Eee-Viii-Industrial Management_ Electrical Estimation and e [06ee81]-Notes

INDUSTRIAL MANAGEMENT, ELECTRICAL ESTIMATION & ECONOMICS

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VIII SEMESTER INDUSTRIAL INDUSTRIAL MANAGEMENT, ELECTRICAL ESTIMATION & ECONOMICS

Subject Code

:

06EE81

IA Marks

:

25

No. of Lecture Hrs. / /

:

04

Exam

:

03

Week Total No. of Lecture

Hours :

52

Hrs.

Exam

: 100

Marks

PART - A

UNIT - 1

persona l emplo yer and PERSONAL MANAGEMENT: Recruitment and select ion, training of per employee relationship, causes and settlement of disputes.

5 Hours

UNIT - 2 PRODUCTION MANAGEMENT: Plant location, plant la y-o ut, CPM and PERT strateg ies, line

balan cing, auto mation, statistical statistical quality control, control cha rt, motion study.

7 Hours

UNIT – 3 3 Econ omics of power

tor, factor improvement, Definition of power factor, factor, Factors a ff ecting power f actor

Disa dvantages of low power factor, to r, factor, Causes of low power factor, Advantages of high power f a ctor factor, Methods of improving power factor, factor, Relative R elative merits and de merits Avoidances of low power factor,

of static and synchronous conde nsers, Economics of po w er f a ctor tor improvement, Advantages of

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static

conde nsers,

Advan tages

and disadvan ta ges

of synchron ous

conde nser,

examples.

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worked 8 Hours

UNIT - 4 TARIFFS: Aim and ob ject ives of Tariff s, f a ctor tors governing the Tariff s, compo nents of Tariff s,

Choice of electrical power supply, Worked examples.

6 Hours

PART - B UNIT – 5 5

Choice of plan ts and economic selection, Factors to be consider dered in ed in selectin g equipment, Meth ods of selection, Worked exa mples.

6 Hours

UNIT – 6 6 INTERIOR WIRING SYSTEM: Wiring system, eart hing , and est imation of wiring insta llation. 6 Hours UNIT - 7

terials for power POWER INSTALLATION: Load ca lcu lation, wire size selection, wiring mater circuits, and the e stimate for motor installation, pump set, workshop, theater etc et c.,

8 Hours

UNIT - 8

Depr epreciation and valuati on of machinery, Inventor to ry, Econ omic order quan t ity, break-even analysis. 6 Hours TEXT BOOKS:

1.

“Introduction

jee, tter j to Management ”-S. S. Chatter

2.

“Engineering

Economics and Management ” - N. Narasimhaswamy,

3.

“Electrical

Estimation and Electrical Wiring Systems”-Raghavendra Rao.

REFERENCE BOOK: “Industrial

S harma. Organization and Engineering Economic s”-T. R. Ban ga & S. C. Sharma.

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INDEX Sl.no

Contents

x

Page no

PERSONAL MANAGEMENT: Recr uit ment and

selection train in g of per persona l employer UNIT-1

UNIT - 2

x

employee relationship causes

x

settlement of disputes

x

PRODUCTION MANAGEMENT : Plant lo cation

x

plan t la y-o ut, CPM and PERT strategi es

5-18

19-50

x

line balan cing, automation, statistical statistical quality control

x

control chart, motion study

x

Economics of power factor improvement

x

Definition of power factor, Factors aff ectin g power tor factor, Disa dvan tages of low power f a ctor

x

Causes of low power factor, Advantages of h igh power factor, Avoidances of low power f a ctor tor

UNIT – 3 3

x

Methods of improving power factor, Relative merits

51-59

and demerits of static and synchronous conde nsers , Econo mics of power

x

factor improvement

Advantages of static condensers, Advantages and

disadvan tages of synchronous condenser, worked examples. UNIT - 4

x

TARIFFS: Aim and ob j ect ives of Tariff s 60-74

x

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factors governing the Tariffs, components of Ta riff s

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x

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Choice of electrical power supply, Worked examples

x Choice of plants and economic selection UNIT – 5

UNIT – 6

UNIT - 7

x

Factors to be considered in selecting equipment

x

Methods of selection, Worked examples.

x

INTERIOR WIRING SYSTEM : Wiring s yste m

x

earthing, and estimation of wiring installation

x

POWER INSTALLATION: Loa d ca lculation

x

wire size selection, wiring materia ls for power circu its estimate for motor installation

UNIT - 8

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x

pump set, workshop, theater etc.,

x

Depreciation and valua tio n of machinery

x

Inventory, Economic

x

Break-even analysis.

order quan tity

75-86

87-101

87-101

102-123

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UNIT - 1 PERSONAL MANAGEMENT   

Recruitment and selection, Training of persona l employer and employee relationship Causes and settlement of disputes.

The aims of training a supervisor are:

x To develop lea dership qua lities in him. x To develop in him the necessary skill so that, the same may be imparted to the workers x To impart know ledge about management principles to effectively intera ct with the workers. x To develop the skills to improve upon the existing method of work. x To provide him adequate k n ow ledge about labo ur problems and leg islatio ns. x To make him qualify for promotions. x To develop in him the ability to plan, coordina te, control and build up an efficient tea m. x To train him about safety ru les and pra ct ices to be followed in his sectio n.

Methods of training supervisors (lower level management tra ining)

The various methods of training supervisors are:





In duction

and orientation



Lect ure method



Conferences



Written instructional method and



Training within the industry (TW I)

Induction and orientation: This training is given to new employee s appo i nted as supervisor.

x

To familiarize him w ith the organ ization he has joined, its history its structure and the

products that are be in g manu f a ctured. x

To give inf ormation about the au thorities and responsibilities assigned to him.

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x

To familiarize the proper use of too ls and equipment‘s and

x

To explain the persona l policies like disciplinary rules, conditions of employment etc.

Lecture method : Lectures are arranged by experts within or outside the company about the

important top ics such as techn iques and respo nsibilities of shop mana gement, company

policies, prod uction plann in g methods, methods of train ing workers, job evaluation techn iques, merit rating, safety policies, time and motion study etc. The experts use modern

methods of tea ching usin g au dio- visual aids such as OHP, slides, technica l films, LC D pro jection etc. so that the learning process becomes easier. 

Conferences: During a con f erence, a homogeneous group of people join together to discuss

abo ut particula r sub ject matter of their choice, such as how to control a bsentee ism, how to reduce scrap etc. A conference helps in exchan ging ideas and experience of diff erent people. As arrived at. Participation in th e conf erences , chan ges their attitudes, ana l ytica l and questioning abilities are developed and finally h elps in solving a particular problem.



Written instruction method: In this method, writte n instru ctions are given to the super

visors on standard pra ctices to be followed for immed iate or future use as to how various jobs have to be perf ormed, which forms a permanent record. 

Training within the industry (TWI): This method of training is used to impart civilian

supervisory skills and is arranged on the basis of group conference attended by supervisors

on a part time basis. The super visors meet informally in a session and discuss about the basic principles of their own jobs and learn from each other experience. The TWI method impa rts train in g to the supervisors which gives them the ability to give clear instructions to

th e workers to develop leadership qualities, the ability to analyze and han dle labour prob lems, to improve the skills of a pplyin g new improved methods of doing the job and how to prevent a ccidents create safety conditions and awareness among the workers about th e hazards of accidents.

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Training of executives (mana geria l tra ining )

The training of executives is an attempt to improve their mana geria l skills through a planned

and deli berate process, which develops certai n attitudes, skills and knowledge for the eff icient

runn ing and to increas e the eff ectiveness of the organ ization . The efficiency of

the organ ization directly depends on how well the managers are trained to plan and execute the plan s eff ectively. The basic aims of tra ining the executives are: The self develop ment of the executives so that, they acquire the personn el drive, initiative,

i.

inn er motivation and abilities to run the organ ization eff ectivel y. ii.

For improving the a ptitude of the executives.

iii.

For educatin g them to develop a broader outlook about the people working with them, to improve th eir capacity of judgment and decision making a bilities.

iv.

To provide an effective organ izationa l climate and

v.

To effectively use the human resources and to exploit their talents and potentials fully so that, they become eligible for h igher positions. Methods of training executives

The methods of training the executives may be broadly divided into two types: i)

On-the- job train ing and

ii)

Off -the- job train ing i) On-the-job training method: The various meth ods of on the job training of the executives

are (a) un derstudies (b) membership of the committee (c) job rotation (d) job

enla rgement and job enrichment (e) management by ob jectives. a. Understudies: In this method, the trainee is appo inted as an assistan t to some senior mana ger. The trainee, while working as an assistant learns the ways of working from his

superior under whom he is a ppo inted. This method is used for the training of new and young

managers for general management positions. b.

Membership of the committee: In this method of training, the tra inee is appo inted as a

member of a committee consisting of th e executives of various dep artments. The trainee CITSTUDENTS.IN

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develops the required skills for solving problems in a group discussion with executives, who have lot of experien ce in solving such problems.

c. Job rotation: In this method, the trainee is sh if ted from one job to another periodically, this

exposes the employee to diff erent type of experien ces and broadens his kn ow ledge and skills about diff erent types of jobs he may be required to plan and execute. d. Job enlargement and job enrichment : Job enlargement is a horiz ontal expan sion of the job. New tasks will be added to the alrea dy existing job w ithout in crea sing the level at responsibility. Job enrichment is the vertical expan sion of the job. This increases the level of the responsibility of the executives. e. Management by objectives (MBO): MBO is a process of setting up of the ob jectives jointly

w ith the trainee and his superior. Th is type of goal settin g f a cilitates the learnin g through interaction between the l earner and his superior. II.

Off-the-job training: The various methods of off -the- job tra ining are (a) lecture method (b)

case study method (c) business games (d) role playing and (e) con f erences. a. Lecture method: as expla ined in previous section Case study meth od: In this method of training, a real life or hypot hetica l problem is given to a small of trainees for analyzing the problem and to find out the solution through problem analysis by discussion and participation. This method is best suited for a small group of twenty or less tra in ees. The trainees mainly learn from th eir mutua l discussion and the trainer

plays a passive role. The train er assists the group through the use of questions, directs the guides the line of thinking about the prob lem. He helps in sharpe ning their analytical ability to enlarge their capacity to take a broader look at the prob lem in arriving at a solution. The trainee analyze the probl em objectively discu ss about a lternate solutions, and ultimately come out with the best solution. This method of training helps the tra inees to develop ana lytica l thinking, to get prob lem solving ability, to broaden their outlook and to look at the problem from diff erent an gles and to develop decision making skills, verbal commun ication skills and

inter-persona l relation skills. b. Business games: In this meth od, the trainees are formed into several grou ps. The tra inees in each group may be from diff erent departments of the same organ ization or from diff erent organ izations. Each group discusses abo ut sub ject like prod uction plann ing, res earch and development, cost control, inventory control, sa les f orecasting etc. The management provides CITSTUDENTS.IN

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with the relevan t data pertaining to the su b ject of discussion and the tra iner provides them w ith a simulated data regarding results arising out of decisions made by them, which in turn lea ds to fresh decisions at the end of th e business game. This method of training it develops the decision making abilities, team work and develop s intera ction between diff erent groups. The trainees develop the talents to dea l with deal with the real life situations. They l earn from the experien ce of others abilities to anticipate prob lems in advance and to solve them. c. Role playing; this type of training helps the trainees to develop leadership qualities and

human relations. The trainers are given either oral or writte n descript ions of a situation and the role they are required to play in the situation. Two or more train ees are assigned certa in roles to be played. The train ees are req uired to play their role spontan eo usly before the other participants, who watch, analyze, and criticize the behavior of the role players. This type of train ing is called as ‗f ish bow l‘ exercise becau se, the participan ts are in the center of the area

and the others are observing their perf orman ce. Th e

typi cal exa mples of role playing are: mana ger conduction an interview, a salesman

promoting sales, an engineer explaining a new method of working etc. The advantage of this

method of train ing a re: (i) it generates enthu siasm and intera ction among participan ts (ii) the trainees get a chance to observe the performances of others (iii) it develops human relations skills and brin gs about attitudina l chan ge. d. Conference: explained in previous section Employer and employee relationship

The concept of industrial relations mean s the relationsh ip between the employees and the

management in the day-to-day working of the industry. The major parties in the industria l relations are: the employees, employee representatives, employers, a ssociations of employers, the government, courts and tribuna ls. The best way of increa sin g the productivity of an industry is by maintai ning good relations bet ween th e employers and the employees. Industrial

relations exist in various stages such as (i) between government and industry (ii)

between the mana gement and the mana gers (iii) betw een th e mana gers and workers. The government exerts its influence on industrial relati ons through its labo ur policy, implementin g la bour laws, the process of conciliation and ad judication by playing the role of mediator. It

tries to regu late the activities and be havior of both employee‘s organ izations and employer‘s CITSTUDENTS.IN

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organ izations. The relati onship between the employer‘s i.e. managers and the employee‘s i.e

the workers are vital for the successful runn in g of an industry. Emp loyer is

a crucial factor in industrial relations. He employs the worker, pays the wages

and various allowan ces, and regulates th e working relations through various rules and reg ulations and by en f orcing la bour laws. He expects the workers to follow the rules, reg ulations and the laws. He further expects them to work hard and put in their best efforts to maximize produ ction. For th is, mainta ining good working relations with the employees in very importan t. In the early days, the relationship between the employer and the employee was governed by the assumption that the employers were like kings and were free to offer any terms of employment and treat their employees in any way they wan ted. There were few laws and protections available for the employees that would pra ctices and demanded that e mployees are also protected by various labo ur laws of the government. There has been a phen omenal growth in employment, wages, be nef its, working conditions, status of the workers and various facilities are provided to t hem. Objectives of good industrial relations

The ma in ob jectives of good industrial relations are: i)

To mainta in congenial relations between employees and the employer.

ii)

To promote and develop congenial la bo ur management relations.

iii)

To enhance the economic status of the worker by improving wages and other benef its.

iv)

To minimize industrial conflicts and to regulate prod uction.

v)

To provide an opportun ity to the workers to have a say in the mana gement and decision mana ge ment.

vi)

To solve the prob lems of the workers through mutual negot iations and consultation with the mana ge ment.

vii)

To encourage the develop trade un ions in order to improve the worker‘s strength.

viii )

To mainta in democratic approach in solving the prob lems of the workers.

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Code of industrial relations

The management and the trade un ions f ormu late a code of industrial relations in a number of industries. The codes of industrial relations are: i)

The management shou ld have a positive attitude towards trade un ions and employees.

ii)

The trade un ions and employees must have a positive attitude towards the mana gements.

iii)

The attitude of the employees towards the trade un ions must be positive.

iv)

Management sh ould not influence the employees rega rding joining or withdrawing from trade unions.

v)

The management shou ld not encourage the workers to form rival unions.

vi)

All the collective ba rgaining agreements should be implemented in good faith as early as

possible. vii)

The employees and the trade un ions should co-operate in implementin g th e company strategies.

viii )

All the employees must attend the training programs when they are asked to do so.

ix)

All employees must accept the transfer orders made by the mana gement.

x)

Employees

and trade un ions must be allowed to participate in decision making and

implementation at d iff erent levels of the company. xi )

The employees should go on strike only as a last resort and must do so by giving at least one

week‘s prior not ice. xii)

The mana gement sh ould use the lock-o ut techn iqu e only as a last resort and must give a

notice to the trade un ions at least one week in advance. Industrial peace

Permanent industrial peace is required for the growth of the industry, which can be ensu red

through the following measures. There must be an effective machinery to prevent strikes and their settlement. The government must be vested with the au thority to settle disputes bet ween

mana gement

and trade unions.

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There must be provision to form bipa rtite and tripartite committees to draft persona l policies,

code of conduct, code of discipline etc. for the employees. There must be provision to form various committees to implement and evaluate the collective barga ining agreements, court orders and ju dg ments, awards of voluntary arbitration etc.

Industrial disputes

Disputes are common in industries. They man if est in the form of strikes, bundhs and lockouts. The consequences of disputes are loss of production, loss of profit, loss of market and

even the closure of the plant. According to the In dustrial Disputes Act 1947, in dustrial dispute means, any dispute or ―

diff erence bet ween employers and employees, or betw een employers and workmen, or betw een w orkmen and w orkmen, which is conn ected w ith the employment or n onemployment or terms of employment or w ith the conditions of labo ur of any person‖. In practice, a dispute mainly relates to the diff erence between employers and employees. Causes of disputes

The causes of industrial disputes are many and varied. The ma jor causes are: i)

Wage demands

ii)

Union riva lry

iii)

Political interf erence

iv)

Unfair labo ur pra ctices and

v)

Multiplicity of labo ur laws.

i)

Wage demands: One of the most importan t causes for industrial disputes is the demand by

the employees for more wages. High inflation which increases the cost of living results in the never ending demand by the trade un ions for the increas e in the salaries, bonu s, incentives and

other allowances of the employees.

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Normally, the trade un ions and the management with have a wage agreement valid for th ree years. Each new agreement is the outcome of a prolonged battle between the mana gement

and trade un ions, of ten resulting in strikes and lockouts. Any agreement rea ch ed in one company will inspire trade un ions in other compan ies nearby to go on strike for deman ding

more wages. ii)

Union rivalry: In most of the organ izat io ns, there are multiple un ions, which lead to inter-

un ion rivalries. During the settlement of disputes, if the union agrees for the settlement, another un ion will oppose it. This results in never endin g disputes in the industry. Multiplicity of un ions results in peculiar problems to the mana gers. One such prob lem is the au thenticity of members hips. Unions decla re the number of members in their un ions and when ultimately the added up members will be more than the actua l number of employees. An other prob lem w ill be the selection of a bargainer in the process of settlement Union

rivalry often may lead to large scale violence also. iii)

Political interference : Major trade un ions are affiliated to political part ies to derive strength

from their political clout. When the un ions get politicized, the ideologica l issues divide and f ragment un io ns on party lines. When un ions multiply because of diff erent po litica l

affiliation inter –un ion rivalry erupts and settlements become difficult. Another problem is,

even when the settlement is f avorable to all the workers, certain un ions refuse to sign th e agreement because of th eir political ideo logies, thus keep ing the dispute alive. The various trade un ions supported by ma jor political parties in our country are: CITU – affiliated to the Commun ist Party of India, INTUC – affiliated to the congress party of India. Every

po litica l pa rty somehow mana ges to engineer strikes, ghera os and bundhs to

demonstrate their political clout. Inva ria bl y, the political party which is in power favours the un ion which is affiliated to it. Politicization of trade un ions results in endless industrial disputes. iv)

Unfair labour practices: Most of the disputes in the industries is because of the attitude of

th e mana gement towards the employees. The following are the unfair, la bour practices

adopted by mana gements. a)

The management gen erall y do not want to talk to the employees or trade un ions about th e disputes, even when they are willing to talk, which enrages the workers.

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The management does not want to recogniz e a pa rticu lar trade un ion and creates rivalry by supporting other union which is likely to fall in line with the policies of the mana gement.

c)

During negot iations for the settlement of a dispute, the repres entatives of the employers always take the side of the mana gement; create ten sions which ultimately lea d to strikes and lockouts.

d)

The mana gement‘s unw illingn ess to promote workers w ith merit but always help ‗yes‘ masters to high er positions.

e)

The management always trying to restra in workers from f orming trade un ions with threats of dismissal or lockouts, if trade unions are formed.

f)

The mana gement‘s attitude to victimize the workers even for minor mistakes in their work

or misconduct and awa rding disproportionate pun ishment.

g)

Transferring workers from one pla ce to the oth er, even when it is not required.

h)

When the workers are on strike, the management insisting on each worker to sign a good

conduct bond as a precondition to allow him to resume work. i)

In du lging in acts

of force and violence again st workers and failure to honour the settlement

or a greement.

v)

Multiplicity of labour laws: In almost all the coun tries in the world, la bo ur laws have been

enacted to create conditions for the protection of the la bour from unfair employment pra ctices by the managements and to provide a legal framework to ensure the safety and security of the workers. Labo u r legislation is regarded as the most dynamic institution.

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In our country, there are abo ut 180 acts, bot h central and state, earn in g our country the dubious distinction of be ing one of the few highly labo ur legislated countries in the world. The resu lt of so many acts is endless confusion, industrial disharmony, loss of prod uction

and exploitation of labo u r by the management and the management by the labour. Judiciary also has not pla yed a positive role in solving the prob lems of the la bo ur. By giving conf li ctin g decisions, the judiciary has aggravated indiscipli ne amon g workers. The judiciary has gone to the extent of saying that even an ‗illegal strike is justif ied‘. The result is that, the indiscipli ne in the in dustry has spread like wild fire and very badly aff ected productivity and na tiona l growth. Settlement of disputes:

The importan t methods of resolving disputes are: i)

Collective bargaining

ii)

Conciliation

iii)

Adjudication and

iv)

Voluntary arbitration

i)

Collective bargaining: Coll ect ive ba rgain ing is a process of discu ssio n and n egotiation

between two parties to resolve a dispute on mutual consent. It is a collective bargaining between employers and a group of employees, who agree upo n the conditions of work. Coll ective barga ining f ormulates the terms and conditions un der which la bour and

mana ge ment may cooperate and work toget her over a certain period. In coll ective

ba rgaining, the employer does not deal with the workers directly but dea ls with un ions of workers. The collective barga inin g process involves six ma jor step s: (a) preparat ion of negotiations (b) identifying ba rgaining issues (c) n egot iation (d) rea ching the agreement and ratif ication

and (d) administration of the agreement. a) Preparations for negotiations: Careful advance preparations are required from both sides

because of the complexity of the issues and wide range of top ics to be discuss ed during

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negotiations. Each side should present its case in an orderl y way with facts and f igures for discussion during negotiation. b) Identifying bargaining issues: Normally, th e major issues discussed in collective ba rgaining fall under the following categories:

i. Wage related issues which in clude basic wage rates, wage diff erentials, overtime rates, allowances etc.

ii. Supplementa ry economi c be nef its which in clude issues such as pe nsion plains, paid vacations, health issues etc.

iii. Institutiona l iss ues such as rights and duties of the employees, trade un i ons and quality of

life programs.

iv. Administrative issues such as seniority, discipline, health and safety of the employees etc.

c) Negotiation: During negotiation each side will present its initial deman ds. The negot iation goes on for days till the final agreement is rea ched. Negot iation is an art. Successful

n egotiations depend on the k now ledge and skill of the negotiators. A good negotiator must know the techn ique of listening skills and the ability to commun icate clearly.

d) Reaching the agreement and ratif ication: After the initial agreement, the two sides return to their respective grou ps to find out whether the agreement is acceptabl e to them. The

n egotiating tea m explains the po ints of agreement and places the agreement bef ore the members for a vote. If voted, this agreement is formalized into a contract. The contract has to be clear and precise and there should not be any a mbiguity in the interpretation of the po ints in the agreement. The contract is signed by bot h parties af ter ratif ication by the

members of both the groups.

