Production management and Operations Management

Production and Operations Management

Introduction The very essence of any business is to cater needs of customer by providing services and goods, and in process create value for customers and solve their problems. Production and operations management talks about applying business organization and management concepts in creation of goods and services. Production Production is a scientific process which involves transformation of raw material (input) into desired product or service (output) by adding economic value. Production can broadly categorize into following based on technique: Production through separation: It involves desired output is achieved through separation or extraction from raw materials. A classic example of separation or extraction is Oil into various fuel products.

Production by modification or improvement: It involves change in chemical and mechanical parameters of the raw material without altering physical attributes of the raw material. Annealing process (heating at high temperatures and then cooling), is example of production by modification or improvement.

Production by assembly: Car production and computer are example of production by assembly.

Importance of Production Function and Production Management

Successful organizations have well defined and efficient line function and support function. Production comes under the category of line function which directly affects customer experience and there by future of organization itself.

Aim of production function is to add value to product or service which will create a strong and long lasting customer relationship or association. And this can be achieved by healthy and productive association between Marketing and Production people. Marketing function people are frontline representative of the company and provide insights to real product needs of customers.

An effective planning and control on production parameters to achieve or create value for customers is called production management.

Operations Management

As to deliver value for customers in products and services, it is essential for the company to do the following:

Identify the customer needs and convert that into a specific product or service (numbers of products required for specific period of time)

Based on product requirement do back-ward working to identify raw material requirements

Engage internal and external vendors to create supply chain for raw material and finished goods between vendor → production facility → customers.

Operations management captures above identified 3 points.

Production Management v/s Operations Management

A high level comparison which distinct production and operations management can be done on following characteristics:

Output: Production management deals with manufacturing of products like (computer, car, etc) while operations management cover both products and services.

Usage of Output: Products like computer/car are utilized over a period of time whereas services need to be consumed immediately

Classification of work: To produce products like computer/car more of capital equipment and less labour are required while services require more labour and lesser capital equipment.

Customer Contact: There is no participation of customer during production whereas for services a constant contact with customer is required.

Production management and operations management both are very essential in meeting objective of an organization.

Operations: Policy and Strategy

                                  

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Introduction It is very important for an organization to have well defined objective. A well-defined objective facilitates development of strategies and policy thereby creating value for customers. Operation Strategy Operational strategy is essential to achieve operational goals set by organization in alignment with overall objective of the company. Operational strategy is design to achieve business effectiveness or competitive advantage. Operational strategy is planning process which aligns the following:

In this global competitive age organization goal tend to change from time to time therefore operations strategy as a consequence has also be dynamic in nature. A regular SWOT analysis ensures that the organization is able to maintain competitive advantage and business leadership.

Strategic Management Process for Production and Operation

For success of organizational strategic objective, strategic planning has to trickle down to various function areas of the business. In order to build strategy management process a sequential process as below is followed
Competition Analysis: In this step company evaluates and studies current competition in the market and practices that are followed in the industry for operations and production vis-à-vis company policies
Goal Setting: Next step involves narrowing down the objective towards which the organization wants to move towards.
Strategy Formulation: The next step is breaking down of organizational goals into operations and production strategies.
Implementation: The final step is to convert operations and production strategies into day to day activities like production schedule, product design, quality management etc.
As organizations are always customer-centric, production and operation strategy for organization are built around them

Productivity

Measurement of formulated operations and production strategy is important to maintain alignment with the organization objectives. In simple terms productivity is defined as sum of total output per employee or per day. Productivity of company is dependent on industry and environmental conditions in which it is operating.
Two essential part of productivity are labor and capital. In scenario of limited resources, optimum and efficient utilization of labor and capital will generate favorable productivity. Productivity measurement also enables company to identify areas which require improvement or special focus. Also productivity provides ready report card to measure status against company’s production objective.
Productivity measurement can be classified in three categories based on the inputs used for calculation. Partial productivity ration of output is compared to one of resource used for example, labor productivity where output is compared to the labor wages.
Total productivity measure takes into consideration sum of all input factors which are used for the output.
In the modern age technology plays an important part in productivity.

Wastivity

Another important factor is the case of production is wastivity. Not 100% of input would be converted to output, there is going to waste during production. Wastivity is reciprocal of productivity. Classic examples of wastivity are defective products and services which either have to be re-cycle or disposed of completely. Other example is idle capacity of material, man-power equipment etc.

International Production and Operations Management (IPOM)

                   

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Introduction International production and operations management deals with production of goods and services in international locations and markets. It involves management process which has to take into consideration local production market (labor and capital) and international customer requirements. Nature of IPOM The foundation for international production and operations is no different to domestic production and operations management. But there are certain aspects which make international exposure a challenge for an organization. The very 1st difference is international business environment where not just economics but also international quality standards have to be maintained. The 2nd aspect is the international stint makes the company more aware of its surroundings thus making it more competitive. As IPOM is dynamic in nature, organization has to design it strategic objectives which cover following points:

• Meeting international quality standards
• Forecasting demand and production design
• Profitability
• Minimum production cost
• Adaptation to modern available technology

Domestic POM and IPOM

Organization has to clearly identify challenges it is likely to face in an international environment. Those challenges can be categorized as follows:
Culture: Domestic POM has to content with homogenous culture where as IPOM has to content with multi-culture multi-ethnicity scenario.
Business Environment: Domestic POM has to consider local economical and social factors where as IPOM has to deal with economical and social factors across geography and countries.
Quality Standards: Domestic POM has to look at single local market therefore not much variation in quality standards where as IPOM has to consider different international markets with different quality standard requirements.
Pricing: Pricing for Domestic POM may not be a challenge as competition would also operate in the same environment. IPOM has to consider the customer paying capacity which may vary from developed country to developing country.
Technology: In domestic environment innovation and usage of technology is much more comparable among competition. For IPOM owing to different quality and pricing requirements investment in technology becomes important.
Economies of Scale: Domestic POM has to deal with limited local market, hence limiting scope of economies of scale whereas IPOM has to access to larger market thus providing a change of achieving larger economies of scale.
Market Segmentation: Domestic POM is around local market where as IPOM has to developed and diversified market.
Usage of resources: Domestic POM has to deal with in-flexibility of moving around of resources within one location while IPOM has advantage of moving around of resources from high cost market to low cost market.

