• Author / Uploaded
• Randel Madelo

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Acknowledge ment I owe great thanks to many people who helped and supported me during this project. My deepest thanks to Ms. Kajal Sarwal the guide of the project for guiding and correcting various documents of mine with attention and care. I express my thanks to Principal Mr. R.L Behl of Sri Aurobindo College of Commerce and Management for extending her support. I wish to thank my parents for their undivided support and interest without whom I would be unable to complete my project. At last I want to thank my friends who motivated me.

TECHNIQUES OF MATERIAL CONTROL: As discussed above, material control aims at eliminating and minimizing all kinds of wastes and losses while the materials are being purchased, procured, stored, handled, issued or consumed. A number of techniques are used at planning, procuring and holding stage of material which help in exercising and effecting material cost control. Such techniques have been discussed below:

Level setting Economic

VED Analysis

Order Quantity Perpetu al Invento ry System

Material (Inventory) Turnover Ratio

1.

FNSD Analysis

Just In Time Inventory System

Double Bin Syste m

ABC Analysis

InputOutput Rati o

Material (Inventory ) Cost Reports

Level Setting: The materials purchased by a concern may be classified as: Stock Items, which are taken into store and held until required. The control of those materials, which are stock items is known as- Stock Control. This is concerned with the maintenance of sufficient stocks to meet all requirements after giving due consideration to:  The availability of capital for the provision of stock  The storage space available  The cost of storage  The risk of loss due to fall in prices, deterioration, obsolescence, theft etc.  Delivery delays etc. In order to have proper control on materials, the following levels are set:

ReOrder Leve l

Average Stock Level

Danger Level

Minimu m Leve l

Maximu m Leve l

Re-Order Level: It is the point at which if stock of a particular material in store approaches, the storekeeper should initiate the purchase requisition for fresh supplies of that material. This level is fixed somewhere between the maximum and minimum levels in such a way to meet the requirements of production upto the time the fresh supply of material is received. Ordering Level: Minimum Level + Consumption during the time required to get the fresh supplies OR Maximum Consumption * Maximum Re-Order Period

Minimum/ Safety Stock Level: This represents the minimum quantity of the material, which must be maintained in hand at all times. The quantity is fixed so that production may not held up due to shortage of the material after considering:  Lead time  Rate of consumption of material during the lead time  Nature of material Minimum stock Level: Re-Ordering Level(Normal Consumption * Normal Re-Order Period)

Maximum Level: It represents the maximum quantity of an item of material which can be held in stock at any time. Stock should not exceed this quantity to avoid overstocking, because it:  Blocks working capital  More godown space will be required

 

Loss due to obsolescence Fear of reduction in market values Maximum Stock Level: Reordering Level + Reordering Quantity – (Minimum Consumption * Maximum Reordering Period)

This level is fixed after taken into consideration:        

Amount of capital available Godown Space available Maximum requirement of stores Cost of maintaining stores Likely fluctuation in prices The seasonal nature of supply of materials Restrictions imposed by Government Possibility of change in habits or fashion

Danger Level: This means a level at which normal issues of material are stopped and issues are made only under specific instructions. Danger Level: Average Consumption * Maximum Reorder period for emergency purchases

Average Stock Level: This is the desirable quantity of

materials at all times. Average Stock Level: Minimum Stock Level + ½ of Reorder Quantity OR ½ (Minimum Stock Level + Maximum Stock Level)

2.

Economic Order Quantity: The quantity of material to be ordered at one time is known as EOQ. The total costs of a material usually consist of: Total Acquisition Cost + Total Ordering Cost + Total Carrying Cost The total Acquisition costs remains unafected irrespective of the quantity of materials ordered at one time, unless the quantity discounts are available. Therefore, the only costs to be taken care of, while deciding the quantity of a material to be ordered at one time, are: Ordering and Carrying Costs. Carrying Cost: It is the cost of holding the material in the stores and includes: Cost of storage space, which could have been utilized for some other purpose

 Cot of bins and racks, that have to be provided for the storage of materials  Cost of maintaining the materials to avoid deterioration

   

Cost of spoilage in stores and handling Transportation costs Cost of Obsolescence Clerical Cost All these cost taken together in India amount to somewhere near about 20-25% of the cost of materials per year. So efforts should be made to reduce such alarming rate of carrying costs.

