Basics of production

management

Module 11-Basics of production management 1

Operations
 The way an organization transforms
inputs (labor, money, supplies,
equipment) into outputs
(products and services)
 Manufacturing - form of production in
which raw and semi-finished materials
are processed, assembled, or converted
into finished products
 Service - activities of value that do not
result in the ownership of anything
tangible

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Types of organization
(according to output produced)
 Production organizations -
those that produce tangible goods
that can be mass produced and
stored for later consumption
 Service organizations - those
that produce intangible goods that
require consumer participation
and cannot be stored

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Production organizations
 Car manufacturers  Soap
 Pharmaceutical manufacturers
 Watch makers
firms
 Furniture makers
 Petroleum refineries
 Film studios
 Breweries
 Paper
 Semiconductor firms
manufacturers
 Packaging  Chemical firms
companies  Plane
 Printing presses manufacturers
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Service organizations
 Theaters  Internet service
 Travel agencies providers
 Web page
 Beauty parlors
developers
 Banks  Human resource
 Schools management
 Hospitals services
 Financial services
 Insurance
providers
agencies
 Management
 Law firms
consulting services
Module 11-Basics of production management 5
 Characteristics of
products/services
Product Service
•Output •Tangible •Intangible
•Output •Over time; can •Immediate; can’t
consumption be stored be stored
•Nature of work •Producer •Labor intensive
intensive
•Customer •Minimal, •Direct
contact indirect
•Customer •Little or none •Essential
participation

Module 11-Basics of production management 6

 Operations system model
External
Environment

Inputs Outputs
Human Goods
Capital
Services
(Land, Equipment Transformation
Building) Ideas
Technology or Conversion Others
Information Process

Feedback
Module 11-Basics of production management 7
Production management
Aims to supply goods or services
in adequate quantity,
of specified quality,
on the promised date,
at an equitable price

Module 11-Basics of production management 8

Manufacturing activities
 Purchasing parts or raw materials
 Storing parts or raw materials until
needed
 Assembly of parts or processing of raw
materials
 Packaging of finished goods for eventual
shipping, storing, and distribution
 Maintaining equipment
 Training people to operate equipment

Module 11-Basics of production management 9

Concerns in production
Building Repair and maintenance; ventilation;
noise; lighting; utilities; employee
facilities
Plant layout Rent/lease; renovation; expansion;
construction
Equipment Product/line; process; combination
layout
Process Analytic, synthetic, extraction,
fabrication, repetitive or non-repetitive
Raw materials Purchase and handling
Method Work improvement; work
measurement
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Concerns of production
manager
 Designing an operations system
involves deciding on five aspects,
namely:
• What to produce

• How many to produce

• How to produce

• Where to produce

• Who will do the work

Module 11-Basics of production management 11

Product development
(What to produce)

 The process of
creating or
improving a
product or
service

Module 11-Basics of production management 12

Steps in product development
 Develop an idea for a new product
that customers want to buy
 Turn the idea into a workable
product design
 Produce the product and make it
available to consumers at a price
they are willing to pay

Module 11-Basics of production management 13

Product design
 Design for manufacture (DFM) -
technique that involves streamlining the
design of products to simplify assembly
 Computer-aided design (CAD) - design
and drafting performed interactively on a
computer

Module 11-Basics of production management 14

 Capacity planning

(How much to produce)

 Operations decision
concerned with the
quantity of goods or
services to be produced
 A process of forecasting
demand and then
deciding what resources
will be needed to meet
that demand

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4 phases of technological
decisions (How to produce)
 Major technological choice
 Minor technological choice
 Specific-component choice
 Process-flow choice

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Major technological choice
 Does technology exist to produce the
product?
 Are there competing technologies?
 Should innovations be licensed from
elsewhere, such as foreign countries?
 Should an internal effort be
made to develop the
technology?

Module 11-Basics of production management 17

Minor technological choice

 Assembly-lineprocess
 Continuous process
 Job-shop process

Module 11-Basics of production management 18

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Types of technology

 Woodward’s
typology
 Thompson’s
typology
 Perrow’s
typology

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Woodward’s typology
 Unitor small batch
 Large batch or mass production
 Continuous processing

Module 11-Basics of production management 23

Thompson’s typology
 Long-linked technology
 Mediating technology
 Intensive technology

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Perrow’s typology
 Routine
 Craft
 Engineering
 Non-routine

Module 11-Basics of production management 25

Specific-component choice
 What type of equipment (and degree of
automation) should be used?
 Should the equipment be dedicated (tied
to a specific purpose) or general purpose
(leaving open the possibility of using it to
make other products)?
 To what degree should machines replace
people in performing and controlling
work?

Module 11-Basics of production management 26

Process-flow choice
 How should the product or service flow
through the operations system?
 Tools: assembly drawings, assembly
charts, route sheets, and process flow
charts
 Possible decisions: resequencing,
combining, or eliminating operations to
reduce materials-handling and storage
costs

Module 11-Basics of production management 27

Locating the business
(Where to produce)
 Availabilityof raw materials
 Transportation methods
 Supply and cost of energy and water
 Land and building costs
 Labor supply
 Location of customers
 Economic and legal factors

Module 11-Basics of production management 28

Job design issues
(Who will do the work?)

 Worker skills
 Worker safety
 Workplace
collaboration

Module 11-Basics of production management 29

Production planning
 Identifying all of the
resources required
to produce the
product and
estimating when
each will be needed
and in what quantity

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Production planning
 The advance
programming of
manpower,
machinery,
materials,
methods, money to
achieve a given
output for a definite
market
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Production planning activities
 Inventory  Planning the quantities of materials and
management supplies needed for production and the
amount of finished products required to
meet customer orders
 Human resource  Determining the types of jobs required
planning for each part of production, the number
of people needed for each job, and the
skills each person will need in order to
do the job

 Production
 Identifying the steps required in a
manufacturing process, the time
scheduling
required to complete each step, and the
sequence of the steps

Module 11-Basics of production management 32

Inventory
 Inventory - supply of raw materials, work
in progress, and finished goods an
organization maintains to meet its
operational needs
 Raw materials - materials that are in their
natural state, and have not been
processed
 Work in progress - partially finished
goods
 Finished goods - goods that are ready to
be sold
Module 11-Basics of production management 33
How to minimize inventory costs
 MRP or Materials Requirements Planning - the
operational planning system in which end products are
analyzed to determine the materials needed to produce
them
 MRPII - operational planning system that extends MRP
by comparing needs to known resources and calculates
unit costs; can also be used with other computer
programs to handle order entry, invoicing, and other
operations tasks
 JIT or Just-in-Time Inventory - inventory system in
which production quantities are ideally equal to delivery
quantities, with materials purchased and finished goods
delivered just in time to be used (also kanban)

Module 11-Basics of production management 34

 Operations system model
External
Environment

Inputs Outputs
Human Goods
Capital
Services
(Land, Equipment Transformation
Building) Ideas
Technology or Conversion Others
Information Process

Feedback
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Productivity
 Ratio between the value of the output
and the value of the input
P = (Output / Input) x 100%

Module 11-Basics of production management 36

Inputs (5 Ms)
 Manpower
 Machinery
 Materials
 Methods
 Money

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Forms of transformation
 Physical Manufacturing firms
 Locational Transportation and
communication firms
 Exchange Retailing and
wholesaling
 Information Legal and accounting
services

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