Production & Materials Management

1. PROCESS PLANNING
Presented by:
Prof.Dr.P.T. SRINIVASAN
1

2. Process planning
Begins with
Product Selection
2

3. Product Selection
• is a strategic decision i.e. long term decisions
• decisions like technology to be used, capacity
of the production system, location of the
facility, organization of the production
function, planning, and control systems depend
on this
3

4. Product Selection
 involves
other functional areas like
marketing, research and development,
and the top management
4

5. Product Selection
• The process of selecting a product is highly
integrative
• Product function, cost, quality and reliability
are other inputs to product selection
5

6. Product Selection
Organizations try to get synergistic results
by exploiting the following factors:
1. Familiarity with similar products / services
2. Familiarity with the same or similar
production process
3. Familiarity with the same or similar market
segments
4. Familiarity with the same or similar
6
distribution channels

7. Product Development
 Development effort improves the performance of
the product, adds options and additional features
 Also adds variants to the basic product
 Development starts after research has established
an idea that has been examined, evaluated and
refined
7

8. Product Design
 includesdimensional specifications,
specifications regarding capacity, horse power,
speed, colour etc.
8
PM / L 1 / S 8

9. Product Variety
 There are two distinctly different priorities
that can affect the design of a product or
service
1. Standardization
2. Modularization
9

10. Standardization
 Higher the standardization, the greater will be the
ease in producing
 It reduces variety in the product
 Ensures better use of productive facilities
 It reduces unit costs
10

11. Advantages of Standardization
 Simplifies operational procedures
 Raw materials can be purchased in bulk at
reduced price
 Enables steady flow of materials through
work centres
 Reduces the number of production set-ups
11

12. Advantages of Standardization
 Reduces the total inventory of raw materials,
work-in-process, and finished goods
 Provides economies of scales due to high
volume of production
12

13. Modularization
 Used to obtain variety and yet hold down the
cost
 Modules are interchangeable and each different
combination gives a new variety of the product
 Design simplification without compromise on
quality can reduce production costs
13

14. Key Elements in Product Design
 Function
 Cost
 Quality
 Reliability
 Appearance
 Environmental impact
14

15.  FromProduct Design Stage let us now
move on to Process Planning
15

16. Process – Meaning
 Processes
are the essence of operations
management.
 They transform inputs into outputs.
 More than products or technologies, the
ability to do things well- processes –
constitutes a firm’s competitive advantage.
16

17. Process Planning - Definition
 Planning in which the conditions necessary for
transforming material from one state to another are
determined.
 It determines how a work is to be done.
 Itconverts designs into workable instructions for
manufacture, along with associated decisions on
component purchase or fabrication and process and
equipment selection.
17

18. Types of Processes
 Projects:
It is one-of-a kind production of a
product to customer order.
 BatchProduction: Batch production systems
process many different jobs through the system
in groups (or batches).
 Mass production(Line processes) : It produces
large volumes of a standard product for a mass
market.
 Continuousproduction: They are used for very
high volume commodity products. 18

19. Project Batch Mass Continuous
Product Unique Made to order Made to stock Commodity
Customer Singly Few individuals Mass market Mass market
Demand Infrequent Fluctuates Stable Very stable
Volume Very low Low to med High Very high
Variety Infinite Many, high Low Very low
System Long-term Intermittent Flow lines Process industry
Equipment Varied General Special Highly automated
Type of work Contracts Fabrication Assembly Mix, treat, refine
Skills Experts, Wide range Limited range Equipment
craftspeople monitors
Advantages Custom work, Flexibility, Efficiency, Highly efficient
quality speed, low cost large capacity
Disadv. Nonrepeating Costly, slow Capital invest. Difficult to change
Example Construction Printing, bakery Autos, TV’s Paint, oil, food
19

20. Underlying Process Relationship Between
Volume and Standardization Continuum
20

21. Process Planning
• Process planning is a key element in project
management that focuses on selecting resources
for use in the execution and completion of a
project
• In a manufacturing setting, this aspect of
planning also includes establishing the general
sequence of steps that begin with the acquisition
of materials and end with the creation of a
finished product.
21

22. DECISION ON WHAT TO MAKE
DEMAND FORECAST
FUNCTIONAL DESIGN
PRODUCT
PRODUCTION DESIGN
DESIGN
DRAWING & SPECIFICATION
OF WHAT TO MAKE
PRODUCT ANALYSIS & ASSEMBLY CHARTS
MAKE (OR) BUY DECISION
PROCESS
DESIGN
PROCESS DECISION, SELECTION FROM
ALTERNATIVE PROCESSES
ROUTE / SPECIFICATION WORK PLACE &
SHEET TOOL DESIGN
22
MANUFACTURE MODIFICATION OF PROCESS PLANSDUE TO LAYOUT,
PLANING QUALITY PERFORMANCE AND M/C AVAILABILITY

23. Process Planning
 Make-or-buy decisions
 Process selection
 Capacity Planning
 Assembly Chart
23

24. Make-Or-Buy Decisions
 A firm’s Make-or-Buy choices should be
based on the following considerations:
1. Cost (fixed cost + variable cost) make = Cost
(fixed cost + Variable cost) buy
2. Available capacity
3. Quality considerations
4. Speed
5. Reliability
6. Expertise
24

25. Make-Or-Buy Decisions
• Determination whether to produce a
component part internally or to buy
it from an outside supplier. This
decision involves both qualitative
and quantitative factors. Qualitative
considerations include product
quality and the necessity for long-
run business relationships with
subcontractors. Quantitative factors
deal with cost. The quantitative
effects of the make-or-buy decision
are best seen through the Relevant
Cost Approach
• For example, assume a firm has
prepared the following cost
estimates for the manufacture of a
subassembly component based on
an annual production of 8000 units:
25
25

