Tag: Industrial Law Notes

Maintenance that is conducted in order to prevent failure. Usually this maintenance is planned some time in advance and has to be conducted within a registered time frame during which the asset is in non-operating condition

Preventative is used to maximise an assets useful lifetime and minimise cost. Its purpose is to avoid unscheduled or unplanned breakdowns, where reactive maintenance is used.

Preventive maintenance strategies can be further divided into usage and condition based maintenance. Under usage based maintenance, the total usage of a part is measured and maintenance is conducted when a certain threshold level has been reached. The usage of parts can be measured in many ways depending on the nature of the equipment. Time in the field is perhaps the most common mean to measure usage.

For vehicles (e.g., rolling stock), mileage is a common measure of usage. The number of on-off cycles is a measure of usage for equipment that is mainly loaded at the end or beginning of on-off cycles. For example, the number of landings is a measure of usage for the landing gear of an aircraft. Since the usage of equipment is usually scheduled, the moment that maintenance is performed can also be scheduled. If there is a large set-up cost associated with maintenance, it can be beneficial to interchange several parts simultaneously (Block replacement and/or overhaul). Otherwise, maintenance can be performed on a single component (Component replacement and/or overhaul).

Advantages:

Less risk factor: Because the equipment and your building are being regularly checked, they are at less risk to breaking down without notice. Therefore, creating a safer working environment for employees.

Follows a schedule: By following a schedule, you are able to keep to a budget while maintaining your building. Also, you will be able to keep track of all your equipment and pin point times when you will need to replace your equipment.

Longer equipment/building life: When equipment is being checked and maintained, it will be kept in its best shape, therefore extending its lifetime. With routine check-ups on building parts such as pipes, boilers, and roofing you’ll extend the life of your building as well.

Money saving: Over time, you will see that less money is being spend because you will not have to replace equipment as much, as well as dealing with last minute break downs. While there still may be some unplanned maintenance needed, the likely hood will go down when the building and equipment are regularly checked. Property wise, you’ll be able to catch roof leaks before they escalate and quickly repair them before mould and debris occur.

Less energy wasting: In general when equipment is not kept in the best conditions possible, it will drain more energy, hiking up your utilities bill. With properly maintained equipment, it will be saving you energy and money. While regularly kept lighting and cooling/heating systems will also help reduce the energy bill.

Less disruptions: With regular checks, you won’t be surprised when something goes wrong. It will be a quick fix because you will know what needs to be done. There will not be problems when it comes to closing down your property and disrupting your workers, if a large problem were to occur.

Disadvantages:

More money upfront: When initially starting a preventative maintenance plan, it will cost you more to regularly maintain equipment and the building, than it would be if you waited for things to simply break down.

Over maintenance: Because there is a regular plan, sometimes items may not need to be checked as often as planned. If this is the case, you can change your maintenance plan to checking the specific equipment or areas less often, while still maintaining a schedule.

More workers: Preventative maintenance require more workers because regular checks are a must. When compared to reactive maintenance, you simply need to call someone in for a onetime fix. Instead this method requires workers to always be on site and perform daily works.

Planned maintenance

Planned maintenance means that the organization is prepared for a breakdown and even expects it to happen. The equipment runs until it breaks, which initiates a run to failure (RTF) trigger. While RTF triggers can be unplanned, breakdown-maintenance plans use RTF as a way of lowering the cost of maintenance.

This kind of plan needs to be rigorously documented and controlled. Employees should be clear on exactly which parts will break down and which parts will be maintained normally via preventive maintenance. Without these checks, a breakdown maintenance plan can be exploited or run awry.

Unplanned breakdown maintenance

Unplanned breakdown maintenance, on the other hand, occurs when a piece of equipment fails or breaks unexpectedly also called an unplanned downtime event. While some facilities may not utilize a planned maintenance plan, nearly every facility needs resources in place for unplanned maintenance. After all, every piece of equipment will break or fault at some point in its life.

Condition-Based Maintenance

Condition-based maintenance is sometimes considered to be a more advanced alternative to preventive maintenance. Rather than being inspected according to a schedule, machines and systems are carefully observed for changes that could indicate upcoming failure.

With condition-based maintenance, technicians observe the system running and identify variables that could affect functioning, like temperature, vibration speed, power, the presence or absence of moisture, and more.

Corrective Maintenance

Corrective maintenance is initiated when a problem is discovered while working on another work order. With corrective maintenance issues are caught ‘just in time’.

For example, during a scheduled maintenance check or while fixing another issue, a maintenance technician notices that a pipe in a HVAC system is not working as it should. Corrective maintenance is then scheduled for a future date where the problem is repaired or replaced.

Pros

Failed equipment can lead to disastrous consequences, but a clearly-documented maintenance plan can actually have a few significant benefits for an organization.

• Minimizes maintenance cost by cutting out unnecessary preventive maintenance
• Lowers cost of replacing disposable items frequently (light bulbs, tools, fuses)
• Downtime for repairs is consolidated
• Low staffing needs
• Simple and easy to understand when maintenance is required

Cons

The downsides of breakdown-maintenance are especially important to weigh given the nature of the maintenance plan. For example, breakdown-maintenance should never be used with safety equipment because a single lapse can cost one or multiple employees their health or their lives.

• Form of waste in a manufacturing environment
• Safety issues can occur with unplanned failures
• Can be costly depending on parts that fail
• Requires careful planning and execution
• Can be difficult to pinpoint source of issues

Spares Planning and control

Spare Parts Management purpose is to provide “the right parts, in the right quantity, to the right place, at the right time, with the right level of quality, and at the least total cost to the organization”.

