advanced operations and production management om0013

Sikkim Manipal University - MBA - OM0013 – Advance Production & Operation

Management

Semester: 3 - Assignment Set: 1

Name Madhu Kumar .S

Roll No. 531011118

Program MBA 3rd Sem

Subject Advance Production & Operation Management [Set 1]

Code OM0013

Learning Centre

Al Hikma – IAGSRAK, U.A.E, 02541

Madhu Kumar S Roll No: 531011118 of 33


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Q 1 Explain with an example the impact of product or service life cycle on operation strategy.

Ans:-

Introduction

The late 1970s and the early 1980s saw the development of the manufacturing strategy paradigm by researchers at the Harvard Business School. This work carried out by professors William Abernathy Kin clerk, Robert Hayes, and Steven wheel Wright emphasized on how manufacturing executives could use their factories’ capabilities as strategic competitive weapons. Their main theme was concerned with the idea of factory focus and manufacturing tradeoffs. They knew that a factory cannot excel in all performance measures. Its management must device a focused strategy, creating a focused factory that performs a limited set of tasks efficiently. This required tradeoffs among such performance measures as low cost, high quality, and high flexibility in designing and managing factories.

Operations as a Service

The emerging model in industry focuses on the service business. This model always holds true, whether the organization develops airplanes or computers. In the manufacturing sector, such services can be divided into care and value-added services that are provided to internal and external customers of the factory. The core services customers, or the external customers, want the products that are customized to their needs, delivered on time, and priced competitively. These are commonly summarised as the major performance objectives of the operations functions: quality, flexibility, speed and price (cost of production) [1]. Value added services simply make the external customers size easier or in the case of internal customers, help them carry out their particular functions efficiently. Value added factory services can be classified into four broad categories, they are:

· Information: It is the ability to furnish critical data on product performance, process parameters and cost to internal groups (such as Research and Development) and to external customers, who then use the data to improve their own operation or products. For example, many


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companies provide quality data sheets documenting actual product testing and field quality performance to field sales and service personnel.

· Problem solving: It is the ability to help internal and external groups solve problems especially in quality. For example, a metal and fabricator company sends factory workers out with sales people to troubleshoot quality problems. This helps them join with shop floor personnel on remedial efforts.

· Sales support: It is the ability to enhance sales and marketing efforts by demonstrating the technology, equipment, or production system the company is trying to sell. For example, Eureka Forbes organizes Kiosks in busy area to demonstrate its water purifier, vacuum cleaner and other products.

· Field support: It is the ability to replace defective parts quickly (for example, Caterpillar promises to make repair parts available anywhere in the world within 48 hours) or to replenish stocks quickly to avoid downtime or stock outs (for example, a retail chain is linked to its Hong Kong textile mills via a sophisticated computer system that signals factories to begin producing fast selling items as soon as weekly sales figures are collected).

Value added services provided to external customers yield two benefits. Firstly, it helps them to differentiate the organization from the competition. Indeed in many cases it is easier to copy a firm’s product than to create the value added service infrastructure to support. Secondly, these services build relationships that bind customers to the organization in a positive way.

The design and ongoing management of a firm’s operation have a significant impact on the financial success of the firm. The firm’s strategy is implemented with a design that is portrayed financially in the assets of the firm. Each asset - be it a plant, a warehouse, an operations centre, or the inventory carried in these facilities is owned by the firm and requires a significant investment. The firm’s owners and shareholders want a return on this investment. Decisions such as how big a plant should be, how many plants there should be and where to locate them and whether or not certain operations should be outsourced are major topics of operations management. Other decisions such as how much inventory is needed to meet required service levels, relate directly to the asset investment. Figure 2.1 shows the competitive dimensions of a firm.



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Figure 2.1: Competitive Dimensions of a Firm

Many of the costs that affect the firm’s profitability are incurred by the operations of the firm. Deciding on an appropriate number of workers, scheduling these workers, and deciding whether over time or multiple work shifts should be employed directly relate to the strategy and competitiveness of the firm. Operations management is dynamic and challenges posed by global enterprises present new issues for operations managers. The major issues are:

Coordinating Relationships in Outsourcing and Contracts

Recently, there has been a huge surge in the outsourcing of parts and services that had previously been produced internally. This has been made possible by the availability of fast and inexpensive communications.

There are a number of contract manufactures who specialize in performing focused manufacturing activities. The success of outsourcing has led companies to consider outsourcing major corporate functions such as information systems, product development and design engineering services, packaging, testing and distribution. The ability to coordinate these activities is a significant challenge for modern operations managers.

Optimisation of Global Supplier, Production and Distribution Networks

The implementation of global Enterprise Resource Planning (ERP) systems has challenged managers to use all of this information. This requires careful understanding of where autonomy is important. Companies have only begun to take advantage of the information from these systems to


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optimally control such resources as inventory transportation and productions equipment.

Increased Co-production of Goods and Services

The internet has opened new ways for the customer to interact directly with a firm. Simple direct entry and monitoring of orders is only the first step in ensuring value to the customer through information sharing. Intelligent use of information technology allows the shedding of entire layers of inefficient customer oriented functions within a firm, resulting in dramatic reductions in cost while actually improving service to the customer.

Managing Customer Touch Points

As companies strive to be more efficient, customer support and training become the first areas to take cost cutting. This will eliminate customer frustration and results in avoidable frustration to the customers and results in implied costs in the form of litigations and lost customers.



