BBN Chapter I Production Management / Operations Management: It is the management of systems or processes that create goods and/or services.

Business: Individuals or organizations who try to earn profit by providing goods or services that satisfy peoples needs. It is the exchange between buyer and seller. It improves the standards of living. Product: A good or service with tangible or intangible characteristics that provide satisfaction and benefit. Buyer: A buyer recognizes a need for a good or service and trades money with a seller to obtain that product or service. Seller: The seller participates in the process in hopes of gaining profits. Profit / Value added: The difference between what it costs to make and sell product and what the customer pays for it. It is the rewards for the business organizations who use people, information, technologies to create and market want satisfying good and services. A business organization has three primary functions. They are (i) Finance (ii) Operations (iii) Marketing (i) Finance: It is responsible for securing financial resources at favorable prices and allocating those resources through the organization. It is also responsible for budgeting, analyzing investment proposals, and providing funds for production. (ii) Operations: It is responsible for planning and coordinating the use of the organizations resources to convert inputs into output. (iii) Marketing: It is responsible for assessing consumers wants and needs and selling and promoting the organizations goods and services. ** If a business organization is a car then operations is its engine.

BBN Examples of input, transformations and outputs: Inputs (i) Land (ii) Human: Physical, Intellectual (iii) Capital Transformations/processings Processing Transporting Teaching Farming Mixing Copying CD players Faxing (v) Equipments: Machines, computers, trucks, tools, etc (vi)Facilities: Hospitals, factories, retail stores etc. Example 1: Food processing Inputs Raw vegetables Metal sheets water energy labor building equipment Example 2: Hospital service Inputs Hospital Doctor Nurse medical suppliers equipment laboratories Processing Examination surgery monitoring medication therapy Output Healthy patient Processing Cleaning making cans cutting cooking packing labeling Output Canned vagetable Car repairs Etc. Health care Delivery Banking etc Outputs Homes Automobiles Computers Machines TVs Food products Text books

(iv)Raw materials: Energy, water, metals, wood etc

BBN Differences between goods production and service delivery: Although goods and services often occur jointly, there are some very basic differences between them. Production of goods results in a tangible output. It can take place in a factory (automobiles), or elsewhere (farming product). Delivery of services implies an act. It is act oriented. Example: a physicians examination, TV repair. Difference type (i) Degree of customer contact (ii) Uniformity of input (iii) Uniformity of output (vi) Labor content of job (v) Measurement of productivity (vi) Production and delivery (vii) Quality assurance (viii) Amount of inventory Scope of Production Management: Operations management people are involved in product and service design, process selection, technology selection, design of work systems, location planning, facility planning, quality improvement of goods and services. Operations function includes forecasting, capacity planning, scheduling, managing inventory, assuring quality, motivating employees, and deciding where to locate facilities. System design and system operation: A primary function of an organizations manager is to guide the system by decision making. Some decisions affect the design of the system; some decisions affect the operation of the system. System design involves decisions that relate to system capacity, geographic location of facilities, product and service planning and acquisition of equipment. It is usually long term planning. System operation involves management of personnel, inventory control and planning, scheduling, project management, and quality assurance. Role of production Manager: Operations manager has a vital role in system design because system design essentially determines many of the parameters of system operation. Example: cost, space, capacity, and quality are directly affected by design decision. Goods Lower High High Low Easy High Easy High service Higher Low Low High Difficult Low Difficult Low

BBN The manager should answer: What? what resources to be needed? what amount? When? when the resources will be needed? when the workers be scheduled? when materials to be ordered? Where? where will the work be done? How? how will the product be designed? Who? who will do the work? Model: A model is the abstract of the reality, a simplified version of something. Example: A Childs toy car is a model of an automobile. Types: (i) Physical models: Toys, scale-model building (ii) Schematic model: Charts, graphs, pictures (iii) Mathematical models: symbols, formulas.