IPOM Strategies

Organization needs to consider the following point while developing IPOM strategies:
Production/Factory Location: The choice of location for the production facility depends on its proximity near to the market and cost of production (labor) in that particular environment.
Factory design, layout and quality standards: Organization need to standardize design and layout across their production location as to minimize production planning process, provide flexibility in sharing technical knowledge and manpower.
External vendor and procurement: Organization needs to finalize the vendors to provide raw material as well important components required to complete the final product. Also procurement schedule has to be finalized as not to hurt production.

Value Analysis: An Applied Concept for Manufacturing and Service Industry

Introduction All organizations strive to create value for their customers. This value creates mind space for product and services. Value analysis, therefore, is a scientific method to increase this value. Value is a perception hence every customer will have their own perceptions on how they define value. However, overall at the highest level, value is quality, performance, style, design relative to product cost. Increasing value necessarily does not mean decrease in all-inclusive cost of production but providing something extra for which a premium can be charged. The objective and benefits of value analysis can be summarized as below: Value analysis aims to simplify products and process. There by increasing efficiency in managing projects, resolve problems, encourage innovation and improve communication across organization. Value analysis enables people to contribute in the value addition process by continuous focus on product design and services. Value analysis provides a structure through cost saving initiatives, risk reduction and continuous improvement.

Activities for Value Analysis

Activities for value analysis are separated into following activities:
Product/Service - The 1st step is to identify the product or service which is based on usage/demand, complexity in development and future potential.
Cost Analysis: The next step understands in detail cost structure in developing and manufacturing the product.
Define product and function: The next step is to define all the primary function of the product and service through satisfying the basic need and then taking next step in delighting the customer. For this better understanding of product components and characteristics is required.
Evaluation of alternatives: Through brainstorming possible alternatives can short listed which can provide value to the primary function of the product. Cost evaluation at high level needs to be done for all the alternatives, and the cheapest alternative is short listed.
Secondary Function evaluation: Secondary functions of the product and services are studied and evaluated.
Recommendation: Value Analysis done has to communicate to the various level of the management team as to get acceptance.

Value Analysis Team

The process of value analysis is carried out by value analysis team. So it becomes paramount that team selection for value analysis also follows a structured process. Value analysis team consists of trained and qualified team members who have background and knowledge about the project. Team leader is selected by the project manager. Team size for value analysis is 5 to 8.

Value Analysis Process

Value analysis process can be divided into three phases of mainly pre-analysis, analysis and post analysis. Pre-analysis contains activities of project selection and team selection. Analysis phase as the name suggests consists of activities like investigation, speculation, evaluation, development and presentation of the report. Post analysis consists of activities’ implementation of the report and regular audit.

Functional Analysis part of Value Analysis

Function analysis is required to transform the project elements from design of product towards function of product. The main categories are Basic, Secondary, Required Secondary Aesthetic, Unwanted, Higher Order and Assumed.

Effective Product Design

Introduction

Organization success is dependent on customer satisfaction and delight. Customer satisfaction is achieved through development of product and service, which have all attributes required by the customer. A success product or services do not only have attractive package design but should be also able to provide robust performance.

Thus, product design must be practical enough for production and powerful enough to provide a competitive advantage. Product Design A good product design has following common features: Utility: The product design should make product utility as per expectation of customers and provide steady performance through the product life. Aesthetics: Product aesthetics is important in success of the product. The product aesthetics is dependent on market and end customer. Producible: Product design should enable effective production of product through available production methods. Profitability: Product design should make economic sense as to deliver value to customer and sustainability to the organization. Differentiable: A good product design should enable product to be differentiate among its competition. This can be achieved by attractive packaging and also by providing additional service on the product.

Objectives of Product Design

The essence of product design is to satisfy customer and maximizes the value for the customer at minimum cost. The product or service should also be able to meet primary needs and desire of the customer. This may not require development of new product, but enhancement to existing product or service.

Stages of Product Design

Product design is a creative process which looks at all the available options and beyond. The process is can be divided into three stages:

1. First stage: His stage involves brainstorming, bringing ideas and analysis of customer and market feedback.
2. Second Stage: Idea is converted into a feasible solution to satisfy the customer expectation, using available resource and technology.
3. Third Stage: This is the last stage in which the product is introduced in the market.

Factors Affecting Product Design

A successful product design is combination factors as follows:
Correct Team Selection: This is very essential to get the correct team in place which has expert designers who are not only aware and comfortable with technology but also understanding of customer expectation.
Customer Involvement: Involvement of customer in product design and testing can provide insight into the direction of the project
Prototyping and testing: Product design is high risk concept as it involves commitment of capital and man-power; therefore, it is imperative that extensive prototyping and testing are done with customer and market.
Raw Material: It is essential that raw material to be used in the production meets the quality standards of the end product. Furthermore, procurement system needs to be in place to ensure continuous, cost effective supply.
Production method and process layout: Feasibility of production method and process layout determines future success of the product.
External Factors: Environmental and government regulations plays an important part in product design. And these norms are updated from time to time, so product design should have the flexibility to adapt.

Product Selection

Production selection process is done through a combination of financial analysis, risk analysis, existing product portfolio, raw material supply and pre-determined product criteria.

Integrated Product and Process Development - Meaning, Advantages and Key Factors

             

Introduction Objective of any organization is to provide customer satisfaction by building product and services, which not only satisfy needs and want but also create value for them. This requires product design based on the customer feedback and production process which not only minimizes cost but also provides a competitive advantage. However, most organizations tend to follow conventional production method and process. However, in the global age of new technology and competition organization have to re-invent the way they cater to needs of customer, focus on specialization and customization is ever increasing. Given this scenario it is imperative for the organization to integrate technology and innovation within the framework of integrated product and process development.

Integrated Product and Process Development(IPPD)

Integrated product and process development combines the product design processes along with the process design process to create a new standard for producing competitive and high-quality products.
Integration of new technologies and methods provide a complete new dimension to product design process. This process starts with defining of the requirements of products based on the customer feedback while considering the design layout and other constraints. Once the finer details are finalized, they are fed into CAD models where extensive testing and modeling are done to get the best product.
With integration of production method and technology with product design, it is natural for integration of product design and process design. Therefore, integrated product and process development can be defined as a process starting from product idea to development of final product through modern technology and process management practices while minimizing cost and maximizing efficiency.