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Q 2 Explain the types of value added factory services. Explain the major competitive dimensions of operations strategy.

Ans:-

Operations as a Competitive Weapon

In addition to developing the organizations strategy, each functional unit within the organization should establish a strategy and work to achieve its goals. Traditionally, the organization strategies of most companies focused on the marketing function – which products to make, which market to penetrate etc. However, most aspects of the marketing function affect the operation function to some degree. Every time a product is introduced or revised, or the product promotion is changed, the production system feels the effect. This is especially true for services, where the service system is the product.

The following example shows how operational strengths can be used effectively as competitive weapons:

· Product / process expertise: A company can have special expertise in making certain products. For example, Sharp Corporation has prospered in consumer electronics - thanks to its dominance in producing liquid crystal displays.

· Quick delivery: A company can have a production process and capacity, enabling it to produce and satisfy a customer’s request quickly. Some examples are one hour eyeglass manufacturing, one hour photo developing and same day dry cleaning and shoe repair.

· Short product cycle: Research has shown that the first company to enter a market gains a significant market share advantage over subsequent competitors. A market entry study by AMC Kinsey showed that a delay of six months in bringing a product to market can cost a company one-third of the products life time project potential. The study showed that companies which are able to put new products into production quickly are at an advantage. For example, Hewlett Packard (HP) has dominated the larger printer industry because it was the first to enter the market in that sector, and it has continued to bring out new products regularly, thus keeping itself ahead of its competitors.

· Prediction flexibility: Some companies specialize in having highly flexible and responsive operations Celestica, a Canadian computer



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component manufactures uses equipment that is not bolted to the floor so that production lines can be reconfigured within hours or days to make new and different products. This flexibility has allowed Celestica to expand from making a few products for only customer (IBM) to making hundred of products for over 40 different companies. Likewise Dell Computer established itself initially by using a build to order production system that promised delivery of customized personal computers within five days of ordering.

· Low cost process: A company with a special efficient production system or access to a low cost resource is able to make standard products at lower cost than its competitors. For example, steel companies such as Nucor have competed successfully on price against larger integrated steel producers by using processes called mini mills. Mini mills gain their price advantage by processing scrap steel rather than producing primary steel from iron ore and by producing a limited set of commodity products. In the service sector, south most airlines in the US, Rayon Air in Europe and Air Deccan, Indigo and Spice Jet in India have established themselves as pure low cost players.

· Convenience and location: Facility location can provide substantial competitive advantages especially when it is interwoven with the marketing strategy. For example, American Express Corporation competes primarily based on location convenience. It has more offices located throughout the world to replace lost or stolen travelers cheques and to provide other travel services than its competitors. This convenience allows American Express to charge higher fees for many of its services.

· Product variety and facility size: In some industries, the variety of products offered and the size of operations can provide a competitive advantage. For example, Crockery stones and super store retailers increasingly compete by having larger stores that carry a larger inventory of products and offer additional services, such as video rental and banking services.

· Quality: A company that can produce a project of higher quality than its competitors can increase its sales volume while commanding a higher price. Toyota motors and Mc Donald’s are two examples of companies that have used quality as a competitive weapon. Both companies initially used low price as their primary order – winning dimension, and they developed production processes that allowed them to be low cost producers. But each company worked hard on its production processes to develop a reputation for high quality as well. Toyota is able to outsell competitors consistently while being priced higher because of its higher



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perceived quality. One component of product quality, especially for restaurants, is product consistency. Mc Donald’s restaurant has been especially successful at achieving consistency with respect to food quality, quick service, and cleanliness of facilities.

There are ten principles which may guide a firm in the choice of key aspects of competitive strategy. They are:

· Process driver across all organizational functions

· Total employee involvement

· Good labour management relations

· Effective leadership and cross communication

· Adaptability to a changing environment

· Visibility and control of all processes

· Reducing waste

· Customer orientation

· Standardisation

· Quality awareness and quality control

The applicability of these principles depends on the market characteristics and nature and extent of competition.

Competition and Its Forces

There is competition when different organizations supply similar products to satisfy customers in the same market sector. In such scenarios the customer demands products in preference to similar products from competitors. To achieve this, the organization must have some kind of competitive advantage over its competitors to make it the supplier of choice. There are many ways of achieving this competitive advantage – low price, high quality, product features innovation, availability, convenient location, customized products, reliability customer services, guarantees and so on. The difficulty of actually gaining this advantage depends on the performance of competitors – and when competition is weak, it is relatively easy to gain a competitive advantage; it is very



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difficult when competition is fierce. But the level of competition depends on the market features, including its size, growth potential, stability, profitability, significant trends, risks, number competitors, relative size of competitors, barriers to entry and exit, etc.

1. Porter’s Five Forces of Competition

Porter[2] summarizes the forces of competition in his model of five forces of competition which is shown in figure 2.2.

Figure 2.2: Porter’s Five Forces Model

Rivalry among organizations

This is usually the strongest of the five forces, and originates from every organization’s desire to gain a competitive advantage. This competition becomes stronger with:

· A number of organizations of smaller size and capabilities supplying the market.

· No single organization dominating the market or controlling the market conditions

· Organizations that use diverse strategies to improve their market position.





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· High exit barriers so it costs more to get out of a market than to stay in and complete

· Customers who have no loyalty to a particular supplier and can change to another supplier with little cost or inconvenience.