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e) Administration of the agreement: Signing the agreement is not the end of collective barga ining, rather the beginn in g of the process. The agreement must be implemented in the letter and spirit o the provisions of the agree ment. Violation of any provision leads to disputes aga in. The management is primarily respo nsible for implementing the a greement. H.R.D manager plays a crucial role in the day-to-day a dministration of the contra ct. He or she works w ith th e mana ge ment and th e employees to establish a good working

relationship between them to implement the provisions of the agreemen t in letter and spirit. ii)

Conciliation: Conciliation is a process by which representat ives of both the mana ge ment

and workers are brought together before a third party with the purpose of persua ding them to arrive at an agreement by mutual discussion between them. As per the Industrial Disputes Act, 1947 the government is authorized to appo int conciliators to mediate and promote the settlement of industrial disputes. A conciliator a ppo inted by the government tries to bring about an agreement between the two disputed parties, but ultimately the final decision rests with the parties themselves. The conciliator can only offer a solution

acceptable to both the parties. The pa rties may accept his recommending or re j ect it a ll toget her. iii)

Adjudication: If con ciliat io n f ails, the dispute may be settled by a compulsory

ad judication which the parties have no other choi ce than to accept it. Adjudication means a man datory settlement of industria l disputes by la bo ur courts, industrial tribuna ls or

nationa l tribuna ls un der a industria l disputes act. Once a dispute is ref erred for ad judication, the award of settlement by a la bo ur court or tribuna l is binding on both the parties. The system of ad judication is the most significant method of resolving disputes but is often criticized for the dela y in dissolving the conf licts. iv)

Voluntary arbitration : Volunta ry arb itration is one of the most recognized and

democratic ways of settling industrial disputes. It is the best method of resolving industria l disputes when conciliation method fails. In this method, a neutral third party studies the dispute, listen s to both the pa rties, gathers the inf ormation and then makes the recommendations that are binding on bot h the parties. In th is type of settlement, the

agreement must be in writing and a reference to voluntary a rbitration must be made before the dispute is referred to la bour court or a tribunal. The arbitrators shall investigate the CITSTUDENTS.IN

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dispute and submit the award of arbitration to the government with the signature of

the

arbitrators.

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UNIT – 2 PRODUCTION MANAGEMENT    

Plant location, plant la y-o ut CPM and PERT strategies line ba lan cing, automation Statistical quality control, control chart, motion study.

Introduction:

Among all the functional areas of mana ge ment, production is very crucial in any industria l

organ ization. Prod uction is the process by which, raw materials and other inputs are

converted into useful finished prod ucts. Manu f a cturing is another word synonymous with the prod uction.

Manu f a cturing normally refers to a process of prod ucing only tangible goods, where as prod uction includes the creation of tangible goods as well as intan gible services.

Prod uction management refers to the a pp li cation of management principles to the prod uction f un ction in a f actory. It involves the app lication of plann ing, organ iz ing, directing and

controlling of the production process. The standard of living of the people in any nation depends on the quality of the goods prod uced. Prod uction creates national w ea lth . High productivity is the backbone of a nation‘s economic progress. The prod uction mana gement

covers such activities as the location of the plan t, acquisition of the land, plan t la yout, construction of building, procuring and installing of machinery, purchasin g and storing of materials and converting them into sala ble product s. Plant location

The selection of a pla ce for the location of a plan t is one of the importan t prob lems faced by an entrepren eur while laun ching a new enterprise. The important considerations in the location of a plan t are: i)

Easy and regular su pp l y of raw materials

ii)

Availa bility of skilled la bou r force

iii)

Sufficient space for efficient plan t layout

iv)

Proper utilization of prod uction ca pacity

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v)

Reduced cost of producti on and

vi)

Feasibility of marketing the prod ucts

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Even though the location of the plan t itself can n ot gua ran tee th e success of the plan t, how ever an ideal locati on helps in the smoot h and eff icient working of the plan t. A bad location of plan t forms a severe han di ca p and ultimately may lea d to ban kruptcy. Therefore, utmost care must be taken in selecting a proper location of the plan t. If the mistake is done in locating the plan t, it becomes extremely difficult and costly to relocate it.

Need for plant location:

The need for the location of a plant becomes necessary under the following conditions:i)

When the business has to be started newly

ii)

When the existing business has outgrown its existing facilities and expan sion is not possible

in the present location. iii)

When the volume of business increases, it may be necessary to start new branches at diff erent places.

iv)

When the lease of the lan d expires and the lan d lord does not agree to renew the lease.

v)

Other social or econ omic reasons such as ina deq uate la bour supply, shifting of the market,

etc. The selection of the location of the plan t must be made after consideri ng all the economic factors. However, it may not be possible to find a particula r location which satisfies all the requirements to start an industry. The guidin g principle in selecting a plan t ultimately must be

made for a pla ce where the cost of the raw material, its fabrication, cost of prod u ction and marketin g is minimum, so tha t the prod uct is highly compet itive with similar prod ucts

produced by other companies. Weber’s theory of plant location:

According to Albert Weber‘s theory of plan t location, the locationa l f actors are broadly divided into two categories: (i) primary factors (ii) secondary f actors. Materials and la bo u r constitute the primary factors which influence the dispersal of industries over diff erent regions. In dustrial un its are materia ls-oriented , depending on the availability of CITSTUDENTS.IN

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raw materials and the cost of tran sportation. They become market oriented , depen ding on the

cost of tran sportation of the final prod u cts. They become labour-oriented , depending on the availability of skilled and cheap labour. Bank credit, insuran ce, commun ication, cost of lan d and rent constitute the secondary f a ctors of location. Some of these f actors, which attracts the location of industries in a place are called a gglomerating factors and some of these which contribute to the moving away of the industries are called as deglomerating f actor. Th ough , Weber told his theory in1909, it is

relevant even toda y. Errors in location:

Some of the common errors in the s election of a site for plan t location are:

1.

Absence of proper investigation and consideration of various factors involved.

2.

Persona l likes and dislikes of owners or executives in taking into consideration the impartia lly esta blished f a cts.

3.

The reluctan ce of the executives to move from traditiona l home ground to better new location.

4.

Trying to move to the alrea dy congested or over industrialized areas.

5.

Trying to a cquire an existing structure which is not located in a proper area and which is not designed for efficient production.

6.

Choice of backward area to which key administrative and techn ical personnel are not willing

to move and trying to seek employment elsewhere.

In order to see that a wrong site is not located for the plan t, a selection committee comprising people with knowledge of facts and factors, who are in respo nsible po sit ion in the operation CITSTUDENTS.IN

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of the plant, has to be constitute. The committee must tour places, select two or three locations

and ultimately select the best one for the location of the plan t. Steps in plant location

The entrepreneur has to follow a s ystematic procedure, step by step in selecting a su itable site for plan t location. The various steps to be followed are: x

Deciding on do mestic or interna tiona l location

x

Selection of the region

x

Selection of the locality and

x

Selection of the exact site Deciding on demand or international location: Due to liberalization, the

x

business is

internationa lized . The first step in the location of the p lan t is to decide whether, the plan t has

to be located domestically or internationally. If the management decides on f orei gn location , the next logical step w ould be to decide upon a particula r country. In recent times, coun tries

are vying with each other to attract f oreign investments. The choice of a particula r coun try mainly depends on th e po litica l stability, export and import regulations, currency and exchange rates, cultural and economic conditions, availability of natura l resou rces, etc.

Selection of a region: The select ion of a part icula r region in a country is the second step to

x

be followed in the location of a plan t. The following factors influence the selection of a region .

i)

Availability of raw material: The p lan t must be located in pla ce where the suppl y of raw

materia ls is plenty and available at reasona ble cost. Nearness to raw materia ls has the

advantages of reduced cost of transportation, regular and proper suppl y of raw materials and savings in the cost of storage of materia ls.

ii)

Nearness to the market: The goods produced by the plan t have to be sol d in the market and

hence it is better that the market is also nea rby. Nearness to the market has the advantages of

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the requirements of the consumers, ability to render prompt service to the consumers, providing a f ter-sa les services, executing repla cement orders w ithout delay.

iii)

Availability of power: Power is an a bso lute req uirement for prod uctio n in any industry. Coal,

electricity, oil and na tura l gas are the sources of po wer. Industri es req uiring coal such as iron

and steel indu stries have to be located near coal fields. Theref ore, most of the modern industries rely on electricity as the source of po w er. Hence such in dustries have to be set up where electrical power is available in plenty at lower cost.

iv)

Transport facilities: Tran sport facilities are req uired for brin ging raw materials and workers

to the factory and for carrying the finished products from factory to the market. A pla ce which is well connected by rail, road and sea is ideal for plan t location.

v)

Suitability of climate: There are certa in industries which req uire particula r climat ic

conditions because of the type of production and they have to be located in regions of such climate. For Ex: cotton textiles and jute in dustries requires hu mid climatic conditions. Even though, artif iciall y, any climatic conditions can be created , it is very costly. It is always

advisable for an entrepreneur to locate his industry where suita ble natura l climatic conditions exist. The adverse climatic conditions affect la bour efficiency also.

vi)

Incentive and policies of the government: To expan d the industrial base and to provide

employment to the people, many states offer incentives such as lan d at cheap rate, investment subsides and tax exemptions to new industries, which is very lucrative to start med ium-sized

plan ts. The policies of the government such as licensing policy, f rei ght rate policy etc. also influence the location of plan ts in the region .

x

Selection of locality: Selection of a part icular locality is the third step in plan t location. The

various factors that influence the s election of a locality for plan t location are:

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Availability of labour: La bo ur is an importan t factor in the prod uction of goods. Availa bility

i)

of enough workers at reasona ble wages is very essentia l for the su ccessf ul working of an industry. Unskilled la bo ur can be found in any locality. It is the availability of skilled labour which influences the location of the plan t. However, the att itude of workers, un ion activities

and industrial disputes may drive away the existing f actories and discourage new entrepreneurs from locatin g their plants in such localities.

ii)

Civic amenities for workers: The workers must be provided with not only good working

conditions inside the factory, but also other facilities such as clubs, theatres, parks and good schoo ls for their children must be available for the employees, outside the i ndustry.

iii)

Availability of water and fire fighting facilities: Some ind ustries requ ire plenty of water for

their working. Hence, such industries must be located where water is available in plenty. Water may be obta ined from the local au thority from the canal, from a river or lake or by sinking bore wells. Indu stria l un its are exposed to fire haza rds. Hence, adequate fire f ighting

facilities must be available.

iv)

Finance and research facilities: In the developed coun tries, the wea lt h is uniformly

distributed but in developin g coun tries, ca pital is not available uniformly throughout the coun try. Hence in such coun tries, places where f acilities for raising capital are available, attract new indu stries.

During the course of working, a factory may encounter a number of prob lems. There must be facilities to exa mine and find solutions for such prob lems. If the prob lems. If the factory has

to be dynamic, it should always adopt new techn ologies and hence research facilities also

must be available in the locality. x

Selection of the size: The selection of an exact site in a chosen locality is in f luenced by the

following considerations.

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x

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Soil, size and topography : The quality of the soil does not influence the selection of size for

plan t location, if the factory is producing engineerin g goods. However, fertile soil in the size is necessary for agro based in dustries. The size of the site is a lso important because it should not only accommodate the existing manu f a cturing facilities, but there sh ould also be scope for future expan sion.

Proper considerations must also be given to the topography of the site. A hilly, rocky and

rough terra in is un suitable for plan t location becau se, lot of money has to be spent to level the site. Plant Layout

A plan t la yout is the a rran gement of machinery equipment‘s and other industrial f a cilities when a new plan t is erected . The efficiency of the prod u ction flow mainly depends on the

proper layout of the plan t. In the plan t la yout, importan ce is given to th e pla cement of machinery at diff erent places, the location of stores, inspection cabins, too l roo ms, and mainte nan ce wings, plati ng shops, heat treatment chambers, toilets, can tee ns, trolleys, cranes

and other equ ipment‘s. However, there is no set pattern of la yout for all plan ts. It differs from plan t to plan t, from location to location and from industry to industry. The best la yout is the one in which the flow of the raw materia l is quick and the amount of han dling is less in processing the prod uct, from the receipt of raw materia ls to the f ormation of the finished prod uct. Objectives of a good layout

A good la yout of a plan t must serve the following ob jectives. 1.

It shou ld

provide enough capacity for production.

2.

It shou ld

reduce materia l han dling costs.

3.

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4.

There shou ld not be any hazards to the workers.

5.

The workers should be used efficiently and their mora le has to be increased.

6.

Utili ze available space efficiently and eff ectively.

7.

Provide space for proper supervision.

8.

Conductive atmosphere for safety and h ea lth of the workers.

9.

provision for the improvement of productivity and

10.

Allowance for easy maintenan ce.

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Factors influencing plant layout

The types of layouts are diff erent for diff erent types of plants. The selection of a particular la yout depends on several factors. They are:

i)

Materials: In the la yout there must be provision for the storage and proper movement of the

raw materia ls in the plan t until they are converted into finished prod ucts. There must be proper

storage rooms for materials and materials han dling equ ipments such as cran es, trolleys, pipe lines etc. The type of storage mainly depends on the type of material stored i.e. solid or liquid, light or heavy, small or la rge. Flow charts have to be drawn to visualize the path of materia ls

flow during various stages of prod u ction and care must be taken to see that there are no crossover, long distan ces and back tracking. The best path is thus determined and accordingly

the layout is planned.

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Product: A plan t la yout must express its product. Any la yout of a plant is drawn with the

ii)

u ltimate purpose of producing a prod u ct. The type of prod u ct, whether it is solid or liquid, light or heavy, big or small dictates the la yout of the plant. The requirements of a la yout meant for a heavy product is diff erent from the requirements of a la yout for a light prod u ct. The demand for

the sa les of the product a lso influences the type of layout. The sa les demand for a product also inf luences the type of la yout. The sales deman d for a prod u ct determi nes the volume of

prod u ction and therefore the quality and size of the equipment, the area of the storage space

and other facilities, which in turn determines the type of la yout.

iii)

Workers: The type of workers, their position s and their req uirement s must be taken into

consideration in designing th e la yout of a plan t. If women workers are employed, th eir requirements must be kept in mind, wheth er the workers remain stationary or moving also influence the layout. Employee‘s facilities such as hea lth and related services, locker rooms,

public facilities also influence the la yout.

iv)

Machinery: The size and type of machinery used in the p lan t depends on the type of product,

the volume of its produ ct ion , the type of process and the mana ge ment‘s policies, which in turn influences the plan t layout. Prod u ction is the combina tion and man ipulation of men, materia ls

and machines. Th es e elements may be combined in various ratios and in various ways during the course of prod uction activity. Theref ore it is necessary to draw the layout taking into consideration the stationa ry or fixed positions of these elements.

v)

Type of industry: The type of ind ustry and the method manu f acturing significantly influence

the plan t la yout. All types of industries may be classified basically into tw o types (a) intermittent indu stries and (b) continu ous industries. Intermittent indu stries manu f actu re

diff erent compo n ents on diff erent ma chines and assemble them to get the end prod ucts. Continuo us industries produce one or two products of stan dardiz ed na ture. Hence, the layout of

the plan t designer must take the method of manufacture process into consideration during the

process of plann ing a layout.

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Location: The site selected for the location of the plan t influences its la yout in several ways.

vi)

The size and the terrain of the site determine the type of buildin g and mode of transportation which inf luences the layout. The mode of tran sportation may be rail roa ds or by trucks by which the raw materia ls and finished products are transported . The plan t la yout must also take into consideration the fuel req uirements and its transportation. The type of la yout plan also

depends on whether the plan t is located in a village or in urban a rea. If it is in a village, the expan sion may be aff ected by a dding one more wing to th e existin g single-storeys to the construction. If the plan t is in urban area, the expan sion may be aff ected by adding more storeys to the existing buildings. Thus the p lan t layout must also take into consideration any

demand for future expansion.

vii)

Managerial policies: Any plan t la yout is basically decided by th e policies of the top

mana ge ment and the layout engineer must have a clear un derstan ding of these policies and

accordingl y design the plan t la yout. The various mana ge ment policies which inf luence the plan t layout are a. The volume of production and provision for expansion.

b. The extent of automation

c. Desire for prompt and rapid delivery of goods to consumers.

d. Purchasing policies.

e. Personn el policies. Principles of layout:

While designin g a parti cular la yout of a plan t, the engin eer should be gu ided by certain principles. They are:

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x

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The principle of minimum travel: The movement of men and materia l must be minimum

between various operations of production to avoid waste of man-hours and to minimize the cost of materia ls handling.

x

Principle of sequence: The operations on various ma ch in es should be arranged in a seq uentia l

order so that there is continuity in the process of prod ucing the final prod uct from th e raw material.

x

Principle of usage: The entire space of the site must be effectively utilized, especially when t he

plan t is located in urban areas where the lan d is costly.

x

Principles of compactness: There sho uld be a ha rmonio us fusion of all the rel evan t factors so

that the final la yout looks well integrated and compact.

x

Principles of safety and satisfaction : The plan t layout shou ld conta in all built in provision for

the safety of the workers and provide comfort and convenience to them so that they feel satisf ied.

x

Principle of flexibility: The p lan t la yout sh ould have provision for any changes with minimum

effort and cost.

x

Principle of minimum investment : The la yout s hould be such that the ca pital invest ment must

be minimum by an intensive use of available f acilities but n ot sacrificing the necessary requirements.

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Importance of plant layout:

An ideally laid plan t la yout reduces manu f a ctu ring costs and helps in smoot h and eff icient runn ing of the plan t. Some of the advantages of a good plan t la yout are: x

The materials han dling cost is reduced by avoiding long distan ce movements, thereby reducing the manu f a cturing costs.

x

The entire site area is effectively used for the location of equipments so that, the la bo ur force is effectively used.

x

Results in prompt execution of orders and elimina tes delays, which helps in the satisf action of consumers.

x

Provides for inspection at diff erent stages og manufacture and ensure quality control of the

product produced.

x

Investment

on equipment is minimiz ed by proper balance in ma chi ne procu rement and

location.

x

The bottlenecks due to slow prod uction,. Ina deq uate use of spa ce, ma chines capa cities,

accidents and wastage of floor area are avoided.

x

Helps in the produ ction of right type of product at the right time and at reas onable cost.

x

Provides for better su pervision of the workers by providin g a full view of the entire dep artment for the supervisor.

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x

Helps in the effective utilization of la bour by pa ying ways on hourly basis.

x

Improves

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employee‘s mora le by providing better working conditions, better f acilities and

increased earnings to the workers.

Types of layouts:

Plant la youts may be classified as

i)

Process la yout or functional la yout

ii)

Product layout or line la yout

iii)

Static la yout or fixed position la yout and

iv)

Mixed layout or hybrid layout Process layout or functional layout: The process la yo ut involves the group ing together of like

ma ch in es in one department. For example, drilling ma chines are insta lled in drilling dep artments,

all lathes are grouped together in turning secti on, milling ma ch in es are grouped in milling section etc. There will be diff erent departments for do ing diff erent jobs. The fig. 2.1 shows the

process la yout in which the ma chin es in each department attend to any product that is taken to them. The flow of the raw material from stores to the finished product is shown by dotted lines in which the raw materia l is moved from department to department for diff erent operations in sequence. This type of layout is best suited for intermittent type of product ion.

The advantages of process layout are:

x

Reduced investment on ma chines as most of them are gen era l purpose machines.

x

Greater f lexibility in the prod uction.

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x

Greater scope for expan sion as the capa cities of diff erent departments can be easily increased.

x

Results in better utilization of men and machines.

x

Easier to han dle the breakdown of any equipment by tran sf erring the work to another machine.

x

Eff icient

su pervision is possible through specializa tion.

The disadvantages are:

x

There is difficulty in the movement of the materia ls.

x

Requires more floor space

x

There is difficulty in prod u ction control

x

Prod uction time is more as the work-in- progress has to travel from pla ce to pla ce in search of machines.

x

There is accu mulation of work-in-progress at d iff erent places.

