Operations Management

KMB205

UNIT –I

PRODUCTION CONCEPT

“Production and Operation Management is the process of effective planning and

regulating the operations of that section of an enterprise which is responsible for
the actual transformation of materials into finished products”. This definition limits
the scope of operation and production management to those activities of an
enterprise which is associated with the transformation process of inputs into
outputs. The definition does not include the human factors involved in Production
process. It lays stress on materialistic features only.

• Production and Operation Management deals with decision making related to

production processes, so that the resulting goods and services are produced in
accordance with the quantitative specifications and demand schedule with
minimum cost. According to this definition design and control of the production
system are two main functions of production and operation management.

• Production and Operation Management is a set of general principles for

production economies, facility design, job design, schedule design, quality control,
inventory control work study and cost band budgeting control. This definition
explains the main areas of an enterprise where the principles of production and
operation management can be applied. This definition clearly points out that the
production and operation management is not a set of techniques,

OPERATION MANAGEMENT

Operation Management is a way or means through which the listed objectives of an

operating system are achieved. There is always confusion between the word OM &
PM (Production Management). It is accepted norm that OM includes techniques
which are enabling the achievement of operational objectives in an operation
system.

The operation system includes both manufacturing sector as well as service sector,
but when you use the word PM, you should be careful to note that it refers to the
manufacturing sector but not the service sector. Suppose, you are designing a
layout for the hospital you should say that you are applying Operations
Management Technique not the Production Management Technique. When you
design a layout for a manufacturing sector you can say that you are applying
Production Technique or Operation Technique or vice versa. From, the above
discussion we can come to a conclusion that production management is a subset of
Operations Management.

The above functions of production management are briefly discussed below.

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 under stocking, 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.

Difference between Production and Operations Management

BASIS FOR PRODUCTION OPERATIONS

COMPARISON MANAGEMENT MANAGEMENT

Meaning Production Management Operations Management refers

connotes the administration of to the part of management
the range of activities concerned with the production
belonging to the creation of and delivery of goods and
products. services.
BASIS FOR PRODUCTION OPERATIONS
COMPARISON MANAGEMENT MANAGEMENT

Decision Making Related to the aspects of Related to the regular business

production. activities.

Found in Enterprises where production Banks, Hospitals, Companies

is undertaken. including production
companies, Agencies etc.

Objectives To produce right quality goods To utilize resources, to the

in right quantity at right time extent possible so as to satisfy
and at least cost. customer wants.

Definition The course of the place totally The course of that offers with
different capabilities inside an the administration aspect of the
organization gets a cyclic issues relating to the enterprise
illustration that offers with actions and the processes
planning, predicting, and coping with effectively
manufacturing. throughout the group.

Occurrence Takes place every time the Deals with each the issues
manufacturing of merchandise together with the
similar to a pc or automobile. manufacturing of each the
merchandise and the
companies that exist.

Input No enter from the shopper. Takes enter from the patron.

Requirement Requires extra capital gear to Requires much less capital

make the product in the funding however wants extra
beginning and much less labor work as folks need immediate
 BASIS FOR PRODUCTION OPERATIONS
COMPARISON MANAGEMENT MANAGEMENT

because it offers with the outcomes.

units.

Productivity

Productivity is the ratio of outputs to inputs. It refers to the volume of output

produced from a given volume of inputs or resources. If the firm becomes more
productive, then it has become more efficient, since productivity is an efficiency
measure. Productivity can be:

Labour productivity

Total output in a given time period

=Output per worker
Quantity of labour employed

Capital productivity

Total output in a given time period

Output per capital
Quantity or Value of Capital =
input
employed

1. Improved productivity of land:

If by using better seed, better methods of cultivation and more fertilizer, the yield
of corn from a particular hectare of land can be increased from 4 quintals to 6
quintals, the productivity of that land, in the agricultural sense is increased
(improved) by 50 percent. The productivity of land used for industrial purposes is
said to have been increased if the output of goods or services within that area of
land is increased by whatever means.

