Module 1

Project Management
 Definition of a Project:
• "A project is a temporary endeavour with a specific
goal, timeline, and resources allocated to achieve a
unique outcome.“
• A project manager ensures careful planning, direction
and alignment of the company's strategic goals.
• These professionals guide their teams to work on the
right things at the right time and motivate them to
meet critical project deadlines and achieve project
milestones.
• Understanding why project managers are essential can
help you achieve business objectives, ensure projects
stay within the budget and increase the team's
productivity.
 Importance of Project
Management
• Creates a focus
• Ensures quality
• Reduces risk
• Provides leadership
• Minimises project costs
• Ensures realistic project planning
• Encourages teamwork
• Maximises use of resources
• Encourages learning
• Facilitates continuous oversight
• Motivates the project team
 1. Initiating the Project
• The beginning of the project opens with the
project management initiation phase.
• Initiating the project is the first step in the
project process, covering the organization’s
allocation of company resources to the
various project areas.
• Two crucial documents will need to be
created during the project management
initiation phase. Such documentation project
managers need at this time, include:
• Project Charter: A document outlining the
project’s scope, objectives, and participants,
defining roles and responsibilities and
objectives and goals.
• Business Case: Also used as a feasibility
study, this document examines the feasibility
of the project and evaluates its chances of
success by looking at the estimated costs, and
the risks and benefits associated with the
project.
 2. Planning the Project
• The second phase in the project
management process covers the
formulation of project goals and
objectives. This process step charters the
project blueprint, outlining project
requirements and the steps necessary to
reach them. Planning the project is one of
the most essential steps to the project
processes.
• As this document is an integral part of the
planning phase and the project as a whole, project
management plans should cover:
• Budgets
• Activity definition
• Scope planning
• Schedule development
• Risk identification
• Staff acquisition
• Procurement planning
• Work breakdown structure
 3. Executing the Project
• Once the project has been outlined and the plan has
been created, now is the time to begin the project in
earnest. The third phase in project management is
executing a projection of the project plan.
• This phase is all about putting the plan into action and
keeping the project on track. It is up to the project
manager to ensure that all tasks are handled
accordingly, including allocating resources to project
tasks and completing goals that further the project
requirements. For these reasons, the project execution
phase is typically where the most effort is placed,
using up much of the project’s time, money, and
resources.
4. Monitoring and Controlling
the Project
• The fourth stage in the five project phases
covers the control and monitoring of the
project. Monitoring and controlling in project
management covers the process of defining,
taking, and analyzing the project
performance measurements or key
performance indicators (KPI).
• Project managers will use several KPI’s to
help them measure the current state of
completion throughout the project. These
include:
• Project Performance: Tracks the project changes throughout
its life cycle, noting issues that arise, reaction times to
problems, and the efficiency in which they are solved.
• Project Objectives: Determines if the project is on track and
on budget and whether it is projected to meet stakeholder
objectives.
• Effort and Cost Tracking: Measures the monetary and human
resources allocated to project areas to determine if the project
will meet all deadlines and objectives.
• Quality Deliverables: Concerns whether or not all project
tasks are being completed, and goals are being met.
 5. Closing the Project
• The closing phase of project management is all about
conducting an orderly and formal end to the now-
completed project. However, even if the project has
not made it to completion and instead been cancelled,
this closing process is still a necessary part of the
project’s life cycle. It is also the most skipped process
of the five phases of project management.
• At this time, all of the project’s data and
documentation are gathered into one file, which is
then stored by the organization or company for future
reference. It is this formal closing of the project that
sums up all pertinent information that can be used for
further business analysis and insight.
Project Tracking the Phases of
Project Management
• With the five phases of project
management fresh in your mind, now is
the time to consider what project
management tools can help you complete
your next project. Time tracking software
like QuickBooks Time offers business
owners and project managers the support
they need to manage all of a project’s
moving parts.
Project management knowledge areas
 The project management knowledge areas can be simply
defined as the key aspects of project management that
should be overseen by project managers so they can plan,
schedule, track and deliver projects successfully with the
help of the project team and project stakeholders.
 Each of these project management knowledge areas needs
to be managed throughout the five project life cycle phases,
which are project initiation, project planning, project
execution, monitoring and controlling, and project closing.
These are the chronological phases that every project goes
through, also referred to as project management process
groups in PMI’s PMBOK.
1. Project Integration Management
2. Project Scope Management
3. Project Time Management
4. Project Cost Management
5. Project Quality Management
6. Project Human Resource Management
7. Project Communications Management
8. Project Risk Management
9. Project Procurement Management
10. Project Stakeholder Management
 Project integration management can be simply defined as the framework that
allows project managers to coordinate tasks, resources, stakeholders, changes
and project variables.
 Project managers can use different tools to make sure there are solid project
integration management practices in place. For example, the project
management plan is important for project integration because it works as a
roadmap for the project to reach a successful end.
 Once created, the project plan is approved by stakeholders and/or sponsors
before it’s monitored and tracked by the project management team.
 Project management software, like Project Manager, is ideal for project
integration management because it’s an online platform that project managers
can use to create a project plan, oversee project management knowledge areas
and collaborate with their teams online.
 Choose between online Gantt charts, kanban boards, project calendars and
other project management views to plan, schedule and track your projects.
Project Manager also has project reporting features that allow project managers
to create project reports they can share with project stakeholders to keep them
informed.
 Project scope management is one of the most important project management
knowledge areas. It consists of managing your project scope, which refers to the
work that needs to be executed in a project.
 To manage your project scope, you’ll need to build a project scope management
plan, a document where you’ll define what will be done in your project.
 To start building your scope management plan, begin by writing a scope
statement. This statement is anything from a sentence to a bulleted list that’s
comprehensive to reduce major project risks.
 Another part of this area is a work breakdown structure (WBS), which is a
graphic breakdown of project work.
 Validate scope during the project, which means making sure that the
deliverables are being approved regularly by the sponsor or stakeholder. This
occurs during the monitoring and controlling process groups and is about
accepting the deliverables, not the specs laid out during planning.
 The scope statement is likely going to change over the course of the project to
control the scope, such as if a project falls behind schedule.
 Project time management involves estimating your project duration, creating
a project schedule and tracking the project team’s progress to ensure the
project is completed on time. To do so, the first thing to do is to define your
project scope to identify the tasks that should go into your project schedule.
 Those project tasks are then put in an order that makes sense, and
any dependencies between them are noted. These dependencies are then
determined to be either finish-to-start (FS), finish-to-finish (FF), start-to-start
(SS) or start-to-finish (SF). This is mostly for larger projects.
 With the tasks now sequenced, the project resources required for each must be
estimated and assigned. The duration of each task is also determined at this
point. All of this leads to a schedule by first determining the critical path and
float for each task. You should use project management tools like Gantt charts,
kanban boards or project calendars to place the tasks on a timeline, and then
work on resource leveling to balance resource usage.
 Once the project schedule is made, plans to control the schedule are necessary.
Earned value management is performed regularly to make sure that the actual
plan is proceeding as planned.
 This project management knowledge area involves
estimating project costs to create a project budget. To do
so, you’ll need to use cost-estimating tools and techniques
to make sure that the funds cover the project expenses and
are being monitored regularly to keep stakeholders or
sponsors informed.
 As with other project management knowledge areas, the
cost management plan is the document where you’ll
explain the method to establish the budget, which includes
how and if it will change and what procedures will be used
to control it. Each project task will have to be estimated for
cost, which means including all resources such as labor,
materials, equipment and anything else needed to
complete the task.
 A project can come in on time and within budget, but
if the quality isn’t up to standard, then the project is a
failure. This means that quality management is one of
the most critical project management knowledge
areas. Your project management plan should include a
quality management plan section that specifies the
quality control and quality assurance guidelines for
your project.
 Therefore, to control quality, the deliverables must be
inspected to ensure that the standards outlined in the
quality management plan are being met.
 The project team is your most important resource, so it’s crucial
to assemble the best team and make sure they’re happy. But also
you need to track their performance to ensure that the project is
progressing as planned. A human resource management plan
identifies the roles and requirements for those positions, as well
as how they fit into the overall project structure.
 After you’ve determined the project roles, it’s time to fill those
positions and acquire a project team. This can be done in-house
by drawing from other departments in the organization, getting
new hires or a combination of both. The team needs
development, possibly training and other things that’ll make
them viable for the project.
 Managing the project team is an ongoing responsibility of the
project manager. The team is monitored to make sure they’re
working productively and that there are no internal conflicts, so
everyone is satisfied.
 All knowledge areas of project management are important,
but communication management might be paramount as it
informs every aspect of the project. Communications inform the
team and stakeholders, therefore the need to plan
communications management is a critical step in any project.
 It’s at this point that the dissemination of communications is
determined, including how it’s done and with what frequency.
Target who needs what and when. Also, note how
communications will occur when issues such as changes arise in
the project.
 Manage the communications when the project is executed to
make sure it runs as planned. This also involves controlling
communications by reviewing their effectiveness regularly and
adjusting as needed.
 Risk management plans identify how the risks will be itemized,
categorized and prioritized. This involves identifying risks that
might occur during the execution of the project by making a risk
register.
 Perform qualitative risk analysis after the biggest risks have been
identified and classified by likelihood and impact. Then
prioritize them. Then perform quantitative analysis according to
their impact on the project, such as its budget, schedule, etc.
 Now you’ll need to plan risk responses.
 If those risks in fact become issues, then a response needs to
have been written in advance, with an owner who can make sure
the risk is properly identified and handled. Controlling risk
involves regularly reviewing the risk register and crossing off
those risks that are no longer going to impact the project.
 This project management knowledge area deals with
outside procurement, which is part of most projects, such
as hiring subcontractors. This will impact on the budget
and schedule. Procurement management planning starts
by identifying the outside needs of the project and how
those contractors will be involved.
 Now conduct those procurements by hiring the
contractors, which includes a statement of work, terms of
reference, request for proposals and choosing a vendor.
You’ll want to control the procurement process by
managing and monitoring, and then closing the contracts
once the work has been done to everyone’s satisfaction.
 The stakeholders must be happy, as the project has been created for
their needs. Therefore, they must be actively managed like any other
part of the project. To start, identify the stakeholders
through stakeholder analysis and find out what concerns they have. It’s
not always easy, but it’s a crucial part of starting any project.
 Now plan stakeholder management, which means listing each
stakeholder and prioritizing their concerns and how they might impact
the project. This will lead to managing stakeholders’ expectations to
make sure their needs are met and that you’re in communication with
them.
 Throughout the project, you’ll want to control stakeholder engagement
by determining if the stakeholders’ needs are being addressed. If not,
figure out what changes need to be made to either satisfy those needs
or adjust the expectations.

