First Chapter: Introduction

1. What do you mean by product and service?

Product: Generally products means tangible goods which is purchased and sold in exchange
of money. Generally products means tangible goods which is purchased and sold in exchange
of money.
“A product is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need. Its includes objects, services persons, places,
organizations and ideas”- Philip Kotler

Service: Services Activities that provide some combination of time, location, form, and
psychological Value. Service is an act which is intangible in nature. It has no physical
existence. We can just feel it.

2. Define production and production management.

Production: Production is the processes and methods used to transform tangible inputs (raw
materials, semi-finished goods, subassemblies) and intangible inputs (ideas, information,
knowledge) into goods or services. Resources are used in this process to create an output that
is suitable for use or has exchange value.

Production management: Production management means planning, organizing, directing

and controlling of production activities.
Production management deals with converting raw materials into finished goods or products.
It brings together the 6M's i.e. men, money, machines, materials, methods and markets to
satisfy the wants of the people.

3. What are the assumptions of production function?

Assumptions of production function are as follow:

1. Production function is related to a specific time period.
2. The state of technology is fixed during this period of time.
3. The factors of production are divisible into the most viable units.
4. There are only two factors of production, labor and capital.
5. Inelastic supply of factors in the short-run period
4. Briefly discuss the evolution of production and operations management.

For over two century’s operations and production management has been recognized as an
important factor in a country’s economic growth.
The traditional view of manufacturing management began in eighteenth century when Adam
Smith recognized the economic benefits of specialization of labor. He recommended breaking
of jobs down into subtasks and recognizes workers to specialized tasks in which they would
become highly skilled and efficient. In the early twentieth century, F.W. Taylor implemented
Smith’s theories and developed scientific management. From then till 1930, many techniques
were developed prevailing the traditional view. Brief information about the contributions to
manufacturing management is shown in the Table:

Production management becomes the acceptable term from 1930s to 1950s. As F.W. Taylor’s
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 an and other social
 scientists began to study people and human behavior in the working environment. In addition,
economists, mathematicians, and computer socialists contributed newer, more sophisticated
analytical approaches.

With the 1970s emerges 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

5. Explain production and operation management process.

Production/operations management is the process, which combines and transforms various

resources used in the production/operations subsystem of the organization into value added
product/services in a controlled manner as per the policies of the organization. Therefore, it is
that part of an organization, which is concerned with the transformation of a range of inputs
into the required (products/services) having the requisite quality level.

The set of interrelated management activities, which are involved in manufacturing certain
products, is called as production management. If the same concept is extended to services
management, then the corresponding set of management activities is called as operations
management.

6. What are the major decision areas in production and operations management?

Operations managers, the people charged with managing and supervising the conversion process,
play a vital role in today’s firm. They control about three-fourths of a firm’s assets, including
inventories, wages, and benefits. They also work closely with other major divisions of the firm,
such as marketing, finance, accounting, and human resources, to ensure that the firm produces
its goods profitably and satisfies its customers. Marketing personnel help them decide which
products to make or which services to offer. Accounting and human resources help them face
the challenge of combining people and resources to produce high-quality goods on time and at
reasonable cost. They are involved in the development and design of goods and determine what
production processes will be most effective.

Production and operations management involve three main types of decisions, typically made at
three different stages:

1) Production planning: The first decisions facing operations managers come at the
planning stage. At this stage, managers decide where, when, and how production will
occur. They determine site locations and obtain the necessary resources.
 2) Production control: At this stage, the decision-making process focuses on controlling
quality and costs, scheduling, and the actual day-to-day operations of running a factory
or service facility.
3) Improving production and operations: The final stage of operations management
focuses on developing more efficient methods of producing the firm’s goods or services.

7. Discuss the considerable areas of production and operations management?

The considerable areas of production and operations management are:
 The Product
 The Plant
 The Processes
 The Programs
 The People
This also known as 5Ps.

The Product: The processes and methods used to transform tangible inputs (raw materials, semi-
finished goods, subassemblies) and intangible inputs (ideas, information, knowledge) into goods
or services. Resources are used in this process to create an output that is suitable for use or has
exchange value.
The product is mainly concerned for:
 Performance
 Quality
 Reliability
 Quantity
 Production cost

Plant: Plant is an industrial site, usually consisting of buildings and machinery, or more commonly
a complex having several buildings, where workers manufacture goods or operate machines
processing one product into another.
While considering plant in production the following concern are there-
 Future possible demand
 Design and layout of office and buildings
 Social responsibility
 Safety of installation and operation
 Maintenance of performance
 Performance and reliability of equipment

The Processes: Mechanical or chemical steps used to create an object, usually repeated to create
multiple units of the same item. Generally involves the use of raw materials, machinery and
manpower to create a product.

