ASSIGNMENT

Course Code : MS-05

Course Title : Management of Machines and Materials
Assignment Code : MS-05/TMA/SEM-I/2018
Coverage : All Blocks
Note: Attempt all the questions and submit this assignment on or before 30st April, 2018 to
the coordinator of your study centre.
1. It is generally felt that “rural areas are good for locating large plant, semi-urban areas for
locating medium-sized plants, and urban areas for small-scale plants”. Comment.
2. (a) Define job design. How has management viewed job design since the industrial
revolution?
(b) List the important factors that must be addressed in job design and briefly discuss the
importance of each one.
3. Under what circumstances would you use PERT as opposed to CPM in project
management? Give some example of projects where each would be more applicable than the
other.
4. What do you understand by acceptance sampling? In what situations it is used? Briefly
discuss the sampling plans.
5. “Inventory management for slow moving expensive items should focus more on lead time
reduction than anything else”. Critically examine the statement.
6. Write short notes on any three of the following:
(a) Intermittent flow processes
(b) Uses of work sampling
(c) Helgeson and Birnie Method of line balancing
(d) Benefits of value engineering
(e) Objectives of codification.
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Answer
1. It is generally felt that “rural areas are good for locating large plant, semi-urban
areas for locating medium-sized plants, and urban areas for small-scale plants”.
Comment.
Ans.: The impressive recent growth of village and small industries recorded above suggests a
healthy sector. This is in general true but a number of problems continue to face the sector.
An important one is that the interdependence of the different strata of industry (large,
medium and small) has not been fully realised. Thus, for example, schemes for making VSI
ancillaries of large industries have not spread as widely as had been hoped for. The second
problem is that many VSI are technologically obsolete and this has restrained their growth.
They are also undercapitalised, use outmoded equipment and exhibit low productivity and
high production costs.
Furthermore, many small units are sickly and significant numbers of them are going out of
business. Some of these should never have been started as they are in activities where
prospects are too poor to justify further encouragement of VSI development. Another
important problem is that in the name of backward area development, industries have been
set up in inaccessible areas where there are no distinct advantages of raw materials or market.
This has resulted in considerable increase in production costs.
The large number of official assistance institutions at national, state, and lower levels still
have problems in reaching their dispersed clientele. Small industries have attempted to
facilitate access by grouping themselves into associations. Such associations also provide
direct assistance to their members but their most important role is probably that of lobbying
for small-industry interests in dealings with the authorities. The most prominent VSI
organisations are outlined below.
India, for instance, is a country where many people practice agriculture in rural areas. As the
Indian economy develops, however, more people migrate to urban areas like Bangalore to
work in the technology industry. Instead of providing the raw materials (metals) for computer
chips to nations like the United States, Indian companies now manufacture the computer
chips themselves.
Industrial technology has created many jobs unique to urban areas. Developing countries
often have resource-based economies, meaning most people make their living from
agriculture, timber, mining, or other harvesting of natural resources. These natural resources
are most often located in rural areas. As developing countries expand the use of industrial
technology, they often shift their focus to a service-based economy. Service-based economies
use industrial technology to provide finished goods and services to people inside and outside
their countries.
People are migrating to urban areas for many reasons, including agricultural technology,
industrial technology, and the hope of changing ones economic circumstances.
Agricultural technology has decreased the need for agricultural workers. Improved
transportation, tools, fertilizer, and genetically modified crops mean fewer farmworkers