Module 3

Production
and
operations
Management
Production
 Production is the process of combining
various inputs, both material (such as metal,
wood, glass, or plastics) and immaterial (such
as plans, or knowledge) in order to create
output.
 Ideally this output will be a good or
service which has value and contributes to
the utility of individuals.
 The area of economics that focuses on
production is called production theory, and
it is closely related to the consumption (or
consumer) theory of economics.
Production management
 Production management is the process of managing
production inputs to produce outputs. It involves planning,
coordinating, monitoring, and administering production
processes.
Production management responsibilities include:
1. People management: Selecting the equipment and
technology to be used in production
2. Planning and control: Ensuring that operations are
performed according to plan
3. Monitoring and evaluating: Continuously monitoring
and evaluating the production plan
 For companies that manufacture products, production
management is necessary to ensure the operations and
logistics (supply chain) run smoothly.
Block diagram of a production
system
 Results in Value Addition: Production management is a key tool available with an
organization which assist in value addition. It is a process which enables in producing
high-quality products by purchasing raw materials from the right source, in right form,
at right price and in right quantity. These quality goods provide better satisfaction to
customers thereby improving goodwill of an organization.
 Inter-Disciplinary Approach: It is an inter-disciplinary approach which is derived
from several disciplines and subjects. Different subjects like statistics, mathematics,
economics, engineering, sociology and human psychology have contributed toward
the development of production management approach.
 Part of General Management: Production management is an essential component
of General management. It is a tool which assist managers in planning, organizing,
coordinating and controlling all activities related to the production of products and
services.
 Transformation Process: It is a process of transformation in which raw materials
are converted into finished products that are ready for consumption by
consumers. Production management focuses on economical production of products
avoiding any wastage of raw materials used.
 Operative Function: Production management monitors day to day operations of
business for ensuring long-term continuity. It supervises all production activities on
daily basis for checking out whether all resources are efficiently utilized.
 Both Art and Science: It can be treated both as an art as well as science.
Production management is termed as art as it is the one which assign, coordinates
and monitors all work activities of an organization. Whereas, it is a science as it
manages all machines and technical aspects helping in production activities.
 Management of Service Sector: Production management not only manages the
activities related to production of tangible products. It is a process which monitors
the service sector also where intangible products are provided to customers as per
their needs.
 Facility location: It involves selecting the right location for setting up production facilities
of business that affects its long term growth. This is an important decision to be taken as it
involves long term commitment and huge investments in land, building and machinery.
Location of facility should be appropriate from where raw materials, labor and other
factors of production are easily accessible by business.
 Plant layout and Material Handling: Plant layout is concerned with physical
arrangement of facilities set up by business. It involves deciding departments, work Centre’s,
machines and necessary equipment’s within the facility for ensuring better productivity.
Material handling refers to managing the movement of materials from storeroom to
machinery and from machinery to another stage of production like packaging and storing.
 Product Designing: Product designing means giving shapes to ideas of products for
converting them into a reality. Every organization should come up with innovative products
in market after conceiving new ideas based on market requirements.
 Designing of Process: Process design is an overall route followed by business for
transforming raw materials into finished products. It is a crucial decision to be taken as it
determines the efficiency of business. It involves choosing appropriate technology, deciding
sequence of production processes and facilities layout.
 Production Planning and Control (PPC): It involves planning and controlling various
aspects of production activities. PPC is a process of deciding production in advance, setting
up the exact route for each item, deciding the start and finish deadline of each product for
directing production orders to shops and following product progress in accordance with
the order.
 Quality Control: Quality control is a process of checking and maintaining the required
quality standards of production activities within the organization. It ensures that goods
produced are of high quality by setting up check points and measuring performance from
time to time.
 Maintenance Management: It refers to evaluation of all business activities for identifying
any deviations if there. Maintenance management involves taking all corrective steps for
removing these deviations. It focuses on keeping all the processes on track in line with
decided quality, pre-determined cost schedule and time range. Taking care of all machinery
repairs, replacement and servicing are included in this.
operations Management
 Operations management (OM) is the
management of a business's structure,
practices, and processes to improve
efficiency and increase profits.
 It involves the development and execution of
business strategies to maximize productivity
and information flow.
 OM is a leadership-level role that involves
overseeing multiple departments.
 It's vital to every organization because it
ensures things are running on-time and on-
budget.
 objectives of the operations
management
 Efficiency and productivity. Operations management aims to achieve efficiency and
productivity within an organization's processes.This means using resources wisely and
producing goods or services at a low cost.
 Quality management: Maintaining and improving product or service quality is another vital
objective of operations management.This means ensuring that products or services meet
customer expectations and are free of defects.
 Cost control and cost reduction: Controlling costs is a critical objective of operations
management, as it directly impacts an organization's profitability.This means finding ways to
reduce costs without sacrificing quality or customer satisfaction.
 Supply chain management: Operations management is also responsible for managing the
supply chain.This includes ensuring that the organization has the right materials and supplies in
the right place at the right time.
 Innovation and continuous improvement: Operations management should always be
looking for ways to improve the organization's processes.This means being open to new ideas
and technologies, and being willing to make changes.
 Strategic alignment: Operations management should be aligned with the organization's
overall strategy.This means ensuring that the organization's operations are supporting its long-
term goals.
 Customer satisfaction: Customer satisfaction is a key objective of operations
management.This means ensuring that customers are happy with the products or services they
receive.
Scope of Operations Management
 Facility layout planning: Deciding to utilize space in an office or factory
to optimize workflow
 Workforce planning and management: This includes ensuring that
there are enough employees with the right skills to do the work required
and managing employee performance.
 Inventory management: Includes replenishment lead time, carrying
costs, asset management, inventory forecasting, inventory valuation,
inventory visibility, price forecasting, physical inventory, available space,
quality management, replenishment, returns and defective goods, and
demand forecasting.
 Product development: Translates customer needs into technical
specifications and designs product features to meet those specifications.
 Manufacturing: Selects the processes by which the product can be
manufactured.
 Distribution: Operations management is responsible for finding vendors
that supply the appropriate goods at reasonable prices and have the ability
to deliver the product when needed.They also ensure that products are
delivered within the agreed time commitment.
 Customer service: Operations management oversees the day-to-day
activities of the customer support team.They also develop and implement
policies and procedures to ensure effective customer service.
Relationship of Operation
Management with other Functional
Areas
 Supply chain management: Operations management is an
integral part of supply chain management, which encompasses all
activities across all organizations.
 Capacity planning: Capacity planning is a critical part of
operations management, as it helps to ensure that businesses can
meet customer demands in a timely and efficient manner.
 Forecasting: Operations managers play a key role in the
development of new products and services.They oversee the teams
that gather important market research, identify new trends, and
feed into the design process.
 Strategic plan deployment: Operations management translates
strategic plans into operational plans. It ensures efficient and
effective operations within established guidelines, objectives, and
goals.
 Automation: Incorporating automation into regular operations
can save time, money, and resources.
 Communication: Operations managers need to be able to
communicate clearly with their employees and other stakeholders.
What are some systems of
operations management?
 Business process redesign (BPR), which is focused on analyzing and
designing workflow and business processes within a company. The goal of
BPR is to help companies dramatically restructure the organization by
designing the business process from the ground up.
 Reconfigurable manufacturing systems, designed to incorporate
accelerated change in structure, hardware, and software components. This
allows systems to adjust rapidly to the capacity to which they can continue
production and how efficiently they function in response to market or
intrinsic system changes.
 Six Sigma, an approach that focuses on quality. The word “six” references
the control limits, which are placed at six standard deviations from the
normal distribution mean. Tools used within the Six Sigma process include
trending charts, potential defect calculations, and other ratios.
 Lean manufacturing, which is the systematic elimination of waste within
the manufacturing process. This theory sees resource use for any reason
other than value creation for customers as wasteful and seeks to eliminate
wasteful resource expenditures as much as possible.
Types of production system
JOB SHOP PRODUCTION
 Job shop production are characterized by manufacturing of
one or few quantity of products designed and produced as
per the specification of customers within prefixed time and
cost.
 The distinguishing feature of this is low volume and high
variety of products
 A job shop comprises of general purpose machines arranged
into different departments.
 Each job demands unique technological requirements,
demands processing on machines in a certain sequence.
 Example: a paint shop, a machine tool shop, a commercial
printing shop, a machining centre, and other factories that
create customized products in small batches and offer
customization.
Characteristics
1. High variety of products and low volume.
2. Use of general purpose machines and
facilities
3. Highly skilled operators who can take up
each job as a challenge because of
uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for
sequencing the requirements of each
product, capacities for each work centre
and order priorities.
Advantages
1. Because of general purpose machines and
facilities variety of products can be
produced.
2. Operators will become more skilled and
competent, as each job gives them
learning opportunities.
3. Full potential of operators can be
utilized.
4. Opportunity exists for creative methods
and innovative ideas.
Limitations
1. Higher cost due to frequent set up
changes.
2. Higher level of inventory at all levels and
hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.
BATCH PRODUCTION
 Batch production is defined "as a form of
manufacturing in which the job passes
through the functional departments in lots
or batches and each lot may have a different
routing.
 "It is characterized by the manufacture of
limited number of products produced at
regular intervals and stocked awaiting sales
 Example: beverage processing, biotech
products manufacturing, dairy processing,
food processing, pharmaceutical formulations
and soap manufacturing.
Characteristics:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is
used for the production of item in a
batch and change of set up is required
for processing the next batch.
4. When manufacturing lead time and cost
are lower as compared to job order
production.
Advantages
1 Better utilization of plant and machinery.
2. Promotes functional specialization.
3. Cost per unit is lower as compared to
job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process
number of products.
6. Job satisfaction exists for operators.
Limitations
1. Material handling is complex because of
irregular and longer flows.
2. Production planning and control is
complex.
3. Work in process inventory is higher
compared to continuous production.
4. Higher set up costs due to frequent
changes in set up.
MASS PRODUCTION
 Manufacture of discrete parts or assemblies
using a continuous process are called mass
production.
 This production system is justified by very
large volume of production.
 The machines are arranged in a line or
product layout.
 Product and process standardization exists
and all outputs follow the same path.
 Example: cars, clothes, food products, or
electronic goods
Characteristics
1. Standardization of product and process
sequence.
2. Dedicated special purpose machines having
higher production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is
continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
Advantages
1. Higher rate of production with reduced
cycle time.
2. Higher capacity utilization due to line
balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.
Limitations
1. Breakdown of one machine will stop an
entire production line.
2. Line layout needs major change with the
changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the
slowest operation.
CONTINUOUS PRODUCTION
 Production facilities are arranged as per
the sequence of production operations
from the first operations to the finished
product.
 The items are made to flow through the
sequence of operations through material
handling devices such as conveyors,
transfer devices, etc.
 Example: paper and pulp manufacturing,
petrochemicals, or oil and gas refineries,
Characteristics
1. Dedicated plant and equipment with zero
flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined
sequence of operations.
4. Component materials cannot be readily
identified with final product.
5. Planning and scheduling is a routine
action.
Advantages
1. Standardization of product and process sequence.
2. Higher rate of production with reduced cycle
time.
3. Higher capacity utilization due to line balancing.
4. Manpower is not required for material handling
as it is completely automatic.
5. Person with limited skills can be used on the
production line.
6. Unit cost is lower due to high volume of
production.
Limitations
1. Flexibility to accommodate and process
number of products does not exist.
2.Very high investment for setting flow
lines.
3. Product differentiation is limited.
Definition of Forecasting
 Forecasting refers to the process of
predicting future events or trends based
on past and present data and analysis.
 It involves estimating future values of
variables of interest, such as sales,
demand, or market trends, to support
decision-making.
Importance of Forecasting in
Planning
 Forecasting is a crucial tool in the planning process
for businesses, organizations, and governments.
 It helps in anticipating future demand for products or
services, enabling adequate preparation of resources
such as production capacity, inventory, and workforce.
 Effective forecasting minimizes uncertainty and risk,
leading to better allocation of resources, improved
efficiency, and cost savings.
 It supports strategic decision-making by providing
insights into market trends, identifying opportunities,
and anticipating potential challenges.
Objective of Forecasting
 The primary objective of forecasting is to reduce
uncertainty and assist decision-makers in making
informed choices.
 By providing estimates of future outcomes,
forecasting helps in setting realistic goals,
formulating strategies, and allocating resources
effectively.
 It aims to improve the accuracy of planning and
optimize operational performance by aligning
resources with anticipated demand.
 Ultimately, the goal of forecasting is to enhance
organizational performance, competitiveness, and
sustainability.
Types of Forecasting
 Qualitative Forecasting: Qualitative
forecasting involves subjective
assessments and expert judgment rather
than numerical data analysis. Example -
Expert Opinion, Delphi Method etc.
 Quantitative Forecasting: Quantitative
forecasting relies on numerical data
analysis to predict future outcomes.
Example - Time Series Analysis, Causal
Models, Simulation Models etc.
Short-Term vs. Long
Short- Long--Term
Forecasting