2. Improved productivity of materials:

A skilled tailor is able to cut 12 suits from a bale of cloth where an unskilled labour
is able to cut only 10 suits from a bale of cloth, then the productivity of the bale
used by skilled worker is 16.6 percent greater than unskilled labour.

3. Improved productivity of machines:

A machine tool is producing 90 pieces per working day (i.e. 8 hours). Considering
that through the use of improved cutting tools, the output is increased to 120
pieces, then the productivity of that machine will be increased by 33.33 percent.

4. Improved productivity of Men (Labor):

The worker is producing 32 plates per hour. Considering that with the improved
methods of work, he will be able to produce 42 plates per hour, then productivity
of worker will be improved by 31.25 percent. Thus it can be said that more output
results into higher productivity or improvement from same amount of resources
which means lower money costs and higher net money returns per unit of output.

Benefits from Productivity Growth

Productivity growth is a crucial source of growth in living standards. Productivity

growth means more value is added in production and this means more income is
available to be distributed.

At a firm or industry level, the benefits of productivity growth can be distributed in

a number of different ways:

 to the workforce through better wages and conditions;

 to shareholders and superannuation funds through increased profits and
dividend distributions;
 to customers through lower prices;
 to the environment through more stringent environmental protection; and
 to governments through increases in tax payments (which can be used to
fund social and environmental programs)
FACTORS AFFECTING PRODUCTIVITY
There is quite a variety of factors which can affect productivity, both positively
and negatively. These include:

1. capital investments in production

2. capital investments in technology
3. capital investments in equipment
4. capital investments in facilities
5. economies of scale
6. workforce knowledge and skill resulting from training and experience
7. technological changes
8. work methods
9. procedures
10.systems
11.quality of products
12.quality of processes
13.quality of management
14.legislative and regulatory environment
15.general levels of education
16.social environment
17.geographic factors

Productivity Calculation
The output variable of the productivity formula is usually expressed as a dollar
amount. In theory, another measure of output could be used such as a count of
production units or service interactions.
The input variable of the productivity formula is usually hours worked. Hours is
typically used even when measuring productivity for a year. This can be based on
an assumption such as 37.5 hours a week.
Productivity = total value of work / total hours worked
1. Example 1
The productivity of a nation is measured using GDP per worker of $90,000 and
average annual hours worked of 1600.
Productivity = $90,000/1600 = $56.25 / hour
A high productivity rate indicates a nation that produces high value goods and
services. It also indicates extensive use of technology, automation and capital.
2. Example 2
A craftsperson creates handmade canoes from wood. The craftsperson measures
their productivity on a particular project by taking gross revenue of $4400 and the
32 hours spent on the project including sales and administrative tasks.
Productivity = $4400 / 32 = $137.5 / hour
As the craftsperson is self employed, they have costs for electricity, rent, materials,
parts, marketing and tools. As such, the productivity rate should not be confused
with an hourly wage.
3. Example 3
A production line is heavily automated such that a small number of workers can
handle a shift. As such, labor is a small cost compared to the cost of capital
equipment, parts and materials. In a month the production line produces goods
worth $24 million dollars with 1600 total hours worked.
Productivity = $24,000,000 / 1600 = $15,000 / hour

As companies invest in technology and equipment productivity typically rises.

Work Study

“Work study is a generic term for those techniques, particularly method study and
work measurement, which are used in all its context and which lead systematically
to the investigation of all the factors, which effect the efficiency and economy of
the situation being reviewed in order to effect improvement.”

The main objective of work study is to improve productivity of men, machines and
materials. The aim of work study is to determine the best method of performing
each operation and to eliminate wastage so that production increases with less
fatigue. The work study is also used in determining the standard time that a
qualified worker should take to perform the operation when working at a normal
place.

Work study is a technique which deals with the following problems:

(a) As to how should a job be done, and

(b) How much time a job should take for completion.

