DEPARTMENT OF BUSINESS ADMINISTRATION

BAREILLY COLLEGE, BAREILLY

B.B.A. NOTES

OF

PRODUCTION AND OPERATIONS MANAGEMENT

(UNIT 1, 2, 3, 4, 5)

Dr. Abhishek Sharma

Assistant Professor

Department of Business Administration

 NATURE AND SCOPE OF PRODUCTION AND
OPERATION MANAGEMENT

E.S.Buffa defines production management as follows: ‘Production management deals with

decision-making related to production processes so that the resulting goods or services are
produced according to specifications, in the amount and by the schedule demanded and out of
minimum cost’.

Joseph G .Monks defines Operations Management as the process whereby resources, flowing
with in a defined system, are combined and transformed by a controlled manner to add value
in accordance with policies communicated by management.
Objectives of Production/Operations Management:

Some of the important objectives of production/operations management are:

(i) Maximum customer satisfaction through quality, reliability, cost and delivery time.

(ii) Minimum scrap/rework resulting in better product quality.

(iii) Minimum possible inventory levels (i.e.,optimum inventory levels).

(iv) Maximum utilisation of all kinds of resources needed.

(v) Minimum cash outflow.

(vi) Maximum employee satisfaction.

(vii) Maximum possible production (i.e., outputs).

(viii) Higher operating efficiency.

(ix) Minimum production cycle time.

(x) Maximum possible profit or return on investment.

(xi) Concern for protection of environment.

(xii) Maximum possible productivity.

NATURE OF PRODUCTION/OPERATIONS:

The nature of production or operations can be better understood by viewing the manufacturing
function as :

(i) Production/operations as a system,

(ii) Production/operations as an organisational function,

 (iii) Production/operations as a conversion or transformation process and

(iv) Production/operations as a means of creating utility.

These four distinct views are discussed in the following section.

 Production/Operations as a System

This view is also known as “systems concept of production”. A system is defined as the
collection of interrelated entities. The systems approach views any organisation or entity as an
arrangement of interrelated parts that interact in ways that can be specified and to some extent
predicted. Production is viewed as a system which converts a set of inputs into a set of desired
outputs. A production system has the following elements or parts : (i) Inputs,

(ii) Conversion process or transformation process,

(iii) Outputs

(iv) Transportation subsystem,

(v) Communication subsystem and

(vi) Control or decision making subsystem.

 Production/Operations as a Conversion/Transformation Process

The conversion or transformation sub-system is the core of a production system because it

consists of processes or activities wherein workers, materials, machines and equipment are
used to convert inputs into outputs. The conversion process may include manufacturing
processes such as cutting, drilling, machining, welding, painting, etc., and other processes such
as packing, selling, etc. Any conversion process consists of several small activities referred to
as “operations” which are some steps in the overall process of producing a product or service
that leads to the final output.

 Production/Operations as a Means of Creating Utility:

 Production is defined as the process of adding to the value of outputs or the process of creating
utility in outputs. “Utility” is the power of satisfying human needs. During the process of
converting the raw materials into finished goods, various types of utilities are created while
adding value to the outputs. These

Types of utilities are:

 Form utility:

This is created by changing the size, shape, form, weight, colour, smell of inputs in order to
make the outputs more useful to the customers. For example, iron ore is changed to steel, wood
is changed to furniture, etc.

 Place utility:

This is created by changing the places of inputs or transporting the inputs from the source of
their availability to the place of their use to be converted into outputs. For example the iron ore
and coal are transported from the mines to the steel plant to be used in the conversion process.

 Time utility:

This is created by storage or preservation of raw materials or finished goods which are in
abundance sometime, so that the same can be used at a later time when they become scarce due
to higher demand exceeding the quantity available.

 Possession utility:

This is created by transferring the possession or ownership of an item from one person to
another person. For example, when a firm purchases materials from a supplier, the possession
utility of the materials will increase when they are delivered to the buying firm.

 Service utility:

Which is the utility created by rendering some service to the customer. For example, a doctor
or a lawyer or an engineer creates service utility to a client/customer by rendering service
directly to the client/customer.
 Knowledge utility:

This is created by imparting knowledge to a person. For example, a sales presentation or an

advertisement about some product communicates some information about the product to the
customer, thereby imparting knowledge.

SCOPE OF PRODUCTION AND OPERATION MANAGEMENT

Production and operations management concern with the conversion of inputs into outputs,
using physical resources, so as to provide the desired utilities to the customer while meeting
the other organizational objectives of effectiveness, efficiency and adaptability. It distinguishes
itself from other functions such as personnel, marketing, finance, etc., by its primary concern
for ‘conversion by using physical resources.’ Following are the activities which are listed under
production and operations management functions:

1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.

Location of facilities for operations is a long-term capacity decision which involves a long term
commitment about the geographically static factors that affect a business organization. It is an
important strategic level decision-making for an organization. It deals with the questions such
as ‘where our main operations should be based?’

Plant layout refers to the physical arrangement of facilities. It is the configuration of

departments, work centers and equipment in the conversion process. The overall objective of
the plant layout is to design a physical arrangement that meets the required output quality and
quantity most economically.
According to James Moore, “Plant layout is a plan of an optimum arrangement of facilities
including personnel, operating equipment, storage space, material handling equipment’s and
all other supporting services along with the design of best structure to contain all these
facilities”.

‘Material Handling’ refers to the ‘moving of materials from the store room to the machine and
from one machine to the next during the process of manufacture’. It is also defined as the ‘art
and science of moving, packing and storing of products in any form’. It is a specialized activity
for a modern manufacturing concern, with 50 to 75% of the cost of production.

Product design deals with conversion of ideas into reality. Every business organization have to
design, develop and introduce new products as a survival and growth strategy. Developing the
new products and launching them in the market is the biggest challenge faced by the
organizations.

Process design is a macroscopic decision-making of an overall process route for converting the
raw material into finished goods. These decisions encompass the selection of a process, choice
of technology, process flow analysis and layout of the facilities.

Production planning and control can be defined as the process of planning the production in
advance, setting the exact route of each item, fixing the starting and finishing dates for each
item, to give production orders to shops and to follow up the progress of products according to
orders. Planning is deciding in advance what to do, how to do it, when to do it and who is to
do it. Planning bridges the gap from where we are, to where we want to go. Routing may be
defined as the selection of path which each part of the product will follow, which being
transformed from raw material to finished products. Scheduling determines the programmer
for the operations. Scheduling may be defined as ‘the fixation of time and date for each
operation’ as well as it determines the sequence of operations to be followed.

Dispatching is concerned with the starting the processes. It gives necessary authority so as to
start a particular work, which has already been planned under ‘Routing’ and ‘Scheduling’.

Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of
quality in a product or service’. It is a systematic control of various factors that affect the quality
of the product. Quality control aims at prevention of defects at the source, relies on effective
 feed back system and corrective action procedure. Quality control can also be defined as ‘that
industrial management technique by means of which product of uniform acceptable quality is
manufactured’. It is the entire collection of activities which ensures that the operation will
produce the optimum quality products at minimum cost.

The main objectives of quality control are: To improve the companies income by making the
production more acceptable to the customers i.e., by providing long life, greater usefulness,
maintainability, etc. To reduce companies cost through reduction of losses due to defects. To
achieve interchange ability of manufacture in large scale production. To produce optimal
quality at reduced price. To ensure satisfaction of customers with productions or services or
high quality level, to build customer goodwill, confidence and reputation of manufacturer. To
make inspection prompt to ensure quality control. To check the variation during manufacturing.

Materials management is that aspect of management function which is primarily concerned

with the acquisition, control and use of materials needed and flow of goods and services
connected with the production process having some predetermined objectives in view.

The main objectives of materials management are:

 To minimize material cost.

 To purchase, receive, transport and store materials efficiently and to reduce the related cost.
 To cut down costs through simplification, standardization, value analysis, import substitution,
etc.
 To trace new sources of supply and to develop cordial relations with them in order to ensure
continuous supply at reasonable rates.
 To reduce investment tied in the inventories for use in other productive purposes and to develop
high inventory turnover ratios.

THE SCOPE OF OPERATIONS MANAGEMENT

Operations management has been gaining increased recognition in recent years because of the
following reasons:

(i) The application of operations management concepts in service operations.

(ii) The growing importance of quality.

(iii) The introduction of operation management concepts to other areas such as marketing and
human resources and

(iv) The realization that the operations management function can add value to the end product.
 FUNCTIONS OF PRODUCTION MANAGEMENT
The components or functions of production management are as follows:

1. Selection of Product and Design

Production management first selects the right product for production. Then it selects the right
design for the product. Care must be taken while selecting the product and design because the
survival and success of the company depend on it. The product must be selected only after
detailed evaluation of all the other alternative products. After selecting the right product, the
right design must be selected. The design must be according to the customers’ requirements. It
must give the customers maximum value at the lowest cost. So, production management must
use techniques such as value engineering and value analysis.

2. Selection of Production Process

Production management must select the right production process. They must decide about the
type of technology, machines, material handling system, etc.

3. Selecting Right Production Capacity

Production management must select the right production capacity to match the demand for the
product. This is because more or less capacity will create problems. The production manager
must plan the capacity for both short and long term’s production. He must use break-even
analysis for capacity planning.

4. Production Planning

Production management includes production planning. Here, the production manager decides
about the routing and scheduling.

Routing means deciding the path of work and the sequence of operations. The main objective
of routing is to find out the best and most economical sequence of operations to be followed in
the manufacturing process. Routing ensures a smooth flow of work.
 Scheduling means to decide when to start and when to complete a particular production
activity.

5. Production Control

Production management also includes production control. The manager has to monitor and
control the production. He has to find out whether the actual production is done as per plans or
not. He has to compare actual production with the plans and finds out the deviations. He then
takes necessary steps to correct these deviations.

6. Quality and Cost Control

Production management also includes quality and cost control. Quality and Cost Control are
given a lot of importance in today’s competitive world. Customers all over the world want
good-quality products at cheapest prices. To satisfy this demand of consumers, the production
manager must continuously improve the quality of his products. Along with this, he must also
take essential steps to reduce the cost of his products.

7. Inventory Control

Production management also includes inventory control. The production manager must
monitor the level of inventories. There must be neither over stocking nor under stocking of
inventories.

If there is an overstocking, then the working capital will be blocked, and the materials may be
spoiled, wasted or misused.

If there is an understocking, then production will not take place as per schedule, and deliveries
will be affected.

8. Maintenance and Replacement of Machines

Production management ensures proper maintenance and replacement of machines and

equipments. The production manager must have an efficient system for continuous inspection
(routine checks), cleaning, oiling, maintenance and replacement of machines, equipments,
spare parts, etc. This prevents breakdown of machines and avoids production halts.
 TYPES OF PRODUCTION SYSTEMS
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. A simplified production system is shown above.The
production system has the following characteristics:

1. Production is an organized activity, so every production system has an objective.

2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve system
performance.

Classification of Production System

Production systems can be classified as Job Shop, Batch, Mass and Continuous Production
systems.

Classification of production systems

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.

Characteristics

1. High variety of products and low volume.

2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities for
each work centre and order priorities.

Advantages

1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilized.
4. Opportunity exists for creative methods and innovative ideas.

Limitations

1. Higher cost due to frequent set up changes.

2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.

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.
 Characteristics
Batch production system is used under the following circumstances:

1. When there is shorter production runs.

2. When plant and machinery are flexible.
3. 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.
4. When manufacturing lead time and cost are lower as compared to job order production.

Advantages

1. Better utilization of plant and machinery.

2. Promotes functional specialization.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.

Limitations

1. Material handling is complex because of irregular and longer flows.

2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.

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.