Short-term forecasting Long-term forecasting

predicts outcomes within a relatively predicts outcomes over an extended
short time frame, usually up to one period, typically beyond one year.
year
Short-term forecasts focus on Long-term forecasts inform strategic
immediate operational planning and decision-making and long-range
resource allocation. planning.
Economic Forecasting
 Economic forecasting helps businesses,
governments, and policymakers anticipate
economic trends and plan accordingly.
Indicators and Methods:
 Leading Indicators: Economic indicators that
change before the economy as a whole changes.
 Lagging Indicators: Economic indicators that
change after the economy has already begun to
follow a particular pattern.
 Methods include statistical modelling,
econometric analysis, and input-output models.
Forecasting Methods
1. Time Series Analysis: Time series analysis involves
analyzing historical data collected at regular intervals to
identify patterns and make predictions about future values.
Techniques
 Moving Averages: Calculating averages of past data points
to smooth out fluctuations and identify trends.
 Exponential Smoothing: Assigning exponentially
decreasing weights to past observations to give more
importance to recent data.
 Box-Jenkins (ARIMA): Autoregressive Integrated Moving
Average model for analyzing and forecasting time series data.
 Examples:
◦ Sales forecasting based on monthly sales data.
◦ Stock price prediction using historical stock prices.
2. Causal Models
 Causal models identify and analyze cause-and-effect
relationships between variables to make predictions.
Methods
 Regression Analysis: Analyzing the relationship
between one or more independent variables and a
dependent variable to make predictions.
 Scenario Planning: Creating multiple plausible
scenarios based on different assumptions about the
future to assess potential outcomes.
 Examples:
◦ Predicting sales based on advertising expenditure and
competitor activities.
◦ Scenario planning for business expansion considering
various economic conditions and market trends.
3. Simulation Models
◦ Simulation models create virtual representations of
real-world systems to predict outcomes based on
different scenarios and inputs.
 Methods:
◦ Monte Carlo Simulation: Generating random
inputs within specified ranges to simulate possible
outcomes and assess their probabilities.
 Applications:
◦ Project management: Simulating project schedules
and resource allocation to identify potential
bottlenecks and risks.
◦ Finance: Assessing the risk of investment portfolios
by simulating various market scenarios.
4. Hybrid Models
 Hybrid models combine qualitative and
quantitative forecasting approaches to improve
accuracy and reliability.
 Advantages:
◦ Incorporating expert judgment and subjective insights
alongside quantitative analysis.
◦ Enhancing forecasting performance by leveraging the
strengths of different methods.
 Examples:
◦ Using expert opinions to adjust statistical forecasts in
demand planning.
◦ Integrating market research data with time series
analysis for product demand forecasting.
Best Practices in Forecasting
 High-quality data is essential for accurate
forecasting
 Markets and environments are dynamic,
requiring continuous monitoring and
adjustment of forecasts.
 Effective collaboration and
communication foster alignment and
shared understanding among stakeholders.
 Sensitivity analysis helps assess the
impact of changes in assumptions or
variables on forecasted outcomes.
Challenges in Forecasting
 Achieving high forecast accuracy can be
difficult due to inherent uncertainties and
complexities.
 Limited availability or quality of data can
hinder the accuracy and reliability of
forecasts.
 External factors beyond the organization's
control can influence forecast accuracy and
outcomes.
 Over-reliance on forecasting can lead to
complacency and decision-making based on
flawed assumptions.
Common Problems in
Forecasting
 Forecast Inaccuracy
 Bias in Forecasting
 Forecasting Horizon
 Uncertainty and Risk
Facility Planning: Location
Decisions
 Facility location decisions are crucial strategic
choices made by businesses to determine the
optimal geographic location for their operations.
 These decisions have far-reaching implications,
impacting various aspects of business
performance, including operational efficiency, cost
management, and customer service.
 Effective facility location planning involves a
comprehensive assessment of factors such as
market demand, transportation infrastructure,
labor availability, and regulatory considerations.
Factors Affecting Facility
Location
 A multitude of factors influence facility
location decisions, encompassing both
internal and external considerations.
 Key factors include proximity to suppliers
and markets, availability of skilled labor,
transportation infrastructure, cost of real
estate and operations, regulatory
environment, and competitive landscape.
 Each factor requires careful evaluation to
identify the most suitable location that aligns
with the business's strategic objectives and
operational needs.
 Importance of Facility Location

Decisions
Strategic Significance: Facility location decisions are critical strategic
choices that directly impact a business's long-term success and viability. The
chosen location influences various aspects of operations, from supply chain
management to customer service delivery.
 Operational Efficiency: The geographic location of a facility affects
logistical efficiency, including transportation costs, lead times, and inventory
management. Proximity to suppliers, distribution networks, and
transportation hubs can streamline operations and reduce overhead
expenses.
 Customer Service: Facility location plays a vital role in meeting
customer demand and expectations for timely product delivery and
service accessibility. Strategically located facilities can enhance customer
satisfaction by minimizing delivery times, improving product availability, and
offering convenient access to services.
 Competitiveness: A well-chosen facility location can confer competitive
advantages by enabling cost savings, faster response times, and superior
customer experiences. Businesses operating from strategically
advantageous locations are better positioned to capture market share,
attract talent, and sustain growth in dynamic market environments.
 Overall Impact: Facility location decisions have a cascading effect on
operational performance, financial outcomes, and market positioning. They
represent significant investments of resources and require careful
consideration of factors such as market dynamics, regulatory requirements,
and business objectives.
Best Practices in Facility
Location Planning
 Thoroughly analyze market demand and trends to identify
potential locations that align with customer needs and
preferences.
 Conduct comprehensive research on key factors affecting
facility location, leveraging both qualitative and quantitative
data.
 Engage stakeholders, including management, employees,
suppliers, and local communities, to gather insights and
perspectives on potential locations.
 Utilize advanced tools and technologies, such as geographic
information systems (GIS) and location intelligence software,
to facilitate data-driven decision-making.
 Continuously monitor and reassess facility location decisions
to adapt to changing market conditions, technological
advancements, and regulatory requirements.
Factors Affecting Facility
Location Decisions
 Market Demand and Accessibility
 Labour Availability and Skills
 Cost Considerations
 Supply Chain Considerations
 Regulatory Environment
 Competitive Landscape
 Infrastructure and Utilities
 Quality of Life
Factors Manufacturing Retail Facilities Service Facilities
Facilities
Access to Raw High importance for Moderate importance for Moderate importance for
manufacturing facilities due retail and service facilities, retail and service facilities,
Materials and to reliance on timely access depending on the nature of depending on the nature of
Suppliers to raw materials. their operations. their operations.

Transportation Crucial for manufacturing Important for retail facilities Moderately important for
facilities to facilitate efficient to ensure accessibility and service facilities to facilitate
Infrastructure distribution and supply chain customer convenience. customer access and service
logistics. delivery.

Labour Availability Critical for manufacturing Moderate importance for Important for service
facilities due to the reliance retail facilities, depending on facilities to ensure the
and Cost on skilled labor for the level of customer service availability of qualified staff.
production processes. required.

Market Proximity Moderate importance for Essential for retail and Essential for retail and
manufacturing facilities, service facilities to ensure service facilities to ensure
and Demand depending on the proximity to target markets proximity to target markets
distribution strategy and and meet customer demand. and meet customer demand.
market reach.
Problems on Forecasting:
 Given the following six quarterly sales
figures, what sales can you expect for the
third and fourth quarters of 2023?

Year: 22:Q1 22:Q2 22:Q3 22:Q4 23:Q1 23:Q2 23:Q3 23:Q4

Qtr
Sales 146 133 150 131 156 145 ??? ???
 Given the following total sales for all
dress shirts and the distribution of sales
by colour, what will individual and total
sales be over the next six months?
 UNIT-4

FACILITY LAYOUT
Facility Layout Planning
 Facility layout planning involves arranging physical spaces
within a facility to achieve specific objectives, such as
maximizing efficiency, minimizing costs, and enhancing
productivity.
 It encompasses the arrangement of machinery, equipment,
workstations, storage areas, and other resources to support
production processes and workflow.
Importance in Optimizing Efficiency
and Productivity:
1. Optimizing Workflow: Proper facility layout ensures smooth and logical flow of materials and information
throughout the production process, reducing bottlenecks and delays.
2. Minimizing Material Handling:Well-designed layouts minimize the distance materials and products need
to travel between workstations, reducing material handling costs and time.
3. Maximizing Space Utilization: Effective space utilization allows for efficient use of available resources,
minimizing wasted space and optimizing capacity.
4. Enhancing Communication: A well-designed layout promotes better communication and collaboration
among workers, departments, and teams, leading to improved coordination and productivity.
5. Facilitating Lean Manufacturing: Facility layout planning is integral to implementing lean manufacturing
principles such as Just-in-Time (JIT) production and continuous flow, which aim to eliminate waste and
improve efficiency.
6. Adapting to Change: Flexible layouts can easily accommodate changes in production processes, product
designs, and market demands, allowing manufacturers to respond quickly to evolving requirements.
7. Improving Safety and Ergonomics: Properly planned layouts consider ergonomic factors, safety
regulations, and ergonomic considerations to create a safer and more comfortable work environment,
reducing the risk of accidents and injuries.
Objectives of Facility Layout
 Efficiency Improvement
 Arranging resources in a manner that streamlines production processes and reduces idle time.
 Example: Grouping machines in a product layout to minimize setup time between operations.
 Minimization of Material Handling Costs
 Designing layouts to reduce the distance and frequency of material movements.
 Example: Implementing cellular manufacturing layouts to minimize material transportation between workstations.
 Utilization of Available Space
 Optimizing the use of floor space to accommodate equipment, workstations, and storage areas.
 Example: Implementing mezzanine floors or vertical storage solutions to maximize space utilization.
 Enhancing Communication and Workflow
 Creating layouts that facilitate smooth communication and collaboration among workers and departments.
 Example: Arranging workstations in a U-shape to promote interaction and teamwork.
 Flexibility for Future Changes
 Designing layouts that can adapt to changes in production processes, product designs, or market demands.
 Example: Using modular workstations that can be easily reconfigured to accommodate different production
requirements.
 Principles of Facility Layout
 Minimization of Transportation Costs
 Placing workstations and resources in close proximity to minimize the distance traveled by materials or
products.
 Example: Arranging workstations in a sequential order in a product layout to reduce material movement.
 Maximization of Space Utilization
 Efficiently utilizing available space to optimize capacity and minimize wasted area.
 Example: Implementing a compact layout design to maximize the use of floor space without overcrowding.
 Flexibility to Accommodate Changes

