2nd assignment of OPM Free download

MuhammadDanish| www.knowledgedep.blogspot.com
GCUF New Campus
2017
Operation and Production
Management
2nd Assignment
Muhammad Danish
Roll # 119467
Section: A

GCUF New Campus |OperationandProductionManagement 2
Q: -1 what is material management? And briefly explain functions of
material management?
Answer:
MATERIAL MANAGEMENT:
Materials management is a logistical function that essentially manages all "raw"
components of a supply chain, which involves the sourcing, acquisition, warehousing and
overall management of raw materials, parts and other components that go into creation of a
product that is then sold and shipped to end users.
The functions of material management have been classified into two categories as well, namely,
the primary functions and secondary functions. These functions assist in the accomplishment of
the aforesaid basic, and primary and secondary objectives of material management.
FUNCTIONS OF MATERIAL MANAGEMENT:
The functions of material management have been classified into two categories as well,
namely, the primary functions and secondary functions. These functions assist in the
accomplishment of the aforesaid basic, and primary and secondary objectives of material
management.
PRIMARY FUNCTIONS
The primary functions of material management are required to meet the primary objectives
1. Material Requirement Planning (MRP):
Material Requirements Planning (MRP) is a computer-based production planning
and inventory Control system. MRP is concerned with both production scheduling and
inventory control. It is a material control system that attempts to keep adequate inventory
levels to assure that required Materials are available when needed. MRP is applicable in
situations of multiple items with complex bills of materials. MRP is not useful for job
shops or for continuous processes that are tightly linked.
The major objectives of an MRP system are to simultaneously:
 Ensure the availability of materials, components, and products for planned production
and for Customer delivery,
 Maintain the lowest possible level of inventory,
 Plan manufacturing activities, delivery schedules, and purchasing activities.

MRP is especially suited to manufacturing settings where the demand of many of the
components and subassemblies depend on the demands of items that face external
demands. Demands for end items are independent. In contrast, demand for components
used to manufacture end items depend on the demands for the end items. The distinctions
between independent and dependent demands are important in classifying inventory
items and in developing systems to manage items within each demand classification.
MRP systems were developed to cope better with dependent demand items. The three
major inputs of an MRP system are the master production schedule, the product structure
records, and the inventory status records. Without these basic inputs the MRP system
cannot function.
2. Inventory Arrangement and Control:
In the cosmopolitan world of today, the inventory arrangement would mean the
purchase of materials to be stored before entering the production stage or sold out, such
that the stock cost is zero. There are three kinds of inventories: a) raw material, b)
purchased goods, and c) finished components. Their inventory control is the
responsibility of the materials management department, production department and the
sales department. It is always important to ensure that inventory at different levels is
maintained, the raw materials are available at each level and that there is proper flow of
materials from one production facility to another at all levels in a manufacturing firm.
3. Continual and effective flow and supply of materials:
The required material by all production center and other departments should be
ensured for its continuity in flow and supply by the material management department.
Many a times, low or zero inventories lead to stock-outs and halts in production. Importer
or lack of material handling tools can also lead to hurdles in material supplies.
Alternately options or emergency supply systems can be deployed to ensure continuity in
production lines. Fluctuations in both demand and productions capacity are the critical
factors. To keep pace with changing demands and perceptions of consumer, the
management needs to maintain continuity in productions and control the flow of
materials supply and distributions at different productions facilities and other related
departments in an organization.
4. Material Quality Control:
The quality of the finished products manufactured will depend upon the quality of
raw material used to manufacture those products. Therefore, the purchase of right quality
of materials is indeed very important. The quality of materials can be measured through
proper inspection, specification, quality control, simplification and standardization. The
components and parts can be assured for reliability by their size and dimensions within
tolerance limits.

