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Break-even analysis

An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point.


Benchmarking is the process of identifying "best practice" in relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can take place both inside a particular industry, and also in other industries (for example - are there lessons to be learned from other industries?).

Benchmarking is the process of identifying "best practice" in relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can take place both inside a particular industry, and also in other industries (for example - are there lessons to be learned from other industries?).

The objective of benchmarking is to understand and evaluate the current position of a business or organisation in relation to "best practice" and to identify areas and means of performance improvement.

The Benchmarking Process

Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organisation or in key areas of the business environment.

Types of Benchmarking

There are a number of different types of benchmarking, as summarised below:

Type Description Most Appropriate for the Following Purposes
Strategic Benchmarking

Where businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment.

Changes resulting from this type of benchmarking may be difficult to implement and take a long time to materialise

Re-aligning business strategies that have become inappropriate
Performance or Competitive Benchmarking

Businesses consider their position in relation to performance characteristics of key products and services.

Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.

Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance
Process Benchmarking

Focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services.

Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits.

Achieving improvements in key processes to obtain quick benefits
Functional Benchmarking

Businesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements.

Improving activities or services for which counterparts do not exist.

Involves benchmarking businesses or operations from within the same organisation (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardised data is often readily available; and, usually less time and resources are needed.

There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organisation. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking.

Several business units within the same organisation exemplify good practice and management want to spread this expertise quickly, throughout the organisation
External Benchmarking

Involves analysing outside organisations that are known to be best in class. External benchmarking provides opportunities of learning from those who are at the "leading edge".

This type of benchmarking can take up significant time and resource to ensure the comparability of data and information, the credibility of the findings and the development of sound recommendations.

Where examples of good practices can be found in other organisations and there is a lack of good practices within internal business units
International Benchmarking

Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results.

Globalisation and advances in information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differences

Where the aim is to achieve world class status or simply because there are insufficient “national" businesses against which to benchmark.

Business reengineering


Business reengineering is one aspect of the cycle of enterprise change, and also includes Enterprise Engineering Assessment and Strategic Visioning. Although business reengineering can be initiated independently of other activities, it optimally begins with an Enterprise Engineering Assessment. This is a high-level and fast-paced assessment of the various business components of the enterprise. Its purpose is to take a "snapshot" of the condition of the business, assessing the strengths and weaknesses of the enterprise and identifying opportunities for change. Enterprise Engineering Assessments looks at many aspects of the enterprise including operations, culture and infrastructure, technology and technology infrastructure, and physical facilities. The results of an Enterprise Engineering Assessment are recommendations for change initiatives within the enterprise. These initiatives may lead the enterprise in any of a number of directions, depending on the needs that are identified.

Enterprise Engineering Assessment forms a logical springboard to Strategic Visioning, as it frequently points out that the enterprise’s vision is not sufficiently robust to carry the enterprise into the future and encompass the dramatic changes that are needed. Strategic Visioning is performed by the executives of the enterprise. Strategic Visioning is based on unconstrained and creative thinking -- going outside of the confines of the current business structure to determine not what the enterprise does today, but what it should do in the future. The objective of Strategic Visioning is to develop executive management’s vision for the future enterprise, using the core competencies of the enterprise as building blocks to achieve new goals, objectives, and performance levels. The result is a strategic vision statement, a business strategy to achieve the vision, a technology strategy to support and enable the business strategy, and a definition of prioritized change initiatives.

Business reengineering is a primary change initiative resulting from an Enterprise Engineering Assessment and/or Strategic Visioning. It is the way in which an enterprise dramatically improves performance and customer satisfaction by reinventing the enterprises’ business processes and other operational aspects, culture, social systems, and technology. Business reengineering is about change, but it is also about balance -- balancing customer needs and operational performance to achieve business goals and objectives. It is initiated by an executive vision, directive, or concept, not with detailed specifications. It is a venture into the future and, most frequently, the shape of that future is unknown at the time it begins. It is understood that the organization must change dramatically to achieve drastic improvements in performance and customer satisfaction. How these improvements will be achieved remains to be defined through the reengineering effort.

Business reengineering is often divided into two distinct phases -- design and implementation. Business Reengineering Design is the front end of the reengineering effort, encompassing positioning of the project, an assessment of the current state, and reengineering the value streams of the enterprise. It incorporates managerial, operational, social, and technological change. Business Reengineering Implementation is the back end of the reengineering effort. It is the process in which piloting is accomplished, transition plans are developed, and change is implemented, monitored, and measured.