 Designing layouts that can easily adapt to changes in production volume, product mix, or process flow.
 Example: Using modular or movable equipment that can be repositioned as needed.
 Minimization of Material Handling Time
 Reducing the time and effort required to move materials between workstations or storage areas.
 Example: Implementing a layout with centralized storage locations to minimize the distance materials need
to travel.
 Consideration of Safety and Ergonomics
 Designing layouts that prioritize worker safety, comfort, and ergonomic principles.
 Example: Ensuring adequate aisle widths, ergonomic workstation designs, and proper lighting to minimize
safety risks and discomfort.
Types of Plant Layouts
1. Product Layout
 Arrangement of machines according to the sequence of
operations required to produce a specific product.
 Ideal for assembly line production where products move along a
linear path through various workstations.
 Example: Automobile manufacturing, where each workstation
performs a specific task in the assembly process.
2. Process Layout
 Grouping machines based on their functions or processes rather
than the sequence of operations.
 Offers flexibility to accommodate a variety of product types
and production requirements.
 However, may result in increased material handling costs due to
longer travel distances.
 Example: Job shops or custom manufacturing facilities where
products require different processes.
3. Fixed Position Layout
 Products remain stationary, and equipment and workers are
brought to the product.
 Commonly used in construction projects, shipbuilding, aircraft
manufacturing, and large equipment manufacturing.
 Equipment and resources are moved around the fixed product
to complete assembly or fabrication.
 Example: Construction of a building where materials and
workers are brought to the construction site.
4. Cellular Manufacturing Layouts
 Grouping machines and workstations into cells to produce
similar products or parts.
 Each cell operates independently and is responsible for a
specific set of products or tasks.
 Promotes efficiency, as workers within a cell can specialize in
their tasks and coordinate closely with each other.
 Example: Cell-based production in electronics
manufacturing, where each cell produces a specific
component or assembly.
5. Hybrid Layouts
 Combination of two or more types of layouts to meet specific
production needs.
 Integrates the advantages of different layouts to optimize
efficiency and flexibility.
 Example: Combining cellular manufacturing with a product
layout to achieve high efficiency and flexibility in production.
 Factors Influencing Layout Changes
 Technological Advances
 Introduction of new machinery or automation can necessitate layout changes to accommodate new equipment and optimize
production processes.
 Integration of Industry 4.0 technologies, such as IoT devices and data analytics, may require layout modifications to facilitate
connectivity and data exchange.
 Market Demands
 Changes in product demand or variety can influence layout changes to support different production volumes, product
configurations, or customization requirements.
 Shifts in customer preferences may require adjustments to layout to align with changing market trends and consumer needs.
 Cost Considerations
 Capital investment required for layout changes, including purchasing new equipment, modifying existing infrastructure, or
implementing automation solutions, can impact layout decisions.
 Operating costs and efficiency improvements resulting from layout changes should be weighed against initial investment costs
to determine the feasibility of proposed changes.
 Regulatory Requirements
 Compliance with safety and environmental regulations may necessitate layout changes to ensure workplace safety, mitigate
environmental risks, and adhere to legal standards.
 Zoning and building code requirements may influence layout decisions regarding facility location, layout configuration, and
construction specifications.
 Employee Input
 Feedback from workers regarding workflow, ergonomics, and operational challenges can inform layout changes to improve
efficiency, productivity, and employee satisfaction.
 Involvement in continuous improvement initiatives empowers employees to identify opportunities for layout optimization and
participate in decision-making processes.
 Best Practices
 Regular Evaluation and Optimization of Layout
 Continuous assessment of layout effectiveness to identify areas for improvement and optimization.
 Periodic reviews of production processes, workflow efficiency, and space utilization to ensure alignment with organizational
goals and objectives.
 Example: Conducting regular gemba walks and value stream mapping exercises to identify inefficiencies and opportunities for
layout refinement.
 Collaboration between Engineering, Operations, and Management Teams
 Cross-functional collaboration among engineering, operations, and management teams to leverage diverse perspectives and
expertise.
 Involvement of stakeholders in layout planning and decision-making processes to ensure alignment with strategic objectives
and operational requirements.
 Example: Establishing a multidisciplinary layout planning committee comprising representatives from various departments to
facilitate communication and consensus-building.
 Utilization of Simulation Tools for Layout Planning
 Adoption of simulation software and modeling tools to visualize and analyze layout designs before implementation.
 Simulation enables predictive analysis of layout changes, assessing their impact on production flow, resource utilization, and
performance metrics.
 Example: Using discrete event simulation software to simulate material flow, machine utilization, and production throughput
to optimize layout designs.
 Continuous Improvement Mindset
 Cultivation of a culture of continuous improvement and innovation within the organization.
 Encouragement of employee involvement and empowerment to identify opportunities for process optimization and layout
refinement.
 Example: Implementing Kaizen events and Lean Six Sigma methodologies to systematically identify and address inefficiencies
in layout design and production processes.
Definition of Time and Motion Study
 A time and motion study is a scientific method of observing,
analyzing, and measuring the steps of a job to find the most
efficient way to perform it.
 The goal is to establish a standard time for each step, improve
procedures, and increase productivity.
 The terms "time and motion study" and "motion and time study"
are used interchangeably.
 The study combines Frederick Winslow Taylor's time study work
with the motion study work of Frank and Lillian Gilbreth.
 Time study focuses on establishing standard times, while motion
study focuses on improving work methods.
Purpose:
 To understand how work is performed.
 To identify areas for improvement in workflow and
productivity.
 To standardize work processes for efficiency gains.
Time and Motion Study Process:
 Observation and recording of every motion and action involved
in completing a task.
 Analysis of collected data to identify inefficiencies.
 Implementation of improvements based on findings.
Purpose of Work Study in Management
Science
Work Study is the systematic examination of methods of
carrying out activities in order to improve the effectiveness and
efficiency of these activities.
 Purpose:
 To streamline operations and reduce waste.
 To identify and eliminate unnecessary tasks or motions.
 To optimize resource utilization.
Techniques and Tools Used:
Stopwatch Time Study:
 Involves timing each element of a task using a stopwatch.
 Helps quantify the time taken for each motion or action.
Process Mapping:
 Visual representation of the workflow.
 Identifies bottlenecks and areas for improvement.
Work Sampling:
 Random sampling of work activities over a period of time.
 Provides insights into the distribution of work and resource allocation.
Motion Analysis Software:
 Tools for tracking and analyzing movements.
 Provides objective data for process improvement.
Benefits:
 Improved productivity and efficiency.
 Standardized work processes.
 Reduced waste and unnecessary movements.
 Enhanced worker safety and ergonomics.
Applications:
 Manufacturing processes.
 Service industries.
 Healthcare settings.
 Office environments.
Maintenance strategies
 Maintenance strategies are part of maintenance management
that determine when and how to perform maintenance to
restore or maintain an artifact, system, or component to its
original operational state.
 The main maintenance strategies are: Reactive (run-to-
failure), Predetermined maintenance, Preventive
maintenance, Corrective maintenance, Condition-based
maintenance, Predictive maintenance.
1. Reactive (run-to-failure)
 Run-to-failure (RTF) maintenance, also known as reactive maintenance, is a
strategy where equipment is used until it fails and then repaired or replaced.
 RTF is a deliberate strategy that's designed to minimize total maintenance
costs. It's also called "Fit and Forget" because there's no maintenance plan
beyond replacing the item when it fails.
RTF can be an appropriate strategy when applied to the right
equipment in specific situations, such as when:
1. The equipment is non-critical or doesn't have safety or profit implications if
it fails
2. The cost of preventive maintenance outweighs the benefits
3. The equipment is too difficult to reach for preventative maintenance, such as
because of its height, location, or confined space
 RTF can save money by eliminating the impact of regular maintenance. For
example, it's easier to replace an entire unit of sprinkler heads on a farm or golf
course when they occasionally fail. RTF can also be used for small items like
light bulbs, filters, and leaking tap-washers.
 Some advantages of RTF maintenance include: Minimal planning and
Appropriate for small items.
, 2. Predetermined maintenance
strategy
 A predetermined maintenance strategy is a preventive
maintenance plan that's performed according to a schedule
or operating time.The goal of this strategy is to keep
equipment in good condition and prevent breakdowns.
 Predetermined maintenance can help extend the life of
equipment and reduce long-term expenses.
Examples of predetermined maintenance include:
 Replacing oil, belts, and clutch discs
 Scheduled overhauls
 Monitoring and data collection
3. Preventive maintenance strategy
 A preventive maintenance strategy, also known as corrective
maintenance, is a systematic approach to maintaining a
building, machine, or other equipment by regularly
inspecting and maintaining it to prevent potential issues from
becoming more serious.
 When implemented properly, a preventive maintenance plan
can lead to long-term savings because assets last longer, use
less energy, and cause fewer interruptions.
 Here are some steps for designing a preventive
maintenance program:
 Align goals with the company's overall goals
 Gather necessary information
 Rank assets based on criticality
 Establish job and labor resources
 Create preventive maintenance checklists
 Establish short-term and long-term plans
4. Corrective maintenance strategy
 Corrective maintenance (CM) is a maintenance strategy
that restores equipment or software to its normal working
condition after it has failed.
 It can be planned or unplanned, but it's only effective if the
failure is less severe.
 CM can include: Deferred corrective maintenance,
Emergency maintenance, Redesigning of equipment with
poor design, and Improving the reliability of the design.
The general process of corrective
maintenance steps includes:
 Recognizing a malfunction in the system
 Localizing the defect to a specific equipment within the system
 Diagnosing the issue of a particular component within the
equipment
 Repairing or replacing the faulty part or item in the equipment
 Aligning and calibrating the repaired or new part in relation to the
system
 Cleaning and lubricating the equipment accordingly
 Validating performance before returning the system to service
Condition-based maintenance
 Condition-based maintenance (CBM) is a proactive maintenance
strategy that monitors equipment and assets to determine when
maintenance is required.
 CBM aims to optimize maintenance by only performing
maintenance when a problem is indicated, rather than on a fixed
schedule or after a failure occurs.
 CBM can help reduce maintenance costs, downtime, and the risk
of equipment failure.
 CBM uses sensors and other monitoring equipment to collect data
on equipment performance.
 This data is then analyzed using algorithms, machine learning, and
AI to identify patterns and anomalies that might indicate a
maintenance issue.
Common condition-monitoring
techniques include:
 Vibration analysis: Measures machine health through abnormal
waveforms caused by part misalignment, motor failure, belt slips,
or bearing failures
 Infrared thermology (IR): Uses infrared cameras to detect thermal
abnormalities and identify which parts are rising in temperature
 Ultrasonic: Uses ultrasonic sensors to detect high-frequency
sounds, which can be used to identify issues like bearing faults and
lubrication problems
 Lubricant/oil analysis: Monitors machine wear, lubricant
condition, and contamination, and is often used in heavy-duty
machinery and industrial equipment
Predictive maintenance
 Predictive maintenance is a maintenance strategy that uses data
and analysis to anticipate when equipment or systems need
maintenance before they fail.
 This allows property managers to schedule maintenance at
optimal times, instead of waiting for a problem to occur.
 Predictive maintenance is a form of preventive maintenance that
builds on the more conventional preventive approach. It can
increase efficiency by automating the maintenance process and
identifying issues early.
 This can help to streamline maintenance operations and reduce
the amount of time and resources that are required to maintain
equipment.
Predictive maintenance relies on
technology and software, including:
 Downtime tracking software: Analyzes data to anticipate
when maintenance should be performed
 Sensors: Constantly monitor equipment's performance and
machine health
 IoT, artificial intelligence, and integrated systems: Connect
various assets to enable data sharing, analysis, and insights
 Industrial controls: Gather information
 Business software like EAM and ERP: Gather information
Lean operations
 Lean operations is a management philosophy that aims to minimize
waste and maximize value within an organization.
 It's a continuous improvement methodology that can help businesses
improve their performance by increasing efficiency and reducing waste.
The five principles of lean operations are: Identify value, Map the
value stream, Create flow, Establish a pull system, and Strive for
continuous improvement.
 The Toyota Production System (TPS), developed by Taiichi Ohno,
established and popularized these principles.
Some benefits of lean operations include:
 Improved quality
 Eliminating errors and defects can result in higher quality products and
services
 Reduced costs
 Identifying and eliminating non-value-added activities can help
businesses allocate resources more efficiently and reduce overall costs
7 Wastes of Lean
1. Waiting
 idle time resulting from waiting for materials and
information
 email queues from customers
 delayed shipments
 lot processing delays
 capacity bottlenecks
 unbalanced workload
 long setup times equipment
 system downtime
2) Over-Processing
 unnecessary procedures
 undefined customer requirements
 lack of effective communication
 product changes without process changes
 redundant approvals
 making extra copies
 excessive reporting.
3) Defects
 errors
 mistakes
 scrap
 rework
 replacements
 re-inspection
 re-testing
 incorrect data entries
 poor quality
 weak process control
 inadequate training
 deficient planned maintenance
 customer needs that were not understood.
4) Excess Motion
 any movement of people or machine that does not add value.
 poor plant or office layout
 double handling
 inconsistent work methods
 poor workplace organization
5) Transportation
 poor product flow
 poor document flow
 poor raw material flow.
 poor plant or office layout
 widely spaced equipment and workstations
 poor understanding of the process flow.
6) Over-Production
 making too much, too early and faster than required by the next
process.
 unclear goals
 excessive lead times
 outdated forecasts.
 large batch sizes
 producing greater than customer demand.
7) Excess Inventory
 more inventory than needed for a job.
 large orders of raw material.
Continuous Process
 For waste elimination to be successful and sustainable, an
organization’s senior executives need to adopt a mindset that
cutting waste to cut costs creates an on-going journey of
continuous improvement.
 management and employees must collaborate for successful
removal of the 7 wastes of lean.
 Senior executives need to avoid treating waste elimination as
another one-off “tool” or quick fix.
 Essential to managing waste elimination, you must align this
strategic change initiative to the organization’s purpose,
encompassing both people and process transformations.
5S of housekeeping
SORT
 This means segregation. Dirt, dust, rubbish, and all unwanted wastes or
material should be collected and segregated first.
SET IN ORDER
 There should be an effective arrangement of safe disposal of segregated wastes.
This also includes preventive ‘ arrangements such as local exhaust ventilation,
dust collectors, vacuum cleaners, guards, covers, and devices to reduce noise,
vibration, leakage, spillage, etc.
SHINE
 The main activity of good housekeeping is cleaning. It includes cleaning of
floors, walls, ceiling, sanitary and welfare facilities, parts of plant and
machinery, PPE and other equipment, tools, lighting fixtures, lamps, tubes, etc.
STANDARDIZE
 This suggests compliance with statutory provisions and national or international
standards for safety, quality, cleanliness, and environment.
SUSTAIN
 This indicates the duty of everybody to follow rules, regulations, instructions,
notices, orders, appeals, etc for maintaining good housekeeping and safety.
THANK YOU!
 UNIT-5

