Important Terms in Production and Materials Management/ Operations Management

Important Terms in Production and Materials Management/ Operations Management 

Production Management: is concerned with the transformation of resources into goods and/or services.

Plant Layout: is also referred to as facility design or facility layout.  After having decided the location and site, the next step is to draw out a floor plan indicating the location of the various work centres, plants and associated offices, and supporting facilities.

Job Production: These are products manufactured to meet the special requirement of customers for large projects, e.g., ship building, large engineering construction etc.

Batch Production: Involves manufacturing a number of identical products in batches to meet specific one-time requirement or periodic requirements.

Continuous Production: involves specialized manufacture of large quantity of identical items and it is of two types:

Mass Production: A large number of identical products (standardized) are produced through a fully automated product lines.

Flow Production: A number of work centres are arranged in a particular sequence and the products pass from one work centre to another work centre.

Fixed Position Layout: Here, the major equipment remains in a fixed place and all tools, machines, men and material are brought to it.  The job is completed without the major equipment leaving the location.

Process Layout: Here, the machines and services are grouped on a functional basis and operation of the same type are performed in the same area.  For example, all welding work is carried out at one place and all turnings in another.

Product Layout: Here, the machines are laid out in operation along the flow lines.  This is also referred to as a line layout.  Here, the material flow in continuous at a uniform rate and operations are carried out as balanced by various machines.  There is simultaneous working going on at each station.  This layout is used when the volume of production is very high and the nature of work is standardized.

Combined Layout (Group Technology): Generally, the best solution is the fombination of the process and product layout foor batch productions.  Each process is set up as a unit and these units are arranged into a product layout.

Break-even Analysis: based on fixed cost, variable cost and no. of quantities produced

Assembly-Line Balancing: Factories having a large volume of production of standardized equipment and components having a continuous flow, prefer to use conveyor type of assembly line.  Here the work centres are sequenced in such a way that at each stage a certain element of total job is carried out so that at the end of the conveyor line, the final product comes out.  This requires careful pre-planning to lay down the line and balance the time between each work centre so that idle or waiting time is minimized.  This process of internal balancing is called assembly-line balancing.

Resource Planning and Leveling: With the advancement of technology, production and operations have become a specialized area requiring professional management.  Production and operations management consists of various activities which are interrelated and complex in nature.  It requires a higher order of conceptual, technical and human relations skills to achieve the two objectives of optimization of resources and conservation of time and money.

Scheduling: refers to the process of preparing a time target for all production operations including setup and other preparation time in executing a production order in the manufacturing organisation.

Materials Management: covers whole range of functions involved in converting rawmaterials and ancillary supplies into finished products.

Material Control: is the process of providing quantity and quality of materials needed in the manufacturing process with an eye on economy in storage and ordering cost, purchase price and working capital.

Inventory control: refers to the process whereby the investment in materials and parts carried in stock is regulated within predetermined limits in accordance with inventory policy established by the management.

Maximum Level: represents the level beyond which the stock in hand is not allowed to exceed.

Minimum Level: points to the level below which the stock in hand shall not be allowed to fall.

Order Level: is the quantity of stock (level) fixed between the maximum and minimum levels of stock.  When this level is reached, it becomes the duty of the stores incharge to initiate purchase so as to replenish the stock within reasonable times.  It is usually little higher than the minimum in order to be prepared for such emergencies as abnormal usage of materials, unexpected delays in delivery of new supplies, etc.

Danger Level: is below the minimum level and represents the stage at which emergency and immediate steps have to be taken for getting the stock replenished.

Economic Order Quantity: is referred to as the size of the order that gives maximum economy in purchasing the materials.  It is also known as Optimum or Standard Order Quantity.

Ordering Cost: is referred to as the cost of placing an order and securing the supplies.

Inventory Carrying Cost: refers to the cost of keeping the materials in the storehouse which includes i. capital cost, ii. Cost of storage and handling, iii. Cost of deterioration and obsolescence, and iv. Other kinds of expenses and losses during storage.

Working Stock: is procured periodically for normal working and is consumed at a certain rate.  It consists of quantities which are replenished periodically.  An ideal working stock a saw tooth.

Safety Stock: Because of such a threatening behavior of inventory, additional stock is kept on hand as a reserve so as to avoid temporary shortages or stockout situations.  Such an additional stock goes by the name of safety stock, reserve stock or buffer stock.

ABC Analysis: is a basic materials management analytical tool.  It may be applied to any branch of management with ease and success.  It is popularly known as Always (A) Better (B) Control (C). 

V.E.D. Analysis:  V.E.D. is fully stretched as Vital, Essential and Desirable analysis.  VED classification is also in the nature of ABC classification though it is largely applicable to spare parts.  Spare parts are classified as Vital, Essential and Desirable according to their requirement.  Spare classified V (Vital) are stocked adequately to ensure smooth plant operation. 

XYZ Analysis: XYZ analysis usually is resorted to at the time of stock-taking at the end of a period.    X items are those whose inventory value is high.  Z items are those whose inventory value is low.  Y items fall between these two extremes.  XYZ analysis, therefore, is helpful in taking stock of those items which are classes as items of highest value, moderate and low value.

FSN Analysis: is based on movement of items in the storehouse.  The items are classified as Fast Moving (F), Slow Moving (S), and Non-moving (N).  This classification is done on the basis of consumption pattern of the items under analysis.

Fixed Order System: Here, materials are replenished as and when required.  As per predetermined policy, certain replenishment points are fixed and when the materials reach those points, appropriate action is taken.  This system is also known as “review system.”

Two-Bin System: is based on the segregation of the total into two bins – one sufficient to satisfy demand between the arrival of the order and the placing of the next order, the second contains enough stock to satisfy probable demands during lead time. 

Kardex System: It is an improved form of loose leaf ledgers which came into use when the necessity of having a stricter control of inventories arose.  In this system, cards are vertically arranged in a metallic tray and kept in Kardex cabinets specfially manufactured for the purpose.