ERP -enterprise resource planning is an industry term for the broad set of activities that helps a business manage the important parts of its business. The information made available through an ERP system provides visibility for key performance indicators (KPIs) required for meeting corporate objectives. ERP software applications can be used to manage product planning, parts purchasing, inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business. Typically, an ERP system uses or is integrated with a relational database system.

The deployment of an ERP system can involve considerable business process analysis, employee retraining, and new work procedures.

Entrepreneurship is the key to economic progress of a nation. Development of entrepreneurs leads to rapid industrialization and hence improved well being of a country.

Entrepreneurs are therefore called the wealth creators. Traditionally it was believed that entrepreneurial talent is an innate trait which one inherits through his birth.

Traditional business communities used to enter into the world of business with the requisite skills. But entrepreneurial growth requires focus on human resource development and its proper utilization and motivation for entrepreneurial initiatives.

Innovations in behavioral sciences have enabled us to look into the mental facets and develop, ways to change the attitude, inclination and interest of individuals in the desired direction.

There has been a felt need for concerted and systematic effort to identify, develop, nurture and sustain entrepreneurial talents in the interest of the national development.

Exclusive training based interventions have proved to be beneficial in stimulating, supporting and supporting entrepreneurial initiatives.

Entrepreneurial development programme is a systematic and an organized development of a person to an entrepreneur.

The development of an entrepreneur refers to inculcate the entrepreneurial skills into a common person, providing the needed knowledge, developing the technical, financial, marketing and managerial skills, and building the entrepreneurial attitude.

The concept or entrepreneurial development involves equipping a person with the required information and knowledge used for enterprise building and polishing his entrepreneurial skills.

In these days, entrepreneurial development programmes are treated as an important tool of industrialization and a solution of unemployment problem of India.

The overall aim of an entrepreneurial development programme is to stimulate a person for adopting entrepreneurship as a career and to make him able to identify and exploit the opportunities successfully for new venture.

Facility location is actually a term used in operation management, facility location or location analysis is done so that the better uses of the location can be understood. The company by understanding the materials and production process done nearby the location can save ample time in production process and also save a lot in terms of transportation cost. And also the company can find out optimum position for the location of the company so that all the factors that are needed will be not a long distance from the company.

Some of the benefits in location analysis include:

  • You get a thorough knowledge of all the factors involved in the production, and ways through which the materials that are needed in the production can easily be accessed.
  • When you do a proper location analysis for your facility you will also come across alternate substitute materials that are readily available and will cost less.
  • You can save a lot on transportation cost for materials, labour, import and export.
  • The materials will be available at a comparatively low cost.
  • The best way to get a task done is by finding out ways through which the task can be done. Location analysis helps you in those aspects.
  • Allows to you differentiate between practical positions to place your facility. Like for example, you cannot build a hazardous facility in a residential area.
  • Gives you access to cheap labour, and needed raw materials like water electricity and many more.
  • Helps in a smooth running of an organization, by seeing to that all that is possibly needed is readily and easily available.
  • Also has very easy access to production, distribution and sale of the products.
  • Allows you to outperform your competitor’s facilities

Once you have found the optimal location then you will very easily overcome all the issues that you are likely to face and have a smooth running of an organization. When you plan accordingly, you will also be prepared to face some minor hindrances.


The use of historic data to determine the direction of future trends. Forecasting is used by companies to determine how to allocate their budgets for an upcoming period of time. This is typically based on demand for the goods and services it offers, compared to the cost of producing them. Investors utilize forecasting to determine if events affecting a company, such as sales expectations, will increase or decrease the price of shares in that company. Forecasting also provides an important benchmark for firms which have a long-term perspective of operations.

Form of Business Enterprises

The students compare the principal characteristics of sole proprietorship, partnership, and Limited Company as they follow the growth of a domestic appliances business from a sole proprietorship to a large company. They also discover the principal strategies businesses use to finance their operations.