QUALITY MANAGEMENT & QUALITY

ASSURANCE
 Quality Management:

 Quality management is the act of overseeing all

activities and tasks that must be accomplished to
maintain a desired level of excellence.
 Quality management is a comprehensive approach to
ensure that goods and services consistently meet or
exceed customer expectations.
 It involves the systematic control of processes to
ensure that products and services meet quality
standards.
 It involves: Quality policy, Quality planning and
assurance & Quality control and improvement
 Principles of quality management include

 Customer focus: Ensuring everyone in the organization

understands the customer, suppliers, and competitors. This
includes identifying customer needs through feedback and
making changes based on that feedback.
 Process approach: Systematically defining and managing
processes and their interactions to achieve the desired
results. This educates everyone involved in the production
cycle about how inputs and outputs relate to each other and
how those interactions contribute to system efficiency.
 Relationship management: Establishing and maintaining
engagement with customers and business partners. This can
include keeping an eye on the supply chain process and
optimizing it where possible.
 Quality Characteristics of Goods and
Services:
Goods:
 Functional suitability – The degree to which a product or system provides functions that meet stated and implied
needs when used under specified conditions.

 Performance efficiency – The performance relative to the amount of resources used under stated condition.

 Compatibility – The degree to which a product, system or component can exchange information with other products,
systems or components, and/or perform its required functions, while sharing the same hardware or software
environment.

 Usability – The degree to which a product or system can be used by specified users to achieve specified goals with
effectiveness, efficiency and satisfaction in a specified context of use.

 Reliability – The degree to which a system, product or component performs specified functions under specified
conditions for a specified period of time.

 Security – The degree to which a product or system protects information and data so that persons or other products or
systems have the degree of data access appropriate to their types and levels of authorization.

 Maintainability – The degree of effectiveness and efficiency with which a product or system can be modified by the
intended maintainers.

 Portability – The degree of effectiveness and efficiency with which a system, product or component can be transferred
from one hardware, software or other operational or usage environment to another.
Services:
 Intangibility: Services are intangible, meaning they don't have physical attributes
or dimensions. Customers buy services based on performance, not sight, smell,
taste, or touch.
 Inseparability: Services are created and consumed simultaneously, and cannot be
separated from their producers. The service provider is the service product.
 Perishability: Services are similar to food products, and require continuous
sales. Services don't ruin, but if they aren't sold, there's no revenue.
 Heterogeneity: Service quality can vary depending on when, where, how, and who
provides the service.
 Empathy: Customers often want empathy from service providers, and want special
attention throughout the process.
 Fluctuating demand: Unpredictable demand fluctuations can be a problem for
service organizations. For example, a hospital might have the same number of beds,
but more patients due to a sudden calamity.
 Pricing: Offering quality services at an affordable price can lead to repeat
purchases.
 Reliability: Reliability is a fundamental factor of service quality that can
significantly affect customer satisfaction. It's important for businesses to deliver
services accurately.
 Tools and Techniques for Quality
Improvement:

 Check Sheets: Simple tools for collecting and organizing

data.
 Histogram: Graphical representation of data distribution.
 Scatter Diagram: Visualizes the relationship between two
variables.
 Cause and Effect Diagram (Fishbone or Ishikawa
diagram): Identifies potential causes of a problem.
 Pareto Chart: Prioritizes problems or causes based on
frequency or impact.
 Process Diagram: Visual representation of the steps in a
process.
 Statistical Process Control (SPC) Charts: Monitors
process variation and detects abnormalities.
Check Sheets
 Check Sheet is also called as Tally Sheet and is
used for collecting and analyzing data.
 Data collection is an important activity in the
problem solving process as it provides a basic for
further action. A data may be numerical,
observations and opinion.
 This is the basic and very important tool of 7 QC
Tools and is extensively used in Problem Solving
Techniques such as 8D, PDCA (Plan, Do,
Check, Act) and measure phase of Six Sigma.
Histogram
 A histogram is a graphical representation of the
frequency distribution of continuous series using
rectangles.
 The x-axis of the graph represents the class interval, and
the y-axis shows the various frequencies corresponding
to different class intervals.
 A histogram is a two-dimensional diagram in which the
width of the rectangles shows the width of the class
intervals, and the length of the rectangles depicts the
corresponding frequency.
Scatter Diagram
 The scatter diagram graphs pairs of numerical data,
with one variable on each axis, to look for a
relationship between them.
 If the variables are correlated, the points will fall
along a line or curve.
 The better the correlation, the tighter the points will
hug the line. This cause analysis tool is considered
one of the seven basic quality tools.
Cause and Effect Diagram (Fishbone or
Ishikawa diagram):
 “Fishbone Diagram” also known as “Ishikawa
diagram” and “Cause and Effect diagram.
 It helps to Identify all potential or probable causes and select
the best cause which contributes to the problem/effect.
 The brainstorming technique is used here for potential cause
identification.
 In a brainstorming session, all 4M or 6M factors are taken
into consideration to identify the potential causes.
 4M or 6M factors are – Man, Machine, Method, Material,
Measurement, and Mother nature also called Environment.
 This is a very important basic 7 QC Tools and extensively
used in Problem Solving Techniques like 8D, PDCA, and Six
Sigma.
Pareto Chart
 Pareto chart in six sigma is used to show the frequency the phenomena
occur at.
 It is a bar graph where each frequency or frequency range is displayed on
the basis of the Pareto Principle, also referred to as the 80-20 rule or the
vital few rule, in descending order of data importance from left to right.
 The Pareto graph shows vertical bars in a downward order, and a line
graph showing cumulative total categories. In Microsoft Excel, these charts
can be easily created.
 Many of the process defects follow a certain pattern, with relatively few
problems causing the bulk of defects.
 In order of faults, the Pareto Analysis offers the relative frequency of
problems, thus providing a list of absolute priority problems.
 The most outstanding results can be achieved by tackling and improving
problems based on those priorities.
 In most cases, Pareto charts are an indispensable tool used in total quality
management, but the question arises as to when are we supposed to utilize
them.
Process Diagram
 Process flows present an overview of various interrelated
tasks and activities within a process. It maps out these
activities in a structured and easy-to-understand format,
making it easy to spot bottlenecks and areas for
improvement.

