from invoice through cash receiptManaging inter-dependencies of complex processesBOM .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 therevenue , cost and profit at a granular level. 156
DisadvantagesCustomization of the ERP software is limited.Re-engineering of business processes to fit the "industrystandard" prescribed by the ERP system may lead to aloss of competitive advantage.ERP systems can be very expensive (This has led to anew category of "ERP light" solutions)ERPs are often seen as too rigid and too difficult to adaptto the specific workflow and business process of somecompanies, cited as one of the main causes of their failure.Many of the integrated links need high accuracy in otherapplications to work effectively. A company can achieveminimum standards, then over time "dirty data" will reducethe reliability of some applications. 157
Production Control . It involves work scheduling Reporting & corrective action. Production Planning Work order Scheduling Corrective Action ReportingObjective : Manufacture & deliver the work order within thecommitted 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 ofworkers , non availability of material on account of rejection ,unplanned breakdown , daily reporting of production status as perthe target plan. 159
Scheduling: It deals with working out of optimal timerequired to perform each operation and also the timenecessary to perform the entire series as routed,making allowances for all factors concerned. It mainlyconcerns with time element and priorities of a job. Thepattern of scheduling differs from one job to another .Master Schedule: Weekly or monthly Schedule prepared bybreaking -down of the production requirement for eachproduct for a definite time period. By having this as a runningrecord of total production requirements, production manager is in better position to shift the production from one productto another as per the changed production requirements. Thisforms a base for all subsequent scheduling activities. 160
Master schedule ChartMaster schedule chart communicates the following information related to production schedule.1. Operator schedule : This schedule informs the shop manager about the operator detail who is supposed be reporting for the work in a given shift.2. Machine schedule : This schedule informs the shop manager about the type of machine to be used for doing a job in a given time. 161
Reporting of the production progress in the plant.•Load chart•Gantt Chart•Process Chart 162
Gantt chartWork orderProduct AWork orderProduct BWork orderProduct C 163
Date & shiftType of 19.03 19.03 19.03 20.03 20.03 20.03 21.03Work S1 S2 S3 S1 S2 S3 S1SawingM/c Type: ABendingM/c Type: BGrindingM/c Type: CWieldingM/c Type: D 164
A master schedule is followed by operator schedulewhich fixes total time required to do a piece of workwith a given machine or which shows the timerequired to do each detailed operation of a given jobwith a given machine or process. 165
1 a ) Machine scheduling : A process created for effectiveutilization of machine in the shop floor on the basis of actualavailable time for processing .It involves Set up time required . Startup time Routine maintenance time ( Cooling time, Tool trail ) Operator efficiencyTotal Machine Hr – Delay = Actual Hrs1 b ) Process scheduling : A method of establishing mosteconomic & shortest path for production .Process scheduling requires an understanding the flow ofthe work process & create a process sheet or route sheet tooptimize the time. 166
Process sheet : It gives the optimum method to do a job ,thereby fixing the sequence of the operation , link theancillary or parallel process to be accomplished . It gives thedetails & specification of the machines tools , operator to bedeployed for the job. Delays on account of set upmaintenance 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. 167
Preparing process sheet (Routing procedure) involvesfollowing activities.(1) An analysis of the article to determine what to make andwhat to buy.(2) To determine the quality and type of material(3) Determining the manufacturing operations and theirsequence.(4) A determination of lot sizes(5) Determination of scrap factors(6) An analysis of cost of the article(7) Organization of production control forms. 168
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 169
Process scheduling differs depending upon the nature ofproduction .Continuous or mass production : It is done by industrialengineers 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 linechanges it is altered.Job order. In this case the process sheet is created more often asthe nature of operation varies .Process schedule acts as a standard operating manual forprocess engineers to refer incase of any emergency or accidents. 170
Managing project based manufacturing work. A large complex manufacturing task comprising of multiple activities to be performed from design to manufacture, deliver, installation & commissioning requires tight scheduling coordination & monitoring of 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. 171
Steps involved in managing manufacturing projects.•Project planning ( Drawing the network )•Time estimation of the project ( Network analysis . Identifying activitytime and critical path)•Scheduling : ( identifying the amount of slack in the activities and inthe project )•Time- cost trade off : ( Arriving at a time where the overall cost ofexecuting the project is minimum with out compromising on anyactivity.•Resource allocation : ( Checking the feasibility for doing each activityat most optimistic schedule ) 172
Guide lines for managing project based network manufacturing work.• Break the task in to detailed activities.• 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 173 preceding , concurrent , succeeding etc.
