Production & Operation Management
Unit 3 & Unit 4 Notes

Simple words: Getting the right product, to the right place, at the right time, in the right condition, at the right cost.

• Ensures Product Availability — Without logistics, products cannot reach customers no matter how good they are.
• Reduces Cost — Efficient logistics reduces transportation, warehouse, and inventory costs → cheaper product for customer.
• Customer Satisfaction — Fast, accurate, damage-free delivery builds loyalty.
• Supports Global Trade — Enables countries to import raw materials and export finished goods.
• Competitive Advantage — Better logistics = deliver faster and cheaper than rivals.
• Value Addition — Adds Time Utility (when needed) + Place Utility (where needed).
• Economic Development — Strong logistics infrastructure boosts a nation's GDP. India's PM Gati Shakti aims to cut logistics cost from 13% to 8% of GDP.

A Supply Chain is the entire network of organizations, people, activities, and resources involved in moving a product from raw material to the end customer. Logistics keeps this chain moving smoothly.

• Inbound Logistics — Receiving raw materials from suppliers to factory. Includes supplier selection, transport, receiving, inspection, storage. Example: Garment factory receiving cotton fabric from Gujarat suppliers.
• In-Plant (Internal) Logistics — Movement of materials WITHIN the factory — from raw material store to production, between machines, to finished goods store. Uses forklifts, conveyors, AGVs.
• Outbound Logistics — Moving finished goods from factory to customer. Includes warehousing, picking, packing, loading, transport, last-mile delivery. Example: HUL distributing Surf Excel, Lifebuoy to every corner of India.

Far more complex than domestic logistics because it involves multiple countries, languages, currencies, regulations, and customs procedures.

• Enables Global Trade — India exports IT, pharmaceuticals, textiles to the world through international logistics.
• Access to Raw Materials — Japan imports all crude oil from Middle East through sea freight.
• Cost Advantage — Manufacturing in low-cost countries → selling in high-price markets. Bangladesh garments reach European consumers.
• Global Supply Chains — Apple sources chips from Taiwan, screens from South Korea, assembles in China. Only possible with international logistics.
• Disaster Relief — COVID-19 vaccines transported globally through cold-chain air freight.

Effectiveness = Doing the right things (correct goods, right place, on time). Efficiency = Doing things in the right way (minimum cost, minimum waste). Both must go together.

• Technology (GPS, RFID, TMS) — Real-time visibility of shipments worldwide.
• Proper Documentation — Accurate documents prevent costly customs delays.
• Strong Partner Relationships — Reliable shipping lines and freight forwarders ensure consistent quality.
• Risk Management — Alternative routes, backup carriers, cargo insurance protect against disruptions.
• KPI Monitoring — Track: On-time delivery rate, customs clearance time, freight cost per unit, damage rate.
• Lean Logistics — Continuously eliminate waste from logistics processes.

• Receiving — Records goods arriving, checks against Purchase Order, generates receipt using barcode scanner.
• Put-Away — Directs workers to the most efficient storage location based on product type and movement frequency.
• Inventory Tracking — Real-time record of every product — what, how many, exact location (rack/bin), batch, expiry date.
• Order Picking — Generates optimized pick list, guides workers to collect products in the most efficient sequence.
• Packing & Dispatch — Guides packing, generates shipping labels, schedules dispatch per carrier pickup times.
• Reporting & Analytics — Order accuracy, picking speed, stock turnover, space utilization reports for management.

MRP 3 Inputs:

• Master Production Schedule (MPS) — What to produce, how many, in which week.
• Bill of Materials (BOM) — Complete list of all materials needed to make one unit.
• Inventory Records — Current stock levels of all materials.

• Zero Inventory — Ideal goal: materials arrive exactly when needed, no warehouse buffer stock.
• Zero Defects — No buffer stock to hide defects. Everyone must maintain very high quality.
• Zero Waste (Muda Elimination) — Eliminate 7 types of waste: Overproduction, Waiting, Transport, Over-processing, Excess Inventory, Unnecessary Motion, Defects.
• Reduced Lead Time — Shorter time between customer order and delivery.
• Flexible Production — Switch quickly between products to match actual demand.
• Continuous Improvement (Kaizen) — Every day, everyone looks for ways to reduce waste and improve.

IT is the backbone of modern supply chain. It provides Visibility (see everything in real time), Connectivity (all parties connected), and Intelligence (data analytics for better decisions).

Simple words: Work Study finds the best way to do a job and then measures how long it should take. Goal: Maximum output with minimum effort, time, and cost.

• Find the most efficient method — eliminate unnecessary, wasteful steps.
• Set Standard Times for tasks — used for planning, scheduling, and wage systems.
• Improve resource utilization — reduce idle time and waste.
• Reduce fatigue — better working methods improve safety and comfort.
• Improve product quality — standardize best method for all workers.
• Provide scientific basis for wage incentive schemes.

Method Study is systematic recording and critical examination of existing methods to develop easier, more effective ways of working and reducing costs.

• S — SELECT the job to study. Choose bottlenecks, high-labour-cost jobs, safety risks, or worker complaints.
• R — RECORD all facts about the existing method using process charts, flow diagrams, etc. Capture what is ACTUALLY happening.
• E — EXAMINE the facts critically. Ask: What? Why? Where? When? Who? How? Then: What ELSE? Why else? etc.
• D — DEVELOP the best alternative — eliminate unnecessary activities, combine operations, change sequence, simplify.
• I — INSTALL the new method — train workers, modify equipment, implement on shop floor.
• M — MAINTAIN the new method — monitor workers are following it. Update if conditions change.