Advantages of Integrated Product and Process Development (IPPD)

Organization stands to benefit greatly from the implementation of IPPD. Some of the advantages are as follows:

• Using modern technologies and implement logical steps in production design, the actual production is likely to come down, thereby reducing product delivery time.
• Through optimum usage of resources and using efficient process, organizations are able to minimize cost of production thus improving profitability of the organization.
• Since extensive uses of CAD model are employed chances are of product or design failure are greatly reduced thus reducing risk for organization.
• As the focus is solely in delivering value to customer, quality is paramount importance and achieved through technology and methods.

Key Factors for IPPD

There are certain factors, which can vastly improve IPPD. These factors are as follows:

• IPPD success is greatly dependent on agreement on the end objective which is the successful address to customer requirements. All the stakeholders and management should be aligned to the single objective.
• Since this is a scientific approach, its success dependent on building up of plan, implementation of plan and constant review of the implemented plan.
• With implementation of modern methods and technology comes usage of modern tools and systems. This tools, and systems need to be integrated within the organization framework.
• Skilled manpower is another essential; therefore, organization need to make investment in human capital.

Customer is the focal point of IPPD. Therefore, constant feedback from them is essential for IPPD to be a success.
Therefore, IPPD is approach design to address all the concern of modern organization in the globalized world.

Facility Location - Factors Influencing the Location

Facility Location is the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors: Overall objective of an organization is to satisfy and delight customers with its product and services. Therefore, for an organization it becomes important to have strategy formulated around its manufacturing unit. A manufacturing unit is the place where all inputs such as raw material, equipment, skilled labors, etc. come together and manufacture products for customers. One of the most critical factors determining the success of the manufacturing unit is the location. Facility location determination is a business critical strategic decision. There are several factors, which determine the location of facility among them competition, cost and corresponding associated effects. Facility location is a scientific process utilizing various techniques.

Location Selection Factors

For a company which operates in a global environment; cost, available infrastructure, labor skill, government policies and environment are very important factors. A right location provides adequate access to customers, skilled labors, transportation, etc. A right location ensures success of the organization in current global competitive environment.

Industrialization

A geographic area becomes a focal point for various facility locations based on many factors, parameters and issues. These factors are can be divided into primary factors and secondary factors. A primary factor which leads to industrialization of a particular area for particular manufacturing of products is material, labor and presence of similar manufacturing facilities. Secondary factors are available of credit finance, communication infrastructure and insurance.

Errors in Location Selection

Facility location is critical for business continuity and success of the organization. So it is important to avoid mistakes while making selection for a location. Errors in selection can be divided into two broad categories behavioral and non-behavioral. Behavioral errors are decision made by executives of the company where personal factors are considered before success of location, for example, movement of personal establishment from hometown to new location facility. Non-behavioral errors include lack of proper investigative practice and analysis, ignoring critical factors and characteristics of the industry.

Location Strategy

The goal of an organization is customer delight for that it needs access to the customers at minimum possible cost. This is achieved by developing location strategy. Location strategy helps the company in determining product offering, market, demand forecast in different markets, best location to access customers and best manufacturing and service location.
Factors Influencing Facility Location
If the organization can configure the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors:
Customer Proximity: Facility locations are selected closer to the customer as to reduce transportation cost and decrease time in reaching the customer.
Business Area: Presence of other similar manufacturing units around makes business area conducive for facility establishment.
Availability of Skill Labor: Education, experience and skill of available labor are another important, which determines facility location.
Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing facility by providing incentives in custom duties and levies. On another hand free trade agreement is among countries providing an incentive to establish business, in particular, country.
Suppliers: Continuous and quality supply of the raw materials is another critical factor in determining the location of manufacturing facility.
Environmental Policy: In current globalized world pollution, control is very important, therefore understanding of environmental policy for the facility location is another critical factor.

Forecasting For an organization to provide customer delight it is important that organization can understand what customer wants and how much does they want. If an organization can gauge future demand that manufacturing plan becomes simpler and cost effective. The process of analyzing and understanding current and past information to understand the future patterns through a scientific and systemic approach is called forecasting. And the process of estimating the future demand of product in terms of a unit or monetary value is referred to as demand forecasting. The purpose of forecasting is to help the organization manage the present as to prepare for the future by examining the most probable future demand pattern. However, forecasting has its constraint for example we cannot estimate a pattern for technologies and product where there are no existing pattern or data.

Business Forecasting Objective

The very objective of business forecasting is to be accurate as possible, so that planning of resources can be done in a very economical manner and therefore, propagate optimum utilization of resources. Business forecasting helps in establishing relationship among many variables, which go into manufacturing of the product. Each forecast situation must be analyzed independently along with forecasting method.

Classification of Business Forecasting

Business forecasting has many dimensions and varieties depending upon the utility and application. The three basic forms are as follows:
Economic Forecasting: these forecasting are related to the broader macro-economic and micro-economic factors prevailing in the current business environment. It includes forecasting of inflation rate, interest rate, GDP, etc. at the macro level and working of particular industry at the micro level.
Demand Forecast: organization conduct analysis on its pre-existing database or conduct market survey as to understand and predict future demands. Operational planning is done based on demand forecasting.
Technology Forecast: this type of forecast is used to forecast future technology upgradation.

Timeline of Business Forecasting

A forecast and its conclusion are valid within specific time frame or horizon. These time horizons are categorized as follows:
Long Term Forecast: This type of forecast is made for a time frame of more than three years. These types of forecast are utilized for long-term strategic planning in terms of capacity planning, expansion planning, etc.
Mid-Term Forecast: This type of forecast is made for a time frame from three months to three years. These types of forecasts are utilized production and layout planning, sales and marketing planning, cash budget planning and capital budget planning.
Short Term Forecast: This type of forecast is made of a time frame from one day to three months. These types of forecasts are utilized for day to day production planning, inventory planning, workforce application planning, etc.

Characteristics of Good Forecast

A good forecast is should provide sufficient time with a fair degree of accuracy and reliability to prepare for future demand. A good forecast should be simple to understand and provide information relevant to production (e.g. units, etc.)

Forecasting Methods

Forecasting is divided into two broad categories, techniques and routes. Techniques are further classified into quantitative techniques and qualitative techniques. Quantitative techniques comprise of time series method, regression analysis, etc., where as qualitative methods comprise of Delphi method, expert judgment.
Routes forecasting consist of top-down route and bottom-up route.

