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intermediate group i paper 9 operation management and information systems the institute of cost and works accountants of india 12 sunder street kolkata 700 016

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first edition january 2008 published by director of studies the institute of cost and works accountants of india 12 sudder street kolkata 700 016 printed at repro india limited 50/2 ttc midc industrial area mahape navi mumbai 400 710 india copyright of these study notes in reserved by the institute of cost and works accountants of india and prior permission from the institute is necessary for reproduction of the whole or any part thereof.

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syllabus paper 9 operation management and information systems one paper 3 hours 100 marks section a operation management 50 marks 1 overview of production process · fabrication process · metal working process ­ forming heat treatment welding surface treatment etc · machining process · class of machine ­ lathes drilling grinding milling plaining shaping slotting etc · special purpose machine ­ special grinding hobbing honing cutting tools jigs and fixtures etc · pump motor transformer electrical drives · classification of industries based on production process · technological aspects of different production process like power pollution control recovery process · plant layout material handling system etc 2 production planning productivity management · time study work study method study job evaluation · production planning and control-introduction · forecasting · capacity planning and utilization · process planning · project planning · progressing and follow-up · dispatching · scheduling technique line balancing problem · economic batch production · human resource planning · material requirement planning · productivity measurement techniques of factors of production · quality control 3 maintenance management · obsolesce replacement of machinery · breakdown maintenance preventive maintenance routine maintenance · maintenance techniques · maintenance organization · maintenance problems etc 4 resource management · input-output ratio · linear programming · transportation · replacement of machine · change of technology and its implication

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operation management contents study note 1 page no 1 overview of production process 1.0 fabrication process metal working process forming heat treatment welding surface treatment 1.1 machining process blanking boring broaching die cutting drilling flame cutting or gas cutting grinding etc 1.2 class of machine lathes drilling grinding milling plaining shaping slotting etc 1.3 special purpose machine special grinding hobbing honing cutting tools jigs and fixtures etc 1.4 1.5 1.6 1.7 pump motor transformer electrical drives classification of industries based on production process technological aspects of different production process like power pollution control recovery process plant layout 1 2 5 7 8 20 23 25 28 study note 2 2 production planning and productivity management 2.0 2.1 2.2 2.3 2.4 2.5 time study work study method study job evaluation production planning and control-introduction forecasting capacity planning and utilization process planning project planning 53 54 61 69 86 120 133

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page no 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 progressing and follow-up dispatching scheduling technique line balancing problem economic batch production human resource planning material requirement planning productivity measurement techniques of factors of production quality control 139 139 140 157 165 167 168 197 study note 3 3 maintenance management 3.0 3.1 3.2 3.3 3.4 obsolescence replacement of machinery breakdown maintenance preventive maintenance and routine maintenance breakdown maintenance maintenance techniques maintenance organization maintenance problems 219 220 220 222 222 223 study note 4 4 resource management 4.0 4.1 4.2 4.3 4.4 5 input-output ratio linear programming transportation replacement of machine and other relevant concepts change of technology and its implication 229 230 231 251 268 279 objective type questions and answers 289

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information system contents page no study note 1 1 information system 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 contribution of information technology in the social life and industrial fields information information system open and closed system evolution of information system growth of business information system strategic planning for development of an information system information system infrastructure information system organization information systems personnel management quality of a business information system business opportunities due to development of computers 317 318 319 319 321 321 324 325 327 329 331 331 332 study note 2 2 hardware 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 hardware analog digital and hybrid computer evolution of hardware different generations of computers how a computer functions system of stroge in memory different types of memory secondary storage device virtual memory classification of digital computers input output devices input devices different types of input devices 335 336 336 337 338 339 342 343 344 344 344 346 346

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page no 2.13 2.14 2.15 2.16 2.17 different types of output devices selection of a computer system hardware procurement installation of a computer system hardware manitenance 348 353 354 355 355 study note 3 3 software and it s tools 3.1 3.2 3.3 3.4 3.5 3.7 3.8 3.9 3.10 3.11 3.12 3.14 3.15 software computer program compiler interpreter difference between compiler and interpreter fourth generation language 4 gl some general software features advanced programming languages visual programming language object oriented programming oracle application software applicability of program language 357 358 358 361 362 362 365 365 365 366 366 367 368 369 study note 4 4 system development cycle 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 system development development of prototype system development life cycle system development team system proposal system study system design program development system implementation system evaluation review system maintenance 371 372 372 372 373 373 376 376 382 388 390 390

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page no 4.12 4.13 4.14 4.15 4.16 4.17 system documentation system development controls software development cost operating cost readymade software tailor made software 391 392 392 392 393 394 study note 5 5 data management data processing 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 file data structure types of files file organization data base database management system dbms dbms system structure normalisation code s rules data processing data processing activities factors for decision on mode of data processing advantage of data processing type of data processing information system architecture 395 396 396 396 397 399 400 402 405 405 406 406 407 407 408 410 study note 6 6 communication 6.1 6.2 6.3 communication protocol modes of data transmission over a channel 413 414 414 415 study note 7 7 information management decision making 7.1 7.2 7.3 data source data quality data storage and management 439 440 440 440

