GOM Notes 2024 PDF

GLOBAL OPERATIONS MANAGEMENT Semester – V BMS-IB Edition: 2024 #44/4, District Fund Road, Behind Big Bazaar, Jayanagar 9th Block, Bengaluru, Karnataka -560069 All rights reserved. No part of this work may be reproduced in any form, by any means, without written permission from JAIN UNIVERSITY The workbook is developed for the students of JAIN UNIVERSITY For Internal Circulation Only Edition: 2024 NOTE: THE WORKBOOK IS ONLY A DIRECTIVE FOR STUDENTS AND NOT EXHAUSTIVE TOWARDS THE COURSE. THE STUDENTS MUST REFER TO THE REFERENCE BOOKS AND READING LISTS MENTIONED. Developed by: School of Commerce Studies, JAIN UNIVERISTY Published Printed by: Center for Virtual Learning & Innovation, JAIN UNIVERSITY Page|3 Program: BMS-IB Semester: V COURSE: GLOBAL OPERATIONS MANAGEMENT Total hours: 45 Credits:03 COURSE OBJECTIVES To introduce students to Operations terminology and concepts. To enable the students to comprehend the important aspects like production system, layout, production planning and inventory management. To enable the students to understand the utility of work measurement techniques. Course Outcomes: COURSE OUTCOME BTL At the end of the course, the students will be able to Differentiate production system according to the nature of the product 3 Examine the factors influencing location decision 3 Analyze the production planning control 3 Evaluate the different inventory control mechanisms 5 Illustrate the seven types of wastes in an international manufacturing 2 company For private circulation only Page|4 Syllabus: Module – 1: Production System 09 Hours Production and Operations Management: Evolution and Functions of Production Management. Production Systems - Job, Batch, Mass, Continuous Flow, Group technology, Cellular manufacturing Module – 2: Production Location and Layout 10 Hours Location Decision: Factors Affecting Location Decision, Facility Layout - Product, Process Layout, Cellular Layout, Fixed Position Layout, Line Balancing, Ford assembly line production system Module – 3: Production Planning 08 Hours Production planning environment. Material Requirement planning (MRP) - Bill of material (BOM) – MRP System and overview- Production planning control, Manufacture Resource Planning (MRP) II. Managing capacity and demand in service, Service supply relationship. Product tree ERP Module – 4: Inventory Management 09 Hours Economic Order Quantity (EOQ) Model (problems). Types of Inventory control - P System, Q System, and Techniques of Inventory control: ABC Analysis (problem), Just in Time (JIT), KANBAN and ons Module – 5: Work Measurement Techniques and Lean Manufacturing 09 Hours Work Measurement Techniques: Time Study, Method Time Measurement(MTM), Work Sampling(problems), Lean Manufacturing – 7 Wastes, Toyota production systems, Motion study. Textbooks: Norman Gaither and Greg Frazier., "Operations Management", New Delhi: Thomson Learning Inc, 2010. KanishkaBedi, "Production and Operations Management", New Delhi: Oxford University S.N.Chary, "Production and Operations Management", New Delhi: Tata McGraw Hill, 2009 Byron J Finch, "Operations Now", New Delhi: Tata McGraw Hill, 2007. Chase Jacobs, Aquilano, and Agarwal, “Operations Management for Competitive Advantage", New Delhi: Tata McGraw Hill, 2005. James A. Fitzsimmons, MonaJ. Fitzsmmons, "Service Management" Chennai McGraw Hill Education (India) Private Limited, 2017 For private circulation only Page|5 Contents Page No Module – 1: Production System 1.1 Introduction 8 1.2 Historical Evolution of Production And Operations Management 9 1.3 Concept of Production 9 1.3.1 Example of Production Concept 12 1.4 Managing Global Operations 14 1.5 Functions of Operations Management 16 1.5.1 Major sub functions of Production and Operations Management. 18 1.6 Production System. 18 1.7 Classification of Production System. 18 1.7.1 Job Shop Production. 19 1.7.2 Batch Production. 20 1.7.3 Mass Production. 21 1.7.4 Continuous Production. 22 1.8 Group technology. 23 1.9 Cellular Manufacturing. 25 1.10 Case. 33 1.11 Self-Assessment Questions. 34 1.12 Suggested Reading. Module – 2: Production Location and Layout 2.1 Location Decision 35 2.2 Factors influencing Plant Location/Facility Location. 36 2.2.1 General Locational Factors 37 2.2.2 Specific Locational Factors for Manufacturing Organisation 41 2.3 Facility Layout 45 2.4 Objectives of Plant Layout. 45 2.5 Principles of Plant Layout. 45 2.6 Process Layout. 46 2.7 Product Layout. 47 2.8 Fixed Position Layout. 49 2.9 Group / Cellular Layout. 49 2.10 Line Balancing. 51 2.11 Ford assembly line production system. 54 2.12 Case 55 2.13 Self-Assessment Questions. 59 2.14 Suggested Reading. 60 Module–3: Production Planning 3.1 Production Planning environment 61 3.1.1 Introduction and meaning. 61 3.1.2 Need for Production Planning and Control 62 3.1.3 Objectives of Production Planning and Control. 63 3.1.4 Functions of Production Planning and Control. 64 3.2 Material Requirement Planning (MRP). 65 3.3 MRP System overview. 66 3.4 Bill of materials 66 3.5 Difference between MRP and MRP II 71 For private circulation only Page|6 3.6 Managing capacity and demand in Service 73 3.7 Product Structure Tree 81 3.8 ERP. 83 3.9 Summary. 86 3.10 Self-Assessment Questions. 86 Module – 4: Inventory Management 4.1 Economic order quantity (EOQ) 88 4.2 Types of Inventory System (Q and P Models) 97 4.3 ABC Analysis 101 4.4 Just-in-Time (JIT) 109 4.5 Kanban Card 112 4.6 ANDON 115 4.7 Summary 119 4.8 Self-Assessment Questions 119 Module – 5: Work Measurement Techniques and Lean Manufacturing 121 5.1 Work Measurement Techniques: Time Study 127 5.2 Methods-Time Measurement 128 5.3 Work Sampling 130 5.4 Lean manufacturing (lean production) 132 5.5 Toyota Production System (TPS) 134 5.6 Motion study 139 5.7 Summary 139 5.8 Self-Assessment Questions For private circulation only Page|7 Module – 1: Production System Syllabus: Production and operations Management: Evolution and Functions of Production Management; Production System – Job, Batch, Mass, Continuous flow, group technology, cellular manufacturing. Structure: 1.1 Introduction 1.2 Historical Evolution of Production And Operations Management 1.3 Concept of Production 1.3.1 Example of Production Concept 1.4 Managing Global Operations 1.5 Functions of Operations Management 1.5.1 Major sub functions of Production and Operations Management. 1.6 Production System. 1.7 Classification of Production System. 1.7.1 Job Shop Production. 1.7.2 Batch Production. 1.7.3 Mass Production. 1.7.4 Continuous Production. 1.8 Group technology. 1.9 Cellular Manufacturing. 1.10 Case. 1.11 Self-Assessment Questions. 1.12 Suggested Reading. 1.1 Introduction Production/operations management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level. The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to services management, then the corresponding set of management activities is called as operations management. For private circulation only Page|8 1.2 Historical Evolution of Production And Operations Management For over two century’s operations and production management has been recognised as an important factor in a country’s economic growth. The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour. He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient. In the early twentieth century, F.W. Taylor implemented Smith’s theories and developed scientific management. From then till 1930, many techniques were developed prevailing the traditional view. Brief information about the contributions to manufacturing management is shown in the Table 1.1. For private circulation only Page|9 Production management becomes the acceptable term from 1930s to 1950s. As F.W. Taylor’s works become more widely known, managers developed techniques that focussed on economic efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful efforts and achieve greater efficiency. At the same time, psychologists, socialists and other social scientists began to study people and human behaviour in the working environment. In addition, economists, mathematicians, and computer socialists contributed newer, more sophisticated analytical approaches. With the 1970s emerges two distinct changes in our views. The most obvious of these, reflected in the new name operations management was a shift in the service and manufacturing sectors of the economy. As service sector became more prominent, the change from ‘production’ to ‘operations’ emphasized the broadening of our field to service organizations. The second, more suitable change was the beginning of an emphasis on synthesis, rather than just analysis, in management practices. 1.3 Concept of Production Production Concept is a belief that states that the customers would always acquire products which are cheaper and more readily available (or widely available). The production concept advocates that more the products or production, more would be the sales. In countries where labor is cheap and easily available, the production can be maximized while minimizing the costs, hence increasing the production efficiency. Production Concept is very important for an economy where certain commodities can be mass produced for consumers keeping the prices low. The supply is always high so shortage does not happen. Production concept is relevant in a new market which is not saturated with competition. More you produce, more customers you get. The market can still absorb more of the product and can earn profit but still keeping the prices low. It can help grow new categories in the market. Once the competition arrives then the focus can move away from the Production concept. 