Suppliers of key inputs

Every organization needs reliable suppliers for its materials such as raw materials, resources, services, utilities etc. These suppliers can play a direct role in competitiveness. At a basic level, an unreliable supplier can reduce the availability of some key resource making it impossible for an organization to compete customer orders thereby reducing its competitiveness. On a broader level suppliers affect the cost of operations, quality, performance of products, production quantities, delivery times, terms and conditions of supply and the very feasibility of an organization. This effect is particularly strong when:

· Reliable advertise are critical for smooth operations.

· Materials have a major affect on the final quality of products.

· Purchased materials account for a large part of operating costs.

· It is cheaper for an organization to buy materials than make them itself.

· There are no substitute materials.

· It is difficult or expensive for an origination to change suppliers.

· A few suppliers dominate the industry.

· There is little fear of backward integration.

· The industry is not an important customer of the suppliers.

· Most organizations prefer to develop long-tern supplier relationship.

Customers

Customers prefer competitive markets, which offer the best deals. In general, customers are in a strong position when:



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· Their numbers are big and they buy in large quantities.

· They buy a large proportion of a particular organization’s output.

· Products are standardized, with little to differentiate between them.

· There are many competing suppliers of the same product or service, and customers can shift between them with little cost or inconvenience.

· There are low cost substitutes or alternative products.

· Customers can integrate backward and established their own services of supply.

· The materials are relatively expensive, making customers more careful in their choices.

Potential new entrants

As the market widens there is always an opportunity for new entrants into the market. If conditions are in place, they bring extra capacity, in either building new facilities or acquiring and reorganizing operations that already supply the market. And they typically adopt strategies of aggressive competition to build market share at the expense of existing suppliers.

Potential new entrants to a market usually face some kind of entry barrier, which consists of the obstacles that put them at a disadvantage compared with organizations already in the market. The sources of these barriers include:

· The need for large initial investments.

· Economics of scale that make it difficult for new entrants to start small and build up their operations.

· Effects of experience and the learning curve.

· Need to access specialized knowledge or technology.

· Customer loyalty and brand preferences.



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· Access to logistic channels that might be reluctant to take on new products.

· Vertically integrated competitors that limit access to parts of the supply chain.

· Regulatory barriers such as heresies, tariffs and international trade restrictions.

· The threat from new entrants is increasing.

When entry barriers are low, the industry is attractive and there are many potential new entrants. The existing players in the industry find it difficult to compete when the entrants bring in new operations, technologies that make the existing competitors obsolete.

Substitute products

These situations occur when customers can replace one product by another that comes from organizations in a different industry. For example, a mail service can substitute printed letters by telephone email or text messages. Similarly, customers can substitute contact lenses for glasses, artificial sweetness for sugar, and internet news services for newspapers. Substitute products are a strong force when:

· They are relatively cheaper compared with the existing price of the product.

· Other costs of moving to the substitute are low.

· They are readily available.

· They have equivalent performance and features.

· Producers of substitutes are keen to increase their sale.

· Producers of the substitute can easily add new capacity.

Value addition through operations

All the operations contributing to a process must add value to the final product. Rotter says that “an organization adds value by performing both primary and support activities.” The primary activities are:



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· In bound logistics: Moving all the inputs from suppliers into the operations.

· Operations: Transforming activities from inputs to outputs.

· Outbound logistics: Moving outputs to their destinations, including finished products to customers.

· Marketing and sales: Promoting the product and providing the means of buying it.

· Service: Enhancing the value of the product (through installation, maintenance, repair, etc).

Support activities are those that are still essential, but are not linked directly to operations, such as human resource management, public relations, technology development and organizational systems.

Competitive Dimensions of Operations

The operations strategy of an organization has to be able to align the operational goals to that of the organizational goals. However, the organizational objectives change over time. Thus, the operations strategy of an organization must include provisions to anticipate the organization’s future needs. Figure 2.3 shows the sources of competitive advantages.

Figure 2.3: Sources of Competitive Advantage

The keys to competitive success for the operations strategy lie in:




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· Understanding target markets

· Identifying the priority choices

· Understanding the consequences of each choice

· Appreciating the various trade offs.

Thus, the starting point of any competitive analysis must be a basic understanding of the organization’s markets and then the choices that customers face when deciding which product or service to buy.

The following are the main steps necessary to perform a competitive analysis:

1. Stage 1: Developing properly defined corporate objectives.

2. Stage 2: Determining marketing strategies to meet those objectives.

3. Stage 3: Appreciating the operational implications for the markets in which firm operates.

4. Stage 4: Understanding the essential attributes of product and service combinations.

5. Stage 5: Establishing operations strategy competitive priorities using the main building blocks of the operations strategy (tactical and support activities, core competencies and processes, resources and technologies).

6. Stage 6: Analyzing how the strategies are interconnected, how they will affect the market, and customer choices with respect to a particular product or service.

7. Stage 7: Developing a strategy for operations.

8. Stage 8: Executing the operations strategy.

Different customers are attracted by different attributes[3]. Some customers are interested primarily in the cost of a product or service and hence some companies attempt to position themselves to offer the lowest prices. The major competitive dimensions of operations strategy include the following:




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Cost or price

In any market, there is always a segment of the market that buys solely on the basis of low cost. To successfully complete in this inch, a firm must be the low cost producer, but even this does not always guarantee profitability and success products and services sold strictly on the basis of cost are typically commodity like the customer do not differentiate the product or service of one company from that of the others. This segment of the market is usually quite large and many companies are lured by the potential for significant profits, which they associate with the large hint volumes. Competition in this segment is fierce and so is the failure rate. Ultimately, there can be only one low cost producer, who usually establishes the selling price in the market.