Goldratt Theory of Constraints

The Theory of Constraints (TOC) is an overall philosophy developed by Dr. Eliyahu M. Goldratt, usually applied to running and improving an organization. TOC consists of Problem Solving and Management/Decision-Making Tools called the Thinking Processes (TP). TOC is applied to logically and systematically answer these three questions essential to any process of ongoing improvement:

  • “What to change?”
  • “To what to change?”
  • “How to cause the change?”

More specific uses of the Thinking Processes can be used to significantly enhance vital management skills, such as:

  • Win-win conflict resolution
  • Effective communication
  • Team building skills
  • Delegation
  • Empowerment

TOC postulates that the goal is to make (more) money. It describes three avenues to this goal:

  • Increase Throughput
  • Reduce Inventory
  • Reduce Operating Expense

In order to achieve the goal, there are also 5 Focusing Steps:

1. IDENTIFY the system’s constraint.

2. Decide how to EXPLOIT the system’s constraint.

3. SUBORDINATE everything else to the above decision.

4. ELEVATE the system’s constraint.

5. If in the previous step the constraint has been broken, go back to Step 1.

Industrial Engineering is for business and manufacturing. Industrial Engineers combine the pieces that make up an industrial process and make them work more efficiently for owners and other stakeholders interests. Industrial Engineers help combine all the information, technical and people aspects, in better ways.

Consequently Industrial Engineers have a solid grounding in computer applications, engineering science and management, and focus this knowledge on the design, improvement and installation of integrated systems composed of people, materials and equipment.


Some of the more common areas in which to exercise inventory control are:

  • Raw materials availability. There must be enough raw materials inventory on hand to ensure that new jobs are launched in the production process in a timely manner, but not so much that the company is investing in an inordinate amount of inventory. The key control designed to address this balance is ordering frequently in small lot sizes from suppliers. Few suppliers are willing to do this, given the cost of frequent deliveries, so a company may have to engage in sole sourcing of goods in order to entice suppliers into engaging in just-in-time deliveries.
  • Finished goods availability. A company may be able to charge a higher price for its products if it can reliably ship them to customers at once. Thus, there may be a pricing premium associated with having high levels of finished goods on hand. However, the cost of investing in so much inventory may exceed the profits to be gained from doing so, so inventory control involves balancing the proportion of allowable backorders with a reduced level of on-hand finished. This may also lead to the use of a just-in-time manufacturing system, which only produces goods to specific customer orders (which nearly eliminates inventory levels).
  • Work in process. It is possible to reduce the amount of inventory that is being worked on in the production process, which further reduces the inventory investment. This can involve a broad array of actions, such as using production cells to work on subassemblies, shifting the work area into a smaller space to reduce the amount of inventory travel time, reducing machine setup times to switch to new jobs, and minimizing job sizes.
  • Reorder point. A key part of inventory control is deciding upon the best inventory level at which to reorder additional inventory. If the reorder level is set very low, this keeps the investment in inventory low, but also increases the risk of a stockout, which may interfere with the production process or sales to customers. The reverse problems arise if the reorder point is set too high. There can be a considerable amount of ongoing adjustment to reorder levels to fine tune these issues. An alternative method is to use a material requirements planning system to order only enough inventory for expected production levels.
  • Bottleneck enhancement. There is nearly always a bottleneck somewhere in the production process that interferes with the ability of the entire operation to increase its output. Inventory control can involve placing an inventory buffer immediately in front of the bottleneck operation, so that the bottleneck can keep running even if there are production failures upstream from it that would otherwise interfere with any inputs that it requires.
  • Outsourcing. Inventory control can also involve decisions to outsource some activities to suppliers, thereby shifting the inventory control burden to the suppliers (though usually in exchange for a reduced level of profitability).

The issues noted here highlight how difficult it can be to manage the inventory control function. Your operating boundaries are to either invest too much in inventory, or to have too little inventory on hand to satisfy the production manager or customers.


Job Evaluation is concerned with measuring the demands the job places on its holder. Most factors that contribute to this job pressure and are regarded as important for the effective performance of the job, e.g. physical strength required, knowledge of mathematics required, are assessed and the result is a numerical estimate of the total job pressure. The resulting numerical gradings can form the basis of an equitable structure of job gradings. The job grades may or may not be used for status or payment purposes. When evaluations are carried out on all hourly paid personnel the technique's uses include establishing relative wage rates for different tasks. It is possible to use it for all grades of personnel, even senior management.