Critical Path of a Project : Critical path of a project network isthe longest path in the network . It is identified by listing allpossible path of the network & selecting the path havingmaximum sum of the critical activity time.Total Floats of the project: Total time that a project completiontime of an activity can be delayed without affecting the actualproject completion time.Free Floats : Total time that an activity can be delayed with outaffecting earliest start time. Of immediate successor activity .When time of the activities are given in three different timeestimates like a = Pessimistic time m= Most likely time b = Optimistic Time mean time has to be calculated. 174
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] 175
Following activities are involved in doing a production work. Activitytime & relation ship is indicated. Draw a networkSr no Activity Time Predecessor1 A 2 days _2 B 5 A B E F C3 C 3 A A D4 D 4 A5 E 6 B,C,6 F 7 E,D 176
Activities Relationship Time A - 2day Project Flow B - 3 C A 5 D B 3 2/2 E C,B 5 F D 4 5 Task 2 C Task 4 2 E 7/7 5 A Start End 12/12 B F0/0 3 Task 1 3 4 Task 3 D 3/5 6/8 Critical path = Longest path which accommodates all critical activities. Task 1 & 3 are non critical . CP = A-C-E = 12 days Task Task Precedence relationship 178
Manufacturing Less than Customer RequiredObjective : time Lead Time Efficiency, Effectiveness, Cycle time reduction in manufacturing operationKey Drivers Minimal Faster High Reduced Inventory Response Quality over head Time Low Faster High No waste , sustained High Outcome cost delivery flexibility quality morale Exceed customer expectation Increase market share & profitability 180
In today’s business world, competitivenessdefines an industry leader. The drivetoward maximum efficiency is constantly atthe forefront of all organization. Globalcompetitiveness is key success factor . Organizations across the country are strivingto adopt lean manufacturing practices tohelp address worries about their bottom line.Cellular Manufacturing is one staple of leanmanufacturing. 181
•In a lean manufacturing processes all nonvalue adding processes are squeezed out.•In a lean manufacturing process a cell consistsof close arrangements of people, machines , orworkstation in a processing sequence.•A one piece flow of product or service throughvarious operations with a least amount of delay& waste. 182
Toyota, the foremost lean manufacturer in businesstoday (Toyota Production System –TPS ) views valueas a combination of cost; quality, and time. Cost is thetotal expense involved in the delivery of the product.Quality is any deviation from standard. Time is bestcaptured as the total elapsed process time from thestart 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 completepicture of where time is being effectively spent, orwasted, in the organization) .It is the key fundamental differentiator between leanand traditional practices. 183
Waste Reduction Process. Value Value Value Added added added timeWaiting time time time Transport Staging Staging Set up machining Assembly Casting Inspection RM FGValue added time is only a small % of the total time .Lean thinking focuses on the value stream to eliminate nonvalue adding items. 184
Waste caused in Manufacturing Process.According to Toyota ‘s production system , seven importantcauses of waste in manufacturing are :1. The Process : Wrong process create high quantity of scrap. Wrong type or size of the machines are used or if theprocess is not being operated correctly it causes waste.2. Methods : Unnecessary motions of operator, machine &tool or material creates in efficiency & leads to waste .3. Movement. Poorly planned production plan layout createsback tracking of the process looses efficiency. 185
4. Re work due to product defect , sorting process due toscrap not being identified, leads to interruption in thesmooth flow of work leading to waste.5. Waiting Time: Operator waiting & material waiting timein the shop floor / work center on account of no material ,no work etc is a waste.6. Over Production : It increases the cost of carryinginventory , locks the capital creates quality problem.7. Inventory : Excess stocking of RM & WIP inventorybrings down cost efficiency of the organization therebyreducing its competitive bargaining power . Puts theorganization in stress to liquidate the inventory at lowerprice . 186