The factor affecting the processes are:

 Available skill
  Type of production
 Safety
 Lay out of plants and equipment
 Available capacity
 Maintenance requirements

The Programs: The program is a plan of action to accomplish a specified end.

It includes-
 Purchasing
 Transforming
 Maintenance
 Cash
 Transport
 Storage

The People: Our responsibilities extend to not only our own people, but those impacted by our
operations. We are committed to our goal of ensuring zero harm to our employees, our
contractors and the communities in which we operate. We recognize that our people are the
primary source of our competitiveness.
For retransition and welfare of employee, some factors should be discuss with the employees.
Such as-
 Wages/salaries
 Safety
 Condition of work
 Motivation
 Trade union
 Education and training

8. Describe different types of production.

The production system of a company mainly uses facilities, equipment and operating methods
(called the production system) to produce goods that satisfy customers’ demand. The above
requirements of a production system depend on the type of product that the company offers and
the strategy that it employs to serve its customers.
Types of production system:

Fig: Classification of production systems

Job shop production: Job shop production are characterized by manufacturing of one or few
quantity of products designed and produced as per the specification of customers within prefixed
time and cost. The distinguishing feature of this is low volume and high variety of products.

The Job-shop production system is followed when there is:

 High variety of products and low volume.
 Use of general purpose machines and facilities.
 Highly skilled operators who can take up each job as a challenge because of uniqueness.
 Large inventory of materials, tools, parts.
 Detailed planning is essential for sequencing the requirements of each product, capacities
for each work center and order priorities.

.
Batch production: Batch production is a method used to produce similar items in groups, stage
by stage. In batch production, the product goes through each stage of the process together before
moving on to the next stage.
Ex. Assembly of television sets, assembly of auto, assembly of computer keyboard, cold drinks
factory etc.

Batch production system is used under the following circumstances:

 When there is shorter production runs.
 When plant and machinery are flexible.
 When plant and machinery set up is used for the production of item in a batch and change
of set up is required for processing the next batch.
 When manufacturing lead time and cost are lower as compared to job order production

Mass production: Mass production is the manufacturing of large quantities of standardized

products, often using assembly lines or automation technology. Mass production facilitates the
efficient production of a large number of similar products.
Mass production is used under the following circumstances:
 Standardization of product and process sequence.
 Dedicated special purpose machines having higher production capacities and output rates.
 Large volume of products.
 Shorter cycle time of production.
 Lower in process inventory.
 Perfectly balanced production lines.
 Flow of materials, components and parts is continuous and without any back tracking.
 Production planning and control is easy.
 Material handling can be completely automatic.
 Continuous production: Continuous production system involves a continuous or almost
continuous physical flow of materials. It makes use of special purpose machines and produces
standardized items in large quantities. The examples are cement, steel, sugar and fertilizer
industries, etc.

Continuous production is used under the following circumstances:

 Dedicated plant and equipment with zero flexibility.
 Material handling is fully automated.
 Process follows a predetermined sequence of operations.
 Component materials cannot be readily identified with final product.
 Planning and scheduling is a routine action

9. What are the scopes of production and operations management?

Production and operations management concern with the conversion of inputs into outputs,
using physical resources, so as to provide the desired utilities to the customer while meeting
the other organizational objectives of effectiveness, efficiency and adoptability.

The scopes of production and operations management are:

1. Location of facilities: Location of facilities for operations is a long-term capacity decision

which involves a long term commitment about the geographically static factors that affect
a business organization. It is an important strategic level decision-making for an
organization. It deals with the questions such as ‘where our main operations should be
based?’

2. Plant layouts and material handling: Plant layout refers to the physical arrangement of
facilities. It is the configuration of departments, work centers and equipment in the
conversion process. The overall objective of the plant layout is to design a physical
arrangement that meets the required output quality and quantity most economically.

3. Product design: Product design deals with conversion of ideas into reality. Every business
organization has to design, develop and introduce new products as a survival and growth
strategy. Developing the new products and launching them in the market is the biggest
challenge faced by the organizations.