Just in time production (JIT)

Just in time is a ‘pull’ system of production, so actual orders provide a signal for when a product should be manufactured. Demand-pull enables a firm to produce only what is required, in the correct quantity and at the correct time.

This means that stock levels of raw materials, components, work in progress and finished goods can be kept to a minimum. This requires a carefully planned scheduling and flow of resources through the production process. Modern manufacturing firms use sophisticated production scheduling software to plan production for each period of time, which includes ordering the correct stock. Information is exchanged with suppliers and customers through EDI (Electronic Data Interchange) to help ensure that every detail is correct.

Supplies are delivered right to the production line only when they are needed. For example, a car manufacturing plant might receive exactly the right number and type of tyres for one day’s production, and the supplier would be expected to deliver them to the correct loading bay on the production line within a very narrow time slot.

Advantages of JIT

  • Lower stock holding means a reduction in storage space which saves rent and insurance costs
  • As stock is only obtained when it is needed, less working capital is tied up in stock
  • There is less likelihood of stock perishing, becoming obsolete or out of date
  • Avoids the build-up of unsold finished product that can occur with sudden changes in demand
  • Less time is spent on checking and re-working the product of others as the emphasis is on getting the work right first time

Disadvantages of JIT

  • There is little room for mistakes as minimal stock is kept for re-working faulty product
  • Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed
  • There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production.

Line Balancing is leveling the workload across all processes in a cell or value stream to remove bottlenecks and excess capacity. A constraint slows the process down and results if waiting for downstream operations and excess capacity results in waiting and absorption of fixed costs.

  • Objective
  • Match the production rate after all wastes have been removed to the takt time at each process of the value stream.

Material Handling can be defined as "efficient short-distance movement of goods that usually takes place within the confines of a building such as a plant or a warehouse or between a building and a transportation agency.

Material Handling has four dimensions:





Material Handling improves efficiency by making the logistics system respond quickly and effectively to plant and customer requirements. For efficient movement of goods into the warehouse, locating stock, accurately filling orders, and rapidly preparing orders for shipment to customers, materials handling is very important to outbound logistics. In inbound logistics terms, materials handling serves company plants in the same way. Firms need to integrate materials handling requirements not only for the company's departmental needs, but also for meeting their customers' needs.

Materials Requirements Planning (MRP)

MRP is a planning tool geared specifically to assembly operations. The aim is to allow each manufacturing unit to tell its supplier what parts it requires and when it requires them. The supplier may be the upstream process within the plant or an outside supplier. Together with MRP II it is probably the most widely used planning and scheduling tool in the world. MRP was created to tackle the problem of 'dependent demand'; determining how many of a particular component is required knowing the number of finished products. Advances in computer hardware made the calculation possible.

Master Production Schedule

The process starts at the top level with a Master Production Schedule (MPS). This is an amalgam of known demand, forecasts and product to be made for finished stock. The phasing of the demand may reflect the availability of the plant to respond. The remainder of the schedule is derived from the MPS. Two key considerations in setting up the MPS are the size of `time buckets' and the `planning horizons'. A `time bucket' is the unit of time on which the schedule is constructed and is typically daily or weekly. The `planning horizon' is how far to plan forward, and is determined by how far ahead demand is known and by the lead times through the operation. There are three distinct steps in preparing an MRP schedule:

1. exploding

2. netting

3. offsetting.


Explosion uses the Bill of Materials (BOM). This lists how many, of what components, are needed for each item (part, sub assembly, final assembly, finished product) of manufacture. Thus a car requires five wheels including the spare. BOM's are characterised by the number of levels involved, following the structure of assemblies and sub assemblies. The first level is represented by the MPS and is 'exploded' down to final assembly. Thus a given number of finished products is exploded to see how many items are required at the final assembly stage.


The next step is 'netting', in which any stock on hand is subtracted from the gross requirement determined through explosion, giving the quantity of each item needed to manufacture the required finished products.


The final step is 'offsetting'. This determines when manufacturing should start so that the finished items are available when required. To do so a 'lead time' has to be assumed for the operation. This is the anticipated time for manufacturing.

The whole process is repeated for the next level in the BOM and so on until the bottom is reached. These will give the requirements and timings to outside suppliers.