Effective management of maintenance spare parts is a critical contributor to equipment operating performance and to the cost of the maintenance investment.

The scope of Spare Parts Management therefore includes all functions from the supplier through to the point of use. identification and coding, criticality classification, procurement, quality inspection, stocking policies, links to work planning (kitting, staging), supplier management and internal performance.

For managing parts inventory more effectively:

Identify all spare parts: Make sure that all parts required for maintaining the asset are properly identified. If, for example, a part is required for a major overhaul, there may be several items that are purchased for a one-time use. Once the machinery overhaul is completed, there may be unused parts which have future use and should be inventoried. Other equipment in the plant may be able to use the same parts. So, rather than maintenance storing these parts without any correlation with the asset, the items should be added to the inventory control system and placed into parts inventory on the EAMS/CMMS.

Classify all spare parts: Classify the spare parts as per criticality. This classification will support the process to define an effective safety stock:have the right parts, at the right time, with the lowest possible cost at the minimum inventory value.

Utilize and Manage the Bill of Materials (BOM): Having accurate BOMs will support the scheduled preventive maintenance (PM) that is needed on a given piece of equipment. This process will allow the generation of a work order with the scheduled date of the PM.

BOMs will make ordering parts and placing work orders simpler. Additionally, make sure that your BOMs are kept up to date, considering the asset status and modifications.

Use the work order: All spare parts that have been used have to be linked to a work order. For PM, work orders requested in advance can be pulled and staged for pickup or delivered to the requesting department. This will reduce the maintenance department’s wait time at the parts warehouse for their work order to be fulfilled. Work orders need to be created for all parts issuance so that inventory remains accurate.

In case of emergency, it would be possible to understand the historical information related to breakdowns to improve the parts in stock, when this is reasonable.

Limited access to the parts warehouse inventory: Limiting access to the parts warehouse inventory is mandatory to maintain inventory accuracy. Adopt a policy that parts inventories are “off limits” and only parts department employees have access, utilizing badge access to entry and exit points. Allowing everyone to have access can quickly make parts inventories inaccurate.

Optimize the warehouse: Centralize and consolidate parts – Having all your parts centralized (in one or satellite warehouses) and consolidated can make security easier but also makes this potentially large asset easier to control and maintain inventory accuracy.

Use an Inventory control system: By utilizing your ERP’s warehouse functionality or a warehouse management system (WMS) to manage your parts inventory will ensure accuracy and ease of managing your parts warehouse. This should be linked to the EAMS/CMMS.

Using barcodes and scanning functionality in conjunction with the system will improve the efficiency of the management processes in the parts warehouse and inventory accuracy.

Define a stock location for every part: Ensure that stock locations are created at the lowest detail, typically a bin and slot location for each SKU, allowed by your systems.

Implement cycle counting for inventory control: Cycle Counting is a Periodic inventory system audit-practice in which different portions of an inventory are counted or physically checked on a continuous schedule, related with inventory ABC classification. The usual class breakpoints applied are:

A = 10% of line items, gives 65% of turnover

B = 20% of line items, gives 25% of turnover

C = 70% of line items, gives 10% of turnover

Each portion is counted at a definite, preset frequency to ensure counting of each item at least once in an accounting period.

Some variation about these figures is usual, but significant differences can indicate problems with stock holding policy.

Standardize Spare Parts: Standardizing for spare parts management, usually means agreeing that a certain type/model of equipment will be used and with that the spare parts required for each installation will be the same. This is different to industry-wide standardization. This can contribute to improve the MTTR, the negotiations with the Spare Parts Suppliers and the stocks.

Develop Spare Parts Management Processes: Make sure that your Spare Parts Management Processes are developed as per best practices to ensure sustainability and a base for training.

Decide based on accurate data: Use quality data for decision making: develop your reports and KPI´s considering the Spare Parts Management Processes, to support the improvement and base for Spare parts maintenance budget.

Benefits of spare parts management:

• Allows you to keep spare inventory levels low, reducing carrying and storage costs but providing access to spare parts when needed.
• Better service to your customers. The longer your operations are up and running, the better you’re able to deliver the services and support your customers demand.
• Enhanced part visibility so your supply chain can show where the need is and where the parts are headed.
• Improved equipment uptime as you limit how long equipment is down and don’t have to wait to generate revenue or find a funding source to repair a part when it breaks.
• Quicker repairs and replacements for defective parts, plus assistance with larger failures.

Waste management places an important role in managing operations. Wastes can be categorized into obsolete, surplus and scrap items.

• Obsolete items: These are those materials and equipments which are not damaged and which have economic worth but which are no longer useful for the Company’s operation owing to many reason such as, changes in product line, process, materials, and so on.
• Surplus items: These are those materials and equipments which have no immediate use but have accumulated due to faulty planning, forecasting and purchasing. However, they have a usage value in future.
• Scrap: It is defined as process wastage, such as, turnings, borings, sprues and flashes. They may have an end-use within the plant having commercial values. Hence, should be disposed of periodically.

Disposal of Scrap surplus and Obsolete materials

Disposal of scrap when handled in an imaginative manner can result in handsome returns to the organization. An effective disposal requires a compact disposal organization reporting to the materials manager, continuous market survey on the prices of various categories of scrap generated in the plant and constant touch with the industries which generate similar scrap and with the end-users.

