PRODUCTION & OPERATIONS MANAGEMENT

Semester – 4

UNIT - 1

Faculty : P. K. Mitra
U1- Introduction to Production & Operations
Management
 Definition – Production/Operations Management is
concerned with the conversion of inputs, using physical
resources, so as to provide desired utilities (goods or
services) of Form, Place, Possession & State thereof, to
the customer while meeting the other organizational
objectives of effectiveness, efficiency and adaptability.
The set of interrelated management
activities which are involved in manufacturing products is

called “Production Management”. If the same concept is

extended to service sectors, then the corresponding set
of management activities is called as “Operations
Management”
(BD-1)
However, an Operation System is defined as one in which several activities are performed to
transform a set of inputs into a useful output using a transformation process. These inputs &
outputs may be tangible(raw materials/physical products) or intangible(information/
experiences). Viewed in this manner, both manufacturing & service system can be broadly
classified under Operation System. So, Operations Management is a systematic approach to
address issues in the transformation process that converts inputs into useful, revenue
generating outputs.

 Examples of manufacturing sectors – steel, automobile, chemical process, paper,

food process, textile, power generation, furniture etc.
 Examples of service sectors – hospital, bank, college/university, petrol pump,
restaurant, cab service etc.

 Difference between Manufacturing & Service :

 Intangibility – product is defined by certain attribute & customer can touch and feel
the product and make an assessment of it. Whereas, services can’t be touched,
tasted or felt. At the most, the customer, based on his personal assessment, can
make an opinion about the quality of the service
 Heterogeneity – in service, the experiential component is dominant, so no two
similar services are exactly alike. High heterogeneity results in high variability in the
operations system
  Simultaneous production and consumption – mostly, services occur in presence of
the customer. In the case of manufacturing, goods are produced at some point of
time and distributed to customer later
 Perishability – services are perishable and thus can’t be inventoried. Whereas, the
possibility of inventorying the supply and using it at a later time is very common in a
manufacturing system

 Need & Responsibilities of Operations Management

 To deliver products in required quantity, quality, delivery schedule

& at minimum possible cost
 To ensure maximum utilization of all resources
 To minimize production cycle time
 To maintain optimum inventory level
 To maintain flexibility in operations
 To coordinate between manpower & machines
 To plan for plant capacities for future requirement
 To remove the bottlenecks at all stages of production
 To ensure effective cost reduction and cost control
 To establish routes and schedules for work that will ensure
optimum utilisation of all resources
 The ultimate objective is to contribute to the profit of the
organisation
 Importance & Scope of OM:
Importance :
 it coordinates all phases of production & operations
management
 It results in specified quality product, optimum utilisation of
resources, reduced inventory, reduced production cycle time,
faster delivery, better customer service, lower production cost
 Scope :
 Materials – planning for procurement of right quality &
quantity of raw materials at right time
 Method – selecting the best method of processing from
several alternatives
 Machines & equipment – it involves facility planning, capacity
planning, optimum utilisation of
equipment
 Manpower – planning for manpower having appropriate skill and
expertise
 Scheduling - to ensure that all jobs are completed as per stated
delivery dates
 Evaluation & cost control – to improve performance, cost control
by waste reduction, value analysis

 Principles of PPC :
 Type of production determines the kind of PPC system required
 Number of parts involved in product generation affect the
expenses of operating production department
 Complexity of PPC function varies with the number of assemblies
involved
 Time is a common denominator for all scheduling activities
 PPC permits “Management by Exception”
 Cost control should be a by product of PPC function

Limitations of PPC function :

 PPC function is based on certain assumptions e.g. forecasting of

customer demand, plant capacity, availability of materials
manpower etc. if such assumption go wrong, PPC becomes
ineffective
 Employees may resists changes in production plan, if such plans
are rigid
 It is time consuming
 PPC function becomes extremely difficult when there is rapid
changes in environmental factors like technology, taste & habit of
the consumer, govt. policy, factors arising of natural calamities
Integrated approach of Production Planning
and Control(PPC)
(Relation between PPC & other functional
department of an organisation):
BD-2
The PPC function is an effort to optimise the process of
conversion of raw materials into finished products as per
requirement of the market. Since various activities are involved
in the conversion process, the PPC has to be an “Integrated
Function” if the corporation has to derive maximum benefit out
of planning. The procurement of raw materials, quality control,
inspection of materials, inventory control, the production cost,
the availability of labour, machinaries & equipments, the
warehousing capacity etc. all have their influence on PPC
operations, all such functions have interlinking and more such
interlink, better is the planning process.
For instances, if production function and maintenance are
planned separately, it will lead to conflict between the
preventive maintenance need and the production need. Such
conflicts can be avoided if planning for maintenance is done in
coordination with planning for production, allowing for
sufficient number of days of shut down for such maintenance.