Continuous production: - It refers to the production of standardizedproducts with a standard set of process and operation sequence inanticipation of demand. It is also known as mass flow production orassembly line production. This system ensures less work in processinventory and high product quality but involves large investment inmachinery and equipment. The system is suitable in plants involvinglarge volume and small variety of output e.g. oil refineries reformcement manufacturing etc.Job or batch production: - It involves production as per customersspecification each batch or order consists of a small lot of identicalproducts and is different from other batches. The system requirescomparatively smaller investment in machines and equipment. It isflexible and can be adapted to changes in product design and ordersize without much inconvenience. This system is most suitable whereheterogeneous products are produced against specific orders. 187
Production Process. Standardization VariationMass Batch Job Project/ TurnProduction production production key production MTS ATO MTO/ BTO ETO Plant Layout 189
Managing Manufacturing Lead time ( MLT ) is an essentialtask in any organization to deliver the goods as per thecustomer order lead time.MLT depends on the nature of manufacturing process. Thefour types of manufacturing process are :ETO ( Engineer to Order)MTO ( Manufacture to Order )ATO ( Assemble to Order )MTS (Made to Stock )Design Procure Manufacture Assemble Ship ETO Lead Time 190
Shorter delivery Lead Time Inventory as Stock as ATO No WIP Per per Inventory order demand No MLT, more varietyLonger delivery Lead Time MTS High RM High WIP Inventory Inventory High FG Stock Long MLT no variety Shorter delivery Lead Time Inventory WIP (RM) inventory Ship MTO 191 Short MLT & variety
CRANKSHAFT MANUFACTURING PROCESS 192
PRODUCTION PROCESS OF CRANK SHAFT 194
HEAT TREATMENT PLANT 195
Maintenance Planning & Control 196
Continuous use of machinery causes wear & tear leading to disruption production process.1. Maintenance function’s objective is to keep the machines in best operating conditions with economical cost.2. Maintenance function has to take a timely decision to repair or replace the equipment to avoid the excessive cost incurred in the maintenance. (Maintenance Plan & cost control )3. Overcome accidents & unsafe work conditions in the shop floor.4. Enhance machine utilization & productivity .5. Maxim mum availability of machines ( UP TIME) for 197 production.
Impact of poor maintenance function in a manufacturing organization.1. High down time cost. Incurred loss due to the inability of the machine to produce the goods.2. Down time cost = cost /unit X no. of units X total idle Hrs3. If the manufacturing processes are interdependent activities , the financial loss goes exponential as all other dependent activities come to a halt.4. Idle wage : Wages to be paid to the work force & loss of productivity , leading to the in efficiencies of the machine shop .5. High wastage & scrap due to poor performance of the 198 machine leading to high input material cost.
6. High cost of rework due to inferior quality of finish . Loss of customer confidence.7 Expediting cost to meet the dead line in the form of overtime, hiring of equipment , shifting of work to another plant. etc.8 Accident cost incurred due to partial disability or or loss of life.9 Opportunity cost of the business 199
Performance measure of machines for maintenance decisionOverall Equipment Efficiency ( OEE) : It is thecombination of uptime ( availability of the machine forproduction ) , cycle time efficiency ( productionefficiency ) & quality of the equipment. OEE% = Uptime % X Speed % X Quality % ( MTBF – MTTR ) MTBF= Meantime betweenWhere Uptime % = ______________ X 100 Failure MTBF MTTR = Mean time to repair MTBF = Total Running Time Number of Failure Actual Cycle Time X 100Speed % ( Efficiency) = Design Cycle Time 200
Good Parts ProducedQuality ( %) efficiency = __________________ X 100 Total parts produced 201
Reliability of Machines . Reliability is the probability that an equipment will satisfactorily perform the function for which it is designed when operated under a specified condition for a given period.1. Reliability is a function of time .2. 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 202
Reliability of Machines. Weibull Distribution Graph It helps to decide an appropriate maintenance strategy for high productivity in the shop floor.RateOfFailure Infant Reliability Zone EOL Zone Morality Zone ( Aging out of Machinery) Time 203
Reliability of the equipments depends on the designparameters , operating conditions , Probability ofperformance ( 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 extendEOL : Failure rate increases due to aging of the equipments& increases un predictability . 204
Maintenance required at infant mortality stage is high dueto 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 asthe workers are now trained to operate it efficiently,machine set up issues & idea ling problems have beenhandled by the maintenance team.As the machine starts aging , the failure rate increases dueto high failure rate of the parts & components. At thisstage, the reliability of the machine is low. 205