Characteristics

Mass production is used under the following circumstances:

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

Advantages

1. Higher rate of production with reduced cycle time.

2. Higher capacity utilization due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.

Limitations

1. Breakdown of one machine will stop an entire production line.

2. Line layout needs major change with the changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.

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.

Characteristics

Continuous production is used under the following circumstances:

1. Dedicated plant and equipment with zero flexibility.

2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.

Advantages

1. Standardization of product and process sequence.

2. Higher rate of production with reduced cycle time.
3. Higher capacity utilization due to line balancing.
4. Manpower is not required for material handling as it is completely automatic.
5. Person with limited skills can be used on the production line.
6. Unit cost is lower due to high volume of production.

Limitations

1. Flexibility to accommodate and process number of products does not exist.

2. Very high investment for setting flow lines.
3. Product differentiation is limited.

ROLES & RESPONSIBILITIES OF PPC MANAGER

 Manage production control activities to reduce outages and incidents.

 Manage production planning and scheduling for on-time delivery.
 Recommend process improvements for high quality, cost effectiveness and excellent customer
services.
 Evaluate system performance and recommend improvements.
 Supervise team members in their assigned job duties.
 Organize job trainings to employees to achieve production objectives.
 Ensure that team follows security and safety policies.
 Review the job orders with customers and production team to determine pricings and
schedules.
 Monitor execution of job orders and adjust job schedule to meet the deadlines.
 Communicate the status of job orders to customers on regular basis.
 Attend daily meetings to prioritize and plan production activities to maintain on-time delivery.
 Review daily reports to identify and address equipment malfunctions, material shortages and
other factory problems.
 Determine equipment, materials and staff needs to meet production schedule.
 Coordinate with Department Manager to develop company policies and procedures.
 Perform inventory management for timely delivery and for minimizing transportation charges.
 PPC: JOB, BATCH, MASS (ASSEMBLY)
AND CONTINUOUS
Batch Process
Batch process refers to a process that consists of a sequence of one or more steps that should
be performed in a defined order. A finite quantity of the product is produced at the end of the
sequence, which is repeated in order to produce another product batch.

Generally, batch is a process that results in the production of limited quantities of material
through subjecting quantities of raw materials to a set of processing activities over a significant
period of time with the use of one of more piece of equipment. Processing of successive batches
must wait until the completion of the current batch.

A flexible assembly system is appropriate when:

 A wide variety of products and/or parts is to be manufactured on the same equipment

 Products have a short life cycle.
 Environmental uncertainties are taken into account in order for a firm to accommodate
internal changes and external influences.
 Offshore competition can produce products at much lower costs than can traditional
manufacturing methods.
 Parts can be easily damaged by over-handling through manual cells.
 A high degree of accuracy and repeatability is required.
 Parts are too intricate to be assembled efficiently with considerable human intervention.
 Volumes are moderate to high, i.e., cycle time rates are not dependent on the slowest worker.
 Ergonomics is a significant factor.
 The assembly task requires less than roughly 10 seconds.

Continuous Process

A continuous process, on the other hand, refers to a processing that involves moving a single
work unit at a time between every step of the process without any breaks in time, substance,
sequence or extend. As the name suggests, the flow of product or material is continuous. Every
machine operates in a steady state and performs a certain processing function.
For majority of applications, continuous flow saves costs, energy and time. When this process
is properly implemented, it can reduce waste, improve quality by making it easier to identify
and correct errors, increase productivity and adapt to the needs of customers more efficiently
than batch processing.
 PRODUCTION PLANNING AND CONTROL: OBJECTIVES,
ADVANTAGES, ELEMENTS

Production planning and control is an important task of Production Manager. It has to see
that production process is properly decided in advance and it is carried out as per the plan.
Production is related to the conversion of raw materials into finished goods. This conversion
process involves a number of steps such as deciding what to produce, how to produce, when to
produce, etc. These decisions are a part, of production planning. Merely deciding about the
task is not sufficient.

The whole process should be carried out in a best possible way and at the lowest cost.
Production Manager will have to see that the things proceed as per the plans. This is a control
function and has to be carried as meticulously as planning. Both planning and control of
production are necessary to produce better quality goods at reasonable prices and in a most
systematic manner.

Production planning is the function of looking ahead, anticipating difficulties to be faced and
the likely remedial steps to remove them. It may be said to be a technique of forecasting ahead
every step in the long process of production, taking them at a right time and in the right degree
and trying to complete the operations at maximum efficiency. Production control, on the other
hand, guides and directs flow of production so that products are manufactured in a best way
and conform to a planned schedule and are of the right quality. Control facilitates the task of
manufacturing and see that everything goes as per the plans.

Charles A. Koepke:

“Production planning and control is the coordination of a series of functions according to a plan
which will economically utilize the plant facilities and regulate the orderly movement of goods
through the entire manufacturing cycle, from the procurement of all materials to the shipping
of finished goods at a predetermined rate.”

James L. Lundy:

“Basically, the production control function involves the co-ordination and integration of the
factors of production for optimum efficiency. Overall sales orders or plans must be translated
 into specific schedules and assigned so as to occupy all work centres but overload none. The
job can be done formally in which case elaborate charting and filing techniques are used ; or it
can be done informally, with individuals’ thoughts and retention there of supplanting tangible
aids.”

Goldon B. Carson:

“Production planning and control involves generally the organization and planning of the
manufacturing process. Specifically, it consists of the planning of the routing, scheduling,
dispatching and inspection, co-ordination and the control of materials, methods, machines,
tooling and operating times. The ultimate objective is the organization of the supply and
movement of materials and labour, machine utilization and related activities, in order to bring
about the desired manufacturing results in terms of quantity, time and place.”

Following are the objectives of production planning and control functions:

1. Systematic planning of production activities to achieve the highest efficiency in production of

goods/services.
2. To organize the production facilities like machines, men, etc., to achieve stated production
objectives with respect to quantity and quality time and cost.
3. Optimum scheduling of resources.
4. Coordinate with other departments relating to production to achieve regular balanced and
uninterrupted production flow.
5. To conform to delivery commitments.
6. Materials planning and control.
7. To be able to make adjustments due to changes in demand and rush orders.

The importance of production planning and control are summarized below:

 Better Service to Customers: Production planning and control, through proper scheduling
and expediting of work, helps in providing better services to customers is terms of better quality
of goods at reasonable prices as per promised delivery dates. Delivery in time and proper
quality, both help in winning the confidence of customers, improving relations with customers
and promoting profitable repeat orders.
 Fewer Rush Orders: In an organization, where there is effective system of production
planning and control, production, operations move smoothly as per original planning and
matching with the promised delivery dates. Consequently, there will be fewer rush orders in
the plant and less overtime than, in the same industry, without adequate production planning
and control.
 Better Control of Inventory: A sound system of production planning and control helps
in maintaining inventory at proper levels and, thereby, minimizing investment in inventory. It
requires lower inventory of work-in-progress and less finished stock to give efficient service
to customers. It also helps in exercising better control over raw-material inventory, which
contributes to more effective purchasing.
 More Effective Use of Equipment: An efficient system of production planning and control
makes for the most effective use of equipment. It provides information to the management on
regular basis pertaining to the present position of all orders in process, equipment and personnel
requirements for next few weeks. The workers can be communicated well in advance if
any retrenchment, lay-offs, transfer, etc. is likely to come about. Also, unnecessary purchases
of equipment and materials can be avoided. Thus, it is possible to ensure proper utilization of
equipment and other resources.
 Reduced Idle Time: Production planning and control helps in reducing idle time i.e. loss of
time by workers waiting for materials and other facilities; because ensures that materials and
other facilities are available to the workers in time as per the production schedule.
Consequently, less man-hours are lost, which has a positive impact on the cost of production.
 Improved Plant Morale: An effective system of production planning and control co-ordinates
the activities of all the departments involved in the production activity. It ensures even flow
of work and avoids rush orders. It maintains healthy working conditions in the plant thus, there
is improve plant morale as a by-product.
 Good public image: A proper system of production planning and control is helpful in keeping
systematized operations in an organization. Such an organization is in a position to meet its
orders in time to the satisfaction of its customers. Customer’s satisfaction leads to increased
sales, increased profits, industrial harmony and ultimately good public image of the enterprise.
 Lower capital requirements: Under a sound system of production planning and control,
everything relating to production is planned well in advance of operations. Where, when and
what is required in the form of input is known before the actual production process starts. Inputs
are made available as per schedule which ensures even flow of production without any
bottlenecks. Facilities are used more effectively and inventory levels are kept as per schedule
 neither more nor less. Thus, production planning and control helps, in minimizing capital
investment in equipment and inventories.

Main elements of production planning & control

The following are main elements of Production Planning and Control.

1. Routing
2. Loading
3. Scheduling
4. Dispatching
5. Follow up
6. Inspection
7. Corrective

1. Routing

It is about selection of path or route through which raw materials pass in order to make it into
a finished product. The points to be noted while routing process are – full capacity of machines,
economical and short route and availability of alternate routing. Setting up time for the process
for each stage of route is to be fixed. Once overall sequence are fixed, then the standard time
of operations are noted using work measurement technique.

2. Loading and scheduling

Loading and Scheduling are concerned with preparation of workloads and fixing of starting
and completing date of each operation. On the basis of the performance of each machine,
loading and scheduling tasks are completed.

3. Dispatching

Dispatching is the routine of setting productive activities in motion through the release of
orders and instructions, in accordance with previously planned time and sequence, embodied
in route sheet and schedule charts. It is here the orders are released.

4. Expediting / Follow-up
 It is a control tool which brings an idea on breaking up, delay, rectifying error etc., during the
progress of work.

5. Inspection

Inspection is to find out the quality of executed work process.

6. Corrective

At evaluation process, a thorough analysis is done and corrective measures are taken in the
weaker spots.
 UNIT 2

PPC AND PRODUCTION SYSTEMS

Job production involves manufacture of products to meet specific customer requirements of
special orders. The quantity involved is usually small. Examples of job production are
manufacture of large turbo generators, boilers, steam engines, processing equipments, material
handling equipments, ship buildings etc.
Under job production, we may have three types according to the regularity of manufacture
namely:

1. A small number of products produced only once.

2. A small number of products produced intermittently when, the need arises.
3. A small number of products produced periodically at known intervals of time.

When the order is to be executed only once, there is either scope for improvement of production
techniques by introducing intricate method studies, special tools or jigs and fixtures unless the
technical requirements justifies it .But if the order is to be repeated, jigs and fixtures, tools as
well as specially designed inspection gauges should be carefully considered to reduce the
manufacturing cycle time.

PPC function is relatively difficult in job production because of the following reasons:

1. Every job is of a different nature and has a different sequence of operations. There is no
standardized routing for job orders.
2. Specific job orders are assigned to different work stations as per the availability of capacity.
3. Production schedules drawn depend on the relative priority assigned to various job orders.
4. Scheduling is dependent on the assessment of production times and estimating is based on
judgment.

PPC in Batch Production or Intermittent Production

 Batch production is the manufacture of a number of identical articles either to meet a specific
order or to satisfy the continuous demand. The decisions regarding tooling and jigs and fixtures
are dependent on the quantities involved in the production batch.

In batch production too, there can be three types namely:

1. A batch produced only once.

2. A batch produced repeatedly at irregular intervals, when the need arises.
3. A batch produced periodically at known intervals, to satisfy continuous demand.

Here again, planning and control become more simplified as quantities increase and as
manufacture becomes more regular .Two problems that may arise in batch production are due
to the size of the batch and due to scheduling of production.

The solution to these problems depends on whether the production is governed by

1. External customer orders only.

2. Whether the plant is producing for internal consumption i.e., a sub-assembly used in the final
product.

If it is the case of external customer orders, the customer order size usually determines the
batch size. The timing will also depend on the delivery dates specified by the customers. If it
is for internal consumption, both batch size and production scheduling problems are matters
for internal management decisions.