Quality

There are two characteristics of a product or service that define quality: design quality and process quality. Design quality relates to the set of features the product or service contains. This relates directly to the design of the product or service. The goal in establishing the proper level of design quality is to focus on the requirements of the customer.

Process quality, the second characteristic of quality, is critical because it relates directly to the reliability of the product or service. The goal of process quality is to produce defect free products and services. Product and service specifications, given in dimensional tolerances and/or service error rates define how the product or service is to be made. Adherence to these specifications is critical to ensure the reliability of the product or service as defined by its intended use.

Delivery speed

In some markets a firm’s ability to deliver more quickly than its competitions may be critical. A company that can offer an on-site repair service in only 1 or 2 hours has a significant advantage over a competing firm that guarantees service only within 24 hours.

Delivery reliability

This dimension relates to the firm’s ability to supply the product or service on or before a promised delivery due date. For an automobile manufacture, it is very important that its supplier of tyres provide the needed quantity and types for each day’s car production. If the tyre



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needed for a particular car is not available when the car reaches the point on the assembly line where the tyres are installed, the whole assembly hire may have to be shutdown until they arrive.

Coping with changes in demand

In many markets, a company’s ability to respond to increase and decrease in demand is important to its ability to complete. When demand is strong and increasing, costs are continually reduced due to economies of scale, and investments in new technologies can be easily justified. But scaling back when demand decreases, the company has to take many difficult decisions about laying-off employees and related reduction in assets. The ability to deal with dynamic market demand over the long term is an essential element of operations strategy.

Flexibility and new product introduction speed

Flexibility from a strategic prefecture refers to the ability of a company to offer a wide variety of products to its customers. The critical feature of operations strategy is the ability of the company to turn out new products in the shortest possible time span.

The concept of “Trade off” in Operations Strategy

The underlying logic of the concept of “Trade off” in Operations Strategy is that an operation cannot excel simultaneously on all competitive dimensions, Consequently, management has to decide which parameters of performance are critical to the firm’s success and then concentrate the resources of the firm on these particular characteristics. For example, if a company wants to focus on speed of delivery, it cannot afford to be very flexible in its ability to offer a wide range of products. Similarly, a low cost strategy is not compatible with either speed of delivery or flexibility. High quality is also viewed as a trade off to low cost.

A strategic position is not sustainable unless there are compromises with other positions. Tradeoffs occur when activities are in compatible so that more of one thing necessitates less of another.

The Marketing – Operations link

It is necessary for an organization to understand its markets from both marketing and an operations perspective. Terry Hill, a professor at Oxford University, has coined the terms ‘order winner’ and ‘order qualifier’ to



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describe marketing oriented dimensions that are key to competitive success. An order winner is a criterion that differentiates the product or services of one firm in from other. Depending on the situation, the order winning criterion may be the cost of the product (price) product quality and reliability or any of the other dimensions developed earlier. An order qualifier is a screaming criterion that permits a firm’s products even be considered as possible candidates for purchase.

When Japanese companies entered the world of automobile markets in the 1970s, they changed the way these products respond to orders, from predominantly price to product quality and reliability. American automobile producers were losing orders through quality to the Japanese companies. By the late 1980s, the product quality was improved by Ford, General motors and Chrysler and hence they became ‘qualified’ to be in the market. Consumer groups continually monitor the quality and reliability criteria, thus pre-qualifying the top performing companies.

Current Trends in Operations Management

In recent years many significant trends in operations management have continued to bring change. Radical changes have been brought into the business world due to key changes in process in operations management. Some of these key developments and concepts are listed below:

· Global operations: With organizations trading in a single world marker, and competition, not limited to other local organizations but appearing from anywhere in the world.

· Mass customization: Bring a combination if high volume operations and flexibility to meet individual customer demands.

· Lean operations: Remove all waste from operations.

· Agile operations: Use the ability to change quickly from one type of produce or market section to another.

· Integration of operations: Extend co-operation and manage operation for the whole process rather than dividing it into separate bits.

· E-business: Improve communications allowing all kinds of electronic business particularly B2B and B2C.



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· Just In Time (JIT) operations: Which has every operation done just at the right time, thereby reducing stocks and improving flows through the process.

· Total quality management (TQM): Where products are made with guaranteed perfect quality.

· Quick response or efficient customer response: Pulling materials quickly through supply chain.

· Out sourcing: What organizations concentrate on their core operations and use other organization to do the periphery operations.

· Strategic view: Emphasizing the importance of setting long term directions.

· Time based competition: Reducing delays throughout the process and rapidly delivering new products to customers.

The importance of these trends is that they show the directions in which operations are moving and the likely shape of operations in the future. Operations managers must take this changing environment into accounting when making their decisions. For example, it might take several years before this expansion is complete – so their decisions must be based on likely conditions in several years time. During this period, operations have to become more international; communicators have to be improved; the service sector and automation have to be increased; more money has to be spent on e-business; manufacturing will become more productive; operations will be more flexible; materials will move faster through the process. Only then the operations managers will be able to meet increasing customer expectations.

Q 3. What is the meaning of performance measure? Explain with an example. List the different types of benchmarking?