Role of Work Study:

1. To standardize the method of doing a work,

2. To minimize the unit cost of production,

3. To determine the standard time for doing a task,

4. To minimize the material movement, and operators movement,

5. To eliminate unnecessary human movements,
6. To utilise facilities such as man, machine and materials most effectively, and
7. To a systematic investigation of all factors.
Objectives of Work Study:
The following are the objectives of work study:
1. Increased efficiency,
2. Better product quality,
3. To choose the fastest method to do a job,
4. To improve the working process,
5. Less fatigue to operators and workers,
6. Effective labor control,
7. Effective utilization of resources,
8. To decide equipment requirements,
9. To pay fair wages,
10. To aid in calculating exact delivery,
11. To formulate realistic labor budgeting, and
12. To decide the required manpower to do a job.
Advantages of Work Study:
The advantages of work study are the following:
1. Work study ensures higher productivity,
2. Better working conditions with less fatigue,
3. Higher wages to workers,
4. Uniform production flow,
5. Job satisfaction and job security to workers,
6. Reduction in unit cost of production,
7. Quality products to consumers,
8. Fast delivery schedule,
9. Harmonious employer-employee relation, and
10. Better service to customers.
Classification of Production system

1. Job-Shop Production

It is featured by manufacturing one or more 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 a high variety of products. A job-
shop comprises of general-purpose machines arranged into different departments.
Each job demands unique technological requirements demands to process on
machines in a certain sequence.

Features of Job-shop Production

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.

Advantages of Job-shop Production

1. Because of the general purpose machines and facilities, a variety of

products can be produced.
2. Operators will become more skilled and competent, as each job gives
them learning opportunities.
3. The full potential of operators can be utilized.
4. An opportunity exists for Creative methods and innovative ideas.
Production Planning and Control

Limitations of Job-shop Production:

1. Higher cost due to frequent setup changes.

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

2. Batch Production

Batch Production is a form of manufacturing in which the job pass through the
functional departments in lots or batches and each lot may have a
differentrouting. It is characterized by the manufacture of a limited number of
products produced at regular intervals and stocked stored for sales.

Features of Batch Production

1. Shorter production runs.

2. Plant and machinery are flexible.
3. Plant and machinery set up are used for the production of the item in a
batch and change of set up is required for processing the next batch.
4. Manufacturing lead-time and cost are lower as compared to job order
production.

Advantages of Batch Production:

 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.
4. Flexibility to accommodate and process a number of products.
5. Job satisfaction exists for operators.

Limitations of Batch Production

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

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

3. Mass Production

Manufacturer of discrete parts or assemblies using a continuous process is

called Mass Production. This production system is justified by a 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.

Features of Mass Production

1. Standardization of product and process sequence.

2. Dedicated special purpose machines having higher production capacities
and output rates.
3. A Large volume of products.
4. The shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.

Advantages of Mass Production:

1. The 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 of Mass Production:

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

4. Continuous Production

Production facilities are arranged as per the sequence of production

operationsfrom 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.

Features of Continuous Production

1. Dedicated plant and equipment with zero flexibility.

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

Advantages of Continuous Production

1. Standardization of product and process sequence.

2. The 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. A person with limited skills can be used on the production line.
6. Unit cost is lower due to the high volume of production.

Limitations of Continuous Production

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

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

Consider the manufacturing of a ship. Such products are never made in large
numbers. Manpower, facilities and other resources center around such products.
Each such product can therefore be treated as a project, requiring sequencing of
certain activities either in series or concurrently. PERT/CPM or network analysis is
a useful technique to plan and control such projects.

PLANT LOCATION

Every entrepreneur is faced with the problem of deciding the best site for location
of his plant or factory.

What is plant location?

