Production & Supply Chain Basics PDF

1 Production & supply chain basics by Anjana R. Nair...

1 Production & supply chain basics by Anjana R. Nair PART 1 Production and Supply Chain Basics by Anjana R. Nair  2 Anjana R. Nair Production implies the creation of goods and services to satisfy human needs. It involves conversion of inputs (resources) into outputs (products). Production and Supply Chain Basics by Anjana R. Nair  3 PRODUCTION Production is defined as “the step- by-step conversion of one form of Anjana R. Nair material into another form through chemical or mechanical process to create or enhance the utility of the product to the user.” Production is a value addition process. At each stage of processing, there will be value addition. Production and Supply Chain Basics by Anjana R. Nair  4 Edwood Buffa defines production as a process by which goods and services are created. Anjana R. Nair Ptoduction Function Conve Inputs Output r-sion s Transormation process Production Vs Manufacturing The four factors of production (also called inputs of production) are the resources used to create goods and services. 1. Land: Land refers to all natural resources, such as minerals, forests, and water 2. Labor: Labor refers to the effort and skills of people who work to produce goods and services. 3. Capital: Capital refers to the tools, machinery, and other physical assets used to produce goods and services. Production and Supply Chain Basics by Anjana R. Nair  5 It can be physical capital (physical/human made stuff) or human capital (knowledge and skills). 4. Entrepreneurship: Entrepreneurs combine the other factors of production, land, labor, and capital to make a profit. They identify opportunities, organize resources, and bring new products or services to the market. Production and Supply Chain Basics by Anjana R. Nair  6 PRODUCTION The part of an organisation SYSTEM that produces products. Anjana R. Nair 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. Production and Supply Chain Basics by Anjana R. Nair  7 a.) Production is an organized activity, so every production Anjana R. Nair system has an objective. b.) The system transforms the various inputs to useful outputs. c.) It does not operate in isolation from the other organization system. d.) There exists feedback about the activities, which is essential to control and improve system performance. Production and Supply Chain Basics by Anjana R. Nair  8 Production System Continuous Intermittent Production Anjana R. Nair Production Assembly Process Mass Job Batch Production Production Production Production Production Analytical Synthetic Production and Supply Chain Basics by Anjana R. Nair  9 CONTINUOUS PRODUCTION Anjana R. Nair Production facilities The items are are arranged as per made to flow the sequence of through the production sequence of operations from the operations through first operations to material handling the finished devices such as product. conveyors, transfer devices, etc. Continuous means something that operates constantly without any irregularities or frequent halts. In the continuous production system, goods are produced constantly as per demand forecast. Goods are produced on a large scale for stocking and selling. They are not produced on customer's orders. Here, the inputs and outputs are standardized along with the production process and sequence. Production and Supply Chain Basics by Anjana R. Nair  Anjana R. Nair Paper Oil Manufacturers Refineries Production and Supply Chain Basics by Anjana R. Nair Cement Manufacturers Food and Beverage Manufacturers 10  11 a.) Dedicated plant and equipment with zero flexibility. Anjana R. Nair b.) Material handling is fully automated. c.) Products are identical and have little to no variation. d.) A large quantity of products are being produced. e.) Process follows a predetermined sequence of operations. f.) Component materials cannot be readily identified with final product. g.) Planning and scheduling is a routine action. Production and Supply Chain Basics by Anjana R. Nair  12 a.) Standardisation of product and process sequence. Anjana R. Nair b.) Higher rate of production with reduced cycle time. c.) Higher capacity utilisation due to line balancing. d.) Manpower is not required for material handling as it is completely automatic. e.) Person with limited skills can be used on the production line. f.) Unit cost is lower due to high volume of production. Production and Supply Chain Basics by Anjana R. Nair  13 a.) Inflexible system, hard to accommodate changes. Anjana R. Nair b.) Very high investment for setting flow lines. c.) Breakdowns can cause significant losses. d.) Product differentiation is limited. e.) Requires highly skilled technical staff for maintenance. Production and Supply Chain Basics by Anjana R. Nair  14 Assembly pdn. A type of flow production which is developed in the automobile industry in USA. In an assembly line, Anjana R. Nair each machine must directly receive Machine and equipment should be arranged material from the in such a manner that every operator has a previous machine and free and safe access to each machine. pass it directly to the Space should be provided for free next