Product layout or line layout: Product la yout involves the arrangement of ma chines in one

i)

line, depen ding on the sequence of operations. Raw materials are fed into the first machine and finished products from machine to machin e. The output of one becoming the input to the next machine. For Ex: Sugarcane is fed at one end and sugar comes out at the other end in a sugar

factory. In paper mills, bamboos are fed to the machine at one end and paper comes out at t he

other end. The advantages of product layout are :

x

Handling of materia ls is au tomatic and hence there is reduction in material han dling etc.

x

There is saving in manu f a ctu ring time.

x

Less floor area is req uired for production .

x

Little skill is req u ired for supervision

x

The mistakes in prod ucti on can be detected early.

as the process is automatic.


x

There is no scope for f lexibility of operations. A change in product de sign may need major

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x

The break-down of one ma chine lea ds to the complete stoppage of that line of production.

x

Comparatively, high investment is required as stan dby machines are req uired during

breakdowns. x

Expan sion is difficult.

x

The pace of prod u ction is determined by the slowest mach ine and hence machin es have excess idle time. Static layout or fixed position layout: Static la yout involves the movement of men and

ii)

machines to the product which is stationary. In this type of layout, the work piece rema ins in a

fixed position and too ls, machinery and men are moved to this position . This type of la yout is followed in the manufacture of bulky and heavy products such as locomotives, ships, boilers,

aircrafts, generators etc.

The advantages of this type of layout are:

x

The h igh cost and difficulty of tran sportin g a bulky product is avoided.

x

The investment on la yout is small.

x

The workers identif y th emselves w ith the work and takes pride in th e completion of the prod uct.

x

A number of diff erent pro jects can be taken up in the same la yout.


iii)

x

Highly skilled workers are required.

x

Machines and too ls take more time to reach the place.

x

Under utilization of la bo ur and equipment‘s.

Mixed layout or hybrid layout: Mixed la yout is the combination of both process la yout and

product layout, which is su itable for most of the industrial establishments. This type of la yout is su ita ble when the manufactured goods are somewhat similar and are not complex. In plan ts which involve both f abri cation and assembly, the f abrication part employs process la yout and the assembl y part employs the product process.

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PERT and CPM:

An industrial pro ject consists of a number of activities involving la bo ur, time, materials, money etc. Many of these activities are interdependent and the rest can be carried out in dependently in order to achieve the desire objectives. The pro ject management should not only plan, schedule, coordinate and opt imize the activities but also shou ld identify and watch closely the critical activities which must be completed within the a ll otted time. To deal with large and complex pro jects, a number of mana gement techn iqu es known as ‗network techn iques‘ have been developed. They are: x

PERT

: Program Eva luation

and Review Technique.

x

CPM

: Crit ical Path M ethod

x

RA MS

: Resource Allocation

x

PEP

: Program Eva lua tio n Procedure

x

COPAC : Critical Operatin g Prod uctio n Allocation Control

x

MA P

: Manpower Allocation Procedure

x

RP S M

:Resource Planning and Sched u ling M ethod

x

LCS

: Lea st Cost Scheduling

x

PCS

: Project Cost System

x

GERT

: Graphical Eva luation Review Technique

and Multi pro ject Scheduling

The most convenient and commonl y used network techn iqu es are PERT and CPM. PERT and CPM are the scheduling techn iques used to plan, schedule and control a pro ject con sisting of a

number of inter-related activities.

Th ese

techn iques provide a frame which def in es the jobs to

be done integrates th em in a logical sequence and provides a syste m of control over the

progress of the plan. Objectives of PERT and CPM

The ob jectives of PERT and CPM are: a)

To plan, schedule and control the pro ject consistin g of a number of inter-related activities. CITSTUDENTS.IN

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b)

To def in e and integrate the tasks in a logical sequence.

c)

To show the precedence relationsh ip between the various activities of the pro ject.

d)

To give guidan ce about the proper sequence of operations.

e)

To draw the attention on the most critical activities for which the time sch edules have too be strictly followed.

f)

To know the progress of the work as related to the schedu led time.

g)

To maximize the use of resources to achieve the ob jective within time and cost limitations.

h)

Provides basis for determining the requ irements of man po w er, material and money.

i)

Helps in design ing, plann ing, coordina ting, controlling and decision making in order to

accomplish the pro ject most economically and in the minimum possible time, with the available limited resources.

Terms related with PERT and CPM

1 Event: An event is a specific instan t of time which indicates the begi nn ing or end of the

activity. Even is also known as a junction. It is represented by a circle and the even t number is represented with in the circle. An event consumes n either time nr resources. For ex: Start the motor, loan approved etc.

2. Activity: Every pro ject consists of a number of operations or tasks which are called as activities. An activity is time consuming or resource consuming part of the pro ject which has a def ina ble start and finish. It may be a process like moldings, a material han dli ng or machine procurement process. For Ex: In stall mach in ery, arran ge f oreign exchange is examples of

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An activity is represented by an arrow in the network diagram. It beg ins in start event (or tail

event) and ends on completion event (or head event). An activity is normally given a name such as A, B, C etc. which is marked be low the arrow and the estimated time to accomplish the

activity is marked above the arrow. Tail event mean s: start mach in e installation Activity A mean s: ma chin e installation

Head event mean s: complexity of machine installation. 3. Represents the time required for installation which may be in hours or days. The activities are classified as: x

Critica l activities

x

Non critical activities and

x

Dummy activities

1. Critical activities: In a pro ject, critical activities are those which have to be completed within the stipulated time. If they consume more time than the estimated time, the pro ject

will be delayed. Hence, more attention must be paid to the critical activities. Any dela y even in the completion of one critical activity, the pro ject can not be completed in time. In the network diagra m, the critical activity is marked by a thick arrow or a do u ble line arrow to

distinguish it from non-critical activity.

2. Non-critical activities: These are such activities in the pro ject, even if they are dela yed over

and above th e estimated time, the pro ject as a whole w ill not be delayed. Hence such activities will have a provision of f loat or stack.

3. Dummy activities: A dummy activity in an artificial activity introd uced in a network, to maintain a un ique nu mberin g system for the diff erent activities and a lso to keep the logical sequence of activities and their inter-relationships correctl y. A dummy activity doe s not CITSTUDENTS.IN

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consume time or resources. In the network, it is represented by a dotted arrow. In Fig 2.4, F represents a dummy activity.

4. Critical path: It is that sequence of activities which decide the total pro ject duration. Critical

path is followed by critical activities. In f igure 2.4, the path 1-2-4-5 is the critica l

path. Critica l path consumes maximum resources. It is th e longest path and consumes maximum time. A critical path has zero float. Even if one critical activity is de la yed , th e

pro ject cannot be completed in time. A critical path indicates that these activities must be completed by hook or crook, if the pro ject schedule has to be mainta ined. 5. Duration: It is estimated or the a ctua l time req uired to complete a task or a ctivity.

6. Total project time: It is the time taken to complete a pro ject and is found from the sequence of the critical activities. In other words, it is the duration of the critical path.

7. Earliest start time (EST): It is the earli est possible time by which the activity is started.

8. Earliest finish time (EFT): It is the earliest po ssible time by which an activity can be finished EFT= EST+ duration of that activity

9. Latest start time (LST): It is the latest po ssible time by which an activity can start without dela ying the date of completion of the pro ject. LST= LF T- du ration of that activity.

10. Latest finish time (LFT); it is the latest time by which the activity must be completed so that the scheduled date for the completion of the pro ject is not dela yed . It is ca lculated by moving backwards from the last event to the network diagram.

11. Float or slack: Float or slack means a margin of extra time over and above its duration which a critical activity can consume w ithout dela ying the date of completion of the pro ject. CITSTUDENTS.IN

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Float is used with respect to an activity and slack is used with respect to an event i.e. f loat is used in CPM and slack is used in P ERT. However, in genera l, they can be used interchan gea bl y. Float or slack = (LST – EST) or (LFT – EFT) Network diagram or arrow diagram:

A network dia gra m is the basic feature of network plann ing. It is a diagra m which represents all the events and activities in a sequence in which they are req uired to be performed to complete the pro ject alon g with th eir inter-relation and inter-dependen cies. Arrow diagram is the visual representation of the complete activities represented by means of arrows. It is

the most f requ ently used form of network dia gram, where every activity is represented by an arrow and the activity sequences are indicated by the direction of the arrows. Complete. F is

a dummy activity represented by a dotted arrow and shows that activities. A and B finish at th e same time i.e. t1 = t2 and C and D start at th e same time. There are tw o paths to complete the pro ject. They are 1-2-4-5 and 1-3-4-5. In an arrow diagram, the length and inclination of an arrow does not have any significance. Arrow diagrams are very useful as they provide detail ed inf ormation for makin g decisions in conn ections with large and complex pro jects. PERT (Project Evaluation and Review Techniques)

PERT is a techn ique used for plann ing, scheduling and controlli ng the industrial pro jects. It is used in progra mmes, where the activities are su b ject to considerabl e degree of un certain ly in performance time. It is very ess ential for timely execution of the pro jects. it is used for large and complex pro jects. Because of the un certa inty of activity timings. PERT is a probabilistic mode l. It uses linear progra mming and probability concepts for plann in g and

controlling the activities. PERT is mainly concerned w ith events and is thus an event oriented syste m. The basic too l used in PERT techn ique is th e n etwork diagra m which consists of a series of related events and a ctivities. The various steps followed in PERT plann ing techn iqu es are: x

The pro ject is broken into diff erent activities syste matica ll y.

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x

The activities are arranged in a logical sequence.

x

The network diagra m is drawn. The events and activities are marked on the netw ork diagram.

x

Using three times estimate, the expected time for each activity is calculated .

x

The standard deviation and variance for each activity is computed .

x

ESTs and LFTs are calculated .

x

Expected

time, earliest starting time and latest finishing times are marked on the network

diagram. x

The slack is ca lcu lated .

x

Critica l path is identif ied and marked on the network diagram.

x

The len gth of the critical path or total pro ject du ration is found out.

x

Last l y, the probability that the pro ject will finish at due date is ca lculated.

CPM (Critical Path Method)

CPM is a techn ica l us ed for plann ing and controlling the most logical and economic

sequence of operations for accomplishing a pro ject. It is widely recogniz ed and is the most versatil e and potent mana ge ment techn ique. CPM is app li cable to bot h small and big

pro jects. The Project is ana lyzed into diff erent activities, whose relationships are expressed in the netw ork

dia gram. The network is then utilized for opt imizin g the resources, progress and control. CPM employs the following techn iques for accomplishing the pro ject planning. x

The pro ject is broken into various activities syste maticall y.

x

All the activities are arranged in a logical sequence.

x

The arrow dia gra m is constructed .

x

All the events and activities are labeled.

x

The time required for each activity is found and marked in the arrow diagram.

x

ESTs and LSTs are calculated and marked in the arrow diagram.

x

The f loat for each activity is calculated .

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All critical activities are identif ied and the critical path is marked on the arrow dia gram thick lines.

x

The total duration required for the pro j ect is cal culated.

Difference between PERT and CPM

Both PERT and CPM use the same f un damental dia gram for plann ing and controlling of a pro ject. However, there are some diff eren ces between the two. They are:

P ER T x

x x

x

x

x

x

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A probabilistic mode l with in un certa inty activity duration. An event-oriented approach. PERT techn ology uses like terms netw ork diagram, events and slack. The use of dummy activities is required for repres enting the proper sequencing. Does not diff erentiate between critical and n oncritical activities. Finds applications in pro jects where resources ma de are always available as and when required. Especially su ita ble for defense pro jects and R & D pro jects activity times can not be reliably predicted .

CPM x

x x

x

x

x

x

A deterministic model with well known a ctivity duration. An activity – ori ented system. CPM terminology uses terms like arrow diagram, nodes and f loat. The use of dummy activities is not necessa ry. The arrow dia gram thus becomes slightly simpler. Critical activities are ide ntif ied and diff erentiated from non critical activities. Finds app lications in pro jects where minimum overall costs are of primary importan ce. There is better utilization of resources. Suitable for setting up industrial pro jects, plan t mainte nan ce, civil construction pro jects etc.

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Applications of network techniques

Netw ork techn iqu es find wide range of app lications in plann ing and controlling various

processes a re: 1. The detailed and thoughtf ul plann ing provides better analysis and logical th inking. 2. Identif ies critical activities so that more a ttention can be given to t hem. 3. Helps in f orecasting the pro ject durations more accurate l y. 4. The resources are opt imized by usin g the concept of slack. 5. Scientifically monitor the slippa ges and controls them. 6. Helps in better coordination among the related activities.

The limitations of networks techniques are:

1. Network techn ique is only a too l to help the management and hence, its eff ectiveness mainly

depends on how well it is used by the mana gement. 2. Its accuracy depends on the estimation of the data used in the network. 3. It is useful only if it is updated regularly and corrective a ctions are taken in time. Line balancing:

In an industry, line ba lan cing means the balan cing of the prod uction line or an assembl y line. The ma in ob jective of line balan cing is to distribute the tasks over the work stations so as to minimize the idle time of men and machines. Lin e balan cing is done by groupin g the tasks and workers in order to obta in an opt imum ba lan ce of the capacities and flow of prod uction of

assembl y processes. The main aim of la yout plann ing is to find out the minimum number of workers required and assignin g tasks to each one of them so that, the desired level of output is

ach ieved. If the line balan cing of any product la yout is not proper, it means that the u tilization of machinery and men is poor and the idle time is more. Lin e balan cin g is the arrangement of a prod uction line such that, there is an even flow produ ction from one work station that will leave the next work station with idle time. The main prob lem in line ba lan cing is to assign the task to th e workers at work stations so tha t the perf orman ce times are made as equal as

possible. This prob lem can be solved to a great extent by following the steps given below.

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The task is def ined i.e. task is the small est grouping of work that can be a ssigned to a work station.

x

The tasks are properly s equen ced. For th is the predecessor and successor tasks are to be properly identif ied.

x

The minimum number of work stations required to produce a desired output is calculated .

x

Tasks are assigned to each station. For this, several combinations are possible. Normally heuristic method (i.e. Thu mb rules, logical analysis, common sense, and past experience) are

normally used. x

The efficiency and eff ectiven ess of the line ba lan ce is evaluated . If it yields th e desired output, it is effective, efficient and minimizes idle time.

x

The line ba lan cing of the layout may be improved by trial and error method .

Methods of line balancing

The various methods of line balan cing are: x

Heuristic method

x

Linea r progra mmin g method

x

Dynamic programming method

x

Computer based sampli ng techn iques.

Heu ristic and computer based techn iques are widely us ed for solving large scale line ba lan cing prob lems. We w ill discuss only abo ut the Heu ristic meth od of line balancing. Heu ristic method is a thu mb rule meth od which gives almost a satisf actory but not opt imized solution to the line ba lan cin g prob lem. Heuristic methods are accept a ble when opt imizing solutions are not f easible and are too costly to apply. Heuristic method of line ba lan cing is a trial and error techn ique in which work elements are grouped such that, th e cycle time is not violated and the procedure diagram is made use of to group the activities as

per the sequence of operations.

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Automation:

Automation is de f in ed as the process of moving materia ls and parts in and out of machines

and operating the mach ines automaticall y w ithout any human control. It requ ires that ma chines, too ls and other mechan ica l han dli ng devices are so integrated that all these a ct

like a continu ous ma chin e w ith out any hu man intervention. Automation is not just mechan ization but something more than that. Mechan ization mean s doing something by ma chines wha t previousl y was don e by men. It requires hu man watch ing, thinking and

rea cting for routine ma chines operations. But in automation, ma chine operators are no longer required to load, put the ma chine through its cycle, un loa d, inspect, make any ma chine corrections and send the part on its way to the next operation . All these steps are

performed by instru ments, mechan ical and electronic devices and other means of controls, f eed, operator and link ma chin es together into an automatic process. Types of automation:

There are three types of au tomation. They are: 1. Continu ous au tomation 2. Segmented au tomation and 3. Non-manu f a cturing auto mation x

Co ntinu ous auto mation: This type of au tomation is used in industries like chemical plan ts,

oil ref ineries etc, where homoge nous materia ls such as liquid, gases and pulverized su bstan ces w ill be conveyed throughout the whole process. The operations are done by

control boards and push butto ns. The instruments mea sure, record and control volumes, w eight flow, pressure, humidity, temperature etc and take corrective measures when something starts goin g out of control. x

Segmented au tomation: This type of automation is intermitte nt auto mation of a pa rt of the whole process, such as f a bri cation or assembl y w ith intervals bet ween automation equ ipment‘s. This type of auto mation is used where it is not practically possible to auto mation the whole process of f abrication or assembly.

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Non-manu f a cturing automation: This type of auto mation is used in office automation,

x

automatic elevators, tran sportation ticket selling eq uipment‘s etc. in which no manu f a cturing process is involved. Advantages of automation

The various advantages of automation are: x

Greater output per un it labour

x

Greater output per un it investment

x

Lesser floor space req uired

x

Increased

x

Automatic prod uction schedules

x

Uniform quality of prod ucts

x

High rate of prod u ction due to transfer of know ledge of efforts from man to machine.

x

Less s cra p

x

Less inventories

x

Requires less expert staff and rest semi-skilled workers.

safety to the operators

The various disadvantages are:

x

Requires greater ca pita l investment

x

Less manu f a ct uring f lexibility

x

In creased

x

Failure of one part may resu lt in the shut down the whole process

x

During less de man d, the automated p lant can not be used for any other purpose.

unemployment

Applications of automation.

Automation of plan ts is not economical, if the volume of prod uction is small or where a

great variety of prod ucts are to be manu f actured, in th e plan t. Auto mated plan ts are employed in the following cases: x

Where a prod uct design is stable for a long time, so that the cost of automation can be sustained.

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Where the volu me of continu ous manufacture is adequate and steady for a long time so that, the plan t installation becomes economical, prof itable and permit the use of single purpo se equ ipment.

x

Where the manu f acturin g method requ ires more manua l work and automation helps in cost saving.

x

Where machines are complex or work at such a high speed that it is not possible to work

efficiently using manpower. x

Where the product is so hazardous that it can not be controlled by manua l methods such as radioactive materia ls. Statistical Quality Control

Before un derstan ding the mean ing of statistical quality control, it is better to know the mean ing of the three words statistics, quality and control. Statistics means data required to

obt ain reliable results. Quality is a relative term which describe s the f itness of the product for a particula r purpose. Control means measurin g and checking. It speaks a bo ut, when to inspect, how often to ins pect and how much to inspect. Hence statistical quality control may

be def ined as a quality control system employin g the statistical techn iques to control the quality of the product by perf orming in spection, testing and analysis to find out whether the quality of the product is as per the laid quality stan dards. S.Q.C relies on probability theory to evaluate the batch quality and controls the quality of the processes and prod ucts. Statistica l quality control involves the statistical analysis of the inspection data obt ained

from the samples. The f un da menta l basis of S.Q.C is the theory is probability. According to the theory of probability, the dimensions of the components made on the same mach in e in a batch, vary sli ghtl y from component to compo nent due to th e inh erent machine chara cteristics and environmenta l conditions. The chance that a sample will represent the entire batch of compo nent is developed from the theory of probability. S.Q .C evaluates

batch quality and controls the quality of the processes and products u sing the following three techn iques. x Sampling inspection x Control charts and

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x Analysis of data

When large number of similar components is manu f a ctured , it is impo ssible to inspect all the

components individually as it is very tiring and costly. This continu ous process becomes monotonous and chances of errors in inspection increases. On the other han d, if a ran dom sample is selected from a lot and inspected using probability concept s, assuming that this sample represents the lot, there will be much saving in cost and la bor involved in in spection.

In certain cases such as f atigue testing, analyzing the chemica l composition of an alloy, sampling test is the only method of inspection. Sampling plan s control of the average qua lity

of th e outgo ing compo n ents. The results are ana lyzed by determining the mean , range,

standard deviation and the control limits for fixed levels of conf iden ce. S.Q.C also decides about the shape and size of the sample and its relia bility. Advantages of S.Q.C

S.Q .C is one of the tools of scientific mana ge ment and has the following advantages as

compared to 100% inspection. x

Red uction in cost: The cost of inspection is greatly reduced as only a small part of the

output is inspected . x

Greater eff iciency: It requires less time and reduces boredom as monotony of inspecting a ll

the components is avoided and hence, the efficiency of inspection also improves. x

Easy to a pp l y: Once the statistical quality control plan is established, it is easy to apply even by a person who does not have exte nsive special train ing.

x

Accurate pred iction: Specif ication can be easily prescribed for th e f ut ure, which is not

possible with 100% inspection. x

Where destruction of items is required: In cases where destru ction of product is required for inspection, 100% inspect ion is not possible as all the components have to be destroyed.

x

Early detection of f au lts: The moment a sample is not a ccording to specifications, corrective

measures can be immediatel y taken using control charts. In 100% inspections variations in quality can be detected only after a large nu mber of def ective items are already being produced.

