Production and Operations Management

Module 4: Capacity Management

Work Design is the over all term used for Job design and Work measurement.

Job design aims to organize tasks, duties and responsibilities into a unit of work . The objective may be: to increase Productivity to reduce costs. job satisfaction motivation

Poor job design may lead to Lower productivity High attrition rate Absenteeism Complaints Sabotage

Principles of motion economy

Stop watch Time study

Work Sampling

Work measurement

Job design

Method study

Job enlargementJob rotationJob enrichment

Work design

Objectives of Job designTechnical feasibility – Jobs ( set of tasks) should be able to be performed by the person (s) with y

the equipments and systems available.Economic feasibility – cost of performing the job should \be as low as possibleBehavioral feasibility- motivation and mental simulation are considered.

Techniques of Job designWork simplification- Big job is broken down into small parts and assigned to one employee.

Less trained or less skilled persons can do the job. This may also result in highly repetitive jobs and less job satisfaction.

Job rotation - Persons are assigned different jobs at different times . reduces boredom , monotony and exposes employees to different aspects of the process.

Job enlargement - Adding similar tasks to a job . to add variety and autonomy . to make work more meaningful.

Job enrichment - tasks of planning, organizing and controlling are assigned along with routine tasks. Objective is more involvement , motivation and satisfaction.

ErgonomicsErgonomics is concerned with designing of work situations with human characteristics in mind.

1. Human and machine interfaces- some considerations are : location on tools , switches, parts for assembly , controls, levers, push buttons, Working height, sitting height, left hand and right hand operations, heights at which readings are taken, weights lifted, forces applied , direction of force .

2. Environmental factors – which affect morale , productivity , quality and long term heath problems. Ambient temperature ( 26-38 C) , Noise ( < 90 dB), Lighting( 100 ft-candles Machines), vibrations, air circulation, comfortable furniture.

Work Study

Work study is concerned with the analysis of work methods and the equipment used in performing the job, the design of optimum work method and the standardization of proposed work methods.Work study covers: Method study Work Measurement

Objective of work study:Analysis of present method and to develop a new and better method To measure work content by measuring time and to establish standard time. To increase the productivity by ensuring best possible man- machine interface To reduce cost of production / increase efficiency

Benefits of work study1. Increased productivity2. Reduced production costs3. Better layout4. Better manpower planning5. Reduced handling costs6. Better Morale and satisfaction of employees7. Standard performance measurement and basis for incentive schemes

Methods studyMethod is a technique of observing, recording and examining the present method of performing the work with a view to develop a cheaper and productive method. It covers work processes, working conditions, equipments and tools used to carry out the job.

When method study is conducted:1. High operating cost2. Heavy rejections 3. Excessive movement of materials and men4. Production bottle necks5. Quality problems6. Poor working conditions7. Excessive overtime8. Poor delivery performance

Objectives of Method study:1. To study present method and propose new and improved method2. Improvement in productivity and cost 3. Reduce material handling and operator fatigue4. Elimination of wasteful motions5. To standardize work methods

Advantages of Method study:1. Work simplification2. Improved method( cheaper and productive03. Better quality product4. Improved layout5. Better material handling

6. Better work flow7. Less fatigue to operator8. Shorter production time9. Job satisfaction

Method study procedure

1. Selection of work based on present problems and scope for improvement2. Record relevant facts and information on existing method , use appropriate charts and

diagrams3. Examining recorded facts ( use what, when , how, who, where, why type of

questioning on collected facts)4. Developing improved method by

a. Eliminating wasteful tasksb. Simplifying tasksc. Combining tasksd. Evaluating alternatives with respect to cost, savings, feasibility , reaction of

employees, short term and long term implications etc.

5. Installing improved method ( plan, schedule, coordinate, involve all concerned)6. Maintaining the new method ( feed back on performance towards objectives)

Symbols used in process charts:

Operation ( conversion)

Movement /‘ Transportation

Inspection Delay / waiting

Storage Combined activity

Recording Charts and diagrams used in method study:

# Chart type Usage1 Outline process chart Covers only main operations and Inspections2 Operations process chart Includes operations, inspections and material

inputs3 Flow process charts Includes sequence of operations, transportation,

inspections, delays and storages. For Material or product For Man For Machine

4 Two handed process charts Depicts the activities of both hands or limbs

5 Multiple activity chart For more than one worker/ machine or equipment

6 Man- machine chart Worker and machine on common time scale Worker and two machines on common time

scale

7 Flow diagram Actual paths followed by materials. Diagram drawn to scale

8 String diagram Sting used to trace the path of materials or workmen in a scale plan or a Model. To measure distances traveled.