5. System Efficiency:
This function ascertains the efficiency of the system being used. If the system
used for materials management in inept of faulty, the above objectives cannot be met,
irrespective of the procedure adopted. For things to be maintained in an effective manner
as planned for managing materials, an effective control ought to be there for every single
process in the department. The Management Information Systems (MIS) and a feedback
control mechanism should be adopted at every stage to organize the management and
employees’ performance and achieve best results.
SECONDARY FUNCTIONS
The secondary objectives can only be fulfilled through the following key
secondary functions of the materials management:
1. Standardization and Generalization:
The design and the technical department of an organization, which comes after
the production department process, determine the standards and specifications of
different types of materials. The term ‘standard’ encompass the alterations in sizes and
variety, the quality and the exchangeability of components and products. Standard and
generalization (or simplification) ensures proper utilization of materials and diminishes
wastage. Standard materials can also be availed at economic costs. It also aids the
purchasing department in selecting the materials and the vendors from whom they need
to be purchased. If there is lesser variety of materials to be bought and stored, it saves on
both the kinds of investors as well as the costs of transporting those inventories to the
stores. Manufacturing a standard product ensures overall cost of production.
2. Product Designand Development:
The product sales can be boosted with its range and functionality. With the help
of the advanced technology such as computer such as Computer Aided Design (CAD),
the product can be designed different with a variety of options and yet a fast pace.
Another technology development in manufacturing is the computer Aided Manufacturing
(CAM) that can bring both a variety as well as flexibility to a product. The materials
management department shall then perform as per the use of the ranges of material and
produce variety of components and hence, ensure the delivery of such material.
3. Manufacturing and Purchase Decisions:
The manufacturing and purchase decisions are a part of the management’s policy
decisions. The organization’s capacity and other facilities developed to produce a range
of items should be the prime objective and is the most important planning activity of
every organization. However, when an organization grows rapidly, its sales also increases

at the same pace and this is when it comes critically important to take a decision on
whether the organization must buy the parts or expand its facilities to keep pace with the
rising demand and sales. This is also a key decision for the materials management
department and aides in the selection of vendors such that the items can be purchased at
reduced prices. The manufacturing and buying decisions can be largely influenced by
material assessment, its availability, procurement, alternate material selection and
inventory control functions, and are taken on the basis of the cost economics and cost-
benefit analysis developed by the organization by use of existing and future production
capacity of skills, labour and available machines in the factory.
4. Material Coding and Classification:
One of the important functions of materials management, the material coding and
classification provides support to the production and purchasing department of an
organization. The materials are classified through a simple yet standard method, such as
ABC Analysis, to manufacture the product or sell various goods. This method is used by
many organizations for the purposes of classifying and storing materials, which are
identified by their codes and nomenclatures. The coding methods should be used by
every firm to keep a check on the range of materials, their quantities and costs.
5. Estimation and Planning:
The MRP can be implemented through accurate estimates of sales and demand for
products in the industry. Market fluctuations should be given due consideration to make
any production control. The materials management department can make use of one of
the methods of forecasting that gives productive results to the organization. Predicting the
future demand of sales helps in the planning of materials supply.

Q: 2- Explain plant layout and its principle? And describe criteria of
goodlayout?
Answer:
PLANT LAYOUT:
Plant layout refers to the physical arrangement of production facilities. It is the
configuration of departments, work centers and equipment in the conversion process. It is a floor
plan of the physical facilities, which are used in production.
PLANT LAYOUT PRINCIPLE:
1. Principle of Overall Integration:
According to this principle the best layout is one which provides integration of
production facilities like men, machinery, raw materials, supporting activities and any
other such factors which result in the best compromise.
2. Principle of Minimum Distance:
According to this principle, the movements of men and materials should be minimized.
3. Principle of Flow:
According to Muther, the best layout is one which arranges the work station for
each operate process in same order or sequence that forms treats or assembles the
materials.
4. Principle of Cubic Space Utilization:
According to this, the best layout utilizes cubic space i.e. space available both in
vertical and horizontal directions is most economically and effectively utilized.
5. Principle of Satisfaction and Safety:
According to this principle, best layout is one which provides satisfaction and
safety to all workers.
6. Principle of Flexibility:
In automotive and other allied industries where models of products change after
sometime, the principle of flexibility provides adoption and rearrangements at a
minimum cost and least inconvenience.