The problem of optimal batch size has to take into account the set-up costs which are involved,
before each production runs and the inventory carrying costs incurred, when the finished
product is held in stock .The batch size determines the length of the production run and affects
both the production schedule and batch size considerations of other products.
 TYPES OF PRODUCTION SYSTEMS

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. A simplified production system is shown above.The
production system has the following characteristics:

1. Production is an organized activity, so every production system has an objective.

2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve system
performance.

Classification of Production System

Production systems can be classified as Job Shop, Batch, Mass and Continuous Production
systems.

Classification of production systems

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.

Characteristics

1. High variety of products and low volume.

2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities for
each work centre and order priorities.

Advantages

1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilized.
4. Opportunity exists for creative methods and innovative ideas.

Limitations

1. Higher cost due to frequent set up changes.

2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.

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.
 Characteristics
Batch production system is used under the following circumstances:

1. When there is shorter production runs.

2. When plant and machinery are flexible.
3. 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.
4. When manufacturing lead time and cost are lower as compared to job order production.

Advantages

1. Better utilization of plant and machinery.

2. Promotes functional specialization.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.

Limitations

1. Material handling is complex because of irregular and longer flows.

2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.

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.

Characteristics

Mass production is used under the following circumstances:

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

Advantages

1. Higher rate of production with reduced cycle time.

2. Higher capacity utilization due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.

Limitations

1. Breakdown of one machine will stop an entire production line.

2. Line layout needs major change with the changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.

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.

Characteristics

Continuous production is used under the following circumstances:

1. Dedicated plant and equipment with zero flexibility.

2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.

Advantages

1. Standardization of product and process sequence.

2. Higher rate of production with reduced cycle time.
3. Higher capacity utilization due to line balancing.
4. Manpower is not required for material handling as it is completely automatic.
5. Person with limited skills can be used on the production line.
6. Unit cost is lower due to high volume of production.

Limitations

1. Flexibility to accommodate and process number of products does not exist.

2. Very high investment for setting flow lines.
3. Product differentiation is limited.
 PRODUCT PLANNING AND DEVELOPMENT

Product planning and development is the critical journey a product takes from conception
through to sales. While product planning and development is an integral part of any successful
product’s launch and lifespan, there are no guarantees on the road to success. And yet, this
phase can’t be rushed, or consequences can be severe.

Steps in Product Planning and Development

1. Generation of New Product Ideas

The first step in product planning and development is generation of ideas for the development
of new/innovative products.

Ideas may come from internal sources like company’s own Research and Development (R&D)
department, managers, sales-force personnel etc.; or from external sources like, customers,
dealers, competitors, consultants, scientists etc.

At this stage, the intention of management is to generate more and more new and better product
ideas; so that the most practical and profitable ideas may be screened subsequently.

2. Screening of Ideas

Screening of ideas means a close and detailed examination of ideas, to determine which of the
ideas have potential and are capable of making significant contribution to marketing objectives.
In fact, generation of ideas is not that significant as the system for screening the generated
ideas.
 The ideas should be screened properly; as any idea passing this stage would cost the firm in
terms of time, money and efforts, at subsequent stages in product planning and development.

3. Product Concept Development

Those product ideas which clear the screening stage must be developed into a product concept
– identifying physical features, benefits, price etc. of the product. At this stage product idea is
transformed into a product concept i.e. a product which target market will accept.

4. Commercial Feasibility

At this stage, the purpose is to determine whether the proposed product idea is commercially
feasible, in terms of demand potential and the costs of production and marketing. Management
must also ensure that product concept is compatible with the resources of the organization
technological, human and financial.

5. Product Development

Product development encompasses the technical activities of engineering and design. At this
stage, the engineering department converts the product concept into a concert form of product
in view of the required size, shape, design, weight, colour etc. of the product concept.

A model or prototype of the product is manufactured on a limited scale. Decisions are also
made with regard to packaging, brand name, label etc. of the product.

6. Test Marketing

A sample of the product is tested in a well-chosen and authentic sales environment; to find out
consumers’ reaction. In view of consumers’ reactions, the product may be improved further.

7. Commercialization

After the management is satisfied with the results of test marketing, steps are taken to launch a
full-fledged programme for the production, promotion and marketing of the product. It is the
stage where the new product is born; and it enters it life cycle process.
 UNIT 3

PLANT LOCATION
Location of an industry is an important management decision. It is a two-step decision: first,
choice of general area or region and second, the choice of site within the area selected. Location
decision is based on the organisations long-term strategies such as technological, marketing,
resource availability and financial strategies.
The objective of plant location decision-making is to minimise the sum of all costs affected by
location.

Plant location is important because of the following:

(i) Location influences plant layout facilities needed.

(ii) Location influences capital investment and operating costs.

Location decisions are strategic, long-term and non-repetitive in nature. Without sound and
careful location planning in the beginning itself, the new facilities may create continuous
operating problems in future. Location decision also affects the efficiency, effectiveness,
productivity and profitability.

The location decision should be taken very carefully, as any mistake may cause poor location,
which could be a constant source of higher cost, higher investment, difficult marketing and
transportation, dissatisfied and frustrated employees and consumers, frequent interruptions of
production, abnormal wastages, delays and substandard quality etc.

Therefore, it should be based upon a careful consideration of all factors that are essentially
needed in efficient running of a particular industry. The necessary factors in the selection of
plant location vary among industries and with changing technical and economical conditions.

Site selection is not an easy problem because if the selection is not proper then all money spent
on factory building, machinery and their installation etc., will go as waste and the owner has to
 suffer a great loss. Therefore, while selecting a site, owner must consider technical,
commercial, financial aspects which may provide maximum advantages.

It is sometimes possible that all the requirements and features of ideal site may not be available
at one particular location but then it will be advantageous to find out suitable site with
combinations of all essential requirements of the particular industry to be established as
explained in following paras.

Market Location:

To solve such problems a market analysis of the area is conducted and answers of the
following questions can be found out:

1. If there is a market which could be served and if retail price of product can be reduced?
2. Whether quick delivery of the product can be made by better plant location to the particular
market?
3. Whether there is a competitor for the product in the market? Whether demand for product may
increase? Whether an additional plant is required to meet the future demand?
4. What is the potential purchasing power of the market?
5. What are the buying habits of local people, and what must be done to fit your service to these
habits?

Economical Aspects:

Locational economics for an enterprise includes a consideration of the product to be manu-

factured, the processes and machinery to be used, and the service and facilities required.

To know this the following factors may be studied:

1. Product:

(a) Nature,

(b) Volume, and

(c) Value.
2. Production process:

(a) Continuous,

(b) Intermittent, and

(c) Interrupted.

3. Manufacturing machinery.
4. Other manufacturing equipment’s.
5. Special manufacturing requirement.
6. Service:

(a) Steam,

(b) Gas,

(c) Water,

(d) Air or high pressure,

(e) Electricity, and

(f) Sewerage.
 PLANT LOCATION METHODS, FACTOR RATING METHOD

Techniques used for Selecting Best Location:

Following are the few important techniques used to decide best location from the
available alternative locations:

1. Subjective Techniques:

(a) Industry precedence,

(b) Preferential factor and

(c) Dominant factor.

2. Qualitative Techniques (Factor ranking system)

3. Semi-quantitative Techniques (Factor weight-rating system)
4. Quantitative Techniques (Operation Research Models):

(a) Break-even analysis.

(b) Economic/cost analysis, and

(c) Transportation model.

Procedure for Selecting a Site:

For selecting a site following procedure should be followed:

1. Constitution of a site selection committee.

2. Determining the company needs.
3. Deciding criteria for selection.
4. Accumulate the data.
5. Analyse the data.
6. Evaluate the alternatives.
7. Reduce number of alternatives.
8. Investigation in detail.
9. Collect and analyze further data.

Factor Rating Method for Location Planning

The process of selecting a new facility location involves a series of following steps:

1. Identify the important location factors.

2. Rate each factor according to its relative importance, e., higher the ratings is indicative of
prominent factor.
3. Assign each location according to the merits of the location for each factor.
4. Calculate the rating for each location by multiplying factor assigned to each location with basic
factors considered.
5. Find the sum of product calculated for each factor and select best location having highest total
score.
 FACTORS AFFECTING PLANT LOCATION

Eight Factors Affecting Plant Location

1. Selection of Region

The selection of a region or area in which plant is to be installed requires the consideration of
the following:

(i) Availability of Raw Materials: Proximity of sources of raw materials is the obvious
explanation of the location of majority of sugar mills in Uttar Pradesh. This means that the raw
material should be available within the economical distance. Easy availability of supplies
required for maintenance and operation of the plant should also be considered.

(ii) Proximity to Markets: Cost of distribution is an important item in the overhead expenses.
So it will be advantageous to be near to the center of demand for finished products. Importance
of this is fully realized if the material required for the manufacturing of products are not bulk
and fright charges are small.

(iii) Transport Facilities: Since freight charges of raw materials and finished goods enter into
the cost of production, therefore transportation facilities are becoming the governing factor in
economic location of the plant. Depending upon the volume of the raw materials and finished
products, a suitable method of transportation like rail, road, water transportation (through river,
canals or sea) and air transport is selected and accordingly plant location is decided. Important
consideration should be that the cost of transportation should remain fairly small in comparison
to the total cost of production.

(iv) Availability of Power, Fuel or Gas: Because of the wide spread use of electrical power
the availability of fuel or gas has not remained a deciding factor in most of the cases for plant
location. The location of thermal power plants (like Bokaro Thermal Plant) and steel plants
near coal fields are for cutting down cost of the fuel transportation. The reliability of continuous
supply of these facilities is an important factor.
 (v) Water Supply: Water is required for processing as in chemical, sugar and paper industries
and is also used for drinking and sanitary purposes. Investigation for quality and probable
source of supply is important, since the cost of treating water is substantial so the chemical
properties like hardness, alkalinity and acidity.

(vi) Disposal Facility for Waste Products: Thorough study should be made regarding
disposal of water like effluents, solids, chemicals and other waste products likely to be
produced during the production process.

(vii) Availability of Labour: Potential supply of requisite type of labour governs plant location
to major extent. Some industries need highly skilled labour while other need unskilled and
intelligent labour. But the former type is difficult in rural areas in comparison with industrially
developed location.

2. Township Selection

The factors to be considered regarding township selection are:

(i) Availability of men power of requisite skill

(ii) Competitive wage rates of workers

(iii) Other enterprises which are complementary or supplementary regarding raw materials,
other input, labour and skill required.

(iv) Moderate taxes and the absence of restricting laws.

(v) Favourable cooperative and friendly attitude towards the industry.

(vi) Favourable living conditions and standards keeping in view the availability of medical and
educational facilities, housing, fire service, recreational facilities, cost of living etc.

3. Question of Urban and Rural Area

Question of urban and rural area should be decided in view of the following:
 Advantages of Rural Area:

(i) The initial cost of land, erection cost of building and plant is less in rural area as compared
to urban or city area.

(ii) Acquisition for additional area for extension work expansion of plant is possible without
much difficulty whereas urban area being congested; the additional land is not easily available.

(iii) Rural areas are free form labour trouble which is most common in towns and cities.

(iv) Over crowding of working class population in cities is avoided.

Advantages of Urban Area:

(i) Better modes of transportation for collection and distribution of materials and finished
products.

(ii) Availability to requisite type of labour for special and specific jobs is there.

(iii) Utilities like water, power, fuels etc. are easily available.

(iv) Industries do not need to construct colonies to provide residential facilities to their workers
since houses are available on rental basis whereas in rural areas, houses have to be build for
workers.