Disposal action follows when the scrap cannot be utilized within the organization. In practice, it has been found that it is profitable to dispose the scrap directly to end-users rather than to middlemen who normally form a cartel of their own which leads to lower returns. Before disposal action it is essential that the scrap is segregated according to metal, size, etc. when the scrap is mixed, the return is even lower than the lowest element in the mixture. This is because the buyer of scrap will have to segregate it at an extra cost. A cursory analysis of scrap prices will reveal that sheet and plate cuttings will fetch fewer amounts per a tonne compared to that of turnings and borings. Also when costly scrap such as copper, aluminum and tungsten are involved, it is imperative that they are segregated as returns are huge and price levels are different. Since scrap is generated process-wise, it comes out in a segregated condition and there should be no difficulty in sorting.

Auction and Tender methods are frequently used for disposal of scrap. Parties in both the cases are normally required to inspect the scrap in the scrap yard and deposit earnest money. Very often the company insists on a basic price depending upon the category of scrap. The disposal section works, in this aspect, in close coordination with the finance department. In many cases the disposal section may try to enter into a long-term contact with end-users such as steel plants.

Many companies have found to their displeasure scrapped components appearing in the market and competing with their parts as ‘original equipment’. This is the price which organizations pay for not dismantling and disfiguring the scrap before disposal. Automobile spare parts and bearings especially are prone to such dangers. For this purpose some organizations go to the extent of requesting vehicle users to demolish filters and plugs before scrapping them. This is very important aspect.

In view of the paucity of raw materials and shortage of credit, it is necessary that optimum usage of materials is made and funds tied up in obsolete surplus and scrap items minimized. This is only possible when top management shows commitment and support. The employees of the organizations are naturally the best people to suggest improvements in materials, processes and new end users for scrap. It is they who can minimize the accumulation of scrap through coordination.

Therefore, top management should work out formal reward systems to promote employee participation in this matter. A few organizations have suggestion box schemes which pay rich dividends to the organization. Employees, too get rewards and recognition in the process.

Following are the reasons for the generation and accumulation of obsolete, surplus and scrap items:

• Changes in product design: This may lead to some items getting invalid so far as the final product is concerned. Hence, the entire stock of such items as surplus obsolete.
• Rationalization: Sometimes raw materials are renationalized so as to minimize variety and simplify procurement. The rationalization process renders some items as surplus or obsolete.
• Cannibalization: When a machine breakdown occurs, sometimes it is rectified using parts of an identical machine which is not functioning due to various reasons. This process of ‘cannibalization’ is not uncommon in many project-based industries. When continued unchecked, this results in obsolete and scrap items.
• Faulty planning and forecasting: The marketing department may have projected a sales forecast which might be on the higher side. Any material planning has to be based on sales forecasts and this could result in surplus items. Wrong indenting by the user departments also leads to accumulation.
• Faulty purchase practices: Sub-optimizing decisions like buying in bulk to take care of discounts and transportation economy without taking into account factors such as, shelf life, storage space requirements and technological changes once again lead to the accumulation of surplus and obsolete stocks.
• Other causes: Many items are held as insurable spares for many years without any consumption. Faulty store-keeping methods, without adequate preservation, lead to spoilage. Inferior materials handling, improper codification and poor manufacturing methods also result in obsolete, surplus and scrap items. Poor maintenance of machine tools may result in excessive tools wear and greater process scrap.

Production planning is the planning of production and manufacturing modules in a company or industry. It utilizes the resource allocation of activities of employees, materials and production capacity, in order to serve different customers.

Different types of production methods, such as single item manufacturing, batch production, mass production, continuous production etc. have their own type of production planning. Production planning can be combined with production control into production planning and control, or it can be combined with enterprise resource planning.

Production planning is the future of production. It can help in efficient manufacturing or setting up of a production site by facilitating required needs. A production plan is made periodically for a specific time period, called the planning horizon. It can comprise the following activities:

• Determination of the required product mix and factory load to satisfy customer’s needs.
• Matching the required level of production to the existing resources.
• Scheduling and choosing the actual work to be started in the manufacturing facility”
• Setting up and delivering production orders to production facilities.

Types of planning

Different types of production planning can be applied:

• Advanced planning and scheduling
• Capacity planning
• Master production schedule
• Material requirements planning
• MRP II
• Scheduling
• Workflow

Tips to improve production planning

Forecasting demand

Before production planning, the first action to take is forecasting demands for your products. While this may not be accurate to the last digit, getting rough estimates rolling is important to allocate resources. Forecasting can be done based on factors like historical order data and market trends/demands. Drawing out proper forecasts helps planning the type and quantity of materials to be produced and also the planning of raw material procurement.

Control inventory

Both, inventory shortage and inventory surplus are undesirable states. You can’t proceed with production when there’s a shortage and you waste space and money when there’s a surplus. Efficiently controlling inventory involves reordering when current inventory dips below a certain level, calculating the lead times to order items with long lead times earlier, and factoring in storage conditions. A well-controlled raw material inventory helps run a smooth production line and outputs finished goods inventory on time.

Plan for everything and everyone

Often, when making production plans, some machine or some person is unaccounted for. The problem here is that that machine may go down or the worker may be on leave, or worse, working on something else. Hence, plan for every machine, raw material, workstation, warehouse, and employee.

Monitor

Once the production plan is final and work orders are handed out, the manufacturing process begins. At this point, things may go wrong, machines pause, or items may get misplaced. Constantly monitoring the factory floor with supervisors or with IoT devices ensures that all the pieces are moving as planned.