CRITERIA OF GOOD LAYOUT
The designing of a layout is a creative exercise. The use of work study methods and
industrial engineering techniques are helpful in designing the layout. Following are some of the
criteria that need to be satisfied by a good layout.
1. Maximum flexibility
A good layout is one that can be rapidly modified with the changing environment.
2. Maximum coordination
All the departments or functions must be arranged in such a manner that it is easy to
coordinate their activities with the issuing or receiving departments.
3. Maximum visibility
The layout should have no hiding places in which goods or information can get
misled. All the people and materials should be readily observable at all times.
4. Maximum accessibility
All the servicing and maintenance points should be readily accessible.
5. Minimum distance
All unnecessary and circuitous movements should be avoided and all movements
should be direct.
6. Minimum handling
The handling of material and information should be minimized by using appropriate
devices.
7. Minimum discomfort
Good lighting and ventilation have to be provided. Excessive sunlight, heat, noise,
vibrations and smell should be minimized.
8. Inherent safety
Safety should be an important consideration in each and every layout. No person,
worker, customer or passerby should be exposed to danger.
9. Efficient process flow

Intersection of work flow and transport flow should be avoided. Material or
information must flow in one direction only.
10. Identification
Workers must be provided with their own work space. Provision of a space with
which a person can be identified helps enhance the person's morale.

Q: 3- Describe the process ofproduct development?
Answer:
Employees in the service/product development process design and develop new services
or products. The services or products may be developed to external customer specifications or
conceived from inputs received from the market in general.
There are eight steps of Product development;
Step 1: Generating
Utilizing basic internal and external SWOT analyses, as well as current marketing
trends, one can distance themselves from the competition by generating ideologies which
take affordability, ROI, and widespread distribution costs into account.
Lean, mean and scalable are the key points to keep in mind. During the NPD
process, keep the system nimble and use flexible discretion over which activities are
executed. You may want to develop multiple versions of your road map scaled to suit
different types and risk levels of projects.
Step 2: Screening the Idea
Set specific criteria for ideas that should be continued or dropped. Stick to the
agreed upon criteria so poor projects can be sent back to the idea-hopper early on.
Because product development costs are being cut in areas like Wichita, “prescreening
product ideas,”means taking your Top 3 competitors’ new innovations into account, how
much market share they’re chomping up, what benefits end consumers could expect
etc. An interesting industry fact: Aviation industrialists will often compare growth with
metals markets; therefore, when Boeing is idle, never assume that all airplanes are
grounded, per se.
Step 3: Testing the Concept
Aside from patent research, design due diligence, and other legalities involved
with new product development; knowing where the marketing messages will work best is
often the biggest part of testing the concept. Does the consumer understand, need, or
want the product or service?
Step 4: Business Analytics
During the New Product Development process, build a system of metrics to
monitor progress. Include input metrics, such as average time in each stage, as well as
output metrics that measure the value of launched products, percentage of new product

sales and other figures that provide valuable feedback. It is important for an organization
to be in agreement for these criteria and metrics.
Even if an idea doesn’t turn into product, keep it in the hopper because it can
prove to be a valuable asset for future products and a basis for learning and growth.
Step 5: Beta / Marketability Tests
Arranging private tests groups, launching beta versions, and then forming test
panels after the product or products have been tested will provide you with valuable
information allowing last minute improvements and tweaks. Not to mention helping to
generate a small amount of buzz. WordPress is becoming synonymous with beta testing,
and it’s effective; Thousands of programmers contribute code, millions test it, and finally
even more download the completed end-product.
Step 6: Product Development
Provided the technical aspects can be perfected without alterations to post-beta
products, heading towards a smooth step 7 is imminent. According to Akrani, in this
step, “The production department will make plans to produce the product. The marketing
department will make plans to distribute the product. The finance department will
provide the finance for introducing the new product”.
Step 7: Commercialize
At this stage, your new product developments have gone mainstream, consumers
are purchasing your good or service, and technical support is consistently monitoring
progress. Keeping your distribution pipelines loaded with products is an integral part of
this process too, as one prefers not to give physical (or perpetual) shelf space to
competition. Refreshing advertisements during this stage will keep your product’s name
firmly supplanted into the minds of those in the contemplation stages of purchase.
Step 8: Post Launch Review and Perfect Pricing
Review the NPD process efficiency and look for continues improvements. Most
new products are introduced with introductory pricing, in which final prices are nailed
down after consumers have ‘gotten in’. In this final stage, you’ll gauge overall value
relevant to COGS (cost of goods sold), making sure internal costs aren’t overshadowing
new product profits. You continuously differentiate consumer needs as your products
age, forecast profits and improve delivery process whether physical, or digital, products
are being perpetuated.

