1ST MODULE FULL FLEDGE NOTES OF BANGALORE CITY UNIVERSITY MBA 2ND SEMESTER POR PAPER

1. Meaning of Production Management
Production Management refers to the
application of management principles to the
production function in a factory. In other
words, production management involves
application of planning, organizing, directing
and controlling the production process.

2. Definition of Production Management
E.L. Brech: “Production Management is the
process of effective planning and regulating the
operations of that section of an enterprise which
is responsible for the actual transformation of
materials into finished products.”
“Production management deals with decision-
making related to production processes so that
the resulting goods or service is produced
according to specification, in the amount and by
the schedule demanded and at minimum cost.”

3. Functions of Production Management
• Design and development of production
process.
• Production planning and control.
• Implementation of the plan and related
activities to produce the desired output.
• Administration and co-ordination of the
activities of various components and
departments responsible for producing the
necessary goods and services.

4. Objectives of Production Management
• Right quality
• Right quantity
• Right time
• Right / Minimum cost

5. Definitions of Materials Management
 ‘Materials Management’ is a term used to connote
“controlling the kind, amount, location, movement and
timing of various commodities used in production by
industrial enterprises”.
 Materials Management is the planning, directing,
controlling and coordinating those activities which are
concerned with materials and inventory requirements,
from the point of their inception to their introduction
into the manufacturing process.
 Materials Management is a basic function of the
business that adds value directly to the product.

6. Functions of Materials Management
• Planning and programming for materials
purchase.
• Stores and Stock control.
• Receiving and issue of the material.
• Transportation and material handling of the
material.
• Value engineering and value analysis.
• Disposal of scrap and surplus materials.

7. Objectives of Materials Management
• Material Selection
• Low operating costs
• Receiving and controlling material safely and in good
condition.
• Issue material upon receipt of appropriate authority.
• Identification of surplus stocks and taking
appropriate measures to produce it.

8. Benefits of Material Management
• Regular uninterrupted supply of raw-materials to
ensure continuity of production.
• By providing economy in purchasing and
minimizing waste it leads to higher productivity.
• To minimize storage and stock control costs.
• By minimizing cost of production to increase
profits.
• To purchase items of best quality at the most
competitive price.

9. Production System
The production system of an organization is
that part, which produces products of an
organization. It is that activity whereby
resources, flowing within a defined system,
are combined and transformed in a controlled
manner to add value in accordance with the
policies communicated by management.

10. Types of Production systems

11. Intermittent Production System
 Intermittent means something that starts (initiates)
and stops (halts) at irregular (unfixed) intervals (time
gaps).
 In the intermittent production system, goods are
produced based on customer's orders. These goods are
produced on a small scale.
 The flow of production is not continuous. In this
system, large varieties of products are produced.
 These products are of different sizes.
 The design of these products goes on changing
according to the design and size of the product.
Therefore, this system is very flexible.

12. Examples
• The work of a goldsmith is purely based on the frequency
of his customer's orders. The goldsmith makes goods
(ornaments) on a small-scale basis as per his customer's
requirements. Here, ornaments are not done on a
continuous basis.
• The work of a tailor is also based on the number of orders
he gets from his customers. The clothes are stitched for
every customer independently by the tailor as per one's
measurement and size. Goods (stitched clothes) are made
on a limited scale and is proportional to the number of
orders received from customers.

15. Project Production flows
• Project production flows, company accepts a
single, complex order or contract. The order
must be completed within a given period of
time and at an estimated cost.
• Examples of project production flows mainly
include, construction of airports, dams, roads,
buildings, shipbuilding, etc.

16. JOB SHOP PRODUCTION
Job shop production are characterized by
manufacturing of one or few quantity of products
designed and produced as per the specification of
customers within prefixed time and cost.
The distinguishing feature of this is low volume and
high variety of products.
• A job shop comprises of general purpose machines
arranged into different departments. Each job
demands unique technological requirements,
demands processing on machines in a certain
sequence.

