You are on page 1of 10

Introduction

Operation is the activity of an organization, which is concerned with the transformation of inputs into the required output. Management involves variety of process/functions like- marketing, finance and accounting, production, purchasing etc., which are done to convert various resources into value added services. Operation is the process that adds value to the consumers of the organisation. Typical operation task include: adding chemicals, sampling/testing, collecting data, installing new service, preparing reports, answering customer complaints etc. so we can say that operations are performed in order to deliver the values to the customer in form of goods and services. Organizations are of two types: 1. Manufacturing organisation 2. Services organisation Manufacturing organisation deals with goods which are physical items that include raw materials, parts, sub assemblies such as motherboards that go into computers, and final products such as cell phones and automobiles. Services organisation provides or rendering services that provide some combination of time, location, form, or psychological value like medical treatment, telephone conversation etc. Operational management is the translation process that transforms inputs such as raw material and labour into outputs in the form of finished goods and services. Operations Management is significant, exciting, challenging, and universal in nature. Significant Exciting Challenging Universal concerning with creating product and services centre of so many changes that affect the business world solution of competing globally every product and service that you use is the result of operation.

HISTORY
Operations and production management has been considered as a vital factor in the economic growth of country for over two centuries. The traditional view of manufacturing management began in eighteenth century when Adam Smith recognized the economic benefits of specialization of labour. He recommended breaking of jobs down into subtasks and recognises workers to specialized tasks in which they would become highly skilled and efficient. In the early twentieth century, F.W. Taylor implemented Smiths theories to Operations Management

and developed scientific management. From then till 1930, many techniques were developed prevailing the traditional view. Production Management becomes the acceptable term from 1930s to 1950s. As F.W. Taylors works become more widely known, managers developed techniques that focused on economic efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful efforts and achieve greater efficiency. At the same time, psychologists, socialists and other social scientists began to study people and human behaviour in the working environment. In addition, economists, mathematicians, and computer socialists contributed newer, more sophisticated analytical approaches. With the 1970s emerge two distinct changes in our views. The most obvious of these, reflected in the new name Operations Management was a shift in the service and manufacturing sectors of the economy. As service sector became more prominent, the change from production to operations emphasized the broadening of our field to service organizations. The second, more suitable change was the beginning of an emphasis on synthesis, rather than just analysis, in management practices.

CONCEPTS
PRODUCT The term product can be understood from the different view point: For a Consumer: For consumer, the product is a combination/mix of benefits/utilities. For a Production Manager: For the production Manager, the product is the combination/mix of various processes/operations. For a Financial Manager: For the financial manager, the product is a mixture of various cost elements. For a Personnel Manager: For the personnel manager, the product is a mix of various skills. PRODUCTION Production function is that part of an organisation, which is concerned with the transformation of inputs into the required outputs. Production is defined as the steps in conversion process to create or enhance the utility of the product to the user. It involves value addition at every stage that is why it is called as value addition process. Edwood Buffa defines production as a process by which goods and services are created. Production function shows the relationship between the input and the output of an organization. By the study of production function one can maximize the output with given inputs, or say resources. The production function can be represented by the simple mathematical equation which relates the outputs as the function of inputs, i.e. Y = f (X1, X2 Xn)

Where Y = units of output, which is the function of the quantity of two or more inputs X1 = unit of labor, and X2 = unit of machinery, and so on. PRODUCTION SYSTEM The production system is the system within the organisation, which produces products of an organisation. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value to the customers. A simplified production system is shown below

INPUT Men Material Machines Information Capital

TRANSFORMATION PROCESS Product design Process planning Production control Maintenance

OUTPUT Product Services

CONTROL Inventory Quality Control

INPUT Elements Materials Data Energy Variable cost

CONVERSION PROCESS Transformation Machines Interpretation Skill Fixed cost

OUTPUT Useful products Products Knowledge Services Revenue

Features of Production system: 1. Production is an organized activity, so every production system has an objective.

2. The system transforms the various inputs to useful outputs. 3. It does not operate in isolation from the other organisation system. 4. There exists a feedback about the activities, which is essential to control and improve system performance. TYPES OF PRODUCTION SYSTEM Production systems can be classified as Job-shop, Batch, Mass and Continuous production systems, which are discuss as follow: 1. JOB PRODUCTION Oldest method of production on very small basis Popularly called as Job-shop unit To meet requirement of specific order Involve small quantity. Each job order Each job stands alone and may not be repeated. Manufacturing or production is as per the customer specification. This system has a lot of flexibility of operation. General purpose machines are required. Generally no automation is used in this system, but computer-aided-design (CAD) is used. It deals with low volume and large variety production. Examples include manufacturing of aircrafts, ships, space vehicle, bridge and dam construction, ship building, boilers, turbines, machine tools, things of artistic nature, die work, etc. Advantages of job production Flexibility in operation Low risk of loss due to flexibility No chance of failure of factory due to reduction in demand because factory always gets one or the other job orders to keep it going. Requires less money (capital) and is easy to start. Less or no management problem because of very small work force Customer satisfaction is achieved as production is on customer order Large Varity of product.

Disadvantages of job production

Increase labour cost because this type of production demand for handling different types of jobs, only workers with multiple skills are needed. Low equipment utilization As the raw materials are purchased in less quantity, the cost of material procurement is more. Unable to exploit market opportunities at time of purchase raw material like heavy discount, rebates on heavy purchases.