Again, the product have to be manufactured only as per

customer demand and need of the market, the data of which is
fed by the marketing department.

The manufacturing activities requires specific skills. The

manufacture and personnel management department would have
to recruit manpower only as per the need of PPC department.

The PPC functions require lot of funds which is arranged only

by the financial planning department,
The manufacturer of specific product require particular quality
of raw materials and levels of in-process and raw materials
inventory which is arranged by the materials planning
department and quality control department.

With this, it is clear that there is a close relationship between

the PPC and other major functional department (Marketing
Management, Product design & Engineering, Materials
Management, Human Resource Management, Financial
Management, Research & Development) of an organisation.
 Key decisions of Operations Management:
 design of operation requires decisions on Capacity,
Products / Services to be offered
 Operational planning and control requires that supply is
static, operations are properly planned & scheduled, demand
is matched with supply
The key decisions are classified into –
 Strategic decisions – defining the goals, making policies,
determination of organisational objectives
 Tactical decisions – acquisition of resources, plant location,
new product establishments
 Operational decisions – effective & efficient use of existing
facilities & resources to carry out the activities within budget
constraints, highlighting the areas of bottleneck
In view of growing global competition, it is essential
to provide goods & services at competitive price. If the market
is not highly competitive, the organisation compute the cost of product by considering all
the expenses in manufacturing & administering the business and then add the required
profit to the cost. Whereas, in a competitive market, the organisation should first fix up the
price and then it try to plan its activities by eliminating unnecessary cost till the required
profit is achieved, so, this is a working-backward approach.

 Comparison of Goods vs. Services :

Manufacturing Organisation Service Organisation
 Differences:
Physical & durable product Intangible, perishable
It is inventoried Output can’t be inventoried
Customer contact is less More customer contact
Response time is high Short response time
Wide market(regional, national, international) Mostly local market
Facilities are more Small facilities
Capital intensive Labour intensive
Quality easily measured Quality not easily measured
 Similarities :
 Both concerned about quality, productivity, timely response
 Both make choices about capacity, location & layout
 Both deal with suppliers
 Both plan for operations, resources & schedules
 Both balance the capacity & demand
 Operation as a key functional area :
Since various activities are involved in the conversion process, the operations have
to be an integrated function if the company has to derive maximum benefit out of planning.
The procurement of raw material, quality control, inspection, inventory level, availability of
labour, equipment, warehousing capacity etc. all have their influence on
PPC/operations function
The operations function in an organisation has the following layers :
 Customer layer
 Core operations layer
 Operations support layer
 Innovation layer
 Supplier layer (BD-3)