17. Characteristics of Job shop Production
• High variety of products and low volume.
• Use of general purpose machines and facilities.
• Highly skilled operators who can take up each job as
a challenge because of uniqueness.
• Large inventory of materials, tools, parts.
• Detailed planning is essential for sequencing the
requirements of each product, capacities for each
work centre and order priorities.

18. • Advantages:
• Because of general purpose machines and facilities
variety of products can be produced.
• Operators will become more skilled and competent, as
each job gives them learning opportunities.
• Full potential of operators can be utilized.
• Opportunity exists for creative methods and innovative
ideas.
• Limitations:
• Higher cost due to frequent set up changes.
• Higher level of inventory at all levels and hence higher
inventory cost.
• Production planning is complicated.
• Larger space requirements.

19. Jobbing Production flows
• Jobbing production flows, company accepts a
contract to produce either one or few units of a
product strictly as per specifications given by the
customer.
• The product is produced within a given period
and at a fixed cost.
• This cost is fixed at the time of signing the
contract.
• Examples of such jobbing production flows
include, services given by repair shops, tailoring
shops, manufacturer of special machine tools, etc.

20. BATCH PRODUCTION
Batch production is defined by American
Production and Inventory Control Society
(APICS) “as a form of manufacturing in which the
job passes through the functional departments in lots
or batches and each lot may have a different
routing.”It is characterized by the manufacture
of limited number of products produced at
regular intervals and stocked awaiting sales.

21. Characteristics
• When there is shorter production runs.
• When plant and machinery are flexible.
• When plant and machinery set up is used for the
production of item in a batch and change of set up is
required for processing the next batch.
• When manufacturing lead time and cost are lower as
compared to job order production.

22. • Advantages
Following are the advantages of batch production:
• Better utilization of plant and machinery.
• Promotes functional specialization.
• Cost per unit is lower as compared to job order production.
• Lower investment in plant and machinery.
• Flexibility to accommodate and process number of products.
• Job satisfaction exists for operators.
• Limitations
Following are the limitations of batch production:
• Material handling is complex because of irregular and longer
flows.
• Production planning and control is complex.
• Work in process inventory is higher compared to continuous
production.
• Higher set up costs due to frequent changes in set up.

23. MASS PRODUCTION
Manufacture of discrete parts or assemblies
using a continuous process are called mass
production. This production system is justified
by very large volume of production. The
machines are arranged in a line or product
layout. Product and process standardization
exists and all outputs follow the same path.

24. Characteristics
• Standardization of product and process sequence.
• Dedicated special purpose machines having higher
production capacities and output rates.
• Large volume of products.
• Shorter cycle time of production.
• Lower in process inventory.
• Perfectly balanced production lines.
• Flow of materials, components and parts is continuous
and without any back tracking.
• Production planning and control is easy.
• Material handling can be completely automatic.

25. • Advantages
• Higher rate of production with reduced cycle time.
• Higher capacity utilization due to line balancing.
• Less skilled operators are required.
• Low process inventory.
• Manufacturing cost per unit is low.
• Limitations
• Breakdown of one machine will stop an entire
production line.
• Line layout needs major change with the changes in
the product design.
• High investment in production facilities.
• The cycle time is determined by the slowest operation.

26. CONTINUOUS PRODUCTION
Production facilities are arranged as per the
sequence of production operations from the
first operations to the finished product.
The items are made to flow through the
sequence of operations through material
handling devices such as conveyors, transfer
devices, etc.

27. Characteristics
• Dedicated plant and equipment with zero
flexibility.
• Material handling is fully automated.
• Process follows a predetermined sequence of
operations.
• Component materials cannot be readily
identified with final product.
• Planning and scheduling is a routine action.

28. Advantages
• Standardization of product and process sequence.
• Higher rate of production with reduced cycle time.
• Higher capacity utilization due to line balancing.
• Manpower is not required for material handling as it is
completely automatic.
• Person with limited skills can be used on the
production line.
• Unit cost is lower due to high volume of production.
Limitations
• Flexibility to accommodate and process number of
products does not exist.
• Very high investment for setting flow lines.
• Product differentiation is limited.

29. Forecasting

40. NAÏVE APPROACH
• Estimating technique in which the last period's
actual are used as this period's forecast,
without adjusting them or attempting to
establish causal factors. It is used only for
comparison with the forecasts generated by
the better (sophisticated) techniques.