This system may be further classified as. (i) The Job produced only once: The customer visit the firm and book his order. After the completion of the product on his order, he takes delivery of the product and leaves the firm. He may not visit the firm to book the order for the same product. The job produced at irregular intervals: The customer visits the firm to place orders for the same type of the product at irregular intervals The Jobs Produced periodically at regular intervals: The customer arrives at the firm to place orders for the same type of product at regular intervals. The firm knows very well that the customer visits at regular intervals

(ii) (iii)

Note: The Job Production system slowly transform into Batch Production system. (b) BATCH PRODUCTION: Manufacture of number of identical products either to meet the specific order or to satisfy the demand. It can also purchase materials required in bulk in advance Batch production is bigger in scale than job production, but smaller than that of mass production. Material handling may be automated by robots. Batch production is a stage in between mass production and job-shop production Plant and equipment can be used for producing similar products.

Advantages of batch production It is flexible in the sense that it can go from one job to another with almost zero cost. It needs general purpose machine having high production rate. If demand for one product decreases then production rate for another product may be increased, thus the risk of loss is very less. Most suitable for computer-aided-manufacturing (CAM). Automatic works. Exploit the market opportunities by availing discount, concessional rate etc.

Production of identical product leads to efficiency in operations Efficiency leads to reduced wastage of product.

Disadvantages of batch production It needs specially designed jigs and fixtures. Chance of failure of factory due to reduction in demand. Involve heavy capital. Management problem because of very large work force Block capital in purchasing raw material in bulk. Difficulty in achieving level of customer satisfaction in case production is not o specific order.

This system also can be classified under three categories. (i) (ii) A batch produced only once: The customer places order with the firm for the product of his specification. The size of the order is greater than that of job production order. A Batch produced at irregular intervals as per Customer order or when the need arises: As the frequency is irregular, the firm can maintain a file of its detailed plans and it can refer to its previous files and start production. A Batch Produced periodically at known Intervals: Here the firm either receives order from the customer at regular intervals or it may produce the product to satisfy the demand.

(iii)

Note: As the frequency of regular orders goes on increasing the Batch Production system becomes Mass Production System. (c) CONTINUOUS PRODUCTION: Continuous Production system is the specialized manufacture of identical products on which the machinery and equipment is fully engaged. The continuous production is normally associated with large quantities and with high rate of demand. Advantage of automatic production is taken. The production activity continues for 24 hours or on three shifts a day basis. Impossible to stop the production process on a short notice. Examples include bottling plant, soft drink industry, fertilizer plant, power plant, etc)

This system is classified as

Continuous production

Flow production Mass production

Mass Production: Producing same/identical product n large numbers to meet the demand of the market. If the demand falls , the machinery and equipment, after slight modification be used for manufacturing products of similar nature Needs good planning for material, process, maintenance of machines and instruction to operators. A purchase of materials in bulk quantity is advisable.

Flow Production: The plant and equipments are designed for a specified product. If the demand falls for the product or ceases, the plant cannot be used for manufacturing other products. It is to be scraped. Example Tailors shop; cycle and vehicles repair shops, Job typing shops, small Workshops. Tyre Production Shops, Readymade dress companies, Cosmetic manufacturing companies Components of industrial products, Cement Factory, Sugar factory, Oil refineries

Types of production system Job production Batch Production

Mass Production Flow Production PRODUCTION MANAGEMENT

Production management involves the activities of planning, organizing, directing and controlling the production function. All these activities are performed in order to transforms various resources used in the production into value added product in a controlled manner as per the organizations policies. E.S.Buffa defines production management as follows:

Production management deals with decision-making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded and out of minimum cost. FUNCTION /OBJECTIVES OF PRODUCTION MANAGEMENT The basic function/objective of the production management is to produce goods and services of Right Quality and Quantity at the Right time and Right manufacturing cost. Right Quality: The quality of product should be established on based upon the customers need. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. Right Quantity: The manufacturing organisation should produce the products in right number. If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of products. Right Time: Timeliness of delivery is one of the important parameter to judge the effectiveness of production department. So, the production department has to make the optimal utilization of input resources to achieve its objective. Right Manufacturing Cost: Manufacturing costs are established before the product is actually manufactured. Hence, all attempts should be made to produce the products at pre-established cost, so as to reduce the variation between actual and the standard (pre-established) cost. MANUFACTURING OPERATIONS Vs SERVICE OPERATIONS Basis Manufacturing operations Services operations manufacturing (or production) service yields an intangible yields a tangible output output

A conversion process that includes manufacturing (or production) yields a tangible output: a product. In contrast, a conversion process that includes service yields an intangible output: a deed, a performance, an effort. For example, Mesfin Industries produces a lot of tangible products, whereas Ethiopian Airlines provides air transport services to passengers which is an intangible output. Distinguishing Between Manufacturing and Service Operations

Generally the following characteristics are used to distinguish between manufacturing and service operations: Tangible and intangible nature of output Consumption of output Nature of work (jobs) Degree of customer contact Customer participation in conversion Measurement of performance Put simply, the manufacturing is characterized by tangible outputs (products), outputs that customers consume over time, jobs that use less labor and more equipment, little customer contact, no customer participation in the conversion process (in production), and sophisticated methods for measuring production activities and resource consumption as products are made. Service, on the other hand, is characterized by intangible outputs, outputs that customers consume immediately, jobs that use more labor and less equipment, direct customer contact, frequent customer participation in the conversion process, and elementary methods for measuring conversion activities and resource consumption. However, some service is equipment-based like Computer software services, Internet services, telephone services, etc. Some service is people-based like tax accounting services, hair styling, and golf instruction. Input Elements Materials Data Energy Conversion process Transformation Machines Interpretation Skill Output Useful products Products Knowledge Services

Variable cost

Fixed cost

Revenue