Capacity Planning

The production system design planning considers input requirements, conversion process and output. After considering the forecast and long-term planning organization should undertake capacity planning. Capacity is defined as the ability to achieve, store or produce. For an organization, capacity would be the ability of a given system to produce output within the specific time period. In operations, management capacity is referred as an amount of the input resources available to produce relative output over period of time. In general, terms capacity is referred as maximum production capacity, which can be attained within a normal working schedule. Capacity planning is essential to be determining optimum utilization of resource and plays an important role decision-making process, for example, extension of existing operations, modification to product lines, starting new products, etc.

Strategic Capacity Planning

A technique used to identify and measure overall capacity of production is referred to as strategic capacity planning. Strategic capacity planning is utilized for capital intensive resource like plant, machinery, labor, etc.
Strategic capacity planning is essential as it helps the organization in meeting the future requirements of the organization. Planning ensures that operating cost are maintained at a minimum possible level without affecting the quality. It ensures the organization remain competitive and can achieve the long-term growth plan.

Capacity Planning Classification

Capacity planning based on the timeline is classified into three main categories long range, medium range and short range.
Long Term Capacity: Long range capacity of an organization is dependent on various other capacities like design capacity, production capacity, sustainable capacity and effective capacity. Design capacity is the maximum output possible as indicated by equipment manufacturer under ideal working condition.
Production capacity is the maximum output possible from equipment under normal working condition or day.
Sustainable capacity is the maximum production level achievable in realistic work condition and considering normal machine breakdown, maintenance, etc.
Effective capacity is the optimum production level under pre-defined job and work-schedules, normal machine breakdown, maintenance, etc.
Medium Term Capacity: The strategic capacity planning undertaken by organization for 2 to 3 years of a time frame is referred to as medium term capacity planning.
Short Term Capacity: The strategic planning undertaken by organization for a daily weekly or quarterly time frame is referred to as short term capacity planning.

Goal of Capacity Planning

The ultimate goal of capacity planning is to meet the current and future level of the requirement at a minimal wastage. The three types of capacity planning based on goal are lead capacity planning, lag strategy planning and match strategy planning.

Factors Affecting Capacity Planning

Effective capacity planning is dependent upon factors like production facility (layout, design, and location), product line or matrix, production technology, human capital (job design, compensation), operational structure (scheduling, quality assurance) and external structure ( policy, safety regulations)

Forecasting v/s Capacity Planning

There would be a scenario where capacity planning done on a basis of forecasting may not exactly match. For example, there could be a scenario where demand is more than production capacity; in this situation, a company needs to fulfill its requirement by buying from outside. If demand is equal to production capacity; company is in a position to use its production capacity to the fullest. If the demand is less than the production capacity, company can choose to reduce the production or share it output with other manufacturers.

What is Aggregate Planning ? - Importance and its Strategies

Introduction

An organization can finalize its business plans on the recommendation of demand forecast. Once business plans are ready, an organization can do backward working from the final sales unit to raw materials required. Thus annual and quarterly plans are broken down into labor, raw material, working capital, etc. requirements over a medium-range period (6 months to 18 months). This process of working out production requirements for a medium range is called aggregate planning.

Factors Affecting Aggregate Planning Aggregate planning is an operational activity critical to the organization as it looks to balance long-term strategic planning with short term production success. Following factors are critical before an aggregate planning process can actually start; A complete information is required about available production facility and raw materials. A solid demand forecast covering the medium-range period Financial planning surrounding the production cost which includes raw material, labor, inventory planning, etc. Organization policy around labor management, quality management, etc.

For aggregate planning to be a success, following inputs are required;

• An aggregate demand forecast for the relevant period
• Evaluation of all the available means to manage capacity planning like sub-contracting, outsourcing, etc.
• Existing operational status of workforce (number, skill set, etc.), inventory level and production efficiency

Aggregate planning will ensure that organization can plan for workforce level, inventory level and production rate in line with its strategic goal and objective.

Aggregate planning as an Operational Tool

Aggregate planning helps achieve balance between operation goal, financial goal and overall strategic objective of the organization. It serves as a platform to manage capacity and demand planning.
In a scenario where demand is not matching the capacity, an organization can try to balance both by pricing, promotion, order management and new demand creation.
In scenario where capacity is not matching demand, an organization can try to balance the both by various alternatives such as.

• Laying off/hiring excess/inadequate excess/inadequate excess/inadequate workforce until demand decrease/increase.
• Including overtime as part of scheduling there by creating additional capacity.
• Hiring a temporary workforce for a fix period or outsourcing activity to a sub-contrator.

Importance of Aggregate Planning

Aggregate planning plays an important part in achieving long-term objectives of the organization. Aggregate planning helps in:

• Achieving financial goals by reducing overall variable cost and improving the bottom line
• Maximum utilization of the available production facility
• Provide customer delight by matching demand and reducing wait time for customers
• Reduce investment in inventory stocking
• Able to meet scheduling goals there by creating a happy and satisfied work force

Aggregate Planning Strategies

There are three types of aggregate planning strategies available for organization to choose from. They are as follows.

1. Level Strategy

As the name suggests, level strategy looks to maintain a steady production rate and workforce level. In this strategy, organization requires a robust forecast demand as to increase or decrease production in anticipation of lower or higher customer demand. Advantage of level strategy is steady workforce. Disadvantage of level strategy is high inventory and increase back logs.

2. Chase Strategy

As the name suggests, chase strategy looks to dynamically match demand with production. Advantage of chase strategy is lower inventory levels and back logs. Disadvantage is lower productivity, quality and depressed work force.

3. Hybrid Strategy

As the name suggests, hybrid strategy looks to balance between level strategy and chase strategy.

Materials and Resource Requirement Planning

Introduction Success of an operation department of any organization is dependent upon an efficient production plan. One of the key essential of a production plan is material and manufacturing planning system. Material requirement planning plays a pivotal role in assembly-line production. Material requirement planning is a system based approach, which organizes all required production material. Material requirement planning is an information system for production planning based on inventory management. The basic components of material planning are: Material planning provides information that all the required raw material and products are available for production. Material planning ensures that inventory level are maintained at its minimum levels. But also ensures that material and product are available whenever production is scheduled, therefore, helping in matching demand and supply. Material planning provides information of production planning and scheduling but also provides information around dispatch and stocking.