Ans:-



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In Performance Measurement and Evaluation: Definitions and Relationships GAO/GGD-98-26), the U.S. General Accounting Office (GAO) provides the following definition: Performance measurement is the ongoing monitoring and reporting of program accomplishments, particularly progress towards pre established goals. It is typically conducted by program or agency management. Performance measures may address the type or level of program activities conducted(process), the direct products and services delivered by a program (outputs), and/or the results of those products and services (outcomes). A ?program” may be any activity, project, function, or policy that has an identifiable purpose or set of objectives.What are performance Measure?Performance measures quantitatively tell us something important about our products, services, and the processes that produce them. They are a tool to help us understand, manage, and improve what our organizations do. Effective performance measures can let us know:• How well we are doing,• If we are meeting our goals,• If our customers are satisfied,• If our processes are in statistical control, and• If and where improvements are necessary.They provide us with the information necessary to make intelligent decisions about what we do.A performance measure is composed of a number and a unit of measure. The number gives us a magnitude (how much) and the unit gives the number a meaning (what). Performance measures are always tied to a goal or an objective (the target). Performance measures can be represented by single-dimensional units like hours, meters, nanoseconds, dollars, number of reports, number of errors, number of CPR- certified employees, length of time to design hardware, etc. They can show the variation in a process or deviation from design specifications. Single-dimensional units of measure usually represent very basic and fundamental measures of some process or product.More often, multidimensional units of measure are used. These measures are expressed as ratios of two or more fundamental units. They may be units such as miles per gallon (a performance measure of fuel economy), number of accidents per million hours worked (a performance measure or the companies safety program), or number of on-time vendor deliveries per total number of vendor deliveries. Performance measures expressed this way almost always convey more information than the single-dimensional or single unit performance measures. Ideally, performance measures should be expressed in units of measure that are the most



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meaningful to those who must use or make decisions based on those measures.Most performance measures can be grouped into one of the following six general categories. However, certain organizations may develop their own categories as appropriate depending on the organization’s mission:1. Effectiveness: A process characteristic indicating the degree to which the process output (work product) conforms to requirements. (Are we doing the right things?)2. Efficiency: A process characteristic indicating the degree to which the process produces the required output at minimum resource cost. (Are we doing things right?)3. Quality: The degree to which a product or service meets customer requirements and expectations.4. Timeliness: Measures whether a unit of work was done correctly and on time. Criteria must be established to define what constitutes timeliness for a given unit of work. The criterion is usually based on customer requirements.5. Productivity: The value added by the process divided by the value of the labor and capital consumed.6. Safety: Measures the overall health of the organization and the working environment of its employees.

Why Measure Performance?

Why measure performance? Many authorities on the subject have provided answers to this question. Severalof them are quoted below.National Performance ReviewIn their benchmarking study report, Serving the American Public: Best Practices in Performance Measurement (1997), the National Performance Review (NPR) notes that:• Performance measurement yields many benefits for an organization. One benefit is that it provides a structured approach for focusing on a program’s strategic plan, goals, and performance. Another benefit is that measurement provides a mechanism for reporting on program performance to upper management.General Services AdministrationThe General Services Administration’s (GSA’s) Performance-Based Management: Eight Steps to Develop and Use Information Technology Performance Measures Effectively states that:• Measurement focuses attention on what is to be accomplished and compels organizations to concentrate time, resources, and energy on achievement of objectives. Measurement provides feedback on progress



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toward objectives. If results differ from objectives, organizations can analyze gaps in performance and make adjustments.U.S. Department of EnergyIn DOE G 120.1-5, Guidelines for Performance Measurement (1996), the U.S. Department of Energy proposes that:• Performance measurement improves the management and delivery of products and services. A recent opinion poll asked a group of adults what they thought the Federal government’s top priority should be. Almost half wanted emphasis put on better management. In a world of diminishing resources, improving management of programs and services is critical.

How Is Performance Measurement Used?• Performance measurement improves communications internally among employees, as well as externally between the organization and its customers and stakeholders. The emphasis on measuring and improving performance (i.e., results-oriented management”) has created a new climate, affecting all government agencies, and most private sector and nonprofit institutions as well.A results-oriented organization requires timely and accurate information on programs and supporting services, whether at headquarters, field elements, or contractor locations. Collecting and processing accurate information depends on the effective communication of mission-critical activities.• Performance measurement helps justify programs and their costs. The public, Congress, and Office of Management and Budget are increasingly taking a more ?results-oriented” look at government programs, and the cost-effectiveness of program expenditures is increasingly being called into question. In an era of shrinking federal budgets, demonstration of good performance and sustainable public impacts with positive results help justify programs and their costs.• Performance measurement demonstrates the accountability of Federal stewardship of taxpayer resources. Federal employees and contractors want their day-to-day activities to contribute to a better society. Performance measurement can show that we are addressing the needs of society by making progress toward national goals.• Performance measurement is mandated by the Government Performance and Results Act (GPRA) of 1993 and is central to other legislation and Administration initiatives. In addition to holding federal agencies accountable for achieving program results, GPRA also promotes a focus on service quality and customer satisfaction, and seeks to improve executive and Congressional decision making byclarifying and stating organizational performance expectations, measures, and program costs upfront.” The Government Management Reform Act of



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1994 gives additional impetus to improve management of government performance by requiring, among other things, annual audited financial statements. Agencies must include performance information (programmatic and financial) in the overview to their financial statements.