Q: 4- Explain in detail supply chain management and its principle?
Answer:
SUPPLY CHAIN MANAGEMENT:
Supply chain management (SCM) is the oversight of materials, information, and finances
as they move in a process from supplier to manufacturer to wholesaler to retailer to
consumer. Supply chain management involves coordinating and integrating these flows both
within and among companies.
SUPPLY CHAIN MANAGEMENT PRINCIPLES:
A competitive advantage will exist only if several key attributes exist in a supply chain.
Five guiding principles are necessary for effective supply chains. Applying all Five Principles of
Supply Chain Management is necessary for the effective design and execution of supply chain
systems:
1. Market segmentation:
Without a clear understanding and definition of customer requirements, a supply
chain cannot be effectively constructed. One must construct an information infrastructure to
capture customer transaction data, store the data, and analyze it from an operational
perspective. The objective is to obtain a clear statement of the customer’s requirements. A
supply chain’s requirements vary by customer, product, and location. These requirements
must be thoroughly understood and form the foundation for constructing an efficient and
effective supply chain.
2. Integrate business processes:
Business processes must be
established both intra- and inter-
organizationally to support the supply
chain’s strategic objectives, as illustrated in
Figure, above. These processes, coupled
with the information infrastructure, support
the efficient flow of material through the
supply chain. While much attention has
been placed on understanding business
processes within organizations, it is
essential to build processes inter-organizationally to leverage and enhance partners’
capabilities. These inter-organizational processes must be designed to take advantage of the
increased information that drives daily supply chain decisions.

3. Create a supply chain information infrastructure
An effective information infrastructure, both intra- and inter-organizationally, is
necessary for a supply chain to achieve competitive advantage. Today, internet enabled B2B
collaboration makes it much easier for supply chain partners to share timely demand
information, inventory status, daily capacity usage requirements, evolving marketing plans,
product and process design changes, and logistics requirements to mention just a few.
However, true collaboration requires joint planning of inventory and production strategies
and the reliable joint execution of operational plans on a continuing basis. How capacity is
used daily must be considered from an overall system perspective, not just a local viewpoint.
Simply passing data (even customer demand data) among partners does not realize the true
economic potential of collaboration.
4. Unify decision support systems
Academics and software providers have designed and built Decision Support System
(DSS) environments for individual companies and supply chains. These environments are
based on different philosophical models. Also, they differ in how they forecast demand, and
how they drive production and allocation decisions. Their goal is to generate plans that
simultaneously consider all elements of the supply chain. No matter which approach is taken,
these systems and their embedded rules drive many daily supply chain activities. Therefore,
they have a substantial impact on the operating behavior, and consequently, on overall supply
chain performance. How much they enhance this performance depends on both the accuracy
of their input data and the modeling approaches employed. These decision support systems
need to address uncertainty in an explicit manner—and most do not.
5. Adopt lean philosophies
Most of companies have focused on creating lean organizations. These companies
have shortened internal lead times and made them more predictable and repeatable. They
reduced work-in-process inventories from months of supply to days. Firms implemented just
in time delivery strategies for their most costly component materials, and have worked to
dramatically reduce setup times. These actions have substantially reduced indirect costs and
improved use of physical space. They have created cross-trained, empowered and more
highly motivated workers. For maximum supply chain efficiency, all partners must engineer,
align, and execute their processes so that the entire chain has the above attributes. Lean
supply chains must also be designed as tightly-coupled systems that quickly and profitably
respond to market demand fluctuations. Therefore, lean philosophies must be extended
beyond a company’s internal operations to its trading partners across the entire supply chain.