1.3.1 Example of Production Concept India and China are great examples of the Production Concept of marketing. China made sure that it increases its overall production through manual labor available by mass producing and distributing products across the world. Today China is one of the biggest exporter of its manufactured product across the globe. What China did in manufacturing, India did with information technology services by mass producing talent for IT. Today India is one of the biggest exporter of IT services. For private circulation only P a g e | 10 The production concept can easily explain the above two examples. The production concept is one of the few orientations which a company has towards the market. Other being - The Product Concept, The Selling Concept, The Marketing Concept and the Holistic Marketing Concept. Production function is that part of an organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level. Production is defined as “the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user.” Thus production is a value addition process. At each stage of processing, there will be value addition. Edwood Buffa defines production as ‘a process by which goods and services are created’. Some examples of production are manufacturing custom-made products like, boilers with a specific capacity, constructing flats, some structural fabrication works for selected customers, etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc. Production of a commodity or service requires the use of certain resources or factors of production. Since most of the resources necessary to carry on production are scarce relative to demand for them they are called economic resources. Resources, which we shall call factors of production, are combined in various ways, by firms or enterprises, to produce an annual flow of goods and services. In fact, the resources of any community, referred to as its factors of production, can be classified in a number of ways, but it is common to group them according to certain characteristics which they possess. If we keep in mind that the production of goods and services is the result of people working with natural resources and with equipment such as tools, machinery and buildings, a generally acceptable classification can readily be derived. The traditional division of factors of pro-duction distinguishes labour, land and capital, with a fourth factor, enterprise, some-times separated from the rest. The people involved in production use their skills and efforts to make things and do things that are wanted. This human effort is known as labour. In other words, labour represents all human resources. The natural resources people use are called land. And the equipment they use is called capital, which refers to all man-made resources. The first three factors—land; labour and capital do not work independently or in isolation. There is need to combine these factors and co-ordinate their activities. This two-fold function is performed by the organiser or the entrepreneur. For private circulation only P a g e | 11 Examples of the Concept of Production A solid example of the concept of production is the outsourcing of services from one company to another for the reason that the outsourcing company can save enough by letting the other company do the task more efficiently. For example, Apple produces most of its phones in Asia but sells them all over the world. Here, manufacturing is outsourced to China and it is a glaring example of the concept of production. Another similar example is the outsourcing of ITES projects of renowned US companies to India. By harnessing the knowledge and power of Indian employees at a fraction of the cost, US-based companies are earning huge profits. It is also an example of the concept of production. If we look back to history, there are many examples of the concept of production. One such example was related to the Ford Motor Company. The Ford Motor Company started producing cars at economies of scale at the beginning of the twentieth century believing that the more it produces, the more people will buy the cars. This idea was true. At the beginning of the twentieth century, there was so much demand for cars and so little availability that Ford Motor Company became one of the most successful automobile companies in history. Believing in the concept of production brought high dividends to Ford Motor Car Company. For private circulation only P a g e | 12 1.4 Managing Global Operations Operations Management refers to the administration of business practices to create the highest level of efficiency possible within the organization. It is concerned with converting materials and labour into goods and services as efficiently as possible to maximize the profit of the organization. Operations Management is becoming more and more international in its scope. Even a firm, which markets the products/services only within domestic market, may be conducting its business operations internationally like sourcing of the inputs or finished products internationally and even manufacturing the products internationally. A dynamic company will take advantage of the favourable conditions that exist anywhere in the world. We may say that International Operations Management refers to the transformation of raw material into finished goods and other related activities of an international firm. There are several advantages in planning for large-scale production for international markets rather than producing for domestic markets. Fig 1.2 Model for Global Operations Management The term ‘globalization’ describes businesses’ deployment of facilities and operations around the world. Globalization can be defined as a process in which geographic distance becomes a factor of diminishing importance in the establishment and maintenance of cross border economic, For private circulation only P a g e | 13 political and socio-cultural relations. It can also be defined as worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments. There are four developments, which have spurred the trend toward globalization. These are: 1. Improved transportation and communication technologies; 2. Opened financial systems; 3. Increased demand for imports; and 4. Reduced import quotas and other trade barriers. When a firm sets up facilities abroad it involve some added complexities in its operation. Global markets impose new standards on quality and time. Managers should not think about domestic markets first and then global markets later, rather it could be think globally and act locally. Also, they must have a good understanding of their competitors. Some other important challenges of managing multinational operations include other languages and customs, different management style, unfamiliar laws and regulations, and different costs. Managing global operations would focus on the following key issues: To acquire and properly utilize the following concepts and those related to global operations, supply chain, logistics, etc. To associate global historical events to key drivers in global operations from different perspectives. To develop criteria for conceptualization and evaluation of different global operations. To associate success and failure cases of global operations to political, social, economic and technological environments. To envision trends in global operations. To develop an understanding of the world vision regardless of their country of origin, residence or studies in a respectful way of perspectives of people from different races, studies, preferences, religion, politic affiliation, place of origin, etc. For private circulation only P a g e | 14 1.5 Functions of Operations Management The primary responsibility of the Operations Manager is to ensure that the appropriate processes and practices are implemented throughout the organization. Formulating strategy, enhancing performance, acquiring material and resources, and ensuring compliance are some of the specialized responsibilities of an operations manager. Operations managers are accountable for or involved in making choices about the following at the strategic level (long term): Product development (what shall we make?) Process and layout decisions (how shall we make it?) Site location (where will we make it?) Capacity (how much do we need?) Operations management deals with the difficulties of efficiently arranging material and labor within the restrictions of the firm's strategy and making aggregate planning decisions at the tactical level (intermediate term). Operations managers make the following decisions: Employee levels (how many workers do we need and when do we need them?) Inventory levels (when should we have materials delivered and should we use a chase strategy or a level strategy?) Capacity (how many shifts do we need? Do we need to work overtime or subcontract some work?) Operations management is focused with lower-level (daily/weekly/monthly) planning and control at the operational level. Operations managers and their subordinates must make the following decisions: Scheduling (what should we process and when should we process it?) Sequencing (in what order should we process the orders?) Loading (what order to we put on what machine?) Work assignments (to whom do we assign individual machines or processes?) 1. Pre-Planning Activities Pre-planning is a strategic level planning and it deals with the analysis of data from feedback received from both operations and external environment such as competitors, political, economic, social and cultural environments. It is concerned with the decision For private circulation only P a g e | 15 making regarding products, processes, machineries, plant location and layouts with respect to availability, scope and capacity. It deals with the outline of production policies based upon forecasted demand. 2. Demand Forecasting Demand forecasting is very important for the organizations to know about the quantity of output an organization has to plan for in the future period to meet the demands of the customer. ”Estimating the different activities level of the future in the organization is known as Forecasting.” It helps the managers in making continuous decisions regarding employment levels, carrying inventories, purchasing new equipments, developing new products, scheduling production, quality control, plant maintenance etc. 3. Product Design Product design is defined as the determination and specification of parts of a product and their interrelationships so that they become unified as the whole. It is the process of transferring the customers’ expectations into technical specifications. The components of the products must be designed in such a way that it meets the specification of the whole product. Also the design should contribute to the economy of the production process. The product design is elaborately discussed in the forthcoming chapters 4. Process Design The physical processes for producing goods and services have to be designed to ensure optimum production in the organization. Some decisions have to be taken at top level management regarding the selection of process, choice of technology, process low and layout facilities. 