TYBCom- Operations Management and Research

SEMESTER VI

Module 1: Introduction to Operations Management

Topics Covered:

1. Basics of operations management

2. Scope & functions
3. Production Vs Productivity
4. Partial and Total Productivity
5. 4 Ms
6. Efficiency Vs Effectiveness

 Basics of operations management

*attached in the pdf

 Scope & functions

*attached in the pdf

 Production Vs Productivity
Production
 Production is an organized activity of transforming raw materials into finished products. It is
an intentional act of producing something useful.
 In production systems we have different resources as inputs.
 The inputs are processed in a series of operations
 The sequence, number and type of operations (mechanical, chemical, electrical, assembly,
inspection, inspection, transportation etc.) are mentioned for each input.
 The output of the system will be complete parts, products, chemicals etc.

 The main purpose of the aggregate plan is to specify the optimal combination of production
rate, workforce level and inventory on hand.
 Production rate refers to the number of units completed per unit of time (such a hour per
day).
 Workforce level is the number of workers needed for production
 Production = production rate x workforce level
 Inventory on hand is unused inventory carried from the previous period.
 A formal statement of aggregate planning problem is : “Given the demand forecast F tfor
each period t in the planning horizon that extends over T periods, determine the production
level Pt , inventory level I tand workforce W t for periodst=1,2 , … ,T that minimize the
relevant cost over the planning horizon.
 The form of aggregate planning varies from company to company. In some firms, it is a
formalized report containing planning objectives and planning premises on which it is based.
In other companies particularly smaller ones, the owner may make simple calculations of
workforce needs that reflect a general staffing problem.
 Production function shows the relationship between input and output of an organization.
 By studying the production function the maximum output that can be achieved given the
inputs, or say resources with a given state if technology is determined.
 The production can be represented by the simple mathematical equation which relates to the
simple mathematical equation which relates the outputs as a function of inputs that is
Y =f ( X 1 + X 2+ … , X 3 )
 Where
Y= units of output , which is the function of two or more inputs
X 1 = unit of labour
X 2 =unit of machinery and so on.
Some quantities of production are assumed to be fixed, that is not varying with change of
output such as quantities never enter in the equation.

Production planning
 The production planning involves the consideration of all input variables to achieve defined
output goals.
 Production planning in particular would therefore consist mainly of the evaluation and
determination of production-inputs such as labour (manpower), machinery and equipment,
materials, and utilities to achieve the desired goals.
 The planning process can be divided into various stages:
 Defining objectives and setting priorities to attain these
 (a) studying the environment external to the system being planned
(b) Studying the internal environment of the system being planned
 Determining the realisable targets (quantified as far as possible).
 Gearing the inputs to achieve the targets

Production Planning Duration

 Plans have a time dimension and to the extent the time-span is limited, the scope of
functional plans also remains limited with less interaction from other functional plans.
 The longer the time-span of the plan, the more integrative, organization wide the plan has to
be. The wider time-horizon plans over a wider organizational perspective.
 As the time-horizon of the production plan widens from a short range plan (day-to day
scheduling) to an intermediate range (monthly, or quarterly or annual) to a long range plan
(annual or five-yearly) the flexibility available – to change the variables and allow
modifications when found necessary – also increases.
 The five-year range plan allows a company the flexibility of increasing the production
capacity by purchasing new equipment, locating new plants, acquiring new technology or
recruiting adequate technical man-power.
 This is not applicable for one-year plan. Here flexibility in procuring new plants and
machinery or acquiring the technology and know-how is lost.
 Coming to the weekly or daily plans, hardly any flexibility is left except to assign different
jobs to the available machines and manpower.
 The planning problems for different time-horizons are therefore different and the solutions are also
different.

Production Planning Environment

Production Planning Strategies

There are three production planning strategies. These strategies involve trade-offs among the
workforce size, work hours, inventory and backlogs.
 Chase Strategy: Match the production rate to the order rate by hiring and laying off
employees as the order rate varies. The success of this strategy depends on having a pool of
easily trained applicants to draw on as order volumes increase. There are obvious
motivational impacts. When order backlogs are low, employees may feel compelled to slow
down out of fear of being laid off as soon as existing orders are completed.
 Stable Workforce: Vary the output by varying the number of hours worked through flexible
work schedules or overtime. By varying the number of work hours, you can match
production quantities to orders. This strategy provides workforce continuity and avoids
many of the emotional and tangible costs of hiring and firing associated with the chase
strategy.
 Level Strategy: Maintain a stable workforce working at a constant output rate. Shortages and
surpluses are absorbed by fluctuating inventory levels, order backlogs and lost sales.
Employees benefit from stable work hours at the costs of potentially decreased customer
service levels and increased inventory costs. Another concern is the possibility of inventoried
products becoming obsolete.

Production Control
 Production Control is the updating and revising procedure where, according to the
requirements of implementation, the labour assignments, the machine assignments, the job
priorities, the line speeds, production routes etc. may be revised.
 It is basically the correcting mechanism which goes on throughout the implementation
process of the already drawn up production plan and schedule.
 In order to continually monitor the progress of implementation, many control techniques
such as Gantt charts, PERT/CPM etc. may be used.
 Extraordinary revisions of schedules would need an extra person to look after the changes
and monitor and communicate decisions and information faster on the production line. Such
a person is called an expediter.

Productivity
 It is a matter of common knowledge that higher productivity leads to reduction in cost of
production, reduces the sales price of an item, expands markets and enables the goods to
compete effectively in the world market.
 Productivity can be defined in many ways and some are as follows:
 Productivity is nothing but the reduction of wastage of resources as labour,
machines, materials, power, space, time, capital etc.
 Productivity can also be defined as human endeavour (effort) to produce more and
more with less and less inputs of resources so that the products can be purchased by
a large number of people at affordable price.
 Productivity implies development of an attitude of mind and a constant urge to find
better, cheaper, easier, quicker and safer means of doing a job, manufacturing a
product and providing service.
 Productivity aims at the maximum utilization of resources for yielding as many
goods and services as possible, of the kinds most wanted by consumers at lowest
possible cost.