Plant location refers to the choice of region and the selection of a particular site for
setting up a business or factory. But the choice is made only after considering cost
and benefits of different alternative sites. It is a strategic decision that cannot be
changed once taken. If at all changed only at considerable loss, the location should
be selected as per its own requirements and circumstances. Each individual plant is
a case in itself. Businessman should try to make an attempt for optimum or ideal
location.

What is an ideal location?

An ideal location is one where the cost of the product is kept to minimum, with a
large market share, the least risk and the maximum social gain. It is the place of
maximum net advantage or which gives lowest unit cost of production and
distribution. For achieving this objective, small-scale entrepreneur can make use of
locational analysis for this purpose.

 LOCATIONAL ANALYSIS

Locational analysis is a dynamic process where entrepreneur analyses and

compares the appropriateness or otherwise of alternative sites with the aim of
selecting the best site for a given enterprise.

It consists the following:

(a) Demographic Analysis: It involves study of population in the area in terms of
total population (in no.), age composition, per capita income, educational level,
occupational structure etc.

(b) Trade Area Analysis: It is an analysis of the geographic area that provides
continued clientele to the firm. He would also see the feasibility of accessing the
trade area from alternative sites.

(c) Competitive Analysis: It helps to judge the nature, location, size and quality of
competition in a given trade area.

(d) Traffic analysis: To have a rough idea about the number of potential
customers passing by the proposed site during the working hours of the shop, the
traffic analysis aims at judging the alternative sites in terms of pedestrian and
vehicular traffic passing a site.

(e) Site economics: Alternative sites are evaluated in terms of establishment costs
and operational costs under this. Costs of establishment is basically cost incurred
for permanent physical facilities but operational costs are incurred for running
business on day to day basis, they are also called as running costs.

SELECTION CRITERIA
The important considerations for selecting a suitable location are given as
follows:
a) Natural or climatic conditions.
b) Availability and nearness to the sources of raw material.
c) Transport costs-in obtaining raw material and also distribution or
marketing finished products to the ultimate users.
d) Access to market: small businesses in retail or wholesale or services
should be located within the vicinity of densely populated areas.
e) Availability of Infrastructural facilities such as developed industrial sheds
or sites, link roads, nearness to railway stations, airports or sea ports,
availability of electricity, water, public utilities, civil amenities and means of
communication are important, especially for small scale businesses.
f) Availability of skilled and non-skilled labour and technically qualified and
trained managers.
g) Banking and financial institutions are located nearby.
 h) Locations with links: to develop industrial areas or business centers result
in savings and cost reductions in transport overheads, miscellaneous
expenses.
i) Strategic considerations of safety and security should be given due
importance.
j) Government influences: Both positive and negative incentives to motivate
an entrepreneur to choose a particular location are made available. Positive
includes cheap overhead facilities like electricity, banking transport, tax
relief, subsidies and liberalization. Negative incentives are in form of
restrictions for setting up industries in urban areas for reasons of pollution
control and decentralization of industries.
k) Residence of small business entrepreneurs want to set up nearby their
homelands

GENERAL FACTORS AFFECTING PLANT LOCATION DECISION:

 INPUT CONSIDERATIONS

o Material- Quantity, quality, cost and regular supply.

o Land- Site availability and cost cost of construction, constructional
regulations.
o Equipment- Cost and availability.
o Plant utilities- Water, electricity, gas, coal etc.
o Labor- Availability, skill, wage rates etc.

 PROCESSING CONSIDERATIONS
o Production analysis
o Process analysis
o Forecasting and scheduling
o Production control
o Maintenance
o Cost control

 OUTPUT CONSIDERATIONS
o Distribution- Distribution and storage facilities
o Transportation- Facilities and cost
o Present and future market potential
o Local rates
 o Local taxes

 OTHER CONSIDERATIONS
o Community attitude towards industry and company
o Public and community services
o Stockholder interests
o Organizational decentralization policies.
o Political situation
o Environmental standards

PLANT LAYOUT

 Layout refers to the arrangement of facilities in a particular workstation. It

may be plant layout, office layout, auditorium layout etc.