5. Flow Design Flow design decides the direction of movement of materials, semi-finished goods, and finished goods inside the plant. The flows of materials have to be decided according to the nature of product to be manufactured. It decided the type of manufacturing system. The flow pattern for materials, type of layouts and material handling systems are defined in this process. 6. Production Planning For private circulation only P a g e | 16 Production planning is the function of deciding the manufacturing requirements such as raw materials, facilities, manpower, and manufacturing process. Based on the results from demand forecasting and other facilities forecasting of the organization, the planning function establishes the programmes to meet the demands using the various resources. 7. Scheduling Scheduling is an important tool for manufacturing and it can have a major impact on the productivity of a process. The purpose of scheduling is to maximize the efficiency of the operation by minimizing the production time and costs. The production time and cost is minimised by telling a production facility what to make, when, with which staff, and on which equipment. Effective scheduling can also give a company the competitive advantage in terms of customer service if its competitors are less effective with their scheduling process. 8. Production Control Production control regulates and stimulates the orderly how of materials in the manufacturing process from the beginning to the end. Control function is exercised over the quantity to be produced, quality expected, time needed, inventory consumed and cost incurred. 1.5.1 Major sub functions of Production and Operations Management 1. Inventory Control Inventory control deals with the control over raw materials, work-in-progress, finished goods, stores and supplies, tools, jigs fixtures etc. purchasing and store keeping is also an important aspect of inventory control. Proper decisions should be made regarding maintaining proper inventory of raw materials, work-in-progress, finished goods, supplies etc. 2. Quality Control In engineering and manufacturing, quality control is involved in developing systems to ensure products or services are designed and produced to meet or exceed customer requirements. These systems are often developed in conjunction with other business and engineering disciplines using cross-functional approach. The quality standards are prescribed. In terms of specifications like size, colour, shape, taste etc. the quality control For private circulation only P a g e | 17 is mainatined by testing the actual production and by assertaining whether they conform to the preset standards. 3. Materials Management: Materials management is concerned with planning, directing and controlling the kind, amount, location, movement and timing of various flows of materials used in and produced by the process. An effective materials management ensures that right kinds of materials are at the right place whenever needed. 4. Purchasing Purchasing refers to buying of a material or an item from a company or division that supplies materials. Purchasing is a very important function in production management since it deals with the input which is the primary resource for manufacturing process. The purchase procedure varies according to the nature of demand and market conditions from company to company and also from industry to industry. 5. Maintenance management Maintenance in any activity is designed to keep the resources in good working condition or restore them to operating status. Maintenance can be defined as a productive activity undertaken to bring an equipment, facility or system back to its original level of performance in terms of quality and quantity of output. Maintenance also includes activities to improve the quality over and above the design capability and also augment the capacity through debottlenecking, modification and modernization. 6. Cost Reduction and Control Cost reduction methods are developed in the organization to improve productivity and attain the competitive advantage in the market. Cost reduction and cost elimination are productivity techniques. The techniques like value engineering, budgetary control, standard costing, cost control of labour and material helps to maintain optimality in cost. 1.6 Production System The production system of an organization is that part, which produces products of an organization. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. For private circulation only P a g e | 18 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. 1.7 Classification of Production System Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems 1.7.1 Job Shop Production Job shop production are characterised 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 The Job-shop production system is followed when there is: 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. For private circulation only P a g e | 19 5. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities. Advantages Following are the advantages of job shop production: 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 utilised. 4. Opportunity exists for creative methods and innovative ideas. Limitations Following are the limitations of job shop production: 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. 1.7.2 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 characterised 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. For private circulation only P a g e | 20 Advantages Following are the advantages of batch production: 1. Better utilisation of plant and machinery. 2. Promotes functional specialisation. 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 Following are the limitations of batch production: 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. 1.7.3 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 standardisation exists and all outputs follow the same path. Characteristics Mass production is used under the following circumstances: 1. Standardisation 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. For private circulation only P a g e | 21 8. Production planning and control is easy. 9. Material handling can be completely automatic. Advantages Following are the advantages of mass production: 1. Higher rate of production with reduced cycle time. 2. Higher capacity utilisation due to line balancing. 3. Less skilled operators are required. 4. Low process inventory. 5. Manufacturing cost per unit is low. Limitations Following are the 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. 1.7.4 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: 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 Following are the advantages of continuous production: 1. Standardisation of product and process sequence. 2. Higher rate of production with reduced cycle time. For private circulation only P a g e | 22 3. Higher capacity utilisation 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 Following are the limitations of continuous production: 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 1.8 Group technology Group technology is a manufacturing philosophy in which a similar parts are identified and group together as a part family, in order to taken the advantages of their similarities in design and manufacturing. In addition, there increase trend achieving a higher level of integration between the design and manufacturing activities of a company. The above two objectives can be achieved by using a manufacturing philosophy known as group. Benefits of GT Reduced material handling. Reduced tool set-up time. Reduced work- in- process. Promotes standardization of tooling, fixture and setups. Simplified process planning and production scheduling. Better work satisfaction. Better product quality and productivity. There are two major tasks that a company must undertake when it implements group technology. These two tasks represent significant obstacles to the application of GT. Identifying the part families. If the plant makes 10,000 different parts, reviewing all of the part drawings and grouping the parts into families is a substantial task that consumes a significant amount of time. For private circulation only P a g e | 23 Rearranging production machines into machine cells. It is time consuming and costly to plan and accomplish this rearrangement and the machines are not producing during the changeover. Group Technology (GT) and Cellular Manufacturing are both manufacturing strategies that aim to improve efficiency and productivity in production processes. Here are the key differences between Group Technology and Cellular Manufacturing: Group Technology (GT): - Group Technology involves classifying parts into families based on their similarities in design, manufacturing processes, or other characteristics. This classification helps in identifying similarities among parts and grouping them together. - The main goal of GT is to reduce setup times, improve workflow, and increase productivity by organizing manufacturing processes around part families. - GT focuses on creating specialized work cells for each part family, where similar parts are produced in batches. This helps in reducing changeover times and improving overall efficiency. - GT is more about part classification and organization based on similarities in design or manufacturing processes. 