4. Process design: Process design is a macroscopic decision-making of an overall process

route for converting the raw material into finished goods. These decisions encompass the
selection of a process, choice of technology, process flow analysis and layout of the
facilities.
 5. Production and planning control: Production planning and control can be defined as the
process of planning the production in advance, setting the exact route of each item, fixing
the starting and finishing dates for each item, to give production orders to shops and to
follow up the progress of products according to orders.
Main functions of production planning and control includes planning, routing, scheduling,
dispatching and follow-up

6. Quality control: Quality Control (QC) may be defined as ‘a system that is used to maintain
a desired level of quality in a product or service’. It is a systematic control of various factors
that affect the quality of the product. Quality control aims at prevention of defects at the
source, relies on effective feedback system and corrective action procedure.

7. Materials management: Materials management is that aspect of management function

which is primarily concerned with the acquisition, control and use of materials needed and
flow of goods and services connected with the production process having some
predetermined objectives in view.

8. Maintenance management: In modern industry, equipment and machinery are a very

important part of the total productive effort. Therefore, their idleness or downtime becomes
are very expensive. Hence, it is very important that the plant machinery should be properly
maintained.

10. What is 5W’s in production and operation management?

The term 5W’s refers to the five basic questions to ask when gathering information or solving
a problem.
The goal of this technique is to gain a factual answer to each question. Answers to all five
questions should give clarity to whatever the questioner is trying to discover: the solution to a
problem, the answer to a mystery, or even the best way to build a product.
The questions are:
What: What resources will be needed, and in what amounts? How the resources will be
allocated?
When: When will each resources be needed? When should the work be scheduled? When
should materials and other supplies be ordered? When is corrective action needed?
Where: Where will the work be done?
How: How will the product or service be designed? How will the work be done (Organization,
methods, equipment)?
Who: Who will do the work?
11. Compare between manufacturing operation and service operation.

Distinction between Manufacturing Operations and Service Operations:

Subject Manufacturing Operations Servicing Operations

Definition Goods Oriented Services oriented

Degree of customer contact
Uniformity of input
Labor content of Job
Uniformity of Outputs
Manufacturing allows a Higher degree of consumer and service
separation between production must be performed at the point of
and consumption consumption
Manufacturing operations have Greater variability of inputs on the basis
low variability of inputs and have of problems.
the ability to control
Lower Labor content Higher labor content
Low variability High variability

Measurement of Productivity Straightforward due to high Productivity measurement is difficult

degree of uniformity

Production and Delivery Production and delivery are not Production and delivery are same time
same time

Quality Assurance Quality may be assured where QA is more challenge because

errors can be corrected production and consumption in same
time
Amount of Inventory More inventory Low inventory

12. Explain different factors of production.

The factors of production are resources that are the building blocks of the economy; they are what
people use to produce goods and services. Economists divide the factors of production into four
categories: land, labor, capital, and entrepreneurship.

Land: Land refers to all natural resources. All natural resources either on the surface of the earth
or below the surface of the earth or above the surface of the earth is Land. It is the primary and
natural factor of production. All gifts of nature such as rivers, oceans, land, climate, mountains,
mines, forests etc. are land.

Characteristics -
a) The land is a free gift of nature.
b) The land has no cost of production.
c) It is immobile.
d) The land is fixed and limited in supply.
Labor: All human effort that assists in production is labor. This effort can be mental or physical.
It is a human factor of production. It is the worker who applies their efforts, abilities, and skills to
produce. The payment for labor is the wage.

Characteristic-

a) It is a human factor.
b) No two types of labor are the same.
c) One cannot store labor.

Capital: Capital refers to all manmade resources used in the production process. It is a produced
factor of production. It includes factories, machinery, tools, equipment, raw materials, wealth etc.
The payment for capital is interest.

Characteristics-

a) Capital is a manmade factor of production.

b) It is mobile.
c) It is a passive factor of production.

Entrepreneur: An entrepreneur is a person who brings other factors of production in one

place. He uses them for the production process. He is the person who decides

What to produce
 Where to produce
 How to produce
A person who takes these decisions along with the associated risk is an entrepreneur.

Characteristics-

a) He has imagination.
b) He has great administrative power.
c) An entrepreneur must be a man of action.
1. An entrepreneur must have the ability to organize.
2. He should be a knowledgeable person.
3. He must have a professional approach.
13. Explain production function with its features.