Ordering Cost: It is the cost of placing orders for purchase of materials and includes:  Cost of staff posted in purchasing dept., Inspection section & Payment dept.  Cost of stationery, postage & telephone charges. Therefore, EOQ is a technique to derive at the optimum quantity for purchase order. The objective of EOQ Model is to minimize the total costs associated with carrying and ordering costs, as the amount ordered gets larger, average inventory increases and so do carrying costs.

Assumptions of EOQ:  Dynamic Conditions  Prices remain stable  Quantity to be consumed during a particular period is totally known.

3.

Just In Time Inventory Analysis: Keeping in view the enormous carrying cost of inventory in the stores and godowns, manufacturers and merchandisers are asking for more frequent deliveries with shorter purchase order lead times from their suppliers. Now-a-days, organizations are becoming more and more interested in getting potential gains from making smaller and more frequent purchase orders. In other words, they are becoming interested in JIT purchasing system. JIT purchasing is the purchase of materials or goods in such a way that delivery of purchased items is assured before their use or demand. There is a diference between EOQ and JIT model. EOQ assumes a constant order quantity, whereas JIT advocates a different quantity for each order, if demand fluctuates. JIT takes into consideration all these costs and moves outside the assumptions of the EOQ model.

ADVANTAGES:  Investment in Inventory is reduced.  Carrying cost is reduced. 

A reduction in number of suppliers to be dealt with is possible by contracting with proven suppliers only.  Quality costs like: Inspection cost, scraps and rework costs etc. are reduced.  Helps in reducing the waste of time of work force and the entire production process is concentrated on the time spent in actually producing products.  Higher productivity  Competitive advantage  Improved job satisfaction  Reduced set-up time DISADVANTAGES:  Dependence on Historical demands  Risky to certain businesses and in certain situations  Demand fluctuations  Communication breakdowns

4.

ABC Analysis: Manufacturing organizations find it useful to divide materials into three categories for the purpose of exercising selective control on materials. It is system of inventory control, which exercises discriminating control over diferent items of stores classified on the basis of investment involved. In this, materials are listed in ‘A’, ‘B’ and ‘C’ categories in descending order based on money value of consumption. Ca t egory ‘A’: of items consists of only a small percentage i.e. about 10% of total items handled by the stores, but require heavy investment about 70% of inventory value, because of their high price or heavy requirement or both. Ca t egory ‘B’: of items are relatively less important- 20% of the total items of material handled by stores and % of investment required is about 20% of total investment in inventories. Ca t egory ‘C’: 70% of items handled and 10% of value. For Example: Group A B

Percentage of Item 8% 25 %

Percentage of Cost 75% 20%

C

67 %

5%

Such an analysis of materials is known as ABC Analysis. This technique is also known as:   

Stock control according to Value method Always Better Control (ABC) Method Proportional Parts Value Analysis Method

ADVANTAGES:    

5.

A strict control is exercised Minimum possible level of investment in inventories Storage cost is reduced Management time is saved

VED Analysis: VED (Vital, Essential and Desirable)- analysis is used primarily for control of spare parts keeping in view the criticality to production. The spare parts can be divided into three categories Vital: The spares, the stock-out of which, even for a short time, will stop production for quite some time and where the cost of stock-out is very high.  Essential: The spares, the absence of which cannot be tolerated for more than a few hours or a day and the cost of lost production is high and which are essential for production to continue.  Desirable- The parts, which are needed, but their absence for even a week or so will not lead to stoppage of production. In VED analysis, only those spares are included, which do not receive the attention, they deserve, if they are maintained according to ABC analysis.

6.

Perpetual Inventory System: It is a system of records maintained by the controlling department, which reflects the physical movement of stocks and their current balance. It is a system of ascertaining the balance after every receipt and issue of materials and also reflects the balance in the stores, to facilitate regular checking and to avoid closing down the firm for stocktaking. It involves a process: Bin Cards (i.e. Quantitative perpetual inventory) Stores Ledger (i.e. Quantitative cum valued perpetual inventory) Continuous Stocktaking (i.e.

Physical perpetual inventory) Bin cards and stores ledger are perpetual inventory records, whereas Stocktaking is the physical verification of the accuracy of the above said records.

