Production and Project Management

Lecture-2 Production
By
Dr. M. Jayakumar
Assistant Professor
Department of Chemical Engineering
Haramaya University
Chapter-2.
Production
2.1 Concepts of production
2.2 Production system and its classifications
2.3 Product
2.4 Productivity
2.5 Production planning and control
Production/Manufacturing
Production/manufacturing is the application of
processes(Technology)
to converting raw materials or semi-finished
products into finished products
by the best method, without sacrificing the
desired quality that have value in the market place.
Cont…..
This process involves the contribution of
labor
equipment
energy and
information.
We have three ways of Production, they are:

(i) Production by Disintegration: By separating the

contents of Crude oil or a mixture the desired products are
produced.
For example the crude oil is disintegrated into various
fuel oils.
Similarly salt production is also an example for product
produced by disintegrated.
We can use Mechanical or Chemical or both technologies
to get the desired product, so that it will have desired use
value.
(ii) Production by Integration:
In this type of Production various Components of
the products are assembled together to get the desired
product.
In this process, Physical and Chemical Properties
of the materials used may change.
Examples are: Assembly of Two wheelers, four wheelers
and so on.
(iii) Production by Service:
Here the Chemical and Mechanical Properties of
materials are improved without any physical change.
Example for this is Heat Treatment of metals.
In real world, a combination of above methods is
used.
In general production is the use of any process or
procedure designed to transform a set of input elements
into a set of output elements, which have use value and
economic value.
Concept of production
☼ Production is defined as “the step-by-step conversion
of one form of material into another form through
chemical or mechanical process to create or enhance the
utility of the product to the user.”
☼ Thus production is a value addition process.
☼At each stage of processing, there will be value
addition.
Edwood Buffa defines production as ‘a process by which
goods and services are created’.
Some examples of production are:
manufacturing custom-made products like heat
exchangers, evaporators, distillation columns with a
specific capacity
constructing flats, some structural fabrication
works for selected customers, etc., and
manufacturing standardized products like,
cosmetics, car, bus, motor cycle, radio, television, etc.
Production System
The production system is that part of an
organization, which produces products of an
organization.
It is that activity whereby resources, flowing
within a defined system, are combined and transformed
in a controlled manner to add value in accordance with
the policies communicated by management.
A simplified production system is shown below:

Fig.2.1 Schematic production system

The production system has the following
characteristics:
1. Production is an organized activity, so every
production system has an objective.
2. The system transforms the various inputs to useful
outputs.
3. It does not operate in isolation from the other
organization system.
4. There exists a feedback about the activities, which is
essential to control and improve system performance.
Classification of Production System

Fig. 2.2 Classifications of production systems

Job-Shop Production
are characterized by manufacturing one or few
quantity of products designed and produced as per the
specification of customers within prefixed time and cost.
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.

Examples: Candle manufacturing, Soap manufacturing.

Job-shop Production is characterized by

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 as a form of manufacturing in
which the job pass 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.
Examples: Chemicals, paint & motor vehicles
etc.
Batch Production is characterized by
1. Shorter production runs.
2. Plant and machinery are flexible.
3. 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. 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.
Examples: Assembly shop of automobiles, radios, electric
fans.
Mass Production is characterized by
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.
Examples: Sugar, Alcohol, Steel, Paper, and
Cement plants.
Continuous Production is characterized by
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. Very high investment for setting flow lines.
2. Product differentiation is limited.

3. PRODUCT
Though many authors define the product with
Consumer orientation, it is better for us to deal with
different angles, because it will be helpful for us to
understand the subject of production and Project
Management.
(i) For a Consumer:
Product is a combination of or optimal mix of potential
utilities.
This is because every consumer expects some use or uses
from the product.
he/she always identifies the product in terms of the uses.

Example-Soap can be identified by complexion,

cleanliness of body, freshness, fragrance or health.... etc.
 Because of this, many producers advertise that
they are selling health, or they are selling Cine star
Complexion or they are selling freshness and so on.

(ii) For a Production Manager:

Product is the combination of various surfaces
and processes (or operations).
This is because the production Manager is solely
responsible for producing the product.
(iii) For a Financial Manager:
For him the product is a mix of various cost
elements as he is responsible for the profitability of the
product.

(iv) For a Personnel Manager:

For him the product is a mix of various skills, as
he is the person who selects and trains the personnel to
meet the demand of the skill to produce the product.
 In general we can define the product as a bundle
of tangible and intangible attributes, which along with
the service is meant to satisfy the customer wants.

Productivity

Productivity is defined in terms of utilization of

resources, like material and labour.
In simple terms, productivity is the ratio of output
to input.
Example, productivity of labour can be measured as
units produced per labour hour worked.

Productivity = output/Input
For survival of any organization, this productivity
ratio must be at least 1.
If it is more than 1, the organization is in a
comfortable position.
The ratio of output produced to the input
resources utilized in the production.
 Productivity is closely linked with quality,
technology and profitability.
Hence, there is a strong stress on productivity
improvement in competitive business environment.
Productivity can be improved by
(a) Controlling inputs,
(b) Improving process so that the same input
yields higher output, and
(c) Improvement of technology.
 Productivity can be measured at firm level, at
industry level, at national level and at international
level.