 Operation Strategies :
 Definition – Operation strategy is the process of making key decision regarding the
operations function of an organisation on the basis of inputs from its overall
corporate strategy. In this way, it links the overall strategic intents and the
corporate strategy to specific aspects of the operation system. Strategic decisions
include –
 the extent of capacity to be built into the system
 type of process & technology to be used
 Nature of products & services to be offered
 Type of supply chain to be configured
 Relevance – an analysis of the competitive scenario reveals that it is now imperative
for organisations to have a sound operations strategy. Due to globalisation of the
economy. Indian manufacturing & service firms have had to face competition from
other parts of the world. Indian organisations are now required to have a global
outlook and as such can no longer afford to ignore the need for customer orientation
and cost cutting for their survival.
A strategic planning exercise enables an organisation to respond to the
needs of the market in the most effective manner by :
 Identifying products & services that are likely to succeed in the market place
 Aligning the resource and activities in the organisation to deliver these products
and services as per need of the customer
Key Challenges faced by Indian organisation in Operations :
 Pricing pressure – even when the annual inflation during the last 10 yrs
averaged at about 5-6%, several manufacturing firms were bound to reduce the
price of the component manufacturing. In such a scenario, better cost
management practices are required in manufacturing as well as in servicing to
handle the threat of price competition
 Lead time reduction – organisations have faced another competitive threats in
the lead time for supply of goods. In traditional domestic outlook, customers
were willing to pay in advance and wait for long to take the delivery of goods.
But as on today, manufacturers can’t afford to make customers wait that long.
The development of superior capabilities to cut down the lead time is an
important requirement today
 Proliferation of variety – in response to mounting competition, there has been a
proliferation of variety in several sectors of the industry. These sectors include
white goods, electronic appliances and industrial goods. Nowadays, it is interesting
to note that even simple commodities such as wheat flour and salt, which were
never considered to be branded items, have more than a dozen varieties to choose
from. So, organisations need to develop a high capability for managing variety
So, it can be summarised as follows :
 Competitive dynamics will change on account of socio-economic changes and
the policy changes of the government. The expectations of customers will also
change along with these.
 Organisations need a structured approach to scan the market and distil the
changing needs at the market place. They also need a mechanism to chalk out
a plan for responding to these changes in the most effective way
 With the changes in the market place, the competitive priorities must also
change. Organisations need to tune their operations to match with the
competitive priorities
 The above mentioned processes are expected to repeat several times in the
future and organisations must be in a position to respond to changes
whenever the need arises
 Strategy Formulation Process :
The process of formulating appropriate operations strategy involves a
sequential & structured set of activities. These can be grouped into 3 broad steps –
 Identifying the strategic options for sustaining competitive advantage
 Developing the overall corporate strategy on the basis of firm-level strengths
& weaknesses
 The corporate strategy provides the basis for arriving at the appropriate
operations strategy for the organisation

 Steps of strategy formulation process :

 Understanding the competitive dynamics at the marketplace
 Identifying order-winning and order-qualifying attributes
 Deciding on strategic options for sustaining competitive advantage
 Matching the strategic options with the resources, constraints, values and
objectives of the organisation to arrive at the overall corporate strategy
 Developing the operations strategy on the basis of the corporate strategy
 Using the operations strategy to select appropriate options for configuring
an operations system and establishing relevant measures for operational
excellence
 Order–qualifying and Order–winning Attribute :
 Order- Qualifying Attributes are the set of attributes that the customers
expect in the product or service they consider for purchase. The absence of
any of these attributes will result in the customer removing the product or
services from his/her list of preference. However, the mere presence of
these attributes does not guarantee that the customer will buy the
product. It only indicate the threshold level of requirements for considering
the product
 Order-winning Attributes are the attributes that have the potential to
sufficiently motivate the customer to buy the product. The perception of
the customer is that the presence of these attributes indicates to him/her
that the product or services under consideration surpasses the basic
requirements and, therefore, has the potential to provide better value for
money. The presence of order-winning attributes in a product or service
helps the customer differentiate it from the competitors’ offerings. It also
favourably influences the customers’ buying decision with respect to the
product or service. The more the number of such attributes that a
customer perceives in a product or service, the greater is the chance that
the customer may buy the product or service.
Examples : such attributes might changes from time to time. During
The early & mid ‘80s, quality was an order winning attribute. But
thereafter, quality became an order-qualifying attribute as customer
began to expect high level of quality in product or services. The next order-winning attribute
was high delivery reliability. Organisations developed JIT practices to addresses the issue of
delivery. Other order-winning attributes that have evolved over time include efficient
customer response, speed, variety & convenience

 Maintenance Management :
 Definition - that function of the manufacturing management which is
concerned with day to day problem of keeping the physical plant and machineries in
good operating condition

 Need / Importance of Maintenance Management :

 To establish a competitive edge and to provide good customer
service, the company must have reliable equipment
 It is an important factor in quality assurance
 The organisation with JIT programme must have to maintain
the equipment on regular basis to avoid idle machine, labour
and lost sales due to breakdown
 A good maintenance management is important for cost control
 Objectives of Maintenance Management :

 Minimising the loss of productive time

 Minimising the repair time and repair cost
 Efficient use of maintenance personnel and equipment
 To maximise the useful life of the equipment
 To keep equipment safe and prevent the development of
safety hazards
 To maximise efficiency and economy in production
through optimum use of facilities
 To improve the quality of products and to improve
productivity
 Impact of poor maintenance:

 Loss of production time

 Rescheduling of production
 Spoilage and damage of materials
 Labour cost per unit rise because of idle labour
 Low quality product
 Safety hazard for workers resulting in poor staff morale
 Customer dissatisfaction due to delayed delivery of product
 Low productivity
 Statistics of Failure (Equipment Life Cycle):

The general failure pattern of any plant or equipment may be

shown by a curve known as Bath-Tub Curve in failure. It has three
distinct phases –
 Phase – I : there may be large number of failure in the early
period owing to non-alignment during transportation or misfit
while manufacturing or very high initial friction between the
moving parts. This is often compared with Infant Mortality.
Accordingly, this period is known as Infant / Green / Burn-in
period
 Phase – II : the failure rate is drastically reduced in this period and
remained stabilised over a long period. In this period the
reliability is very high. This period is compared with Youth Period
where death may occur only by chance (e.g by accident).
Accordingly, this period is known as Normal / Useful Life /Adult
Period
  Phase III : in this period, failure rate follow normal distribution
with an indication for group replacement. This is due to normal
wear and tear and compared with the Old Aged Period.
Accordingly, this period is also known as Ageing / Wear-out
Period
(BD-4)

 Types Of Maintenance :
The maintenance activity of plants and equipment can be
classified in to five types as follows –
 Breakdown Maintenance
 Preventive Maintenance
 Predictive Maintenance
 Routine Maintenance
 Planned Maintenance
 Corrective Maintenance
 Maintenance prevention
• Breakdown Maintenance :
It is the repair which is done after the equipment has
attained down-state / out of order. So it will have associated penalty
in terms of cost of maintenance and down-time cost of equipment
Breakdown maintenance seeks to achieve the following objectives :
 To get equipment back into operation as quickly as possible in
order to minimise interruption to production
 To control the cost of maintenance crews
 To control the cost of operation of repair shop to control the
investment in replacing spare parts
 To incur the appropriate amount for repair at each malfunction

• Preventive Maintenance :
It is undertaken before the failure of the equipment with an aim to
minimise the possibility of un-anticipated production interruptions
or major breakdown. It consists of :
 Periodic inspection of plant to prevent breakdown
 Repetitive servicing, upkeep and overhaul of equipment
 Adequate lubrication and cleaning of equipment
Preventive Maintenance may take four different forms :
 Time based – it is the maintenance at regular intervals, e.g. every
two months. It is easier to monitor time. This form is used when
deterioration is time based
 Work based – it is the maintenance after a pre-determined
volume of works performed
 Opportunity based – it is the maintenance whenever equipment
is available, e.g. during a holiday closure
 Condition based – it is the planned inspection to reveal when
maintenance is prudent
 Benefits of Preventive Maintenance :
 Decreased production down time & losses
 Fewer large scale & repetitive repairs
 Reduction of breakdown maintenance expenses
 Improvement in product quality
 Greater safety for workers
• Predictive Maintenance :
One of the new type of maintenance that have gained increased
attention and popular is Predictive Maintenance. Here the condition
like vibration, temperature, pressure, consumption of lubricants,
changes in electrical resistance is monitored by sensing device so
that the warning is obtained for any approaching failure

• Routine Maintenance :
It includes activities like periodic inspection, cleaning, lubrication
and repair of parts after their service life. It is of two types –
 Running maintenance – here the maintenance is carried out
while the equipment is in operation
 Shut down maintenance – here the maintenance is carried
out when the equipment is out of operation
• Planned Maintenance :
It is also known as Scheduled Maintenance or Productive Maintenance. It
involves the inspection of all plants & equipment,
building etc. according to a pre-determined schedule in order to service,
overhaul, lubricate or repair before actual breakdown or deterioration in service
occurs
• Corrective Maintenance :
It is to modify or improve an equipment for increased reliability and easier maintenance.
This means that the equipment with design weaknesses are redesigned to improve
reliability or maintainability
• Maintenance Prevention:
It is to design and install new equipment that are maintenance-free based on the
study of the weakness of current equipment

 Economies of Maintenance:
The level or degree of maintenance which gives the minimum total cost is known
as optimum level (or Ideal level ) of maintenance activity. Preventive
maintenance is justified only up to this level. Beyond this level, preventive
maintenance is absolutely uneconomical
(BD-5)
 Measures of Maintenance Performance :
The key performance measure of maintenance system are as follows :

 Availability – the availability of a plant or equipment is the ratio of total

time of operating of the said equipment, under normal operating
condition, to the total time available.