There are three major assumptions made when constructing an MRP schedule:

  • The first, and possibly the most important, is that there is sufficient capacity available. For this reason MRP is sometimes called infinite capacity scheduling.
  • The second is that the lead times are known, or can be estimated, in advance.
  • The third is that the date the order is required can be used as the starting date from which to develop the schedule.

Plan layout

Definition: Plant layout refers to the arrangement of physical facilities such as machines, equipment, tools, furniture etc. in such a manner so as to have quickest flow of material at the lowest cost and with the least amount of handling in processing the product from the receipt of raw material to the delivery of the final product.

Objectives of good Plant Layout:

  • A well designed plant layout is one that can be beneficial in achieving the following objectives:
  • Proper and efficient utilization of available floor space
  • Transportation of work from one point to another point without any delay
  • Proper utilization of production capacity.
  • Reduce material handling costs
  • Utilize labour efficiently
  • Reduce accidents
  • Provide for volume and product flexibility
  • Provide ease of supervision and control
  • Provide for employee safety and health
  • Allow easy maintenance of machines and plant.
  • Improve productivity


There are mainly four types of plant layout:

(a) Product or line layout

(b) Process or functional layout

(c) Fixed position or location layout

(d) Combined or group layout


The creation of products with new or different characteristics that offer new or additional benefits to the customer.

Product development may involve modification of an existing product or its presentation, or formulation of an entirely new product that satisfies a newly defined customer want or market niche.

Production Planning And Control

Objectives of Production Control

The success of an enterprise greatly depends on the performance of its production control department. The production control department generally has to perform the following functions:

  • Provision of raw material, equipment, machines and labour.
  • To organize production schedule in conformity with the demand forecasts.
  • The resources are used in the best possible manner in such a way that the cost of production is minimized and delivery date is maintained.
  • Determination of economic production runs with a view to reduce setup costs.
  • Proper co-ordination of the operations of various sections/departments responsible for production.
  • To ensure regular and timely supply of raw material at the desired place and of prescribed quality and quantity to avoid delays in production.
  • To perform inspection of semi-finished and finished goods and use quality control techniques to ascertain that the produced items are of required specifications.
  • It is also responsible for product design and development.

Thus the fundamental objective of production control is to regulate and control the various operations of production process such a way that orderly flow of material is ensured at different stages of the production and the items are produced of right quality, in right quantity, at the right time with minimum efforts and cost.

The objectives or benefits of a system of production planning and control within a manufacturing firm are:

1. To ensure a system of regular availability and adequacy of labour, machines, and raw materials for production through the preparation of work and materials schedule thus allowing smooth and continuous production runs with reduced possibilities of disruptions and fewer stocking of raw materials.

2. To ensure that orders are met and that production targets and schedules are achieved in quantity, quality and cost.

3. To facilitate the co-ordination of production with other functions of business and ensure harmony with other sectional policies and the corporate objectives of the company.

4. To provide a basis for the maintenance of material and stock records

5. To ensure conformity of output with quality standards by maintaining constant touch between the design and the sales sections and the actual production department.

6. To use the best method of manufacture and minimize costs i.e. to ensure that the resources (costs) budgeted are not exceeded.

7. To make sure that machines and workers are co-ordinated and used efficiently i.e to prevent under and over utilization of equipment and manpower through the preparation of machine utilization schedules otherwise called machine loading.

8. To make sure that production workers understand what they are required to do through a clear definition of targets - what they are required to produce and the pace at which they are to work.

9. To respond to the pattern of demand and prevent unnecessary pilling of stocks at the factory.

10. To point to or specify the actions that are needed to remedy deviation from planned or target output.

11. To ensure that the right raw materials and components are used for producing goods.

12. To avoid delays in production and errors arising form a stampede, rush or fire brigade approach.

13. To ensure that raw materials, finished goods and work in progress are generally maintained at the optimum levels with the cardinal aim of ensuring an uninterrupted system of production to meet demand.

Production System

A production system (or production rule system) is a computer program typically used to provide some form of artificial intelligence, which consists primarily of a set of rules about behavior. These rules, termed productions, are a basic representation found useful in automated planning, expert systems and action selection. A production system provides the mechanism necessary to execute productions in order to achieve some goal for the system.