Adapt

Despite your best planning, things go wrong on the factory floor. Anything can happen from suppliers making late deliveries to workers falling sick to machines failing. It’s important to be flexible and adapt to these changes quickly so that the planned quantities can be delivered on time. Ideally, you should also plan for any such risks beforehand.

KPIs for production planning

A few key performance indicators to track in production planning are:

• Production cost: This is essentially the monetary cost involved in producing the item. Costs include raw materials, electricity, fuel, worker salaries, rent, etc.
• Capacity utilization rate: It’s the percentage of actual manufacturing output against the total possible manufacturing output. If many machines and workers are sitting idle, your capacity utilization is low. Ideally, you want it high but never full.
• Projected versus actual hours: When planning, you may allocate a certain number of hours for completion of the production plan. But, it may take longer due to delays from workers or unexpected tasks. This KPI gives you a picture of how much time it was supposed to take and how much it did.
• Employee utilization (productivity): You want workers to be working properly during the punch in and punch out. Nobody wants to be a machine by working to the dot but working 4 hours out of 8 is also not reasonable.
• Takt time: Takt time is a lean manufacturing concept. It is the time taken to produce a single unit of item.

Acceptance sampling is a statistical measure used in quality control. It allows a company to determine the quality of a batch of products by selecting a specified number for testing. The quality of this designated sample will be viewed as the quality level for the entire group of products.

A company cannot test every one of its products. There may simply be too high a volume or number of them to inspect at a reasonable cost or within a reasonable time frame. Or effective testing might result in the destruction of the product or making it unfit for sale in some way.

Acceptance sampling solves these problems by testing a representative sample of the product for defects. The process involves first, determining the size of a product lot to be tested, then the number of products to be sampled, and finally the number of defects acceptable within the sample batch.

Products are chosen at random for sampling. The procedure usually occurs at the manufacturing site the plant or factory and just before the products are to be transported. This process allows a company to measure the quality of a batch with a specified degree of statistical certainty without having to test every single unit. Based on the results how many of the predetermined number of samples pass or fail the testing the company decides whether to accept or reject the entire lot.

The statistical reliability of a sample is generally measured by a t-statistic, a type of inferential statistic used to determine if there is a significant difference between two groups that share common features.

Acceptance sampling uses statistical sampling to determine whether to accept or reject a production lot of material. It has been a common quality control technique used in industry. It is usually done as products leaves the factory, or in some cases even within the factory. Most often a producer supplies a consumer a number of items and a decision to accept or reject the items is made by determining the number of defective items in a sample from the lot. The lot is accepted if the number of defects falls below where the acceptance number or otherwise the lot is rejected.

In general, acceptance sampling is employed when one or several of the following hold:

• Testing is destructive;
• The cost of 100% inspection is very high; and
• 100% inspection takes too long.

A wide variety of acceptance sampling plans are available. For example, multiple sampling plans use more than two samples to reach a conclusion. A shorter examination period and smaller sample sizes are features of this type of plan. Although the samples are taken at random, the sampling procedure is still reliable.

Acceptance sampling for attributes

A single sampling plan for attributes is a statistical method by which the lot is accepted or rejected on the basis of one sample. Suppose that we have a lot of size M; a random sample of size  N<M is selected from the lot; and an acceptance number B is determined. If it is found the number of nonconforming is less than or equal to B, the lot is accepted; and if the number of nonconforming is greater than B, the lot is not accepted. The design of a single sampling plan requires the selection of the sample size N and the acceptance number B.

MIL-STD-105 was a United States defense standard that provided procedures and tables for sampling by attributes (pass or fail characteristic). MIL-STD-105E was cancelled in 1995 but is available in related documents such as ANSI/ASQ Z1.4, “Sampling Procedures and Tables for Inspection by Attributes”. Several levels of inspection are provided and can be indexed to several AQLs. The sample size is specified and the basis for acceptance or rejection (number of defects) is provided. MIL-STD-1916 is currently the preferred method of sampling for all Department of Defense (DoD) contracts.

O.C. curves quantifies manufacturer’s (producer’s) risk and consumer’s (purchaser’s) risk. This is a graph of the percentage defective in a lot versus the probability that the sampling plan will accept a lot.

An O.C. Curve drawn for sampling plan of n = 300 and C = 10 at Fig. 60.1 indicates the following:

AQL = 0.02 or 2%

Manufacturer’s risk = 0.05

Consumer’s risk = 0.10

LTPD = 0.05 or more defectives.

All practical sampling plans have an operating characteristics curve, briefly called O.C. curve.

Following points need emphasis regarding O.C. curves:

(i) There is some chance that good lots will be rejected.

(ii) There is some chance that bad lots will be rejected.

(iii) These risks can be calculated by the theory of probability and depends on the number of samples inspected, the acceptance number, and the percent defectives in the lot offered for sample inspection. Given the amount of risks which can be tolerated, a sampling plan can be devised to meet these requirements.

(iv) The larger the sample used for inspection, the nearer the O.C. curve approaches the ideal. However beyond a certain point, the added cost in inspecting a large number of parts far exceeds the benefit derived.

In any acceptance sampling plan, three parameters are specified. The first parameter is number of articles N in the lot from which sample is to be drawn. The second parameter is the number of articles n in the random sample drawn from the lot, and the third is the acceptance number C.

This acceptance number C is the maximum allowable number of defective articles in the sample. If more than C defectives are found in a sample the lot is liable to be rejected. Since the lot size has little affect on the probability of acceptance, therefore lot size is generally ignored in deriving a sampling plan.