 Plant Layout implies the physical arrangement of machines, equipment and

other industrial facilities on the factory floor in such a manner that they may
be handled efficiently.

 Plant layout refers to the arrangement of physical facilities such as

machinery, equipment, furniture etc. within the factory building in such a
manner so as to have quickest flow of material at the lowest cost and with
the least amount of handling in processing the product from the receipt of
material to the shipment of the finished product.

 Layout is a Fundamental of every organization and enterprise.

 Kitchen, Retailers, offices, service organization and all the enterprises have a
specific layout.

 Previously Layouts were based on intuition, experience and judgment.

 With the complexities and competition now scientific methods are used.

 The Layout comes in picture after the location has been finalized.

 Development of good layout depends on decisions already taken on location,

capacity, facility, manufacturing method and material handling techniques.
CHARACTERISTICS OF PLANT LAYOUT:

Provide space for machine / materials / storage / etc.

 Flexible for future changes in capacity / Design / Process etc. (Cellular
design).
 Accommodate future expansion.
 Deals with government rules & regulations (Municipal corporation / Labor
law & rules).
 Safety of employees / visitors / vendors is prime concern.
 Achieve economy in operation.
IMPORTANCE OF PLANT LAYOUT:
 It is long-term commitment.
 It facilitates the production process, minimizes material handling, time and
cost, and allows flexibility of operations.
 It facilitates easy production flow, makes economic use of the building,
promotes effective utilization of manpower, and provides for employees’
convenience, safety, comfort at work, maximum exposure to natural light
and ventilation.
 It affects the flow of material and processes, labor efficiency, supervision
and control, use of space and expansion possibilities.
OBJECTIVES OF PLANT LAYOUT:
 Overall simplification of production process in terms of equipment
utilization, minimization of delays, reducing manufacturing time and better
provisions for maintenance.
 Overall integration of men, materials, machinery, supporting activities and
many other considerations in a way that result in the best compromise.
 Minimization of material handling cost by suitably placing the facilities in
the best flow sequence.
 Saving in floor space, effective space utilization and less congestion.
 Increased output and reduced inventories in process.
 Better supervision and control.
 Worker convenience, improved morale and worker satisfaction.
 Better working environment, safety of employees and reduced hazards.
 Minimization of waste and higher productivity.
 Avoid unnecessary capital investment.
 Higher flexibility and adaptability to changing conditions.
EVIDENCE OF POOR LAYOUT:
 Slow movement of materials through the plant.
 High handling and transportation costs.
 Crowded stock rooms and production departments.
 Congested workplaces.
 Inconveniently located service departments.
 In-process materials are frequently damaged, misplaced or lost.
PRINCIPLE OF PLANT LAYOUT:
 Principle of Overall Integration:
All the plant facilities are integrated one single operating unit considering all
the servicing necessary for operations.

 Principle of Minimum Distance Moved:

Attempts are made to minimize the movements as far as possible. However,
the principle of overall integration should be considered while planning for
the minimum distance moved.

 Principle of Flow:
A layout must arrange the work areas as far as possible, in the same way as
the sequence of operations or processes. The basic idea is to move the work
towards completion progressively without interference of backtracking with
a minimum of interruption or congestion.

 Principle of Cubic Space:

Economy is obtained by using effectively available space- both vertical and
horizontal.

 Principle of Satisfaction and Safety:

Satisfaction of working people is an important factor to be kept in mind.
Similarly due consideration must be given to safely requirements.

 Principle of Flexibility:
The layout must be sufficiently flexible to take care of the necessity of
rearranging the production facilities, when the need comes.