Productions consist of two parts: a sensory precondition (or "IF" statement) and an action (or "THEN"). If a production's precondition matches the current state of the world, then the production is said to be triggered. If a production's action is executed, it is said to have fired. A production system also contains a database, sometimes called working memory, which maintains data about current state or knowledge, and a rule interpreter. The rule interpreter must provide a mechanism for prioritizing productions when more than one is triggered.


An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in revenues and other GDP components such as business inventories. Productivity measures may be examined collectively (across the whole economy) or viewed industry by industry to examine trends in labor growth, wage levels and technological improvement.

Queuing Models

Queuing occurs widely, and is a ubiquitous system phenomenon. The Ancient Egyptians will have queued to raise the stones when building the Great Pyramid. Messages queue when being relayed via Ethernet... Work in Progress (WIP) forms queues in front of the machines in factories that are processing/assembling. Sometimes there are many machines, and many queues. Analysis of such queues and processing times can contribute to increased efficiency and reduced production costs in lean volume supply systems

Reliability engineering is an engineering field that deals with the study, evaluation, and life-cycle management of reliability: the ability of a system or component to perform its required functions under stated conditions for a specified period of time.[1] Reliability engineering is a sub-discipline within systems engineering. Reliability is often measured as probability of failure, frequency of failures, or in terms of availability, a probability derived from reliability and maintainability. Maintainability and maintenance are often important parts of reliability engineering.

Reliability engineering is closely related to safety engineering, in that they use common methods for their analysis and may require input from each other. Reliability engineering focuses on costs of failure caused by system downtime, cost of spares, repair equipment, personnel and cost of warranty claims. The focus of safety engineering is normally not on cost, but on preserving life and nature, and therefore deals only with particular dangerous system failure modes.

Reliability engineering for complex systems requires a different, more elaborate systems approach, than reliability for non-complex systems. Reliability analysis has important links with function analysis, requirements specification, systems design, hardware design, software design, manufacturing, testing, maintenance, transport, storage, spare parts,operations research, human factors, technical documentation, training and more. Effective reliability engineering requires experience, broad engineering skills, and knowledge from many different fields of engineering.

Replacement and Selection


Simulation is the imitation of the operation of a real-world process or system over time.[1] The act of simulating something first requires that a model be developed; this model represents the key characteristics or behaviors of the selected physical or abstract system or process. The model represents the system itself, whereas the simulation represents the operation of the system over time. Simulation is also used when the real system cannot be engaged, because it may not be accessible, or it may be dangerous or unacceptable to engage, or it is being designed but not yet built, or it may simply not exist.

Statistical Quality Control

Statistical quality control refers to the use of statistical methods in the monitoring and maintaining of the quality of products and services. One method, referred to as acceptance sampling, can be used when a decision must be made to accept or reject a group of parts or items based on the quality found in a sample.

Supply Chain Management

Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). As a solution for successful supply chain management, sophisticated software systems with Web interfaces are competing with Web-based application service providers (ASP) who promise to provide part or all of the SCM service for companies who rent their service.

Supply chain management flows can be divided into three main flows:

  • The product flow
  • The information flow
  • The finances flow

The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements.

There are two main types of SCM software: planning applications and execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties.

Some SCM applications are based on open data models that support the sharing of data both inside and outside the enterprise (this is called the extended enterprise, and includes key suppliers, manufacturers, and end customers of a specific company). This shared data may reside in diverse database systems, or data warehouses, at several different sites and companies.

By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company's clients), SCM applications have the potential to improve the time-to-market of products, reduce costs, and allow all parties in the supply chain to better manage current resources and plan for future needs.

Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturers can trade and even make auction bids with suppliers.

Total Quality Management

At its core, Total Quality Management (TQM) is a management approach to long–term success through customer satisfaction.

In a TQM effort, all members of an organization participate in improving processes, products, services and the culture in which they work.

The methods for implementing this approach come from the teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa and Joseph M. Juran.