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harvest more food. This decreased need for farm employment drives many farm-workers into
cities in search of jobs.
Most rural areas have large arable land. Farming of food crops, fruits or rearing of animals
devoid of artificial feed can provide substantial income to a would-be farmer. The farmer can
use branding and good packaging to increase the revenue of the produce. If your produce is
well promoted, people from within and outside your locality will buy from you since people
are looking for avenues to obtain food which is fertilizer free.
Organic manure is another business one can tap into. People in the cities who need flowers,
or who grow their own vegetable in their small garden are potential customers. Organic
manure is actually a lucrative market. To get started, however, you need to have the needed
skills to produce high-quality organic manure.
People living in small communities love to distinguish themselves with their traditional styles
of fashion. For this reason, you may have a hard time selling outlandish clothing. But if you
dance to the tune of the people by making their kind of clothes, you will make lots of profit.
You don’t have to be the maker. You can find one or two tailors in the community and
negotiate with them. They produce, and you sell.
Students from small towns and rural areas have to travel a long distance in case if they need
help on a subject. Finding one good option locally will not just save their time, but money
also. On the other hand, one has a lot of time in his or her student life and it can easily be
channelized to earn money through offering tuition to junior grade students. If you have a
decent amount of knowledge on various subjects and want to earn money, then start
providing tuitions to your juniors, especially in groups.
It is true that starting a business in a small town can be somewhat discouraging. This is none
other than the fact that the level of competition might not really make one attract the number
of clients they envisaged. So, you have to do some thorough homework to arrive at the best
and above all you just need a CAN DO attitude to succeed.
Always focus on servicing the most basic human needs, especially in smaller towns/villages,
since the nature of their consumer awareness may not always be as evolved as that of city
dwellers owing to the restricted and limited economy.
Focus on bringing a taste of the urban life, especially fast foods, which tend to be quite well-
known but unavailable in smaller towns. Examples of this (in India) could be Bombay Chaat,
Mughlai Dishes, and so on.
Another very good business is a tea house. This is especially viable in smaller towns owing to
availability of cheaper space. Nothing very elaborates here, just a few long benches, some
tables, and you’re in business. Keep running the chai stall from morning till evening, and
you’ll be surprised how much you can make from it.
If the village / city is poor then whatever product or service you offer better be really cheap.
The 99p shop in the UK recently sold to another budget retailer after growing into a chain of
220 shops in 15 years. It was successful basically because it undercut various £1 shops by
£0.01. Another option in the scenario where you don't have much money in the local area is

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that you employ local labour at a low cost to provide services or goods to another location
(set up some kind of manufacturing or internet service business).
If the village/city is rich you may have more success selling goods or services to local
affluent people. In this case a shop or food outlet might be a good idea. Wealthy individuals
are happy to pay a premium for a good product or service.
In either scenario it is good to start small, keep your costs low and give yourself time to learn
from your mistakes.
2. (a) Define job design. How has management viewed job design since the industrial
revolution?
Ans.: Job design is the process of organizing work as group of tasks, arranging and defining
the job process and structure at the workplace depending on the job analysis performed. The
job design takes into account the organizational objectives to be achieved along with trying to
minimize on–the-job fatigue, stress and human error. Job Design is done specifically to
reduce the mechanical aspects of the job and make sure that the employee derives satisfaction
from the assigned roles and responsibilities.
Job analysis plans the job and analyses the roles and responsibilities which are core to the job
but Job design makes the job better and basically updates the job so that it remains relevant.
The factors the affect the process of job design are the task characteristics, workflow,
ergonomics, work practices, employee abilities and availability, social and cultural
expectations and feedback.
Job design is very important because this is the process which makes sure that the job
remains updated and is relevant to the employee. The main objective here is to reduce
dissatisfaction which comes while doing the job on daily basis. This dissatisfaction can lead
to employee leaving the organization and causing issues for the company. Job design has
primary responsibility of regularly updating the job.
The following are the benefits of a good job design:
• Employee Input: A good job design enables a good job feedback. Employees have
the option to vary tasks as per their personal and social needs, habits and
circumstances in the workplace.
• Employee Training: Training is an integral part of job design. Contrary to the
philosophy of “leave them alone’ job design lays due emphasis on training people so
that are well aware of what their job demands and how it is to be done.
• Work / Rest Schedules: Job design offers good work and rest schedule by clearly
defining the number of hours an individual has to spend in his/her job.
• Adjustments: A good job designs allows for adjustments for physically demanding
jobs by minimising the energy spent doing the job and by aligning the manpower
requirements for the same.

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Job design is a continuous and ever evolving process that is aimed at helping employees
make adjustments with the changes in the workplace. The end goal is reducing
dissatisfaction, enhancing motivation and employee engagement at the workplace.
Years ago, employers looked for worker with the physical capabilities to suit a given task.
Today jobs are designed to suit an average worker & capability distinction is more likely to
be on the basis of education & experience. Since the industrial revolution job design is
approached by using socio technical system. There are three important approaches to job
design –Engineering approach, human approach and the characteristic approach.
The most important single element in the engineering approach, proposed by F W Taylor and
other, was the task idea,” the work of every workman is fully planned out by the management
at least an day in advance & each man receive in most cases complete written instruction
describing in details the task which he is to accomplish. This task specific not only what to be
done but how it is to be done & the exact time allowed for doing it”.
Thus, the principles offered by scientific management to job design can be summarized as:
(a) Work should be arranged so that workers can be efficient.
(b) Employee selected for work should be matched to the demands of the job.
(c) Employees should be trained to perform the job.
(d) Monetary compensation should be used to rewards successful performance of the job.
These principles to job design seem to be quite rational & appealing because they point
towards increasing organization performance. Specialization over a period of time result in
job incumbents becoming experts rather quickly, leading to higher levels of outputs despite
the assumed gains in efficiency, behavioral scientists have found that some job incumbents
dislike specialized & routine job.
Human Relations Approach
(1) The human relation approach recognized the need to design jobs in an interesting manner
work has been directed to changing jobs so that job incumbents can satisfy their needs for
growth , recognition & responsibility, enhancing need satisfaction through job enrichment.
(2) There are two type of factor that the job designer should recognize:
(a) Motivators like achievement recognition, work itself, responsibility, advancement &
growth and
(b) Hygiene factors (which merely maintain the employee on the job & in the
organization) like working condition, organization policies, inter-personnel relations,
pay & job security.
(3) The employee will be satisfied with his job & he will be more productive if motivators are
introduced into to the job contact. The job designer has to introduce hygienic factors
adequately to reduce dissatisfaction & build motivating factors thus, the emphasis is on the
psychological needs of the employees in designing jobs.

