Introducing Operations ManagementCh 20
Operations
The operations function is concerned with the creation of goods and servicesoffered to consumers.
We clearly associated operations with manufacturing industry when secondarysector was dominated in the past; this was the reason that we used term
Production management
when we talked about managing the operations in anyorganization. But we can also see an operations function in department stores, banks, schools, hospitals etc. In recent years the concept has been applied to thenon manufacturing sector and there has been an exchange of idea and techniqueswith manufacturing sector. Due to increase the importance of tertiary sector and primary sector, the term has been replaced with
Operations management
for broader approach.
Operations Management
Operations management is concerned with the use of resources i.e. land, labor and capitalto provide goods and services that will satisfy the demand of customers identified by themarket research department.
The operations function has a central role in most types of organization. It iscentral to the organization’s success by providing what the customers require. It istherefore concerned with issues that are crucial to the customer like quantity,quality, availability and price; and issues that are crucial to the management like productivity and cost.
The Production Process
In puts are converted into out put. See the Production Process on P. 312 Figure 20.1 aswell as attachment in the end “Operation as a System”.
Value Added
“Sales revenue less the value of bought in materials and components”. The degree of value added depends on different factors like;
Design of the product
Efficiency in production process
Strategies adopted by the organization
Value Analysis
“Value analysis is a procedure to evaluate a product after manufacturing to see how costsmay be reduced”. There are three main features involved in the design of any new product.
Performance
Appearance
Economy of manufacture
Production
Production is the measured quantity of output that a firm produces in a given period of time.
Productivity
Productivity is a ratio of outputs to inputs in a production process.
Efficiency
How well inputs can be changed into out puts is called efficiency.
Production Methods
The long term production decision in a business must include the methods by which thegoods and services will be produce some
constraints on this planning process
include:
The cost of the product
Market size
Business size
Technology required
Strength of business- skills available, financial position, etcProduction methods include,
1)Job Production
“Job production is a method of production which involves employing all factorsto complete one unit of output at a time”.
“Job production is a production of “one off” products”.
Examples: servicing a car, making furniture according to the specificationof an individual customer, design of a computer system to meet therequirement of an individual customer, dams in a country etc are theexamples of Job Production.
Characteristics
Highly skilled labor force required.
Focus on customer
Centralized management
Flexible machinery required
No repetition of work
Advantages
Easy to identify problem- because at on time onetask is completed- for example in a garage, customer complaintsabout the standard of services, it is easy for owner to locatewhich worker is responsible.
Motivation of workers- opportunity to be a multiskilled
Unique designs of product can be introduced.
Organization of job production is simple.
Disadvantages
High cost- no economy of scale
High labor cost- cost on training,high wage rate due to highly skilled
Needed a wide range of equipments
Selling cost may be high- if productis so technical then selling force should be highly qualified.
2)Batch Production
“A method which involvescompleting one operation at a time on all units before performing the next iscalled batch production”.
“Batch production is amethod of production in which a number of items are processed at the sametime”.
“It involves production of identical product in separate batches where the whole units of product goesthrough in the whole production process together”.
Examples: A baker uses batch production when baking bread or other bakery items. Theoperations in the baking process are broken down in to different stages. Ineach stage operation is completed for a group of products (the batch) before the batch is moved on the next stage.
Characteristics
Organization of work in different stages
Each operation is completed for a group of product beforethe batch is moved to the next operation.
Used for product having regular demand.
Minor changes can be made on customer demand for thewhole batch.
Repetition of work is involved.
It falls between job and flow production methods.
Advantages
Flexibility in production even large quantities is produced. Each batch can be change according to customer demand.
Employees can concentrate on operation rather than the wholetask. This reduces the need of costly skilled labor.
It provides opportunities for quality control as a batch movedthrough different stages.
Disadvantages
Careful planning and coordination needed otherwise machineryand workers may be idle waiting for a whole batch to finish its previous operation.
Workforce may be less motivated due to repetitive work.
If batch is small then cost will be high.
A large amount of capital is tied up in work in process.3)
Flow/Mass Production
“The manufacturing of a product using a continuous production line.”
“A method of organizing the work so that each item move to next stage assoon as a process is completed without waiting for the other products.”
Examples: Pepsi Cola production plant, sugar industry,
Characteristics
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