4. Location of a Factory in a Big City

Generally factories are located in big cities for obvious reasons of skilled labour, market
proximity for both raw materials and end products.

Its advantages and disadvantages are mentioned below:

(i) Existence of educational and recreational facilities is advantageous for children and
dependents of workers.

(ii) Facilities for technical/ industrial education and training for children of workers are
available.
 (iii) Evening classes facilities are available.

(iv) Discussion opportunities and facilities for exchange of thoughts are available for interested
people in societies and clubs.

(v) All types of skilled man power is available.

(vi) Repair, maintenance and service facilities for various utilities are available in abundance.

(vii) Banking facilities regarding finance (loan etc.) for industry in case of necessity are
available.

(ix) Big markets for sale of products available.

(x) Better transport facilities for movement of raw materials, finished products and workers are
available.

5. Location of an Industry in Small Town

There are some industries which are located in the rural areas or small towns specifically for
the want of raw material and cheap labour.

Its advantages and disadvantages are mentioned below:

(i) Less labour trouble and co-ordinal employee-employer relation.

(ii) Suitable land for current and future requirements easily available.

(iii) Local bye laws do not impose problem in working of the unit.

(iv) No resistance from existing industries.

(v) Possibility of tax exemptions exist.

(vi) Not much congestion.

(vii) Lower rents in comparison to big cities and urban areas.

 (viii) Lower wage rates for labour/ employees / workers.

(ix) Less fire risks.

(x) Noise not much problem.

6. Site Selection

The third step is to select the exact plant site with the following considerations:

(i) The cheap availability of land for current and future requirements, soil characteristics sub
soil water, availability or possibility of economic drainage and waste disposal system are
desirable parameters.

(ii) The site should be easily accessible to various modes of transport as required so that apart
from input materials, employees can also reach the site conveniently.

(iii) The site should be free from zonal restrictions like from railways or civil aviation
restrictions.

7. Current Trends in Pant Location

(I) Location in Proximity of Cities: First tendency is to locate the industries or enterprises in
the proximity of cities rather than in rural or urban areas. These sub-urban sites offer today
practically all advantages, facilities and services available in cities and towns with the added
advantage of land required for future expansion on cheap rates.

(II) Planned Industrial Centers: While industrial towns may be planned and developed by
big industrial houses or govt., the late trend is to develop areas as industrial estates and sell
these to people interested in starting their units at various places. Noida and Faridabad are the
examples of this type of development.

(III) Competition for Development of Industries: In order to generate the employment

opportunities the state and central govt. offer concessions to attract industrialists to set up
industries in their states or territories.
8. The Design of Factory Plant Building

After a plant location has been decided upon, management’s next problem deals with the design
of building. A building is designed and built to protect the property and employees of an
organization. This basic fact is mostly overlooked in planning the requirement for building
structures.

For those plants where employees, materials and infrastructure facilities require protection, the
problems involved in designing and constructing effective and economical structures are many.
 OBJECTIVES OF PLANT LAYOUT

A properly planned plant layout aims at achieving the following objectives:

1. To achieve economies in handling of raw materials, work in- progress and finished goods.
2. To reduce the quantum of work-in-progress.
3. To have most effective and optimum utilisation of available floor space.
4. To minimise bottlenecks and obstacles in various production processes thereby avoiding the
accumulation of work at important points.
5. To introduce system of production control.
6. To ensure means of safety and provision of amenities to the workers.
7. To provide better quality products at lesser costs to the consumers.
8. To ensure loyalty of workers and improving their morale.
9. To minimise the possibility of accidents.
10. To provide for adequate storage and packing facilities.
11. To workout possibilities of future expansion of the plant.
12. To provide such a layout which permits meeting of competitive costs?

The objectives of plant layout have been nicely explained by Shubin and Madeheim. “Its
objective is to combine labour with the physical properties of a plant (machinery, plant
services, and handling equipment) in such a manner that the greatest output of high quality
goods and services, manufactured at the lowest unit cost of production and distribution, will
result.”

Principles of Plant Layout:

According to Muther there are six basic principles of “best layout”.

These are:

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.
 FACTORS AFFECTING FOR PLANT LAYOUT

(1) Policies of management:

It is important to keep in mind various managerial policies and plans before deciding plant
layout.

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

(2) Plant location:

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

(3) Nature of the product:

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

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

(4) Volume of production:

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

(a) Job production:

Under this method peculiar, special or non- standardized products are produced in accordance
with the orders received from the customers. As each product is non- standardized varying in
size and nature, it requires separate job for production. The machines and equipment’s are
adjusted in such a manner so as to suit the requirements of a particular job.

Job production involves intermittent process as the work is carried as and when the order is
received. Ship building is an appropriate example of this kind. This method of plant layout viz.,
Stationery Material Layout is suitable for job production.

(b) Mass production:

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

(c) Batch production:

It is that form of production where identical products are produced in batches on the basis of
demand of customers or of expected demand for products. This method is generally similar to
job production except the quality of production.

Instead of making one single product as in case of job production a batch or group of products
is produced at one time, It should be remembered here that one batch of products has no
resemblance with the next batch. This method is generally adopted in case of biscuit and
confectionary manufacturing, medicines, tinned food and hardware’s like nuts and bolts etc.

(5) Availability of floor space:

Availability of floor space can be other decisive factor in adopting a particular mode of layout.
If there is a scarcity of space, product layout may be undertaken. On the other hand more space
may lead to the adoption of process layout.
(6) Nature of manufacturing process:
The type of manufacturing process undertaken by a business enterprise will greatly affect the
type of layout to be undertaken.
 TYPES OF PLANT LAYOUT

Four Main Types of Plant Layout

1. Product or Line Layout

2. Process or Functional Layout.
3. Fixed Position Layout.
4. Combination type of Layout.

1. 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.

The raw material is supplied at one end of the line and goes from one operation to the next
quite rapidly with a minimum work in process, storage and material handling. Fig. 8.3 shows
product layout for two types of products A and B.

Advantages offered by Product Layout:

(i) Lowers total material handling cost.

(ii) There is less work in processes.

(iii) Better utilization of men and machines,

(iv) Less floor area is occupied by material in transit and for temporary storages.

(v) Greater simplicity of production control.

(vi) Total production time is also minimized.

Limitations of Product Layout:

 (i) No flexibility which is generally required is obtained in this layout.

(ii) The manufacturing cost increases with a fall in volume of production.

(iii) If one or two lines are running light, there is a considerable machine idleness.

(iv) A single machine break down may shut down the whole production line.

(v) Specialized and strict supervision is essential.

2. Process or Functional 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.

Same type of operation facilities are grouped together such as lathes will be placed at one place,
all the drill machines are at another place and so on. See Fig. 8.4 for process layout. Therefore,
the process carried out in that area is according to the machine available in that area.

Advantages of Process Layout

(i) There will be less duplication of machines. Thus, total investment in equipment purchase
will be reduced.

(ii) It offers better and more efficient supervision through specialization at various levels.

(iii) There is a greater flexibility in equipment and man power thus load distribution is easily
controlled.

(iv) Better utilization of equipment available is possible.

(v) Break down of equipment can be easily handled by transferring work to another
machine/work station.
 (vi) There will be better control of complicated or precision processes, especially where much
inspection is required.

Limitations of Process Layout

(i) There are long material flow lines and hence the expensive handling is required.

(ii) Total production cycle time is more owing to long distances and waiting at various points.

(iii) Since more work is in queue and waiting for further operation hence bottle necks occur.

(iv) Generally, more floor area is required.

(v) Since work does not flow through definite lines, counting and scheduling is more tedious.

(vi) Specialization creates monotony and there will be difficult for the laid workers to find job
in other industries.

3. Fixed Position 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.

Advantages Offered by Fixed Position Layout

(i) Material movement is reduced

(ii) Capital investment is minimized.

(iii) The task is usually done by gang of operators, hence continuity of operations is ensured
 (iv) Production centers are independent of each other. Hence, effective planning and loading
can be made. Thus total production cost will be reduced.

(v) It offers greater flexibility and allows change in product design, product mix and production
volume.

Limitations of Fixed Position Layout

(i) Highly skilled man power is required.

(ii) Movement of machines equipment’s to production centre may be time consuming.

(iii) Complicated fixtures may be required for positioning of jobs and tools. This may increase
the cost of production.

4. Combination Type of Layout

Now a days in pure state any one form of layouts discussed above is rarely found. Therefore,
generally the layouts used in industries are the compromise of the above mentioned layouts.
Every layout has got certain advantages and limitations. Therefore, industries would to like use
any type of layout as such.

Flexibility is a very important factory, so layout should be such which can be molded according
to the requirements of industry, without much investment. If the good features of all types of
layouts are connected, a compromise solution can be obtained which will be more economical
and flexible.
 UNIT 4
NEED OF MATERIAL MANAGEMENT
The need for materials management was first felt in manufacturing undertakings. The servicing
organizations also started feeling the need for this control. And now even non-trading
organizations like hospitals, universities etc. have realized the importance of materials
management. Every organization uses a number of materials. It is necessary that these materials
are properly purchased, stored and used.
Any avoidable amount spent on materials or any loss due to wastage of materials increases the
cost of production. The object of materials management is to attack materials cost on all fronts
and to optimize the overall end results. Materials management connotes controlling the kind,
amount , location and turning of the various commodities used in and produced by the industrial
enterprises. It is the control of materials in such a manner that it ensures maximum return on
working capital.

De Rose : “Material management is the planning, directing, controlling and co-ordination of

all those activities concerned with material and inventory requirements, from the point of their
inception to their introduction into manufacturing process.”

As per De Rose all those functions which start with the procurement of materials and end with
completion of manufacturing are a part of material management.N.K. Nair: “Material
management is the integrated functioning of the various sections of an organization dealing
with the supply of materials and allied activities in order to achieve maximum co-ordination.”

N.K. Nair has emphasized the co-ordination of all those activities which are related to the
efficient use of materials.

Importance of Material Management:

Material management is a service function. It is as important as manufacturing, engineering

and finance. The supply of proper quality of materials is essential for manufacturing standard
products. The avoidance of material wastage helps in controlling cost of production. Material
management is essential for every type of concern.
 The importance of material management may be summarized as follows:

1. The material cost content of total cost is kept at a reasonable level. Scientific purchasing helps
in acquiring materials at reasonable prices. Proper storing of materials also helps in reducing
their wastages. These factors help in controlling cost content of products.
2. The cost of indirect materials is kept under check. Sometimes cost of indirect materials also
increases total cost of production because there is no proper control over such materials.
3. The equipment is properly utilized because there are no break downs due to late supply of
materials.
4. The loss of direct labour is avoided.
5. The wastages of materials at the stage of storage as well as their movement is kept under
control.
6. The supply of materials is prompt and late delivery instances are only few.
7. The investments on materials are kept under control as under and over stocking is avoided.
8. Congestion in the stores and at different stages of manufacturing is avoided.

Functions of Material Management:

Material management covers all aspects of material costs, supply and utilization. The
functional areas involved in material management usually include purchasing, production
control, shipping, receiving and stores.

The following functions are assigned for material management:

1. Production and Material Control

Production manager prepares schedules of production to be carried in future. The requirements

of parts and materials are determined as per production schedules. Production schedules are
prepared on the basis of orders received or anticipated demand for goods. It is ensured that
every type or part of material is made available so that production is carried on smoothly.

2. Purchasing

Purchasing department is authorized to make buying arrangements on the basis of requisitions

issued by other departments. This department keeps contracts with suppliers and collects
quotations etc. at regular intervals. The effort by this department is to purchase proper quality
 goods at reasonable prices. Purchasing is a managerial activity that goes beyond the simple act
of buying and includes the planning and policy activities covering a wide range of related and
complementary activities.