9 SIMO chart Simultaneous motion cycle chart . used for cery small cycle time operations .

Micro motion study is useful for analysis of very small cycle operations, rapid movements and high production rates. Eg. Sewing, assembly of small parts.Video pictures are take and analyzed to understand the minute tasks and to eliminate unnecessary movements. Therbligs which indicate basic body motions of worker is used to analyse the activities.

Some therbligs are:Search , Select, Grasp ,Transport empty, Transport loaded, Hold, Release load, Position, Inspect, Assemble, Disassemble

Principle of motion economyAims at minimizing the fatigue of workers due to repetitive motions of various parts of body such as hands, feet, eyes etc.Some principles: Two hands should begin and complete their motions at the same time Two hands should not be idle at the same time except during rest Curved motions are preferred to straight line motions Fixed place for tools and materials Materials to be fed to point of use by feeders Materials and tools to be located for best sequence of motions Height to be such that alternate suiting and standing is easily possible Materials to be prepositions Operations to be combined Levers, clamps to have greatest mechanical advantage

Work Measurement

Work measurement is concerned with techniques to establish work content of specified task by measuring the time required to carry out the job at defined standard of performance by a qualified worker.

Qualified worker ( ILO Definition)A qualified worker is one who has the necessary physical attributes, intelligence, education and skills and knowledge to carry out the work to satisfactory standards of safety, quality and quantity

Objectives of Work Measurement Improved planning and control Basis for sound incentive schemes Better utilization of manpower Better labour productivity Better labour cost control

Work measurement procedure: ( arriving at standard time for the job)1. Divide the job into elements 2. Record observed time for each element by

Time study Synthesis Analytical estimation Predetermined motion time system ( PMTS) ( for basic body movements)

3. Establish elemental value by normalizing observed values4. Add relaxation allowances ( personal, fatigue)5. Add contingency allowances ( for non-repetitive elements)6. Process allowance ( for forced idleness , wating for operation to complete)

Time studyDetermination of amount of time required to perform a unit of work at defined level of performance.Objective of Time study

1. To set standards of performance2. To determine labour costs3. To balance the work of operators4. To establish a incentive scheme

Conducting time study1. Select job 2. Select worker to be studied3. Plan and stopwatch study

a. divide into elements. Elements may be repetitive, occasional, manual , machine foreign etc

b. Measure time with stop watchc. Note rating factor ( normal pace of work is equivalent of walking 4 kmph )

4. Determine normal time for each element by: Normal time = observed time x rating factor

Synthesis method

Synthesis method takes values of normal time foe reach element from the data base developed and available . data base has elemental times for all similar job elements eg.` loading, unloading, clamping, checking etc.Advantages: less time to establish, reliable , good for estimation for new jobs

Analytical estimationTakes data from elemental time data base as far as possible. Estimation of time is made for remaining elements based on experienceAdvantages : good for non-repetitive jobs and for estimation for new jobs

Predetermined motion time systemsTimes for basic motions ( Therbligs ) are established in TMUs ( time measurement units) . 1 TMU =0.036 sec. Times for reach, move , grasp etc are available in TMUs.

Problem1:Calculate standard production per shift of 8 hours with following data.Observed time per unit= 5 minsRating factor =120%Total allowance =33 1/3 % of Normal time

Ans: observed time X observed rating = Normal time x normal rating 5 x 120 =Normal time X 100 : normal tine = 5 x 120 / 100 = 6 min.allowance = 33 1/3 percent = 1/3 of normal time = 6/3 =2 min.Standard time =normal time + allowance = 6 +2 =8 minStandard production / shift = time available / standard time per piece = (8 x 60)/ 8 =60 pcs.

Problem 2;Time for making 4 pieces of an item with elements a, b, c, d is as follows .. Fatigue allowance is 25% of normal time. find the standard time per piece

Element Cycle 1 ( min)

Cycle 2 ( min)

Cycle 3 ( min)

Cycle 4 ( min)

Rating

a 1.2 1.3 1.3 1.4 85b 0.7 0.6 0.65 0.75 120c 1.4 1.3 1.3 1.2 90d 0.5 0.5 0.6 0.4 70

Ans# average observed time Normal timea 1.3 1.105b 0.675 0.81c 1.3 1.17d 0.5 0.35

Total Normal time = 3.435

Allowance = 25/100 X 3.435 = 0.858 : Standard time = 3.435 + 0.858 =4.29 min. Standard time per pc = 4.29 / 4 =1.073 min per pc

Work sampling

Work sampling is based statistical theory of random sampling and probability of Normal distribution.Normally used for determining fraction of time the machines are idle or the operators are idle. More the number of samples taken , less is the error.