Q: 5- Define inventory? And explain objectives and benefits of
inventory control?
Answer:
INVENTORY:
Inventory is the raw materials, work-in-process products and finished goods that are
considered to be the portion of a business's assets that are ready or will be ready for sale.
OBJECTIVES OF INVENTORY CONTROL:
1. Avoid Stock-Outs
Making sure that your customers have access to products when they need or want
them is a key service issue in inventory control. Your system should include a well-
outlined replenishment system, where critical inventory levels at a store result in swift
shipments from your distribution center or directly from a vendor. Given the time and
effort put into promoting products to attract customer interest, you want inventory on
hand when they come to buy.
2. Avoid Excess Inventory
Optimized inventory control actually balances a fine line between too much and
too little. In fact, a main reason companies have gone to just-in-time systems and
advanced software solutions is to avoid having excess inventory while trying to meet
demand. Carrying too much inventory in distribution centers or retail stores is costly. It
takes up space, employee time, utility costs and limits floor space for selling. Plus,
perishable items or products with expiration dates must be thrown out if you can't sell
them.
3. Move Goods Efficiently
Efficiency in inventory means the ability to quickly receive and store products as
they come in and retrieve and ship when they go out. Every extra second spent in these
processes adds to the costs of inventory management. Plus, efficient distribution is a
customer satisfaction issue for trade channel sellers and retailers. Retailers expect
suppliers to meet prescribed delivery timetables, and customers expect customized orders
and products to arrive on time.
4. Maximize Profit Margins
Well-managed inventory control is often a key in meeting profit margin
objectives. Gross profit margin is the difference between revenue earned from sales and
the costs of goods sold. Take away fixed costs including buildings, utilities and labor and

you get to operating margin. Investing as little as possible in inventory control while
meeting the other objectives is critical in earning profit and growing your business.
BENEFITS OF INVENTORY CONTROL
Increase in Customer Service
An increase in customer service levels results from having a highly defined and working
inventory control policy. Inventory control is the main factor of customer satisfaction and
attraction of customers to buy much more.
Reduce Labor Cost
Well-defined inventory control policies can reduce the labor costs associated with managing the
inventory. Each time inventory gets handled, whether to move it from one location to another, to
retrieve it for order picking or to put it away for storage, it involves labor. This handling makes
up part of the cost associated with managing inventory. Companies prefer to handle the
inventory as little as possible. When a company constantly searches for lost inventory, a move
inventory from one location to another because of poor space utilization or handles the inventory
multiple times, it results in increased labor costs. Properly managed inventory reduces these
incidents and reduces the labor cost associated with the inventory.
Lower Inventory Costs
Lower inventory cost is a definite advantage for the company that effectively controls its
inventory. Business owners need to fully understand the costs of carrying inventory, not just how
much the inventory costs to purchase. Inventory carrying costs consist of all the expenses a
company incurs for owning inventory. These expenses include the cost of capital, storage and
risks costs (including obsolescence, damage, theft and deterioration) plus the appropriate taxable
amounts. Effective inventory control reduces these costs because it reduces the total amount of
inventory required to manage the business. Inventory control monitors the level of inventory and
proactively manages obsolescence and deterioration by ordering in the appropriate quantities.
Effective inventory control also reduces storage costs, because it orders enough inventories to fill
consumer demand and not much more.
Bottom Line
The company that effectively and proactively controls and manages its inventory has a
competitive advantage over the company that has lax inventory control policies and procedures.