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page no 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 data warehousing data mart data mining knowledge management business process re-engineering bpr expert system artificial intelligence ai decision making process decision support system dss flow of information for supporting decision making 441 442 442 443 445 447 447 447 452 453 study note 8 8 management information system 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13 8.14 8.15 8.16 8.17 management information system objectives of mis basic fetures of an mis implementation of mis different approaches for developing management information system constraints in operating mis limitations information requirements of management information need for strategic decision making different types of reports management decision making components of business information system need for integration of information enterprise wide models used for representing the information analysis of information information requirement for product pricing strategy executive information system 455 456 456 456 457 458 459 459 460 462 463 464 465 466 468 468 469 469 study note 9 9 enterprise resource management 9.1 9.2 introduction selection process of an erp package 471 472 473

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page no study note 10 10 information system control 10.2 10.3 10.4 10.5 10.6 10.7 10.8 information system and management control controls in information system controls in processing environment documentation control computer fraud security of information system disaster recovery 481 483 485 487 489 489 490 493 study note 11 11 information system audit 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 objective definition internal control audit planning documentation testing outsourcing internal auditors vs external auditors audit charter 495 496 496 496 498 498 499 502 503 503 503 504 510 11.10 information system audit and control association isaca 11.11 pratical examples 11.12 short notes 12 revisional questions 13 suggested answer to revisional questions 515 525

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part i operation management

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study note 1 overview of production process

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overview of production process 1.0 fabrication process fabrication is the process of forming casting machining and welding of metals a fabricating process modifies the physical characteristics of materials with the help of certain labour or machine operations it is generally applied in metal working industries the fabricating process involves changing the shape of materials and connecting the parts fabrication work involves several operations like forging gas welding flame-cutting etc classification of fabrication processes a fabrication process concerning iron smelting metals are widely used for fabrication purposes in most of the modern industries various metals like iron have-to be smelted to get them in virgin form iron is obtained in free state as oxide and it is smelted in a blast furnace with the help of coke and limestone b fabrication process concerning making of steel steel making involves re-melting the pig iron and processing the molten iron to reduce the carbon content several other metals are then added to give physical characteristics to the iron this process is used in manufacturing high grade alloy steel because of the improved control c fabrication process concerning rolling of steel in this process liquid steel is cast into ingots these rectangular pyramids are then rolled into blooms which square section lengths of steel blooms are further heated and rolled into billets of smaller cross-section which are then converted into various fabricated lengths like beams angles rods flats sheets plates etc d fabrication of steel the fabrication requirements are designed based and depends upon the complexity of the process it is done when steel materials are to be shaped in different forms metal working processes metal working processes involve operations on metals like cast iron steel brass bronze aluminium etc with the help of machine tools like lathe shaper miller grinder planner etc the following are the metal working processes · · · · · finishing plating honing galvanizing anodising forming casting forging hot-rolling extruding heat treatment hardening tempering annealing normalising joining welding soldering brazing riveting machining milling plaining shaping grinding metal working processes can be described as under casting a casting may be defined as a molten material that has been poured into a prepared cavity and allowed to solidify casting may be classified as sand casting it is used mainly for steel and iron and it can also be used for brass aluminium bronze copper etc and relatively large amount of metal is to be removed 2

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operation management features of sand casting · · · · · clay and water act as a bond compressed moist sand is used less costly more machining of finished goods is required more weight there are two methods of sand casting green sand moulding and dry sand moulding green sand moulding utilises a mould made of compressed moist sand this method is not suitable for large and heavy castings in case of dry sand casting the mould surfaces are given refractory coating and are dried before the mould is closed for pouring this method is useful for large and heavy castings centrifugal casting the molten metal is poured into a hollow cylindrical mould which is spinning and the centrifugal force causes the liquid metal to flow to the outside of the mould and to remain there then it is allowed to cool die casting the dies are expensive but the advantage is that no finish machining is required in many cases this is limited to low melting point alloys investment casting machining the part made out of an alloy is very difficult and in such cases the investment casting is used permanent mould casting this is developed to avoid the above disadvantage the advantages are smoother finish higher mechanical properties good dimensional uniformity and ease of adaptability to automatic high production but this is having high initial cost of tooling and the size of casting is also limited by the mould making equipment plaster mould casting only one casting is made and then mould is destroyed the advantages of plaster are the superior surface finish improved metal characteristics and good dimensional accuracy but the disadvantage is that the mould is destroyed each time forming forming processes are those which accomplish the rough sizing or shaping of manufactured articles any cutting tool which produces a desired contour on the work piece comes under forming process heat treatment it is a process of heating and cooling metals in order to obtain certain desired properties then the right combination of hardness and toughness is achieved for enabling the cutting tools to be able to successfully machine other metals in addition to hardness and toughness this process will improve heat and corrosion resistance and relieve stresses the various types of heat treatment processes are briefly discussed below · annealing it refers to the heating and cooling operations which are usually applied to induce softening annealing softens overly hard overly brittle part through heating short of critical point followed by gradual cooling thus it relieves further the brittleness introduced by hardening and reduces metal electricity slightly case hardening this process involves two operations the first is a carburizing process where carbon is added to the outer surface by heating low carbon steel the second operation is heat treatment of the carburized parts so that the outer surface becomes hard 3 ·

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