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The Job Characteristics Approach

(1) The job characteristic theory states that employees will work hard when they are rewarded
for the work they do & when the work gives them satisfaction. Hence, they suggest that
motivation, satisfaction & performance should be integrated in the job design.
(2) According to this approach, any job can be described in the terms of 5 core job
dimensions which are as follows.
(a) Skill variety = the degree to which the job requires that’s workers use a variety of
different activities, talents & skills in order to successfully complete the job
requirement.
(b) Task identity = the degree to which the job allows workers to complete whole tasks
from start to finish, rather than disjointed portions of the job.
(c) Autonomy = the degree to which the allows worker freedom in planning and
scheduling & the methods used to complete the job.
(d) Task significance = the degree to which the job significantly impacts the lives of other
both within & outside the workplace.
(e) Feedback = the degree to which job itself provides workers with clear, direct &
understandable knowledge of their performance.
(3) The entire job dimensions impact workers psychologically. The first three dimensions
affect whether or not worker view their job as meaningful. Autonomy determines the extent
of responsibility workers feel. Feedback allows for feeling of satisfaction for a job well done
by providing knowledge of results.
(4) These critical psychological states lead to the outcome such as;
(a) high internal work motivation,
(b) high growth satisfaction,
(c) high quality work performance,
(d) high general job satisfaction
(e) high work effectiveness, and
(f) low absenteeism & turnover the model says that internal rewards are obtained by an
individual when he learns that’s he personally has performed well on a task that he
cares about.
(b) List the important factors that must be addressed in job design and briefly discuss
the importance of each one.
Ans.: A well defined job will make the job interesting and satisfying for the employee. The
result is increased performance and productivity. If a job fails to appear compelling or
interesting and leads to employee dissatisfaction, it means the job has to be redesigned based
upon the feedback from the employees.

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Broadly speaking the various factors that affect a job design can classified under three heads.
They are:
Organizational Factors: Organizational factors that affect job design can be work nature or
characteristics, work flow, organizational practices and ergonomics.
• Work Nature: There are various elements of a job and job design is required to
classify various tasks into a job or a coherent set of jobs. The various tasks may be
planning, executing, monitoring, controlling etc and all these are to be taken into
consideration while designing a job.
• Ergonomics: Ergonomics aims at designing jobs in such a way that the physical
abilities and individual traits of employees are taken into consideration so as to ensure
efficiency and productivity.
• Workflow: Product and service type often determines the sequence of work flow. A
balance is required between various product or service processes and a job design
ensures this.
• Culture: Organizational culture determines the way tasks are carried out at the work
places. Practices are methods or standards laid out for carrying out a certain task.
These practices often affect the job design especially when the practices are not
aligned to the interests of the unions.
Environmental Factors: Environmental factors affect the job design to a considerable
extent. These factors include both the internal as well as external factors. They include factors
like employee skills and abilities, their availability, and their socio economic and cultural
prospects.
• Employee availability and abilities: Employee skills, abilities and time of
availability play a crucial role while designing of the jobs. The above mentioned
factors of employees who will actually perform the job are taken into consideration.
Designing a job that is more demanding and above their skill set will lead to
decreased productivity and employee satisfaction.
• Socio economic and cultural expectations: Jobs are nowadays becoming more
employee centered rather than process centered. They are therefore designed keeping
the employees into consideration. In addition the literacy level among the employees
is also on the rise. They now demand jobs that are to their liking and competency and
which they can perform the best.
Behavioural Factors: Behavioural factors or human factors are those that pertain to the
human need and that need to be satisfied for ensuring productivity at workplace. They
include the elements like autonomy, diversity, feedback etc. A brief explanation of some is
given below:
• Autonomy: Employees should work in an open environment rather than one that
contains fear. It promotes creativity, independence and leads to increased efficiency.