Objective of Material Requirement Planning

Material requirement planning is processed which production planning and inventory control system, and its three objectives are as follows:

• Primary objective is to ensure that material and components are available for production, and final products are ready for dispatch.
• Another primary objective is not only to maintain minimum inventory but also ensure right quantity of material is available at the right time to produce right quantity of final products.
• Another primary objective is to ensure planning of all manufacturing processes, this scheduling of different job works as to minimize or remove any kind of idle time for machine and workers.

Advantages and Disadvantages of Material Resource Planning

As with every system based process, material resource planning also has its advantages and disadvantages, and they are as follows:

Advantages of Material Resource Planning

• It helps in maintain minimum inventory levels.
• With minimum inventory levels, material planning also reduces associated costs.
• Material tracking becomes easy and ensures that economic order quantity is achieved for all lot orders.
• Material planning smoothens capacity utilization and allocates correct time to products as per demand forecast.

Disadvantages of Material Resource Planning

• Material planning is highly dependent on inputs it receives from other systems or department. If input information is not correct than output for material planning will also be incorrect.
• Material planning requires maintenance of robust database with all information pertaining inventory records, production schedule, etc. without which output again would be incorrect.
• Material planning system requires proper training for end users, as to get maximum out of the system.
• Material resource planning system requires substantial investment of time and capital.

Material Resource Planning - Inter dependency of Business Function

Material planning not only benefits operation department but is also beneficial to the other department of organization. They are as follows:

• Material planning is useful in determining cash flow requirement based on material requirements and final dispatch schedules.
• It helps procurement team in scheduling purchase of necessary material.
• It helps the sales team in determining delivery dates for final products.

Implementation of Material Resource Planning

Implementation and success of material resource planning dependent on following factors:

• Acceptability of by top management about advantages and benefits
• Proper training and participation of all workers and personnel
• Precision and accuracy of input data for accurate and reliable results

Production Planning and Control

Introduction

For efficient, effective and economical operation in a manufacturing unit of an organization, it is essential to integrate the production planning and control system. Production planning and subsequent production control follow adaption of product design and finalization of a production process.

Production planning and control address a fundamental problem of low productivity, inventory management and resource utilization. Production planning is required for scheduling, dispatch, inspection, quality management, inventory management, supply management and equipment management. Production control ensures that production team can achieve required production target, optimum utilization of resources, quality management and cost savings.

Planning and control are an essential ingredient for success of an operation unit. The benefits of production planning and control are as follows:

• It ensures that optimum utilization of production capacity is achieved, by proper scheduling of the machine items which reduces the idle time as well as over use.
• It ensures that inventory level are maintained at optimum levels at all time, i.e. there is no over-stocking or under-stocking.
• It also ensures that production time is kept at optimum level and thereby increasing the turnover time.
• Since it overlooks all aspects of production, quality of final product is always maintained.

Production Planning

Production planning is one part of production planning and control dealing with basic concepts of what to produce, when to produce, how much to produce, etc. It involves taking a long-term view at overall production planning. Therefore, objectives of production planning are as follows:

• To ensure right quantity and quality of raw material, equipment, etc. are available during times of production.
• To ensure capacity utilization is in tune with forecast demand at all the time.

A well thought production planning ensures that overall production process is streamlined providing following benefits:

• Organization can deliver a product in a timely and regular manner.
• Supplier are informed will in advance for the requirement of raw materials.
• It reduces investment in inventory.
• It reduces overall production cost by driving in efficiency.

Production planning takes care of two basic strategies’ product planning and process planning. Production planning is done at three different time dependent levels i.e. long-range planning dealing with facility planning, capital investment, location planning, etc.; medium-range planning deals with demand forecast and capacity planning and lastly short term planning dealing with day to day operations.

Production Control

Production control looks to utilize different type of control techniques to achieve optimum performance out of the production system as to achieve overall production planning targets. Therefore, objectives of production control are as follows:

• Regulate inventory management
• Organize the production schedules
• Optimum utilization of resources and production process

The advantages of robust production control are as follows:

• Ensure a smooth flow of all production processes
• Ensure production cost savings thereby improving the bottom line
• Control wastage of resources
• It maintains standard of quality through the production life cycle.

Production control cannot be same across all the organization. Production control is dependent upon the following factors:

• Nature of production( job oriented, service oriented, etc.)
• Nature of operation
• Size of operation

Production planning and control are essential for customer delight and overall success of an organization.

Operations Scheduling and Workplace Planning

Introduction Scheduling and workplace planning is the final step in operation planning and design. Operation’s scheduling and workplace planning is implemented during transformation of input to output. Scheduling deals with production of required quantity of product within the required time frame. Workplace planning deals with allocation of resources with priority to work job with first delivery date. Operations Planning Scheduling deals with both time allocations as well resource allocation for production of required quantity. Operations’ planning is done as part of short term planning. High level objective of operation’s planning is to decide the best way of allocation of labor and equipment as to find balance between time and use of limited resources within the organization.

In modern age of competition and global market importance is given to Just In Time and the lean production concepts. This has led to importance of operation’s scheduling. There are three important task performed by operations scheduling:

• Allocation of resources
• Workforce scheduling
• Production equipment scheduling

Operations’ planning ensures that proper workflow is established by ensuring allocation of job on appropriate machines before the advent of production activities. Scheduling is production timetable highlighting sequence of job, timing and quantity for allocation of resources as to help an organization in cash flow planning. Therefore, there are three main objectives of production scheduling:

• Due importance to delivery date and avoiding delays in completion
• Reducing time of job on machines
• Proper utilization of work centers

Operation scheduling is arrived at base on the following principles.

• Ensure continuous job schedule
• End to end completion of job
• Remove the bottleneck
• Ensure feedback as to make adjustment
• Skill set of workforce
• Enhancement of product and process
• Scheduling helps in capacity planning as to reduce bottlenecks.
• Scheduling helps in streamlining order production based on due date.
• Scheduling helps in sequencing of various job works.

Scheduling is done with two approaches, and they are as follows:

• Forward scheduling is type of scheduling where the planner considers order received date as the starting point for forward planning of all the activities.
• Backward scheduling is type of scheduling where the planner considers the order delivery date as the starting point and does backward planning of all activities.

Workplace Planning

Workplace planning ensures optimum productivity by ensuring proper utilization of limited resources and priorities’ job order at different work centers. Workforce control ensures that maximum output is achieved from machines, raw material and workforce. All production-related information is recorded as to establish input-output control as to achieve overall efficiency and optimum utilization of raw materials.
The main objectives of workforce planning and control are as follows:

• Priorities various job orders
• Record data related to process quantities
• Providing status of workplace orders to control panel
• Record output data to monitor capacity control
• Provide measurement of efficiency and productivity

Therefore operations scheduling and workplace planning play an pivotal role in success of an organization.