3. Non-Production Stores

Non-production materials like office supplies, perishable tools and maintenance, repair and
operating supplies are maintained as per the needs of the business. These stores may not be
required daily but their availability in stores is essential. The non-availability of such stores
may lead to stoppage of work.

4. Transportation

The transporting of materials from suppliers is an important function of materials management.

The traffic department is responsible for arranging transportation service. The vehicles may be
purchased for the business or these may be chartered from outside. It all depends upon the
quantity and frequency of buying materials. The purpose is to arrange cheap and quick transport
facilities for incoming materials.

5. Materials Handling

It is concerned with the movement of materials within a manufacturing establishment and the
cost of handling materials is kept under control. It is also seen that there are no wastages or
losses of materials during their movement. Special equipment’s may be acquired for material
handling.

6. Receiving

The receiving department is responsible for the unloading of materials, counting the units,
determining their quality and sending them to stores etc. The purchasing department is also
informed about the receipt of various materials.
MEANING OF INVENTORY, TYPES OF INVENTORY

Inventory is the term for the goods available for sale and raw materials used to produce goods
available for sale. Inventory represents one of the most important assets of a business because
the turnover of inventory represents one of the primary sources of revenue generation and
subsequent earnings for the company’s shareholders.

Inventory is the array of finished goods or goods used in production held by a company.
Inventory is classified as a current asset on a company’s balance sheet, and it serves as a buffer
between manufacturing and order fulfillment. When an inventory item is sold, its carrying cost
transfers to the cost of goods sold (COGS) category on the income statement.

Organizations with inventory items of small unit cost generally update their inventory records
at the end of an accounting period or when financial statements are prepared (called periodic
inventory method). The value of an inventory depends on the valuation method used, such as
first-in, first-out (FIFO) method or last-in, first-out (LIFO) method. GAAP require that
inventory should be valued on the basis of either its cost price or its current market price
whichever is lower of the two to prevent overstating of assets and earning due to sharp increase
in the inventory’s value in inflationary periods. The optimum level of inventory for an
organization is determined by inventory analysis. Called also stock in trade, or just stock.

Importance of Inventory Management

Possessing a high amount of inventory for a long time is usually not advantageous for a
business because of storage costs, spoilage costs, and the threat of obsolescence. However,
possessing too little inventory also has its disadvantages; for example, the business runs the
risk of market share erosion and losing profit from potential sales. Inventory management
forecasts and strategies, such as a just-in-time (JIT) inventory system, can help minimize
inventory costs because goods are created or received only when needed.

INVENTORY TYPES

Generally, inventory types can be grouped into four classifications: raw material, work-in-
process, finished goods, and MRO goods.
1. RAW MATERIALS

Raw materials are inventory items that are used in the manufacturer’s conversion process to
produce components, subassemblies, or finished products. These inventory items may be
commodities or extracted materials that the firm or its subsidiary has produced or extracted.
They also may be objects or elements that the firm has purchased from outside the organization.
Even if the item is partially assembled or is considered a finished good to the supplier, the
purchaser may classify it as a raw material if his or her firm had no input into its production.
Typically, raw materials are commodities such as ore, grain, minerals, petroleum, chemicals,
paper, wood, paint, steel, and food items. However, items such as nuts and bolts, ball bearings,
key stock, casters, seats, wheels, and even engines may be regarded as raw materials if they are
purchased from outside the firm.

The bill-of-materials file in a material requirements planning system (MRP) or a manufacturing

resource planning (MRP II) system utilizes a tool known as a product structure tree to clarify
the relationship among its inventory items and provide a basis for filling out, or “exploding,”
the master production schedule. Consider an example of a rolling cart. This cart consists of a
top that is pressed from a sheet of steel, a frame formed from four steel bars, and a leg assembly
consisting of four legs, rolled from sheet steel, each with a caster attached.

Generally, raw materials are used in the manufacture of components. These components are
then incorporated into the final product or become part of a subassembly. Subassemblies are
then used to manufacture or assemble the final product. A part that goes into making another
part is known as a component, while the part it goes into is known as its parent. Any item that
does not have a component is regarded as a raw material or purchased item. From the product
structure tree it is apparent that the rolling cart’s raw materials are steel, bars, wheels, ball
bearings, axles, and caster frames.

2. WORK-IN-PROCESS

Work-in-process (WIP) is made up of all the materials, parts (components), assemblies, and
subassemblies that are being processed or are waiting to be processed within the system. This
generally includes all material—from raw material that has been released for initial processing
up to material that has been completely processed and is awaiting final inspection and
acceptance before inclusion in finished goods.
 Any item that has a parent but is not a raw material is considered to be work-in-process. A
glance at the rolling cart product structure tree example reveals that work-in-process in this
situation consists of tops, leg assemblies, frames, legs, and casters. Actually, the leg assembly
and casters are labeled as subassemblies because the leg assembly consists of legs and casters
and the casters are assembled from wheels, ball bearings, axles, and caster frames.

3. FINISHED GOODS

A finished good is a completed part that is ready for a customer order. Therefore, finished
goods inventory is the stock of completed products. These goods have been inspected and have
passed final inspection requirements so that they can be transferred out of work-in-process and
into finished goods inventory. From this point, finished goods can be sold directly to their final
user, sold to retailers, sold to wholesalers, sent to distribution centers, or held in anticipation of
a customer order.

Any item that does not have a parent can be classified as a finished good. By looking at the
rolling cart product structure tree example one can determine that the finished good in this case
is a cart.

Inventories can be further classified according to the purpose they serve. These types include
transit inventory, buffer inventory, anticipation inventory, decoupling inventory, cycle
inventory, and MRO goods inventory. Some of these also are know by other names, such as
speculative inventory, safety inventory, and seasonal inventory.

4. MRO GOODS INVENTORY

Maintenance, repair, and operating supplies, or MRO goods, are items that are used to support
and maintain the production process and its infrastructure. These goods are usually consumed
as a result of the production process but are not directly a part of the finished product. Examples
of MRO goods include oils, lubricants, coolants, janitorial supplies, uniforms, gloves, packing
material, tools, nuts, bolts, screws, shim stock, and key stock. Even office supplies such as
staples, pens and pencils, copier paper, and toner are considered part of MRO goods inventory.
 ECONOMIC ORDER QUANTITY (EOQ)

Economic order quantity (EOQ) is the ideal order quantity a company should purchase for its
inventory given a set cost of production, demand rate and other variables. This is done to
minimize variable inventory costs, and the equation for EOQ takes into account storage,
ordering costs and shortage costs.

The full equation is:

EOQ = √(2SD / H), or the square root of (2 x S x D / H).

S = Setup costs (per order, generally includes shipping and handling)

D = Demand rate (quantity sold per year)

H = Holding costs (per year, per unit)

EOQ applies only when demand for a product is constant over the year and each new order is
delivered in full when inventory reaches zero. There is a fixed cost for each order placed,
regardless of the number of units ordered. There is also a cost for each unit held in storage,
commonly known as holding cost, sometimes expressed as a percentage of the purchase cost
of the item.

The economic order quantity is computed by both manufacturing companies and

merchandising companies. Manufacturing companies compute it to find the optimal order size
of raw materials inventory and

merchandising companies compute it to find the optimal order size of ready to use merchandise
inventory.

The ordering and holding costs

The two significant factors that are considered while determining the economic order quantity
(EOQ) for any business are the ordering costs and the holding costs.
Ordering costs

The ordering costs are the costs that are incurred every time an order for inventory is placed
with the supplier. Examples of these costs include telephone charges, delivery charges, invoice
verification expenses and payment processing expenses etc. The total ordering cost usually
varies according to the frequency of placing orders. Mostly, it is directly proportional to the
number of orders placed during the year which means If the number of orders placed during
the year increases, the annual ordering cost will also increase and if, on the other hand, the
number of orders placed during the year decreases, the annual ordering cost will also decrease.

Holding costs

The holding costs (also known as carrying costs) are the costs that are incurred to hold the
inventory in a store or warehouse. Examples of costs associated with holding of inventory
include occupancy of storage space, rent, shrinkage, deterioration, obsolescence, insurance and
property tax etc. The total holding cost usually depends upon the size of the order placed for
inventory. Mostly, the larger the order size, the higher the annual holding cost and vice versa.
The total holding cost is some time expressed as a percentage of total investment in inventory.
MODELS/METHODS OF INVENTORY CONTROL: EOQ,
RE-ORDER LEVEL

Economic Order Quantity

A problem which always remains in that how much material may be ordered at a time. An
industry making bolts will definitely would like to know the length of steel bars to be purchased
at any one time.

This length is called “economic order quantity” and an economic order quantity is one which
permits lowest cost per unit and is most advantages.

This can be calculated by the following formula:

Q = √2AS/I

Where Q stands for quantity per order

A stands for annual requirements of an item in terms of rupees

S stands for cost of placement of an order in rupees; and

I stand for inventory carrying cost per unit per year in rupees.

Reorder level of stock (also known as reorder point or ordering point) in a business is a
preset level of stock or inventory at which the business places a new order with its suppliers to
obtain the delivery of raw materials or finished goods inventory.

Every business has to maintain a certain level of raw materials or finished goods in its store.
This is done in order to sustain the continuity of production in case of raw materials and the
continuity of sales in case of finished goods. For this purpose, the business must set a specific
level at which it should place a new order with the suppliers of inventory.

Formula:

The two formulas used to calculate the re-order level are given below:
1. When the business does not need to maintain safety stock:

Maximum demand or usage (in days, weeks or months) × Maximum lead time (in days, weeks
or months)

2. When the business needs to maintain a safety stock:

[Maximum demand or usage (in days, weeks or months) × Maximum lead time (in days, weeks
or months)] + Safety stock

What is lead time?

The timing difference between placing an order with the supplier and arrival of the goods is
known as the lead time.

What is safety stock (also known as buffer stock)?

In some scenarios, it may be unlikely that the reorder level could be estimated accurately. This
is because the demand and the lead time of the goods could differ than the usual trends and in
that case the business may run out of stock. So, a level of safety stock is set to avoid such a
condition. It is also known as buffer stock.
 ABC ANALYSIS

ABC method of inventory control involves a system that controls inventory and is used for
materials and throughout the distribution management. It is also known as selective inventory
control or SIC.

ABC Method of Inventory Control

It has become an indispensable part of a business and the ABC analysis is widely used for
unfinished good, manufactured products, spare parts, components, finished items and assembly
items.

This method of management divides the items into three categories A, B and C; where A is the
most important item and C the least valuable.

Need for prioritizing inventory

Item A:

In the ABC model of inventory control, items categorized under A are goods that register the
highest value in terms of annual consumption. It is interesting to note that the top 70 to 80
percent of the yearly consumption value of the company comes from only about 10 to 20
percent of the total inventory items. Hence, it is crucial to prioritize these items.

Item B:

These are items that have a medium consumption value. These amount to about 30 percent of
the total inventory in a company which accounts for about 15 to 20 percent of annual
consumption value.

Item C:
The items placed in this category have the lowest consumption value and account for less than
5 percent of the annual consumption value that comes from about 50 percent of the total
inventory items.

Note: The annual consumption value is calculated by the formula:

(Annual demand) × (item cost per unit)

Use of ABC Analysis

The ABC analysis is widely used in supply chain management and stock checking and
inventory system and is implemented as a cycle counting system. It is most important for
companies that seek to bring down their working capital and carrying costs.

This done by analyzing the inventory that is in excess stock and those that are obsolete by
making way for items that are readily sold. This helps avoid keeping the working capital
available for use rather than keeping it tied up in unhealthy inventory.