1.9 Cellular Manufacturing: Cellular manufacturing refers to a manufacturing strategy used to arrange different machines functionally in specific geometric layouts and larger functional units known as manufacturing cells to optimize the production process. The manufacturing cells are designed in such a way that each cell consists of all the machinery and workforce required to produce a product or a product family that is similar to each other. Since there are various machines in a unit, cellular manufacturing systems focus on training a cross-functional workforce that can easily operate all the machinery within a cell. This encourages the technicians to be creative and suggests process improvements, adding fewer defects and higher product throughput. Cellular manufacturing evolved from ideas that were first proposed by Ralph Sanders. They then went on to mature into important concepts of lean manufacturing and lean six sigma principles due to their common focus on reducing waste and continually improving production processes. For private circulation only P a g e | 24 Advantages of cellular manufacturing Here are some advantages of implementing cellular manufacturing in your lean manufacturing workflow: Enhanced production environment and quality control Improved capacity to produce high-volume, high-variety products at a fast pace Substantial reduction in manufacturing lead time and waste Smaller work-in-progress (WIP) inventory Develop a highly versatile and efficient workforce Disadvantages of cellular manufacturing As with everything, there are disadvantages to cellular manufacturing as well. Here are three: Prone to production bottlenecks in case of machinery breakdown Errors in the setup can lead to a loss of efficiency instead of the promised improvements The setup time can be long since moving machinery and training take time Cellular Manufacturing involves organizing the production process into cells or groups of workstations that are dedicated to producing a specific group of products or part families. The key idea behind Cellular Manufacturing is to create self-contained work cells that are responsible for producing a complete product or a part of it. This helps in reducing lead times, improving quality control, and increasing flexibility. In Cellular Manufacturing, the focus is on creating multi-skilled teams or workers within the cell who can perform various tasks to meet production requirements. Cellular Manufacturing typically involves implementing a layout where machines and workstations are arranged in a way that minimizes material handling and setup times. In summary, while Group Technology focuses on classifying parts into families to improve manufacturing processes, Cellular Manufacturing goes a step further by organizing production into self-contained work cells that are responsible for producing specific groups of products efficiently. Both approaches aim to reduce lead times, improve productivity, and enhance overall efficiency in manufacturing processes, but they differ in their focus and implementation strategies. For private circulation only P a g e | 25 1.10 Case: Introduction As globalization sweeps around manufacturing world, most companies have to build and/or manage an international network of operations either through Mergers and Acquisitions (M&A) activities or via their actual organic growth (De Meyer and Vereecke, 2000). On global scale, an increase of manufacturing activities is reported (Wiktorsson, 2014) that implies expansion of production networks worldwide. This has accordingly changed the role of manufacturing companies from supplying domestic markets with products, via supplying international markets through export, to supplying international markets through local manufacturing (Cheng et al., 2015). Meanwhile, the networked structure of global production companies, aside from capturing new markets, could result in new capabilities acting thus as “a formidable source of competitive advantage” as put by Ferdows (2014, p. 1). The considerable research potential within the global manufacturing networks was identified by some scholars such as Shi and Gregory (1998), Vereecke and Van Dierdonck (1998) and still keeps viable (see e.g. Cheng et al., 2014). Global production networks are complex constructs perceived as new manufacturing systems in terms of mission, structure, infrastructure, capability, and design process (Shi and Gregory, 1998). The research on global manufacturing is vast and dense and different researchers have targeted different sub-areas in certain levels. Strategy, configuration and coordination have been identified as three main themes in this area (Mundt, 2012). The strategy aspect considers mainly the manufacturing strategy defined as a sequence of decisions that will enable a business unit to achieve its desired competitive advantage (Wheelwright, 1984). Configuration concerns fours subjects: the network structure with its geographic distribution of capacity between the sites within the network; the specialization of the network and sites; the distribution of resources in terms of technology and investment; and the design of the internal supply chain structure (Friedli et al., 2014). The coordination aspect deals with the organization and steering of interplay between the network sites and focuses on questions around the level of autonomy for each site and the exchange of knowledge and information (Mundt, 2012). The latest has been addressed years ago when Flaherty (1986) argued that the coordination of international operations in a network can improve cost and delivery performance and enhance the learning from the experiences of units in the network. A gap has been identified between the policy-level and operation level which necessitates more research on the design and management of global operation (Ferdows, 2014). In this regard, many researchers have tried to descend from the highest corporate strategic goals to the characteristics of the network and consequently the plants of the network. Years after the introduction of focused factory (Skinner, 1974), six different strategic roles for the plants of multinational manufacturers For private circulation only P a g e | 26 were determined (Ferdows, 1997). Based on this model, Feldmann et al. (2013) took further steps to realize the specifications of the plants and identified three types of plants within a global production network. Besides, Thomas et al. (2013) also investigate how to link the plant capabilities and the network’s strategic targets. Despite the mentioned research, there is no “upward” approach that aims at reaching the network strategic goals via the design of production systems i.e. to establish (implant) the right pre- requirements in the design of production systems that yields to the desired network capabilities. It should be mentioned that ‘production system’ here refers to the arrangement of main production resources which is different than the company-specific production system (XPS) tailored to the specific characteristics of the company inspired by Toyota Production System (Netland, 2014). Therefore, in the light of manufacturing globalization, there is a need for a global perspective on design of production systems in order to achieve capabilities in “network” level already from the “plant” level. This paper particularly aims to investigate the potential of attaining desired network capabilities through a case study. In order to identify when and how network capabilities could and should be considered, a single case study (Yin, 2013) was conducted including three data collection channels: interviews, documents, and direct observations. The case company was a global contract manufacturer within automotive and telecommunication sector headquartered in Sweden. In total, ten semi-structured interviews with respondents from different levels of the organization were performed (see Table- 1). The respondents were selected based on their involvement in the production system design process and each interview was adjusted to the respondents’ background and role. All interviews were transcribed and sent back to the respondents for data cleaning (Saunders et al., 2011). Table 1 - Details regarding the performed interviews Respondents’ position Duration Content Chief Operation Officer 120 The production system Plant manager 90, 60 design process, project Global project manager 90 model, network Production and maintenance manager 90 capabilities, workflow Quality coordinator and project leader 90 within a design project Global marketing and sales manager 90 The documents included the project model for production system design in the company and its related education material and strategy documents. The lead author was actively involved in a project at the case company with the aim of developing the company’s management system For private circulation only P a g e | 27 containing six different modules of which one module focused on the project model. In addition, the research benefited from the informal discussions during his presence of the lead author as industrial PhD student in the company for more than two years. The main unit of analysis was the production system design process of the company with a focus on network capabilities. Data were analyzed based on the suggested guidelines by Merriam (2014) due to the qualitative nature of the data. Primarily, data were coded before putting into different categories. Later on, by sorting the categories, conclusions were drawn after making sense of the analyzed data with linkage to the theoretical knowledge. Case company selection motivation The case company was a global contract manufacturer with eleven plants in six different countries. Due to its market, the company continuously encountered diverse orders which entail practicing the production system design in an iterative manner. Thus production had a great strategic weight being the company’s product offered to their customers as mentioned in the core values of the company: “our product is our production facilities”. The contracted products included a wide range of mechanical, electromechanical and telecommunication solutions with varying yearly volumes. During the past seven years, the company experienced a considerable growth with seven new production plants; two in Sweden and one in each of the following countries: Germany, Brazil, Latvia, Hungary and China that has brought up new challenges along with the opportunities of the network structure. All in all, the conditions provided a suitable setting to perform the current study in the selected company. Empirical findings Production system design process at the case company Within the case company, the production system was designed through certain stages of a process called ‘project model’. The project model was actually the underlying roadmap of typical projects within the company where a production system was designed, implemented and operated based on a specific demand from the customer. It includes all necessary actions and interactions from/among different involving departments and stakeholders demonstrated respectively in two parts in Figure 2 and Figure 3. The project model is elaborated further in a document including all the tasks, responsible people, and reference to a few key documents such as Request for Quotation (RFQ), Production Part Approval Process (PPAP), etc. The process is comprised of two main parts (separated by contract handover) and five different phases. The first part of the process starts with a quotation request from the customer and ends with a production order (contract) in case the customer is satisfied with the quotation. The second