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• Feedback: Feedback should be an integral part of work. Each employee should

receive proper feedback about his work performance.
• Diversity: Repetitive jobs often make work monotonous which leads to boredom. A
job should carry sufficient diversity and variety so that it remains as interesting with
every passing day. Job variety / diversity should be given due importance while
designing a job.
Use of Skills and abilities: Jobs should be employee rather than process centered. Though due
emphasis needs to be given to the latter but jobs should be designed in a manner such that an
employee is able to make full use of his abilities and perform the job effectively.
3. Under what circumstances would you use PERT as opposed to CPM in project
management? Give some example of projects where each would be more applicable
than the other.
Ans.: Project management can be understood as a systematic way of planning, scheduling,
executing, monitoring, controlling the different aspects of the project, so as to attain the goal
made at the time of project formulation. PERT and CPM are the two network based project
management techniques, which exhibit the flow and sequence of the activities and events.
Program (Project) Management and Review Technique (PERT) is appropriate for the projects
where time needed to complete different activities are not known. On the other hand, Critical
Path Method or CPM, is apt for the projects which are recurring in nature.
The two scheduling methods, uses common approach for designing the network and for
ascertaing its critical path. They are used in the successful completion of a project and hence
used in conjunction with each other. Nevertheless, the truth is that CPM is different from
PERT in a way that the former concentrates on time while the latter stresses on time-cost
trade-off. In the same manner, there are many differences between PERT and CPM, which
we are going to discuss in this article.
PERT is an acronym for Program (Project) Evaluation and Review Technique, in which
planning, scheduling, organising, coordinating and controlling of uncertain activities take
place. The technique studies and represents the tasks undertaken to complete a project, to
identify the least time for completing a task and the minimum time required to complete the
whole project. It was developed in the late 1950s. It is aimed to reduce the time and cost of
the project.
PERT uses time as a variable which represents the planned resource application along with
performance specification. In this technique, first of all, the project is divided into activities
and events. After that proper sequence is ascertained, and a network is constructed. After that
time needed in each activity is calculated and the critical path (longest path connecting all the
events) is determined.
Developed in the late 1950’s, Critical Path Method or CPM is an algorithm used for planning,
scheduling, coordination and control of activities in a project. Here, it is assumed that the
activity duration are fixed and certain. CPM is used to compute the earliest and latest possible
start time for each activity.

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The process differentiates the critical and non-critical activities to reduce the time and avoid
the queue generation in the process. The reason behind the identification of critical activities
is that, if any activity is delayed, it will cause the whole process to suffer. That is why it is
named as Critical Path Method.
In this method, first of all, a list is prepared consisting of all the activities needed to complete
a project, followed by the computation of time required to complete each activity. After that,
the dependency between the activities is determined. Here, ‘path’ is defined as a sequence of
activities in a network. The critical path is the path with the highest length.
PERT has primarily been used for R&D projects, the type of projects for which it was
developed, though its use is more common on the "development” side of R&D than it is on
the "research” side. CPM was designed for construction projects and has been generally
embraced by the construction industry. (There are many exceptions to these generalities. The
Eli Lilly Company, for example, uses CPM for its research projects.).
The use of PERT has decreased sharply in recent years because a large majority of project
management software generates CPM networks. The two methods are quite similar and are
often combined for educational presentation. Originally, PERT was strictly oriented to the
time element of projects and used probabilistic activity time estimates to aid in determining
the probability that a project could be completed by some given date. CPM, on the other
hand, used deterministic activity time estimates and was designed to control both the time
and cost aspects of a project, in particular, time/cost trade-offs. In CPM, activities can be
“crashed" (expedited) at extra cost to speed up the completion time. Both techniques
identified a project critical path with activities that could not be delayed, and also indicated
activities with slack (or float) that could be somewhat delayed without lengthening the
project completion time. Some writers insist on a Strict differentiation between PERT and
CPM. This strikes us as unnecessary. One can estimate probabilistic CPM times. and can
”crash” PERT networks. We might note in passing that the critical activities in real-world
projects typically constitute less than 10 percent of the total activities. In our examples and
simplified problems in this chapter, the critical activities constitute a much greater proportion
of the total because we use smaller networks to illustrate the techniques.
PERT uses beta probability distribution, which in its essence, models the behavior of random
variables and can be implemented by either using the statistical probability theory or discrete-
event simulation. The way it is used in project management is through calculating the time
allocated (Expected time) for the completion of a given activity. The way PERT deals with
variation is its main differentiator. You determine the probability of any given activity to be
successfully completed within three time estimates – optimistic (shortest), most likely and
pessimistic (longest) times. These estimates (called random variables) represent the
reasonable values you can give as the rate at which an activity can be possibly completed.
Then, these time estimates are used in a weighted average assuming a beta probability
distribution, and this weighted average forms the Expected time for a given task.
PERT can also be used for risk analysis and to identify potential opportunities and difficulties
for the activities, as well as for the calculation of the worst case scenario. Imagine a famous
band going on a world tour. They are on their way to play another concert that day in a