No. of observations n= pqz2 / a2

p= percentage of observations where machine was idleq= 100 -p ( percentage machine not idle)z= desired confidence level ( z=1 for 68.3%, 2 for 95.4%, 3 for 99%)a= desired accuracy or error ( in percentage)

Advantages Economical Not necessary to use trained work study experts No stop watch measurements

Limitations Little value to improve the operations If random sampling is not done results will be erroneous

ProblemNine observations were made for machine busy or idle. If an accuracy of +- 15% is required at a confidence level of 95.4%, determine the sample size necessary.

No. working

1 yes2 yes3 yes4 no5 yes

6 no7 no8 yes9 yes

Ans p= 3/9 X 100 = 33.33% ; q =66.67% ; z=2 ; a= 15%:

n= pqz2 / a2 : n= 33.33 x 66.67 x (2 x 2) / 15 x 15 = 39.50 = 40 observations

Productivity

Production – refers to total out put : 1000 pcs per month ; 100 tons of castings per monthProductivity = Out put / input = Quantity of goods and services / Amount of resources used

Productivity can be improved by: Increase production with same amount of resources Decrease resources while keeping the production same Add few resources and get higher production Allow slight production decrease while utilizing significantly less resources

Productivity can be applied to labour, space, money, materials energy used .

Ways of measuring labour productivity; Output per man –hour = Output / man hours used ( 50 pcs per man-hr) Labour hour per unit of out put = man-hours/ output ( 100man-hrs per part) Added value per unit of labour cost = added value for the product/ total wages ( eg. 8, 10 )

Some ways to increase productivity:1. Reducing rejections and rework2. Reducing cycle time3. Reducing setup time4. Reducing wasted time by method study5. Good training6. Automation

Learning curve

Workers take more time in the beginning when the task or product is new. As they gain experience the performance improves. The reduction in time taken is drastic in the beginning , tapers off and finally the time taken is constant .

There are mathematical models to estimate the time taken such as : Arithmetic analysis Logarithmic analysis

Typical learning curve is as below

Aggregate planning

Aggregate planning involves best quantities to be produced during the time period ( normally 6months to 18 months) at the lowest cost. It involves:

Planning work force size Production rate Inventory levels

Aggregate production planning involves determining the output levels of product groups for the planning period.Aggregate planning or aggregate capacity planning consists of devising a plan to support the production required.

Why aggregate planning is required?

No. of components

Time taken

1. It facilitates loading of facilities fully. Minimizes over loading and under loading2. Provision of production capacity to meet aggregate demand3. Helps in Systematic production in spite of peaks and valleys in customer demand.4. Utilization of resources is enhanced

Steps in Aggregate capacity planning1. Prepare sales forecast for each product over the planning period (normally 6-18 months)2. Indicating quantities for weeks/ months .3. Sum up individual product requirements into one arrogate demand for the factory.4. Convert aggregate demand into labour, materials, machines and other elements of

production capacity5. Identify alternate resources for supplying necessary production capacity , if required.6. Develop alternatives and select one which meets the objectives of the organization.

Production capacity may have to be computed with respect to:1. Size of work force2. Use of over time or idle time3. Inventories or back orders4. Use of subcontractors

Costs associated with aggregate planning are:Pay roll costsCost of overtimeSecond shift/ third shift operationCost of hiring or laying off workersCost of inventories Cost of backlogs ( liquidity damages – reduced price in case of delays as a part of contract)

Approaches to Aggregate planningTopdown approach – consideration is given to product families , products and quantities. Does not consider small capacity differences that may exist among specific products

Bottomup approach- each product with details at lower level ( say parts) are taken into consideration while developing the plan. This the most popular method of arriving at aggregate plan.