part provides a detailed design of the production solution for the order, implement the design, and For private circulation only P a g e | 28 run it at full production rate. Figure 2 - The project model in the case company (Part 1) Following a signal from the market which entails a quick analysis over the feasibility of the order, the available competence within the network is assessed. In the very beginning, the irrelevant quotations are excluded. For the interesting quotations, a meeting is held where three main documents, material price and strategic services are discussed among responsible persons from market and sales, production, logistics and purchasing departments. Already in this phase, a rough sketch is prepared which depicts a preliminary design of the production system. The main purpose here is to make sure that the solution will be both feasible and profitable. The results of the RFQ meeting are sent back to the key account managers including three main documents for further compilation and applying market strategy. Then the quotation is submitted to the customer. In case the customer approves the quotation and is willing to proceed with the project, a contract is signed. This happens sometimes after a few interactions between the customer and the marketing department. The next part of the project model encompasses three phases: detailed design, implementation and handover of the production system to the operation (see Figure-3). In the design stage, which mainly involves responsible people from production and operation as well as the project manager, the project organization is established and the project is registered in the system. Project specifications are saved on a document including the scope of the project and the project costs. After those steps, the production layout is designed in details. Based on this design, a cost follow-up is prepared upon pre-calculation to spot any deviation. The pre- calculation is taken from an “estimated” flow which specifies the machines and their order. For private circulation only P a g e | 29 In the next stage, the design is implemented and a few test orders are produced for the final verifications before reaching the full production rate. When the PPAP is signed by the customer, it is the time for the next stage where production is started and there is a need for auditing that everything is in place. At this point post-calculations are done using the Enterprise Resource Planning (ERP) system output in order to verify if the requirements are met. Then the production system is handed over to the operation and maintenance department. Figure 3 - The project model in the case company (Part 2) Toward achieving network capabilities through production system design The network capabilities are not explicitly, if at all, considered during the production system design process of the case company. In fact, apart from the first part of the process where available competence within the network is explored, there is no trace of a conscious solid method to achieve network capabilities within the process. That being said, it became evident that the company had an ambition of exploiting its network structure. So, there existed already awareness about the potential of the network structure. However it was not well specified “when” and “how” in the process this must be considered (implanted) and consequently get operationalized (harvested). A few respondents referred to “white books” as a potential tool that could be utilized in order to be able to trace past projects and learn from them. The white book is a report document prepared by project manager which keeps a diary of the performed project. Nevertheless, the company does not have a well defined strategy for the use of such document; instead, they are used sporadically. Moreover, regarding the project model, it was understood that although the project model For private circulation only P a g e | 30 demonstrates a linear sequential process theoretically, in practice the project progresses in different phases at the same time most often. This raises the question of “is the way of working not right or the model is not providing a suitable presentation of the working way?” Although, the detailed design of production system occurs in the third phase, some issues are already discussed in the first phase. Therefore, it is important to consider the whole flow when it comes to production system design. Analysis By studying the process of production system design within the case company, a few potential points were identified in the production system design process of the case company (see Figure 4) which is described in details in the following. The empirical data illustrates that the case company requires a global perspective on the production system design despite the existing ambition to make a better use of their global production network. As mentioned before, the goal was to seek network capabilities via the design of production system within the case company. From literature synthesis, four key network capabilities i.e. learning, accessibility, thriftiness, and mobility where chosen as those represent a concrete rather than abstract model for the network capabilities. Learning This is one of the most fundamental abilities which a network of plants can gain by using the knowledge via internal learning mechanisms (Colotla et al., 2003). Although the learning ability refers to a wide scope, here the focus is on potentials through different points of the production system design process. Already in the first stages, a learning potential is identified. In average, about 25% of all incoming quotations lead to a contract which means that the company does not get to produce approximately 75% of the quotations. This can be due to different reasons such as the company’s strategy, competitors, etc. Whatever it might be, there are some potential in understanding the reasons behind not succeeding or accepting those quotation. Today this knowledge stays within a group of key account managers mostly sitting in the headquarters. Besides being an invaluable piece of knowledge for other plants of the network regarding the available competence throughout the whole network, this can provide insights regarding the strategic competence development of the company. This intensifies the importance of networking and open constant discussion among the key people within the network as explained by a global marketing and sales manager “...it can be a matter of five minutes telephone call between two persons in the network to abandon a quotation or turning it to a prosperous contract” and “...We can already in the concept study For private circulation only P a g e | 31 phase go deeper in some key issues and assess the risk of not having a certain competence and decide if we want to invest in such competence and think about what it means for us...” as the global production manager explained. The result of the case study also shows that although the production system is designed through different stages, the most crucial phase is the third phase where the production system is designed in fine details in regard to different factors plus the prospective operation. Here again it was revealed that much of this part of the process happens in the mind of the experienced people and lies within personal competency. This hinders knowledge transfer regarding the core activity of the company which signals a high risk of competence loss in case if some resources leave the company. Therefore a learning procedure must be devised in order to transfer the knowledge regarding the detailed design of production system considering the role of the plants. Another potential point regarding learning in the process which might be case-specific is in the implementation phase. As explained in the empirical findings, a few samples which are critical and are the base for the PPAP to become approved are sent to the customer. Aside from the technical details of these documents, the company could decrease the lead-time of the projects by producing the parts before approval on its own risk based on former similar project results. Therefore, the information on this stage of the project could be of great significance in the similar prospective projects. Accessibility and Thriftiness (Economy of scale and scope) During the initial stage and right after the quotation signal is received from a potential customer, accessibility and thriftiness of the network could be considered. Regarding accessibility, proximity to certain markets, and access to production factors could be discussed. This consequently could help the company to provide thrifty solutions through the existing economy of scale and scope by using the available resources within its network and obtain higher return of investments. The company had a strategy regarding the production machineries which demanded For private circulation only P a g e | 32 using existing available equipments within the network as much as possible which is in line with the importance of thriftiness or being “economically smart”. Mobility In some cases, to satisfy the customer demand, there is a need to send resources between certain plants. This could be either managerial or technical skills or the machinery and equipments available in certain plants. Although the company has already a concept for how to perform mobility projects, it is still a bit challenging for the company to identify when mobility is required. In this case, the question of mobility could be raised in the initial meeting in the first phase (see figure 4) in order to make it clear if there is a need for mobility in a project and what the sender/receiver plants are. Later in the design stage, after the production system is getting ready to be implemented, it is the time to conduct the mobility project which should have already been defined earlier in the first stage. To sum up, the overall results imply that reaching the network capabilities via the design of production systems is possible to certain extents through a bottom up approach. However, to fully leverage the network structure of a company, there must be a well established strategy that defines the network priorities sent down to the each production units. Those capabilities must then be built in the design of the plants to satisfy the defined strategic priorities upwards. Preferably, this process has to act in a cyclical way to make