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neighboring country, but production trucks cannot cross the border because there is a strike at
the border of the country they are currently in. To make it in time to perform, the truck has to
cross the border by a certain time. In such a case, it’s out of the organizer’s (or project
manager’s) control to project how long it will take until the production truck makes it to the
concert area. To avoid such a situation, it’s more realistic to have implemented PERT,
allowing some buffers between ongoing tasks, much like transporting rock stars between
concert venues.
4. What do you understand by acceptance sampling? In what situations it is used?
Briefly discuss the sampling plans.
Ans.: Arguably, acceptance sampling is an effective and efficient means to ensure the proper
surveillance of product and service quality. Using this approach, a random sample (of product
or service) is inspected or tested to determine if the observed level of quality is acceptable or
unacceptable. If the sample supports the hypotheses of unacceptability, then certain
corrective actions are invoked. On the other hand, if the sample supports the hypothesis of
acceptability, then no action is taken.
Owing to the nature of acceptance sampling, it is possible to design a set of actions based on
certain probabilistic alternatives (outcomes). In this manner, the governance of a process is
made more efficient and less prone to decision error. In short, the methodology allows the
quality of a process to be regulated with known degrees of risk and confidence.
One such methodology is fully described in MIL-STD-105D: Sampling Procedures and
Tables for Inspection by Attributes. Recall than an attribute is a characteristic or feature of
some product or service that either conforms or fails to conform to its respective quality
standard. For example, a unit of product (or service) is either delivered on time, or it is not –
there is no middle ground, so to speak. Therefore, attribute sampling is generally useful for
describing how well a job is done, in terms of defects per hundred observations, or percent
defective.
Essentially, there exist five general types of sampling plans – each having its own merits and
drawbacks. The following is a brief summary of each type:
(1) Single sampling plans: A random sample is selected from a lot of product (or
service). Next, the quality disposition of the lot is decided based on certain inspection
criteria and various tabulated values. If the observed case is in agreement with the
theoretical case (tabulated statistics), no action is taken. On the flip side, action is
taken in the event of disagreement. Of interest, single sampling plans are the most
common type and are usually the easiest to deploy and implement, although not
necessarily the most efficient in terms of sample size.
(2) Double sampling plans: Once the first sample is inspected, there are three
possibilities – the lot is accepted, rejected, or no decision is rendered. In the event of
indecision, a second sample is taken. In turn, this information is combined with the
first sampling so as to facilitate a final decision.

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(3) Multiple sampling plans: This is an extension of the double sampling plan – more
than two samples are needed to reach a conclusion. The advantage of multiple
sampling is smaller sample sizes.
(4) Sequential sampling plans: This type of sampling plan is an extension of the
multiple sampling plan – units of product (or service) are sequentially selected and
then progressively inspected (or tested). After each unit is examined, a decision is
made to accept the lot, reject the lot, or select another unit for inspection. Of course,
sampling continues to a predefined point. If the lot has not been rejected up to this
point, it is accepted with a known degree of statistical confidence.
(5) Skip lot sampling plans: Skip lot sampling only inspects a fraction of the submitted
lots.
A company receives a shipment of product from a vendor. This product is often a component
or raw material used in the company’s manufacturing process. A sample is taken from the lot
and some quality characteristic of the units in the sample is inspected. On the basis of the
information in this sample, a decision is made regarding lot disposition. Usually, this decision
is either to accept or to reject the lot. Sometimes we refer to this decision as lot sentencing.
Accepted lots are put into production; rejected lots may be returned to the vendor or may be
subjected to some other lot disposition action. While it is customary to think of acceptance
sampling as a receiving inspection activity, there are other uses of sampling methods. For
example, frequently a manufacturer will sample and inspect its own product at various stages
of production. Lots that are accepted are sent forward for further processing, while rejected
lots may be reworked or scrapped.
Acceptance sampling plans do not provide any direct form of quality control. Acceptance
sampling simply accepts / rejects lots. Even if all lots are of the same quality, sampling plan
will accept some lots and reject others, the accepted lots being no better than the rejected
ones. Process controls are used to control and systematically improve quality, but acceptance
sampling is not. The most effective use of acceptance sampling is not to “inspect quality into
the product” but rather as an audit tool to ensure that the output of a process conforms to
requirements.
Acceptance sampling is most likely to be useful in the following situations:
1. When testing is destructive.
2. When the cost of 100% inspection is extremely high.
3. When 100% inspection is not technologically feasible or would require so much
calendar time that production scheduling would be seriously impacted.
4. When there are many items to be inspected and the inspection error rate is sufficiently
high that 100% inspection might cause a higher percentage of defective units to be
passed than would occur with the use of a sampling plan.
5. When the vendor has an excellent quality history and some reduction in inspection
from 100% is desired, but the vendor’s process capability is sufficiently low as to
make no inspection an unsatisfactory alternative.