When a company is better able to check its stock and maintain control over the high-value
goods it helps them to keep track of the value of the assets that are being held at a time. It also
brings order to the reordering process and ensures that those items are in stock to meet the
demands.

The items that fall under the C category are those that slow-moving and need not be re-ordered
with the same frequency as item A or item B. When you put the goods into these three
categories, it is helpful for both the wholesalers and the distributors to identify the items that
need to be stocked and those that can be replaced.

Advantages of implementing the ABC method of inventory control

(i) This method helps businesses to maintain control over the costly items which have large
amounts of capital invested in them

(ii) It provides a method to the madness of keeping track of all the inventory. Not only does it
reduce unnecessary staff expenses but more importantly it ensures optimum levels of stock is
maintained at all times
(iii) The ABC method makes sure that the stock turnover ratio is maintained at a comparatively
higher level through a systematic control of inventories

(iv) The storage expenses are cut down considerably with this tool

(v) There is provision to have enough C category stocks to be maintained without

compromising on the more important items.

Disadvantages of using the ABC analysis

(i) For this method to work and render successful results, there must be proper standardization
in place for materials in the store

(ii) It requires a good system of coding of materials already in operation for this analysis to
work

(iii) Since this analysis takes into consideration the monetary value of the items, it ignores other
factors that may be more important for your business. Hence, this distinction is vital
 INVENTORY CONTROL: OBJECTIVES, ADVANTAGES

The Inventory control system is maintained by every firm to manage its inventories efficiently.
Inventory is the stock of products that a company manufactures for sale and the components or raw
materials that make up the product. Hence, an inventory comprises of the buffer of raw material,
work-in-process inventories and finished goods.

Following are the popular Inventory Control Systems that are being used by big manufacturers
and the retail units:

 ABC Inventory Control System

 Three-Bin System
 Just-in-Time (JIT) System
 Outsourcing Inventory System
 Computerized Inventory Control System
 Fixed Order Quantity
 Fixed Period Ordering

There are several inventory control systems that are in practice, and these range from simple
system to a complex one depending upon nature and the size of the business operations. Talking
about the simple system, several small manufacturing firms operate a Two-Bin System;
wherein inventory is stored in two bins. Once the inventory in one bin is used, and the order is
placed, meanwhile, the inventory from the other bin is used by the firm.

This system is quite inadequate for the larger firms that deal in several product lines and
maintain a heavy sales counter. Thus, self –operating or an automatic computer system is to be
employed to keep track on the inventory stock and place the order in case of a shortage.

Objectives:
(i) To minimize capital investment in inventory by eliminating excessive stocks;

(ii) To ensure availability of needed inventory for uninterrupted production and for meeting
consumer demand

(iii) To provide a scientific basis for planning of inventory needs;

 (iv) To tiding over the demand fluctuations by maintaining reasonable safety stock;

(v) To minimize risk of loss due to obsolescence, deterioration, etc.;

(vi) To maintain necessary records for protecting against thefts, wastes leakages of inventories
and to decide timely replenishment of stocks.

Advantages of Inventory Control:

Scientific inventory control provides the following benefits:

1. It improves the liquidity position of the firm by reducing unnecessary tying up of capital in excess
inventories.
2. It ensures smooth production operations by maintaining reasonable stocks of materials.
3. It facilitates regular and timely supply to customers through adequate stocks of finished products.
4. It protects the firm against variations in raw materials delivery time.
5. It facilitates production scheduling, avoids shortage of materials and duplicate ordering.
6. It helps to minimise loss by obsolescence, deterioration, damage, etc.
7. It enables the firms to take advantage of price fluctuations through economic lot buying when prices
are low.

Limitations of Inventory Control:

(i) Efficient inventory control methods can reduce but cannot eliminate business risk.

(ii) The objectives of better sales through improved service to customer; reduction in
inventories to reduce size of investment and reducing cost of production by smoother
production operations are conflicting with each other.

(iii) The control of inventories is complex because of the many functions it performs. It should
be viewed as shared responsibilities.
 DIMENSIONS OF QUALITY
Important Dimensions of Quality formulated by David A. Garvin

David A. Garvin, a specialist in the area of quality control, argues that quality can be used in
a strategic way to compete effectively and an appropriate quality strategy would take into
consideration various important dimensions of quality

Eight dimensions of product quality management can be used at a strategic level to analyze
quality characteristics. The concept was defined by David A. Garvin, formerly C. Roland
Christensen Professor of Business Administration at Harvard Business School (died 30 April
2017). Some of the dimensions are mutually reinforcing, whereas others are not—improvement
in one may be at the expense of others. Understanding the trade-offs desired by customers
among these dimensions can help build a competitive advantage.

Garvin’s eight dimensions can be summarized as follows:

1. Performance

It involves the various operating characteristics of the product. For a television set, for example,
these characteristics will be the quality of the picture, sound and longevity of the picture tube.

2. Features

These are characteristics that are supplemental to the basic operating characteristics. In an
automobile, for example, a stereo CD player would be an additional feature.

3. Reliability

Reliability of a product is the degree of dependability and trustworthiness of the benefit of the
product for a long period of time.

It addresses the probability that the product will work without interruption or breaking down.

4. Conformance
 It is the degree to which the product conforms to pre- established specifications. All quality
products are expected to precisely meet the set standards.

5. Durability

It measures the length of time that a product performs before a replacement becomes necessary.
The durability of home appliances such as a washing machine can range from 10 to 15 years.

6. Serviceability

Serviceability refers to the promptness, courtesy, proficiency and ease in repair when the
product breaks down and is sent for repairs.

7. Aesthetics

Aesthetic aspect of a product is comparatively subjective in nature and refers to its impact on
the human senses such as how it looks, feels, sounds, tastes and so on, depending upon the type
of product. Automobile companies make sure that in addition to functional quality, the
automobiles are also artistically attractive.

8. Perceived quality

An equally important dimension of quality is the perception of the quality of the product in the
mind of the consumer. Honda cars, Sony Walkman and Rolex watches are perceived to be high
quality items by the consumers.
 UNIT 5
QUALITY CONTROL: MEANING AND IMPORTANCE

Production planning cannot be properly ac system of production control. Production control

is primarily concerned with orderly flow of materials in the manufacturing process from the
beginning (raw state) to the end (the finished products). The following definitions clearly
explain the meaning of production control.

Present era is the ‘Era of Quality’.In this age of cutthroat competition and large scale
production, only that manufacturer can survive who supplies better quality goods and renders
service to-the consumers. In fact quality control has become major consideration before
establishing an industrial undertaking. Proper quality control ensures most effective utilisation
of available resources and reduction in cost of production.

The word quality control comprises of two words viz., quality and control. It would be
appropriate to explain these two words separately to understand clearly the meaning of quality
control.

According to Dr. W.K. Spriegel “The quality of a product may be defined as the sum of a
number of related characteristics such as shape, dimension, composition, strength,
workmanship, adjustment, finish and colour”.

In the words of John D. McIIellan, “Quality is the degree to which a product conforms to
specifications and workmanship standards”.

Importance

1. The brand products build up goodwill or image which ultimately increases sales.
2. It helps the manufacturers/ entrepreneurs in fixing responsibility of workers in the production
process.
3. Quality control also helps in minimizing the costs by increasing efficiency, standardization,
working conditions, etc.
4. It also enables the entrepreneur to know the cost of his / her product quite in advance which
helps him in determining competitive prices of his product.
5. Last but not the least; the entrepreneur can confirm whether the product manufactured by him
/ her is in accordance with the standard set by the Government. It further facilitates the
entrepreneur to take necessary actions to comply with the standard set.
 PHASES OF QUALITY CONTROL
Quality control is a process employed to ensure a certain level of quality in a product or service. It may
include whatever actions a business deems necessary to provide for the control and verification of
certain characteristics of a product or service. The basic goal of quality control is to ensure that the
products, services, or processes provided meet specific requirements and are dependable,
satisfactory, and fiscally sound. Essentially, quality control involves the examination of a product,
service, or process for certain minimum levels of quality. The goal of a quality control team is to
identify products or services that do not meet a company‘s specified standards of quality. If a problem
is identified, the job of a quality control team or professional may involve stopping production
temporarily. Depending on the particular service or product, as well as the type of problem identified,
production or implementation may not cease entirely.

Phases of Quality Control Process

1. Planning for Review

In this phase the main focus is on collection of data. Data is the main input requirement of any
successful project information system and therefore the project.
The steps to follow in this phase include:

 Preparing a suitable plan for data analysis after the data has been gathered.
 Obtaining necessary commitment from management and team members to participate actively and
take actions on findings.
 Ensuring that every project member gives his or her commitment to participate and deliver the
service/product in the project.
 Ensuring that review is planned for every stage of the project.
 Preparing schedule for each project review.

2. Conducting the Review

In this phase, the review is conducted as a planned in the preceding phase. The review leader is the
project manager. The steps to conduct the review include:

 Preparing an agenda before the review. The agenda should be well structured in terms of time and
content.
 Making necessary arrangements to gather inputs for the review.
 Incorporating points, which are external to the project. These external points have to be well
structured to be reviewed.
 Documenting key points of the meeting. A reporter should be designated for this job.
 Formulating an automated checklist for the session. Make use of flipcharts to collect data from
participants.

3. Taking actions on findings

In this phase, a project team takes actions on the findings of the review meeting. The steps to follow
in this phase include:

 Determining the points which are critical to the project and its performance.
 Having brain storming sessions to discuss critical points.
 Making a list of all such items discussed and items suggested.
 Grouping the data into categories and then prioritise, either by group discussion or voting.
 Identifying action items
 Assigning the task to a project member or a team.
 Setting expectations of scope, investment, time, for each item and send a copy to the team
 Following up all the actions.
 Placing review reports in the project documents file, in the quality/productivity departments and in
the library.
 Making reports available to managers of the life process for similar projects.

4. Do continuous improvement
Continual improvement is one of the management mantras. Every organisation wants to improve
continuously. It is not possible to achieve improvement unless sufficient measures are adopted to
calculate improvement. The steps to ensure continuous improvement include:Encouraging the
quality managers to look for quality themes that emerge from review meetings. The quality
managers should highlight trends and de-escalate chronic problems.

 Acting on recommendations from previous projects as reviews are a continuous check process in the
―Plan-Do-Check-Act‖ cycle of a quality management cycle.
 Capturing project data to check do a retrospective analysis of the progress and improvement.
 Doing periodic project reviews that will trigger mid-project corrections.
 Conducting immediate and informal retrospective analysis after solving unexpected obstacles
 Understanding any impact on the remainder of the project.
 Recognising people for extra efforts and noteworthy contributions.
 Being open to attend reviews for other projects.
 Learning from similar ventures, warranty failures, customer surveys and experiences of other divisions
and companies.
 Being a part of continuous organisational learning program that includes experimentation, evaluation
and documentation with easy access and retrieval.

5. Identifying Critical Success Factors

It is necessary that a company identifies critical factors in a project. These factors may slacken the
project if not focused. Some of these success factors are discussed below.
Routine tasks may be assigned to lower level team members as this may relieve the project team
from wasting their skill set on routine matters. In terms of project delivery, the project office can
relieve project managers of tasks, like filling forms and templates, getting these forms signed off,
mailing, receiving and checking items.
The project office can also help the project manager in the project scope definition, project kick-off
preparation and planning tasks, through mentoring and coaching services.Regarding project quality
reviews, the project management office adds value providing processes, tools and project
management experience but any quality review process can be implemented by the team without
sponsorship from the management level.
These are the combining strengths that make the project manager move forward and achieve the
project success. It is necessary to identify all the critical success factors. One of the critical success
factors for the project quality review process implementation is to convince and sell the benefits to
the management team of the organisation. The team should exhibit better control of their project
portfolio a and then demonstrate better control about business profitability.
6. Results and Benefits of the Project Quality Reviews
The main benefits of the project quality review are that project status is formally visible to the whole
organisation. It creates awareness and room for improvement. Through reviewing, in a detailed
manner, we can have a clear idea about the lack of knowledge mistakes, errors, deviations, and their
reasons.
The project quality reviews help the project manager to make the necessary adjustments and take
the actions needed to finish the project on time, scope and budget. The entire project team
including the project manager, the customer and the sponsor benefit from project quality reviews.
 QUALITY ASSURANCE
Quality is extremely hard to define, and it is simply stated: “Fit for use or purpose.” It is all
about meeting the needs and expectations of customers with respect to functionality, design,
reliability, durability, & price of the product.