 Craft a process flow for any project—whether drafting a

marketing campaign, improving logistics operations, or
documenting employee onboarding plans. With a well-
designed business process flow, you can gain clarity and
enhance collaboration across teams, ensuring things are
on track to hit your goals.
Statistical Process Control (SPC) Charts
 The term "statistical process control" (SPC) refers to
the application of statistical methods for process or
production method control.
 It is a quick strategy to support ongoing
improvement. When regularly monitored and
regulated, managers can ensure a process that
operates at its best potential and produce consistent,
high-quality manufacturing.
 Quality Assurance:

 Quality assurance (QA) is a systematic process that

ensures a product or service meets specific
requirements. It is used in both manufacturing and
service industries to ensure that products meet
customer expectations for performance, design,
reliability, and maintainability.
 Quality assurance focuses on preventing defects
rather than detecting and correcting them.
 It involves establishing processes, standards, and
guidelines to ensure quality throughout the
product/service lifecycle.
Total Quality Management (TQM) Model:

 Total Quality Management (TQM) is a management

approach that focuses on improving quality and
customer satisfaction.
 TQM is a management approach that emphasizes
continuous improvement of processes, products, and
services to meet or exceed customer expectations.
 It involves all employees in improving processes,
products, services, and the organization's culture.
 TQM uses strategy, data, and communication to
integrate quality into an organization's activities and
culture.
 It involves the participation of all employees in quality
improvement efforts.
 Service Quality:

 Service quality is a measure of how well a service

meets or exceeds a customer's needs and
expectations.
 It's determined by both technical and emotional
aspects of the service.
 Factors that can be considered when assessing
service quality:

 Physical quality: The quality of the product or support

for the product
 Interaction quality: The relationship between the
customer and service provider
 Responsiveness: The service provider's willingness to
help customers and provide prompt service
 Reliability: The organization's ability to consistently
perform a service in a way that meets customer needs
 Tangibles: The physical features of the service, such as
the appearance of the facilities, personnel, and
equipment
 Importance Of High Service Quality

 It increases sales. A company that offers high service quality has

customers who prefer to do business with it, allowing the company to have
repeat customers and boost its sales.
 It reduces marketing costs. A company may use its funds to attract and
gain new customers, but it is typically less expensive when it retains its
existing ones by offering high-quality services.
 It attracts motivated employees. If a company has high service quality,
motivated and skilled professionals may prefer working with that company
to find growth in their career.
 It offers repeat business. When customers know that a company's
customer service department is always willing to resolve their issues
quickly, they are more likely to buy from that company again in the future.
 It eliminates customers' doubts. A customer may feel hesitant before
purchasing a particular product, but a company's high service quality may
convince them to make the purchase because the customer knows they can
trust the company to resolve their issues if they find any.
 Concept of Six Sigma and Its Application:

 The Six Sigma management method philosophy focuses on a better

understanding of customer requirements, improving business systems
throughout the organization, and enhancing the organization’s financial
performance.
 It is used to improve the organization’s products, services, and processes
across various disciplines, including production, product development,
marketing, sales, finance, and administration.
 It is achieved through understanding the underlying processes and
reducing or eliminating defects and wastes.
 The Six Sigma management method integrates profound knowledge of
statistics, engineering, process, and project management.
 Six Sigma is a data-driven approach for eliminating defects and reducing
variation in processes.
 It aims to achieve near-perfect quality (3.4 defects per million
opportunities).
 Application areas include manufacturing, service industries, healthcare,
and more.
Six Sigma project methodology
 Define: Here, the objectives and scope of the project are
defined. Relevant information about the process and
customer are collected.
 Measure: Data on the current situation and process
matrix are collected.
 Analyse: Collected data are analyzed here to find the
root cause(s) of the problem.
 Improve: Solutions to the problem are developed and
implemented in this phase.
 Control: In this phase, the implemented solution is
evaluated and the mechanisms are implemented to hold
the gains, which may include standardization.
 Benefits of Six Sigma

 Better understanding of changing customer

requirements
 Improvement of quality and delivery
 Reduction of waste
 Reduction of cost
 Development of robust products and processes
 Enhancement of competitive position
 Sustained competitive advantage through
continuous improvement of all business systems in
the organization.
 Application of the Six Sigma method in project
management

 Scope: Applying Six Sigma in scope management would enforce a clear

definition of requirements and rigorous change management. The risk may
be that this application could inhibit innovation.
 Time: Applying Six Sigma in time management would require better
scheduling, immovable deadlines, careful progress monitoring, risk
management, and better resource management. The risk may be that this
application could encourage additional schedule padding and increase
buffers.
 Cost: Applying Six Sigma in cost management would imply absolute
budgets, enforce careful cost controls, and effective forecasting. The risk
may be that this application could encourage additional budget padding
and increase reserves.
 Quality: Applying Six Sigma in scope management would enforce
unyielding quality targets, careful selection of standards, and realistic
assessment of capabilities. The risk may be that this application could
result in hiding problems and assigning blame for defects to others.
 Juran’s Quality Trilogy:

 Dr. Joseph Juran (1904-2008)

 Dr. Joseph Juran was one of the foremost experts in the
area of quality.
 Juran believed that to achieve quality, you must start
with organizational goals, policies, and vision.
 Converting organizational goals into results is
accomplished through three managerial processes called
the JURAN TRILOGY: Quality Planning, Quality Control,
and Quality Improvement (The Juran Institute, 2016).
 Focuses on meeting customer needs, establishing
processes to meet those needs, and continuous
improvement.
 Quality Planning

“Quality does not happen by accident; it must be

planned.” Quality planning is the structured process of
designing products and services to meet new goals and
ensure that customer needs are met.
 Quality Planning Steps:
 Establish the project.
 Identify customers.
 Discover the customer’s needs.
 Develop the product.
 Develop the process.
 Develop the controls and transfer to Operations.
 Quality Control

Quality control is a universal managerial process for

conducting operations to provide stability, to prevent adverse
change, and to "maintain the status quo." Quality control can
also be described as "a process for meeting the established
goals by evaluating and comparing actual performance and
planned performance and taking action on the difference."
 The quality control process:
 Choose a control subject.
 Establish Measurement.
 Establish Standards of Performance.
 Measure Actual Performance.
 Compare to Standards (interpret the difference).
 Act on the difference.
 Quality Improvement

"All improvement takes place project by project."

Quality improvement is the process of creating
breakthrough levels of performance by eliminating
wastes and defects to reduce the cost of poor quality.
 Steps to Quality Improvement:
 Prove the need for improvement.
 Identify the improvement projects.
 Establish project improvement teams.
 Provide project teams with resources.
 Juran’s Fitness for Use

Juran’s four components of product fitness:

 Quality of Design: A successful company conducts market research and
creates satisfied customers by building their needs into the product design. The
quality of design must also consider the intended functions of the product and
the type of conditions in which it will perform. Another consideration affecting
the quality of the design is cost. How much will it cost to make the product?
 Quality of Conformance: Does the manufacturing process adhere to
specifications? Attention to conformance can be a vital tool and decrease the
cost of manufacturing as it reduces the likelihood of these types of catastrophic
failures.
 Availability: In the customer's view, availability and reliability are often
synonymous. For example, if a customer attempts to order a laboratory
instrument only to find out that the product is out-of-stock and will be on
backorder for a month, his level of customer satisfaction goes down. Quality, as
it relates to availability, can be a matter of maintaining inventory and ensuring
availability as in the above example, and it can also be an issue of speedy
shipping and have a good distribution infrastructure.
 Field Service: Field service personnel are, typically, the technicians who
deliver, install, and set up products, providing training to the customer on
proper use and maintenance.
 Deming’s 14 Principles:

 Principles for transforming business effectiveness

through quality management.
 Emphasizes management's responsibility,
continuous improvement, and the importance of
data-driven decision-making.
 What Is Deming's 14-Point Philosophy?

 Dr. W. Edwards Deming is largely credited with the

focus on quality within business to achieve success.
 A statistician who went to Japan to help with the
census after World War II, Deming also taught
statistical process control to leaders of prominent
Japanese businesses.
 His message was this: By improving quality,
companies will decrease expenses as well as increase
productivity and market share.
 1. Create a Constant Purpose Toward
Improvement

 Plan for quality in the long term.

 Resist reacting with short-term solutions.
 Don't just do the same things better – find better
things to do.
 Predict and prepare for future challenges, and always
have the goal of getting better
 2. Adopt the New Philosophy

 Embrace quality throughout the organization.

 Put your customers' needs first, rather than react to
competitive pressure – and design products and
services to meet those needs.
 Be prepared for a major change in the way business
is done. It's about leading, not simply managing.
 Create your quality vision, and implement it.
 3. Stop Depending on Inspections

 Inspections are costly and unreliable – and they

don't improve quality, they merely find a lack of
quality.
 Build quality into the process from start to finish.
 Don't just find what you did wrong – eliminate the
"wrongs" altogether.
 Use statistical control methods – not physical
inspections alone – to prove that the process is
working.
4. Use a Single Supplier for Any One Item

 Quality relies on consistency – the less variation you

have in the input, the less variation you'll have in the
output.
 Look at suppliers as your partners in quality.
Encourage them to spend time improving their own
quality – they shouldn't compete for your business
based on price alone.
 Analyze the total cost to you, not just the initial cost
of the product.
 Use quality statistics to ensure that suppliers meet
your quality standards.
 5. Improve Constantly and Forever

 Continuously improve your systems and processes.

Deming promoted the Plan-Do-Check-Act approach
to process analysis and improvement.
 Emphasize training and education so everyone can
do their jobs better.
 Use kaizen as a model to reduce waste and to
improve productivity, effectiveness, and safety.
 6. Use Training on the Job

 Train for consistency to help reduce variation.

 Build a foundation of common knowledge.
 Allow workers to understand their roles in the "big
picture."
 Encourage staff to learn from one another, and
provide a culture and environment for effective
teamwork.
 7. Implement Leadership

 Expect your supervisors and managers to understand

their workers and the processes they use.
 Don't simply supervise – provide support and resources
so that each staff member can do their best. Be
a coach not a policeman.
 Figure out what each person actually needs to do their
best. For example, hardware, software, other tools, and
training.
 Emphasize the importance of participative management
and transformational leadership.
 Find ways to reach full potential, and don't just focus on
meeting targets and quotas.
 8. Eliminate Fear

 Allow people to perform at their best by ensuring that

they're not afraid to express ideas or concerns.
 Let everyone know that the goal is to achieve high quality
by doing more things right – and that you're not
interested in blaming people when mistakes happen.
 Make workers feel valued, and encourage them to look
for better ways to do things.
 Ensure that leaders are approachable and that they work
with teams to act in the company's best interests.
 Use open and honest communication to remove fear
from the organization.
 9. Break Down Barriers Between
Departments

 Build the "internal customer" concept – recognize

that each department or function serves other
departments that use their output.
 Build a shared vision.
 Use cross-functional teamwork to build
understanding and reduce adversarial relationships.
 Focus on collaboration and consensus instead of
compromise.
 10. Get Rid of Unclear Slogans

 Let people know exactly what you want – don't make

them guess. "Excellence in service" is short and
memorable, but what does it mean? How is it
achieved? The message is clearer in a slogan like
"Always be striving to be better."
 However, don't let words and nice-sounding phrases
replace effective leadership. Outline your
expectations, and then praise people face-to-face for
doing good work.
 11. Eliminate Management by Objectives

 Look at how processes are carried out, not just

numerical targets. Deming said that production
targets can encourage high output but result in low
quality.
 Provide support and resources so that both
production levels and quality are high and
achievable.
 Measure the process rather than the people behind
the process.
 12. Remove Barriers to Pride of
Workmanship

 Allow everyone to take pride in their work without

being rated or compared.
 Treat workers equally, and don't make them compete
with colleagues for monetary or other rewards. Over
time, the quality system will naturally raise the level
of everyone's work to an equally high level.
 13. Implement Education and Self-
Improvement

 Improve the current skills of workers.