CAUSES OF MISMATCH BETWEEN RECORDS AND PHYSICAL STOCK: It is possible that the balance of stock shown by bin cards and stores ledger may differ from the actual balance of stock as ascertained by physical verification. It may be due to some avoidable and unavoidable causes: Avoidable causes:  Clerical mistakes  Pilferage and thefts  Carelessness in material handling  Short or over-issue of materials Unavoidable causes:  Actual balance may be less due to shrinkage and evaporation  Actual balance may be more due to absorption and moisture  Actual balance may be less due to breakdown of fire, riots etc.  Material may be lost due to breaking up bulk material into smaller parts for issue, For example: Some iron is lost due to breaking up big iron rods into smaller parts. ADVANTAGES:  Avoids dislocation of materials  Obviates the necessity for the physical checking of all items of stores at the end of the year  More reliable check  Accurate and up-to-date records  A system of internal check  Errors and shortage of stock are readily discovered  Capital investment in stores can be kept under control  Correct stock figures for claim to be lodged with the insurance company for loss on account of stock destroyed by fire.  Better planning for materials 7.

Double Bin System: In this method, the materials are stored in bins, which are divided into two compartments (two racks, two shelves or same shelf can be divided into two). Material is issued for production from the first compartment and the materials from the second compartment are not touched in regular course. When the materials in the first compartment are fully consumed, an order is placed. This method is better applicable:  In Small organizations, which cannot aford expensive techniques of stores control, or



For materials of comparatively less value.

8.

Input-Output Ratio: This ratio is used to judge the efficiency in the usage of material. The ratio indicates the relation between the units of material put in for production and the units of finished product. Input-Output Ratio: Units of Input/ Units of Output * 100

9.

Material Turnover Ratio: Cost of materials consumed during the period/ Cost of average stock held during the period Inventory Turnover in days: Days during the period/ Inventory Turnover Ratio  High Turnover Ratio is an indication of fast moving stock and less investment in stock  Low Turnover Ratio is an indicator of slow moving stock, accumulation of obsolete stock and carrying of too much stock.

10. FNSD Analysis: This divides the items of stores into four categories in the descending order of importance of their usage rate.  ‘F’ indicates fast moving items that are consumed in a short span of time.  ‘N’ Indicates Normal moving items, which are exhausted over a period of a year or so.  ‘S’ Indicates Slow moving items, which are not issued at frequent intervals and are expected to be exhausted over a period of two years or more.  ‘D’ means dead items and the consumption of such items is almost Nil. 11. Material Cost Reports: Material Cost Reports serve as means of communications usually in the written form of facts relating to materials which should be brought to the attention of the various levels of management who can use them to take suitable action for the purpose of material control. The objective is to help the management in exercising efective material control and taking appropriate decisions. Material Control is divided into three aspects:  Purchase Control: is to ensure the eficiency of purchasing department  Stores Control: is to ensure the eficiency of the stores department  Consumption Control

PLANT LAYOUT: Once a decision about location of the plant has been taken, next important problem before the management is to plan suitable layout for the plant. The simple meaning of the word ‘Layout’ is an arrangement. Plant Layout is the arrangement or physical configuration of departments, work stations and equipment’s in the conversion process. It is the disposition of different production facilities such as machines, materials, manpower and services required by the plant within the area of the site selected so as to perform various operations:   

in the most efficient and convenient manner with high quality product at minimum costs.

In this process, all the inputs of production are given a proper place in the factory place. According to Nor Man Galther, “Plant Layout means planning for the location of all machines, employee work stations, customers service areas and flow pattern of material and people around, into and within building.” Plant Layout is an important decision on the part of management. Efficiency and performance of machines, equipment’s and processes depend to a great extent on the layout of plant.

Essentials of a Sound Plant Layout: Following are the requisites of a sound or good plant layout:

Departmentation array of

Strategic placement of equipment s & tools

Scientific Plant & Machinery

Smooth flow of work

Continuou s improvem ent

Proper arrangement of material handling

Comfort and Safety design

Proper

Factors governing Plant Layout decision: Every industrial plant aims to achieve the highest standards of performance by the best or ideal layout. Unfortunately, there is nothing like a ‘Standard’ layout, which can match perfectly to each individual case, because these norms differ from plant to plant, industry to industry and time to time. The actual layout is the outcome of certain factors or forces, which determines it. The most significant factors that influence the type of layout are:

Factory Location The Type of Manufacturing Process The Type of Product The Material Input The Employee Requirements The Machinery in the Factory The Managerial Policies Plant Enviornment

Types of Plant Layout: There are following types of plant layout:

Process/ Function al Layout

Combination / Hybrid Layou t

Types of Plant Layout

Product Layout

1.