O.C. curve of an acceptance sampling plan (i.e. for a particular combination of n and C) shows how well the sampling plan discriminates between good and bad lots. In order to exam­ine the suitability of an acceptance sam­pling plan, it is necessary to compare their performance over a range of pos­sible quality levels of the product.

The graph of this performance is known as operating characteristic curve. Fig. 60.2 below shows an ideal O.C. curve where it is desired to accept all lots having 3% or less defectives, and to reject all lots having more than 3% defectives.

In this curve, all lots with less than 3% defectives have a probability of accep­tance of 100%, while all lots with more than 3% defectives have a probability of acceptance as 0%. However, such a plan does not exist in reality.

Zones of O.C. Curve:

O.C. curve can be divided into following 3 zones:

(a) Acceptance Zone:

In this zone all the batches are accepted, therefore, the O.C. curve should be so selected that its acceptance zone accepts what is considered to be satisfactory lot.

(b) Rejection Zone:

In this zone, all the batches are rejected. Hence the O.C. curve selected should be such that it rejects what is considered to be an unsatisfactory lot.

(c) Zone of Indecision:

This is the zone where there is no purity that whether any particular batch or lot will be accepted or rejected. This problem can be solved either by adopting 100% inspection or by taking larger sample, but these will increase the inspection costs.

A batch or lot in this zone is worse than acceptable lot, and better than those what is considered as unaccept­able. Thus its quality is border-line, and practically does not matter much whether a lot is finally accepted or rejected from this zone.

Credit: https://www.businessmanagementideas.com/production-management/operating-characteristic-o-c-curves/6960

Availability of Raw Materials:

Proximity of sources of raw materials is the obvious explanation of the location of majority of sugar mills in Uttar Pradesh. This means that the raw material should be available within the economical distance. Easy availability of supplies required for maintenance and operation of the plant should also be considered.

Proximity to Markets:

Cost of distribution is an important item in the overhead expenses. So it will be advantageous to be near to the center of demand for finished products. Importance of this is fully realized if the material required for the manufacturing of products are not bulk and fright charges are small.

Transport Facilities:

Since freight charges of raw materials and finished goods enter into the cost of production, therefore transportation facilities are becoming the governing factor in economic location of the plant. Depending upon the volume of the raw materials and finished products, a suitable method of transportation like rail, road, water transportation (through river, canals or sea) and air transport is selected and accordingly plant location is decided. Important consideration should be that the cost of transportation should remain fairly small in comparison to the total cost of production.

Location in Proximity of Cities:

First tendency is to locate the industries or enterprises in the proximity of cities rather than in rural or urban areas. These sub-urban sites offer today practically all advantages, facilities and services available in cities and towns with the added advantage of land required for future expansion on cheap rates.

Planned Industrial Centres:

While industrial towns may be planned and developed by big industrial houses or govt., the late trend is to develop areas as industrial estates and sell these to people interested in starting their units at various places. Noida and Faridabad are the examples of this type of development.

Competition for Development of Industries:

In order to generate the employment opportunities the state and central govt. offer concessions to attract industrialists to set up industries in their states or territories.

Appropriate Site Selection:

Appropriate site selection is important because of the following:

(i) A good location may minimize the cost of production and distribution to a considerable extent. Such reduction in the cost of production helps in elevating either the competitive strength or the profit margin of the business.

(ii) Initiation of an enterprise involve a relatively large permanent investment. If the selected site is not proper, all the money invested on factory building, installation of machinery etc. will go waste and the owner will have to suffer a great loss.

(iii) Location put constraints for the physical factors of the overall plant designs heating, ventilation requirements, storage capacity for raw materials, transportation requirements for input material and finished products, energy requirements cost of labour, taxes and construction costs.

(iv) Location of plant decides the nature of investment cost to be incurred.

(v) Government policies sometimes play an important role in site selection.

(vi) Probably no location is so perfect as to guarantee success but locations can be so bad as to bankrupt an enterprise.

Nearness to Markets:

It reduces the cost of transportation as well as the chances of the finished products getting damaged and spoiled in the way (especially perishable products). Moreover a plant being near, to the market can catch a big share of the market and can render quick service to the customers.

Availability of Labour:

Stable labour force, of right kind, of adequate size (number), and at reasonable rates with its proper attitude towards work are a few factors which govern plant location to a major extent. The purpose of the management is to face less boycotts, strikes or lockouts and to achieve lower labour cost per unit of production.

Availability of Fuel and Power:

Because of the wide spread use of electric power, in most cases fuel (coal, oil, etc.) has not remained a deciding factor for plant location. Even then steel industries are located near source of fuel (coal) to cut down the fuel transportation costs.

It is of course essential that electric power should remain available continuously, in proper quantity and at reasonable rates.

Availability of Water:

Water is used for processing, as in paper and chemical industries, and is also required for drinking and sanitary purposes. Depending upon the nature of plant, water should be available in adequate quantity and should be of proper quality (clean and pure). A chemical industry should not be set up at a location which is famous for water shortage.

Climatic Conditions:

With the developments in the field of heating, ventilating and air- conditioning, climate of the region does not present much problem. Of course, control of climate needs money.

Financial and Other Aids:

Certain states give aids as loans, feed money, machinery, built up sheds, etc., to attract industrialists.

Land:

Topography, area, the shape of the site, cost, drainage and other facilities, the probabil­ity of floods, earthquakes (from the past history) etc., influence the selection of plant location.

Community Attitude:

Success of an industry depends very much on the attitude of the local people and whether they want work or not.