Mark Graham BrownNoted performance measurement expert, Mark Graham Brown, points out that:• Measurement reduces emotionalism and encourages constructive problem solving. Measurement provides concrete data on which to make sound business decisions, thus reducing the urge to manage by gut feeling” or intuition.• Measurement increases one’s influence. Measurement identifies areas needing attention and enables positive influence in that area. Also, employees perform to the measurement,” an example of how measurement influences employee performance.• Improvement is impossible without measurement. If you don’t know where you are, then you can’t know where you’re going and you certainly can’t get to where you want to be. It’s akin to traveling in unknown territory without a compass or a map. You’re totally lost. Another way of asking this question is, ?What are the benefits of performance measurement?” The answer is that performance measurement has many beneficial uses. For example, it can be used to:• Set goals and standards.• Detect and correct problems.• Manage, describe, and improve processes.• Document accomplishments.

6 The Performance-Based Management HandbookWhat Performance Measures Won’t Tell You• Gain insight into, and make judgments about, the effectiveness and efficiency of programs, processes, and people.• Determine whether organizations are fulfilling their vision and meeting their customer-focused strategic goals.• Provide measurable results to demonstrate progress towards goals and objectives.• Determine the effectiveness of your part of your group/department/division/organization.

Bench Marking:-- It is a method of measuring a company’s processes, methods, procedures and in a way all functions in great detail. Benchmarking is used to understand how these got into the system and what circumstances brought them about. It is a learning process with a



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few to find out whether some of the reasons have changed and bring in new processes for improvement.. The metrics thatcould be used are – number of pieces per hour, cost per unit, number of breakdowns per week., customer alienation during a week, return on investment, number of returns from customers in a month, inventory turnover, and many others. As can be seen the figures as found above determine the efficiency of the organization. To keep focused, many organizations, especially the large ones, select afew processes for purposes of benchmarking. This helps in ensuring constant and deep attention to those aspects which are to be dealt with. The following are the types of benchmarking firms consider.Types of benchmarking:- • Process benchmarking - the initiating firm focuses its observation and investigation of business processes with a goal of identifying and observing the best practices from one or more benchmark firms. Activity analysis will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing may be a consideration.• Financial benchmarking - performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity. • Benchmarking from an investor perspective- extending the benchmarking universe to also compare to peer companies that can be considered alternative investment opportunities from the perspective of an investor.• Performance benchmarking - allows the initiator firm to assess their competitive position by comparing products and services with those of target firms. • Product benchmarking - the process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses. • Strategic benchmarking - involves observing how others compete. This type is usually not industry specific, meaning it is best to look at other industries. • Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.



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• Best-in-class benchmarking - involves studying the leading competitor or the company that best carries out a specific function. • Operational benchmarking - embraces everything from staffing and productivity to office flow and analysis of procedures performed.



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Q 4. What is Flexible Manufacturing System? How does it help in improving the manufacturing process?

Ans:-

A Flexible Manufacturing System (FMS) is a production system consisting of a set of identical and/or complementary numerically controlled machine which are connected through an automated transportation system

Competitive business environment offers new pressures to be confronted by the manufacturing systems, such as tailored product (increasing variety) with delivery on time along with emphasize conventional requirements of quality and competitive cost. Therefore, to sustain in the global scenario, the focus is to develop a manufacturing system that can fulfil all the demanded requirements within due dates at a reasonable cost. The introduction of Flexible manufacturing System (FMS) facilitates manufacturing industries to improve their performance along with the flexibility to make the customized product with medium volume. A Flexible manufacturing System (FMS) can be defined as a computer-controlled configuration of semi-dependent workstations and material-handling systems designed to efficiently manufacture various part types with low to medium volume. It combines high levels of flexibility with high productivity and low level of work- in-process inventory (Jang & Park, 1996). The exquisiteness of FMS is that it gleaned the ideas both from the flow shop and batch shop manufacturing system and is designed to imitate the flexibility of job shops while maintaining the effectiveness of dedicated production systems. Such FMS should be designed to improve productivity while fulfilling the demand with decreasing makespan time. A generic FMS is able to handle a variety of products in small to medium sized batches simultaneously. The flexibility of a flexible manufacturing system (FMS) has enabled it to become one of the most suitable manufacturing systems in the current manufacturing scenario of customized and varied products with shorter life cycles.

With the aim of combining production flexibility and productivity, the design of flexible manufacturing system (FMS) is subject of high investments. Deterministic models based on discrete-event simulation can be utilized to design production systems such as FMSs. Distinctively these are used to design and size the hardware requirements of a FMS (buffer capacity, layout design, material handling layout design, and number of workstations with respect to the projected production) with an objective to raise the utilization of resources. However these decisions of FMS design



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are strategic and to be taken in initial phase with extreme care ensuring that the designed FMS will successfully fulfill the demands of fluctuating market. The design decisions of FMS must be based on the justification of performance improvement. In recent environment where a manager can make use of easily available computing power along with the various commercial tools and techniques,it is quite reasonable to estimate some performance issues of existing and proposed FMS and subsequently suggest the design decisions. The employment of above mentioned tools and models to judge the FMS performance could be very useful to evaluate the system parameters like production rate, resource utilization, make span time etc. at a beginning stage of design decision making. The company selected for the case was under pressure from the market and was ready with the funds to introduce some major modifications in their existing system to improve the productivity along with the flexibility to survive in the competitive working domain.

This paper presents a study performed for performance evaluation of an existing system with the objective to improve the performance by designing a new FMS. The case company is located in National Capital Region of India and was striving to improve the performance of existing flexible system and setting up to make some investment decisions for up-gradation.