Assurance is nothing but a positive declaration on a product or service, which gives

confidence. It is certainty of a product or a service, which it will work well. It provides a
guarantee that the product will work without any problems as per the expectations or
requirements.

Quality Assurance (QA) is defined as an activity to ensure that an organization is providing

the best possible product or service to customers. QA focuses on improving the processes to
deliver Quality Products to the customer. An organization has to ensure, that processes are
efficient and effective as per the quality standards defined for software products. Quality
Assurance is popularly known as QA Testing

Quality assurance has a defined cycle called PDCA cycle or Deming cycle. The phases of this
cycle are:

 Plan
 Do
 Check
 Act

These above steps are repeated to ensure that processes followed in the organization are
evaluated and improved on a periodic basis. Let’s look into the above steps in detail:

 Plan: Organization should plan and establish the process related objectives and determine the
processes that are required to deliver a high Quality end product.
 Do: Development and testing of Processes and also “do” changes in the processes
 Check: Monitoring of processes, modify the processes, and check whether it meets the
predetermined objectives
 Act: Implement actions that are necessary to achieve improvements in the processes
An organization must use Quality Assurance to ensure that the product is designed and
implemented with correct procedures. This helps reduce problems and errors, in the final
product.
 QUALITY CIRCLES
A quality circle is a volunteer group composed of workers, usually under the leadership of
their supervisor, who are trained to identify, analyze and solve work-related problems and
present their solutions to management in order to improve the performance of the organization,
and motivate and enrich the work of employees. When matured, true quality circles become
self-managing, having gained the confidence of management.
Participative management technique within the framework of a company wide quality system
in which small teams of (usually 6 to 12) employees voluntarily form to define and solve a
quality or performance related problem. In Japan (where this practice originated) quality circles
are an integral part of enterprise management and are called quality control circles.

“A Quality Circle is volunteer group composed of members who meet to talk about workplace
and service improvements and make presentations to their management with their ideas.”
(Prasad, L.M, 1998).

Quality circles enable the enrichment of the lives of the workers or students and creates
harmony and high performance. Typical topics are improving occupational safety and health,
improving product design, and improvement in the workplace and manufacturing processes.

Objectives of Quality Circle

The perception of Quality Circles today is ‘Appropriateness for use1 and the tactic
implemented is to avert imperfections in services rather than verification and elimination.
Hence the attitudes of employees influence the quality. It encourages employee participation
as well as promotes teamwork. Thus it motivates people to contribute towards organizational
effectiveness through group processes. The following could be grouped as broad intentions of
a Quality Circle:

1. To contribute towards the improvement and development of the organization or a department.

2. To overcome the barriers that may exist within the prevailing organizational structure so as to
foster an open exchange of ideas.
3. To develop a positive attitude and feel a sense of involvement in the decision making processes
of the services offered.
4. To respect humanity and to build a happy work place worthwhile to work.
5. To display human capabilities totally and in a long run to draw out the infinite possibilities.
6. To improve the quality of products and services.

7. To improve competence, which is one of the goals of all organizations?

8. To reduce cost and redundant efforts in the long run.
9. With improved efficiency, the lead time on convene of information and its subassemblies is
reduced, resulting in an improvement in meeting customers due dates.
10. Customer satisfaction is the fundamental goal of any library. It will ultimately be achieved by
Quality Circle and will also help to be competitive for a long time.

BENEFITS OF QUALITY CIRCLES

There are no monetary rewards in the QC’s. However, there are many other gains, which
largely benefit the individual and consecutively, benefit the business. These are:

(i) Self-development: QC’s assist self-development of members by improving self-

confidence, attitudinal change, and a sense of accomplishment.

(ii) Social development: QC is a consultative and participative programme where every

member cooperates with others. This interaction assists in developing harmony.

(iii) Opportunity to attain knowledge: QC members have a chance for attaining new
knowledge by sharing opinions, thoughts, and experience.

(iv) Potential Leader: Every member gets a chance to build up his leadership potential, in
view of the fact that any member can become a leader.

(v) Enhanced communication skills: The mutual problem solving and presentation before the
management assists the members to develop their communication skills.

(vi) Job-satisfaction: QC’s promote creativity by tapping the undeveloped intellectual skills
of the individual. Individuals in addition execute activities diverse from regular work, which
enhances their self-confidence and gives them huge job satisfaction.
(vii) Healthy work environment: QC’s creates a tension-free atmosphere, which each
individual likes, understands, and co-operates with others.

(viii) Organizational benefits: The individual benefits create a synergistic effect, leading to
cost effectiveness, reduction in waste, better quality, and higher productivity.
 QUALITY COST
Cost of Quality (COQ) is a measure that quantifies the cost of control/conformance and the
cost of failure of control/non-conformance. In other words, it sums up the costs related to
prevention and detection of defects and the costs due to occurrences of defects.
Definition by ISTQB

Cost of quality: The total costs incurred on quality activities and issues and often split into
prevention costs, appraisal costs, internal failure costs and external failure costs.

Definition by QAI

Money spent beyond expected production costs (labor, materials, equipment) to ensure that the
product the customer receives is a quality (defect free) product. The Cost of Quality includes
prevention, appraisal, and correction or repair costs.

Quality costs are categorized into four main types. Theses are:

 Prevention costs
 Appraisal costs
 Internal failure costs and
 External failure costs.

These four types of quality costs are briefly explained below:

(i) Prevention costs

It is much better to prevent defects rather than finding and removing them from products. The
costs incurred to avoid or minimize the number of defects at first place are known as prevention
costs. Some examples of prevention costs are improvement of manufacturing processes,
workers training, quality engineering, statistical process control etc.

(ii) Appraisal costs

 Appraisal costs (also known as inspection costs) are those cost that are incurred to identify
defective products before they are shipped to customers. All costs associated with the activities
that are performed during manufacturing processes to ensure required quality standards are also
included in this category. Identification of defective products involve the maintaining a team
of inspectors. It may be very costly for some organizations.

(iii) Internal failure costs

Internal failure costs are those costs that are incurred to remove defects from the products
before shipping them to customers. Examples of internal failure costs include cost of rework,
rejected products, scrap etc.

(iv) External failure costs

If defective products have been shipped to customers, external failure costs arise. External
failure costs include warranties, replacements, lost sales because of bad reputation, payment
for damages arising from the use of defective products etc. The shipment of defective products
can dissatisfy customers, damage goodwill and reduce sales and profits.

FORMULA / CALCULATION

Cost of Quality (COQ) = Cost of Control + Cost of Failure of Control

where

Cost of Control = Prevention Cost + Appraisal Cost

and

Cost of Failure of Control = Internal Failure Cost + External Failure Cost

NOTES

 In its simplest form, COQ can be calculated in terms of effort (hours/days).

 A better approach will be to calculate COQ in terms of money (converting the effort into money
and adding any other tangible costs like test environment setup).
 The best approach will be to calculate COQ as a percentage of total cost. This allows for
comparison of COQ across projects or companies.
 To ensure impartiality, it is advised that the Cost of Quality of a project/product be calculated
and reported by a person external to the core project/product team (Say, someone from the
Accounts Department).
 It is desirable to keep the Cost of Quality as low as possible. However, this requires a fine
balancing of costs between Cost of Control and Cost of Failure of Control. In general, a higher
Cost of Control results in a lower Cost of Failure of Control. But, the law of diminishing returns
holds true here as well.
 TOTAL QUALITY MANAGEMENT (TQM)
Total Quality Management (TQM) is the continual process of detecting and reducing or
eliminating errors in manufacturing, streamlining supply chain management, improving the
customer experience, and ensuring that employees are up to speed with their training. Total
quality management aims to hold all parties involved in the production process accountable for
the overall quality of the final product or service.

A total approach to quality is the current thinking of today; which is popularly called total
quality management (TQM).

TQM is a philosophy that believes in a company-wide responsibility toward quality via

fostering a quality culture throughout the organization; involving continuous improvement in
the quality of work of all employees with a view to best meeting the requirements of customers.
 Advantages of TQM

(i) Sharpens Competitive Edge of the Enterprise

TQM helps an organization to reduce costs through elimination of waste, rework etc. It
increases profitability and competitiveness of the enterprise; and helps to sharpen the
organization’s competitive edge, in the globalized economy of today.

(ii) Excellent Customer Satisfaction

By focusing on customer requirements, TQM makes for excellent customer satisfaction. This
leads to more and more sales, and excellent relations with customers.

(iii) Improvement in Organisational Performance

Through promoting quality culture in the organization, TQM lead to improvements in

managerial and operative personnel’s performance.

(iv) Good Public Image of the Enterprise

TQM helps to build an image of the enterprise in the minds of people in society. This is due to
stress on total quality system and customers’ requirements, under the philosophy of TQM.

(v) Better Personnel Relations

TQM aims at promoting mutual trust and openness among employees, at all levels in the
organization. This leads to better personnel relations in the enterprise.

Limitations of TQM

The philosophy of TQM suffers from the following major limitations

(i) Waiting for a Long Time

TQM requires significant change in organization; consisting of:

1. Change in methods, processes etc. of organization.

2. Change in attitude, behaviour etc. of people

Launching of TQM and acceptance of the philosophy of TQM requires a long waiting for the
organization. It is not possible to accept and implement TQM overnight.

(ii) Problem of Labour Management Relations

Success of TQM depends on the relationships between labour and management; because
participation of people at all levels is a pre-requisite for TQM programme implementation. In
many organizations, here and abroad, labour-management relations are quite tense. As such,
launching, acceptance and implementation of TQM programme is nothing more than a dream
for such organizations.

Basic Principles of TQM

In TQM, the processes and initiatives that produce products or services are thoroughly
managed. By this way of managing, process variations are minimized, so the end product or
the service will have a predictable quality level.

Following are the key principles used in TQM

(i) Top management – The upper management is the driving force behind TQM. The upper
management bears the responsibility of creating an environment to rollout TQM concepts and
practices.

(ii) Training needs – When a TQM rollout is due, all the employees of the company need to
go through a proper cycle of training. Once the TQM implementation starts, the employees
should go through regular trainings and certification process.

(iii) Customer orientation – The quality improvements should ultimately target improving the
customer satisfaction. For this, the company can conduct surveys and feedback forums for
gathering customer satisfaction and feedback information.

(iv) Involvement of employees – Pro-activeness of employees is the main contribution from

the staff. The TQM environment should make sure that the employees who are proactive are
rewarded appropriately.
(v) Techniques and tools – Use of techniques and tools suitable for the company is one of the
main factors of TQM.

(vi) Corporate culture – The corporate culture should be such that it facilitates the employees
with the tools and techniques where the employees can work towards achieving higher quality.

(vii) Continues improvements – TQM implementation is not one time exercise. As long as
the company practices TQM, the TQM process should be improved continuously.
 LEAN MANAGEMENT AND JUST IN TIME PRODUCTION

Lean management is an approach to running an organization that supports the concept of continuous
improvement, a long-term approach to work that systematically seeks to achieve small, incremental
changes in processes in order to improve efficiency and quality.