41. TREND PROJECTION
• Trend projection or least square method is
the classical method of business forecasting.
In this method, a large amount of reliable data
is required for forecasting demand. In
addition, this method assumes that the
factors, such as sales and demand, responsible
for past trends would remain the same in
future.

42. DELPHI METHOD
• The method relies on the key assumption
that forecasts from a group are generally
more accurate than those from individuals.
The aim of the Delphi method is to construct
consensus forecasts from a group of experts in
a structured iterative manner.

43. Exponential Smoothing Method
• Exponential smoothing is a time series
forecasting method for Uni-variate data.
• The simplest of the exponentially smoothing methods is
naturally called simple exponential smoothing (SES). This
method is suitable for forecasting data with no clear trend or
seasonal pattern.
• Forecasts produced using exponential smoothing methods are
weighted averages of past observations, with the weights decaying
exponentially as the observations get older. In other words, the
more recent the observation the higher the associated weight.

44. Types of Exponential Smoothing
• Single Exponential Smoothing
• Double Exponential Smoothing
• Triple Exponential Smoothing

45. Single Exponential Smoothing
• Single Exponential Smoothing, SES for short, also called Simple
Exponential Smoothing, is a time series forecasting method for Uni-
variate data without a trend or seasonality.
• It requires a single parameter, called alpha (a), also called the
smoothing factor or smoothing coefficient.
• This parameter controls the rate at which the influence of the
observations at prior time steps decay exponentially.
• Alpha is often set to a value between 0 and 1. Large values mean
that the model pays attention mainly to the most recent past
observations, whereas smaller values mean more of the history is
taken into account when making a prediction.
• A value close to 1 indicates fast learning (that is, only the most
recent values influence the forecasts), whereas a value close to 0
indicates slow learning (past observations have a large influence on
forecasts).

46. Double Exponential Smoothing
• Double Exponential Smoothing is an extension to Exponential
Smoothing that explicitly adds support for trends in the Uni-
variate time series.
• In addition to the alpha parameter for controlling smoothing
factor for the level, an additional smoothing factor is added to
control the decay of the influence of the change in trend
called beta (b).
• The method supports trends that change in different ways: an
additive and a multiplicative, depending on whether the trend
is linear or exponential respectively.
• Double Exponential Smoothing with an additive trend is
classically referred to as Holt’s linear trend model, named for
the developer of the method Charles Holt.

47. • Additive Trend: Double Exponential Smoothing with a linear trend.
• Multiplicative Trend: Double Exponential Smoothing with an exponential trend.
• For longer range (multi-step) forecasts, the trend may continue on unrealistically.
As such, it can be useful to dampen the trend over time.
• Dampening means reducing the size of the trend over future time steps down to a
straight line (no trend).
• The forecasts generated by Holt’s linear method display a constant trend
(increasing or decreasing) indecently into the future. Even more extreme are the
forecasts generated by the exponential trend method […] Motivated by this
observation […] introduced a parameter that “dampens” the trend to a flat line
some time in the future.
• As with modeling the trend itself, we can use the same principles in dampening
the trend, specifically additively or multiplicatively for a linear or exponential
dampening effect. A damping coefficient Phi (p) is used to control the rate of
dampening.
• Additive Dampening: Dampen a trend linearly.
• Multiplicative Dampening: Dampen the trend exponentially.
• Hyper parameters:
• Alpha: Smoothing factor for the level.
• Beta: Smoothing factor for the trend.
• Trend Type: Additive or multiplicative.
• Dampen Type: Additive or multiplicative.
• Phi: Damping coefficient.

48. Triple Exponential Smoothing
• Triple Exponential Smoothing is an extension of
Exponential Smoothing that explicitly adds support for
seasonality to the Uni-variate time series.
• This method is sometimes called Holt-Winters
Exponential Smoothing, named for two contributors to
the method: Charles Holt and Peter Winters.
• In addition to the alpha and beta smoothing factors, a
new parameter is added called gamma (g) that
controls the influence on the seasonal component.
• As with the trend, the seasonality may be modeled as
either an additive or multiplicative process for a linear
or exponential change in the seasonality.