The remainder of this paper is described as following: Section 2 gives an overview of the literature surveyed to conduct the research; subsequently section 3 delineates the problem definition along with the objectives of the case and the data collection. Section 4 includes the design and simulation of new FMS while section 5 analyses and compares the results of the study. In section 6, the paper has been concluded with some issues and future intensions of the research.

How does it help in improving the manufacturing process?

If you have implemented lean manufacturing into your company, you

have most likely adopted flexible system manufacturing. Flexible system

manufacturing helps you to get more use out of your equipment. You no

longer need to have one machine for one job as each machine will serve

multiple purposes within the organization. The equipment can be changed

by hand to make one part and then changed to make a completely


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different part. By doing this, you are using flexible system manufacturing.

Most companies have a complete automated system as computers control

the entire thing, making it easier and more efficient for your company.

Flexible system manufacturing is to be used quickly as you need to

change the speed of your manufacturing lines in a hurry if you are to

adjust for an influx of sales or changing market conditions. Some

companies alter their equipment in order to get it to make more than one

product where others will simply take the time to buy the right type of

equipment in the first place in order to provide a better output for your

manufacturing plant in the first place.

If you need to go out and buy new equipment, doesn't negate the purpose

of lean manufacturing, which is to save money? While you need to spend

money to make money, buying equipment that serves multiple purposes

is ideal for your company because it will help to reduce expenses. You will

reduce expenses because you only have one machine that is doing

multiple jobs. In the past, you probably needed 2-3 machines to make the

products that one machine can easily pump out in half that time.

The start-up costs initially will be higher but they will pay themselves off

in a timely manner. Companies that produce automobiles commonly use

flexible manufacturing because with a small adjustment they can easily

create products for 2-3 different vehicles that they are producing. The

switchover is simple to do and it will take just a few moments for the

machine to make the change and start producing a completely different

product.

Still don't see the value in flexible system manufacturing? Here's an

impressive statistic for you to dwell on, in 2004 Ford Motor Company

released a report pertaining to flexible system manufacturing and how it

has aided their company to produce better products and services. How







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much money did Ford Motor Company save? They added up the costs and

found that they saved over $2.5 billion once they implemented flexible

system manufacturing at about 5 different facilities. Smaller organizations

aren't just saving thousands of dollars, many of them are saving millions

of dollars.

Like any system you will have some initial adjustments to make but with

the right type of equipment and employees that are willing to make

adjustments, it will be easy for your company to forge ahead with the new

manufacturing system. The only problem you will face is when you get

customers that want custom orders. You need to set a limit on how many

custom orders you are willing to take on in order to get the right response

from your customers and to actually make a profit on the custom orders.

Improving efficiency is the main aspect of using flexible system manufacturing. When you make the switchover you do need to take a look at your products in order to make sure they don't have any defects. This can be common in the beginning as you are getting used to the new system and the manufacturing equipment is learning the changes and understands what it needs to change. Overall flexible system manufacturing is one of the best systems to implement, especially if your overhead costs are incredibly high

Q5 Name and explain the different types of plant layouts by providing examples for each.

Ans:-

The following are some important factors, which influence the planning of effective layout to a significant degree.

1. Nature of the product: The nature of the product to be manufactured will significantly affect the layout of the plant. Stationary layout will be most suitable for heavy products while line layout will be best for the manufacture for the light products because small and light products can be moved from one machine to another very easily and, therefore, more attention can be paid to machine locations can be paid to machine locations and handling of materials.




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2. Volume of production: Volume of production and the standardization of the product also affect the type of layout. If standardized commodities are to be manufactured on large scale, line type of layout may be adopted.

3. Basic managerial policies and decisions: The type of layout depends very much on the decisions and policies of the management to be followed in producing the commodity with regard to the size of plant, kind and quality of the product, scope for expansion to be provided for, the extent to which the plant is to be integrated, amount of stocks to be carried at anytime, the kind of employee facilities to be provided etc.

4. Nature of plant location: The size shape and topography of the site at which the plant is located will naturally affect the type of layout to be followed in view of the maximum utilization of the space available .For e.g., if a site is near the railway line the arrangement of general layout for receiving and shipping and for the best flow of production in and out the plant may be made by the side of the railway lines .If space is narrow and the production process is lengthy, the layout of plant may be arranged on the land surface in the following manner:

5. Type of industry process: This is one of the most important factors influencing the choice of type of plant layout. Generally the types of layout particularly the arrangement of machines and work centers and the location of workmen vary according to the nature of the industry to which the plant belongs. For the purpose of lay out, industry may be classified into two broad categories:

(i) Intermittent and (ii) continuous. Intermittent type of industries is those, which manufacture different component or different machines.

Such industries may manufacture the parts, when required according to the market needs. Examples of such industries are shipbuilding plants. In this type of industry functional layout may be the best. The second type of


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industry in ‘continuous industry. in this type of industry raw material are fed at one end and the finished goods are received at another end. A continuous industry may either be analytical or synthetic . A analytical industry breaks up the raw material into several parts during the course of production process or changes its form, e.g. oil and sugar refineries. A synthetic industry on the other hand mixes the two or more materials to manufacture one product along with the process of production or assembles several parts to get finished product. Cement and automobiles industries are the examples of such industry. Line layout is more suitable in continuous process industries.