Q: 6- Define Forecasting also explain common features of forecasting
and steps of forecasting process?
Answer:
FORECASTING:
Forecasting is a decision-making tool used by many businesses to help in budgeting,
planning, and estimating future growth. In the simplest terms, forecasting is the attempt to
predict future outcomes based on past events and management insight. Business forecasting is an
estimate or prediction of future developments in business such as sales, expenditures, and profits.
COMMON FEATURES OF FORECASTING:
As pointed out, forecasting techniques are quite different from each other. But four features and
assumptions underlie the business of forecasting. They are:
Forecasting techniques generally assume that the same underlying causal relationship that
existed in the past will continue to prevail in the future. In other words, most of our
techniques are based on historical data.
Forecasts are rarely perfect. Therefore, for planning purposes, allowances should be made
for inaccuracies. For example, the company should always maintain a safety stock in
anticipation of a sudden depletion of inventory.
Forecast accuracy decreases as the time period covered by the forecast (i.e., the time
horizon) increases. Generally speaking, a long-term forecast tends to be more inaccurate
than a short-term forecast because of the greater uncertainty.
Forecasts for groups of items tend to be more accurate than forecasts for individual items,
because forecasting errors among items in a group tend to cancel each other out. For
example, industry forecasting is more accurate than individual firm forecasting.
STEPS OF FORECASTING PROCESS
The forecast process itself, typically done on a monthly basis, consists of structured steps. These
steps often are facilitated by someone who might be called a demand manager, forecast analyst,
or demand/supply planner. However, many other people are typically involved before the plan
for the month is authorized.
Step1. The cycle begins mid-month just after the forecasts have been finalized and
communicated to the stakeholders. Now is the time to update the history file and
review forecast accuracy. At the end of the month, enter actual demand and
review forecast accuracy.

Step2. Prepare initial forecasts using some forecasting software package and judgment.
Adjust the parameters of the software to find models that fit the past demand
well and yet reflect the demand manager’s judgment on irregular events and
information about future sales pulled from various sources and business units.
Step3. Hold consensus meetings with the stakeholders, such as marketing, sales, supply
chain planners, and finance. Make it easy for business unit and field sales
personnel to make inputs. Use the Internet to get collaborative information from
key customers and suppliers. The goal is to arrive at consensus forecasts from all
of the important players.
Step4. Revise the forecasts using judgment, considering the inputs from the consensus
meetings and collaborative sources.
Step5. Present the forecasts to the operating committee for review and to reach a final
set of forecasts. It is important to have a set of forecasts that everybody agrees
upon and will work to support.
Step6. Finalize the forecasts based on the decisions of the operating committee and
communicate them to the important stakeholders. Supply chain planners are
usually the biggest users.
As with all work activity, forecasting is a process and should be continually reviewed for
improvements. A better process will foster better relationships between departments such as
marketing, sales, and operations. It will also produce better forecasts.

Q: 7- Let us assume that a new medical facility, Health-care, is to be
located in Lahore. The location factors, factor rating and scores for two
potential sites are shown in the following table. Which is the best
locationbasedon factorrating method? Explain why it is best.
Plant Location and Layout
Sr. No Location factor Factor
Rating
Rating Location
1
Rating Location
2
1 Facility utilization 7 2 6
2 Total patient per month 4 4 3
3 Average time per emergency
trip
8 6 4
4 Land and construction costs 4 4 3
5 Employee preferences 5 3 5
Answer:
Sr. # Location factor Factor
Rating
Rating Location 1
Rating Location 2
(1) (2)
Total
(1x2) (3)
Total
(1x3)
1 Facility utilization 7 2 14 6 42
2 Total patient per month 4 4 16 3 12
3 Average time per emergency trip 8 6 48 4 32
4 Land and construction costs 4 4 16 3 12
5 Employee preferences 5 3 15 5 25
Total 109 Total 123
The total score for the location 2 is higher than that of location 1. Hence
location 2 is the best choice.