(11) Presence of related industries.

(12) Existence of hospitals, marketing centres, schools, banks, post offices, clubs, etc.

(13) Local bye-laws, taxes, building ordnances, etc.

(14) Housing facilities.

(15) Security.

(16) Facilities for expansion.

Sargant Florence’s Theory

Another theory of location, which has assumed great importance and acquired a wide popularity during recent year, is the one put forward by Professor Sargent Florence. He observed that the relation of an industry to an area is not so important as the relation of the distribution of the occupied population as a whole. It means he does not accept relation between industry and geographical area.

An ideal location is one where the cost of the product is kept to a minimum, with a large market share, the least risk, and the maximum social gain. Every entrepreneur is faced with the problem of deciding the best site for locating of his plant or factory. Selection of plant location is important for the success of an organization. The various factors affecting plant location selection decision are discussed below:

• Nature of Product and Industry
• Nearness to raw material
• Proximity to market
• Workforce Requirement
• Availability of Power and Fuel
• Availability of Water
• Land
• Transport and communication facilities
• Climate
• Total costs
• Availability of Infrastructure
• Suppliers Industries Location
• Free Trade Zones
• Political Risk
• Government Policies
• Environmental Regulation
• Host Community
• Competitive Advantage
• Goodwill of Place
• Personal Factors
• Historical Religious Factors
• Other Factors

1. Nature of Product and Industry

Plant location decision is dependent on the nature of product to be produced and the nature of an industry. For example, if it is a chemical product, like sugar, where the manufacturing process emits a particular type of smell, this type of industry needs to be located far from the human communities. While if the industry is a chemical industry, which involves toxic element in manufacturing process, it must be located very far from cities to avoid tragedies like Bhopal Gas Tragedy.

2. Nearness to raw material

If a raw material is heavy then it is also difficult to transport and if it is required in large quantity then the manufacturing plant has to be located at the site where such material is available. Otherwise cost of loading and transportation is huge. The time consumed and managerial inputs are more. As a result the economics of manufacturing goes out of scale and the product become uncompetitive. This is the same reason why Steel mills are located at Bihar and Sugar Mills near the sugarcane producing fields like Kolhapur in Maharashtra. Further natural products like fruits, milk undergo changes after harvesting and milking respectively. Their quality starts deteriorating and contamination begins to multiply. This results in low recoveries and higher cost of production. In such cases plant is located at the origin of the raw materials.

3. Proximity to market

If the volume of a product is much bigger than the raw materials, like plastics products, or if the product is perishable, then the manufacturing plant is located near the market. Nearness to potential market minimizes the risk of deterioration and damage in transport. The organization needs to produce product which is close to the customer due to a time-based competition, trade agreements, and shipping costs benefits. Examples are, bottling plant of cold drinks, which are always near to the city. Some more examples are: Sub-contractors/Vendors-Automobile Industry (TATA,GM), Confectioneries, Food Products, Plastics Products, Electronic items (like T.V., Fridge) etc.

4. Workforce Requirement

Some of the manufacturing operations require skilled workforce in its manufacturing operations. Skilled workforce itself requires well-cultured surrounding, opportunities of advancement through further studies and experience sharing, opportunities of advancement through further studies and experience sharing, recognisation, competition and recreational facilities. Normally such a facilitating environment is there in urban areas. One can establish such environment in rural areas but it is very costly and time-consuming process. Skilled workforce is available are urban places. So such plants are located very near to city. For example most of the software industries are located in Bangalore, Hyderabad and Pune. These cities have good educational and training institutions along with other promotional factors. Which are providing ample skilled workforce for the software industry. Some manufacturing operations require unskilled labour force which is available in rural areas. Hence labour intensive plants are located very away from the city in rural area.

5. Availability of Power and Fuel

Industries consume power in large quantity. An industry will choose a site where there is uninterrupted and cheap power supply available. In place of power if coal or other materials are used as fuel their availability will locate the plants nearby.

6. Availability of Water

Chemical industries, food industries use lot of water in their process. similarly, waste and bi-products of these industries are hazardous and required to be discharged in flowing water after treatment, So, one finds that chemical and pharmaceutical industries are located near to sea or river.

7. Land

Locating a plant requires land. The land must be plane and good. Water should drain naturally. It should be free from all encroachments. It must have free and easy access. Land must be available not only as per present requirement but land must be available for future expansion. It should be available at very low cost, as it will reduce the capital investment.

8. Transport and communication facilities

To gain the advantages of the nearness to the raw material or market, the most important thing is transport and communication facility. Every industry requires transport of raw materials, finished products as well as their workforce and support services. Availability of transport network facilitates the site selection. Cheaper transport reduces production costs. Similarly communication facilities form an integral part of any business.

9. Climate

For the particular type of industry, the climate plays a very important role. Textile industries are located near coastal areas as the weaving of threads needs high humidity.

10. Total costs

The basic objective of a plant location is to maximize the profits by minimizing the total cost of production.

Total costs = Fixed costs + Operational costs

Fixed costs include land and building cost and machines costs. Operational costs are the expenditures incurred on inputs, transformation process cost, and the distribution cost. Hence, the location is selected where the total cost is kept at a minimum.

11. Availability of Infrastructure

Basic facilities of land, roads, power and water are called as infrastructure. Such facilities are not only essential but are backbone of the industry. Presence of these facilities makes management of manufacturing easy and at less cost whereas absence of the infrastructure makes manufacturing very difficult and costly.