Fixed position/ Static Product Layout

Cellular Layout/ Group Technolo gy

Product Layout: Product layout is also known as ‘Line Layou t ’ or ‘St raight Lin e Layou t ’ . It is a kind of arrangement of machines where machines are gathered and arranged keeping product as a focal point. The production department installs the machines in sequence of operations as required in case of a product. A Product Layout is one in which all machines or processes concerned in the manufacture of the same product or range of products are grouped together. In simple words, it is the:  Arrangement of machines in one line,  Depending on the sequence of operations. This can be presented as: Receiving Heat

Form

Bend

Mill Treatment

Shippin g

Pac k

Inspect Paint

Supervisi on Heigh t

Storage Rest Room

Tool Room

W.C.

Bath

Product layout can be arranged in any of the following four alternative possibilities:

Straight Line type Layout

a)

Circul ar produ ct Layou t

UShaped Layou t

Odd AngleProduct Layout

Straight Line type Layout: In this machines are installed as near as possible, because the output of one machine becomes the input for the next machine. Following is the diagram depicting such layout:

Fee d R.M .

SUPERVISION FLOOR M-1

M-2

M-3

M-4

M-5

M-6

M-7

Form

Bend

Mill

H.Treat

Paint

Inspect

Pack

Ship F.P.

b) U-Shaped Layout: This is more compact than straight line. It brings about economy in floor space and allows closer supervision span than straight line. The following can be the configuration: Ship F.P. R.M. Feed

Supervisi on Heigh t

Form

Bend Pack

c)

Mill

Inspect

H.Treat

Paint

Circular Product Layout: Under this arrangement, the machines are laid out in the shape of a circle and the operations are carried out inside or

outside the circle. Following can be one of the alternatives of this type of product layout:

d) Odd-Angle Product Layout: It is odd in the sense that there is not any fixed pattern for arranging the machines, but is designed to available space. However, sequence of operations is strictly maintained.

2.

Process Layout:It is an arrangement of machines and equipments performing similar functions together in an assigned area. It is the portioning of plant into several work areas or departments in which area is occupied by similar type of machines i.e. each department as a whole is known only for performing one operation or process of entire program of production.

“Process Layout is one which is signified by the grouping together of like machines based up on their operational characteristics.”

  

3.

 

4.

This type of layout is best suited to those lines where: Intermittent type of production is wanted Non-standardized and small production activities Unique products

Fixed Position OR Static Product Layout: It is an arrangement where the needed machines, manpower, tools, supporting appliances and services are brought to a particular point at which the production process progresses. This type of layout is SUITABLE when inputs are very heavy and large in size that it is not easy to move them from one place to another. For Example: A hospital operating room where doctors, nurses and medical equipment are brought to the patient Construction of buildings, dams etc. where all the inputs like: cement, bricks etc. are brought to the construction site.

Combinations / Hybrid Layout: As the all the above types of layout involve various merits and demerits. So, many situations call for a mixture of the three main layout types. These mixtures are commonly called Combination or Hybrid Layout. It is an arrangement of production facilities to achieve compromised results of the best of the two basic alternative layout patterns of layout i.e. Product and Process layout. For Example: where an item is being made in diferent sizes and is of unique features and can be produced on mass scale too. It also permits small lot and large lot output. In such cases, the machines are arranged on the principles of process layout and the process grouping is then arranged in a sequence of operations to manufacture variety of products as to types and sizes.

5.

Cellular OR Group Technology Layout: Cellular manufacturing is a type of layout where machines are grouped according to the process requirements for a set of similar items that require similar processing. These groups are called cells. Workers in this layout are cross trained so that they can operate all the equipment within the cell and take responsibility for its output. An automated version of cellular manufacturing is the Flexible Manufacturing System (FMS). With an FMS, a computer controls the transfer of parts to various processes, enabling manufacturers to achieve some of the benefits of product layouts while maintaining the flexibility of small batch production.

Other Layouts:  

Warehouse/Storage Layouts Office Layouts

PLANT LAYOUT FOR BAKERY INDUSTRY

INTRODUCTION: Bread is major product for bakery industry, because which is major consumption by people. Commercially bread manufactured by three type’s likeS2, S4 and family type bread.