Q: 8- Distinguish betweendesign capacityand system capacity?
Answer:.
CAPACITY
Capacity refers to a system's potential for producing goods or delivering services over a
specified time interval. Capacity planning involves long-term and short term considerations.
Long-term considerations relate to the overall level of capacity; short-term considerations relate
to variations in capacity requirements due to seasonal, random, and irregular fluctuations in
demand.
Capacity planning for manufacturing and service systems are different. Both must be
designed with capacity limitations in mind. The approaches for long-term and short-term
capacity planning will help the managers to make best use of resources
DESIGN AND SYSTEMS CAPACITY
Production systems design involves planning for the inputs, transformation activities,
and outputs of a production operation. Design plays a major role because they entail significant
investment of funds and establish cost and productivity patterns that continue in future. The
capacity of the manufacturing unit can be expressed in number of units of output per period. In
some situations measuring capacity is more complicated when they manufacture multiple
products. In such situations, the capacity is expressed as man-hours or machine hours.
Definition of design capacity
“Design capacity is the theoretical maximum output of a system in a given period
under ideal conditions. For many companies designing capacity can be straightforward, effective
capacity is the capacity a firm expects to achieve given its current operating constraints.”
Definition of system capacity
“System capacity is formally defined as the maximum of the product of the
number of users per cell times the user spectral efficiency for a given maximum outage
probability.”
DIFFERENCE BETWEEN
DESIGN CAPACITY AND SYSTEM CAPACITY
DesignCapacity:
Designed capacity of a facility is the planned or engineered rate of output of
goods or services under normal or full scale operating conditions. For example, the

designed capacity of the cement plant is 100 TPD (Tonnes per day). Capacity of
the sugar factory is 150 tonnes of sugarcane crushing per day. The uncertainty of
future demand is one of the most perplexing problems faced by new facility
planners. Organization does not plan for enough regular capacity to satisfy all their
immediate demands. Design for a minimum demand would result in high
utilisation of facilities but results in inferior service and dissatisfaction of
customers because of inadequate capacity. The design capacity should reflect
management’s strategy for meeting the demand. The best approach is to plan for
some in-between level of capacity.
System/effective capacity:
System capacity is the maximum output of the specific product or product
mix the system of workers and machines is capable of producing as an integrated
whole. System capacity is less than design capacity or at the most equal it because
of the limitation of product mix, quality specification, and breakdowns. The actual
is even less because of many factors affecting the output such as actual demand,
downtime due to machine/equipment failure, unauthorized absenteeism. The
system capacity is less than design capacity because of long-range uncontrollable
factors. The actual output is still reduced because of short-term effects such as
breakdown of equipment, inefficiency of labour. The system efficiency is
expressed as ratio of actual measured output to the system capacity.
These different measures of capacity are useful in defining two measures of system
effectiveness: efficiency and utilization. Efficiency is the ratio of actual output to
effective capacity. Utilization is the ratio of actual output to design capacity.
Efficiency = Actual output/ Effective capacity
Utilization = Actual output/ Design capacity
It is common for managers to focus exclusively on efficiency, but in many
instances, this emphasis can be misleading. This happens when effective capacity
is low compared with design capacity. In those cases, high efficiency would seem
to indicate effective use of resources when it does not.

Q: 9- What is JIT? Write the Basic elementand objective of JIT?
Answer:
JUST IN TIME (JIT):
“Just-in-time (JIT) is an inventory strategy companies employ to increase efficiency and
decrease waste by receiving goods only as they are needed in the production process, thereby
reducing inventory costs. This method requires producers to forecast demand accurately.”
It originally referred to the production of goods to meet customer demand exactly, in
time, quality and quantity, whether the `customer' is the final purchaser of the product or another
process further along the production line. It has now come to mean producing with minimum
waste. "Waste" is taken in its most general sense and includes time and resources as well as
materials
BASIC ELEMENTS OF JIT
 Flexible resources
 Cellular layouts
 Pull production system
 Kanban production control
 Small-lot production
 Quick setups
 Uniform production
 Quality at the source
 Total productive maintenance
 Supplier networks
OBJECTIVES OF JIT:
JIT aims to achieve the following objectives:
 Zero inventory
 Zero breakdowns
 100% on time delivery service
 Elimination of non-value added activities
 Zero defects
JIT applies to raw materials inventory as well as to work-in-process inventory. The goals
are that both raw materials and work in process inventory are held to absolute minimums. JIT is
used to complement other materials planning and control tools, such as EOQ and safety stock
levels. In JIT system, production of an item does not commence until the organization receives
an order.