Reliability of an equipment under infant mortality stagecan be measured as: _ T/ MTBF R = e Substituting λ = 1/ MTBF, Hence R = e-T λWhere T = Length of service before failure, e = Natural log value ( 2.71 )MTBF = Mean time between failureProduct will last for a period of time “T” with out break down . 206
Types of Maintenance followed in a plant1. 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 further classified in to Predictive( Condition based ) & 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 . 207
Design out maintenance to install new equipments ofsuperior technology or scrapping of aged out machines,replacing manual to fully automatic machines.3 . Break Down Maintenance : Repair of machines due tosudden or unforeseen breakdown.4. Total Productive Maintenance( TPM ) : Systematicequipment maintenance process in the shop floor for highproductivity , High employee morale & high job satisfaction.It is based on the premise that maintenance is not just theresponsibility of a single department but a collectiveresponsibility of top management to lower level operators. 208
Objectives of TPM : Make the plant operationmaintenance- free , working on maintainability& improvement . Preventive Maint MaintenanceTPM Maintainability Free Predictive Improvement Service Maint 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. 210
Elements Asset Processes Strategy Themes • Training ContinuousImprovement • Decentralization Empowerment Team • Maintenance prevention • Multi-skilling Measurement Resources Planning and Scheduling Systems and Procedures Figure 8-1 The TPM Wheel 211
Objective of TPM :1. Build a collective culture of maintenance to attainmaximum efficiency through out the production process.2. Create Zero accident, Zero defect & Zero Breakdownmanufacturing process.3. Make Problems visibleBenefits : Increased equipment productivity• Lower Maintenance cost• Reduced accident & waste• High employee commitments 213
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 routinemaintenance so that core maintenance team can focus onHigh end maintenance activities. It aims to achieve OEE &OPE ( Overall production efficiency ) .Planned & Quality maintenanceTraining , Safety & Environment 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 215
Tradeoff Between Repairs and PM Annual Cost (Rs) Minimum Total Maintenance Cost Total Maintenance Costs Minimum Level of Preventive Preventive MaintenanceMaintenance Cost Breakdown and Repair Cost Degree of Preventive Maintenance 216
How Speedy Should Repairs BeCost (Rs) Minimum Total Cost of Repairs Total Costs of Repairs Cost of Repair Crews & Shops, Spare Parts, and Standby Machines Cost of Interruptions to 0 Production Slow Speed of Making Repairs Fast 217
• 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?. 218
Based on the last 25 weeks, the demand patternfor standby parts are : Weekly Demand Occurrence 5 15 10 25 15 35 20 30 219
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 1.000 220
• Determining the Number of Spare parts Step –II Create Payoff Table (Cij values in box) SNi Standby parts Needed EC= Sj 5 10 15 20 Σ[P(SNi)(Cij)]Standby 5Parts 10stocked 15 20 P(SNi) .143 .238 .333 .286 221
• 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.) Ts = 2 Hrs MTTR = .75 Hrs Breakdown rate = 12 machine /hr 224
Step -11) Compute the necessary average service rate for the λ plant (entire crew). ts = 1 ( µ − λ ) 2 = 1/(µ – λ) µ = 12.5 machines per hour Given λ = 12 225
2) Compute the implied average service rate per repair specialist. = 1/(Hours per machine per engineer ) = 1/.75 = 1.333 machines per hour/ engineer3) Compute the necessary number of maintenance specialists. = µ/(Machines per hour per engineer) = 12.5/1.333 = 9.375 or 10 specialists 226
Optimum cost decision needs to be achieved if the maintenancefunction has to be profitable to the organization. In other words it isan optimum mix of planed & un planned maintenance decision .Beyond the optimum cost a machine replacement decisions have tobe taken.Replacement decisions are to be taken when the parts aredeteriorating at the faster rate leading to poor efficiency , highfrequency 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: when equipmentdeteriorate with time & fail suddenly. 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 costWhen time is a continuous variable ,Total cost = Cap cost – Scrap value + Maintenance costProb;1A firm is considering of replacement of machine whosecost is Rs 1750& the scrap value is negligible. The runningmaint cost is as follow:Yr - 1 2 3 4 5 6 7 8 R cost 0 100 200 300 400 500 600 700 800When should the equipment be replaced ? 228
In case of probabilistic model replacement policy used are : Individual replacement Policy & Group replacement policy 230