MANUFACTURE OF BREAD: The stages involved in the manufacture of bread are: 1. The preparation if the dough, 2. Fermentation of the dough, 3. Baking. METHODS FOR PREPARATION OF DOUGH: Three methods are commonly used for the preparation of the dough: 1. Straight line method, 2. Sponge and dough method, 3. Mechanical dough method

1. Straight-line method: •It is a batch process •Mixing is conducted until the dough attains the desired smoothness and elasticity. Advantages: Minimum labour requirement Less fermentation time

Better flavour

Disadvantages: Inflexibility require fixed fermentation time Ripe-ready dough must be baked when ready. 2. Sponge-dough method: This method consists of two stages; a) Formation of sponge: The sponge contain about 50-60% of total flour to be used, the total quantity of yeast and malt and sufficient water to yield slightly stiff dough. b) Development of dough: The sponge is mixed with remaining quantity of flour and water and allowed to ferment for a short time 3. Mechanical method: •It is continuous method, •No bulk fermentation and consequent losses are avoided, •Allows addition of extra water and produces better bread from weaker flours.

Process Flow Chart SELECTING THE INGREDIANTS FIRST MIXING ( MAIDA, SUGAR, YEAST) FERMENTAT ION SECOND MIXING DIVIDI NG ROUNDI NG INTERPROOFING MOULDI NG FINAL PROOFING BAKIN G COOLI NG

SLICI NG PACKAGI NG

Manufacturing Process

FIRST MIXING: The ingredients are placed in the mixing bowl of capacity of 200 kg. The mixer is working under the double crank mechanism. The ingredients are properly mixed by the action of double machine. The time for mixing is 30minutes. The resultant product is called as dough. FERMENTATION: The fermentation is done for 1 hour and the quality of bread depends upon fermentation period. Yeast plays a major role in fermentation process. SECOND MIXING: The purpose of the second mixing is to incorporate the air particles into the dough. The mixing time is 20 minutes. DIVIDING: In the dividing sector, the twin pocket divider was used. The divider has two pockets. The size and shape of the boxes are adjustable. So we get the required shape and size of the dough. ROUNDING: In the rounding process, the dough from the dividing unit through the belt conveyor and enter into the rounding machine. Inside the machine the spiral blades are provided to make round size. In the process the heat is liberated and the temperature of dough is increased. INTER MEDIATE PROOFING: In this process, the heat is removed from the dough, which is generating during the dividing and rounding process. The intermediate proofed has 75trays and completion of one cycle requires 7 minutes.

MOLDING: It is the final shaping and sizing operation. In this process, three pairs of rollers are rolled with different directions. The vanaspathi and sunflower oil was used as a lubricant for the roller. Then the thin moulded dough is sent to the final proofer. FINAL PROOFER: In the proofer, the steam is passed over the bread at the temperature of 200c with 16- kg/cm2 pressures. Horizontal tube boiler produces the steam. The proofing time is 1-1.5 hours. BAKING: Baking is done in the large capacity oven. The baking temperature is 215°c for 27-32 minutes. COOLING: After the baking was over, then the bread was cooled into the room temperature. The taken for cooling is one hour. SLICING AND PACKAGING: The action of slicer slices the cooled bread and then the breads are packed in polythene bags each.

Plant Layout for Bread Industry

01. Raw material storage 02. Proofing Section 03. Restroom 04. Reception 05. Mixing 06. Fermentation section 07. Dividing section 08. Rounding section 09. Moulding section 10. Proofing section 11. Baking oven 12. Cooling section 13. Cutting and slicing section 14. Packaging section 15. Finished product storage 16. Toilet 17. Water Tank

Avon Cycles Raw Material: Tubes, Stips, Rubber, Steel more than 3000 R.M Source: Ludhiana. Some materials are imported. They are having more than 100 models. Almost 6 to 7 thousand cycles are manufactured per day. Lead Time: 1 day and in some cases 12hrs. No. of Vendors: more than 500 They follow the principle of Kaizen

KAI ZEN

IMPROVEMENT BETTERMENT

Inventory Control: They follow Just in Time (JIT) and Zero Inventory. On the basis of previous 3-4 years sales forecast production is planned and Raw materials are procured from suppliers.

Stores: 10 stores department: 2 raw material stores, 8 finished goods stores. BIN CARDS and online system in use.