When an order is received for a finished product, productions people give orders for raw
materials. As soon as production is complete to fill the order, production ends. In theory, in JIT,
there is no need for inventories because no production takes place until the organization knows
that it will sell them. In practice, however, companies using just-in-time inventory generally have
a backlog of orders or stable demand for their products to assure continued production.
The fundamental objective of JIT is to produce and deliver what is needed, when it is
needed, at all stages of the production process-just-in-time to be fabricated, sub-assembled,
assembled, and dispatched to the customer. Although in practice there are no such perfect plants,
JIT is an ideal and therefore a worthy goal.
OTHER OBJECTIVES:
 Eliminate waste that is, minimize the amount of equipment, materials, parts, space, and
worker’s time, which adds a great value to the product
 Increase productivity
JIT means making what the market demands when it is in need. It is the most popular
systems that incorporate the generic elements of lean systems. Lean production supplies
customers with exactly what the customer wants, when the customer wants, without waste,
through continuous improvement. Deploying JIT results in decrease of inventories and increases
the overall efficiencies. Decreasing inventory allows reducing wastes which in turn results in
saving lots of money.

Q: 10- What is Strategy? How to relate the strategy implementation with
operations & production management?
Answer:
STRATEGY:
The art and science of formulating, implementing, and evaluating cross-functional
decisions that will enable an organization to achieve its objectives.
Strategy is the continuous planning, monitoring, analysis and assessment of all that is
necessary for an organization to meet its goals and objectives.
STRATEGY IMPLEMENTATION:
Strategic management is an ongoing process of managing an organization strategically.
This involves a set of management decisions and actions that result in formulating and
implementing strategies that determine the performance and success of the organization.
Strategy implementation is the translation of chosen strategy into organizational action so
as to achieve strategic goals and objectives.
STRATEGY IMPLEMENTATION PROCESS IN OPM:
Following steps show the connect of strategy implementation with Operation and process
management;
1. Goal-Setting
The purpose of goal-setting is to clarify the vision for your business. This stage
consists of identifying three key facets:
1- Define both short- and long-term objectives.
2- Identify the process of how to accomplish your objective.
3- Customize the process for your staff, give each person a task with which he
can succeed.
Keep in mind during this process your goals to be detailed, realistic and match the
values of your vision. Typically, the final step in this stage is to write a mission statement
that succinctly communicates your goals to both your shareholders and your staff.

2. Analysis
Analysis is a key stage because the information gained in this stage will shape the
next two stages. In this stage, gather as much information and data relevant to
accomplishing your vision. The focus of the analysis should be on understanding the
needs of the business as a sustainable entity, its strategic direction and identifying
initiatives that will help your business grow. Examine any external or internal issues that
can affect your goals and objectives. Make sure to identify both the strengths and
weaknesses of your organization as well as any threats and opportunities that may arise
along the path.
3. Strategy Formulation
The first step in forming a strategy is to review the information gleaned from
completing the analysis. Determine what resources the business currently has that can
help reach the defined goals and objectives. Identify any areas of which the business
must seek external resources. The issues facing the company should be prioritized by
their importance to your success. Once prioritized, begin formulating the strategy.
Because business and economic situations are fluid, it is critical in this stage to develop
alternative approaches that target each step of the plan.
4. Strategy Implementation
Successful strategy implementation is critical to the success of the business
venture. This is the action stage of the strategic management process. If the overall
strategy does not work with the business' current structure, a new structure should be
installed at the beginning of this stage. Everyone within the organization must be made
clear of their responsibilities and duties, and how that fits in with the overall goal.
Additionally, any resources or funding for the venture must be secured at this point.
Once the funding is in place and the employees are ready, execute the plan.
5. Evaluation and Control
Strategy evaluation and control actions include performance measurements,
consistent review of internal and external issues and making corrective actions when
necessary. Any successful evaluation of the strategy begins with defining the parameters
to be measured. These parameters should mirror the goals set in Stage 1. Determine your
progress by measuring the actual results versus the plan. Monitoring internal and

external issues will also enable you to react to any substantial change in your business
environment. If you determine that the strategy is not moving the company toward its
goal, take corrective actions. If those actions are not successful, then repeat the strategic
management process. Because internal and external issues are constantly evolving, any
data gained in this stage should be retained to help with any future strategies.

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