Availability = trunning / (trunning + tdown)

 Reliability – it is defined as the probability of a plant or equipment to give

satisfactory performance in a particular period of time under specified
operating condition. If the time between consecutive failure of an
equipment is high, the equipment is said to have high reliability.

 Failure – Failure is defined as the inability of the plant or equipment to

process work in the appropriate manner. Thus, an equipment which
deteriorates and consequently produces work of too low a quality or too
high a cost is said to fail.
 Failure rate(in %) = (No of failures = F) / (No of observation = n)

 Failure rate(in terms of operating time)

= (No of failures) / (total time available – non operating
time)
 Overall Equipment Efficiency (O.E.E) – it is a combination of the
uptime(availability of the equipment), cycle time efficiency (production
efficiency) and quality output of the equipment.

OEE (in %) = Up time % X Speed % X Quality %

The Uptime (availability of the equipment) is the proportion of time
the equipment is actually available out of the time it should be available.
Uptime % = (MTBF - MTTR) X 100/ (MTBF)
Speed(%) efficiency = Actual cycle time X 100 / Design cycle time
Quality(%) efficiency = Good parts produced X 100 / Total parts
produced
 MTBF = Mean time between failure
= (Total running time ) / ( no of failures)
 MTTR = Mean time to repair = ∑ti / F where ti = time taken to repair at

different occasions
 Total Productive Maintenance (TPM) :
It is a management system for optimising the productivity of manufacturing
equipment through systematic equipment maintenance involving employees at all
levels. It is a maintenance programme which involves a newly defined concept for
maintaining plants & equipment. The goal of the TPM programme is to markedly
increase production while, at the same time, increasing employees’ morale and
job satisfaction.
Under TPM, everyone is involved in keeping the equipment in good working order
to minimise production losses from equipment repairs, set ups etc.
 Objectives of TPM
 Creation of collective culture relating to the attainment of maximum
efficiency throughout the production process
 To prevent losses and to reach the ‘Zero accident’, ‘Zero defect’, ‘Zero
breakdown’ in the manufacturing process
 Involve the entire work force from bottom to top
 Benefits of TPM
 Increased equipment productivity
 Reduced equipment down time
 Increased plant capacity
 Lower maintenance & production cost
 Improved teamwork and a less adversarial approach between production and
maintenance
 Lean Production :
 Lean Production / Manufacturing is a systematic approach to identify and
eliminate wastes of all non-value added activities through continuous
improvement that is being adopted by world class, high performance firms
to produce remarkable results. It is also called as a production system in
which friction is absent. Masaaki Imai calls this friction as Muda (waste)
which consists of all non-value-added activities.
Global competition is forcing companies to improve quality, reduce
delivery time and lower the production costs. The traditional production way
of thinking has been “Cost + Profit = Selling Price”. But, in the competitive
environment, customers more or less influence the selling price of a product.
Hence, the lean way of thinking is “Selling Price – Cost = Profit”. Under this
redefined scenario, the only way to survive in the market is to decrease cost by
eliminating all forms of wastes.
The essence of lean manufacturing is to compress the time from
the receipt of an order to the receipt of payment for that order.
In specific terms, lean production achieves the following :

 Reduction in cycle time

 On time deliveries
 Reduction in WIP inventory
 Improvement in quality
 Increase in the availability of machines
 Reduction in scrap/rework

Lean manufacturing which is often called Just in Time (JIT) or Agile

manufacturing is an operating strategy that seeks to maximise operational
effectiveness by creating value in the eyes of the end customer.