6. Types of methods of production: Layout plans may be different according to the method of production proposed to be adopted. Any of the following three methods may be adopted for production- (1) Job order production, (2) batch production, and (3) mass production. Under job production goods are produced according to the orders of the customers and therefore, specification vary from customer to customer and the production cannot be standardized. The machines and equipment can be arranged in a manner to suit the need of all types of customers. Batch production carries the production of goods in batches or group at intervals. In this type of manufacturing the product is standardized and production is made generally in anticipation of sales. In such cases functional or process layout may be adopted. In case of mass production of standardized goods, line layout is most suitable form of plant layout.

7. Nature of machines: Nature of machines and equipment also affects the layout of plants. If machines are heavy in weight or create noisy atmosphere, stationery layout may reasonably be adopted. Heavy machines are generally fixed on the ground floor. Ample space should be provided for complicated machines to avoid accidents.

8. Climate: Sometimes, temperature, illumination and air are the deciding factors in the location of machines and their establishments. For example, in lantern manufacturing industry, the spray-painting room is built along the factory wall to ensure the required temperature control and air expulsion and the process of spray painting may be undertaken.

9.Nature of material: Design and specification of materials, quantity and quality of materials and combination of materials are probably the most important factors to be considered in planning a layout. So, materials storage, space, volume and weight of raw materials, floor load capacity, ceiling height ,method of storing etc. should be given special consideration. This will affect the space and the efficiency of the



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production process in the plant. It will facilitate economic production of goods and prompt materials flow and soundly conceived materials handling system.

10. Type of machine: Machines and equipment may be either general purpose or special purpose. In addition certain tools are used. The requirements of each machine and equipment are quite different in terms of their space; speed and material handling process and these factors should be given proper consideration while choosing out a particular type of layout. This should also be considered that each machine and equipment is used to its fullest capacity because machines involve a huge investment. For instance, under product layout, certain machines may not be used to their full capacity so care should be taken to make full use of the capacity of the machines and equipment.

12.Human factor and working conditions: Men are the most important factor of production and therefore special consideration for their safety and comforts should be given while planning a layout, specific safety items like obstruction-free floor, workers not exposed to hazards, exit etc. should be provided for. The layout should also provide for the comforts to the workers such as provision of rest rooms, drinking water and other services etc. sufficient space is also to be provided for free movement of workers.

13. Characteristics of the building: Shape of building, covered and open area, number of storey’s, facilities of elevators, parking area and so on also influence the layout plan. In most of the cases where building is hired, layout is to be adjusted within the spaces available in the building. Although minor modification may be done to suit the needs of the plants and equipment. But if any building is to be constructed, proper care should be given to construct it according to the layout plan drawn by experts. Special type of construction is needed to accommodate huge or technical or complex or sophisticated machines and equipment.

6. Explain the ingredients of a Business Process.

Ans:-



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Some people believe that only business start-ups need funding and that only large companies need business plans. But the truth is that every business needs a 'blueprint' - not just for the benefit of potential investors, but so that the people who work in the business can have a clear idea of its direction, and can commit to a plan.

A good business plan serves various functions, but it must have a practical structure. Here are five essential ingredients:

1. A business description and mission statement. Every business needs a clear declaration of why it exists, and a basic description of how it intends to meet its primary objective. If you look at a good company website, it will often include elements of the mission statement in an 'About Us' section. It need only be a few sentences, and might be something like "Our company aims to provide outstanding solutions and service to the x industry in and around the area of y". Think of your mission statement as the heart of your business plan. All your goals and activities should flow from it.

Having prepared your mission statement, you next need to comprehensively describe your company. Provide a brief history and then explain what it does, identify the marketplace niche it fills and assert why you and the business will succeed. You may also wish to reveal why your business chose its location and how you will benefit the local community.

2. A management profile In business, as in any walk of life, people matter. Potential investors, lenders and even employees are not interested in a faceless, soulless corporate entity. They need to know that competent, experienced people are steering the ship. Provide an outline of your organizational structure and management team, giving solid reasons why your staff are competent to succeed. A chart illustrating the roles and relationships of key employees can work particularly well, and if you are a small company you may even be able to include every single employee.

3. A financial portrait and strategy Prospective investors and lenders need a good idea of the financial aspects of your business. Include basic data such as current and projected balance sheet, a profit and loss account and an analysis of cash flow. If you are a start-up, project this information as accurately as possible. It is important not to cut corners with these calculations and do ask for our assistance with this.



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Above all, make sure your numbers demonstrate that you and your management team have considered the key 'drivers' that will determine your success or failure. Don't fill the business plan with overly optimistic financial projections that could ultimately depict your company in a bad light.

4. Sales and marketing objectives Expertise and past success mean little without an up-to-date strategy for bringing your products or services to market. Describe your intended market, giving specific details on its size and how much of it you intend to serve. What is your market's growth potential? What specific geographic and economic factors play a role?Competitor intelligence is another crucial factor. Name your five largest competitors and explain why you can serve your market better than these rivals. Do not conceal your weaknesses: recognising the challenges you must overcome shows that you are realistic.

5. An executive summary The likelihood is that many potential lenders will initially only read an executive summary. That's not to say they'll never read your entire business plan - but it does mean that a concise, readable executive summary may be necessary to get your 'foot in the door'. An executive summary should show the highlights of each section of the business plan, providing a clear synopsis of who you are, what you do and where you're heading. An Ongoing Process Like keeping a 'To Do' list, writing a business plan is an ongoing process. Yours must adapt to changes in your company, its market and the economy - and that means regular reviewing and updating


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