Productivity Analysis
Purposes of studies of productivity for
improvement purposes, following types of analysis can
be carried out:

1. Trend analysis: Studying productivity changes for

the firm over a period of time.
2. Horizontal analysis:
Studying productivity in comparison with other
firms of same size and engaged in similar business.

3. Vertical analysis:

Studying productivity in comparison with other

industries and other firms of different sizes in the same
industry.
4. Budgetary analysis:
Setting up a norm for productivity for a future
period as budget, based on studies as above, and planning
strategies to achieve it.

Factors Affecting Productivity

Economists site a variety of reasons for changes in
productivity.
However some of the principle factors influencing
productivity rate are:
1. Capital/labour ratio:
It is a measure of whether enough
investment is being made in plant,
machinery, and tools to make effective use of
labour hours.

2. Scarcity of some resources:

Resources such as energy, water and number
of metals will create productivity problems.
3. Work-force changes:
Change in work-force effect productivity to
a larger extent, because of the labour turnover.
4. Innovations and technology:
This is the major cause of increasing
productivity.
5. Regulatory effects:
These impose substantial constraints on some
firms, which lead to change in productivity.

6. Bargaining power:
Bargaining power of organized labour to
command wage increases excess of output increases has
had a detrimental effect on productivity.
7. Managerial factors:

Managerial factors are the ways an organization

benefits from the unique planning and managerial skills
of its manager.

8. Quality of work life:

It is a term that describes the organizational

culture, and the extent to which it motivates and satisfies
employees.
Productivity Measurement:
Productivity may be measured either on aggregate basis
or on individual basis, which are called total and partial
measure.

Illustration 1: The input and output data for a small scale

chemical process industry is given in the table. Find out the
following productivity measures.

1. Total Measures

2. Multifactor Measures and

3. Partial measures.

Output and Input production data in dollar ($)

[Link] Output Input
1. Finished units 11,000 Human 3,100

2. Work in progress 2,600 Material 155

3. Dividends 1,000 Capital 12,000

4. Bonds ------- Energy 550

5. Other income -------- Other Expenses 1,600

Solution
1. Total Measure = Total Output / Total Input

Total Output = [Finished Units + Work in Process + Dividends + Bonds

+ Other Income]
Total Input = [ Human + Material + Capital + Energy + Expenses]
Total Output = [11000 + 2600 + 1000]
Total Output = 14600$
Total Input = [3100 + 155 + 12000 + 550 + 1600]
Total Input = 17405$
Total Measure = 14600/ 17405
= 0.8388
≃ 0.84

The Total measure is 0.84 i.e. less than one (1).

This indicates that the productivity of this industry is not well. Productivity is

not in perfect manner.

2. Multifactor Measure
Multifactor Measure 1= Total output / Human + Material
Multifactor Measure 2 = Finished Units / Human + Material

Multifactor Measure 1 = 14600 / 3100 + 155

= 4.4854
≃ 4.49
Multifactor Measure 2 = 11000 / 3100 + 155
= 3.3794
≃ 3.38
3. Partial measure
Partial measure 1 = Total output / Energy
Partial measure 2 = Finished Units / Energy

Partial measure 1 = 14600 / 550

= 26.5454
≃ 26.55
Partial measure 2 = 11000 / 550
= 20
Illustration 2: A soap manufacturing industry has
provided the following data. Compare the labour,
raw materials and supplies and total productivity
of 2006 and 2007.
Sales value of production in dollar ($)
Output:
23,000 (in 2006) and 36,000 (in 2007)
Input:
S. No Year 2006 2007
1. Labour 11,000 16,000
2. Raw materials 8,500 13,000
3. Capital equipment 750 1,400
depreciation
4. Other 2,400 5,000
Solution
1. Partial Productivities of Labour = Total Value / Labour

2006 2007

=23000 / 11000 = 36000 / 16000

= 2.01 = 2.25
2. Raw Materials and Supplies = Total Value / Raw Materials

2006 2007
= 23000 / 8500 = 36000 / 13000
= 2.71 = 2.77
3. Total Measure ( Or) Productivity = Total Output / Total Input
Total Input = [Human + Material + Capital +
Energy + Expenses]
Total Input [2006] = [11000 + 8500 + 750 + 2400]
= 22650
 Total Input [2007] = [16000 + 13000 + 1400 + 5000]
= 35400
2006 2007
= 23000 / 22650 = 36000 / 35400
= 1.02 = 1.0169 ≃ 1.02
Therefore total productivity in year 2006 = 1.02
and total productivity in year 2007 is also ≃ 1.02.
This indicates that the productivity of soap
manufacturing company is perfect, such that the total
productivity is greater than one as calculated in above
for both year 2006 and 2007.