 Steps of Lean Production :

 Precisely specify value by specific product
 Identify the value stream for each product
 Make the value flow without interceptions
 Let the customer pull value from the producer
 Pursue perfection

 Lean Demand Pull Logic :

Demand Pull is defined as designing the production system based on customer
need / demand. Here, the customers pull their required product from a producer as
and when they need that product. The implementation of value stream automatically
reduces the product lead time to a greater extent. This enables the producers to
provide the products as and when they are needed by the customers which helps the
customers to pull their products on their necessity for those products. So, the value
stream and pull are complementary to each other.
Note : Value Stream – the value is all the steps and processes required to bring a
specific product, from raw materials to finished product, in the hands of the
customers. Analysing the entire flow of a product will almost reveal
enormous amount of waste and non-value-adding sequences. This is
frequently referred to as process reengineering.
The value stream analysis show three types of actions :
 Steps that create value
 Steps that create no value but they are unavoidable due to current
technologies or production methods
 Steps that create no value and they are avoidable

 Wastes in operations :
Any process or set of activities that does not add value as perceived by
the customer is classified as waste. It consists of both NVA and NNVA.
From a short-term perspective, NVA is avoidable waste whereas NNVA is
an unavoidable waste.
 Wastes during conversion:
o For manufacturing –
1. Accumulating inventory
 2. Waiting for materials to work on
3. Stock verification
4. Counting the number of parts
5. Temporary storage
6. Shortage of parts

o For Service organisation –

1. Overflowing “in baskets”
2. Duplication of work
3. Excessive paper work
4. Incomplete information
5. Leading to pending decisions

 Process waste :
o For manufacturing –
1. Defects & rework
2. Machines breakdowns
3. Watching the machine run
o For Service organisation –
1. Payments not made on time
2. Service failure
 3. Proposals not completed on time for the bid
4. Customer orders taking too long to be filled

 Waste due to planning :

o For manufacturing –
1. Looking for tools
2. Carrying heavy pieces
3. Transferring parts over long distances
4. Overproduction & repeated handling

o For Service organisation –

1. Poorly planned meetings
2. Documents handled many times
3. Extra signature needed that holds up completion
4. Teams with incomplete or no direction

 Elements that address elimination of waste :

When organisations begin their journey towards creating a lean enterprise through
a process of continuous waste elimination, they make several changes in the organisation.
These include –
 Changing the structural elements in the system
 Simplifying operations planning and control by introducing alternative scheduling
methodologies
 Improving the responsiveness of the system to the market

JIT (Just-In-Time) and TQM (Total Quality Management) fundamentally aim at

elimination of waste. While, JIT is an organisation- wide mechanism for exposing
problems related to wasteful activities in an organisation, TQM is an organisation-
wide mechanism for solving the problems.

 Ways of elimination of waste :

 Set-up time reduction activities

 Use of simplified operations planning & control systems introduction of TQM
enables an organisation to eliminate waste on an ongoing basis.
 By setting on a trajectory of benchmarking and continuous improvement,
organisations can utilise several QC tools and small group improvement
activities to make continuous waste elimination a workable reality
 Increase in production with no addition of capacity
 Elimination of manpower even when production levels go up
 No appreciable increase in the cost of production even when the volume
drops
  Increase in the velocity of various business processes without any addition of
new capacity or technology
 Significant reduction in defects, rework and inventory investments when the
production rates go up
 Overall increase in the productivity

Clearly, all these point to the elimination of wasteful activities in an

organisation. Moreover, on account of waste elimination, the organisation
becomes more responsive, agile and flexible to handle changing needs at the
marketplace.
The core logic of JIT is that of elimination of waste in a manufacturing
system using a Deliberate Method.
Let us assume that there is frequent production disruption due to
delayed/poor quality supply of materials. Traditionally, it would have been
solved by increasing the level of safety stock. One can advance similar
arguments for solving problems arising out of excess absenteeism of the
workers and frequent breakdown of the machines.
The philosophy of JIT is in contradiction with traditional thinking on
solving such problems encountered in manufacturing and service systems. In
manufacturing case, if there is a problem with the supplier, instead of
increasing the safety stock, collaborative efforts will be launched with the
 Suppliers to solve the problem.
However, the crux of JIT philosophy is to go one step further and
deliberately create some disturbances in the system in order to uncover
problem areas. Once the problems are exposed, the organization will work
towards solving the problem and restoring smooth production rates. Thus, in the
manufacturing case, what it means is to have a method by which the buffer is
withdrawn from the system. By withdrawing the buffer, new problems are
exposed. By studying the problem, new methods will be devised to restore
smooth production rates. After one cycle of this exercise is satisfactorily
completed, begin the next cycle by withdrawing the buffer once again. Proceeding
in this manner, the buffer in the system could be progressively reduced even while
smooth production rates are restored.
What makes JIT philosophy different from conventional thinking is
the deliberate choice on the part of management to expose hidden problems
even while the production system is operating at a certain level of equilibrium.
 2 Card KANBAN Production Control System :