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There are risks of accepting “bad” lots and rejecting “good” lots. Less information is usually
generated about the product or about the process that manufactured the product
Acceptance sampling is a “middle ground” between the extremes of 100% inspection and no
inspection. If often provides a methodology for moving between these extremes as sufficient
information is obtained on the control of the manufacturing process that produces the
product. While there is no direct control of quality in the application of an acceptance
sampling plan to an isolated lot, when that plan is applied to a stream of lots from a vendor, it
becomes a means of providing protection for both the producer of the lot and the consumer. It
also provides for an accumulation of quality history regarding the process that produces the
lot, and it may provide feedback that is useful in process control, such as determining when
process controls at the vendor’s plant are not adequate. Finally, it may place economic or
psychological pressure on the vendor to improve the production process.
Acceptance sampling plans can be classified as variables and attributes. Variables, of course
are quality characteristics that are measured in numerical scale. Attributes are quality
characteristics that are expressed on a “go, no-go” basis. The primary disadvantage of
variables sampling plans is that the distribution of the quality characteristic must be known.
In most of the standard variable acceptance sampling plans assume that the distribution of the
quality characteristic is normal. If the distribution of the quality characteristic is not normal,
and a plan based on the normal assumption is employed. Serious departures from the
advertised risks of accepting or rejecting lots of given quality may be experienced. Another
disadvantage of variable sampling plan is that a separate sampling plan must be employed for
each quality characteristic that is being inspected. For example, if an item is inspected with
respect to four quality characteristics, it is necessary to have four separate variables
inspection sampling plans. If this same product were being inspected under attribute
sampling, one attribute sampling plan could be employed. Finally it is possible that the use of
variable sampling plans will lead to rejection of a lot even though the actual sample inspected
does not contain any defective items.
5. “Inventory management for slow moving expensive items should focus more on lead
time reduction than anything else”. Critically examine the statement.
Ans.: Every enterprise needs inventory for smooth running of its activities. It serves as a link
between production and distribution processes. There is, generally, a time lag between the
recognition of need and its fulfilment. The greater the time – lag, the higher the requirements
for inventory.
The investment in inventories constitutes the most significant part of current assets/working
capital in most of the undertakings. Thus, it is very essential to have proper control and
management of inventories. The purpose of inventory management is to ensure availability of
materials in sufficient quantity as and when required and also to minimise investment in
inventories.
In accounting language it may mean stock of finished goods only. In a manufacturing
concern, it may include raw materials, work in process and stores, etc. Inventory includes the
following things:

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(a) Raw Material: Raw material form a major input into the organisation. They are
required to carry out production activities uninterruptedly. The quantity of raw
materials required will be determined by the rate of consumption and the time
required for replenishing the supplies. The factors like the availability of raw
materials and government regulations etc. too affect the stock of raw materials.
(b) Work in Progress: The work-in-progress is that stage of stocks which are in between
raw materials and finished goods. The raw materials enter the process of manufacture
but they are yet to attain a final shape of finished goods. The quantum of work in
progress depends upon the time taken in the manufacturing process. The greater the
time taken in manufacturing, the more will be the amount of work in progress.
(c) Consumables: These are the materials which are needed to smoothen the process of
production. These materials do not directly enter production but they act as catalysts,
etc. Consumables may be classified according to their consumption and criticality.
(d) Finished goods: These are the goods which are ready for the consumers. The stock of
finished goods provides a buffer between production and market. The purpose of
maintaining inventory is to ensure proper supply of goods to customers.
(e) Spares: Spares also form a part of inventory. The consumption pattern of raw
materials, consumables, finished goods are different from that of spares. The stocking
policies of spares are different from industry to industry. Some industries like
transport will require more spares than the other concerns. The costly spare parts like
engines, maintenance spares etc. are not discarded after use, rather they are kept in
ready position for further use.
It is necessary for every management to give proper attention to inventory management. A
proper planning of purchasing, handling storing and accounting should form a part of
inventory management. An efficient system of inventory management will determine (a)
what to purchase (b) how much to purchase (c) from where to purchase (d) where to store,
etc.
There are conflicting interests of different departmental heads over the issue of inventory.
The finance manager will try to invest less in inventory because for him it is an idle
investment, whereas production manager will emphasize to acquire more and more inventory
as he does not want any interruption in production due to shortage of inventory. The purpose
of inventory management is to keep the stocks in such a way that neither there is over-
stocking nor under-stocking. The over-stocking will mean reduction of liquidity and starving
of other production processes; under-stocking, on the other hand, will result in stoppage of
work. The investments in inventory should be kept in reasonable limits.
Inventory is held to avoid the nuisance, the time and the cost etc. of constant replenishment.
However, to replenish inventory only infrequently would necessitate the holding of very large
inventories. It is therefore apparent that some balance or trade-off or compromise is needed in
deciding how much inventory to hold, and therefore how much inventory to order. There are
costs of holding inventory and there are costs of re-ordering inventory and these two costs
need to be balanced.

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purposes only. We encourage you to use our material as a research and study aid only. Plagiarism is a crime,
and we condone such behavior. Please use our material responsibly, and avoid academic fraud. 

Inventory control is a critical function for businesses spanning every industry. Without
effective inventory control methods, the supply chain suffers, you’re not able to meet
customer needs adequately, and ultimately, your company’s bottom line will reflect these
inadequacies.
But choosing the right method for inventory control and developing effective policies to
ensure that processes are followed, improving the accuracy of your inventory control
methods, and collecting accurate data to understand how to use that data to inform other areas
of the business are concerns with no simple, across-the-board solutions.
That’s why evaluating your company’s current business scenario to identify key needs and
choose systems and develop processes that will best accommodate these unique needs is
often a necessary first step for companies who are selecting an inventory control system for
the first time. It’s also a good idea for companies to conduct these audits periodically to
ensure that current systems and processes are adequate considering growth or change that has
occurred within the organization.
To help companies choose or develop methodologies that are well-suited to business
requirements, we’ve compiled a list of 51 expert tips on inventory control methods, ranging
from information to help you choose the right inventory control framework or methodology
to understanding your company’s unique business needs and creating and enforcing effective
inventory control policies. To browse tips in a specific section, use the links below to
navigate to each category.
Inventory is a necessary evil. Necessary, because it aims at absorbing the uncertainties of
demand and supply by `decoupling' the demand and supply sub-systems. Thus an
organisation maybe carrying inventory for the following reasons:
(a) Demand and lead time uncertainties necessitate building of safety stock (buffer
stocks) so as to enable various sub-systems to operate somewhat in a decoupled
manner. It is obvious that the larger the uncertainty of demand and supply; the larger
will have to be the amount of buffer stock to be carried for a prescribed service level.
(b) Time lag in deliveries also vcessitates building of inventories. If the replenishment
lead times are positive then stocks are needed for system operation.
(c) Cycle stocks may be maintained to get the economics of scale so that total system cost
due to ordering, carrying inventory and backlogging are minimized. Technological
requirements of batch processing also build up cycle stocks.
(d) Stocks may build up as pipeline inventory or work-in-process inventory due to
finiteness of production and transportation rates. This includes materials actually
being worked on or moving between work centres or being in transit to distribution
centres and customers.
(e) When the demand is seasonal, it may become economical to build inventory during
periods of low demand to ease the strain of peak period demand.

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purposes only. We encourage you to use our material as a research and study aid only. Plagiarism is a crime,
and we condone such behavior. Please use our material responsibly, and avoid academic fraud. 