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Control charts:

A control chart is a day-to-day gra phica l representation of the collected inf ormation about a few samples ran domly taken out from a lot consisting of a large number of sample produced. The in f ormation may pertain to the measured or quality cha racteristics of the samples. The samples are drawn at ran dom from a lot and for each selected sample, a particu lar mea surement or quality is plotted and studied to know its deviation from th e stan dard mea surement or qua lity expected. All processes whether automatic or semi-au tomatic are suscept ible to variations, which result in the changes in the dimensions of the produ cts. These variatio ns occur due to chan ce cau ses or due to certain f actors. For ex .variation in the

dia meter of spindles being manu f a ctured may be due to too l wear, chan ges in machine settings etc. The purpose of the control chart is to detect these changes d imensions and to indicate whether the variation in the products is with in the specif ied toleran ce or not. A

control chart detects variations in the processing and warns if there is any departure from the specific toleran ce limits. A control chart is a diagnostic techn iqu e. It is dynamic in nature. It

keeps the current and up to date record about the d imensions or quality of the prod uct. It immediatel y tells about the un desired deviations and helps in eliminating the manu f a cturing

troubles. Let us assume

that a turret is set to produce 1000 spindles of 2 cm dia meter each. After they

are made , ran domly about 20 specimens are selected and their diameters are measured and plotted aga inst the number of the pieces .Certain measured diameter values lie very close to the desired dia meter i.e. 2 cm which is known as the mean dia meter or mean value. Some dia meter values are quite far from th e mean value. All those pieces which f all under a specif ied to leran ce limits i.e. control limits are accepted. Once the upper and lower control limits are specified, the plot becomes a control cha rt. Normally 3σ limits are taken for plotting

control cha rts, where σ is the standard deviation. 3σ + 3σ = 6σ is known as the basic spread. Besides 3σ control limits, certa in control charts also show warning limits spaced at 4σ spread. Th ese

warning limits give the indication to the manufacturer that the samples are a pproa ch in g

danger level and corrective a ction have to be immediately taken so that the process does not go out of control

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The important uses of control charts are:

x

A control chart indicates, whether the process is in control or out of control.

x

It

detects the variations taking place in the process.

x

It

ensures the quality level of the prod uct.

x

It warns

in time about the deviation beyond control limits so that, the process is rectified in

time and hence the scrap or percentage re jection of the sa mples can be reduced. provides inf ormation about the selection of the process and setting of the toleran ce limits.

x

It

x

The control charts buil d up the rep utation of the organ ization through custo mer‘s satisf action. Motion study:

Frank Gilbreth is the founder of motion study and a ccording to him, the motion study is the ‗scien ce

of eliminating wastef uln ess resu ltin g from ill-d irected and inefficient motions‘. The

aim of motion study is to find a scheme of least wastage of labo ur. The motion study is a techn ique which ana l yses each operation of a given piece of work very closely in order to eliminate unn ecessary operations and to a pproa ch the quickest and easiest method of perf orming each operati on and to approach the qu ickest and easiest method of perf orming

each operation. The main ob jectives of motion study are: x

To eliminate wastage of time and labour.

x

To reduce boredom and f atigue of workers by eliminating unnecessary movements.

x

To find the best way of do in g the job.

x

To have more effective utilization of materials, men and machines.

x

To improve the design of work pla ce la yout.

x

To standa rdiz e the method, obtained after conducti ng the motion stu dy.

x

To train the individual worker in the practice of the motion study as per stan dardized method. Procedure for motion study

Motion study can be performed in the following step s:

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Step-1: Break up of the operat ion of the job: A detail ed list of all operations in the present

manu f a cturin g method including material han dling, mach ine work and hand work made. Step-2: Crit ical exa minat ion: The motio n study en gineer sh ould ask the quest io ns about the

following po ints to ascertain the way in which the various operations are conducted . The

procedure of questioning is called as ‗critica l exa mination‘. x

What is the purpose of the operation? Whether it is required or can be eliminated?

x

Which is the best pla ce to do t his operation?

x

What are the sequences of operations?

x

Who will do t his operation in a better way?

x

How is the operation performed? Which machines and too ls are required? Can we make this work ea sier and safer both for the worker and for the equipment? Step-3: Develop a new method: After the critical exa mina tion, a new method is developed

taking into consideration the following points: x

E very operation is studied in detail to find out whether any operation can be eliminated

w ithout any harm. x

To find out whether two or more operations can be combin ed without any adverse effect so that, the time of operation is reduced.

x

To find out whether the sequence of operations can be rearranged so that the operation s are simplified.

x

The operation s can be simplified by pla cin g the materials, too ls and equi pment‘s at proper working area, taking useful work from both hands and by u sin g jigs and f ixtu res.

Step-4: Insta lling new method: Af ter developi n g the new method, first, it should be

approved by the supervisors, workers and mana gement. Then, the workers must be tra ined to work according to the new method and the progress of the job is continu ousl y monitored.

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Step-5: Maintaining new method: Once the new method is accepted for operation, it should

be seen that it is not allowed to step back into old method or any other new meth od. Copies

of the job instruction sheets must be distributed to all the concerned and continu ous checking is requ ired to compare what is actually be in g done and selection of persons for train ing must be done a ccordin g to job specifications of the new meth od.

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UNIT – 3 Economics of power factor improvement  Econ omics of power

factor improvement



Definition of power factor, Factors a ff ectin g power f a ctor



Disa dvantages of low power factor, Causes of low power f a ctor.



Advantages of high power factor, Avoidances of low power f actor



Methods of improving power f a ctor



Relative merits and demerits of static and synchronous condensers

 Econ omics of power 

factor improvement

Advantages of static condensers,

 Advantages and disa dvan tages of synchronous condenser.

What is Power Factor? Power factor is the percentage of electrictricity that is be ing used to do useful work It is def in ed as

the ratio of 'active or a ctua l power' used in the mau l measured in watts or kilowatts ( or KW to the

'apparent power expressed in volt-a mperes or kilo va-amperes (VA or KVA) Active Power W Power factor = or Apparent Power VA The apparent power a lso referred to as tota l power delivered by utility company has. ° Compo nents 1) Prod uctive Power' that powers the equipment and performs the useful work It is measured in Kw (kilowatts)

2) 'Reactive Power' that generates magnetic fields to produce field necessary for the operation of induction devices (AC motors, tran sf ormer, inductive furnaces, ovens etc ) It is measured in KV. (Kil ovolt-Ampere-Rea ctan ce) Rea ctive po w er produces no prod uctive work An inductive motor

with power app lied and no loa d on rms shaft should draw almost nil prod uctive po wer, same no

output work is being accomplished un till a load is app lied The current associated w ith no-load

motor readings is a lmost entirely "Reactive" Power As a load is app lied to shaft of the motor, the 'Reactive" Power requirement will change only a small amount The 'Prod uctive Power' is the power

that is transferred from electrical energy to some other form of energy (le su. as heat energy or mechan ical energy) The apparent power is always in always in excess of the prod uctive power for CITSTUDENTS.IN

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inductive loads and is dependent on the type of machine in use The working power (KM a. reactive

po wer (KV.), toget her make up apparent po wer which is measured in kilovolt-a mperes (KVA) Graphically it can be represented as

Understanding Power Factor

The cosine of the phase an gle 0 between the KVA and the 1,KW components represents the power factor of the load. KVAR represents the n on-prod uctive rea ctive power and 0 is lagging phase angle.

The Relationship between KVA KW and KVAR is non-li near and is expressed KVA2= KW2

+ KVAR 2

A power factor of 0.72 would mean that only 72% of your power is being used to do useful work. Perfect power factor is 1.0. (Unity); mean ing 100% of the power is being used for useful work.

Any industrial process using electric motors (to drive pu mps. fans, conveyors. ref ri geration plan t etc.) introduces ineff iciencies into the electricity supp l y netw ork by draw ing add itiona l currents, called "inductive rea ctive currents". Although these currents produce no useful power they in creas e the load on the supp lier's sw itchgea r

& distribution network and on the consumer's switchgear & cabling. The inefficiency is expressed

as the ratio of useful power to tota l power (KW / KVA) known as Power Factor.

Typical uncorrected industrial power factor is 0.8. This means that a 1MVA transformer can only supp ly 800KW or that a consumer can only draw 80 useful Amps from a 100Amp supply. To put it

the other way, a 3-phase 100KW load w ould draw 172A per phase instead of the 139A expected . For inh erentl y low power factor equ ipment, the utility company has to generate much more current CITSTUDENTS.IN

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than is theoretically required. This excess current flows through ge nerators, cables, and tran sf ormers in the same manner as the useful current. If steps are not taken to improve the power factor of the load, all the equipment from the power station to the installation sub-circu it wiring, has to be larger

than necessary. This results in increas ed ca pita l expe nditure and higher tran smission and distribution losses throughout the whole netw ork.

To discoura ge these inefficiencies the electricity compan ies charge for this wasted pow er. These

charges appear on electricity bills as "reactive power cha rges", "KVA maximum demand" or "KVA availability cha rges". For instan ce known inf ormation taken from billing about electrical s ystem: KVA = 1000, KW = 800, KVAR = 600, PF = .80

Typical Utility Billing Structure Examples:

I) 90% Billing Structure - Where demand billed is based on 90% of the KVA or 100% of the KW Whichever is greater. Becau se the f acility has a power factor of 0.80 they will pay demand rates on 90% of the KVA 1000 x .90 = 900 KVA because it is the larger number (900 KVA > 800 KW). Thus the f a cility is pa ying a pe nalty on 100 KVA of un prod uctive po w er. Correcting the f a cility‘s Power Factor to 90% + will elimina te this pe na lty cost.

II) 100% KVA + 100% KW Billing Structure - Where one rate is app li ed to 100% of the KVA

and another rate is app li ed to 100% of the KW. Both are then added together to determine the total demand charged on the bill. If we correct the power factor to unity (KVA = KW or 800 KVA = 800 KW) we can recover costs pa id on 200 KVA at *KVA rates. Assuming an equa l rate is be ing paid for KVA and KW Rather than pay demand costs on 1000 KVA + 800 KW = 1800 if the Power Factor = Unity we will pay demand costs on 800 KVA + 800 KW = 1600. Savings = 1800 -1600 =

200. *Note: Generally the

cost per KVA is greater than the cost for KW. Thus the savings would be

greater by correcting the power factor to unity. The reactive power charges levied as pe na lties in the billing should always be regulated . The excess rea ctive currents and associated cha rges can be removed by a well -established techn ology called "Power f actor correction". Simply put, this techn ology off sets the inductive rea ctive currents by introducing equa l and opposite ca pa citive reactive currents. Typically this can reduce electricity bills by 5-8%, with a payback period of 12 to CITSTUDENTS.IN

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18 months. In add ition , the consumer shall ga in from improved supply availability, improve voltage

and reduced power losses. To improve the power factor, equipment draw ing KVAR of approximate l y the same magnitude as the load KVAR , but in phase opposition ‗Leading‘ is conn ected in parallel w ith th e load. The resultan t KVA is now smaller and the new power factor, cosine Ǿ2 is increased. Thus any value of cosine Ǿ2 can be obt ained by controlli ng the ma gnitude of the l eading KVAR a dded . It is never econ omic to attempt to improve the power factor to unity, since the nearer the approach to unity th e

more KVAR that must be insta lled for a given improvement. Disadvantages of low power factor

Many en gineers are oblivious to the effects of low power factor. They view it only as a direct charge

on their electrical bill, and only when stated as such. Low power factor is a direct cost to the utility company and must be pai d for. Direct costs of low power factor

Power factor may be billed as one of or combination of, the f oll ow ing:

1) A pe nalty for power factor be low and a cred it for power factor above a predetermined value, 2) An increasin g pe nalty for decreasing power f a ctor, 3) A charge on month ly KVAR Hours, 4) KVA deman d: A straight charge is made for the maximum value of KVA used durin g the month. In clu ded in th is charge

is a charge for KVAR since KVAR increase the amount of KVA.

Indirect costs of low power factor Loss in efficiency of the equip ment: When an installation operates with a low power factor, th e

amoun t of useful po wer available inside th e installation at the distribution transformers is considera bly reduced due to the amount of reactive energy that the transformers have to carry. The figure below indicates the available actual power of distribution equipment designed to supply 1000KW Benefits of Power Factor Correction Benefit 1 - Reduce Utility Power Bills

In areas where a KVA deman d clause or some other form of low po wer f actor pe na lty is incorporated in the electric utility's po w er rate structure, removing syste m KVAR improves th e CITSTUDENTS.IN

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power factor, reduce power bills by reducing the KVA. Most utility bills are inf luenced by KVAR

usage. Benefit 2 – Increase System Capacity

The po wer f actor improvement releases syste m ca pa city and permits additional loads (motors, lighting, etc.) to be added w ithout overloa ding the system. In a typical system with a 0.80 PF, only 800 KW of prod u ctive power is available out of 1000 KVA installed. By correctin g the system to unity (1.0 PF), the KW = KVA. Now the corrected system will support 1000 KW, versus the 800 KW at the .80 PF un corrected condition; an increas e of 200 KW of produ ctive po w er. This is

achieved by addin g ca pa citors which furnish the necessary magnetiz in g current for induction motors and transf ormers. Capacitors reduce the current drawn from the power supp l y; less current means lesser loa d on transformers and feeder. Benefit 3 - Improve System Operating Characteristics (Gain Voltage)

A good po w er f a ctor (0.95) provides a "stiff er" voltage, typically a 1-2% voltage rise can be expected when power factor is brought to + \ -0.95. Excessive voltage drops can make your motors sluggish, and cau se th em to overheat. Low voltage also interf eres w ith lighting, the proper

app lication of motor controls and electrical and electronic instruments . Motor performance is improved and so is prod uction. An estimate of voltage rise from the improved power factor with the installation of power capa citors can be made u sing following equa tion: Benefit 4 - Improve System Operating Characteristics (Reduce Line Losses) Improvin g

power factor at the load po ints shall relieve the system of tran smitting rea ctive current.

Less current shall mean lower losses in the distribution system of the f acility since losses are

proportional to the square of the current (I2R). Therefore, fewer kilowatt-hours need to be p urchas ed

from the utility. An estimate of redu ction of power losses can be made u sing following equa tion: Equ ipment Creatin g

Poor Power Fa ctor

It is useful to have an idea of the value

of the power factor of commonly used electrical equ ipment.

This will give an idea as to the amount of rea ctive energy that the network will have to carry. Find below is the summary of power factor of commonly used electrical equipment.

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Lighting In can des cent Lamps: The power factor

is equa l to un ity.

Fluorescent Lamps: Usually have a low power factor, for example, 50% power factor would not be

unu sual. They are sometimes suppli ed with a compe nsation device to correct low power f a ctor. Mercury Vapor La mps: The power factor of the lamp is low; it can vary between 40% to 60%, but the lamps are often su ppli ed with correction devices. Distribution Transformer

The power factor varies considera bl y as a f un ction of the loa d and the design of the tran sf ormer. A completel y un loa ded transformer w ould be very inductive and have a very low power f a ctor. Electrical Motors In duction

Motors: The power factor varies in accordance with the load. Unloa ded or lightly loaded

motors exhibit a low power factor. The variation can be 30% to 90%. Synchronous Motors: Very

good power factor when the excitation is properl y ad ju sted. Synchrono us motors can be over excited to exhibit a lea ding po w er f a ctor and can be used to

compensate a low power system. Industrial Heating

With resistan ce, as in ovens or dryers, the power factor is often closed to 100%. Welding Electric arc w elders generall y have a low power factor, around 60%. Other types of machinery or equipment

those are likely to have a low power factor include: Power Factor Correction

Power factor correction can be made in two wa ys:

1) Reduce the amount of rea ctive energy 2) Compensate artif icia lly for the consumption of rea ctive energy with power factor capacitors. In practice, two type of equipment are available for power factor correction: Rotary Equipment:

Phase advan cers, synchron ous motors and synchronous conden sers. Where auto-s ynchronous motors are employed the power factor correction may be a secondary f un ction.

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Capacitors:

Power f actor correction is ach ieved by the addition of ca pacitors in parallel with the conn ected

motor circuits and can be a pp lied at the starter, or app lied at the switch boa rd or distribution panel. Capacitors connected at each starter and controll ed by each starter is known as "Static Power Factor

Correction" while capacitors connected at a distribution board and controlled independentl y from the individual starters is known as "Bulk Correcti on". When installing equipment, the following po ints are normally considered:

3) Reliability of the eq ui pment to be insta lled 4) Proba ble life of such equipment 5) Capital cost 6) Maintenan ce cost 7) Running cost 8) Space required and ease of installation Generally the cost of rotating ma chinery, bot h synchronous and phase a dvan cing, makes its use

un economical, except where one is usin g rotating plan t for a dua l f unction – drive and power f a ctor correction. In addition th e wear and tear inh erent in all rotating ma chines involves additional

expense for upkeep and ma inte nan ce. Capacitors have none of these disadvan tages. Compared w ith other forms of correction , the initial cost is very low, upkeep costs are minimal and they can be used with the same high efficiency on all sizes of installation. They are compa ct, reliable, highly eff icient

& conven ient to install and lend themselves to individual, group or automatic method of correction. Th ese

facts indicate that genera ll y speaking, power factor correction by means of ca pa citors is the

most satisfactory and economica l methods. The static ca pacitor ow ing to its low losses, simpli city

and h igh efficiency is now used almost universally for power factor correction.

Synchronous condensers In

el ectrical

engineering

synchronous

condensers

(sometimes synchronous

capacitor or synchronous compensator ) is a device identical to a synchronous motor, whose sha f t

is not conn ected to an ything but spin freely. Its purpose is not to convert electric power to

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mechan ical power or vice versa, but to a d just conditions on the electric power tran smission grid. Its

field is controll ed by a voltage regulator to either generate or absorb rea ctive power as needed to

ad just the grid's voltage, or to improve power factor. The con denser‘s installation and operation are identical to la rge electric motors. In creasing

the device's field excitation results in its furnishing magnetizing power (kvars) to the

system. Its principal advantage is the ease with which the amount of correction can be ad justed .

The energy stored in the rotor of the machin e can also help stabilize a power system during short circuits or rapidly f luctua tin g loa ds such as electric arc furnaces. La rge installations of synchronous

condensers are sometimes used in association with high -volta ge direct current converter stations to supp ly rea ctive po w er.

Unlike a ca pacitor bank, the value of reactive po w er from a s ynchronous condenser can be continu ously a d ju sted. In addition, reactive power from a ca pacitor bank decreases with voltage decrease, while a synchronous condenser can increas e current as voltage decreases. However, it does have higher losses than a static ca pa citor bank. Most synchronous condensers connected to electrical grids are rated between 20 Mvar and 200 Mvar and many are hydrogen cooled. As the load on a synchronous motor increases, the stator current Ia increa ses rega rdless of excitation. For un der and over ex cited motors, the power factor (p.f .) ten ds to approach 1 with increase in loa d. The change in power factor is greater than the change in Ia with in crease in load.

The magnitude of armature current varies with excitation. The current has large value both for low and high values of excitation. In betw een, it has minimum value correspo nding to a certai n excitation. The variations of I with excitation are known as V curves because of their shape. For the same output load, the armature current varies over a wide range and so causes the power factor also to vary accordingly. When over-excited , the motor runs with leadin g power factor and

with lagging power factor when un der-excited. In betw een, the power factor is unity. The minimum

armature current corresponds to unity power f actor. An over-excited syn chron ous motor has a leading po wer f actor. Th is makes it useful for power factor correction of industrial loa ds. Both transformers and induction motors draw la ggin g currents

from the line. On light loa ds, the power drawn by induction motors has a large rea ctive compo nent and the power factor has a very low value. The current flowing to supp ly rea ctive power create s

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losses in the power system. In an industrial plan t, synchronous motors can be used to supp ly some

of the reactive po wer required by induction motors. This improves the plan t po w er f actor and

reduces supp ly current. A synchronous condenser provides step-less auto matic power factor correction with the ability to

produce up to 150% add itiona l Mvars. The system prod uces no sw itching transients and is not aff ected by syste m electrical harmon ics (some harmonics can even be absorbed by synchronous condensers ). They will not prod uce excessive voltage levels and are not sus ceptible to electrical resonan ces. Becau se of the rotating inertia of the condenser, it can provide limited voltage

support du ring short power outages. The use of rotating synchronous condensers was common through the 1950s. They remain an

alternative (or a su pp lement) to ca pa citors for po w er f a ctor correction because of prob lems that have been experienced with harmonics cau sing capa citor overheating and catastrop hic failures.

Synchronous condensers are a lso very good for supporting voltage. The reactive power produced by a ca pa citor bank is in direct proportion to the square of its termina l voltage, where a s ynchronous condenser's reactive po wer declines less rapidly, and can be ad justed to compe nsate for falling termina l voltage. This reactive po w er improves voltage regulation in situations such as starting large motors, or where power must travel long distan ces from where it is generated to where it is

used, as is the case with power wheeling, the tran smission of electric power from one geographic reg ion through another within a set of interconn ected electric power syste ms. Synchrono us conde ns ers may also be referred to as Dynamic Power Fa ctor Correction systems.

These ma chines can prove very eff ective when advan ced controls are utilized. APLC based controller with PF controller and regulator will allow the system to be set to meet a given power

factor or can be set to produce a specif ied amount of rea ctive power. On an electric power system, synchronous condensers can be used to control the voltage on long transmission lines, especially for lines with relatively high ratio of inductive reactance to resistan ce.

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UNIT – 4 TARIFFS 

Aim and ob jectives of Tariff s



Factors governing the Tariff s



Components of Tariff s



Choice of electrical power supply.

INTRODUCTION

Now -a-da ys, electrical energy is universally used by all types of consu mers. Domestically, it is used for ref rigeration, air-conditioning, TVs and for almost all h ousehold applian ces. It is used to small induction motors to li f t water to the overhead tanks. Farmers extensively used it for lifting water

through three-p ha se indu ction motors for the purpose of agriculture. Industriall y, most of th e ma chines that work in the industry are supp lied by electrical energy. The percentage use of electrica l energy by various types of consumers in our country is approximately as f ollows:

1.

Domestic use: about 12%

2.

Agricu lture

: about 30%

3.

In du stries

: about 58%

The electrical po w er may be supp lied to the consumers eith er by a private company or public supply. In most of the developed countries, the s upply of electrical energy is privatized, but in our country. It is through public supply. A.C electrical energy is extensively used as its voltage can be

easily stepped up or stepped down and can not be stored. It has to be generated at a volta ge (11 kV)

and tran smitted at a higher voltage (220 kV or 400 kV) and distributed to the consumers at a lower vo ltage (400 V or 230 V). As the vo lta ge of D.C electrical energy can not be decreased or increased

greatly, it is used only for some special app li catio n. However, it can be stored in small quan tities in

the form of cells and batteries.