machine. movement of fork lifts, trucks etc. which deliver materials and collect finished products. Production and Supply Chain Basics by Anjana R. Nair  15 Automobiles Anjana R. Nair Electronics Household appliances Production and Supply Chain Basics by Anjana R. Nair  16 a.) Step-by-step assembly of components. Anjana R. Nair b.) Specific tasks are assigned to workers or machines. c.) Streamlined workflow ensures minimal delays. d.) Machines are tailored for specific assembly tasks. e.) Produces large quantities efficiently. Production and Supply Chain Basics by Anjana R. Nair  17 a.) Faster production speeds are achieved by reducing time Anjana R. Nair spent on individual tasks. b.) Cost-effective for mass production as fixed costs are spread across a large number of units, reducing per-unit expenses. c.) Products can be inspected at different stages of assembly. d.) Workers focus on specific tasks, requiring less time to gain proficiency. Production and Supply Chain Basics by Anjana R. Nair  18 a.) Adjusting the production line for a new product is time- Anjana R. Nair consuming and costly. b.) Delays in the supply of components can disrupt the workflow. c.) A failure at one stage can halt the entire production line. d.) Establishing an assembly line requires significant financial investment. Production and Supply Chain Basics by Anjana R. Nair  19 Process pdn. Raw materials undergo chemical or mechanical transformations in a series of sequential stages to Anjana R. Nair create a finished product. The production of goods that are typically produced in bulk quantities, as opposed to discrete and countable units. Process manufacturing industries include chemicals, food and beverage, gasoline, cement, paint and pharmaceutical. Production and Supply Chain Basics by Anjana R. Nair  20 Chemical industry Anjana R. Nair Paint industry Production and Supply Chain Basics by Anjana R. Nair  21 a.) Raw materials are transformed through multiple stages into Anjana R. Nair the final product. b.) The end products are uniform and consistent in quality. c.) Equipment is specifically designed for each stage of the process. d.) The workflow is continuous and uninterrupted. e.) Significant financial resources are needed for specialized equipment and infrastructure. Production and Supply Chain Basics by Anjana R. Nair  22 In Analytical Process of production, a raw material is broken into Anjana R. Nair different products. e.g. Crude oil is analysed into petrol, diesel, gas, naptha, kerosine etc. Similarly, coal is processed to obtain coal gas, coal tar etc. It is a system that breaks down raw materials into their component parts to create marketable products. Production and Supply Chain Basics by Anjana R. Nair  23 Synthetic Process of production involves the mixing of two or Anjana R. Nair more materials to manufacture a product. e.g. Soap manufacturing The basic ingredients for soap manufacturing are: oils or fats (like coconut oil, olive oil, palm oil), a lye solution (sodium hydroxide), and water. Production and Supply Chain Basics by Anjana R. Nair  24 a.) Uniform standards are followed throughout the production Anjana R. Nair process. b.) Large-scale production reduces the overall cost per unit. c.) Designed for bulk manufacturing. d.) Raw materials and energy are managed effectively to reduce waste. Production and Supply Chain Basics by Anjana R. Nair  25 a.) The system is inflexible. Anjana R. Nair b.) Specialized equipment requires regular servicing and skilled technicians. c.) Breakdowns can cause significant losses. d.) Waste management and disposal can become significant challenges. Production and Supply Chain Basics by Anjana R. Nair  26 mass pdn. Manufacture of discrete parts or assemblies using a continuous process. Anjana R. Nair This production system is justified by very large volume of production. The machines are arranged in a line or product layout. Product and process standardisation exists and all outputs follow the same path. Suitable for Consumer goods, FMCG products Production and Supply Chain Basics by Anjana R. Nair  27 Food and Beverage industry/ Canned goods Anjana R. Nair consumer electronics industry Production and Supply Chain Basics by Anjana R. Nair  28 a.) Standardization of product and process sequence. b.) Dedicated special purpose machines having higher production capacities and output rates. Anjana R. Nair c.) Produces goods in bulk. d.) Shorter cycle time of production. e.) Perfectly balanced production lines. f.) Flow of materials, components and parts is continuous and without any back tracking. g.) Production planning and control is easy. h.) Material handling can be completely automatic. Production and Supply Chain Basics by Anjana R. Nair  29 a.) Higher rate of production with reduced cycle time. Anjana R. Nair b.) Higher capacity utilization due to line balancing. c.) Less skilled operators are required. d.) Low process inventory. e.) Manufacturing cost per unit is low. Production and Supply Chain Basics by Anjana R. Nair  30 a.) Breakdown of one machine will stop an entire production Anjana R. Nair line. b.) Line layout needs major change with the change. c.) Skilled labor required for