A. Process Charts — 5 ASME Symbols:

• Outline Process Chart — Shows only main operations and inspections. High-level overview.
• Flow Process Chart — Shows ALL 5 activity types in detail for ONE material/person. Most commonly used.
• Two-Handed Process Chart — Shows both hands of a worker simultaneously. Used for repetitive assembly.
• Multiple Activity Chart — Shows activities of multiple workers/machines on same time scale. Identifies idle time.

B. Flow Diagram & String Diagram:

• Flow Diagram — Scale drawing of workplace layout showing actual movement paths of materials/workers. Reveals inefficient travel routes.
• String Diagram — Scale floor plan with pins at each location. Thread wound around pins shows travel sequence. Total thread length = total distance traveled.

C. SIMO Chart: Records activities of both hands at the level of basic motions called Therbligs (18 basic motions: Reach, Grasp, Move, Position, Release, etc.). Used for very repetitive short-cycle assembly operations.

• Select the job and inform the worker being observed.
• Break job into small elements (e.g., pick up part / position in jig / tighten bolt / remove).
• Time each element for 20-30 cycles using stopwatch.
• Rate the worker's performance (100% = normal pace, 120% = faster, 80% = slower than normal).
• Calculate Normal Time: Normal Time = Observed Time × (Rating ÷ 100)
• Add Allowances (personal needs, fatigue, unavoidable delays) → Standard Time

• Define activities to observe (working, idle-breakdown, idle-material shortage, personal time).
• Determine number of observations needed (statistical formula based on accuracy required).
• Prepare random observation schedule — when exactly to observe.
• Make observations at scheduled random times, record what each worker/machine is doing.
• Calculate: % time on each activity = (observations in category ÷ total) × 100

PMTS (Predetermined Motion Time Systems): Build standard time from a database of standard times for basic human motions (Reach, Grasp, Move, Position). MTM system is most used. No actual timing needed — useful for jobs that don't yet exist.

• Planning Principle — All materials handling must be planned as a complete system. Random movement is wasteful.
• Unit Load Principle — Move materials in the largest practical unit load. Moving one container of 100 parts is more efficient than 100 individual trips.
• Space Utilization — Use all three dimensions — floor space AND height. Racking systems allow vertical stacking.
• Gravity Principle — Use gravity wherever possible. Chutes and slides reduce energy cost.
• Mechanization Principle — Use machines (forklifts, conveyors, cranes) instead of manual labour wherever possible.
• Standardization Principle — Standardize equipment, containers, and methods for interchangeability and simplicity.
• Safety Principle — Equipment maintained, operators trained, safe work practices enforced at all times.
• Flow Principle — Materials should flow smoothly with minimum backtracking, cross-traffic, or congestion.
• Minimum Handling — Each handling = risk of damage + cost. Minimize the number of times materials are touched.
• Environment Principle — Minimize noise, vibration, dust, and environmental impact on workers.

A. Conveyors — Continuous mechanical devices moving materials along a fixed path:

B. Cranes & Hoists — Lift and move heavy materials:

C. Industrial Trucks (Vehicles) — Mobile, flexible path handling:

D. AS/RS (Automated Storage & Retrieval Systems) — Computer-controlled stacker cranes that automatically store and retrieve loads in high-bay warehouses. Operates 24/7, no human error. Used in pharmaceutical distribution warehouses.

Purchase cost = 40-70% of total production cost in manufacturing companies. That's why effective purchasing directly impacts profitability.

• Purchase Requisition — A department sends formal request to Purchase dept for materials needed.
• Supplier Identification & Enquiry — Send Request for Quotation (RFQ) to potential suppliers.
• Quotation Analysis & Supplier Selection — Compare quotes on price, quality, delivery, reliability. Select best.
• Purchase Order (PO) — Formal legal document: what to supply, quantity, quality, delivery date, price.
• Follow-up — Monitor supplier to ensure on-time delivery.
• Receiving & Inspection — Check goods against PO and quality standards. Accept or reject.
• Invoice Verification & Payment — Verify invoice against PO and goods received, then pay.

• Receiving — Accept deliveries, verify quantity and quality against Purchase Order.
• Storage — Store in designated locations (bins, racks, shelves) safely and organized.
• Issue — Issue materials to production against Material Requisition. Maintain records of all issues.
• Record Keeping — Bin cards and stock ledgers showing receipts, issues, and balances for every item.
• Physical Verification — Regular physical stock counting. Investigate and correct discrepancies with records.
• Housekeeping & Safety — Clean, safe, well-organized stores. Fire safety and chemical storage compliance.

• Ordering Cost — Fixed cost per order placed (admin, phone, receiving, inspection). Same whether ordering 10 or 1,000 units.
• Carrying Cost (Holding Cost) — Cost of holding stock over time (interest on capital, warehouse rent, insurance, obsolescence). Typically 15-30% of inventory value per year.
• Stockout Cost — Cost of running out of stock (lost sales, production stoppage, emergency procurement at higher price, customer damage).

EOQ is the order quantity that minimizes total annual inventory cost (ordering cost + carrying cost). Developed by F.W. Harris, 1913.

Classifies inventory by annual consumption value (annual demand × unit price) to focus control effort where it matters most.

• V — Vital — Without this, production stops COMPLETELY. Must always be in stock. Main bearing of the only press machine.
• E — Essential — Without this, production is severely disrupted. Maintain reasonable stock.
• D — Desirable — Minor inconvenience if unavailable. Can wait for normal procurement. Spare office light bulbs.