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The su pp lying agen cy has to chan ge the consumers supp lying electri ca l energy. The supply of electrical energy cost money and hence, it is necessary to recover these costs from the uses. This recovery must be such tha t, all the costs involved in ge neration, tran smission and distribution of electrical energy is recovered along with a reasona ble margin of profit. The suppl ying au th orities

evolve a scheme for fixing these cha rges, which is known as tariff .

Tariff:

Tariff is the rate of payment of schedule of rates on the energy bill of the consumer is prepa red. There are diff erent methods of cha rging diff erent types of consumers depending on the type of load (do mestic, commercia l or industrial), maximum deman d, time at which load is req uired , power

factor of the load and the amount of energy consumed.

Aims and objectives of tariff

The aims and ob jectives of tariff a re: i) The rates cha rged by the supp lying agen cy must conf orm with the energy received by the consumers. ii) The recovery from the diff erent types of consumers should be equ ita bly distributed among them, except in some cases where special con cession have to be g iven to special type of consumers such as farmers, small scale industries, cottage industries etc.

iii) While f raming the tariff, the su pplyin g agen cies should take into account all the costs involved

from the point of gen erat ion to the point of the consumption. In add ition to gen eration, tran smission and distribution costs, of metering, meter rea ding, billing, bill collection and annual charges on ca pital investment should also be considered.

Classification of costs

The cost of generating electrical energy, its tran smission and distribution can broadly classified as: a. Fixed costs or stan ding costs b. Running costs or variable costs or operating costs

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a) Fixed costs: The fixed costs are those costs which do not vary w ith the operation of the generatin g plan t and the connected equ ipment‘s which generate electrical energy. These costs are independe nt of the number of units of electrical energy generated. This consists of

i)Interest on capital investment : fixed costs are necessary to purchase of machinery and equipment

and repla cement of worn out and obsolete equ ipment‘s. The interest on this capital investment is one of importan t components of the fixed charges. ii) Depreciation: when the building machinery and equipment are used for a number of years. Their value gradually decreases and hence provision must be made to take into account depreciation as a

component of fixed charges. iii) Various taxes levied by the government bot h state and centra l, insuran ce costs also form a

component of fixed cost. iv) Salaries and wages of management people and workers.

v) Small portion of fuel cost and mainte nan ce costs.

b) Running costs vary with the operation of the plan t. They depend upon the number of kWhs generated and hence on the amount of fuel spe nt and other related charges. The runn in g costs comprise of i) Fuel costs: The plan t requires fuel for its operation such as steam, oil or water. Hence fuel cost is one of the main components of runn ing costs. ii) Small part of salaries and wages: su pervisors and operators are required to han dle the operations

and a small part of that is considered as runn ing cost as temporary staff has to be requited to do certa in operation. iii) Mainte nan ce costs: these costs of coolin g water, lubricating oil and the cost of mainte nan ce and repairs to be done as and when required. iv)A dmin istration costs: these costs relate to promotion, legal aspects, engineering aspects and

accountin g charges.

Before finalizing a particula r tariff, all the costs have to be considered in detail before fixing up the costs for the various components of the ta riff . CITSTUDENTS.IN

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Factors governing a tariff:

Determination of the various costs in curred to generate el ectrical energy is not so diff icult but distributing these costs equita bl y to all the types of consumers is difficult. It requires good engin eering ju dgment and ultimately the tariff produced is a huge compromise as it is not possible to satisfy all types if consumers. The following factors are considered in f ra ming a tariff in order to satisfy all types of consumers. i) Maximum or peak demand (M.D): The maximum demand of an installation is the greatest of

the demands that have occurred du rin g a given period of one month or one year which is expressed either in kilowatts (KW) or kilovolt (KVA). It is not the greatest instan tan eo us deman d. It is greatest

average KW or KVA demand during a specif ied period of 1 minu te, 5 minu tes, 15 minutes, 30 minu tes or any suitably relatively small period of time in a month or year. The maximum de man d

determines KVA or KW capacity of the plan t and hence, determines the ca pital investment cost of the plan t. The generator and all the connected apparatus with maximum demand for short duration,

w ithout any adverse eff ects.

ii) Demand factor: The deman d factor of a plan t system def ined as the ratio of the maximum

demand in KW or KVA to the tota l loa d connected to the s ystem.

Maximum demand in KW or KVA . . Demand ‘

factor =

------------------------------------------

Total load in KW or KVA

For ex. Let the maximum demand over the speci f ied period = 1.200 kW and total connected load be 1,500 kW. Then, Demand factor =1,200

-------- =0.8 or 80%.

If the demand factor is more, then the maximum demand on the p lant is more and the fixed charges increase. Hence, the demand factor must be low keep down these cha rges. Low demand factor also

red uces runn ing cha rges. Lighting loads have almost constan t deman d f a ctors, as their rating is fixed. However, the industrial loads change a bru ptly and the demand factor a lso changes. CITSTUDENTS.IN

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iii) Diversity factor (D.F): Diversity factor is def ined when diff erent types of loa ds such as do mestic, power and industria l loads are conn ected to a station which is supp lyi ng electricity to a particular locality. There is

diversification of loads and diff erent types of loa ds are ON during diff erent of intervals of time.

Diversity factor is def ined as the ratio of the sum of all the individual maximum demands of the loads to the simultan eo us maximum demand of all the loads.

Sum of all the consu mer‘s maximum de man ds D.F=

-------------------------------------------------------- = Station maximum demands

E CM D

---------

MD

ECM D

Or M.D = ---------D.F

Diversity factors is always greater then unity. The greater is the diversity factor, less will be th e station ca pital costs and hence less will be the fixed charges on the consumers.

For Ex. Consider a station havin g diff erent types of loads such as lighting load =10 k W, Power load=20 kW, industrial load =50 k W.

Then, E C.M.D. = 50+20+10=80kW But at any point of time, let the maximum power drawn is not more than 50 k W, The diversity factor is given by E CMD D.F= --------- = MD

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iv) Load factor (L.F):

No consumer switches ON all his simultaneously. He switches them ON only for the duration he req uires them. If we draw a graph of the loa d power demand in kW req uired at every instan t during a certa in time interval we get a curve known as the ‗loa d duration curve‘ This curve is drawn for a day i.e.24 hours of a day. Hence, it is called as ‗dail y load curve‘. The area

under the curve gives the energy consumed by the load in kWhs per day. In a similar way ‗monthl y load curve‘ and ‗annua l loa d curve‘ also can be drawn. BEFGHIJ is the regular daily load curve. A rectan gula r curve MCDO is drawn such that the area

under the curve BEFGHIJD is equa l to the area rectan gle MCDO. Then the height OM represents the average demand in kW which is given by Total energy drawn in kWhs Average demand in kW= ----------------------------------

Duration in hours

Area under the curve MCDO .‗.

A.D = ----------------------------------Duration in hours

For the daily load curve, the duration is 24 hours. The load factor is def ined as the ratio of th e

average demand in kW to the maximum demand in kW. A.D in kW . . L.F = ‘

------------M.D in kW

The load factors calculated for a day is ‗dail y load f actor‘. If it is calculated for a month, it is known

as ‗monthly loa d f actor‘ and if it is calcu lated for a year, it is known as ‗annual loa d f actor‘. Average demand per day in kW

Daily loa d factor = ---------------------------------------------Maximum demand during the day in kW

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Average demand per month in kW

Monthly loa d factor = ------------------------------------------------Maximum demand during the month in kW

Average demand per year in kW

Annual loa d factor = --------------------------------------------------Maximum demand during the year in kW

The load factor helps in fixing the runn ing charges i.e. charge per kWh of energy consumed by th e consumer.

Net runn ing costs Cost per kWh = ------------------------------Number of kWhs supplied

Total kWhs supp lied per year = average demand in kW * 8,760 hours = A.D * 8,760 kWhs = L.F * M.D * 8,760 kWhs (as per equation 4.2)

Net runn ing cost . . Cost per kWh = ‘

----------------------L.F *

M.D * 8,760

Form equation (4.3), we find that th e cost per un it decrea ses by raising th e maximum demand. Maximum demand can be increased by in crea sing the L.F.

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From equa tion (4.3), we also find that the runn ing charges can be decreased by raising the maximum deman d. Maximum deman d can be increased by increasin g the consumers, maximum demand, which can be done by suitably staggering the load supp ly to diff erent types of consumers.

v) Power factor (P.F): we know that power factor is given by the ratio of the true power to th e

apparent power. kW = kVA * cos$ true power

When the power drawn remains constant, if the p.f of the system is low, then kVA of the gen erating plan t has to be increa sed. If the generated voltage rema ins constan t, then to maintain constan t po wer, the current drawn by the load increases. This increase in current increases the copper loss (i^R loss) and the voltage drop in the line also increases. Theref ore, the consumers must be

encouraged to improve the p.fs of loads. This can be done by making the fixed charges on the basis of maximum kVA demand instead of maximum kW demand.

vi)Utilization factor (U.F): The utilization factor is def ined as the ratio of the maximum demand on the generating station on the in stalled capacity of the plan t.

Max. demand on the ge nerating station U.F =

----------------------------------------------Install ed capacity of the plan t

The U.F is low; it means that the plan t has been install ed much in advance need. A high value indicates that the plan t is more eff icient. If its value exceed s un ity, it mean s that the plan t is

overloa ded . For redu cin g energy costs, the U.F must be very close to unity.

vii) Plant capacity factor: plan t ca pa city factor is the ratio of actua l energy produced to th e

maximum po ssible energy that the plan t is capable of producing durin g the same period . It can be

also be def ined as the ratio of the rated capacity of the plant.

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Total kWhs generating the a period Plant capacity factor = ---------------------------------------------- = Insta lled capacity *

hours in the period

Average deman d

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Average demand

-------------------Rated ca pacity

Max. demand

= ----------------------- * -----------------Maximum deman d

Rated ca pa city

= Load factor * utilization f a ctor For reducing energy cha rges, the plan t use factor must be more.

viii)

Plant

use

factor:

It

is

th e

ratio

of th e

actua l

enera ge

generated

during

given period of time to the product of the capacity of the plan t and number of hours for which the plan t is actually in operat ion . Total kWhs generated Plant use factor = ------------------------------------------------------------------------Rated capacity of the p lan t in kW * No. of ours the plan t is operation

Requirements of good tariff

The requirements of a good tariff are: i) The tariff sh ould be fair for both supp lies and consumers. It should correspond to the a ctua l cost of suppl ying energy with a margina l prof it

ii) It shou ld be impartial, uniform and must be su pp lied with same conditions to all the consumers of

the same type .

iii) A good tariff must take into account both the fixed charges and the runn in g charges and keep

them as minimum as possible. This can be a chi eved by having diversity factor, due to which the fixed charges are minimized. CITSTUDENTS.IN

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iv) The loa d factor must be more which reduces the runn ing costs. v) A good tariff must be simple so that, the consumer is a ble to understand it and the can be easily prepared. vi) It sh ould encourage the consumer to work their loads at h igh power factors, which reduces th e fixed costs on maximum kVA demand.

vii) The metering equipment must be simple and cheap. viii) There should be separate charges for H.T su ppl y and L.T supply. It should be lower for H.T

consumers than

L.T

consumers, because in the case of H.T consumers, the authorities are relived of

the investment cost on the sub-station equipment cost and its ma intenan ce. ix) A good tariff should promote the cause of socialism, such as supp l ying energy at reduced rates to

poorer and backward sections of the society than the richer sections.

Components of a tariff

Different supp lying age ncies have proposed diff erent tariffs from time to time. However, all of

them have a general formula as given be low: C = Ax + By + D Where, C= Total charges for a certa in period (say one month) X = Maximum demand during that period ( kW or kVA) Y

= Total energy consumed duri ng that period

A = Cost per kW or kVA of maximum de man d. This charge takes care Of the fixed charges B = Cost per kWh of energy consu med. This charge takes care of The runn in g charges D = Fixed charge durin g each billing period. This charge takes care of Service cha rges, surcha rge, tax or any other charge which is Indepe nde nt of maximum

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Types of tariffs

Some of the impor portan t types of the tariff are descr ibed as f ollows:

i) Flat demand rate tariff: The flat demand rate tariff is expressed in the form C=Ax. The bill

depends on only the maximum demand and is in dependent of the energy consumed. This type of tariff is used when the hours of use of loa ds are know in advance such as street lighting, single system, si sign lighting etc etc. the charge is based on the number of lamps insta lled or ed or on the basis of the

total connected load. M eter etering is not required in ed in this type of tariff . ii) Flat rate tariff: This type of tariff is given by the relation C = By. The bill depends only on the

amount of energy con sumed. Charges are made as a simple f lat-r t-rate per te per kWh. Different types of loads are charged at d iff erent rates. Hence, separate energy meters are to be in stalled for ed for diff erent

ters, gey ge ysers, bo il ers etc). The main advantage of types of loads such as lighting, power loads (h eater this method is that, it is very simple and he consumer does not waste any energy. The disadvan tages is that, if the consumer does not use energy for a particular per period, he need not pay any charges and the fixed charges incu rred rred by the supp lyin g agency is not recovered from the consumer.

iii) Step rate tariff: In t his type of tariff, the energy co nsumption is d ivided into d iff erent blocks

and diff erent charges are fixed for diff erent blocks. Earlier, when the electrical energy was available in plenty, to encourage the consumers to use more energy, the rate per un it for the first block of un its is the highest and it decreases for the succeed cceed in g blocks. This type of tariff does not en coura ge conservation of energy. Now-a -da ys, when there is energy crisis, the rate per un it for the first block is the low est and incre crea ses for the su cceed cceeding blocks.

For Ex: The first 100 un its are charged at Rs.1.50 per unit. The next 100 un its at Rs.2.00 per un its and the add itiona l un its may be Charged at Rs.3.00 per un it.

This type of tariff is normally used for do mestic and commercial Consumers.

iv) Power factor tariffs : In this type of tariff, the charges are divided i nto two compo nents. The

f irst co mpo nent is the fixed cha rges which depend on th e maximum kW or kVA de man d. The CITSTUDENTS.IN

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second compo nent is the runn ing cha rge which depen ds on the energy consu med. The tariff is

expressed as C = Ax + By, where A = charge per kW or kVA maximum demand X = kW or kVA maximum demand B = charge per kWh of energy consumed The maximum demand can be taken as a certain fraction of the connected load or measured by a maximum demand indicator. The consumer is not happy about this type of tariff, because he has to

pay the fixed cha rges, even if he does not consume any energy. This type of tariff is normally used for industrial consumers. For such consumers, the fixed charges are charged on the basis of maximum kVA demand rater than maximum kW demand, Becau se kVA

=----and the consumer tries to ma intain a good p.f of his load by installing Cos $ a p.f

improvement device in order to reduce fixed charges.

creases for a v) Power factors tariff: If the consumer loa ds have poor p.fs, the kVA demand incre crease. Due to low p.f, more current flows through the constant kW supp lied . The su ppli er has to in cre system, which incre smissi ssion efficiency decr creas es the copper opper loss and tran smi decreeases. Thus consumers,

who oper ope rate their loads at low p.fs ‗pow er f a ctor tor tariff ‘ is offered to them, which forces the

consumers to improve the p.f of th eir loa ds or pay a pena lt y for oper ope rating their loads at low p.fs. The following are three diff erent types of power factor tariffs offered.

a) KVA maximum demand tariff: In th is type of tariff, the fixed charge is ba sed

on maximum

kVA demand instead of maximum kW de man d. If the p.f of consumer loa d is poor poo r, for a given kW load, the kVA demand incre creas es and hence the consumer has to pay more. On the other han d, the consumer tries to improve the p.f of his loa d by installing a p.f improvement device, which will be

more economical.

b) KWh and kVARh tariff: in this type of tariff, the consumer not only

pays for the rea l energy

consumed i.e.kWhs but also the rea ctive energy kVARh. If the p.f is low, consumer has to pay more

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for kVARh. Hence, he tries to improve the p.f by installing a p.f improvement device due to which the reactive energy kVARh decreases

c) P.f penalty or bonus tariff: in this type of tariff, a cert ain p.f says 0.9 laggin g is taken as th e

reference p.f. If the load p.f is less than this, the consumer is pe na lized . On the other han d, of the p.f

is more than 0.9, he will be rewarded with a bo nu s. Normally, the p.f pena lt y or bonus will be a certa in amount per month for every decrease or in cre crease of p.f by 0.01. This is one form of surcharge levied on the custo mer.

vi) Three-part tariff: This is the only tariff which truly passes on a ll

types of costs in curred rred by the

company to the consumer under all conditions of load. In this type of tariff, the changes are divided into three components and is expressed as

C = Ax + By + D And all these components are expla in ed in ed in section 4.6. the constant A takes care of the charges for kW or kVA maximum demand i.e. fixed charges. The constant B takes care of the charges for the

actual energy consumed i.e. runn in g cha rges. The constant D takes care of the services charges, surcha rges, tax or any other charge charge except maximum demand charges and energy charges.

Vii) Welding tariff: in resistan ce w eldin g and arc welding. Very la rge currents are drawn from th e

supp ly for short duration of time. In spot welding, welding, the welding time is usually less then a second or even may last less than one cycle. The voltage regulation of the system is affected by this and the

neigh bor boring loa ds are a ff ected . The short welding currents may not be recorded and the p.f is also low. Theref ore any type of tariff described will bed will not take into account this instan tan eo us maximum current deman d. In such cases, the tariff is mod if ied to levy extra charges on the rated kVA of the

crea sed for ed for higher kVA ratings, depending on the number of welding equipment. The rate may be incre

welding sets used.

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Choice of electrical power supply:

The consumer may obta in electrical energy from two types of supplies

a)

Public suppl y system or

b)

Private suppl y system or own captive power plant

a) Public supply system: In this type of su pp l y system, the electrical

power supp l y is obtained by

state government owned electricity boa rds. In Karnataka, the state government owned Karnataka

po wer corporation (KPC) generated electrical energy and supplies it to the consu mers though Karnataka

Power Transmission Corporation Limited (KPTCL). The consumers prefer public supply

system because of the following rea sons: i) The management of a company can concentrate entirely on its own business, since it is completely relieved of the responsibilities of ge neration and distribution of electrical energy.

ii) Ample overload capacity is available and any expan sion of the company can be taken up without prob lem as and when required. iii) One of the distinctive features of public su pp ly system is reliability of the supply. The power

shut down is occasiona l and that too for a few hours only. iv) The electrical energy supp lied by a public suppl y system is reasona bly cheap and hence is more economical. v) The space for setting up a sub-station in the industrial premises is very small as compared to setting up a captive power plan t.

vi) During operations at light loads, the energy from public su ppl y s yste m.

b) Own captive power plant: There are certa in circumstan ces, when generating electrical energy from a captive po wer plan t i.e. private gen eratin g plan t i.e. private gen eratin g plan t has certain

advantages. The various such circumstan ces are:

i) Exhaust steam: In certain industries such as paper mills, textile mills,

sugar mills, chemical

industries etc. steam generated at a high pressure is used. The exhaust steam after bein g used for the CITSTUDENTS.IN

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various processes can be used to drive stea m turbines which from prime movers for alternators generatin g considerable amount of energy.

ii) Industrial wastes: The industrial wastes can be used to generate electrical energy. For Ex. In steel industries, coke-over-gas and blast f urna ce gas having high calorific values come out as

byprod ucts. These gases can be used to run gas engines, which in turn run generators directly to generate electrical energy. The gases can also be burnt in boilers to generate stea m, which can be

used to run steam turbin e driven generators to generate electrical energy. In sugar industries, the lef t over sugarcane waste can be crushed and burnt in boilers to produce ste am, which can be used to generate electrical energy.

iii) Low grade oils: Collieries sometimes use low gra de, unsa la ble oils for burning in boilers

generatin g steam which can be used for generatin g electrical energy. This energy can be used for coal cutting, coal hau la ge and transport. Diesel also can be used to generate electrical energy, where power requ irements are less than 500 kW.

The capt ive generation of power has two advan tages i)

The captive generation of electri cal energy becomes inevita ble, where the public supply

system imposes regula r power cuts, as the product ion should not suffer. ii)

During power crisis, the generated energy can be supp lied to the public supply company and

make a reasona bl e amount of money also.

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PART - B UNIT – 5 Choice of plants and economic selection 

Choice of plants and economic selection



Factors to be considered in selecting equipment

 Methods of selection.