machine operations. Production and Supply Chain Basics by Anjana R. Nair  31 Intermittent Production Anjana R. Nair According to Buffa, Intermittent productions are those where the facilities must be flexible enough to handle a variety of products and sizes or where the basic nature of the activity imposes change of important characteristics of the input. Intermittent means something that starts (initiates) and stops (halts) at irregular (unfixed) intervals (time gaps). In the intermittent production system, goods are produced based on customer's orders. These goods are produced on a small scale. The flow of production is intermittent (irregular). In other words, the flow of production is not continuous. In this system, large varieties of products are produced. These products are of different sizes. The design of these products goes on changing. It keeps changing according to the design and size of the product. Therefore, this system is very flexible. Production and Supply Chain Basics by Anjana R. Nair  32 In the industries following the intermittent production system, Anjana R. Nair some components may be made for inventory but they are combined differently for different customers. The finished product is heterogeneous but within a range of standardized options assembled by the producers. Since production is partly for stock and partly for consumer demand, there are problems to be met in scheduling, forecasting, control and coordination. Production and Supply Chain Basics by Anjana R. Nair  33 Customised furniture Anjana R. Nair Baking Production and Supply Chain Basics by Anjana R. Nair  34 a.) The volume of production is generally small. Anjana R. Nair b.) A wide variety of products are produced. c.) General purpose, machines and equipment’s are used so as to be adaptable to a wide variety of operations. d.) No single sequence of operations is used and periodical adjustments are made to suit different jobs or batches. e.) Process layout is most suited. Production and Supply Chain Basics by Anjana R. Nair  35 a.) Easily accommodate design changes and customization Anjana R. Nair according to customer requirements. b.) allows manufacturers to handle both small and large batches efficiently without significant adjustments. c.) Equipment and machinery can be used for multiple products, reducing idle time and increasing resource utilization. d.) Ideal for products that are in lower demand or produced in limited quantities. Production and Supply Chain Basics by Anjana R. Nair  36 e.) Skilled workers can focus on specialized tasks, enhancing Anjana R. Nair product quality. f.) As production is based on specific orders or batches, there is less risk of overproduction and excess inventory. g.) With smaller production runs, greater attention can be given to maintaining quality standards. Production and Supply Chain Basics by Anjana R. Nair  37 a.) Due to frequent changes in setup, production costs per unit are generally higher than in continuous production. Anjana R. Nair b.) Time and resources are often spent on changing machine settings and preparing equipment for different production batches. c.) Coordinating schedules, raw materials, and machine availability can become challenging. d.) During the transition between batches or products, machinery and workers may remain idle. Production and Supply Chain Basics by Anjana R. Nair  38 e.) relies heavily on skilled labor, reducing the scope for extensive automation. Anjana R. Nair f.) Producing different types of products in batches makes standardization and quality control more complex. g.) Managing raw material procurement for diverse batches can be logistically challenging and expensive. Production and Supply Chain Basics by Anjana R. Nair  39 job pdn. Manufacturing of one or few quantity of products designed and produced as per the specification Anjana R. Nair of customers within prefixed time and cost. Comprises of general purpose machines arranged into different departments. Suitable for the production of low volume and high variety of products. Production and Supply Chain Basics by Anjana R. Nair  40 An artist drawing a portrait Anjana R. Nair Hairdressing Other examples > An architect creating a custom home plan > Tailoring > Making flower arrangements for a specific wedding > Painting and decorating Production and Supply Chain Basics by Anjana R. Nair  41 a.) High variety of products and low volume. Anjana R. Nair b.) Use of general purpose machines and facilities. c.) Highly skilled operators who can take up each job as a challenge because of uniqueness. d.) Large inventory of materials, tools, parts. e.) Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities. Production and Supply Chain Basics by Anjana R. Nair  42 a.) Because of general purpose machines and facilities variety Anjana R. Nair of products can be produced. b.) Operators will become more skilled and competent, as each job gives them learning opportunities. c.) Full potential of operators can be utilised. d.) Opportunity exists for creative methods and innovative ideas. Production and Supply Chain Basics by Anjana R. Nair  43 a.) Higher cost due to frequent set up changes. b.) Higher level of inventory at all levels and hence higher Anjana R. Nair inventory cost. c.) Production planning is complicated. d. Larger space requirements Production and Supply Chain Basics by Anjana R. Nair  44 batch pdn. It is characterised by the manufacture of limited number of products produced at regular intervals and Anjana R. Nair stocked awaiting sales. American Production and Inventory Control Society (APICS) defined 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. Production and Supply Chain Basics by Anjana R. Nair  45 Rice and Curry Anjana R. Nair Print media Other examples: > Clothes manufacturers can batch-produce variants of the same product, like t-shirts in different colors and sizes. > Soaps and shampoos: A large batch of the product is made before dividing it into appropriate volumes for consumers. Production and Supply Chain Basics by Anjana R. Nair  46 a.) When there is shorter production runs. Anjana R. Nair b.) When plant and machinery are flexible. 8 c.) 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. d.) When manufacturing lead time and cost are lower as compared to job order production Production and Supply Chain Basics by Anjana R. Nair  47 a.) Better utilisation of plant and machinery. Anjana R. Nair b.) Promotes functional specialisation. c.) Cost per unit is lower as compared to job order production. d.) Lower investment in plant and machinery. e.) Flexibility to accommodate and process number of products. f.) Job satisfaction exists for operators. Production and Supply Chain Basics by Anjana R. Nair  48 a.) Material handling is complex because of irregular and longer flows. Anjana R. Nair b.) Production planning and control is complex. c.) Work in process inventory is higher compared to continuous production. d.) Higher set up costs due to frequent changes in set up. Production and Supply Chain Basics by Anjana R. Nair  49 RESOURCE MANAGEMENT. Anjana R. Nair A production resource can be an individual machine or a group of machines, materials for production and under production and an employee or group of employees. Resource management is the process of planning, scheduling, and allocating production resources in the best way possible to maximize the value and potential of the resources. Generally, Resource management is the process of planning, scheduling, and allocating organisational resources in the best way possible to maximize the value and potential of the resources. Production and Supply Chain Basics by Anjana R. Nair  50 Resource allocation is strategically selecting and assigning available resources to the production process. Why is resource allocation important? Anjana R. Nair 1.Ensure work is divided evenly among all resources to prevent staff burnout. 2.Empower teams by providing knowledge and necessary training to complete allocated work. 3.Ensure performance optimisation by matching the right resources, to the right task, at the right time. In General, Resource allocation is strategically selecting and assigning available resources to a task or project to support business objectives. Challenges in Resource Allocation > Organizations often face constraints in available resources, necessitating difficult decisions on prioritization. > Sometimes it is difficult to get skilled human resources. > Market conditions, technological advancements, and internal changes require continuous reassessment and reallocation of resources. > Future events or outcomes are unpredictable, so the allocation process can be complicating at times. Production and Supply Chain Basics by Anjana R. Nair  51 How to allocate resources? 1.Determine the resource requirements. 2.Confirm the availability of resources. Anjana R. Nair 3.Include your team when assigning tasks. 4.Keep an eye on things as development continues. Include your team when assigning tasks - By involving your team in task assignments, you can ensure the right tasks go to the right people. This is especially important if you’re working with a new team and haven’t quite learned everyone’s skills. Keep an eye on things as development continues - Things are bound to change during development. Make sure to monitor resource allocation and make adjustments if required. Production and Supply Chain Basics by Anjana R. Nair  52 CAPACITY Anjana R. Nair PLANNING Production and Supply Chain Basics by Anjana R. Nair  53 Anjana R. Nair Capacity is the amount of goods that a firm is capable of producing over a specified period of time. Production and Supply Chain Basics by Anjana R. Nair  54 Capacity can be defined as Anjana R. Nair highest reasonable output rate which can be achieved with the current product specifications, product mix, work force, plant and equipment. Capacity is the maximum possible output or use from a system under normal design or planned conditions in a given time period. Production and Supply Chain Basics by Anjana R. Nair  55 TYPES OF CAPACITY MAXIMUM EFFECTIVE Anjana R. Nair CAPACITY CAPACITY (Design capacity) It identifies the output The highest rate of rate that managers output a process or expect for a given activity can achieve. activity or process. Maximum capacity: It specifies a theoretical upper limit above the usual rate of routine