Chapter I

Understanding of Operations Management

Learning Objectives
Reading this chapter would enable you to understand:
The meaning of operations management.
The nature of modern operations management.

The importance of operations management.

Contents
1.1 Introduction of Operation Management
1.2 The Definition of Production and Operations Management
1.3 The Nature of Operations Management
1.4 The Objectives of Production Management
1.5 The Scope of Operations Management
1.6 The Importance of Operations Management
1.7The Functions of Operations management
Summing Up
Self-assessment

1.1 Introduction of Operations Management

Manufacturing is the basic activity of all the industrial organisations. All other
activities revolve around this activity. Manufacturing or production is a process of
converting raw materials into finished products to satisfy the needs of the members
of the society.

1.2 Definition of Production and Operations Management

Production Management deals with decision-making related to production
processes so that the resulting goods or services are produced according to
specifications, in amounts and by the schedule demanded at minimum cost.
Production Management is concerned with those processes, which convert inputs
into outputs.
The inputs are the various resources like raw materials, men, machines, methods
and the outputs are goods and services. It is a process of effective planning and
regulating the operations of that section of an enterprise, which is responsible for
the actual transformation of materials into finished products.
The word of production is often used to mean the same as manufacture. In order to
go through the process of manufacturing itself, we basically need three things:
i)

Someone to do the job

ii)

The equipment

iii)

The necessary materials

To ensure production we need services, which make sure that the manufacturing
activity takes place in a controlled manner and in the right direction.
Production Management, hence, refers to the application of management principles
to the production function in the factory.
Production management involves application of planning, organising, directing and
controlling to the production process.
It brings together men, materials and machines for producing goods and services
desired by the society to satisfy the wants of the people.
There are three terms in use: production, manufacturing and operations
management. Although these terms may be used synonymously, some authors
make distinction between them. The term production is used to refer to the process

of producing goods and services or tangible and intangible outputs. The term
manufacturing refers to the process of producing only tangible products; whereas
the term operations management is used for a system or process where only
intangible services are provided. Hence, operations management covers such
service organisations like banks, utilities, transport, educational services, super
markets etc.

1.3

The Nature of Modern Production Management

To explain the nature of production management it is desirable to consider

production as a system. A system is defined as an aggregate of various elements,
which are interrelated, interdependent and interactive. The production process
consists of following three systems:
a) A production system: A sub-system, which deals with transforming inputs into
outputs, that is goods and services desired by the society.
b) A conversion system: A sub-system where inputs are converted into the
desirable outputs.
c) A control system: A sub-system where a portion of the output is monitored for
feedback and to take corrective action whenever required.
The production system receives inputs in the form of materials, personnel, capital,
utilities and information. These inputs are supplied to the conversion sub-system
where these inputs are transformed into desired products in the form of goods and
services. While the output is being produced the control sub-system is
continuously monitoring to observe whether the output produced is up to the
predetermined standards of quality, quantity and cost. The control subsystem is
essential to maintain uniform level of performance through feedback, which
enables the management to take the necessary corrective actions.

1.4 The Objectives of Production Management

Production is an organised activity of a manufacturing organisation. Its objectives
are as stated below:
i)

Produce quality products at a minimum unit cost;

ii) Strictly maintain the time schedule;

iii) Acquire, utilise and maintain machinery and equipment and keep it in good
order;
iv) Obtain the best quality of raw materials at cheaper prices and store it in the
most economical way;
v) Select, train and maintain motivated manpower;
vi) Provide proper and adequate services so as to keep the flow of production
smooth and efficient;
vii) Produce quality products and sell them at fair prices.

1.5 The Scope of Production Management

The scope of manufacturing management is vast and expanding on account of
increasing complexity of the production processes and the competitive conditions.
The main areas covered by the manufacturing management are:
i)

Selecting and designing the product;

ii) Selecting and planning the process;

iii) Making decisions about the location of a plant;
iv) Preparing the plant layout;
v) Providing for material and handling;
vi) Capacity planning;
vii) Purchasing and storing the raw materials;

viii) Converting the raw materials into finished goods;

ix) Providing for quality management;
x) Arranging for maintenance management;
xi) Arranging for production planning and control;
xii) Conducting the work-study.

1.6 The Importance of Manufacturing Management

Manufacturing management is important considering the following factors.
i) Production activities in the country play a key role in promoting the economic
development of an underdeveloped country.
ii) Factories that are production centres are described as the temples of modern
India.
iii) Factories, which are manufacturing units, produce goods required to satisfy the
needs of the people, without these life will be miserable.
iv) Factories promote industrialisation and also provide employment directly and
indirectly to a large number of people in the country.
v) The productivity in the industrial sector is higher than that in agricultural
sector, it can pay higher wages and hence, it can improve the standard of living of
the people.
vi) Production units play a key role in bringing about the socio-economic
transformation of the society.
vii) The production structure of the economy affects the lifestyle of the people in
the country.

1.7 The Functions of Manufacturing Management

In modern times, production management has to perform a large variety of
functions and these functions are likely to expand in the near future.
The main functions carried out at present are as follows:
i)

Designing and developing production process.

ii) Carrying out production planning and control more efficiently and effectively.
iii) Implementing production plans and the related activities in order to produce
quality output at minimum cost per unit.
iv) Administering and coordinating the various activities of different departments
so as to run the whole production process smoothly and deliver goods in time.
v) Promoting the research and development activities in organisations with a view
to develop the products to match the changing tastes and preferences of the
consumers.
Summing Up
The chapter introduces us to the exciting and challenging field of operations and
production management. It explains the objectives, scope, importance and
functions of operations and production management.
Self-assessment
a. Fill in the blanks
1. Operations and production management deals with--------------.
a. production
b. manufacturing
c. production and manufacturing
d. all the above including the service organisations

2.Production management consists of ______ sub-systems.

a.4
b.5
c.3
d. 2
3.The objectives of manufacturing management are -----------.
a to produce to maximum at any cost
b to exploit manpower
c. to produce good quality products and sell at a fair price
d. none of the above
4. The importance of manufacturing management includes --------.
a. promoting economic growth of a country
b. providing employment to a large number of people
c. none of the above
d. both the above
5. The functions of manufacturing management are -----------.
a. to design and produce better production processes
b. to produce maximum output at the minimum cost per unit
c. both the above
d. none of the above