A core concept in implementing TQM is Deming’s 14 points, a set of management practices to help companies increase their quality and productivity:

1. Create constancy of purpose for improving products and services.

2. Adopt the new philosophy.

3. Cease dependence on inspection to achieve quality.

4. End the practice of awarding business on price alone; instead, minimize total cost by working with a single supplier.

5. Improve constantly and forever every process for planning, production and service.

6. Institute training on the job.

7. Adopt and institute leadership.

8. Drive out fear.

9. Break down barriers between staff areas.

10. Eliminate slogans, exhortations and targets for the workforce.

11. Eliminate numerical quotas for the workforce and numerical goals for management.

12. Remove barriers that rob people of pride of workmanship, and eliminate the annual rating or merit system.

13. Institute a vigorous program of education and self-improvement for everyone.

14. Put everybody in the company to work accomplishing the transformation.

Transportation Model

Value Engineering

Value Engineering is a fuction oriented, systematic team approach and study to provide value in a product, system or service. Often, this improvement is focused on cost reduction; however other important areas such as customer perceived quality and performance are also of paramount importance in the value equation.

Value Engineering techniques can be applied to any product process procedure system or service in any kind of business or economic activity including health care, governance, construction, industry and in the service sector.

Value Engineering focuses on those value characteristics which are deemed most important from the customer point of view.

Value Engineering is a powerful methodolgy for solving problems and/or reducing costs while maintaining or improving performance and quality requirements.

Value Engineering can achieve impressive savings, much greater than what is possible through conventional cost reduction exercise even when cost reduction is the objective of the task.

Wage Incentive Plans

Compensation Plans (OM)

Compensation Plans OM Wage Incentive Plans: Wage as monetary reward is paid to an employee for the services rendered by him. One of the important components of any wage plan is the incentive bonus paid to the operative personnel. There are a good number of incentive plans that have been devised. All the incentive plans are based on the fundamental factors such as the standard time actually worked time saved and the output level attained.

Incentive Plans

Incentive Plans Wage Incentive Plans: Wage as monetary reward is paid to an employee for the services rendered by him. One of the important components of any wage plan is the incentive bonus paid to the operative personnel. Here are a good number of incentive plans that have been devised. All the incentive plans are based on the fundamental factors such as the standard time actually worked time saved and the output level attained.

Wage incentive plans

We do provide this scheme to our workers 100 More achievement Rs. 500.00 per employee per month 80 100 achievement Rs. 300.00 per employee per month 80 achievement minimum criteria can any1 provide me info on wage incentive plans in a manufacturing organization.

Work Measurement

There is a variety of work measurement techniques, each suited to different types of work or to different forms of measurement (depending, for example, on the uses to which the measurement data is to be put and the degree of 'accuracy' and 'reliability' required).

The commonest are:

  • Time Study
  • Pre-determined Motion Time Systems
  • Activity Sampling
  • Analytical Estimating
  • Synthesis.

However the basic methodology of work measurement remains common to all of these techniques. This is to:

Analyse the work being measured into its constituent parts (called 'elements' in a number of the measurement techniques)

Measure the time taken to complete each of these elements, using some process (which is part of the specific measurement technique) that converts any observed or recorded times to a time at a defined level of performance

Synthesise the time for the whole job of work by combining these element times according to the specific frequency with which they should occur in the work when carried out as properly specified, and making due allowance for such factors as the need for workers to recover from stresses and fatigue brought about by doing this work.

Work Study

Work Measurement is a term which covers several different ways of finding out how long a job or part of a job should take to complete. It can be defined as the systematic determination, through the use of various techniques, of the amount of effective physical and mental work in terms of work units in a specified task. The work units usually are given in standard minutes or standard hours.

Why should we need to know how long a job should take? The answer to this question lies in the importance of time in our everyday life. We need to know how long it should take to walk to the train station in the morning, one needs to schedule the day's work and even when to take out the dinner from the oven.

In the business world these standard times are needed for:

i. planning the work of a workforce,

ii. manning jobs, to decide how many workers it would need to complete certain jobs,

iii. scheduling the tasks allocated to people

iv. costing the work for estimating contract prices and costing the labour content in general

v. calculating the efficiency or productivity of workers - and from this:

vi. providing fair returns on possible incentive bonus payment schemes.

On what are these standard times set? They are set, not on how long a certain individual would take to complete a task but on how long a trained, experienced worker would take to do the task at a defined level of pace or performance.

Who sets these standard times? Specially trained and qualified observers set these times, using the most appropriate methods or techniques for the purpose i.e. "horses for courses".

How it is done depends on circumstances that obtain. The toolkit available to the comprehensively trained observer is described below.

The reader is invited to search the individual methods on this current Website.