12. Suppliers Industries Location

Many times the well-established industrial areas attract new industries. For example, when General Motors started its operation in India, they chose Pune as their location, as all necessary part suppliers are available in the region.

13. Free Trade Zones

India signed Free Trade Agreement (FTA) with Thailand in October 2003. Under the FTA, 82 auto components are covered under the Early Harvest Scheme, which will have zero custom duty when traded between India and Thailand. Such an agreement attracts industries to establish plants in either of the countries to get benefit of it.

14. Political Risk

Political uncertainties have great impact on plant location decision. Political stability is essential for industrial growth. That political stability fosters industrial activity. The political stability builds confidence and political instability causes lack of confidence among the prospective and present entrepreneurs to venture into industry which is filled with risks.

15. Government Policies

The policies of the state governments and local bodies concerning labour laws, building codes, safety, etc., are the factors that demand attention. In order to have a balanced regional growth of industries, both central and state governments in our country offer the package of incentives to entrepreneurs in particular locations. The incentive package may be in the form of exemption from a safes tax and excise duties for a specific period, soft loan from financial institutions, subsidy in electricity charges and investment subsidy. Some of these incentives may tempt to locate the plant to avail these facilities offered.

16. Environmental Regulation

Due to recent issues of global warming, it is mandatory for all type of industries to follow the environmental regulation. Hence, the organizations are selecting locations decisions.

17. Host Community

Plant location decision is greatly dependent on the nature of host community/society. It is political, supportive, or non-supportive.   Community’s perception about a factory is that either the product is for their development, if not they are against the product. What type of community facilities are provided in the region is also taken into consideration for a plant location. For example:

1. Accommodation for employees
2. Public transport like railway station, bus stand etc.
3. Schools, post, banks, telephone, medical facilities

18. Competitive Advantage

When new markets are coming up, organizations are selecting a plant location in that area to get competitive advantages. For example many MNCs are coming to India and China to tap this new upcoming market. Indian Management Institutes started their first offshore centers in UAE. Similarly Harvard Business School started MDO centre in Hyderabad.

19. Goodwill of Place

Apart from all above factors, sometimes plant location is selected at some well-known places or prestigious places. Some examples are:

1. Offices at Nariman Point In Mumbai
2. IT industry in Pune/Bengaluru
3. A company in Silicon Valley.

20. Safety Requirements

Plant location must meet all essential safety requirements. Due to air, water and sound pollution, some factories have a bad effect on the health of the people. Therefore, these factories must be located away from residential areas. Safety of environment must also be given priority in this regards.

21. Personal Factors

Sometimes personal factors play a very important role in selecting plant location. For example, Henry Ford started his factory in Detroit (USA) because he started his career there, where he created his Quadricycle. Most of the cooperative sugar factories are located in the political constituency of the chairman of the factory.

22. Historical Religious Factors

With respect to service industry or related industry, where visitors number is important, he plant location is selected near a historical/religious places. For example, idol carving factory is always near historical temples.

23. Other Factors

Apart from the above discussed factors, there may be one or more factors which can influence plant location decision. For example, special grants or Import.Export needs, the location might be selected in memories of someone for the purpose of rural development as part of a corporate social responsibility of big industrial houses or any other reason, availability of finance, facilities for expansion  etc.

Weber’s Theory of Location

Alfred Weber was a German Scientist who gave a systematic theory on industrial location. Weber, after a great lot of analysis and investigation, discovered the factors that causes and determine the location of industry into two broad divisions:

1. Primary causes of regional distribution of industry (Regional Factors) and
2. Secondary (agglomerative and deglomerative factors) that are responsible for location of industry.
3. The Primary factors involve cost element as follow,

• Cost of land
• Cost of building, machines and other fixed cost
• Cost of procuring materials, power and fuel
• Cost of labour
• Cost of transportation
• Interest rates
• Rate of depreciation of fixed capital

Secondary Factors

An agglomerative factor is an advantage or a cheapening of production or marketing which results from the fact that production is carried on to some considerable extent at one place while a deglomerative factor is a cheapening of production which results from the decentralization of production (production in more than one place).

Principles of Plant Layout:

While designing the plant layout, the following principles must be kept in view:

(i) Principle of Minimum Movement:

Materials and labour should be moved over minimum distances; saving cost and time of transportation and material handling.

(ii) Principle of Space Utilization:

All available cubic space should be effectively utilized – both horizontally and vertically.

(iii) Principle of Flexibility:

Layout should be flexible enough to be adaptable to changes required by expansion or technological development.

(iv) Principle of Interdependence:

Interdependent operations and processes should be located in close proximity to each other; to minimize product travel.

(v) Principle of Overall Integration:

All the plant facilities and services should be fully integrated into a single operating unit; to minimize cost of production.

(vi) Principle of Safety:

There should be in-built provision in the design of layout, to provide for comfort and safety of workers.

(vii) Principle of Smooth Flow:

The layout should be so designed as to reduce work bottlenecks and facilitate uninterrupted flow of work throughout the plant.

(viii) Principle of Economy:

The layout should aim at effecting economy in terms of investment in fixed assets.

(ix) Principle of Supervision:

A good layout should facilitate effective supervision over workers.

(x) Principle of Satisfaction:

A good layout should boost up employee morale, by providing them with maximum work satisfaction.

Township Selection:

The factors to be considered regarding township selection are:

(i) Availability of men power of requisite skill

(ii) Competitive wage rates of workers

(iii) Other enterprises which are complementary or supplementary regarding raw materials, other input, labour and skill required.

(iv) Moderate taxes and the absence of restricting laws.