Capacity planning

Capacity indicates the ability of the firm to meet the market demandTypes of capacity planning Long range capacity planning Medium range capacity planning Short range capacity planning Long range capacity planning

Meets corporate / business objectives

Normally for 3 or more years ahead Planning of land Planning of facilities Planning of technology and equipments Planning of human resources

Medium range capacity planning Making of aggregate plans Normally for 6 to 18 months or more years ahead Work force reallocation Inventory management Work force recruitment Second shift and third shift operation Subcontracting ( development and permanent loading) Make –buy decisions

Short tem capacity planning Normally for 3-6months Overtime management Control of inventories ( raw material, WIP and finished goods) Work force reallocation Subcontracting Alternate tooling

Capacity requirement planning (CRP)

Capacity requirement planning is concerned with determining the following requirement for a Master production schedule.( MPS)

What and when materials are required ( MRP – Material requirement planning) Machine hours required Labour hours and categories required

Major CRP inputs are: Planned orders and released orders Loading information from work centre file ( standard hours for jobs and hours available) Routing information and alternate routing , if any

Major CRP outputs are Load reports Revisions to MPS for rescheduling if any Verfication of materials planned as per MRP system

If the load reports indicate inadequacy of capacity, overtime or subcontracting to be resorted to or changes to be made to MPS.

Strategies to meet non –uniform demandStrategy 1: Absorbing demand fluctuations by varying inventory levels or allowing backlogs

Method1- Produce in earlier period and hold in inventory until the product is demandedCost- Inventory carrying cost

Method 2- deliver product when capacity is availableResult- lost revenue, lost customers, unhappy customers

Stategy2 : Change production according to demand

Method 1- Work additional hours with out changing work force sizeCost- overtime pay ( normally double)

Method 2- Add work force for higher productionCost- excessive labour charges during period of slack demand

Method 3- Sub -contractCost- company overhead and sub-contact costQuality and production schedules may be affected

Strategy 3 : vary work force according to demand

Method1- Hire additional personnel when demand increasesCost- cost of advertisement, interview, trainingSkilled labour may not be available when needed

Method 2- lay-off when demand reducesCost- cost of lay off ( half pay during lay off)Capital investments are idle

Problems;Order position for a certain product is as belowMonth Units Month Units1 13, 000 7 11,0002 12, 000 8 7, 0003 10, 000 9 15, 0004 9, 000 10 13, 0005 11, 000 11 12,0006 13, 000 12 10,000Given: Capacity of shop is10,000 per month on regular basis

Overtime capacity is 3000 per monthSub-contract capacity is3000 per month with 3 months lead timeInitial inventory is 1000 units

Production cost is Rs 5 / unit on regular basisProduction cost is Rs 9 / unit on Overtime basisSubcontract cost is Rs 7 / unit Cost of carrying inventory is 1.00 per month per unit

No back log of orders is allowed. Work out the total production cost on: leveled production basis No inventory basisand suggest which to be adopted

Ans :Plan A : Level production basis

Month Units Regular production

Overtime production

Subcontract production

From Inventory ( stock)

Inventory carried ( stock)

1 13, 000 10,000 2000 nil 10002 12, 000 10, 000 2000 nil3 10, 000 10, 0004 9, 000 10, 000 10005 11, 000 10, 000 10006 13, 000 10, 000 30007 11,000 10, 000 10008 7, 000 10, 000 30009 15, 000 10, 000 2000 300010 13, 000 10, 000 300011 12,000 10, 000 200012 10,000 10, 000Total 1, 36, 000 1, 20, 000 4000 11,000 1000** from initial inventory

Cost of production;1. Regular basis :1,20, 000 X Rs .5 = Rs. 6, 00, 0002. Overtime basis: 4000 x Rs 9 = Rs 36, 0003. Subcontract basis 11, 000 X Rs 7 = Rs 77, 0004. Inventory carrying cost : 1000 X 1 (month) X Rs 1 + 3000 x 1 x Rs 1 = Rs 40005. Total cost = Rs 7, 17, 000

Plan B : No Inventory basisMonth Units Regular Overtime Subcontract From

production production production Inventory ( stock)

1 13, 000 10,000 2000 nil 10002 12, 000 10, 000 2000 nil3 10, 000 10, 0004 9, 000 9, 0005 11, 000 10, 000 10006 13, 000 10, 000 30007 11,000 10, 000 10008 7, 000 7, 0009 15, 000 10, 000 2000 300010 13, 000 10, 000 300011 12,000 10, 000 200012 10,000 10, 000Total 1, 36, 000 1, 16, 000 6000 13000 1000

Cost of production;1. Regular basis :1,16, 000 X Rs .5 = Rs. 5, 80, 0002. Overtime basis: 6000 x Rs 9 = Rs 54, 0003. Subcontract basis 13, 000 X Rs 7 = Rs 91, 0004. Inventory carrying cost : nil5. Total cost = Rs 7, 25, 000

Plan A is to be adopted because of lower total production cost.