Introduction: When we want to purchase equipment‘s and materials for prod uction in a plan t, several a lternatives

will be available. Each of these will have certain special features and qualities. After considering a ll he aspects, u ltimately, the choice between alternative types w ill be the relative costs of various equipment‘s and material. The best choice w ould be that eq uipment, whose initial cost in minimum

and annua l fixed charges and running Charges are minimum. Normally, the annua l fixed charges and runn ing charges are minimum, when

initial costs of equipment‘s are more. One of the important criteria for selection of equipment its techn ica l f eatures. However, before making the final selection, we have to consider economic aspects also. For Ex. Silver is the best

conductor in the world, but we can ‘t use it for tran smission of electrical power as it very costly and not available in the required quan tity. Either copper or aluminium is used, as they are cheap and

reasona bl y good conductor also. An electric motor of a particular type and size of lower operating efficiency will usually costs less than a similar motor of higher efficiency. For the first motor, fixed

annual charges are less, but the runn ing costs will be less. Ultimately, the choice will be on the motor, whose annua l cha rges are less. Theref ore, bef ore selecting equi pment for plan t, several

factors have to be con sidered in add ition to its performance cha racteristics. Factors to be considered in selecting equipment The various factors that required in selecting equipment are: a. First cost CITSTUDENTS.IN

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b. Performance cha ra cteristics c. Output or rating d. Labo ur costs e. Fuel and power requ irements f. Eff iciency g. Cost of repairs and ma inte nan ce h. Freedo m from breakdown i. Toleran ces and allowances j. Safety and f lexibility k. Ease of operation l. Floor space a) First cost: first cost is the invest ment required for the purchase of the equipment which in cludes t he

transportation charges and a lso installation cha rges. This first cost must be as minimum as possible,

but the performance qua lities of the machine are also importan t. Low cost equipment may not be efficient, may give poor performance and incur high costs for maintenan ce and repairs. Normally, the investment of equipment‘s is taken in form of loan form banks. The annua l charges include investment on first cost the depreciation . b) Performance characteristics: diff erent eq uipment‘s are req uired for do i ng diff erent types of jobs

in plant. The equ ipment purchased must satisf y all the perf orman ce chara cteristics required for doin g pa rticular job. Therefore, we must know the performance cha racteristics of the equipment are required in advan ce. For Ex. For most of the industrial need s, we requ ire a constant speed motor. Th eref ore

three phase indu ction motors are used. If motor is required for runn ing train s, high

starting torque motors are required for which D.C series motors are us ed. If motors are required for improving the p.f of a system, synchronous motors are used.

c) Output or rating: the rat ing of any ma chine always refers to its full load o utp ut. The rating of

alternators and transformers are rated in kVA. The D.C generators are rated in KW. The three phase indu ction motors are rated in H.P or kW. The conductors are usually in terms of their current CITSTUDENTS.IN

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carrying ca pa city. The cost of any mach in e depends on its rating. Theref ore, we must know in

advance the required output and accordingly the ma chines of req uired rating must be purcha sed. There is no po int in purchasing equ ipment of either lower capacity or h igher capacity, than what is the required.

d) Labour costs: diff erent types of ma chines used in a plan t require diff erent operators having

necessary skills. The ma chines become useless, if they are not operated by skilled operators. If

skilled la bo ur is not available, the operator selected must be tra ined properl y before putting them on work with the mach in es. Therefore, we must have sufficient kn owledge about the type of labour requ ired, the cost of labo ur involved, the probable increase in labo u r cost in future and the type of training required to g iven to the labo ur. e) Fuel and power requirements: for operating the ma chines, fuels and electrical power are required

and they must be easily available. Before installing any ma chin e, we must the cost of fuel and power required and all arrangements must be made so that, they are readily available for use. f) Efficiency: the machine purchased for a plant must have good efficiency as they reduce losses and

output is more, the cost of prod uction is reduced and ma rgin of prof it increa ses. However, the cost of high efficient mach in es is more. Most of machine work at a higher efficiency near about full load

and their efficiency will be very small at low loa ds. Therefore, as far as possible, the mach ine must be always used at t h eir rated output. g) Cost of repairs and maintenance: if the ma ch in es go out of order frequently, the prod u ction w ill

suffer and cost of repairs and ma intenan ce will be increase. The cost of repairs and ma intenan ce

must be known in advance and they must be minimum. Care must be taken to reduce the costs of repairs and mainte nan ce by keepin g the standard parts of the machines always in stock so that,

whenever they are required, they can be easily replaced. The machines must be properly lubricated in time and lu bricating oils must be always kept in stock.

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h) Freedom from breakdown: there shou ld not be any breakdown of ma chines as th ey eff ect

prod uction. If breakdo wns are inevita ble. They should be kept to a minimum. When such breakdowns occur, the ma chine should be repaired immediatel y and put to use.

i) Tolerances and allowances: the durability and reliability of the ma chine largely depends on the

accuracy w ith w itch the parts of the ma chines are manu f actured and assembled.

Th eref ore

th e

toleran ces and allowances of the parts must be minimum. If they are more, the ma intenan ce, repair

and operating cost will increas e. The ma chines will work with low efficiency and the w earin g out the machines will be a ccelerated . j) Safety and flexibility: th e ma chin es purc ha sed for a plan t must be flexible in their operation.

Hence, care must be taken while purcha sing th em. The selection must be made among the general

purpose, special purpose and combination of these machines.

There must be safety to the operators while working. The ma chines must be f itted w ith saf ety devices, so that, when ever disturban ces occur on the ma ch in es, the supply is cut off and the ma chines stop working so tha t, there are no human hazards during operation. k) Floor space: the ma chi nes purchased for the plan t should not be unnecessarily la rge sized. They

should be as compact as possible, so that, the floor space is redu ced. This reduces the cost of the workshop, cost of la bo ur and installation also. l) Ease of operation: the ma chines insta lled in the must be easy to operate, service and repair.

m) Other factors: in addit ion to taking into consideration, all the factors described, while select ing

suita ble equipment for a plan t, costs relating to depreciation, insuran ce costs, taxes, sa lvage value

etc. must a lso be considered. Methods of selection:

Before bu ying any ma chine or equipment‘s, it is clear that, the overall costs involved in buying transportation. A performance characteristic, ease of operation, period of operation, ma intenan ce CITSTUDENTS.IN

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and repairs etc. the highly efficient ma chine may have more initial cost but reduces runn ing costs. A less efficient mach in e may have lower initial cost but runn ing charges will be more. Ultimately, the final economic choice depends on the minimum overall annual cost. Considering all possible expe nses. We have several methods available for this cost comparison. They are: i) Annual cost basis ii) Present worth basis iii) Unit cost basis iv) MAPI method v) Pay back period method vi) Rate of return method

We shall discu ss each one of these method in deta il. 1. Annual cost basis: This method is also known as yearly cost basis or cost per year basis. In this

method, all the items of expenditure are calcu lated on annua l cost basis for various alternative

equipments available for selection. The equipment which has the least annual cost will be

recommended as economic choice. The various annua l costs considered a re: a) Interest on the ca pital (I) =Ci Where, C=capital cost or first cost I=rate of interest

per annum

b) Depreciation annual charges (D): A fixed amount is deposited in a bank every year in a bank equal installment. So that at the end of the life of the eq uipment. We have the ready amount to purchase a new equipment .the annua l depreciation deposit, as per sinking fund method of calculation. Is given

by D=Ai / (l+i)-l=(C-V) i / (l+i)-l Where, D=annual depreciation deposit CITSTUDENTS.IN

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C=capital cost of equipment

V=salvage value of equi pment after L year L=period in years I=rate of interest on sinking fund deposits

Then, C-V=A=Total depreciation deposit for L year

Using equation (6.2), we can also find the book value of the equ ipment at any time of its life, For Ex. The book value of the equipment after x years of its life is given by Vx=C-Ax

Where Vx=book value x years Ax=total depreciation deposit for x years At the end of 6 years, the book value of the eq uipment is given by V6=C-A 6

Where, V6=book value after 6 years A6+depreciation deposit for 6 years

c) Annual ma inte nan ce cost (M) All equipments req uire mainte nan ce and repair work, when there is some prob lem. Therefore,

every year, some amount has to be spent on ma intenan ce and repairs. This cost is also known as operating cost. d) Annual cost on taxes, insuran ce etc. (T) The state and centra l government taxes have to be paid on the products produced and insurance

costs have to be paid towards equipment every year.

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e) Annual losses costs (L) The annual operating cost also depends on the efficiency of the equipment. If the losses are more, the costs involved due to these losses in the year are known as annua l losses costs.

The total annual cost of any equipment is given by the sum of all the above annua l costs Total annua l cost= I+D+M+T+L The tota l annual cost of all the equipment‘s is ca lcu lated and the eq u ipment with the lea st annual

cost will be selected as the most econ omica l choice. This method of comparison has of the following a dvantages. x

The calculations are simple.

x

Depreciation deposits are considered

x

Annual a ccoun ting becomes very easy

2. Present worth method:

This method is also known as ca pitalized cost method. In this meth od, every ite m of expe nditure is

converted into its present worth. The first cost, mainte nan ce costs, repair costs, sa lvage value and others are transformed their toda y‘s money value. All the present and future expenses are converted into their ca pitalized values. In this method, the entire expe nditure on the eq uipment is set aside at

the beginn ing itself for its life time operation. While comparin g tow equipment‘s to the economic choice, all the cost on the both the machin es are

converted into their present worth assu ming that both the eq u ipment‘s will be for equal length of time. Su ppo se, there are two ma chines A and B which are to be compared for an economica l choice. L et

life of machine A is 10 years and that of B is 20 years. Then the period of comparison be made for 20 years. In that case, two mach in es of the type A are req uired, one at the beginn ing and an other after 10 years.

The calculation for each ma chines are done as f ollows: CITSTUDENTS.IN

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i. present worth of the first cost C=C itself ii. present worth of mainte nan ce costs: Let Rs.

M=ma inte nan ce cost per year

The present worth of M required for L years of services for end of year deposits is given by

P=present of M=m / i[(l=i)l-l / (l=i)l]=m / i[l-l / (l=i)l] In a similar way, the present worth of annual taxes, insuran ces can be ca lculated. iii. Sometimes the life of the machine is purchased is less than the years of service required. At the end of life of first machin e, a new ma chine has to be brought. The present worth of the second machine is calculated as follows. Present worth of the first ma chine=P1=f irst cost Lif e of the first ma chine=l years

Salvage value of the equ ipment=V

Then the present worth of the second machine required after L years given by

P2=P 1-V / (l=i)2l Then, the tota l present worth of all such mach in e is given b

P=P1+P 2+P3+….. i)

The present worth of the sa lvage value of the ma chine is given by, VP=V / (l+i)

l

However, the present worth of the sa lva ge value s hould be considered as an ite m of income, not as expe nditure. The some of the present worths of all the above items of expe nditure are calculated for the various ma chines to be compared. The ma chine for which the present worth is minimum is

recommended for purchase.

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The advantages of this method are:

This method gives an idea of the total cost of the equipment concern ed

for its entire life. No

depreciation deposits are required to be made at end of each year.Any change in the operatin g cost does not the comparison becau se, the change same for all machines. The disadvantages of this method are:

i)

Calculations are ela borate , though simple.

ii)

When more than one ma chine is requ ired, the calculation of present worth for the first machine is O.K but for the subsequent ones, it changes.

iii)

Factors like obsoles cence and ina deq ua cy are taken into account.

3. Unit cost basis:

This method of comparison is app lica ble for purc hasing articles which have a relatively short span of life and not very costly and which can not be compared on time basis. For Ex: electric lamps, Batteri es Th ese

etc.

articles have to be rep laced f requentl y and the frequency of the repla cement depends on t h e

number of hours, the article is put into use. The un it of comparison may be the un it of output such as watt, watt-hour or ampere-hour. It may also be cost per element of a set of articles of the same kind. In the case of this articles, the interest compo nent is negligible as the f irst compared to depreciation because th eir short span of lif e. For comparison of such articles, the first cost, cost of its use for a given length of time which is usually in hours and other related changes are determined. Then the cost per unit is determined for various alterna tives and whichever is cheaper in overall cost is recommended for purchase. 4. MAPI method:

MAPI is the a bbreviation of Machinery and Allied Products Institute of Wash ingto n D.C. This new

method of comparison was developed by George Terborgh, the director of the institute. According

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to th is method, the equipment which gives th e minimum adverse cost is to be selected for rep la cement. This method takes into consideration, the following aspects regarding the cost involved. i) All the equ ipment‘s deteriorate in one form or other over a period of time of use and rate of deterioration increa ses with time of use. ii) The equipment‘s are likely to become obsolete or suffer from ina deq ua cy or bot h.

In other methods, the above two factors are considered in the form of depreciation of the equipment. As the ma chine is in use, it suffers form operation inferiority, which brings down its book value. This method of comparison used when an old machine has to be replaced by a new ma chine and

cost comparison has to be made among the new machines. To find out the minimum adverse cost of various alternatives, th e important f actors considered in this method are (i) ca pital cost and (ii ) operating inferiority cost. The minimum adverse cost of all the alternatives is calculated u sing th e

above tw o f actors and whichever mach ine gives the min imum adverse cost, is selected as the economic choice. The old ma chine which is existing and which has to be rep laced is called the defender and the new ma chine rep la cin g the ol d machine is called the cha llen ger. The minimum adverse cost for both the

defender and the cha ll enger is ca lculated and the defender is repla ced by the cha llenger, only if th e adverse minimum cost of the latter is less than that of the former. When rep la cement is required, then the minimum adverse cost of the available a lternatives is calcu lated and the one which has the minimum adverse cost is selected for repla cement.The curve CC‘ shows the way in which the

ca pital cost of the equi pment decreases with time. The curve EE‘ shows the way in which the working inferiority expe nditure on the eq uipment in creases with time. Both the curves meet at point P at which the net cost is minimum. This is determined for all the alternatives available using MAPI

method whichever a lternative give the lea st of all these minima is selected as the best alternative for rep la cement. The ca lculations involved in MAPI method are very complex cumbersome and sop histicated. However MAP I-charts and work sheets are available for use. 5. Pay back period method:

This method h elps to determin e the period in years. At the end of which the equipment pays back the invested ca pital. CITSTUDENTS.IN

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Let C=capital invest ment

R=annua l prof it after ded ucting the taxes Lp=pa y back period in years

Then, Lp=C / R This method is not normally used for comparison as it has the following disadvan ta ges. does not consider insuran ce costs, interest charges and mainte nan ce charges.

i)

It is not reliable as it

ii)

It

does not take account the allowances for depreci ation and obsolescence.

iii)

It

is assumed that, the prof it and taxes will be same every year, which is not correct. During the

initial years. The prof it will be less than the later years. 6. Rate of return method:

In this method, the average net income per year, af ter ded ucting the taxes and allowan ces for depreciation, is expressed as a percentage of the ca pital investment.

Percentage rate of return= Net income per year / Net investment*100 The percentage rate of return is calculated for all the a lternatives and the a lternative for which the

rate of return is selected for replacing the old machine. All the expected earnings over the years and salvage value are converted into their present worths

usin g the formula, C=Rn / (l+r)n=R1 / (l+i)1+R2 / (l+i)2+R3 / (l+i)3+…Rn / (l+i)n+V / (l+r)n

Where, C=investment cost or present w orth Rn=expected return in the nth year

r=rate of return R1=return for the first year R2=return for the second year etc.

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V=salvage value of the equipment after n years The disa dvantage of this method is that the rate of return ‗r‘ can not be determined exactly. This can be determined only by trial and error method ‗r‘ is compared with the rate of interest

‗i‘

if r>i, th e

new mach in e is worthy of buying to rep la ce the old. If r
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UNIT – 6 & 7

 Interior 

wiring s ystem,

Wiring system, earthing,

 Estimatio n of wiring

installation.



Power installation, Loa d ca lculation



Wire size selection , wiring materia ls for power circu its

 Estimate

for motor installation, pump set, workshop, theater etc.

Introduction

Before any electrical pro ject is initiated, it is essential to list out the materia ls required and compute

the cost involved for completion of that work. Thus estimation con sists of two parts; (a) Prep aring list of various items involved and (b) Calculating the cost of materia ls and labo ur cost involved for executing the work. The quan tity and specification of various materia ls requ ired for installation work writte n in a ta bula r form is called schedule of materials.

Graphical symbols for diagram

In engineering draw ing it is common pra ctice to employ gra phical s ymbo ls to represent various compo nents. In order to get the same mean in g to every one who reads the drawing, symbo ls are stan dardized by Bureau of Indian Standards (BIS). As far as possible these s ymbols are agreed w ith

the convention adopted by the Internationa l Electro Technical Commission. An importan t criterion in the selection of symbol is that, as far as po ssible, they should be self explana tory and easy to draw. Standard values of voltages

For the sake of complete ness, all the standard values of voltages given in IS: 585 – 1962. Single phase, two wire system – The standard voltage shall be 240 V Three phase system -415 V, 3.3 kV, 6.6 kV, 11 kV, 22 kV, 33 kV, 66 kV, 110 kV, 132 kV, 220kV and 400 kV.

The standard dc voltage shall be 220 / 440 V CITSTUDENTS.IN

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Voltage limits for AC system

The volta ge at any po int of the system under n ormal conditions shall not depart fromthe declared vo ltage by more than the values given below; x

6% in the case of low (250V or less) or medium (251 to 650 V) voltage

x

6% in the higher side or 9% on the lower side in case of High voltage (651 V to33 kV

x

12.5% in case of Extra High volta ge ( above 33 kV)

Distance from Electric Lines

No buildin g shall be allowed to be erected or re- erected , or any a dditions or a lterations made to t h e existing buil ding un less the following minimum clearan ces are provided from the over head electric supp ly lines. Vertical Horizontal

(a) Low & medium Voltage lines 2.5 1.2Up to and including 11 kV 3.7 1.2 (b) High voltage lines above 11 kV up to and including 33kV3.7 2.0 (c) Extra high voltage lines 3.7 2.0Note :- For extra high volta ge lines apart from the minimum clea ran ce indicated , a vertical and h oriz ontal clearan ce of 3.0 m from every a dditional 33 kV or part

thereof shall be provided. Wiring Installations

A ma jor portion of the fixed installation design in a buil ding relates to wiring installation. Fittings

and Accessories

•A ceiling rose or any other attachment shall not be used on a circuit, the voltage of which normally exceeds 250 V.

•Each 15 A socket outlet provided in building for the use of domestic applian ces such as AC, water cooler etc.

•Each socket outlet shall be controlled by a switch which shall pref era bl y be located immed iatel y ad ja cent thereto or combin ed therew ith.

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•Ordinary socket outlet may be fixed at any convenient pla ce at a hei ght above20 cm from the floor

level. In a situation where the socket outlet is accessible to children, socket outlet which automatically gets screened by th e with drawl of plug is preferable.

•In an earthed system of supply, a socket outlet w ith plug shall be three pint types with th ird termina l connected to ea rth.

•All lamps unless otherwise required and suitably protected , shall be hung at a height of not less than 2.5 m above floor level •Unless oth erwise specified, the cl ea ran ce between the bottom most po int of the ceiling fan and th e

floor shall be not less than 2.4 m. the minimum clea ran ce between the ceiling and the plan e of the blade shall be not less than 30 cm.(6.2) Reception and Distribution of Main Supply •There shall be circuit breaker or a linked switch with fuse on each live conductor of the supply

mains at the po int of entry. The main switch shall be easily a ccessible and shall be situated near to

the termination of service line. •Branch distribution board shall be provided with a fuse or a miniature circuit breaker (MCB) or

both of adequate rating / setting. •Light and fans may be wired on a common circuit. Such sub-circu it shall not have more than a total

of 10 points of light, fan and 5 A socket outlets. The loa d of such circuit shall be restricted to 800 Watts. Power sub-circ uit shall be designed according to the load but in no case shall there be more

than two 15A outlets on each sub-circu it.

•The load on any low voltage sub circuit shall not exceed 3000 Watts. In case of new installation, all circuits and sub-circuits shall be designed by makin g a provision of 20% in creas e in load due to any future mod if ication. •The distribution fuse board shall be located as near as possible to the center of the load. Th ese shall

be fixed in suitable stan ch ion or wall and shall not be more than 2 m from the floor level.

•All conductors shall be of copper or aluminium. Conductor for final sub-circuit of fan and light wiring shall have a nomina l cross sectional area not less than 1Sq. mm copper and 1.5 Sq. mm aluminium. The cross sectiona l area for power wiring shall be not less than 2.5 Sq. mm copper, 4 CITSTUDENTS.IN

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Sq. mm aluminium. The minimum cross sectiona l area of conductors of flexible cord shall be 0.5 Sq.mm copper.(6.3) Conduit wiring

•Rigid non-meta lli c con duits are used for surface, recessed and concealed conduit wiring. Conductors of ac supply and dc supply shall be bunched in separate con duits. The numbers of

insulated cables that may be drawn in to the con duit are given in table. Maximum permissible

number of 1.1 kV grade single core ca bles that may be drawn into rigid non metallic con duits Earthing Earth in g

or groun ding mean s conn ecting all pa rts of the apparatus (other than live part) to the

genera l mass of earth by wire of negligible resistan ce. This ensures that all parts of the eq uipment

other than live part shall be at earth potential (ie, zero potentia l) so that the operator shall be at earth potentia l at all the time, thus will avoid shock to the operator. The neutral of the supply system is also solidly earthedto ensure its potentia l equa l to zero. Earth in g shall ge nera lly be carried out in accordance with the requirement of Indian Electricity Rule 1956, particularly IE Rules 32, 51, 61,

62, 67, 69, 88(2) and 90.

•All med ium voltage equ ipment shall be earthed two separate and distinct conn ections with eart h through an earth electrode. In the case of high and extra high voltage the neutral point shall be earthed by not less than two separate and distinct conn ections.

•Each earth system shall be so devised that the testing of individual earth electrode is possible. It is recommended that the value of any earth syste m resistan ce shall not be more than 5Ω, unless otherwise specified. •Under ordinary conditions of soil, use of copper, iron or mild stee l electrodes is recommended . In

direct cu rrent syste m, h owever due to corrosive action, it is recommen ded to use only copper electrode . Use similar materials for earth electrode and earth conductors to avoid corrosion. Design data on earth electrode Standard earth electrode s are;

(a) Road and pipe electrodes, (b) Strip or conductor electrode s, (c)Plate electrode s, and (d) Cable sheaths.