 Encourage people to learn new skills to prepare for
future changes and challenges.
 Build skills to make your workforce more adaptable
to change, and better able to find and achieve
improvements.
 14. Make "Transformation" Everyone's
Job

 Improve your overall organization by having each

person take a step toward quality.
 Analyze each small step, and ask yourself how it fits
into the bigger picture.
 Use effective change management principles to
introduce the new philosophy and ideas in Deming's
14 points.
 PDCA Cycle:

 Plan, Do, Check, Act cycle for continuous

improvement.
 Involves planning a change, implementing it,
evaluating results, and making adjustments as
necessary.
 Step 1: Plan

 In the “Plan” stage, a team identifies a challenge they want to

overcome or an opportunity they hope to take advantage of.
 Let’s say a marketing team has been running a digital
advertisement for several weeks. The headline has generated
many leads, and the team is happy with the results. But they’d
like to learn if they can improve the ad and earn even better
results. (They might also be worried that the current ad will
soon start losing its effectiveness and need to be updated
anyway.)
 For a simple A/B test, the team changes only a single element
of the campaign and runs both versions simultaneously. In
this case, let’s say the team wants to try a different headline.
 The planning phase: Create an alternate version of the ad’s
headline.
 Step 2: Do

 The “Do” stage is the team’s opportunity to test their

idea for change. This stage typically includes a small
experiment or trial run.
 In our A/B test scenario, the marketing team runs its
alternate headline and for half of their online ad buys
for a few days. For the other half, they keep running
the original version of the ad.
 The do phase: Carry out a real-world experiment
to test the team’s hypothesis.
 Step 3: Check

 In the “Check” phase of the PDCA cycle, the business

gathers and evaluates its small experiment results. If it
proves successful, the company will implement the
change on a wider scale. If not, the company can return
to the Plan stage and come up with a different plan.
 Let’s assume that after a few days, the marketing team
analyzes the results of both versions of their online ad. In
terms of leads generated, the new headline outperformed
the original by almost 50%. The plan worked.
 The check phase: Analyze the data to determine if
your experiment was successful.
 Step 4: Act

 In the “Act” phase, the final step in the PDCA cycle, a

business takes action according to the insights it gained
after analyzing its experiment. If the small change
worked well, the company could implement that change
more broadly. If it fell short, the company might need to
return to the beginning—the Plan phase—to try
something else.
 Because the marketing team’s alternate headline
outperformed the original, the team will now want to use
the newer headline for all of its ad buys going forward.
 The act phase: Use your learnings from the check
phase to take action—either implementing your change
on a wider basis or returning to step one to devise
another plan.
 Quality Circles:

 A quality circle, also known as a quality control circle or

QC, is a group of employees who meet regularly to
identify, analyze, and solve work-related problems.
 The primary objective of a quality circle is to identify and
resolve quality issues, defects, or process inefficiencies.
 Quality circles are usually small, autonomous groups of
6–12 employees who work in the same department.
 They are led by a supervisor or senior worker, and
meetings are held at regularly scheduled times.
 The length of meetings varies depending on the problem
being discussed.
 steps of a quality circle problem-solving
methodology are

1. Identify and categorize problems

2. Select problems
3. Define the problem
4. Analyze the problem
5. Identify causes
6. Find root causes
7. Analyze data
8. Develop a solution
 Quality Improvement and Cost Reduction
– QC Tools:

 The seven basic quality control (QC) tools are:

1. Check sheets
2. Graphs (trend analysis)
3. Histograms
4. Pareto charts
5. Cause-and-effect diagrams
6. Scatter diagrams
7. Control charts
 Introduction to the Current ISO for
Production Management:

 ISO standards provide guidelines for quality

management systems.
 ISO 9000 series focuses on quality management
principles and requirements.
 ISO 9000

 ISO 9000 is a set of standards for quality

management that help organizations improve their
product quality.
 The standards cover a broad range of subjects,
including the quality management system's design
and development, production processes, supplier
relationships, and continual improvement.
 ISO certification can provide many benefits in
production management

 Improved customer satisfaction

 Improved marketability
 Reduced risk
 Improved efficiency
 Reduced costs
 Compliance with regulatory requirements
 A common language for all stakeholders in an
organization, making it easier to communicate and
understand how to improve processes
 Contribution of Quality Gurus:

 Various quality gurus such as Deming, Juran,

Ishikawa, and Crosby have contributed theories,
principles, and techniques to the field of quality
management.
 Their ideas have shaped modern quality
management practices and continue to influence
organizations worldwide.
 W. Edwards Deming: One of the pioneers of
quality management, Deming is known for his work
in Japan after World War II, where he helped
Japanese companies improve their quality and
productivity. He is best known for his "14 Points for
Management," which outline the key principles of
quality management, and his emphasis on the
importance of statistical process control and
continuous improvement.
Philip Crosby:
The Four Absolutes of Quality Management:
 Quality is conformance to requirements
 Quality prevention is preferable to quality inspection
 Zero defects is the quality performance standard
 Quality is measured in monetary terms – the price of
non-conformance
Dr. Armand Feigenbaum
 Developed Total Quality Control (TQC) philosophy
 Quote: “Quality is everybody’s job, but because it is everybody’s job,
it can become nobody’s job without the proper leadership and
organization.”
Dr. Kaoru Ishikawa
 Known as father of Japanese quality control effort
 Established concept of Company Wide Quality Control (CWQC) –
participation from the top to the bottom of an organization and
from the start to the finish of the product life cycle
 Started Quality Circles – bottom up approach – members from
within the department and solve problems on a continuous basis
 The fishbone diagram is also called Ishikawa diagram in his honor
 Introduced concept that the next process is your customer
 Dr. Genichi Taguchi
 The lack of quality should be measured as function of
deviation from the nominal value of the quality
characteristic. Thus, quality is best achieved by
minimizing the deviation from target (minimizing
variation).
 Quality should be designed into the product and not
inspected into it. The product should be so designed
that it is immune to causes of variation.
THANK YOU!
Productivity
 Productivity is the rate at which biomass is
generated in an ecosystem, and is usually
measured in grams per square meter per
day.
 In manufacturing, productivity is a concept
used to manage production efficiency.
 In other contexts, productivity can have
different meanings:
 Capital productivity: A measure of how efficiently physical capital is used
to create goods and services. It's calculated by subtracting liabilities
from physical capital, and then dividing sales by the difference. A higher
number indicates efficient use of capital, while a lower number indicates
the opposite.
 Material productivity: A measure of output compared to the amount of
materials consumed. For example, a software company might measure
material productivity based on the number of resources needed to finish
a project.
 Personal productivity: A measure of how efficiently and consistently an
individual completes tasks or goals. It can refer to how much an
individual accomplishes in their personal lives, not just at work.
 Workforce productivity: The aggregate productivity of all individuals in a
company's workforce.
 Primary productivity: The productivity of autotrophic organisms, such as
plants, to generate biomass. Photosynthesis is the primary tool for
creating organic material from inorganic compounds like carbon dioxide
and water.
 Secondary productivity: The productivity of heterotrophic organisms,
such as animals.
 Materials management is a core supply chain
function that involves planning, coordinating,
and controlling the procurement, storage,
handling, and use of materials.
 The goal is to ensure that the right materials
are available at the right time, in the right
quantity, and in the right condition, while
minimizing costs and optimizing efficiency.