 Types of Plant Layout:

 Two basic plans of the arrangement of manufacturing facilities are – product
layout and process layout. The only other alternative is a combination of
product and process layouts, in the same plant.
 Following is an account of the various types of plant layout:
 (a) Product Layout (or Line Layout):
 In this type of layout, all the machines are arranged in the sequence, as
required to produce a specific product. It is called line layout because
machines are arrange in a straight line. The raw materials are fed at one end
and taken out as finished product to the other end.
 Special purpose machines are used which perform the required jobs (i.e.
functions) quickly and reliably.
 Product layout is depicted below:


 Advantages:
 1. Reduced material handling cost due to mechanized handling systems and
straight flow
 2. Perfect line balancing which eliminates bottlenecks and idle capacity.
 3. Short manufacturing cycle due to uninterrupted flow of materials
 4. Simplified production planning and control; and simple and effective
inspection of work.
 5. Small amount of work-in-progress inventory
 6. Lesser wage cost, as unskilled workers can learn and manage production.
 Disadvantages:
 1. Lack of flexibility of operations, as layout cannot be adapted to the
manufacture of any other type of product.
 2. Large capital investment, because of special purpose machines.
 3. Dependence of whole activity on each part; any breakdown of one
machine in the sequence may result in stoppage of production.
 4. Same machines duplicated for manufacture of different products; leading
to high overall operational costs.
 5. Delicate special purpose machines require costly maintenance / repairs.
 Suitability of product layout:
 Product layout is suitable in the following cases:
 1. Where one or few standardized products are manufactured.
 2. Where a large volume of production of each item has to travel the
production process, over a considerable period of time.
 3. Where time and motion studies can be done to determine the rate of work.
 4. Where a possibility of a good balance of labour and equipment exists.
 5. Where minimum of inspection is required, during sequence of operations.
 6. Where materials and products permit bulk or continuous handling by
mechanical parts.
 7. Where minimum of set-ups are required.
 (b) Process Layout (or Functional Layout):
 In this type of layout, all machines performing similar type of operations are
grouped at one location i.e. all lathes, milling machines etc. are grouped in
the shop and they will be clustered in like groups.
 A typical process layout is depicted below:


 Advantages:
 1. Greater flexibility with regard to work distribution to machinery and
personnel. Adapted to frequent changes in sequence of operations.
 2. Lower investment due to general purpose machines; which usually are
less costly than special purpose machines.
 3. Higher utilization of production facilities; which can be adapted to a
variety of products.
 4. Variety of jobs makes the work challenging and interesting.
 5. Breakdown of one machine does not result in complete stoppage of work.
 Disadvantages:
 1. Backtracking and long movements occur in handling of materials. As
such, material handling costs are higher.
 2. Mechanization of material handling is not possible.
 3. Production planning and control is difficult
 4. More space requirement; as work-in-progress inventory is high-requiring
greater storage space.
 5. As the work has to pass through different departments; it is quite difficult
to trace the responsibility for the finished product.
 Suitability of process layout:
 Process layout is suitable in the following cases, where:
 1. Non-standardized products are manufactured; as the emphasis is on
special orders.
 2. It is difficult to achieve good labour and equipment balance.
 3. Production is not carried on a large scale.
 4. It is difficult to undertake adequate time and motion studies.
 5. It is frequently necessary to use the same machine or work station for two
or more difficult operations.
 6. During the sequence of operations, many inspections are required.
 7. Process may have to be brought to work, instead of “vice-versa”; because
materials or products are too large or heavy to permit bulk or continuous
handling by mechanical means.
 (c) Combination Layout:
 In practice, plants are rarely laid out either in product or process layout form.
Generally a combination of the two basic layouts is employed; to derive the
advantages of both systems of layout. For example, refrigerator
manufacturing uses a combination layout.
 Process layout is used to produce various operations like stamping, welding,
heat treatment being carried out in different work centres as per requirement.
The final assembly of the product is done in a product type layout.
 (d) Fixed Position Layout:
 It is also called stationary layout. In this type of layout men, materials and
machines are brought to a product that remains in one place owing to its
size. Ship-building, air-craft manufacturing, wagon building, heavy
construction of dams, bridges, buildings etc. are typical examples of such
layout.