Inventory Management and Just In Time (JIT)

Introduction Supply-chain management plays a pivotal role in ensuring goods, and services are delivered on time to customers. Within supply-chain management, inventory management plays a central role. Inventory involves various cost, investment, space management, etc. Also there are chances that stored inventory may get damaged or get stolen adding to extra cost to the company. Therefore, it is important to have a robust inventory management for an organization. Inventory Holding For an organization, it becomes important to hold inventory for the following reason: Inventory holding ensures that operation delay do not impact delivery to customers. It also ensures that company can meet spikes or fluctuation in product demand. It ensures that there is flexibility in production. It ensures that any delay by suppliers do not affect working of the company.

Considering the above inventory holding objectives, next step for the company is to make inventory related decision. Inventory decision involves two major considerations, first is the order quantity of the raw material and second is timing for placing those orders.

Inventory Models

Inventory management is based upon two basic models i.e independent demand inventory model and dependent demand inventory model.

• Independent Demand Inventory Model talks about raw material demand which is dependent upon prevailing market conditions and is not correlated to any raw material currently used by the organization. Finished goods is an appropriate example for independent demand inventory model.
• Dependent Demand Inventory Model talks about raw material demand which are integral parts of production and form important part of material resource planning. For example, demand for raw material can be established as the basis of demand of finished products.

Inventory Costs

There are three broad categories of cost associated with inventory; holding cost, ordering cost and set up cost.

• Holding costs are carrying cost associated with inventory over a period of time. They include insurance, warehousing, interest, extra head-count, etc.
• Ordering costs are cost associated with purchasing of raw material and receiving raw materials. They include forms, order processing, office maintenance supplies and staff associated with ordering.
• Set Up Cost are cost associated with installation of machine for production. They include clean- up cost, re-tooling cost and adjustment cost.

Inventory management ensures that organizations are able to minimize cost and maximize profit.

Just In Time (JIT)

Just In Time is set of strategic activities, which are formulated to achieve maximum production with minimal maintenance of inventory. JIT as philosophy is applicable to various types of organization but on implement side it is more relevant with manufacturing operations.
For JIT system to be successful, there are two critical elements, attitude of workers/management and practice.

Fundamentals of JIT

JIT is based on the following fundamentals:

• JIT manufacturing and ordering
• Elimination of waste
• Lean management
• Signal System (Kanban)
• Push-Pull System

With the above fundamentals in place, JIT delivers the following:

• Continuous improvement of production and order processing.
• Elimination of non-value added activities and procedures.
• Simplification and advancement of the existing systems.
• Creation of safety environment and ensuring total quality management.
• Creation crossed skilled workers.

Warehouse and Materials Management

Introduction

Purchase of raw materials is an integral part of any business, i.e. manufacturing organization or service organization. Purpose of raw material is to be converted into finished goods for selling, but after purchase and before selling, they need to keep in safety and good care. The timeframe of storage can be short period or longer depending upon nature and requirement of materials.

Any damage or theft to the materials is going to increase cost to the organization. So it becomes important for organization to have a robust and effective warehouse as well as material’s management. Scope of Warehouse Management The place where raw material and/or finished goods are stored is referred to as warehouse or store. Generally, warehouse is structure or building design keeping in mind raw material and finished goods it is going to store. Therefore, warehouse management should be able to:

• Receive the purchase goods and entered upon the stock register.
• Inventory Accounting of raw material, work-in-progress or finished goods.
• Preservation of the inventory
• Ability to access goods whenever called upon.
• Appropriate record keeping through coding as to preserve goods and reduce obsolescence.
• Proper stocking of goods as ensure smooth handling.

If above objectives are met, warehouse management significantly increases the overall efficiency of the production and organization. A robust warehouse management would ensure that:

• A smooth flow of production
• Appropriate layout management to reduce material handling and equipment handling
• Reduce to wastage as well as spoilage
• Eliminate the possibility of theft and damage
• Ensure preservation of environment and reduce pollution.
• Encourage cost reduction and driving efficiency

Warehouse Design

Warehouse design is art in which goods and material can be stored as to reduce wastage, cost of carrying and increase safety. The various factors considered for warehouse design are as follows:

• Easy material handling including receipt, dispatch and storage.
• Easy supervision of materials as well as personnel
• Reduce and control obsolescence of the goods by following appropriate method.
• Optimum utilization of space

Storage Location

There are three general ways in which goods are stocked as to reduce material handling and increase prompt access. They are as follows:

• Fixed position in which specific area is located where designated goods are stored. If the designated goods are not there, that space will remain empty. Fixed position encourages easy and traceable access to the goods.
• Random Storage in which goods are stored where ever space is available. Here maximum utilization of the space is achieved.
• Categorized fixed location in which particular set of products are placed randomly in the allotted space.

Material Management

Material management is a sub-set of warehouse management dealing exclusively material which contribute the maximum to completion of the end product. The objectives of material management are as follows:

• Lower the price of the raw materials.
• Reduce the cost of production and ensure the smooth flow of production.
• Maintain quality of raw material as well as finished goods.
• Maintain good relation with the supplier as to ensure a smooth flow of raw materials.
• Continuous improvement of the skill set of the workers thereby increasing overall efficiency within the organization.

Material Handling - Principles, Operations and Equipment

Introduction Raw materials form a critical part of manufacturing as well as service organization. In any organization, a considerable amount of material handling is done in one form or the other. This movement is either done manually or through an automated process. Throughout material, handling processes significant safety and health; challenges are presented to workers as well as management. Therefore, manual material handing is of prime concern for health and safety professional, and they must determine practical ways of reducing health risk to the workers. Material Handling Manual material handling ranges from movement of raw material, work in progress, finished goods, rejected, scraps, packing material, etc. These materials are of different shape and sizes as well as weight. Material handling is a systematic and scientific method of moving, packing and storing of material in appropriate and suitable location. The main objectives of material handling are as follows:

• It should be able determine appropriate distance to be covered.
• Facilitate the reduction in material damage as to improve quality.
• Reducing overall manufacturing time by designing efficient material movement
• Improve material flow control
• Creation and encouragement of safe and hazard-free work condition
• Improve productivity and efficiency
• Better utilization of time and equipment

It is critical for manufacturing organization to identify importance of material handling principle as the critical step in promoting the job improvement process. Manual material handling significantly increases health hazard for the workers in from lower back injuries.
In the current competitive and globalized environment, it is important to control cost and reduce time in material handling. An efficient material handling process promotes:

• Design of proper facility layout
• Promotes development of method which improves and simplifies the work process
• It improves overall production activity.
• Efficient material handling reduces total cost of production.