(v) A favourable cooperative and friendly attitude towards the industry.

(vi) Favourable living conditions and standards keeping in view the availability of medical and educational facilities, housing, fire service, recreational facilities, cost of living etc.

Advantages of Rural Area:

(i) The initial cost of land, erection cost of building and plant is less in rural area as compared to urban or city area.

(ii) Acquisition for additional area for extension work expansion of plant is possible without much difficulty whereas urban area being congested; the additional land is not easily available.

(iii) Rural areas are free form labour trouble which is most common in towns and cities.

(iv) Over crowding of working class population in cities is avoided.

Advantages of Urban Area:

(i) Better modes of transportation for collection and distribution of materials and finished products.

(ii) Availability to requisite type of labour for special and specific jobs is there.

(iii) Utilities like water, power, fuels etc. are easily available.

(iv) Industries do not need to construct colonies to provide residential facilities to their workers since houses are available on rental basis whereas in rural areas, houses have to be build for workers.

Layout

Product Layout (or Line Layout):

In this type of layout, all the machines are arranged in the sequence, as required to produce a specific product. It is called line layout because machines are arrange in a straight line. The raw materials are fed at one end and taken out as finished product to the other end.

Special purpose machines are used which perform the required jobs (i.e. functions) quickly and reliably.

Advantages:

1. Reduced material handling cost due to mechanized handling systems and straight flow
2. Perfect line balancing which eliminates bottlenecks and idle capacity.
3. Short manufacturing cycle due to uninterrupted flow of materials
4. Simplified production planning and control; and simple and effective inspection of work.
5. Small amount of work-in-progress inventory
6. Lesser wage cost, as unskilled workers can learn and manage production.

Process Layout (or Functional Layout):

In this type of layout, all machines performing similar type of operations are grouped at one location i.e. all lathes, milling machines etc. are grouped in the shop and they will be clustered in like groups.

Advantages:

1. Greater flexibility with regard to work distribution to machinery and personnel. Adapted to frequent changes in sequence of operations.
2. Lower investment due to general purpose machines; which usually are less costly than special purpose machines.
3. Higher utilisation of production facilities; which can be adapted to a variety of products.
4. Variety of jobs makes the work challenging and interesting.
5. Breakdown of one machine does not result in complete stoppage of work.

Combination Layout:

In practice, plants are rarely laid out either in product or process layout form. Generally a combination of the two basic layouts is employed; to derive the advantages of both systems of layout. For example, refrigerator manufacturing uses a combination layout.

Process layout is used to produce various operations like stamping, welding, heat treatment being carried out in different work centres as per requirement. The final assembly of the product is done in a product type layout.

Fixed Position Layout:

It is also called stationary layout. In this type of layout men, materials and machines are brought to a product that remains in one place owing to its size. Ship-building, air-craft manufacturing, wagon building, heavy construction of dams, bridges, buildings etc. are typical examples of such layout.

Advantages of Operations Management

Overall, operations management is a key factor for manufacturing organizations that wish to take their production to the next level.  Some notable advantages include:

Better Resource Management: Operations management processes focus on effectively managing all of your resources to ensure that their potential is being maximized. Resources can include physical machines as well as labor resources.

Profitability Management: When your operations are properly managed, it is easier for your company’s executives to rely on the production activity to get a better understanding of your revenue stream. They are then able to rely on that consistent information to find new ways to increase sales or come up with new product ideas.

Competitive Advantage: Being able to coordinate the multiple levels and components of your manufacturing organization means that things will run much more smoothly. Your production time will likely decrease, allowing you to deliver goods on time which is a crucial aspect of having great customer relations. This will allow you to promptly deliver great products and keep you ahead of the competition.

Advantages to consumers:

A well-planned production function will lead to good quality products, higher rate of production and lower cost per unit. The consumers will be benefitted from prices of goods and will get good quality products. The availability of goods will also be satisfactory and the consumers will be saved from a lot of botheration which may otherwise be caused by scarcity of products.

Advantages to Investors:

An enhancement in productivity will increase profitability of the business. The investors will get higher returns on investment if profitability is better. This will also result in appreciation of assets values and ultimately the prices of shares will go up which will also benefit investors.

Advantages to employees:

Higher productivity will benefit employees in the form of better remuneration, stability in employment, good working conditions, etc. Better productivity to a worker will give him job satisfaction and improve his morale.

Advantages to suppliers:

Every enterprise depends upon supplies of raw materials, finished goods, spare parts etc. The suppliers will always like to deal with a concern having sound financial position. The company and its suppliers will have an enduring relationship only if both are satisfied with each other’s dealings.

Advantages to the community:

The economic and social stability of a- community is linked with growth and development of its industrial structure. An overall improvement in productivity will improve economic welfare of the society.

Advantages to the nation:

The advantages of various segments of society improve welfare of a nation. Better production management will result in proper and economical use of natural resources and elimination of wastages. An improved industrial climate will bring all round development and prosperity.

Disadvantages of Operations Management

Human Error: Another prevalent problem within manufacturing operations is the fact that humans tend to be mistake-prone. Most of the time, this issue occurs during the transition from manufacturing to sale. Because of this, it is important to ensure that operations management is coordinating various areas effectively such as operations, marketing, finances, accounting, engineering, information, and human resources.

Multi-Level Dependency: One of the main disadvantages is that a large amount of the success of implementing operations management procedures requires coordination between the different components of the organization. Even if an effective plan is put in place, it will fail if it is not carried out in the proper manner by all components.