(f) Inventory may also be built up for other reasons such as: quantity discounts being
offered by suppliers, discount sales, anticipated increase in material price, possibility
of future non-availability etc.
Different functional managers of an organisation may view the inventory from different
viewpoints leading to conflicting objectives. This calls for an integrated systems approach to
planning of inventories so that these conflicting objectives can be scrutinized to enable the
system to operate at minimum total inventory related costs-both explicit such as purchase
price, as well as implicit such as carrying, shortage, transportation and inspection costs.
6. Write short notes on any three of the following:
(a) Intermittent flow processes
Ans.: This process is very suitable for a large variety of output, each output taking a different
route and hence operations, with different time requirements and sequence. In this process the
different outputs are called batches or lots. These follow a different processing route through
the facilities. Here the production is split into a series of manufacturing stages or operations.
Each operation is completed on each one of the single items being made, before the next
operation is started. In this way a group of identical products of a batch are made. This
process is appropriate for all service organizations like a hospital where the offering is made
as per the customer’s demand and follow a different sequence (pathological lab, blood bank,
radiography etc).
The characteristics of intermittent form are as follows:
1. It is suitable when the output variety is large and the volumes are low.
2. It is flexible in approach since it uses general purpose machines for a variety of
outputs.
3. The transformation process is organized around standard operations in the intermittent
form ( e.g. in a bank we have saving accounts counter, current account counter, cash
counter, advances and time deposits departments etc). Here each functional group is a
specialist group.
4. Material handling here depends upon standard operations, and there is a work in
process (WIP) inventory.
(b) Uses of work sampling
Ans.: Work sampling is a statistically based technique utilized for analysing work
performance and machine utilization by direct observation, but without a stop watch. So work
sampling is another useful technique of work study.
This technique is particularly useful to estimate the proportion of delays or idleness’s
occurring in a enterprise/plant and attributing the cause for it, such as power failures/input
delays, machine cleaning, machine breakdowns and manpower idling or in other words,
estimating proportion of time spent by an executive in attending meetings, telephoning or
reading etc.

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purposes only. We encourage you to use our material as a research and study aid only. Plagiarism is a crime,
and we condone such behavior. Please use our material responsibly, and avoid academic fraud. 

The stop watch technique for time estimation is extremely time consuming and therefore not
feasible.
Work sampling is a technique for establishing standard times of activities. This method also
known as activity sampling was devised by L.H.C. Tippet in 1934. This technique is more
suitable for analysing group activities and repetitive activities which take longer duration.
If a given individual performs more than one activity, then the time standard for each activity
can be computed with the help of this method. For example, on a printing press, a single
operator/worker will be doing composing, proofreading, printing etc. The time standards for
all these activities can be determined with the help of work sampling method.
The method of work sampling consists of taking a large number of instantaneous
observations randomly, rather than taking observations continuously as is done in various
production investigations/ studies. This method is a sampling technique and depends upon
laws of probability.
Work Sampling (also sometimes called ratio delay study) is a technique of getting facts about
utilization of machines or human beings through a large number of instantaneous
observations taken at random time intervals. The ratio of observations of a given activity to
the total observations approximates the percentage of time that the process is in that state of
activity. For example, if 500 instantaneous observations taken at random intervals over a few
weeks show that a lathe operator was doing productive work in 365 observations and in the
remaining 135 observations he was found 'idle' for miscellaneous reasons, then it can be
reliably taken that the operator remains idle (135/500) × 100 = 27 % 0f the time. Obviously,
the accuracy of the result depends on the number of observations. However, in most
applications there is usually a limit beyond which greater accuracy of data is not
economically worthwhile.
(d) Benefits of value engineering
Ans.: Value Engineering is a function 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 methodology 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.

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purposes only. We encourage you to use our material as a research and study aid only. Plagiarism is a crime,
and we condone such behavior. Please use our material responsibly, and avoid academic fraud. 

Value Analysis recognizes that good value is achieved when the necessary performance can
be accurately defined and delivered at the lowest life cycle cost. The Value Methodologies
result in benefits to both the individual and the organization.
The benefits to the individual of Value Analysis/Value Engineering include:
• A systematic approach to solving problems.
• Self-satisfaction from contribution their ideas to solution and in participating in an
energetic workshop.
• Improvements in their knowledge and abilities because workshop team members with
different backgrounds share their expertise during the VA workshop.
• Participation in a transparent process that results in more informative decisions.
The benefits to the organization of using Value Analysis/Value Engineering include:
• A Return of Investment typically ranging from 20:1 to 100:1
• Cost savings while achieving required functions
• Improved understanding of the project and validation of costs
• Improved stakeholder engagement,
• Objective selection among competing priorities or solutions,
• Definition, understanding and measurement of the values related to the project,
product, process, or service
• Improvement in corporate culture through enhanced creativity and the introduction of
new ideas and approaches ,
• Expedited project schedules,
• Improved quality.

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