Principles of Material Handling

Material handling principles are as follows:

• Orientation Principle: It encourages study of all available system relationships before moving towards preliminary planning. The study includes looking at existing methods, problems, etc.
• Planning Principle: It establishes a plan which includes basic requirements, desirable alternates and planning for contingency.
• Systems Principle: It integrates handling and storage activities, which is cost effective into integrated system design.
• Unit Load Principle: Handle product in a unit load as large as possible
• Space Utilization Principle: Encourage effective utilization of all the space available
• Standardization Principle: It encourages standardization of handling methods and equipment.
• Ergonomic Principle: It recognizes human capabilities and limitation by design effective handling equipment.
• Energy Principle: It considers consumption of energy during material handling.
• Ecology Principle: It encourages minimum impact upon the environment during material handling.
• Mechanization Principle: It encourages mechanization of handling process wherever possible as to encourage efficiency.
• Flexibility Principle: Encourages of methods and equipment which are possible to utilize in all types of condition.
• Simplification Principle: Encourage simplification of methods and process by removing unnecessary movements
• Gravity Principle: Encourages usage of gravity principle in movement of goods.
• Safety Principle: Encourages provision for safe handling equipment according to safety rules and regulation
• Computerization Principle: Encourages of computerization of material handling and storage systems
• System Flow Principle: Encourages integration of data flow with physical material flow
• Layout Principle: Encourages preparation of operational sequence of all systems available
• Cost Principle: Encourages cost benefit analysis of all solutions available
• Maintenance Principle: Encourages preparation of plan for preventive maintenance and scheduled repairs
• Obsolescence Principle: Encourage preparation of equipment policy as to enjoy appropriate economic advantage.

Material handling operations are designed based upon principles as discussed above. Material handling equipment consists of cranes, conveyors and industrial trucks.

Quality Control Techniques

Introduction Quality of product and services determines success or failure of the organization. Consumers expect the company to maintain high-level of quality and consider it an important aspect of satisfaction. Quality management, therefore, becomes very important as far as any organization is concerned. Quality management can be accomplished through various quality control techniques. Quality assurance and quality control are objective oriented and can be achieved through statistical quality control. Statistical quality control requires usage of acceptance sampling and process control techniques. Statistical quality control extensively uses chart to measure the acceptance level of the product samples. Objective is to ensure that products fall within pre-decided upper control and lower control limits. Any sample falling outside the limits is inspected further for corrective action.

Quality Control

The quality of product or service is ensuring if proper designing process is followed. This designing process needs to be backed by appropriate process design supported by a suitable technology which confirms to requirements of customers. Quality control ensures that defects and errors are prevented and finally removed from the process or product. Therefore, quality control should include; planning, designing, implementation, gaps identification and improvisation. If organization can implement a stringent quality control than following benefits are possible:

• Reducing product defects lead to less variable cost associated with labor and material.
• Reduction in wastage, scrap and pollution.
• Ability to produce quality products over longer period of time
• With quality maintenance needs for inspection reduces leading to decrease in maintenance cost
• Large pool of satisfied customers.
• Increase in employee motivation and awareness of quality.
• Increase in productivity and overall efficiency.

Above mentioned points are relevant not only for production stage but are equally important for input material, manufacturing process, delivery process, etc.

Statistical Quality Control

Quality control techniques require extensive usage of statistical methods. The advantages of the statistical analysis are as follows:

• Statistical Tools are automated and therefore, require less manual intervention, leading cost reduction
• Statistical tools work on a model thus are very useful where testing requires destruction of products.

Statistical Quality tools can broadly be classified into following categories:

• Acceptance sampling is an important part of quality control wherein quality of products is assessed post production.
• Statistical process control helps in confirming whether the current process is falling within pre-determined parameters.

Acceptance Sampling

Acceptance sampling is done on sample’s post production to check for quality parameters as decided by the organization covering both attributes as well as variables. If the sample does not meet the required parameters of quality than that given lot is rejected, and further analysis is done to identify the source and rectify the defects. Acceptance sampling is done on the basis of inspection, which includes physical verification of color, size, shape, etc.
The major objectives of inspection are:

• To detect and prevent defects in products and process.
• To identify defected parts or product and prevent it from further consumption or usage.
• To highlight the product or process defect to appropriate authorities for necessary and corrective actions.

Scope of inspection covers input materials, finished material, plant, machinery etc.
To sustain quality of product and services it is important to have in place robust quality control techniques.

World Class Manufacturing

Introduction Manufacturing has evolved considerably since the advent of industrial revolution. In current global and competitive age, it is very important for organization to have manufacturing practice which is lean, efficient, cost-effective and flexible World class manufacturing is a collection of concepts, which set standard for production and manufacturing for another organization to follow. Japanese manufacturing is credited with pioneer in concept of world-class manufacturing. World class manufacturing was introduced in the automobile, electronic and steel industry. World class manufacturing is a process driven approach where various techniques and philosophy are used in one combination or other. Some of the techniques are as follows:

• Make to order
• Streamlined Flow
• Smaller lot sizes
• Collection of parts
• Doing it right first time
• Cellular or group manufacturing
• Total preventive maintenance
• Quick replacement
• Zero Defects
• Just in Time
• Increased consistency
• Higher employee involvement
• Cross Functional Teams
• Multi-Skilled employees
• Visual Signaling
• Statistical process control

Idea of using above techniques is to focus on operational efficiency, reducing wastage and creating cost efficient organization. This leads to creation of high-productivity organization, which used concurrent production techniques rather than sequential production method.