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Type of Electrodes Measurement Rod Pipe Strip Round conductor P late D iameter(n ot less than )16 mm(Steel orGI)12.5 mm(copper)38 mm(Steel orGI)100 mm(CastIron)Len gth / Depth of burial (not lessthan)2.5 m(ideal 3 to 3.5 m)2.5 m 0.5 m 1.5 m 1.5 mSize - -25 x 1.60mm(copper)25 x 4(Stee l

orGI)3.0 Sq. mm(copper)6 Sq. mm(Steel or GI)60 x 60 cm Thickness - - - -6.30 mm(copper)3.15 mm(Steel orGI)(7.2) Design of earth el ectrode Ea rth resistivity, ρ= 2πSR -mΩ, where S = distan ce between successive electrode in m, R = earth megger readin g in

Permissible current density for 3 sec;

Copper = 118 A / mm Aluminium = 73 A / mm Steel (GI) = 46 A / mm

Current density permissible at an earth electrode ,

Domestic Electric Installations and Estimates

Domestic dw ellin gs / Residential buildings include any bu ildin gs in which sleeping a ccommodation

is provided for norma l residential purpose with cooking and dining f acilities Estimation of load requirements

The electrical installation in this area mainly consists of lights, fans, electrical app lian ces and oth er gadgets. In estimating the current to be carried, following ratings are recommended.

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Number of points in branch circuit

Recommended numbers of po ints for dwelling un its is as follows

Number of socket outlets

Recommended schedule of socket outlets for various sub-un its are as follows

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Recommended levels of illumination

Domestic wiring •Balancing

of circuit in 3 phase installation shall be plann ed before han d. It is recommended that a ll

socket outlets in a room are connected to one phase. •Power sub-circuits shall be kept separate and distinct from light and fan sub-circuit. All wiring

shall be on the distribution system with main and branch distribution boards conveni ent physical

and electrical loa d centers. •It is recommended to provide at least two li ghting sub-circu its in each h ouse. Separate lighting

circuits be utilized for all externa l lightings of step s, walkways, porch, car park terrace etc. with two

way switch control. •Whatever the loa d to be fed is more than 1 kW, it shall be controlled by an isolator switch or MCB

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•Switch boards shall not be erected above gas stove or sink or within 2.5 m of any washing un it in

the wash ing room.

•A switch board shall not be installed at height less than 1.25 m from floor level, un less the front of the switch board is completel y enclosed by a door

•Energy meters shall be insta lled at a height where it is conven ient to note themeter reading; it should pref erably not be insta lled at a height not less than 1m from the ground. Sequence to be followed in carrying out the estimate Wiring layout: Prepare building plan on a suita ble sca le and mark electrical points, switch boards,

main board, meter board, distribution board etc. on the plan using specif ied symbols. The path of

wiring sh owing conn ecti on to each po int is marked by a little thick line.. Calculation of total connected load: The total conn ected load and hence the total current is

ca lculated for deciding the cable size, rating of main switch board and distribution board. Selection of Main Switch: Once th e conn ected load is ca lculated , th e main sw itch can be

convenientl y selected from the available stan dard sw itch list. List of standard Iron Clad main switches for do mestic purpose:

DPIC (Double Pole Iron Clad) main switch: or 30 A, 250V or DPMCB(Double Pole Miniature

Circuit Breaker): 5, 10, 16, 32 and 63 A, 250 Vb) TPIC (Triple Pole Iron Clad) main switch: 30, 60, 100, 200 A, 500 V or TPMCB (Triple Pole Miniature Circuit Brea ker): 16, 32 and 63 A, 500 Beyond this TPMCCB (Triple Pole Molded Case

Circuit Breaker): 100,200, 300 and 500 A, 660 Vc) TPN ma in switch: 30, 60, 100, 200, 300 A, 500 V or TPNMCB: 16, 32,63A, 500 V, beyond this TPNMCCB: 100, 200, 300, 500 A, 660 V.4. Selection of Main Distribution Board: The Main Distribution Board is a fuse box or MCB box

where diff erent sub-circuits are terminated . Numbers of sub-circuits are decided based on the tota l

connected loa d or tota l number of po ints. Assumptions: the con ditions which are not specif ied in the

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question maybe assumed conveniently. Eg:- location of main switch board, switchboards, height of building. Calculation of length of conduit: To avoid duplicity in calculating the length of conduit pipe, t his

may be cal culated in three stages. (a) The con duit install ed from switch board up to horiz onta l run (HR) including from main switch or DB to HR. (b) The conduit on walls runn ing parallel to the floor ie, the HR below ceiling. (c) The conduit installed between HR and ceiling, alon g ceiling and ceiling to last po int on HR.

The tota l length of conduit is ca lculated by a ddin g the len gth of conduit to obta in from the three

stages and including 10% wa stage. Calculation of length of phase wire and n eutra l w ire: The phase wire and n eutral wire is ca lculated sub-circu it wise. Once it is calcu lated , wastage of 15% is included.8.

Calculation of length of earth wire: The earth wire is run along the conduit. The calculations are carried out in length but it is converted into weight while prep aring material. Preparing Material Table: The materia l table s hould be prepared with co mplete specification of

each item. Current rating of copper conductor single core cables

Power distribution in an industry

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•Sub Switch Board (SSB) level •Distribution Board (DB) levelDB is the last element before the loads. But large loads are directly

connected to SSBor MSB. DB / DFB (Distribution Fuse Board) / FDB (Fuse Distribution Board)

�Usually even numbers of ways are used in DBs (2, 4, 6, 8, 10 and 12). As per IS the maximum

number of ways is limited to 12.Eg:- 12 way 3 ph DB = 4 x 12 = 48 cable conn ection including n eut r a l . �Usual current rating of DB s are : 16A, 32A and 63A

� 63A, 12 way DB s are not common. Since maximum input current = 63 x12 = 700A, which is not ssible to han dle by possi b y a DB. Hence 63A DB is 2 ways or4 ways. Motor loads up to 20 hp are fed from DB s of various rating.

� All DBs have isolator to r or SFU as incomer switch. But in some case this isavoided if the switch

board supp lying to the DB is within 3m from the DB �In a de signed system 20% spare o utlets are kept for future expan sio n. ie, inea ch DB, 1 or 2 outlets

shall be kept as spares. Selection of rating of incomer isolator/SFU and incomer feeder size

In any system, all the connected loads will not be put on simultaneously. This reduces the maximum computing by add in g all connected loa ds. The maximum demand is expressed demand from simply co tor, through a factor called ‗Diversity Fa ctor Sum of connected load Diversity Factor (DF) =Si multan eo us max. Demand (MD)>1

ils of connected loa d on each DB areknown to us. For spare From the requirement data, the details

outlets, an average of other outlets can be assumed.

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�If the DF is known, we can find the maximum current req uirement of the DB to feed all loads

including spares. Instead of furnishing the DF, a usual pra ctice is specifying MD. A commonly

accepted and safe value of DF is 1.5. This value can be assumed for each DB tor / SFU, the startin g �If motor loads are conn ected , for selection of isolator

Grading or Discrimination between Feeder Fuse and DB Fuse

The feeder to a DB will be fed from an SSB or MSB. This feeder will be protected by the HRC fuse in the SSB or MSB. It is necessary that the otective fuses hold not blow off before the the feeder protec otective fuse in the DB. This is achieved by proper grading between the fuses. The fuse of motor protec SSB / MSB is denoted as ma jor fuse and that of DB is termed as min or fuse. For achieving grading

the ratio between ma jor and min or fuses shall be 2: 1 or more eede r cable is selected by ted by consider derin g the 20% excess of the MD of DB. Also ma jor fuse rating �F eeder should match with the cable selection. �If the ca ble length exceeds 75 to 100 mtr, the voltage drop condition sho uld betaken in to a cco ccoun t.

The volta ge drop in the feeder shou ld not be more than 3%in the maximum demand con dition.

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Design of incomer SFU, Cable size and Bus bar rating for SSBs and MSBs

ters w ith SFUs / MCCBs / ACBs / OCBs for Switch boards in ge neral are po w er distribution center controllin g outlets and incomer. Unlike DBs, swit chboards are spec pecif ied by ed by its total current carrying capacity or incomer current rating. Where as in DBs current rating of the outlet is the specified

rating. Standard switchboard ratin gs are 100 A, 200 A, 400 A, 800 A, 1200 A, 1600 A, 2000 A, 2500 A and3200 A. If the incomer supp ly is controlled with an SFU, the switch board is called switch fuse controlled board and if the incomer is ACB / OCB controll ed, it is called breaker

controlled board. ed board. �A switch board having three sections �Outlet control gears

�Bus chamber �Incomer control gea r

The outlet switch, fuse and cable rating are dec decided by the loa d that has to be han dled through tha t eeder. If the number of loads is more, SSB is requ ired, which is insta lled a lmost at the load center ters. f eeder In smaller set up SSB may not be necessary and MSB will be the only switch board. Consider the setu p:-

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For 63 A and 100 A respective rating of switch and fuse are available. �For 80 A, 100 A switch with 80 A fuse may be u sed, since 80 A switch is not available. �For 40 hp motor with star-delta starter •Starting current = 40 x 1.4 x 1.5 = 84 A Theref ore 100 A switch and fuse are used

Spare is taken as 100 A

Total out going fuse ratin g = 63 x 2 + 100 x 3 + 80 = 506 A DF of 2 is assumed The MD will be = (506 / 2) = 253 A Taking 20 % extra, the maximum current requirement = 303.6 A say, 300 A Hence the incomer switch and fuse shall have a rating of 300A is used. If 300A switch is not available, 400A switch

with 300A fuse can be us ed. The incomer cable is also rated for 300A.

But in th is case, instea d of 56A (40 x 1.4) continu ous current of 40 hp motor, we have taken 84 A and fuse of 100A. Considering all these, a practical and most econ omica l selection is 250Aincomer.

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Since the incomer fuse is 250A, any fuse on the outlet greater than 125A will grade with 250A. Here maximum fuse rati ng is100A and gradin g is automatically satisf ied

with 300A fuse can be us ed. The incomer cable is also rated for 300A.

But in th is case, instea d of 56A (40 x 1.4) continu ous current of 40 hp motor, we have taken 84 A and fuse of 100A. Considering all these, a practical and most econ omica l selection is 250Aincomer. Since the in comer fuse is 250A, any fuse on the outlet greater than 125A will grade with 250A. Here maximum fuse rati ng is100A and gradin g is automatically satisf ied. Next step is finding Bus bar size.

Bus bar materia ls a re: •Aluminum or Aluminium alloy – working current density, 0.8A / Sq.mm •Copper – working current density, 1.2 A / Sq.mm

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•For the above set up: -

250 / 0.8 = 312.5 Sq. mm

For n eutral bus bar, half the size of phase bus bar size is suff icient. ie, 40 x 8 mm or 50 x 6 mm Al bus bar may be used for phases and 20 x 8 mm or 25 x 6 mm for

neutral .Or31 x 6 mm Cu bus bar may be used for phases and 31 x 3 mm for neutral. For small switch boards the distan ce between the bus supports will be 50 cms.

Used for phases and 20 x 8 mm or 25 x 6 mm for n eutral. Or 31 x 6 mm Cu bus bar may be used for phases and 31 x 3 mm for n eutra l.

For small switch boards the distan ce between the bus supports will be 50 cms. If DF is not given, we can assume, DF as 2 for all switch boards. The term ampacity is some times used to denote the maximum current ratin g of the f eeders. If DF is not clearly known, the tota l ampacity of outlet f eeders shall not be more than tw o times the

ampacity of the incomer feeder. The feeder cables need to be selected for the fuse used in the SFU

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UNIT - 8 

Depreciation and valuati on of machinery

 Inventory, Eco n omic 

order quan tity

break-even analysis

Depreciation refers to two very diff erent but related con cept s:

The decrease in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used (depreciation with the match ing principle).

The former affects values of businesses and entities. The latter affects net in come. Generally the cost is allocated , as depreciation expen se, among the periods in which the asset is expected to be used. Such expense is recognized by businesses for financial reporting and tax purposes. Methods of computin g depreciation may vary by asset for the same business. Methods and lives may be specified in accountin g and / or tax rules in a coun try. Several stan dard methods of computing depreciation expense may be used, including fixed percenta ge, stra ight line, and decli ning balance methods. Depreciation expense ge nera ll y begins when the asset is placed in service. Example: a

depreciation expense of 100 per year for 5 years may be recog nized for an asset costing 500.

of the vehicle were to be sold and the sales price exceeded the depreciated value (net book value)

then the excess w ould be con sidered a gain and sub ject to depreciation reca pture. In add ition, th is gain above the depreciated value w ou ld be recog niz ed as ordinary income by the tax office. If the sales price is ever less than the book value, the resulting capital loss is tax ded uctible. If the sale price were ever more than the original book value, then the ga in above the original book value is recognized as a ca pital gain. CITSTUDENTS.IN

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If a company chooses to depreciate an asset at a diff erent rate from that used by the tax office then this generates a timing diff erence in the income statement due to the d iff erence (at a point in time)

between the taxation department's and company's view of the prof it. Declin in g-balan ce method (or Reducing balan ce method )

Depreciation methods that provide for a higher depreciation charge in the first year of an asset's lif e and gradually decreasing charges in subsequent years are called a ccelerated depreciation methods.

This may be a more realistic ref lection of an asset's actua l expected benef it from the use of the asset: many assets are most useful when they are new. One pop ular a ccelerated method is the decli ning-

balan ce method. Under this method the book value is multiplied by a fixed rate.

Annual Depreciation = Depreciation Rate * Book Value at Beginn ing of Year

The most common rate used is double the stra ight-line rate. For this reason, th is techn ique is

referred to as the double-declining-balan ce method. To illustrate, suppose a business has an asset with $5,000 original cost, $1,500 sa lvage value, and 5 years useful life. First, calculate strai ght-line depreciation rate. Since the asset has 5 years useful life, the stra ight-lin e depreciation rate equa ls (1 / 5) = 20% per year. With double-decli ning-b alan ce method, as the name su ggests, double that rate, or 40% depreciation rate is u sed. The table be low illustrates the do uble-declining-balan ce method of depreciation .

When using the doubl e-decli ning-ba lan ce met h od, the salvage value is n ot considered in determin ing the annual depreciation, but the book value of the asset be ing depreciated is never brought below its salvage value, regardless of the method used. The process continu es until the CITSTUDENTS.IN

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salvage value or the end of the asset's useful life, is rea ched. In the last year of depreciation a subtra ction might be needed in order to prevent book value from falling below estimated Scrap

Value.

Since double-declining-ba lan ce depreciation does not always depreciate an asset fully by its end of life, some methods a lso compute a straight-line depreciation each year, and a pp ly the greater of the tw o. Th is has the effect of converting from declinin g-balan ce depreciation to straight-li ne depreciation at a midpo int in the asset's lif e.

It is possib le to find

a rate that w ould allow for full depreciation by its end of life with the f ormula:

\ mbox{ depreciat ion

rate} = 1 - \ sqrt[N]{ \ mbox{residua l value} \ over \ mbo x{cost of fixed asset}},

\ mbox{ depreciat ion

rate} = 1 - \ sqrt[N]{ \ mbo x{1500} \ over \ mbox{5000}} , where N is the

estimated life of the asset (for example, in years).

Activity depreciation

Activity depreciation methods are not based on time, but on a level of activity. This could be miles

driven for a vehicle, or a cycle count for a ma chine. When the asset is acquired, its life is estimated

in terms of this level of activity. Assume the vehicle above is estimated to go 50,000 miles in its lifetime. The per-mile depreciation rate is calcula ted as: ($17,000 cost - $2,000 salvage) / 50,000 miles = $0.30 per mile. Each year, the depreciati on expense is then ca lculated by multiplying the

rate by the a ctua l activity level.

Sum-of-years' digits method

Sum-of -years' digits is a depreciatio n method that resu lts in a more accelerated write-off than

straight line, but less than decli ning-b alan ce meth od. Under this meth od annual depreciation is

determined by multiplying the Depreciable Cost by a schedule of f ra ctions. depreciable cost = original cost − sa lva ge value book value = original cost − a ccumu lated depreciation

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INDUSTRIAL MANAGEMENT, ELECTRICAL ESTIMATION & ECONOMICS Examp le: If

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an asset has original cost of $1000, a useful life of 5 years and a salvage value of $100,

compute its depreciation schedule. First, determine years' digits. Since the asset has useful life of 5 years, the years' digits are: 5, 4, 3, 2,

and 1. Next, ca lculate the sum of the digits. 5+4+3+2+1=15 The sum of the digits can a lso be determined by u sing the formula (n2+n) / 2 where n is equa l to the useful life of the asset. The example would be shown as (52+5) / 2=15

Depreciation rates are as follows:

5 / 15 for the 1st year, 4 / 15 for the 2nd year, 3 / 15 for the 3rd year, 2 / 15 for the 4th year, and 1 / 15 for

the 5th year.

Units-of-production depreciation method

Under th e un its-of -prod uction method, useful life of the asset is expressed in terms of the tota l

number of un its expected to be produced: \ mbox{ A nnual

Depreciation Expense} = { \ mbox{Cost of Fixed Asset} - \ mbox{ Residua l value}

\ over \ mbox{ Estimated

Total P roduction}} \ times \ mbox{Actua l P roduction}

Suppo se, an asset has original cost $70,000, salvage value $10,000, and is expected to produce

6,000 un its. Depreciation per unit = ($70,000−10,000) / 6,000 = $10 CITSTUDENTS.IN

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10 × actual prod u ctions will give the depreciation cost of the current year.

The table be low illustrates the un its-o f -prod uction depreciation schedule of the asset.

Depreciation stops when book value is equa l to the scrap value of the ass et. In the end, the sum of

accumu lated depreciation and scrap value equa ls the original cost. Units of time depreciation

Units of time depreciation is similar to un its of production, and is used for depreciation equipment

used in mine or natu ral resource exploration, or cases where the amount the asset is used is not linear year to year.

A simple exa mple can be given for construction compan ies, where some equipment is used only for some specific purpos e. Depending on the number of pro jects, the equipment w ill be used and

depreciation charged accordingly. Group depreciation method

Group depreciation method is used for depreciating multiple-asset accounts using straight-li nedepreciation method. Assets must be similar in nature and have a pproximatel y the same useful lives.

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Composite depreciation method

The composite method is applied to a collection of assets that are not similar, and have diff erent service lives. For example, computers and printers are not similar, but both are part of the office equ ipment. Depreciation on all assets is determin ed by using the stra ight-lin e-depreciation meth od.

Composite life equa ls the total deprecia bl e cost divided by the total depreciation per year. $5,900 /

$1,300 = 4.5 years. Composite depreciatio n rate eq ua ls depreciation per year divided by total historical cost. $1,300 /

$6,500 = 0.20 = 20%

Depreciation expense equals the composite depreciation rate times the balan ce in the asset account (h istorica l cost). (0.20 * $6,500) $1,300. Deb it depreciation expe nse and credit accumulated

depreciation .

When an asset is sold, deb it cash for the amount received and credit the asset account for its original cost. Deb it the diff erence betw een th e two to accumulated depreciati on. Under the compo site

method no gain or loss is recog niz ed on the sa le of an asset. Theoretically, this makes sense because the gains and losses from assets sold before and after the composite life will average them selves o u t. Tax depreciation

Most income tax systems allow a tax ded uction for recovery of the cost of assets used in a business

or for the prod uction of income. Such ded uction s are allowed for individuals and compan ies. Where the assets are consumed currently, the cost may be deducted currently as an expense or treated as CITSTUDENTS.IN

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part of cost of goods sold. The cost of assets not currently consumed gen era lly must be deferred and recovered over time, such as through depreciation. Some systems permit full deduction of the cost,

at least in part, in the year the assets are a cquired. Other systems allow depreciation expense over

some life u sing some depreciation method or percentage. Rules vary highly by country, and may vary w ithin a coun try based on type of asset or type of taxpa yer. Many syste ms that specify depreciation lives and methods for financial reporting require the same lives and methods be used for tax purposes. Most tax systems provide diff erent rules for real property (buildings, etc.) and persona l property (equ ipment, etc.).

Capital allowances

A common system is to allow a fixed percentage of the cost of deprecia ble assets to be ded ucted

each year. This is often referred to as a ca pita l allowance, as it is called in the Un ited Kingdom. Deductions are permitted to individuals and businesses based on assets pla ced in service during or

before the assessment year. Canada's Capital Cost Allowance are fixed percentages of assets within a class or type of a sset. Fixed percentage rates are specif ied by type of asset. The fixed percentage is multiplied by the tax basis of assets in service to determine the ca pital allowance ded uction. The tax

law or regu lations of the country specifies these percentages. Capital allowance calculations may be based on the total set of assets, on sets or poo ls by year (vinta ge poo ls) or poo ls by class es of assets.

Tax lives and methods

Some syste ms specify lives based on classes of property def ined by the tax authority. Canada Revenue Agency specifies numerous classes based on the type of property and how it is used. Under

the United States depreciation system, the Interna l Revenue Service publishes a detail ed guide which in cludes a ta ble of lives based on types of businesses in which assets are used. The table also incorporates specif ied lives for certain commonl y used assets (e.g., office furniture, computers, and

automob iles) which override the bu siness use lives. U.S. tax depreciation is computed under the double declining ba lan ce method switching to straight line or the strai ght line method , at the opt ion of the taxpayer.[7] IRS tables specify percentages to a pply to the basis of an asset for each year in which it is in service. Depreciation first becomes ded uctible when an asset is pla ced in service.

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Additional depreciation

Many systems allow an additiona l ded uction for a portion of the cost of depreciable assets acquired

in the current tax year. The UK system provides a first year ca pital allowance of £50,000. In the United States, tw o such deduction s are available. A ded uction for the f ull cost of depreciable

tangible persona l property is allow ed up to $250,000. This deduction is f ully phased out for businesses acquiring over $800,000 of such property during the year.[8] In a ddition, add itiona l f irst year depreciation of 50% of the cost of most other depreciable tan gible persona l property is allowed

as a dedu ction.[9] Some other systems have similar first year or accelerated allowances.