operations. Effective capacity: It is the actual capacity to reflect current conditions and that could be less than or more than design capacity. It normally falls short of maximum capacity by some amount. Production and Supply Chain Basics by Anjana R. Nair  56 TYPES OF CAPACITY ACTUAL Anjana R. Nair CAPACITY (Demonstrated capacity) It measures the actual level of output for a process or activity over a specified period of time. Planners calculate theoretical values for maximum and effective capacity to guide their arrangements for production purposes. Operation managers calculate actual capacity simply by averaging recorded figures for actual output over a period of time. Production and Supply Chain Basics by Anjana R. Nair  57 Capacity planning is the process Anjana R. Nair of predicting and defining the long-term and the short- termcapacity requirements/needs of an organisation and determining how those needs will be satisfied. Capacity planning is the first step when a manufacturing organisation decides to produce new products. Capacity planning for manufacturing and service systems are different. Both must be designed with capacity limitations in mind. Capacity planning decisions are taken based upon the consumer demand. Capacity planning also takes in to consideration the human, material and financial resources of the organisation. With capacity planning, knowing how fast the production system works becomes easier. It not only helps you to know the present condition of a business but, at the same time, will help to know the future scenario of the business. Production and Supply Chain Basics by Anjana R. Nair  58 CAPACITY PLANNING PROCESS DEMAND CAPACITY FORECASTING DECISIONS Anjana R. Nair DECISIONS AND FACILITIES IMPLEMENTATION PLANNING Capacity planning process: > Demand forecasting: The Manager has to take a long-range forecast of demand in order to determine the resources needed to produce and offer specified goods and services. Market trend changes, competitor’s role and technological changes have to be carefully examined. > Capacity decisions: On the basis of forecasting of demand for products, organisation will be able to determine the various resources needed for producing such goods. > Facilities planning: Capacity decisions automatically lead to the setting up of necessary facilities in order to produce goods and services. Facility planning can be done either by the expansion or contraction of existing facilities or by setting up of additional new facilities. > Decisions and implementation: Alternative resource requirements plan should be properly evaluated. Production and Supply Chain Basics by Anjana R. Nair  59 CAPACITY PLANNING: IMPORTANCE 1.Capacity decisions have an impact on the ability of the organisation to meet future demands for products and Services. Anjana R. Nair 2.Capacity decisions affect operating costs. 3.Capacity decisions often involve long-term commitment of funds. 4.Capacity planning reduces the complexity in manufacturing operation. The three most common capacity planning challenges include: > Imbalanced workloads: This happens when some areas or tasks in an organization are overloaded with work, while others have too little to do. This imbalance can cause delays, reduce efficiency, and increase stress on workers, making it harder to meet overall goals. To fix imbalanced workloads, regularly check how tasks are divided among teams. If one team is overloaded and another is underutilized, shift some tasks around. Automating repetitive tasks can save time and help employees focus on more important work. Also, cross-train employees so they can help out in different areas when needed, ensuring a smoother flow of work across the organization. > A lack of data: Without enough data about how resources (like time, employees, or equipment) are being used, it’s difficult to predict future needs. This lack of information can lead to underestimating or overestimating the capacity needed, which results in either wasted resources or missed opportunities. To overcome the lack of data, use tools to track how resources and tasks are being used. Looking at past data can help predict future needs. Make sure to update this data regularly so that it stays accurate and reflects current conditions. This helps make better decisions about capacity planning based on real and up- to-date information. > Future uncertainties: Predicting the future is always challenging, especially in business. Changes in the market, technology, or customer demand can create uncertainty, making it difficult to plan the right amount of capacity. If the future isn’t clear, businesses may end up either over-prepared or under-prepared for what lies ahead. Production and Supply Chain Basics by Anjana R. Nair  60 To deal with future uncertainties, prepare for different scenarios by imagining how changes in the market, technology, or customer demand might affect the business. Keep plans flexible so that quick adjustments can be done when needed. Stay informed about trends in the industry to anticipate changes before they happen and adjust the capacity plans accordingly. End of Part 1 Production and Supply Chain Basics by Anjana R. Nair