World Class Manufacturers

World class manufacturers tend to implement best practices and also invent new practices as to stay above the rest in the manufacturing sector. The main parameters which determine world-class manufacturers are quality, cost effective, flexibility and innovation.
World class manufacturers implement robust control techniques but there are five steps, which will make the system efficient. These five steps are as follows:

• Reduction of set up time and in tuning of machinery: It is important that organizations are able to cut back time in setting up machinery and also tune machinery before production.
• Cellular Manufacturing: It is important that production processes are divided into according to its nature, with similar nature combined together.
• Reduce WIP material: It is normal tendency of manufacturing organization to maintain high levels of WIP material. Increased WIP leads to more cost and decreased WIP induces more focus on production and fast movement of goods.
• Postpone product mutation: For to achieve a higher degree of customization many changes are made to final product. However, it is important that mutation conceived for the design stage implement only after final operation.
• Removal the trivial many and focus on vital few: It is important for organization to focus on production of products which are lined with forecast demand as to match customer expectation.

Principles of World Class Manufacturing

There are three main principles, which drive world-class manufacturing.

• Implementation of just in time and lean management leads to reduction in wastage thereby reduction in cost.
• Implementation of total quality management leads to reduction of defects and encourages zero tolerance towards defects.
• Implementation of total preventive maintenance leads to any stoppage of production through mechanical failure.

Aspects of World Class Manufacturing

The main aspects of the world-class manufacturing are as follows:

• Industrial culture area
• Market/client area
• Product development area
• Operations area
• E-Performance area

Quantitative Techniques for Decision Making

Introduction Decision making is crucial for survival of business. Businesses have to make decision considering the limited amount of information. Decision making problems are divided into two types deterministic and probabilistic. Deterministic model of problem solving depends on the relationship between uncontrollable factors and continuing process of optimizing system performance. A model is developed in under assumption related to existing business condition. If the variables under assumption do not truly reflect the current business conditions, the model developed also will not reflect the reality. Mathematical optimization utilizes mathematical equation to determine the business decision. The business decision derive is in a numerical form. A business model for decision making is constructed by analyst based on inputs of a decision maker. A business model is developed over a period of time using a progressive approach method.

Optimization Modeling Process

Optimization model is developed in three steps, 1st step is describing the problem, 2nd step is elaborating the solution and 3rd step is controlling the problem.
The optimized problem of the 1st step can be classified into linear and non-linear depending upon on nature of variables. Optimization problem has three following aspects:

• An objective function to maximize or minimize.
• A set of variables which affect the value of the objective function.
• A set of uncontrollable factors referred as parameters.

The solution of optimized problem satisfying all parameters and constraints is referred as feasible solution. The objective of an optimization process is to value of variables, which minimize or maximize objective giving out an optimal solution.

Linear Programming

Linear programming is a mathematical procedure of determining linear allocation of business variables. For constructing linear program following factors are essential:

• The objective function needs to be linear.
• The objective must be to either maximize or minimize a linear function.
• The constraints in the program should also be linear.

In formulating a linear program certain variables are integer in nature, such as function with integer variable is known as integer programming.

Decision Tree

In a certain decision-making process, probability plays an important role. On the decision model based upon probability is decision trees.

Scenario modeling

Business environment is always unpredictable and can throw up unusual situation more than often. Thus, organizations find themselves in the middle of dynamic environment. Here model and methods like sensitivity analysis, stability analysis, what-if analysis, scenario modeling, etc. is utilized.
Therefore, model under used uncertainties are as follows:

• Scenario Analysis: this model assumes a different scenario a business may find itself with certain value of parameters.
• Worst Case Analysis: this model assumes an extreme case scenario in computing different variables.
• Monte-Carlo Model: this model assumes uncertainty through statistical distribution.

Theory of Constraints

Theory of constraints is a management concept which helps organization deal with situation, which hampers its growth and march towards higher level of performance. Theory of constraint encourages an organization to deal one constraint at a time and consist of following steps:

• Identifying constraints of the existing system.
• Identifying was to potential extract more out of system constraints.
• Exploiting constraints to its fullest potential should be made priority.
• As the company overcomes 1st constraint, it should look forward to working upon other constraints.

Reliability and Redundancy in Production Management

Introduction Product quality determines the success with the product. One of the key drivers of quality is the performance of the product over a period of time. Performance of product is determined by the reliability and redundancy. Reliability increases the efficiency while redundancy increases the current capability and expectations. Any production organization sets a goal of achieving production efficiency and ability to operate at an optimum level at all the time. Furthermore, the production should be achieved with a least level of wastage. Production reliability is dependent upon speed, quality and time availability. Equipment failure leads to outage and frequent breakdown, which affect the quality of the products. Frequent machine breakdowns also decrease production speed thus affecting time availability. Theoretically, it is recommended to set employees with a goal of reliability.

Reliability

Important characteristics of reliability are as follows:

1. Reliability: This highlights performance of product or system within a known set of parameters.
2. Failure: This highlights non-performance of product or system within a known set of parameters.
3. Normal Operating Conditions: These are conditions, which let the system or product performs to the optimum level without stress.
4. Reliability Leads to Profitability: This highlights that consistent reliability exhibited by product or system leads to increase in profit for an organization.

Reliability is divided into two main parts, and they are as follows:

1. Inherent Reliability: This is kind of reliability, with which product is sold.
2. Achieved Reliability: This kind of reliability is observed during the daily usage of the product.

It has been observed that reliability increases if regular maintenance is undertaken.

Redundancy

Redundancy is defined as an addition of information, resource and time to the existing product or system than required for its optimum performance. Redundancy is of following types:

1. Resource Redundancy: Resource redundancy is made up of two parts; software redundancy and hardware redundancy. Software redundancy talks about addition of software in form of program or patch to undertake a task of fault detection. Hardware redundancy talks about addition of hardware for identifying or modifying defects.
2. Information Redundancy: As the same suggest information redundancies provide extra information to implement given function of error detection.
3. Time Redundancy: As the same suggest time redundancies provide additional time to fault detection.

From the above it can be concluded that redundancy provides extra reliability to product and systems. It helps prevention of decline in performance without direct manual intervention. The importance of the redundancy increase even more when system or product is performing a critical, sensitive and complicated task.
Redundancy is sometimes accompanied with failure. These failures are function failure and reliability failure. Functional failure is observed from the start of product life, and it is caused by production or raw material defect. Reliability failure is observed after usage over period of time.
Reliability is measured through reliability index and failure rate. Reliability index is defined as the ratio of production losses to the loss per production loss. Failure rate is defined as the number of failure per unit time, which decreases initially with passage of time.

Redundancy and Total Quality Management

Total quality management philosophy talks about producing consistent quality of product over a period of time. Redundancy production increases overall cost of production as the extra effort is put into maintaining targeted quality.