 Ensures there is an unbroken chain of
materials for production
 Helps meet production schedules
 Saves costs for a finished product
 Maintains quality through the materials that
are purchased and used
 Purchasing management
 Inventory management
 Materials required planning (MRP)
 Supply chain management
 Sourcing and purchasing
 Transportation
 Receiving and inspection
 Demand and risk management
 Inventory management: Materials managers can increase inventory
turnover by setting rational inventory norms and using control
systems. This can maximize current assets turnover and ROI.
 Spare parts management: Proper planning and control of spare parts can
increase capacity utilization, which can increase fixed assets turnover
and ROI.
 Stock-outs: Effective materials management can minimize the chances
of stock-outs by storing materials in appropriate locations for easy
movement. This ensures that workers and plants don't lose productive
hours, which can lead to higher productivity and maximum utilization.
 Waste reduction: Materials management can help minimize waste and
reduce costs by ensuring that materials aren't over-stocked or under-
stocked.
 Customer satisfaction: Materials management can help improve
customer satisfaction by ensuring that orders are delivered on time and
with the correct items.
 Purchase costs: Before placing purchase orders, companies can verify
how much material is available at each location and whether it can be
used. They can then aggregate indents and place bulk orders with
staggered deliveries, which can provide a negotiation advantage and
reduce purchase costs. This can also help minimize the need for
emergency purchases and their associated costs.
 Material planning and control: Controls and plans the quantity,
quality, and price of materials, and includes purchasing,
material, and shipping control from suppliers
 Inventory control: Monitors inventory levels to ensure they meet
production demands, and purchases new materials when levels
drop below a certain threshold
 Inventory management: Manages the movement of materials
from shipment into the factory to use at the production level
 Quality control: Ensures that all materials used in manufacturing
meet certain standards, and inspects products to ensure they
meet customer expectations
 Standardization: Controls the scope of procurement to a realistic
approach on its goals and objectives
 Value analysis: Analyzes the design and performance of
materials, evaluates alternative materials or suppliers, and
identifies opportunities for process improvements
 Procurement procedures are the steps involved in purchasing goods and
services for a business.
 The procurement process includes many elements, such as:
 Need identification: The first step in the process, which involves
identifying a need that is specific, measurable, and relevant to the
organization's mission
 Procurement strategy: A strategy created after identifying a need that
outlines how the organization will acquire the needed goods or services
 Supplier research: Involves researching suppliers
 Value analysis: Involves analyzing the value of the goods or services
 Purchase request: Involves raising a purchase request
 Reviewal phase: Involves reviewing the request
 Purchase order: Involves converting the request to a purchase order
 Contract administration: Involves administering the contract
 Monitoring and evaluation: Involves monitoring and evaluating the
received order
 Three-way matching: Involves three-way matching
 Payment fulfillment: Involves fulfilling payment
 Record keeping: Involves keeping records
 The vendor rating system assesses a potential
vendor’s capabilities and determines their
suitability for your needs.
 Vendor rating is when the suppliers are provided
with a status or a title based on several factors.
 Vendors can earn a rating based on how reliable,
punctual, and reasonably priced their goods are –
not to mention the quality, of course!
 Ratings range from Good or Average all the way
up to Best-in-Class – depending on performance
and your company’s overall criteria for success.
 Quality: The quality of the products or goods the
vendor supplies is the main factor. The vendor can
maintain good quality by improving production and
having quality planning in the supply chain.
 Price: A company always wants to get the materials at
less expense to reduce its manufacturing cost to
increase its profit. Hence the vendor needs to set a
competitive price for his products.
 Delivery: The supplier has to develop the ability to
deliver the goods on a scheduled date.
 Service: It is one of the crucial criteria for the
suppliers. They have to provide good service by
providing an updated catalog, pricing, technical
information, etc.
 Categorical plan: Managers from various verticals list
crucial factors for a vendor and assign performance
ratings to each vendor in categorical terms such as “good”,
“neutral”, and “poor”. They give ratings based on their
personal experiences, and vendors are compared based on
the same.
 Weighted point plan: Factors are categorized, and weight
is assigned to each factor based on vendor performance.
 Cost ratio plan: Supplier rating is based on different costs
incurred for procuring the materials from other suppliers.
The cost ratios are ascertained for the various rating
variables such as quality, price, and timely delivery. The
cost ratio is calculated in percentages based on the total
individual cost and the total value of the purchase.
 Eavastons’s vendor selection: Previous vendor
performances are considered for choosing them.
 Forced decision matrix: The attributes of rating like
quality, service, price, reliability of the vendor, and lead
time of supply are identified first. Then these factors are
compared between themselves. If something is more
important, it will be assigned with one’s weight, and the
other will be zero for evaluation.
 Service cost ratio: Subjectively measuring other intangible
aspects of a supplier’s services. Aspects to consider could
be labor stability, financial stability, flexibility in
production for rush orders, research, and development
(R&D).
 The IBM quality rating system: It uses quality costs as the
basis for rating vendors. The formula is VGR= ((Desired
cost of inspection)/(Actual cost of inspection)) x 100
 Bell quality rating system: This is developed by the Bell
helicopter company Lot Quality Index(LQI). It assesses lots
received against lots rejected. X/L gives LQI. Where, L =
total number of lots received during the period, X = (L1 x
1.00) + (L2 x 2.10) + (L3 x 2.90) + (L4 x 3.10)+ (L5 x
3.90)
◦ L1 = number of lots acceptable as received.
◦ L2 = number of lots rejected by sampling inspection but labeled.
◦ L3 = number of lots rejected and dispositioned, rework at
supplier’s end.
◦ L4 = number of lots rejected and dispositioned, returned, not
usable.
◦ L5 = number of lots rejected and dispositioned rework at Bell
Helicopter Company.
◦ This formula can be modified easily to suit the needs of a
particular company.
 Ethical procurement refers to the consideration
of a wide range of issues relating to the ethical
and sustainability goals of an organisation.
 Ethical procurement is a company’s code of
conduct and commitment to environmental,
social and legal issues.
 It involves a set of principles which guide a
company to proactively eliminate unethical
practices throughout its supply chain.
 Ethical procurement requires a company to
understand its societal obligations, expectations
and social responsibility.
 Fairness: Ethical procurement ensures contracts are awarded fairly and
without bias, which can help prevent corruption and bad business
decisions.
 Public trust: Ethical procurement can help preserve public trust in the
government and private sector, which can help the economy as a whole.
 Legal issues: Unethical behavior can lead to legal issues.
 Corporate social responsibility: Ethical procurement is an important part
of a company's corporate social responsibility (CSR) strategy.
 Accountability: Accountability in procurement can help ensure that the
right products and services are acquired at the right price and in a timely
manner.
 Transparency: Transparency in procurement can help buyers and sellers
understand each other's interests and affordances, which can improve
trust and the negotiation process.
 Audit trail: A clear and detailed audit trail can help ensure purchases are
efficient and can help with future interactions with suppliers.
 Confidentiality: Contract managers should maintain the confidentiality of
information they obtain during work and not disclose it to unauthorized
individuals.
 Code of conduct: A code of conduct policy can help establish ethical
behavior within a firm and can help protect the organization from legal
or reputational loss.
 Illegal Supply Chain Practices
 Bribery
 Coercion and Intimidation
 Extortion
 Influence Peddling
 Nepotism
 Inventory management is the process of
storing, ordering, and selling goods and
services, as well as managing supplies and
processes.
 It involves receiving, tracking, and storing
products, and provides data for informed
purchasing.
 The goal of inventory management is to
ensure there's enough stock to meet
customer orders while minimizing the costs
and risks of holding inventory.
 Just-in-time management (JIT),
 Materials requirement planning (MRP),
 Economic order quantity (EOQ), and
 Days sales of inventory (DSI).
 Raw materials: Raw materials consist of all the items that
are processed to make the final product. In a cookie
manufacturing company, the raw materials are items like
milk, sugar, and flour that are used in the different stages
of production.
 Work in progress: When raw materials have been sent for
processing but have not yet been approved as finished
goods, this stage is known as work in progress. In a cookie
manufacturing company, after the raw materials have been
processed and the cookies have been molded, they go for
a quality check before they are passed for final packaging.
All the cookies which are waiting for their quality check are
considered work in progress. To put it in simple words,
the work in progress category consists of all the items that
have been processed but not sent for sale.
 Finished goods: Finished goods are the final items that are
ready for sale in the market. These goods have passed
through all stages of production and quality checking. So
for the cookie manufacturer, the final packets of cookies
that are sent to the market for selling after undergoing
quality checks will be the finished goods.
 MRO inventory: MRO stands for Maintenance Repairing and
Operating supplies, this type of inventory is mostly
relevant for manufacturing industries. MRO items are not
accounted as inventory items in books of accounts,
however, they play a crucial role in the day-to-day
working of an organization. MRO supplies are used for
maintenance, repair, and upkeep of the machines, tools,
and other equipment used in the production process.
Some examples of MRO items are lubricants, coolants,
uniforms and gloves, nuts, bolts, and screws.
 In a manufacturing or a trading business, fluctuations
and market movements cannot always be predicted.
Such changes can have a negative impact on the sales
or production process, which can lead to out-of-
stock situations. Buffer inventory attempts to
compensate for this by following the adage that
prevention is better than cure. Buffer inventory (also
known as safety stock), consists of the items stored
in the warehouse of a store or a factory to cushion
the impact of unexpected shocks. A sudden spike in
demand, delay in transport, or labor strike can be
managed if sufficient buffer inventory is
maintained.
 Most manufacturing is carried on by multiple machines.
The output of one machine is fed into the next machine
for further processing. However, the process only works
smoothly if all the machines work in tandem. A breakdown
in any of the machines can derail the entire
process, which is when decoupling inventory comes into
the picture. Decoupling inventory consists of items which
are kept in reserve to be processed by another machine if
the previous machine fails to produce its usual output. In
our example of cookie manufacturing, after the dough has
been molded, it goes to the oven for baking. To prevent
a breakdown in one of the molding machines can delaying
the baking process, the manufacturer might keep some
extra pieces of molded dough which can be sent to the
oven for baking while the machine is being repaired.
 Cycle inventory: Cycle inventory is a term used to
describe the items that are ordered in lot sizes
and on a regular basis. Cycle inventories are
usually materials which are directly used in the
production or they are part of some regular
process.
 Transit inventory
 Transit inventory refers to items that are being
moved from one location to another, such as raw
materials being transported to the factory by
railway or finished goods being transported to
the store by truck.
 Selective inventory management is a strategic
approach to inventory control that prioritizes and
manages inventory items based on their value,
criticality, and usage frequency. It recognizes that not
all inventory items are the same and that some
require more attention and control than others.
 Selective inventory control includes many methods of
inventory control or management, such as ABC
analysis. In this technique, a business segregates
products into three classes, A, B, and C, based on
their usage. Most management efforts and oversights
are expended on managing A items.
 the ABC analysis method categorizes items into A, B, or C
groups based on sales revenue, profit margins, and
demand frequency. Here’s a quick breakdown of the
groups:
1. Category A — High-Priority, High-Value. High-priority,
in-demand products fall under this category. Thus, they
account for 10% of the total inventory on hand but
contribute 70% of the total consumption value.
2. Category B — Medium-Priority, Moderate-Value. These
stocks account for 20% of total inventory, which
accounts for about 20% of the total consumption value.
3. Category C — Low-Priority, Low-Value. Lastly, these
low-demand items account for 70% of total inventory,
which accounts for only 10% of the total consumption
value.
 The ABC Inventory Analysis Method categorizes items
based on their annual consumption value. Sometimes,
inventory managers use the Pareto Principle for
classification.
 As such, an ABC analysis method classifies the essential
items in a particular group, usually constituting a small
portion of the total items. Then, the majority of the items –
as a whole – will seem to be of minor significance. As a
result, this analysis method helps organizations allocate
resources efficiently by prioritizing critical items over less
important ones.
 You can further supplement this method with the XYZ
analysis. It helps forecast the difficulty of selling a
particular item. Therefore, X are those that are easier to
sell, whereas Z classifies items that are most difficult to
sell.
1. First, gather data about each item, such as an item’s
revenue, profit margin, etc.
2. Next, sort and rank the items based on their annual
usage value.
3. Divide the sorted list of items into the A, B, and C
categories.
4. Focus on strict inventory control for Category A
items, moderate attention for Category B, and less
management effort for Category C.
5. Ensure that you regularly review your stock to
account for changes in market conditions.
6. Additionally, utilize inventory management software
to automate reports so you can update your analysis.
 we have another inventory analysis method you can
use, the FSN analysis. Here’s a breakdown of the FSN:
1. Fast Moving — items that are frequently
issued/used. They have a high turnover rate.
2. Slow Moving — items issued or used less for a
certain period. These types of items have a
relatively lower demand than fast-moving stocks.
Also, they tend to remain in inventory for longer,
requiring careful management to avoid
overstocking or obsolescence.
3. Non-Moving — items not issued/used for more
than a particular duration. Of course, they have very
low or no demand and may need to be liquidated,
discounted, or disposed of.
 FSN analysis in inventory management classifies
inventory-based quantity, consumption rate, and
frequency of issues and uses. FSN analysis helps
optimize inventory levels and improve overall
management strategies. Here are its other
benefits:
 Optimizing inventory levels;
 Managing capital;
 Reducing holding costs;
 Minimizing obsolescence, and
 Improving customer service.
1. Gather historical data on the past year’s sales,
consumption, and inventory levels.
2. Determine thresholds for each category to
classify items.
3. Categorize items into Fast, Slow-, or Non-
moving based on your thresholds.
4. Use spreadsheets or inventory management
software to automate categorization. List each
item, its sales or consumption data, and a
formula to determine the threshold category.
5. Regularly review and refine analysis as market
conditions change and take action to maintain
optimal inventory mix.
 We can use the VED analysis method, where we organize
the items into the following three categories:
1. Vital — inventory that you need to keep in stock
consistently. After all, vital stock is indispensable to the
organization’s operations. For instance, not having these
items in a healthcare setting will result in life-
threatening situations.
2. Essential — keeping a minimum supply of this inventory
is enough, as they’re often necessary for emergencies.
Stockouts for this item are unacceptable since they have
more importance than desirable items. Still, they’re not
as critical as the ones in the vital category.
3. Desirable — though these items are convenient, they’re
optional or non-critical. Operations can run with or
without them. As a result, the unavailability of these
items won’t pose an immediate threat to life.
 VED Analysis is used primarily for inventory
control in healthcare and medical supply chain
management. It’s an Inventory Analysis Method
whose classification depends on the user’s
experience and perception. It classifies inventory
according to the relative importance of certain
items to other items, like spare parts.
 VED Analysis helps organizations focus on vital
items while minimizing effort and cost. This
categorization is especially crucial in healthcare,
where patient care and outcomes depend on
available medications, medical equipment, and
supplies.
1. List all items to be identified and analyzed.
2. Collect data on item usage, impact on operations,
and consequences of unavailability.
3. Define criteria for categorizing items into VED
categories.
4. Next, assign the items to their proper classification.
5. Prioritize management and procurement efforts
based on your categorization.
6. Regularly review and update categorization based on
changing requirements or situations.
7. Lastly, you must incorporate findings into materials
management and inventory control processes.
Types of Inventory Costs:
 Holding Costs: Storage, insurance,
depreciation
 Ordering Costs: Purchase order, shipping,
receiving
 Stock out Costs: Lost sales, expedited
shipping
 Total Inventory Costs: Sum of holding,
ordering, and stockout costs
 Optimal order quantity minimizing total
inventory costs
 Given Data:Annual demand (D): 1,000 units
 Ordering cost (S): $50 per order
 Holding cost (H): $5 per unit per year
 It is Extra inventory to prevent stockouts
 Factors Affecting Safety Stock:Demand
variability
 Lead time variability
 Service level goals
 It is Inventory level at which a new order
should be placed
 Given Data: Daily demand (d): 10 units
 Lead time (L): 5 days
 Safety stock: 50 units
 It is Price reductions based on order quantity
 Types:
 All-units discount: The discounted price
applies to all units in the order if the order
quantity exceeds the threshold.
 The Incremental discount: discounted price
applies only to the units purchased beyond
the threshold.