certain that the desired network capabilities are obtained. Conclusion The results of this study augment to other research performed regarding exploiting the network structure of globally dispersed plants. The findings provide important insights in order to fully derive benefits from global production network through the design of its constituting production systems. Production system design within global production networks becomes inherently strategic and sensitive task with long-lasting effects on global firms’ fate. In order to realize the network capabilities and particularly learning ability within the network, communication among the right parties in the whole organization of global manufacturing companies is decisive. This amplifies the critical role of information to carry out production system design projects in an effective and efficient manner (Bruch, 2012). Similarly is the significance of knowledge flow in Multinational Companies (Michailova and Mustaffa, 2012) which has led to interesting concepts such as Corporate University (Konovalenko, 2012). It is also concluded that the process of production system design deploys different functions and people through complex interrelations and therefore includes critical and valuable information. For private circulation only P a g e | 33 Some plants with higher strategic roles and specific functions have critical role in realization of network capabilities. There is still more to explore via research on not only how to capture the desired network priorities out of a global production network but also breaking down network the capabilities into more tangible sub-categories. A few factors could be studied further in this regard some of which are culture, communication and IT. Finally, more research is required to realize how global manufacturing companies can define, prioritize and achieve strategic network capabilities. This study leans more toward understanding the potential of the process of production system design and aligning it to network capabilities. Further research is needed on wider scope about different methods and tools regarding how to achieve such capabilities in practice and finally achieving generic frameworks in this regard. The current study does not gain its novelty trying to link manufacturing strategy to processes choices, even if it draws attention to that direction. It is rather an endeavor to explore accomplishment of network capabilities via the design of production systems in a global manufacturing context. 1.11 Self-Assessment Questions 1.11.1 Short Answer Questions Define 'production management'. Explain the basic concept of 'job production' in production systems. Describe 'batch production'? Describe 'continuous flow production'. List and explain the key characteristics of 'mass production'. 1.11.2 Medium answer questions. Illustrate the main differences between 'job production' and 'batch production' with suitable examples. Examine the impact of 'mass production' on product quality and cost efficiency. Describe how 'group technology' can be implemented in a manufacturing plant. Compare and contrast 'cellular manufacturing' with 'continuous flow production'. Explain with examples how production management functions can improve operational efficiency in a manufacturing setup. 1.11.3 Long Answer Questions Evaluate the advantages and disadvantages of implementing 'cellular manufacturing' in a For private circulation only P a g e | 34 small-scale production environment. Propose a production system for a custom furniture manufacturing company that balances efficiency and flexibility. Assess the role of production management in enhancing the competitiveness of a manufacturing company. Design a hybrid production system that incorporates elements of 'job production' and 'mass production' for a mid-sized electronics company. Critically analyze how the evolution of production management has influenced modern manufacturing practices. 1.12 Suggested Reading Buffa, E. S., & Sarin, R. K. (1987). Modern Production/Operations Management. John Willey & Sons. Inc., ABD, 190. Aswathappa K and Bhat, Shridhar. 2009, Production and Operations Management, Himalaya Publishing House Pvt. Ltd. 2009. Eilon, S. (1962). Elements of production planning and control. Ahuja, K. K. (1993). Production management. CBS Publishers & Distributors Pvt. Limited. For private circulation only P a g e | 35 Module – 2: Production Location and Layout Syllabus: Production Location and Layout Location Decision: Factors affecting location decision, Facility Layout –Product, Process layout, cellular layout, Fixed position layout, Line balancing, Ford assembly line production system. Structure: Module – 2: Production Location and Layout 2.1 Location Decision 2.2 Factors influencing Plant Location/Facility Location. 2.2.1 General Locational Factors 2.2.2 Specific Locational Factors for Manufacturing Organisation 2.3 Facility Layout 2.4 Objectives of Plant Layout. 2.5 Principles of Plant Layout. 2.6 Process Layout. 2.7 Product Layout. 2.8 Fixed Position Layout. 2.9 Group / Cellular Layout. 2.10 Line Balancing. 2.11 Ford assembly line production system. 2.12 Case 2.13 Self-Assessment Questions. 2.14 Suggested Reading. 2.1 Location Decision Plant location or the facilities location problem is an important strategic level decision making for an organisation. One of the key features of a conversion process (manufacturing system) is the efficiency with which the products (services) are transferred to the customers. This fact will include the determination of where to place the plant or facility. The selection of location is a key-decision as large investment is made in building plant and machinery. It is not advisable or not possible to change the location very often. So an improper location of plant may lead to waste of all the investments made in building and machinery, equipment. For private circulation only P a g e | 36 Before a location for a plant is selected, long range forecasts should be made anticipating future needs of the company. The plant location should be based on the company’s expansion plan and policy, diversification plan for the products, changing market conditions, the changing sources of raw materials and many other factors that influence the choice of the location decision. The purpose of the location study is to find an optimum location one that will result in the greatest advantage to the organization. 2.2 Factors influencing Plant Location/Facility Location Facility location is the process of determining a geographic site for a firm’s operations. Managers of both service and manufacturing organizations must weigh many factors when assessing the desirability of a particular site, including proximity to customers and suppliers, labour costs, and transportation costs. Location conditions are complex and each comprises a different Characteristic of a tangible (i.e. Freight rates, production costs) and non-tangible (i.e. reliability, Frequency security, quality) nature. Location conditions are hard to measure. Tangible cost based factors such as wages and products costs can be quantified precisely into what makes locations better to compare. On the other hand non-tangible features, which refer to such characteristics as reliability, availability and security, can only be measured along an ordinal or even nominal scale. Other non-tangible features like the percentage of employees that are unionized can be measured as well. To sum this up non- tangible features are very important for business location decisions. It is appropriate to divide the factors, which influence the plant location or facility location on the basis of the nature of the organisation as: 1. General locational factors, which include controllable and uncontrollable factors for all type of organisations. 2. Specific locational factors specifically required for manufacturing and service organisations. Location factors can be further divided into two categories: Dominant factors are those derived from competitive priorities (cost, quality, time, and flexibility) and have a particularly strong impact on sales or costs. Secondary factors also are important, but management may downplay or even ignore some of them if other factors are more important. For private circulation only P a g e | 37 2.2.1 General Locational Factors Following are the general factors required for location of plant in case of all types of organisations. Controllable Factors 1. Proximity to markets 2. Supply of materials 3. Transportation facilities 4. Infrastructure availability 5. Labour and wages 6. External economies 7. Capital Uncontrollable Factors 8. Government policy 9. Climate conditions 10. Supporting industries and services 11. Community and labour attitudes 12. Community Infrastructure Controllable Factors 1. Proximity to markets: Every company is expected to serve its customers by providing goods and services at the time needed and at reasonable price organizations may choose to locate facilities close to the market or away from the market depending upon the product. When the buyers for the product are concentrated, it is advisable to locate the facilities close to the market. Locating nearer to the market is preferred if: The products are delicate and susceptible to spoilage. After sales services are promptly required very often. Transportation cost is high and increase the cost significantly. Shelf life of the product is low. Nearness to the market ensures a consistent supply of goods to customers and reduces the cost of transportation. For private circulation only P a g e | 38 2. Supply of raw material: It is essential for the organization to get raw material in right qualities and time in order to have an uninterrupted production. This factor becomes very important if the materials are perishable and cost of transportation is very high. General guidelines suggested by Yaseen regarding effects of raw materials on plant location are: When a single raw material is used without loss of weight, locate the plant at the raw material source, at the market or at any point in between. When weight loosing raw material is demanded, locate the plant at the raw material source. When raw material is universally available, locate close to the market area. If the raw materials are processed from variety of locations, the plant may be situated so as to minimize total transportation costs. Nearness to raw material is important in case of industries such as sugar, cement, jute and cotton textiles. 