49. • Additive Seasonality: Triple Exponential Smoothing with a linear seasonality.
• Multiplicative Seasonality: Triple Exponential Smoothing with an exponential
seasonality.
• Triple exponential smoothing is the most advanced variation of exponential
smoothing and through configuration, it can also develop double and single
exponential smoothing models.
• Being an adaptive method, Holt-Winter’s exponential smoothing allows the level,
trend and seasonality patterns to change over time.
• Additionally, to ensure that the seasonality is modeled correctly, the number of
time steps in a seasonal period (Period) must be specified. For example, if the
series was monthly data and the seasonal period repeated each year, then the
Period=12.
• Hyper parameters:
• Alpha: Smoothing factor for the level.
• Beta: Smoothing factor for the trend.
• Gamma: Smoothing factor for the seasonality.
• Trend Type: Additive or multiplicative.
• Dampen Type: Additive or multiplicative.
• Phi: Damping coefficient.
• Seasonality Type: Additive or multiplicative.
• Period: Time steps in seasonal period.

50. What is forecast error?
One way to check the quality of
your demand forecast is to
calculate its forecast error.
Forecast error is the deviation
of the actual demand from the
forecasted demand.
If you can calculate the level of
error in your previous demand
forecasts, you can factor this
into future ones and make the
relevant adjustments to your
planning.

51. The role of improving forecasting
accuracy
 Mitigate the risk of future forecasting accuracy
 Priorities questionable forecasts
 Refine and improve forecast accuracy
 Improve customer satisfaction
 Optimize inventory levels
 Manage supplier lead times
 Prevent lost revenue

52. Forecast accuracy / forecast error
calculations
• There are a number of formulas that inventory
planners can use to calculate forecast accuracy /
forecast error, from the fairly simple to the quite
complex.
• Two of the most common forecast accuracy / error
calculations include MAPE – the Mean Absolute
Percent Error and MAD – the Mean Absolute
Deviation.

53. MAPE formula
The MAPE formula consists of two parts: M
and APE.
The formula for APE is:

55. Mean Absolute Deviation (MAD)
Another common way to work out forecast error
is to calculate the Mean Absolute Deviation
(MAD).
This shows the deviation of forecasted demand
from actual demand, in units. It takes the
absolute value of forecast errors and averages
them over the forecasted time periods.

57. Box Jenkins Method
 Box–Jenkins methodology, named after
the statisticians George Box and Gwilym Jenkins,
applies autoregressive moving
average ARMA or ARIMA models to find the best fit of
a time series to past values of this time series, in order
to make forecasts.
 Autoregressive moving average model
 In autoregressive moving average (ARMA) models,
sometimes called Box-Jenkins models after the
iterative Box-Jenkins methodology usually used to
estimate them, are typically applied to auto-
correlated time series data.

58. This acronym is descriptive, capturing the key aspects
of the model itself. Briefly, they are:
• AR: Auto-regression. A model that uses the dependent
relationship between an observation and some number of
lagged observations.
• I: Integrated. The use of differencing of raw observations
(i.e. subtracting an observation from an observation at the
previous time step) in order to make the time series
stationary.
• MA: Moving Average. A model that uses the dependency
between an observation and residual errors from a moving
average model applied to lagged observations.

59. The parameters of the ARIMA model are defined
as follows:
p: The number of lag observations included in the model,
also called the lag order.
d: The number of times that the raw observations are
differenced, also called the degree of differencing.
q: The size of the moving average window, also called the
order of moving average.

70. Facility layout
• Facility layout is an arrangement of different aspects of
manufacturing in an appropriate manner as to achieve
desired production results. Facility layout considers
available space, final product, safety of users and facility
and convenience of operations.
• An effective facility layout ensures that there is a smooth
and steady flow of production material, equipment and
manpower at minimum cost.
• Facility layout looks at physical allocation of space for
economic activity in the plant. Therefore, main objective
of the facility layout planning is to design effective
workflow as to make equipment and workers more
productive.