Real property

Many tax systems prescribe longer depreciable lives for bu ildings and land improvements. Such lives may vary by type of use. Many such systems, including the Un ited States and Cana da, permit depreciation for real property using only the straight line method , or a small fixed percentage of cost. Generally, no depreciation tax ded uction is allow ed for bare land. In the United States, residentia l renta l buildings are deprecia ble over a 27.5 year or 40 year life, other buil dings over a 39

or 40 year life, and lan d improvements over a 15 or 20 year life, all using the straight line method.

Averaging conventions

Depreciation ca lculations can become complex if done for each asset a business owns. Many systems therefore permit combin ing assets of a similar type a cquired in the same year into a ―pool.‖

Depreciation is then computed for all assets in the pool as a sin gle calculation. Calculations for such poo l must make assumption s regarding the date of acquisition. The United States system allows a taxpayer to use a half year convention for persona l property or mid- month convention for real

property. Under such a convention, all property of a particular type is considered a cquired at the midpo int of the acquisition period. One half of a f ull period depreciation is allowed in the

acqu isition period and in the final depreciation period. United States rules require a mid-q uarter convention for persona l property if more than 40% of the a cquisitions for the year are in the final quarter.

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To ca lculate composite depreciation rate, divide depreciation per year by tota l historical cost. To ca lculate depreciation expe nse, multiply the result by the same tota l historical cost. The result, not surprisingly, will equa l to the total depreciation Per Year again.

Common sense requires depreciation expense to be equa l to tota l depreciation per year, w ithout f irst dividing and then multiplying tota l depreciation per year by the same number. Inventory management

is primarily about specifying the shape and percentage of stocked goods. It is

req uired at diff erent locations within a f a cility or within many locations of a supply network to precede the regu lar and plann ed course of prod uction and stock of materia ls.

The scope of inventory mana gement concerns the fine lines between rep lenishment lead time, carrying costs of inventory, asset mana gement, inventory f orecasting, inventory valuation, inventory visibility, f uture inventory price f orecasting, physical inventory, available physical spa ce for

inventory, qua lity mana ge ment, rep len ishment, returns and def ective goods, and demand f o recasting. Balancing these compet ing requ irements lea ds to optima l inventory levels, which is an

on-go in g process as the business needs shift and react to the wider environment.

Inventory

management involves a retailer seekin g to a cqu ire and maintain a proper merchandise

assortment while orderin g, shipp ing, han dling, and related costs are kept in check. It also involves systems and processes tha t ide ntif y inventory requirements, set target s, provide rep lenishment

techn iques, report actua l and pro jected inventory status and han dle all f un ctions related to th e tracking and management of material. This w ould include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory ba lan ces. It also may include ABC analysis, lot tracking, cycle counting support, etc. Management of the inventories, with the primary ob jective of determining / controlli n g stock levels within the physical distribution system , f un ctions to ba lan ce the need for product availability against the need for minimizing stock holding

and handling costs. Definition: Inventory management Inventory mana gement Inventory management

is primarily abo ut specif yin g the size and placement of stocked goods. is required at diff erent loca tions within a f a cility or within multiple locations

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disturban ce of runn ing out of materials or goods. The scope of inventory management a lso concerns the fine lines between replenishment lead time, carrying costs of inventory, asset mana gement, inventory f orecasting, inventory valuation, inventory visibility, future inventory price f orecasting,

physical inventory, available physical spa ce for inventory, quality mana gement, rep lenishment,

returns and de f ective goods and demand f orecastin g. Or can be def ined as the left out stock of any ite m used in an organ ization.

The reasons for keeping stock

There are three basic reasons for keep ing an inventory: Time - The time la gs present in the supp l y chain, from supp li er to user at every sta ge, requires that you maintain certa in amounts of inventory to use in this lead time. However, in practice, inventory is to be ma inta ined for consumption during 'variations in lead time'. Lead time itself can be

addressed by ordering that many days in advan ce. Uncertainty - Inventories are maintain ed as buffers to meet un certainties in deman d, su ppl y and movements of goods. Econ omies of scale

- Ideal condition of "one un it at a time at a pla ce where a user needs it, when he

needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in econ omies of scale, thus inventory.

All these stock reasons can apply to any owner or prod uct

Special terms used in dealing with inventory

Stock Keeping Unit (SKU) is a un ique combination of all the components that are assembled into the purchasable item. Therefore, any change in the packaging or product is a new SKU. This level of deta il ed specification assists in mana gin g inventory.

Stock out means runn ing out of the inventory of an SKU. New old stock" (sometimes abbreviated NOS) is a term used in business to refer to merchandise being off ered for sale that was manu f actured long ago but that has never bee n used. Such merchan dise may not be produced an ymore, and the new old stock may represent the only market source of a particula r ite m at the present t ime.

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Buffer/safety stock

Cycle stock (Used in batch process es, it is the available inventory, excluding buffer stock) De-coupling (Buffer stock h eld between the mach ines in a single process which serves as a buffer for the next one allowing smooth flow of work in stea d of waiting the previous or next ma chine in the same process)Anticipation stock (Building up extra stock for periods of increased demand - e.g.

ice cream for summer) Pipeline stock (Goods still in transit or in the process of distribution - have left the factory but not arrived at the customer yet)

Inventory examples

While accountants often discuss inventory in terms of goods for sale, organ ization s - manu f a cturers, service-providers and n ot-f or-prof its - also have inventories (fixtures, furniture, supplies, etc.) that

they do not inte nd to sell. Manu f a cturers', distributors', and wh ol esa lers' inventory tends to cluster in warehous es. Reta ilers' inventory may exist in a warehouse or in a shop or store accessible to custo mers. Inventories not intended for sa le to customers or to clients may be held in any premises

an organ ization uses. Stock ties up cash and, if un controlled, it will be impossible to know the actua l level of stocks and therefore impossible to control them.

While the reasons for holding stock were covered earlier, most manu f a cturing organ izations usually divide th eir "goods for sale" inventory into: Raw materia ls - materia ls and components scheduled for use in makin g a produ ct. Work in process, WIP - materials and components that have began thei r tran sf ormation to finished goods. Finished goods - goods ready for sale to custo mers. Goods for resale - returned goods t ha t

are salable. For example: Manufacturing

A canned food manufacturer's materia ls inventory includes the in gredients to form the foods to be cann ed, empty cans and their lids (or coils of stee l or aluminu m for constructing those compo nents), labels, and an ything else (solder, glu e, etc.) that will form part of a finished can. The f irm's work in CITSTUDENTS.IN

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process includes those mater teria ls from the time of release to th e work floor un til th ey become complete and ready for sale to wholesa le or retail cu stomers. This may be vats of prepared food, filled cans not yet la be led or ed or sub-assemblies of food compo nents. It may also in clu de finished cans

that are not yet packaged into cartons or pallets. Its finished good inventory consists of all the filled and la beled cans of food in its warehouse that it has manu f a ctured and wishes to sell to food distributor tors (w holesalers ), to grocer y stor tores (retailers), and even per perha ps to con sumers through ters. arrangements like factory stores and outlet center Principle of inventory proportionality Purpose Inventor tor y

propor opo rtiona lity is the goal of deman d-dr d-d riven inventory mana gement. The primary optima l

across a ll outcome is to have the same number of days' (or h ours', etc.) worth of inventory on hand across

products so that the time of run out of all products w ould be simultan eo us. In such a case, there is no "excess inventor tor y," that is, inventor tor y that would be lef t over of an other prod uct when the f irst

product runs out. Excess inventory is sub-optima l because the money spent to obta in it could have been utilized better elsew here, i.e. to the product product t hat just ran out. The secondary goal of inventory propor opo rtiona lity is inventory minimization. By integr teg rating a ccurate

demand f orecastin g with inventory mana gement, rather than to past averages, a much more a ccurate and optima l outcome. Integr teg rating demand f orecasting into inventory management

in this way a lso allows for the pr prediction

of the "can f it" po int when inventory storage is limited on a per-product basis.

Applications

The tec te chn ique of inventory propor opo rtiona lit y is most appr ppropr opriate for te for inventor tori es that remain unseen by the con sumer, as opposed to "keep full" systems where a retail consumer would like to see f ull shelves of the product they are buying so as not to think they are buying something old, unwanted or stale; and diff erentiated from the "trigger gge r po int" systems where product is reordered when it hits a

certa in level; inventory propor opo rtiona lity is used effectively by just-in-time manu f acturin g processes

and retail app lications where the product is hidde n from view.

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One early example of inventory propor opo rtiona lity used in a retail a pp li cation in the United States was

for motor otor fuel. Motor oto r fuel (e.g. gasoline) is generall y stor to red in un der dergroun d stor torage tan ks. The motor oto rists do not know whether they are buying ga solin e off the top or bottom of the tank, nor need they care. Add itiona lly, these storage tanks have a maximum capacity and cann ot be overfilled.

Finally, the product is expensive. Inventor tor y propor opo rtiona lity is used to ba lan ce the inventor tories of the diff erent grades of motor fuel, each stored in dedicated tanks, in propor opo rtion to the sales of each gra de. Excess inventory is not seen or valued by the consu mer, so s o it is simply cash sunk (liter tera lly) into the groun d. Inventor to ry propor opo rtiona lity minimizes the amoun t of excess inventor tor y carried in

underground storage tanks. This a pplication for motor fuel was first developed and implemented by ted by P etr etrolsof t Corpor poration in 1990 for Chevron Products Company. Most ma jor oil compan ies use such systems tod a y.

The use of inventor tor y propor opo rtiona lity in the United States is th ought to have been inspired by

Japanese just-in-time parts inventory management made famous by Toyota Motors in the 1980s.[3] High-level inventory mana ge ment It see ms

that aroun d 1880 there was a chan ge in manu f acturing practice from compan ies w ith

relatively homogeneous lines of products to horizontally integr teg rated compan ies with un precedented diversity in processes and prod ucts. Those compan ies (especially in metalw orking) attempted to of jointlyy prod ucing two or more products in achieve success through economies of scope - the gains of jointl one f a cilit y. The managers now needed inf ormation on the eff ect of prod uct-mix dec decisions on overall prof its and theref ore n eeded accurate prod uct-c t-cost inf ormation. A variety of attempts to ccessf u l due to the huge overhead of the inf ormation processi ss ing of the t ime. achieve this were un succe However, the burgeo nin g need for financial repor epo rting after 1900 created una voida ble pressure for

financial acco ccoun tin g of stoc tock and the mana gement n eed to cost mana ge prod ucts became oversha dow ed. In particular, it was the need for au dited accounts that sea led the fate of managerial cost acco ccounting. The do minan ce of financial repor eporting acco ccoun ting over mana ge ment acco ccoun ting remains to this day with few exceptions, and the financial repor epo rting def initions of 'cost' have distor torted eff ective mana gement 'cost' acco ccounting since that time. This is particularly true of inventory.Hence, high-level financial inventory has these two basic formulas, which relate to the

ccountin g per period: Cost of Beginn ing Inventor tory at the start of th e per period + inventor tory purchases acco within the per period + cost of production within the per period = cost of goods available

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Cost of goods available − cost of en din g inventory at the end of the per period = cost of goods sold

The be nef it of these f ormulas is that the first absorbs all overheads of production and raw mater teria l costs into a to a value of inventory for repor epo rting. The second formula then creates the new start point for

the next per period and gives a f igu re to be subtracted from the sales price to deter determine some form of sales-ma rgin figure.

Manu f a cturing management is more inter terested in inventory turnover ratio or average days to sell inventory since it tells them something about relative inventory levels.

Inventor tor y turnover

ratio (also known as inventory turns) = cost of goods sold / Average Inventor tor y =

Cost of Goods Sold / ((Beginning Inventor tor y + Ending Inventor tor y) / 2) and its inverse Average Days to Sell Inventor to ry = Number of Days a Year / Inventor tor y Turnover Ratio = 365 days a

year / Inventor tor y Turnover Ratio This ratio estimates how many times the inventory turns over a year. This number tells how much cash / good goods are tied up waiting for the process and is a critical measure of process reliability and eff ectiveness. So a f actor to ry with tw o inventor to ry turns has six months stock on han d, which is industry), whereas a factory that moves from six genera ll y not a good f igure (depending upon the industry), turns to twelve turns has proba bl y improved eff ectiveness by 100%. This improvement will have some negative resu lts in the financial repor eportin g, since the 'value' now stored in th e factory as inventory is redu ced.

While these acco ccounting measures of inventory are very useful because of their simplicity, they are also fraught with the danger of their own assumptions. There are, in fact, so many th in gs that can vary hidde n under this appearance of simplicity that a variety of 'ad justin g' assumptions may be

used. These inclu de: Specific Ide ntif ication Weighted Average Cost Moving-Average Cost

FIFO and LIFO.

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INDUSTRIAL MANAGEMENT, ELECTRICAL ESTIMATION & ECONOMICS Inventory

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Turn is a financial accounting too l for evaluating inventory and it is not necessarily a

management too l. Inventory management should be forward looking. The methodo logy app lied is based on historical cost of goods sold. The ratio may not be able to reflect the usability of f uture prod uction deman d, as well as customer demand.

Business mode ls, including Just in Time (JIT) In ventory, Vendor Managed Inventory (VMI) and Customer Managed Inventory (CMI), attempt to minimize on-hand inventory and increas e inventory

turns. VMI and CMI have ga ined considerable attention due to the success of third-party vendors

who offer added expertise and kn ow ledge that organ izations may not possess. Economic order quantity is the order quan tity that minimizes tot al inventory holdin g costs and ordering costs. It is one of the oldest classical prod u ction scheduling mode ls. The framework used to determin e this order quan tity is also known as Barabas EOQ Model or Barabas Formula . The mode l was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who a pplied it

extensively, is given credit for his in-depth analysis. EOQ app lies

only when deman d for a product is constant over the year and each new order is

delivered in full when inventory reaches zero. There is a fixed cost for each order pla ced, regardless of the nu mber of un its ordered. There is also a cost for each un it held in storage, sometimes

expressed as a percentage of the purchase cost of the ite m. We want to determine the opt ima l number of un its to order so that we minimize the total cost

associated with the purcha se, delivery and storage of the product. The req uired parameters to the solution are the tot al demand for the year, the purchase cost for each item, the fixed cost to pla ce the order and the storage cost for each item per year. Note that th e

number of times an order is placed w ill also aff ect th e total cost, though this number can be determined from the other parameters. Underlying assumptions

The ordering cost is constan t. The rate of demand is known, and spread evenly throughout the year. The lea d time is fixed.

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The purchase price of the item is constant i.e. no discoun t is available The replenishment is made instan tan eo usl y; the whol e batch is de livered at o n ce. Only one product is involved.

EOQ is the quan tity to order, so that orderin g cost + carrying cost finds its minimum. (A common misun derstan ding is that the formula tries to find when these are equal.) Variables x

= Purchase Price

x

= order quan tity

x

= optimal order quan tity

x

= annual demand quan tity

x

= fixed cost per order (not per unit, typically cost of ordering and shipp ing and handling. This is not the cost of goods)

x

= annua l holding cost per unit (also known as carrying cost or storage cost) (warehouse space, ref ri geration, insuran ce, etc. usually not rela ted to the unit cost)

The Total Cost function

The single-item EOQ formula finds the minimum po int of the following cost f un ction: Total Cost = purchase cost + ordering cost + h oldi ng cost

- Purchase cost: This is the variable cost of goods: purchase un it price × annua l demand quan tity. This is P×D - Orderin g cost: This is the cost of placing orders: each order has a fixed cost S, and we need to

order D / Q times per year. This is S × D / Q - Holding cost: the average quan tity in stock (between fully rep lenished and empty) is Q / 2, so this

cost is H × Q / 2

.

To determine the minimum po int of the total cost curve, partially diff erentiate the total cost w ith respect to Q (assume all other variables are constant) and set to 0:

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Solving for Q gives Q* (the opt imal order quan tity):

Th eref ore:

.

Q* is independent of P; it is a f un ction of only S, D, H.

Extensions

Several exte nsions can be made to the EOQ mode l, including backorderin g costs and multiple items. Add itiona lly, the economic order interva l can be determin ed from the EOQ and the economic

prod uction quan tity mode l (which determines the optima l production quan tity) can be determined in a similar fashion. A version of the model, the Bau mol-Tob in model, has also bee n us ed to determine the money

demand function, where a person's holdings of money balan ces can be seen in a way parallel to a f irm's ho ldings of inventory.[3] NOTE: In the example, Q means annua l req uirement quan tity whereas earlier in the article Q mean t

order quan tity. This is confusing. Example x

Suppose annual requirement quan tity (Q) = 10000 un its

x

Cost per order (CO) = $2

x

Cost per unit (CU)= $8

x

Carrying cost %age (%age of CU) = 0.02

x

Carrying cost Per un it = $0.16

Econ omic order

quan tity =

Econ omic order

quan tity = 500 un its

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Number of order per year (based on EOQ ) Number of order per year (based on EOQ) =

Total cost Tota l

cost

Total cost If we check the total cost for any order quan tity other than 500(=EOQ), we will see that the cost is

higher. For in stan ce, suppo sing 600 un its per order, then Tota l

cost

Tota l

cost

Similarly, if we choose 300 for the order quan tity then Tota l

cost

Tota l

cost

This illustrates that the Economic Order Q uan tity is always in the best interests of the entity.

Break-Even Analysis Break-even point (BEP) is the point at which cost or expenses and revenue are eq ua l: there is no

net loss or gain, and one has "broken even". A prof it or a loss has not bee n made , alth ough opportun ity costs have been "paid", and ca pital has received the risk-a d justed , expected retu rn. For example, if a bu siness sells fewer than 200 tables each month, it will make a loss, if it sells more, it will be a profit. With this information, the business managers will then need to see if they

expect to be able to make and sell 200 ta bles per month. If they think they cannot sell that many, to ensure viability they could: 1. Try to reduce the fixed costs (by renegot iatin g rent for example, or keep in g better control of telep h one bills or other costs) 2. Try to reduce variable costs (the price it pays for the tables by finding a new supplier) 3. Increa se the selling price of their tables. CITSTUDENTS.IN

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Any of these w ould reduce the break even point. In other words, the business w ould not need to sell so many tables to make sure it could pay its fixed costs.

Computation

In the linear Cost-Volume-Profit Analysis mode l, the break-even point (in terms of Unit Sales (X))

can be directly computed in terms of Total Revenue (TR) and Total Costs (TC) as:

Where: x

TFC is Total Fixed Costs ,

x

P is Unit Sale Price, and

x

V is Unit Variable Cost .

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The Break-Even P oint can alternatively be computed as the point where Contribution equa ls Fixed Costs.

The quan tity

is of interest in its own right, and is called the Unit Contribution Margin (C):

it is the margina l prof it per unit, or alternatively the portion of each sale that contributes to Fixed Costs. Thus th e break-even po int can be more simply computed as th e po int where Total Contribution = Total Fixed Cost:

In currency un its (sales proceeds) to rea ch break-even, one can use th e above ca lculation and multiply by Price, or equivalently use the Contribution Margin Ratio (Unit Contribution Margin over Price) to computed . R=C, Where R is revenue ge nerated , C is cost incu rred i.e.

Fixed costs + Variable Costs or Q * P(Price per unit) = TFC + Q * VC(Price per un it), Q * P - Q * VC = TF C, Q * (P - VC) = TFC, Break Even Analysis Q = TF C / c / s ratio=Break Even ®® Margin of Safety

Margin of safety represents the strength of the business. It ena bles a busi ness to know what is th e exact amount it has ga ined or lost and whether they are over or be low the break even po int. margin

of safety = (cu rrent output - breakeven output)margin of saf ety% = (current output - breakeven output) / current output × 100When dealing with budgets you would inste ad rep lace "Current outp ut" with "Budgeted outp ut". If P / V ratio is given then prof it / PV ratio Break Even Analysis

By inserting diff erent prices into the formula, you will obt ain a number of break even po ints, one for

each possible price cha rged . If the firm changes the selling price for its prod uct, from $2 to $2.30, in the exa mple abo ve, then it would have to sell only (1000 / (2.3 - 0.6))= 589 un its to break even, rather

than 715.

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To make the results clearer, they can be gra phed. To do this, you draw the total cost curve (TC in th e diagram) which shows the tot al cost associated with each possible level of outp ut, the fixed cost curve (FC) which shows the costs that do not vary with output level, and finally the various total revenue lines (R1, R2, and R3) which show the total amount of revenue received at each outp ut

level, given the price you will be cha rgin g. The break even po ints (A,B,C) are the po ints of intersection between the tot al cost curve (TC) and a total revenue curve (R1, R2, or R3). The break even quan tity at each selling price can be read off the

horiz onta l axis and the break even price at each selling price can be read off the vertical axis. The total cost, tot al revenu e, and fixed cost curves can each be constructed with simple formulae. For example, the total revenue curve is simply the product of selling price times quan tity for each outp ut

quan tity. The data used in these f ormula e come either from accounting records or from various estimation techn iques such as regression analysis. Application

The break-even point is one of the simplest yet lea st used analytical too ls in mana gement. It helps to provide a dynamic view of the relationships between sales, costs and profits. A better un derstan ding of break-even, for example, is expressing break-even sales as a percentage of actua l sales—can give

managers a chance to understand when to expect to break even (by linking the percent to when in the week / month this percent of sales might occur). The break-even po int is a special case of Ta rget Income Sales, where Ta rget Income is 0 (breaking even). This is very importan t for financial analysis.

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Eee-Viii-Industrial Management_ Electrical Estimation and e [06ee81]-Notes

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