3. Transportation facilities: Speedy transport facilities ensure timely supply of raw materials to the company and finished goods to the customers. The transport facility is a prerequisite for the location of the plant. There are five basic modes of physical transportation, air, road, rail,water and pipeline. Goods that are mainly intended for exports demand a location near to the port or large airport. The choice of transport method and hence the location will depend on relative costs, convenience, and suitability. Thus transportation cost to value added is one of the criteria for plant location. 4. Infrastructure availability: The basic infrastructure facilities like power, water and waste disposal, etc., become the prominent factors in deciding the location. Certain types of industries are power hungry e.g., aluminum and steel and they should be located close to the power station or location where uninterrupted power supply is assured throughout the year. The non-availability of power may become a survival problem for such industries. Process industries like paper, chemical, cement, etc., require continuous. Supply of water in large amount and good quality, and mineral content of water becomes an important factor. A waste disposal facility for process industries is an important factor, which influences the plant location. 5. Labour and wages: The problem of securing adequate number of labour and with skills specific is a factor to be considered both at territorial as well as at community level during plant location. Importing labour is usually costly and involve administrative problem. The history of labour relations in a For private circulation only P a g e | 39 prospective community is to be studied. Prospective community is to be studied. Productivity of labour is also an important factor to be considered. Prevailing wage pattern, cost of living and industrial relation and bargaining power of the unions’ forms in important considerations. 6. External economies of scale: External economies of scale can be described as urbanization and locational economies of scale. It refers to advantages of a company by setting up operations in a large city while the second one refers to the “settling down” among other companies of related Industries. In the case of urbanization economies, firms derive from locating in larger cities rather than in smaller ones in a search of having access to a large pool of labour, transport facilities, and as well to increase their markets for selling their products and have access to a much wider range of business services. Location economies of scale in the manufacturing sector have evolved over time and have mainly increased competition due to production facilities and lower production costs as a result of lower transportation and logistical costs. This led to manufacturing districts where many companies of related industries are located more or less in the same area. As large corporations have realized that inventories and warehouses have become a major cost factor, they have tried reducing inventory costs by launching “Just in Time” production system (the so called Kanban System). This high efficient production system was one main factor in the Japanese car industry for being so successful. Just in time ensures to get spare parts from suppliers within just a few hours after ordering. To fulfill these criteria corporations have to be located in the same area increasing their market and service for large corporations. 7. Capital: By looking at capital as a location condition, it is important to distinguish the physiology of fixed capital in buildings and equipment from financial capital. Fixed capital costs as building and construction costs vary from region to region. But on the other hand buildings can also be rented and existing plants can be expanded. Financial capital is highly mobile and does not very much influence decisions. For example, large Multinational Corporations such as coca Cola operate in many different countries and can raise capital where interest rates are lowest and conditions are most suitable. Capital becomes a main factor when it comes to venture capital. In that case young, fast growing (or not) high tech firms are concerned which usually have not many fixed assets. These firms particularly need access to financial capital and also skilled educated employees. For private circulation only P a g e | 40 Uncontrollable Factors 8. Government policy: The policies of the state governments and local bodies concerning labour laws, building codes, safety, etc., are the factors that demand attention. In order to have a balanced regional growth of industries, both central and state governments in our country offer the package of incentives to entrepreneurs in particular locations. The incentive package may be in the form of exemption from a safes tax and excise duties for a specific period, soft loan from financial institutions, subsidy in electricity charges and investment subsidy. Some of these incentives may tempt to locate the plant to avail these facilities offered. 9. Climatic conditions: The geology of the area needs to be considered together with climatic conditions (humidity, temperature). Climates greatly influence human efficiency and behaviour. Some industries require specific climatic conditions e.g., textile mill will require humidity. 10. Supporting industries and services: Now a day the manufacturing organization will not make all the components and parts by itself and it subcontracts the work to vendors. So, the source of supply of component parts will be the one of the factors that influences the location. The various services like communications, banking services professional consultancy services and other civil amenities services will play a vital role in selection of a location. 11. Community and labour attitudes: Community attitude towards their work and towards the prospective industries can make or mar the industry. Community attitudes towards supporting trade union activities are important criteria. Facility location in specific location is not desirable even though all factors are favouring because of labour attitude towards management, which brings very often the strikes and lockouts. 12. Community infrastructure and amenity: All manufacturing activities require access to a community infrastructure, most notably economic overhead capital, such as roads, railways, port facilities, power lines and service facilities and social overhead capital like schools, universities and hospitals. These factors are also needed to be considered by location decisions as infrastructure is enormously expensive to build and for most manufacturing activities the existing stock of infrastructure provides physical restrictions on location possibilities. For private circulation only P a g e | 41 2.2.2 Specific Locational Factors for Manufacturing Organisation Dominant Factors Factors dominating location decisions for new manufacturing plants can be broadly classified in six groups. They are listed in the order of their importance as follows: 1. Favourable labour, climate 2. Proximity to markets 3. Quality of life 4. Proximity to suppliers and resources 5. Utilities, taxes, and real estate costs 1. Favorable labour climate: A favorable labour climate may be the most important factor in location decisions for labour- intensive firms in industries such as textiles, furniture, and consumer electronics. Labour climate includes wage rates, training requirements, attitudes toward work, worker productivity, and union strength. Many executives consider weak unions or al low probability of union organizing efforts as a distinct advantage. 2. Proximity to markets: After determining where the demand for goods and services is greatest, management must select a location for the facility that will supply that demand. Locating near markets is particularly important when the final goods are bulky or heavy and outbound transportation rates are high. For example, manufacturers of products such as plastic pipe and heavy metals all emphasize proximity to their markets. 3. Quality of life: Good schools, recreational facilities, cultural events, and an attractive lifestyle contribute to quality of life. This factor is relatively unimportant on its own, but it can make the difference in location decisions. 4. Proximity to suppliers and resources: In many companies, plants supply parts to other facilities or rely on other facilities for management and staff support. These require frequent coordination and communication, which can become more difficult as distance increases. For private circulation only P a g e | 42 5. Utilities, taxes, and real estate costs: Other important factors that may emerge include utility costs (telephone, energy, and water), local and state taxes, financing incentives offered by local or state governments, relocation costs, and land costs. Secondary Factors: There are some other factors needed to be considered, including room for expansion, construction costs, accessibility to multiple modes of transportation, the cost of shuffling people and materials between plants, competition from other firms for the workforce, community attitudes, and many others. For global operations, firms are emphasizing local employee skills and education and the local infrastructure. Specific Locational Factors for Service Organisation Dominant Factors The factors considered for manufacturers are also applied to service providers, with one important addition — the impact of location on sales and customer satisfaction. Customers usually look about how close a service facility is, particularly if the process requires considerable customer contact For private circulation only P a g e | 43 For private circulation only P a g e | 44 1. Proximity To Customers Location is a key factor in determining how conveniently customers can carry on business with a firm. For example, few people would like to go to remotely located dry cleaner or supermarket if another is more convenient. Thus the influence of location on revenues tends to be the dominant factor. 2. Transportation Costs And Proximity To Markets For warehousing and distribution operations, transportation costs and proximity to markets are extremely important. With a warehouse nearby, many firms can hold inventory closer to the customer, thus reducing delivery time and promoting sales. 