Selecting the most appropriate methods of work measurement

The method chosen for each individual situation to be measured depends on several factors which include:

a. the length on the job to be measured in time units

b. the precision which is appropriate for the type of work in terms of time units (i.e. should it be in minutes, hundredths or thousandths of a minute)

c. the general cycle-time of the work, i.e. does it take seconds, minutes or days to complete

The length of time necessary for the completion of the range of jobs can vary from a few seconds in highly repetitive factory work to several weeks or months for large projects such as major shutdown maintenance work on an oil refinery. It is quite clear that using a stop-watch, for example, on the latter work would take several man-years to time to measure! Thus, more "overall" large-scale methods of timing must be employed.

The precision is an important factor, too. This can vary from setting times of the order of "to the nearest thousandth of a minute" (e.g. short cycle factory work) to the other end of the scale of "to the nearest week" (e.g. for large project work).

These are the dominant factors that affect the choice of method of measurement.

The methods


At the "precision" end of the scale is a group of methods known as predetermined motion time systems that use measurement units in ten thousandths (0.0001) of a minute or hundred-thousandths of an hour (0.00001 hour).

The resulting standard times can be used directly, for very short-cycle work of around one minute total duration such as small assembly work. However, they often are used to generate regularly used basic tasks such using assembling or disassembling nuts and bolts, using a screwdriver and similar. Tasks of this type are filed as standard or synthetic data-banks.


At the other end of the scale (long-cycle and project work) we need something which is quick to use. Such a method is estimating. This can exist in three main forms.

a. Analytical estimating relies on the experience and judgement of the estimator. It is just of case of weighing up the work content and, using this experience, stating a probable time for completion, such as "this job will take about eight days to complete".

b. Category estimating. This is a form of range estimating and requires a knowledge of the work. Estimators may not feel comfortable with overall, analytical estimates upon which may depend the outlay of a great deal of money. They often prefer giving a range estimate such as "this job should take between 12 weeks and 14 weeks to complete", which provides a safety net should things go wrong. Such ranges are not just picked upon at random but are statistically calculated and based on probability theory.

c. Comparative estimating. This is another example of range estimating. Again, estimators rely on experience of the work in order to produce estimates. This experience can be augmented by the provision of each time-range with a few typical, descriptive, jobs that would guide estimators to the most appropriate range. The estimator would compare the work to be estimated with those in the various ranges until the most appropriate fit is found.


The intermediate method between the two groups above, is timing the work in some way, usually with a stop-watch or computerised electronic study board. This method is retrospective in that the job must be seen in action in order to be timed whereas the other methods are prospective and can be used for timing jobs before they start.

The observer times each element of the work and obtains times that the observed operator takes to do the elements. Each timing is adjusted (rated) by the pace at which the operator was working as assessed by the observer. This produces basic times for the elements and hence the whole job, which are independent of the operator and can be used as the time for a trained, experienced worker to carry out the same elements. Another method of assessing the work is using activity sampling and rated activity sampling. This is a method based on the observer making snap observations at random or systematic sample times, observing what the operator is (or operators are) doing at the times of those observations (see the appropriate Topic).


A most useful method for standard or synthetic data-banks of job or element times is using computer models of the jobs. These are generated as mathematical formulae in which the observed data are inserted to compile a time for completion of the task or project. It is a useful method for recycling time standards for elements of basic work over and over again, only changing the values of the variables to suit each project.

Arrival Characteristics

The calling population or input source of a queuing system has three major features. These are:

(i) Size of Input Source: The size of input source may be considered either limited (finite) or unlimited (infinite). When the arrival to a system at any given time is only a very small fraction of potential arrivals, the input calling population is considered infinite. Otherwise, when the arrivals at any time are not considerably small proportion of potential arrivals, the calling population is termed as finite population. The railway reservation system, the airlines reservation system, tax/toll booth on highways, supermarket counters, telephone booth, etc., are examples of infinite queue.

(ii) Arrival Pattern at the System: Arrival at a service counter may be scheduled; else it would be random. A professor gives appointment to his students to come at the interval of half-an hour for guidance in the subject. This is a scheduled arrival. But, is common, most arrivals in a service system are random. This is when each arrival is independent of its previous arrivals. The exact prediction of any arrival in random system is not possible. It may be governed by a probability distribution. The probability distribution of the inter-arrival times, which is the time between two consecutive arrivals, may also be governed by a probability distribution.

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