74. Types of facility layout
• Product or Line layout
• Process layout
• Fixed position layout
• Cellular manufacturing layouts
• Hybrid layouts

75. Product or Line layout
• If all the processing equipment
and machines are arranged
according to the sequence of
operations of the product, the
layout is called product type of
layout.
• In this type of layout, only one
product of one type of products
is produced in an operating
area.
• This product must be
standardized and produced in
large quantities in order to
justify the product layout.

77. Process Layout
The process layout is particularly useful where
low volume of production is needed. If the
products are not standardized, the process layout
is more low desirable, because it has creator
process flexibility than other.
In this type of layout, the machines and not
arranged according to the sequence of operations
but are arranged according to the nature or type
of the operations. This layout is commonly
suitable for non repetitive jobs.

80. Fixed type of Layout
• This type of layout is the least important for today’s
manufacturing industries. In this type of layout the
major component remain in a fixed location, other
materials, parts, tools, machinery, man power and
other supporting equipment’s are brought to this
location.
• The major component or body of the product remain
in a fixed position because it is too heavy or too big
and as such it is economical and convenient to bring
the necessary tools and equipment’s to work place
along with the man power. This type of layout is used
in the manufacture of boilers, hydraulic and steam
turbines and ships etc.

81. • Advantages Offered by Fixed Position Layout:
• Material movement is reduced
• Capital investment is minimized.
• The task is usually done by gang of operators, hence
continuity of operations is ensured
• It offers greater flexibility and allows change in product
design, product mix and production volume.
• Limitations of Fixed Position Layout:
• Highly skilled man power is required.
• Movement of machines equipment’s to production
centre may be time consuming.
• Complicated fixtures may be required for positioning of
jobs and tools. This may increase the cost of production.

82. Cellular manufacturing
• Cellular manufacturing is a process of
manufacturing which is a subsection of just-in-
time manufacturing and lean manufacturing
encompassing group technology.
• The goal of cellular manufacturing is to move
as quickly as possible, make a wide variety of
similar products, while making as little waste
as possible.

85. Hybrid layout
Many situations call for a mixture of the three main layout
types. These mixtures are commonly called combination or
hybrid layouts.
For example, one firm may utilize a process layout for the
majority of its process along with an assembly in one area.
Alternatively, a firm may utilize a fixed-position layout for the
assembly of its final product, but use assembly lines to
produce the components and subassemblies that make up
the final product (e.g., aircraft).

86. Six Sigma
Six Sigma is a disciplined, statistical-based, data-
driven approach and continuous improvement
methodology for eliminating defects in a
product, process or service.
A set of management techniques intended to
improve business processes by greatly
reducing the probability that an error or
defect will occur.

87. Six Sigma statistical table

89. 7 Wastes in Production
The seven wastes originated in Japan, where waste is known as “muda."

91. Lean operations
• Lean operations is a means of running an
organization by focusing on providing greater
customer satisfaction while using as few
resources as possible.
The objective of lean operations is twofold
Creating value for customers and eliminating
waste.
• Lean operations allow companies to do more
with less which creates value and increases
profits.

92. Principles of lean operations

93. JIT
• JIT stands for Just in Time, is system in operation
management under which the production is made as
per the demand at a particular moment.
• There is no prior production for any anticipated
demand. This was pioneered by Toyota at their
facility.

94. Features of JIT
• Long-Term Perspective
• Automated Purchasing
• Strong Relationships
• Efficiency
• Constant Improvements

97. KANABAN
• Kanban is a visual system for managing work
as it moves through a process
• Kanban is a concept related to lean and just-
in-time (JIT) production, where it is used as a
scheduling system that tells you what to
produce, when to produce it, and how much
to produce

98. KANBAN CARD

102. • https://machinelearningmastery.com/exponential-
smoothing-for-time-series-forecasting-in-python/
• https://www.managementstudyguide.com/facility-
layout.htm
• https://www.wisdomjobs.com/e-
university/production-and-operations-management-
tutorial-295/factors-influencing-plant-location-facility-
location-9458.html
• https://www.wisdomjobs.com/e-
university/production-and-operations-management-
tutorial-295/production-system-9436.html