3. Location Of Competitors One complication in estimating the sales potential at different location is the impact of competitors. Management must not only consider the current location of competitors but also try to anticipate their reaction to the firm’s new location. Avoiding areas where competitors are already well established often pays. However, in some industries, such as new-car sales showrooms and fastfood chains, locating near competitors is actually advantageous. The strategy is to create a critical mass, whereby several competing firms clustered in one location attract more customers than the total number who would shop at the same stores at scattered locations. Recognizing this effect, some firms use a follow –the leader strategy when selecting new sites. Secondary Factors Retailers also must consider the level of retail activity, residential density, traffic flow, and site visibility. Retail activity in the area is important, as shoppers often decide on impulse to go shopping or to eat in a restaurant. Traffic flows and visibility are important because businesses’ customers arrive in cars. Visibility involves distance from the street and size of nearby buildings and signs. High residential density ensures nighttime and weekend business when the population in the area fits the firm’s competitive priorities and target market segment. For private circulation only P a g e | 45 2.3 Facility Layout Plant Layout Plant layout refers to the physical arrangement of production facilities. It is the configuration of departments, work centres and equipment in the conversion process. It is a floor plan of the physical facilities, which are used in production. According to Moore “Plant layout is a plan of an optimum arrangement of facilities including personnel, operating equipment, storage space, material handling equipment and all other supporting services along with the design of best structure to contain all these facilities”. 2.4 Objectives of Plant Layout The primary goal of the plant layout is to maximise the profit by arrangement of all the plant facilities to the best advantage of total manufacturing of the product. The objectives of plant layout are: 1. Streamline the flow of materials through the plant. 2. Facilitate the manufacturing process. 3. Maintain high turnover of in-process inventory. 4. Minimise materials handling and cost. 5. Effective utilisation of men, equipment and space. 6. Make effective utilisation of cubic space. 7. Flexibility of manufacturing operations and arrangements. 8. Provide for employee convenience, safety and comfort. 9. Minimize investment in equipment. 10. Minimize overall production time. 11. Maintain flexibility of arrangement and operation. 12. Facilitate the organizational structure. 2.5 Principles of Plant Layout 1. Principle of integration: A good layout is one that integrates men, materials, machines and supporting services and others in order to get the optimum utilisation of resources and maximum effectiveness. 2. Principle of minimum distance: This principle is concerned with the minimum travel (or movement) of man and materials. For private circulation only P a g e | 46 The facilities should be arranged such that, the total distance travelled by the men and materials should be minimum and as far as possible straight line movement should be preferred. 3. Principle of cubic space utilisation: The good layout is one that utilise both horizontal and vertical space. It is not only enough if only the floor space is utilised optimally but the third dimension, i.e., the height is also to be utilised effectively. 4. Principle of flow: A good layout is one that makes the materials to move in forward direction towards the completion stage, i.e., there should not be any backtracking. 5. Principle of maximum flexibility: The good layout is one that can be altered without much cost and time, i.e., future requirements should be taken into account while designing the present layout. 6. Principle of safety, security and satisfaction: A good layout is one that gives due consideration to workers safety and satisfaction and safeguards the plant and machinery against fire, theft, etc. 7. Principle of minimum handling: A good layout is one that reduces the material handling to the minimum. 2.6 Process Layout Process layout is recommended for batch production. All machines performing similar type of operations are grouped at one location in the process layout e.g., all lathes, milling machines, etc. are grouped in the shop will be clustered in like groups. Thus, in process layout the arrangement of facilities are grouped together according to their functions. A typical process layout is shown in Fig. 2.5. The flow paths of material through the facilities from one functional area to another vary from product to product. Usually the paths are long and there will be possibility of backtracking. Process layout is normally used when the production volume is not sufficient to justify a product layout. Typically, job shops employ process layouts due to the variety of products manufactured For private circulation only P a g e | 47 and their low production volume. Advantages 1. In process layout machines are better utilized and fewer machines are required. 2. Flexibility of equipment and personnel is possible in process layout. 3. Lower investment on account of comparatively less number of machines and lower cost of general purpose machines. 4. Higher utilisation of production facilities. 5. A high degree of flexibility with regards to work distribution to machineries and workers. 6. The diversity of tasks and variety of job makes the job challenging and interesting. 7. Supervisors will become highly knowledgeable about the functions under their department. Limitations 1. Backtracking and long movements may occur in the handling of materials thus, reducing material handling efficiency. 2. Material handling cannot be mechanised which adds to cost. 3. Process time is prolonged which reduce the inventory turnover and increases the in process inventory. 4. Lowered productivity due to number of set-ups. 5. Throughput (time gap between in and out in the process) time is longer. 6. Space and capital are tied up by work-in-process. 2.7 Product Layout In this type of layout, machines and auxiliary services are located according to the processing sequence of the product. If the volume of production of one or more products is large, the facilities can be arranged to achieve efficient flow of materials and lower cost per unit. Special purpose machines are used which perform the required function quickly and reliably. The product layout is selected when the volume of production of a product is high such that a For private circulation only P a g e | 48 separate production line to manufacture it can be justified. In a strict product layout, machines are not shared by different products. Therefore, the production volume must be sufficient to achieve satisfactory utilisation of the equipment. A typical product layout is shown in Fig. 2.6. Advantages 1. The flow of product will be smooth and logical in flow lines. 2. In-process inventory is less. 3. Throughput time is less. 4. Minimum material handling cost. 5. Simplified production, planning and control systems are possible. 6. Less space is occupied by work transit and for temporary storage. 7. Reduced material handling cost due to mechanised handling systems and straight flow. 8. Perfect line balancing which eliminates bottlenecks and idle capacity. 9. Manufacturing cycle is short due to uninterrupted flow of materials. 10. Small amount of work-in-process inventory. 11. Unskilled workers can learn and manage the production. Limitations 1. A breakdown of one machine in a product line may cause stoppages of machines in the downstream of the line. 2. A change in product design may require major alterations in the layout. 3. The line output is decided by the bottleneck machine. 4. Comparatively high investment in equipments is required. 5. Lack of flexibility. A change in product may require the facility modification. For private circulation only P a g e | 49 2.8 Fixed Position Layout This is also called the project type of layout. In this type of layout, the material, or major components remain in a fixed location and tools, machinery, men and other materials are brought to this location. This type of layout is suitable when one or a few pieces of identical heavy products are to be manufactured and when the assembly consists of large number of heavy parts, the cost of transportation of these parts is very high. Fig. 2.8 Fixed position layout Advantages The major advantages of this type of layout are: 1. Helps in job enlargement and upgrades the skills of the operators. 2. The workers identify themselves with a product in which they take interest and pride in doing the job. 3. Greater flexibility with this type of layout. 4. Layout capital investment is lower. 2.9 Group / Cellular Layout There is a trend now to bring an element of flexibility into manufacturing system as regards to variation in batch sizes and sequence of operations. A grouping of equipment for performing a sequence of operations on family of similar components or products has become all the important. Group technology (GT) is the analysis and comparisons of items to group them into families with similar characteristics. GT can be used to develop a hybrid between pure process layout and pure flow line (product) layout. This technique is very useful for companies that produce variety of parts in small batches to enable them to take advantage and economics of flow line layout. For private circulation only P a g e | 50 The application of group technology involves two basic steps; first step is to determine component families or groups. The second step in applying group technology is to arrange the plants equipment used to process a particular family of components. This represents small plants within the plants. The group technology reduces production planning time for jobs. It reduces the set-up time. Thus group layout is a combination of the product layout and process layout. It combines the advantages of both layout systems. If there are m-machines and n-components, in a group layout (Group-Technology Layout), the m-machines and n-components will be divided into distinct number of machine-component cells (group) such that all the components assigned to a cell are almo

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