Kanban system is a kind of production system which operates based

on the information contained in cards, called “KANBANS”. There are 2 types of
Kanban namely, Production Kanban (P-Kanban) and Conveyance Kanban (C-
Kanban) /Withdrawal Kanban. For the purpose of working of the Kanban system,
production line is divided into Preceding Process (PP) and Succeeding Process
(SP).
P-Kanban basically serves as the authorization for production of the
number of items indicated in the Kanban.
C-Kanban serves as the authorization to move that many units from
the preceding process to the succeeding process, where it is used for processing.
Kanban system brings immediately any problem in the system to
the notice of the concerned person for corrective action. If a company aims to
implement the Kanban system, it should have a well designed maintenance
system and motivated workforce.
The different terminology used in this system are as follows :
 Preceding & Succeeding Processes - The preceding process feeds the required
component to the succeeding process. The relationship of such preceding &
succeeding processes is primarily responsible for cascading the pull effect from
the end customer down to the raw materials stores.
 Inbound buffer – Every process has a designated space for an inbound buffer.
The inbound buffer has provisions for storing the components moved from a
preceding process using a C-Kanban. Therefore, each full container of inbound
buffer will have a C-Kanban attached to it. However, after utilizing the
components for processing, the empty container is usually returned to the
inbound buffer and the associated C-Kanban to a Kanban Post(or Holder).
 Outbound buffer – just as in an inbound buffer, each process in an outbound
buffer has a designated place to store the components after processing is
completed. Since processing is always authorized only by a P-Kanban, we would
expect every full container to have a P-Kanban attached to it. The succeeding
process would have left empty containers in the outbound area, which need
to be subsequently replenished by the process. The associated P-Kanban will be

deposited in a Kanban post/holder.

 Kanban Post/Holder – The number of C- kanbans and P-kanbans and the
quantity for each Kanban associated with each item of inventory in a
manufacturing system is a design issue. However, since more than one P-
 Several items may be produced in a particular work centre, it is typical to
have a Kanban post to hold these Kanban systematically.

The step-by-step explanation of the working of the Kanban is as follows –

 Step 1 – the succeeding process begins one cycle of production as soon as P-

Kanban (which authorize the production) and empty containers are available.
One P-Kanban is drawn from the Kanban post and an empty container is picked
up from the outbound buffer area.

 Step 2 – in order to begin production, one full container with an attached C-

Kanban is moved from the inbound buffer area to the processing area. The C-
Kanban is detached from the container and displayed at the Kanban post.
Production of components begins.

 Step 3 – as production is completed, the P-Kanban is attached to the full

container of finished item and the container is moved to the outbound area.
Similarly, the empty container (since all components are used up for
manufacturing) is moved back to the inbound buffer area.
Since the succeeding process pulled out one full container of components from the
inbound buffer area, used it for manufacture and returned back the empty
container, it will trigger action in the preceding process to replenish what the
succeeding process consumed. The remaining steps describe this process –

 Step 4 – one empty container from the input buffer area of a succeeding process
and a C-Kanban from the Kanban post of the succeeding process will be taken to
the outbound buffer area of the preceding process for replenishment.
 Step 5 – swapping of Kanban cards between containers takes place at the
outbound buffer area of the preceding process. This means that the P-Kanban
attached to the full container will be replaced by a C-Kanban.
 Step 6 – as a result of this swapping operation, the full container and C-Kanban
will return to the inbound buffer area of the succeeding process.
 Step 7 – the empty container will be placed in the outbound buffer area of the
preceding process. The P-Kanban will be displayed at the Kanban post of the
preceding process.
It may be noted that using this 7-step process, we have ensured that
empty containers and P- Kanban are available at the preceding process. Therefore,
we can return to step-1 & perform one more iteration of moving empty containers
and P-Kanban to an earlier process. This is how the pull effect is played in the
system.