26. Contd….
• The supplier has offered the subassembly at a
price of $16 each. Two-thirds of fixed factory
overhead, which represents executive salaries,
rent, depreciation, and taxes, continue regardless
of the decision. Should the company buy or make
the product? The key to the decision lies in the
investigation of those relevant costs that change
between the make or buy alternatives.
Assuming that the productive capacity
will be idle if not used to produce the
subassembly, we can make the
following analysis
• he make-or-buy decision must be
investigated in the broader perspective
of available facilities. The alternatives
are: (1) leaving facilities idle; (2)
buying the parts and renting out idle
facilities; or (3) buying the parts and
using unused facilities for other
products.
26
26

27. Make-Or-Buy Process
•Stage 1 refers to the
preparations phase, which entails
creating a multi-disciplinary
team, selecting the part,
assembly or family of parts for
analysis and briefing the team.
•Stage 2 is concerned with data
collection.
27

28. Contd….
Stage 3
• consists of data analysis using a spreadsheet which
provides the following:
• Final scores for in-house and for the supplier. The
highest score indicates the best option.
• Weighted gaps for each factor area, highlighting the
strengths and weaknesses of this option.
• A sensitivity analysis which tests the robustness of the
final outcome.
Stage 4 28
• consists of feeding back the results to the team.

29. CROSSOVER CHARTS
 It is a chart of costs at the possible volumes for more than one
process.
Fixed cost Variable cost
Rs
Rs R
. s
Process A Process B Process C
R
110000
80,000 Fixed cost –
Fixed cost –
75,000 Fixed cost – Process C
Process B 29
V1(5000) V2 (15,000) Process A
Volume

30. Break Even Analysis
For a company to produce a new product, the initial
investment in plant & equipment is estd. to be
Rs.2000. Labour & material cost is approx. Rs.5
per unit. If the rafts can be sold at Rs.10 per unit,
what volume of demand would be necessary to
break-even?
Fixed cost: Rs. 2000; variable cost: Rs.5 per unit;
selling price: Rs.10 per unit.
Then BEP is 2000/ 10-5 = 400 rafts.
30

31.  Now the company believes that the demand for their
product will far exceed the break-even point. They are
now contemplating a larger investment of Rs. 10,000 for
more automated equipment that would reduce the variable
cost of manufacture to Rs.2 per unit.
 what is the BEP for this new process?
 Compare the earlier process with the process proposed
here. For what volume of demand should each process be
chosen?
Soln:
a. The BEP for the new process is: 10000/ 10-2 = 1250 rafts.
b. Lets consider the earlier process as process A and this
desired process as process B;
2000 + 5V = 10000 + 2V, V=2667 units 31

32. The solution procedure for process selection consists of
4 steps:
 Formulate a total cost equation for each process
considered.
 Calculate the point of indifference bet 2 alternatives by
equating the total cost of each alternative and solve for
V, which is the demand volume.
 Above the point of indifference, choose the alternative
with the lowest variable cost.
 Below the point of indifference, choose the alternative
with the lowest fixed cost.
32

33. Capacity Planning
• Capacity planning is the process of determining the
production capacity needed by an organization to meet
the demands for its products.
• A discrepancy between the capacity of an organization
and the demands of its customers results in unfulfilled
customers.
33

34. Process Analysis
 Itis the systematic examination of all aspects
of a process to improve its operation.
 A basic tool for process analysis is the
flowchart.
34

35. Flow Chart
• Flow charts are easy-to-understand diagrams showing how steps in a process
fit together. This makes them useful tools for communicating how processes
work, and for clearly documenting how a particular job is done. Furthermore,
the act of mapping a process out in flow chart format helps you clarify your
understanding of the process, and helps you think about where the process
can be improved.
• A flow chart can therefore be used to:
• (i)Define and analyze processes
• (ii)Build a step-by-step picture of the process for analysis,
• discussion, or communication and
• (iii)Define, standardize or find areas for improvement in a process
35

36. Assembly Chart
 Assembly charts :gives pictorially step by
step assembly sequence and what items to be
assembled till finished product is produced.
36

37. Assembly Chart
• Assembly chart gives a
macro view of how
materials and sub
assembly are united to
form a finished product.
It is a starting point to
understand the factory
layout needs,
equipments needs,
training needs for any
company to deliver a
finished product /
service
37

38. Parts of a Wind Mill Turbine
38

39. Example of an Assembly chart
Blade
1
Hub
2 Tower
SA-1 A-2
Generator
3
Rotor
4
A-5
Component/Assembly Operation
Inspection
A Windmill Turbine 39

40. Assembly Drawing-Blueprint
 Shows exploded view of product
Head Neck
End
Cap
Handle
40

41. Assembly Chart
41

42. Operation process chart
• Operation Process chart represents the
sequence of steps or tasks needed to complete a
product and details how to build a product at
each process. It includes what materials are
needed, type of processes, product flow, time
taken to process product through each step of
flow and thus serves as a basis for examining
and possibly improving the way the operation
is carried out.
42

43. Process Re-engineering
 Process Re-engineering is a structured
approach to process flow analysis used when
major business changes are required as a
result of:
 Major new products
 Quality improvement needed
 Better competitors
 Inadequate performance
 In short, it is the total redesign of a process.
43

44. Thank You
44