Lean management seeks to eliminate any waste of time, effort or money by identifying each
step in a business process and then revising or cutting out steps that do not create value. The
philosophy has its roots in manufacturing.

Guiding principles for lean management include:-

(1) Defining value from the standpoint of the end customer.

 (2) Identifying each step in a business process and eliminating those steps that do not create
value.

(3) Making the value-creating steps occur in tight sequence.

(4) Repeating the first three steps on a continuous basis until all waste has been eliminated.

The Lean Management Tools

Many elements within the concept of the lean manufacturing stand out and each of these
presents a particular method:

 5S
 Kanban (pull systems)
 Value Stream Mapping
 SMED
 Poka-yoke (error-proofing)
 Elimination of Time Batching
 Total Productive Maintenance
 Mixed Model Processing
 Single Point Scheduling
 Rank Order Clustering
 Multi-process Handling
 Redesigning Working Cells
 Control Charts (for checking mura)

Some of these methods claim to be an independent manufacturing concept (such as kaizen and
kanban).

Kaizen 5S

One way to cope with wastes and effectively increase profitability is a 5s. The name of this
method uses a list of five words, which all start with the letter “S”: straighten, sort, standardize,
shine, and sustain. It is translation from original Japanese words: seiton, seiri, seiketsu, seiso,
and shitsuke. These words describe ways of workspace organisation for achieving the most
effectiveness and efficiency. It include identifying and storing of the used items, maintaining
the items and area, and sustaining the new order.

KAIZEN 5S FRAMEWORK

The 5 Steps are as follows:

Sort: Sort out and separate what is needed and not needed within the area.

Straighten: Arrange items that are needed so that they are ready and easy to use. Clearly
identify locations for all items so that anyone can find them and return them once the task is
completed.

Shine: Clean the workplace and equipment on a regular basis in order to maintain standards
and identify defects.
 Standardise: Revisit the first three of the 5S on a frequent basis and confirm the condition of
the Gemba using standard procedures.

Sustain: Keep to the rules in order to maintain the standard and continuously improve every
day.

Kanban

The other way to waste reduction was a kanban. In 1952, Taiichi Ohno invented a kanban
system at Toyota, as a system to improve and maintain a high level of production.

Kanban became an effective tool to support running a production system as a whole, and an
excellent way to promote improvement. One of the main benefits of kanban system is to
establish an upper limit to the work in progress inventory, avoiding overloading of the
manufacturing system. The concept of “to do” – “doing” – “done” became the cornerstone of
many online tools used for managing projects and control workflows. Kanbanchi is one of such
tools that supports kanban methodology.

Value Stream Mapping

Value stream mapping is a method of lean management which is applicable for almost any
value chain. It is used for analysing the current stage and designing of its further stages for the
series of events that take a service or product from the beginning through to the client. This
method can be used also in:

 Logistics
 Supply Chain
 Service Related Industries
 Healthcare
 Software Development
 Product Development
 Administrative or Office Processes

Six Sigma
 Sigma is a mathematical term that measures a process deviation from perfection. Like Kaizen,
Six Sigma is a management philosophy focused on making continuous improvements and
bringing improvements into various processes. It was first introduced in 1986 by Bill Smith at
Motorola.

SIX SIGMA
Unlike Kaizen, which has the primary goal of increasing efficiency of all aspects of processes,
Six Sigma focuses on improving quality of the final product by finding and eliminating causes
of defects. Six Sigma uses more statistical analyses than Kaizen and aims for as close to zero
defects as possible. A sigma rating describes the maturity of a manufacturing process by
indicating its percentage or yield of defect-free products it creates. Organizations need to
determine an appropriate sigma level for each of their most important processes and strive to
achieve these.

The Six Sigma concept asserts:

 Achieving sustained quality improvement requires commitment from the entire organization,
particularly from top-level management.
 Manufacturing and business processes have characteristics that can be measured, analyzed,
controlled and improved.
 Continuous efforts to achieve stable and predictable process results (i.e., reduce process variation)
are of vital importance to business success.

JUST IN TIME PRODUCTION

Just in Time (JIT), as the name suggests, is a management philosophy that calls for the
production of what the customer wants, when they want it, in the quantities requested, where
they want it, without it being delayed in inventory.

So instead of building large stocks of what you think the customer might want you only make
exactly what the customer actually asks for when they ask for it. This allows you to concentrate
your resources on only fulfilling what you are going to be paid for rather than building for
stock.

How does JIT differ from traditional manufacturing?

In traditional manufacturing we try to predict what the customer will want and we will create
a forecast (or guess) against which we will produce our products. We will also try to produce
those products in large batches as the belief is that will make machines and processes more
efficient, especially if those machines require a long time to setup. This will typically result in
long lead times through our processes, huge amounts of Work In Process (WIP) stocks and
also large quantities of finished goods stocks that have

not yet been ordered by our customers. This is what many now call “Just in Case”
manufacturing.

If the customer does order something that is not in our current stocks they will either have to
wait many weeks or even months for the product to be manufactured or work will be hurried
through the system by progress chasers causing a huge amount of disruption to the production
schedule.

These systems are often run by Manufacturing Resource Planning (MRP2) programs that will
try to schedule each and every process within the facility. These software packages will seek
to control every step and everything requires careful and often complex planning.

A Just in Time system on the other hand will seek to use simple visual tools known as Kanbans
to pull production through the processes according to what the customer actually takes. It
massively reduces the amount of stock held and will reduce lead times by a significant amount,
often from weeks to just a few hours or days.

The benefits of a JIT system

The following are some of the many benefits that you could gain through the implementation
of just in time:-

(1) Reduction in the order to payment timeline; cash, as they say is king in business. Many
businesses will suffer with cash flow problems as they will often have to purchase large
amounts of raw materials prior to manufacturing and subsequent payment by the customer.
Often this gap is many months. Through implementing JIT you are able to considerably reduce
that time period.
(2) Reduction in Inventory costs; one of the main aims with any JIT implementation is to
improve stock turns and the amount of stock being held. Personal experience has seen
reductions of more than 90% stock in some industries. Along with the reduction in the stock
come many other associated benefits.

(3) Reduction in space required; by removing large amounts of stock from the system and
moving processes closer together we will often see a significant reduction in the amount of
floor space being used. Results from 100’s of projects run within companies in the UK through
the Manufacturing Advisory Service saw average reductions of 33% for simple 5 day
implementation projects.

(4) Reduction in handling equipment and other costs; if you don’t have to move large
batches there is less need for complex machinery to move them and all of the associated labour
and training.

(5)Lead time reductions; one of the most significantly impacted areas is that of the time it
takes for products to flow through the process. Instead of weeks or months most JIT
implementations result in lead times of hours or a few days.

(6)Reduced planning complexity; the use of simple pull systems such as Kanban, even with
your suppliers, can significantly reduce the need for any form of complex planning. With many
implementations the only planning is the final shipping process.

(7)Improved Quality; the removal of large batch manufacturing and reduction in handling
often results in significant quality improvements; often in the region of 25% or more.

(8)Productivity increases; to achieve JIT there are many hurdles that must be overcome with
regards to how the process will flow. These will often result in productivity improvements of
25% upwards.

(9)Problems are highlighted quicker; often this is cited as being a negative aspect of JIT in
that any problems will often have an immediate impact on your whole production process.
However this is the perfect way to ensure that problems are highlighted and solved immediately
when they occur.
(10)Employee empowerment; one requirement of JIT as with most other aspects of Lean
manufacturing is that employees are heavily involved in the design and application of your
system.
STATISTICAL QUALITY CONTROL, VARIABLE & ATTRIBUTE

STATISTICAL QUALITY CONTROL

Statistical quality control refers to the use of statistical methods in the monitoring and
maintaining of the quality of products and services. One method, referred to as acceptance
sampling, can be used when a decision must be made to accept or reject a group of parts or
items based on the quality found in a sample. A second method, referred to as statistical process
control, uses graphical displays known as control charts to determine whether a process should
be continued or should be adjusted to achieve the desired quality.

All the tools of SQC are helpful in evaluating the quality of services. SQC uses different tools
to analyze quality problem.

(1) Descriptive Statistics: – Descriptive statistics are brief descriptive coefficients that
summarize a given data set, which can be either a representation of the entire population or a
sample of it. Descriptive statistics are broken down into measures of central tendency and
measures of variability, or spread. Measures of central tendency include the mean, median and
mode, while measures of variability include the standard deviation or variance, the minimum
and maximum variables

(2) Statistical Process Control (SPC) : – Statistical process control (SPC) is a method of
quality control which employs statistical methods to monitor and control a process. This helps
ensure the process operates efficiently, producing more specification-conforming product with
less waste (rework or scrap). SPC can be applied to any process where the “conforming
product” (product meeting specifications) output can be measured. Key tools used in SPC
include run charts, control charts, a focus on continuous improvement, and the design of
experiments. An example of a process where SPC is applied is manufacturing lines.

SPC must be practiced in 2 phases: The first phase is the initial establishment of the process,
and the second phase is the regular production use of the process. In the second phase, a
decision of the period to be examined must be made, depending upon the change in 5M&E
conditions (Man, Machine, Material, Method, Movement, Environment) and wear rate of parts
used in the manufacturing process (machine parts, jigs, and fixtures).
(3) Acceptance Sampling achieve the desired quality: – Acceptance sampling uses statistical
sampling to determine whether to accept or reject a production lot of material. It has been a
common quality control technique used in industry. It is usually done as products leaves the
factory, or in some cases even within the factory. Most often a producer supplies a consumer a
number of items and a decision to accept or reject the items is made by determining the number
of defective items in a sample from the lot. The lot is accepted if the number of defects falls
below where the acceptance number or otherwise the lot is rejected.

VARIABLE & ATTRIBUTE

Both variable data and attribute data measure the state of an object or a process, but the kind
of information that each describes differs. Variable data involve numbers measured on a
continuous scale, while attribute data involve characteristics or other information that you can’t
quantify. Each has its own benefits over the other.

In science and research, attribute is a characteristic of an object (person, thing, etc.). Attributes
are closely related to variables. A variable is a logical set of attributes. Variables can “vary” –
for example, be high or low.[1] How high, or how low, is determined by the value of the
attribute (and in fact, an attribute could be just the word “low” or “high”). (For example see:
Binary option)

While an attribute is often intuitive, the variable is the operationalized way in which the
attribute is represented for further data processing. In data processing data are often represented
by a combination of items (objects organized in rows), and multiple variables (organized in
columns).

Examples

Age is an attribute that can be operationalized in many ways. It can be dichotomized so that
only two values – “old” and “young” – are allowed for further data processing. In this case the
attribute “age” is operationalized as a binary variable. If more than two values are possible and
they can be ordered, the attribute is represented by ordinal variable, such as “young”, “middle
age”, and “old”. Next it can be made of rational values, such as 1, 2, 3…. 99.

Benefits of Variable Data

Variable data provide detailed and concrete information about a product. In contrast, attribute
data may be obscure or unhelpful. For example, if nails need to be made to a one-inch
specification, with a leeway of 0.1-inches either way, variable data about each nail would
provide the exact length. Attribute data would only state whether each nail fit the specification
or not. It wouldn’t state whether the nail was too long or too short.

Benefits of Attribute Data

Attribute data are often more helpful when qualitative information is needed. Examples include
the state of an object, non-numerical characteristics and customer feedback. For example, the
attribute data might count the number of people who shop at a specific store, or the size of a
product, such as a small or large serving of food. Attribute data are useful for analysis as you
can use attribute data to create ratios, percentages or charts, whereas variable data don’t lend
itself as freely to this.

GOOD LUCK DEAR STUDENTS