Spares ManagementSpares management has to be done by the organization toensure that maintenance job can be conducted smoothlywith out any down time on the machine on account ofspares non availability.However the challenge is to ensure that the maintenancedepartment keeps minimum level of spares so that theholding cost, obsolesce cost etc can be reduced .In order to decide the spares requirement planning ,organization should know the reliability factor of theinstalled machine( failure rate of the components of themachine. ) 231
Classification of Spares Parts1. Maintenance & breakdown spares ( Critical spares parts )2. Insurance Spares3. Capital investment spares ( High value spares)4. Rotable spares ( Reusable & standard parts )5 Consumable spares 232
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 . High High Stock on the Stock Basis of failure sufficient qtyAvailability Rate. Failure Buy as when Build relationship With supplier to Rate required Provide as when Necessary. Low Low Low High Cost 233
Quality ManagementQuality is a measure of how closely a goods or service confirmsto specified standards. The standards can be a combinations ofone or more attributes or variables of product or service beingmanufacture delivered . 234
Quality ManagementVariable data are continuous in nature are measured on asliding scale , ie deviation from standard. The data can haverange in terms of upper & lower limit within which thesamples of acceptance are supposed to be lying.Attributes : Attributes are the data discrete in nature & arebinary . Attribute data samples are accepted or rejected. 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/HrNovember 13, 2012 236
Strategic Areas of Quality Control in manufacturingArea Quality ControlMaterialPlanning SUPPLIERProcurement Incoming RMIncoming InspectionMaterialManufacturing ProcessProcess ControlFinal Assembly , Testing Final& dispatch Inspection 237
Quality Assurance : Design optimum quality standards,which a manufacturing function at design stage ,incoming material stage production stage ,FG dispatchstage after sales are to be followed in a manufacturingfirm.Quality Control: The process of measuring defects( quality ) in the product & process beyond acceptablelevel of defined standard. Statistical Quality control technique. 1 Acceptance sampling 2 Control charts 238
Acceptance Sampling: Objective of Acceptance sampling isto accept or reject a lot on the basis of samplecharacteristics.Accurate method is 100% inspection. However in largemanufacturing firms this approach could lead to timeconsumption, delay, money ( Destructive testing methods ) ,manpower etc. Hence it is necessary to take decision basedon the characteristics of a sample size picked from a givenlot 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 lotsample picked is bad ,but the lot size is good , it getrejected. 239
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 Probability of Acceptance Of a lot for a given percent defective .The value for percent defectiveIndicates the quality level of the lot βinspected . Good Bad lot lotAQL = Accepted Quality Level. LTPD AQLLTPD: Lot tolerance percent defective Indifference zone 240(Quality level of the lot submitted for inspection) Percent defective
If the quality level is equal to or less than AQL , it isconsidered to be good quality. On the other hand , ifthe quality level is more than AQL , it is consideredto be inferior.The probability of getting defective or good partfrom a large lot follows binomial distributionmodel.In order to design a acceptance plan , quality teamshould decide AQL , LTPD . Based on this data , onecan determine the value of C( acceptable no toconsider the lot is good ) from the number of sampletaken . 241
CONTROL CHARTFunctions 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 242
CONTROL CHART Essential features of a control chartVariable Values Upper Control Limit Central Line Lower Control Limit Time 243
Control Chart Types Contro Charts l Variables Attributes Charts Charts R `X P CChart Chart Chart Chart 244
Control charts show the performance of a process fromtwo pints of view . Overall process variation & processtrend as time progress. It helps to identify the out ofcontrol status within the process & variation outsidethe operational limits to identify the cause of variation.Mean chart gives the idea of the central tendency of theobservations . It gives the Variation between the sampleobservations.Range Chart : It gives the spread ( dispersion ) ofobservation . It shows variation within the samples. 245
To make control charts, data required are control limitsA) For X Chart Where X = Mean of the sampleUCL = X + 3 σ X = Mean of the sample means X σ = sample standard error = σ / nLCL = X - 3 σ X UCLVariable Mean LCL Time/ Sample No. 246