 Partial and Total Productivity

Partial Productivity
 Partial Productivity measure is used when the firm is interested in the productivity of
a selected input factor. It is ratio of output values to one class of input.
Outputs Outputs Outputs
PPM = = =
Labour input Material input Capital
  Multi-factor productivity measurement technique is used when the firm is interested
to know the productivity of a group of input factors but not all input factors.
Outputs Outputs
MFPM = =
Labour+Capital Labour + Material

 Total factor productivity is when a firm is interested to know about the overall
productivity of all inputs factors. This technique will give us the production of the
entire organization or even a nation.
Outputs Goods∧services provided
 T PM = =
Inputs All resources used

Difference between Production and Productivity

 Production

 Production is an organized activity of transforming raw materials into finished goods

which have higher value.

 Production of any commodity or services is the volume of output irrespective of the

quantity of resources employed to achieve the level of output.

 Production in an industry can be increased by employing more labour, installing

more machinery and putting in more materials, regardless of cost of production.

 Productivity

 Increase in production does not necessarily mean increase in productivity.

 Higher productivity results when we put in production system an element of

efficiency with which the resources are employed.

 The combined input of a number of factors such as land, materials, capital and labour
gives an output in an industry.

 The ration between output and one of these factors of input is usually known as
productivity of the factor considered.

 Productivity = output value/ input value

 Factor Productivity = output due to the factor/input factor employed

 Business Process Reengineering

 In the past companies have sought to increase the organizational productivity through radical
changes by means of Business Process Reengineering (BPR).

 BPR is about taking a hard look at why the organization is doing things the way it does.

 BPR requires that firm gets out of rigid thinking and do rethinking.

 The business process, which consists of all tasks that create outputs of value to the customer
should be looked afresh.

 The analysis is not limited to the functional areas and departments. It involves organizational
changes, redesign of the work, rationalisation and integration of all the tasks and work-flows,
use of information technology to bring in the speed of response.
  In BPR parlance, processes mean all those actions that lead to results in terms of the customer
satisfaction. In brings in the people and tasks to achieve the ultimate objective.

Benchmarking

 While carrying out BPR the company should have basis for establishing performance goals.

 These bases which should be the best practices in the industry, are called the benchmarks.

 Such benchmarking should lead the company to superior performance.

 Xerox Company, which is a leader in the use of benchmarking as a management technique or

process, terms benchmarking as “the continuous process of measuring our products, services, and
business practices against the toughest competitors or those companies recognised as industry leaders.”

Types of Benchmarking

 Internal benchmarking: One must know one’s internal processes and compare within units,
across units or divisions. This, in fact should be the first kind of benchmarking any company
should do, for it is the easiest, quickest and cheapest type of benchmarking. All the
information is available from within one’s own company. However, the big limitation is that
one is simply looking at one’s own processes. Hence there may not be any significant or
radical improvements.

 Competitive Benchmarking: This involves comparison between specific competitors for the
product or function of interest. Obviously, not an easy thing to do, a competitor generally
does not give data on his company and its processes. Nevertheless, one may collect the data
through secondary sources such as newspapers and magazines, seminars, networks, industry
associations, one’s suppliers, one’s own sales people, customer feedback, consulting firms,
clearing houses and government sources such as departments of industry and commerce. By
being informed about what one’s competitor is doing, one learns how to design, manufacture
and market in a better and planned manner.

 Functional Benchmarking: This involves comparison of similar functions within the same
broad industry or with industry leaders. The benchmarking partners, therefore need not be in
direct competition. This analysis seeks ideas that have already succeeded in a compatible area
as well as conveys that it is not necessary to concentrate solely on direct product competitors.
Within the ambit of the general industry, this procedure helps a company to know

 Generic Benchmarking: It is not always necessary to learn only from the firms that are
competing or those that fall within the general industry. Some processes are same regardless
of the dissimilarities of industries. For instance, Xerox benchmarked American Express for its
process of billing and collections, American Express for its process of billing and collections,
American Hospital Supply for automated inventory, Ford Motor Company for their
manufacturing etc.

 4 Ms
Manpower

 What skills?

 How many ?

 How the position adds value to the customer and to the company?
  Must be trained and performance observed : there is no such as “one and done”
when it comes to training.

Movement:

 Vehicles moved 3 times

 Vehicles stored sequentially

 Parts removed and stored according to environment , sales and available storage

 Warehouses are arranged so that high volume high dollar parts closest to
shipping

Machine

 From small tools to loaders

 From yard to fork lifts

 Computers and Printers

 Make sure who need them have them and they are kept in working order. Make
sure that there is uniformity across employees by position. If the machine can
eliminate or prevent the addition of employees.

Material

 What?

 Cleaning

 Packaging

 Core bins

 Two way radio’s

 Information

 Where?

 Always in the same place

 Where the work is done

Measurement

 What gets monitored and measured gets managed

 Better to best – it’s a journey, not a destination

 Available from the IMS

 Employee Accessible

 Sales

 Credits
  Efficiency Vs Effectiveness

References

1. Ram Naresh Roy. A Modern Approach to Operations Management.  New

Age International (P) Ltd.
2. SN Chary. Production & Operations Management. Tata McGraw-Hill
Education.  
3. Richard Chase, Ravi Shankar, F. Jacobs and Nicholas Aquilano.
Operations and Supply Management. Tata McGraw Hill Publications. (12th
Edition)