In practical situation , calculation of standard deviation aretedious process ,hence they are found from standard tables.Thus the formula can be : UCL X = X + ARControl Limits for R Chart LCL x = X - ARUCLR = R + 3 σ RLCLR = R - 3 σ RWhere R = Range of sample observation σR = Standard deviation of RIn practical situation , calculation of standard deviation aretedious process ,hence they are found from standard tables.Thus the formula for control limits for R = UCL = BR 247 LCL = CR
X Chart Control LimitsUCL = x + A R From x 2 TablesLCL = x − A R x 2 Sub group average X = x1 + x2 +x3 +x4 +x5 / 5 Sub group range R = Max Value – Min value 248
R Chart Control LimitsUCL R = B 4 R From TablesLCL R = C 3 R 249
The following data were obtained over a five day period froma single machine to study the process variations & takenecessary control. Two samples were taken per day .Comment on the process variation.Sample Observation X RNo 1 2 3 4 5---------------------------------------------------------------------------------1 10 12 13 8 9 10.4 52 7 10 8 11 9 9.0 43 11 12 9 12 104 10 9 8 13 115 8 11 11 7 76 11 8 8 11 107 10 12 13 13 98 10 12 12 10 129 12 13 11 12 1010 10 13 7 9 12 103.2/10 39/10 X = 10.32 R=3.9
From standard table , For Sample size = 5Given the values of Mean factor A = .58 Upper range factor B = 2.11 Lower range C = 0 factorUCL x = 10.32 + .58X 3.9 = 12.586LCL x = 10.32 - .58X 3.9 = 8.058UCL R = 2.11 X 3.98 = 8 .229 LCL R = 0 X 3.99 = 0 251
Mean Chart12.58 UCL x x 11.6 x x x x10.32 While process is under control, there 9x is a dominant up trend towards the x 8.8 end of the Process. Hence the cause8.05 LCL for such variation need to be traced. Reasons could be due to tool wear, over heating etc. 0 1 2 3 4 5 6 7 8 9 10 R -Chart UCL8.22 The variation with in the sample are fairly in control.3.9 0 LCL 0 1 2 3 4 5 6 7 8 9 10 252
Total Quality ManagementTotal 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 companys operations, with processes being done right the first time and defects and waste eradicated from operations.1. 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.2. The objective of TQM is "Do the right things, right the first time, every time". 253
. TQM activities include:1. Commitment by senior management and all employees2. Meeting customer requirements3. Reducing development cycle times4. Just In Time/Demand Flow Manufacturing5. Improvement teams6. Reducing product and service costs7. Systems to facilitate improvement8. Line Management ownership9. Employee involvement and empowerment10. Recognition and celebration11. Challenging quantified goals and benchmarking12. Focus on processes / improvement plans13. Specific incorporation in strategic planning 254
Principles of TQM 1. Plan (drive, direct) 2. Do (deploy, support, participate) 3. Check (review) 4. Act (recognize, communicate, revise)• Employee Empowerment • Training • Suggestion scheme • Measurement and recognition 5. Create Excellence teams6 Make Fact Based Decision 7. Use SPC (statistical process control) 255
8. TOPS (FORD 8D - Team Oriented Problem Solving)9. Continuous Improvement 10 Systematic measurement 11. Excellence teams 12 Cross-functional process management 13 Attain, maintain, improve standards14 Customer Focus 15 Supplier partnership 16 Service relationship with internal customers 17 Never compromise quality 256 18 Customer driven standards
TQM encourages participation amongst shop floorworkers and managers. There is no single theoreticalformalization of total quality, but Deming, Juran andIshikawa provide the core assumptions, as a "...disciplineand philosophy of management which institutionalizesplanned and continuous... improvement ... and assumesthat quality is the outcome of all activities that take placewithin an organization; that all functions and allemployees have to participate in the improvementprocess; that organizations need both quality systemsand a quality culture.". 257
AttributesPercent DefectiveDefective Chart per sample areaP- Chart C - ChartTo identify the average proportion of non confirmingpart submitted for inspection 258Over a period of time. ( P Chart )
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 acceptor reject a lot on the basis of a lot’s sample characteristics.Identify the supplier’s risk or customer’s risk in acceptancesampling & decide the mutually acceptable level .Sampling technique can be single sampling , doublesampling. 259
Factors need to be considered before making a choice of manufacturingprocess.a) Effect of volume/variety: This is one of the major considerations in selection ofmanufacturing process. When the volume is low and variety is high, intermittentprocess is most suitable and with increase in volume and reduction in varietycontinuous process become suitable. Manufacturing Process Continuous Production Intermittent Production Mass or Batch production flow Production Job Production Project / Turnkey productionHigh volume & Low variety Low volume and high variety 260