The production function relates the maximum amount of output that can be obtained from a
given number of inputs.

Following are the main features of production function:

1. Substitutability: The factors of production or inputs are substitutes of one another which
make it possible to vary the total output by changing the quantity of one or a few inputs, while
the quantities of all other inputs are held constant. It is the substitutability of the factors of
production that gives rise to the laws of variable proportions.

2. Complementarity: The factors of production are also complementary to one another, that
is, the two or more inputs are to be used together as nothing will be produced if the quantity of
either of the inputs used in the production process is zero.
The principles of returns to scale is another manifestation of complementarity of inputs as it
reveals that the quantity of all inputs are to be increased simultaneously in order to attain a
higher scale of total output.

3. Specificity: It reveals that the inputs are specific to the production of a particular product.
Machines and equipment’s, specialized workers and raw materials are a few examples of the
specificity of factors of production. The specificity may not be complete as factors may be
used for production of other commodities too. This reveals that in the production process none
of the factors can be ignored and in some cases ignorance to even slightest extent is not possible
if the factors are perfectly specific.

14. What are the ethical issues in production and operations management?

Ethics A standard of behavior that guides how one should act in various situations.
Operations managers, like all managers, have the responsibility to make ethical decisions.
Ethical issues arise in many aspects of operations management, Including:

1. Financial statements: accurately representing the organization’s financial condition

2. Worker safety: providing adequate training, maintaining equipment in good
working condition, maintaining a safe working environment.
3. Product safety: providing products that minimize the risk of injury to users or
damage to property or the environment.
4. Quality: honoring warranties, avoiding hidden defects.
5. The environment: not doing things that will harm the environment.
6. The community: being a good neighbor.
 7. Hiring and firing workers: avoiding false pretenses (e.g., promising a long-term job
when that is not what is intended).
8. Closing facilities: taking into account the impact on a community, and honoring
commitments that have been made.
9. Workers’ rights: respecting workers’ rights, dealing with workers’ problems
quickly and fairly.

15. Define productivity and multi-function productivity?

Productivity: Productivity is a measure of the effective use-of resources, usually expressed as the
ratio of output to input.
Productivity is an index that measures output (goods and services) relative to the input (labur,
material, energy, and other resources) used to produce them.
Measured productivity is the ratio of a measure of total outputs to a measure of inputs used in the
production of goods and services.
Output
Productivity =
Onput
Multi-function productivity: The concept of multi-factor productivity was developed by Scott
D. Sink, multi-factor productivity measurement model considered labor, material and energy as
major inputs. Capital was deliberately left out as it is most difficult to estimate how much capital
is being consumed per unit/ time.
Output Output
𝑀𝐹𝑃 = 𝑜𝑟
𝐿𝑎𝑏𝑜𝑟 + 𝑀𝑎𝑐ℎ𝑖𝑛𝑒 + 𝐸𝑛𝑒𝑟𝑔𝑦 𝐿𝑎𝑏𝑜𝑟 + 𝐸𝑛𝑒𝑟𝑔𝑦 + 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙

16. What are the factors affecting productivity?

The factors influencing productivity can be classified broadly into two categories:

 (A) Controllable Factors.

 (B) Uncontrollable Factor.

(A) Controllable Factors:

Controllable Factors are considered as internal factors. These are the factors which are in control
of industrial organization.
Controllable factors are:

1. Material and Power: Improved quality of raw materials and increased use of power have a
favorable effect on productivity. An effort to reduce materials and energy consumption brings
about considerable improvement in productivity.

2. Machinery and Plant Layout: The size of the plant and the capacity utilization has direct
bearing on productivity. Production below or above the optimum level will be uneconomical and
will tend towards lower level of productivity. The arrangement of machines and position in the
plant and the setup of the wore-bench of an individual worked will determine how economically
and efficiently production will be ferried out.

3. Human Factors: Human nature and human behavior are the most significant determinants of
productivity.
Human factors include both their ability as well as their willingness.
i. Ability to Work
ii. Willingness to Work
iii. Motivation and morale of people

4. Organization and Managerial Factors:

Organization factor include various steps taken by the organization towards maintaining better
industrial relations such as delegation and decentralization of authority. These factors also
influence motivation likewise the existence of group, with higher productivity as their goal is likely
to contribute to the organization objectives.

5. Technological Factors:
Technological factors exert significant influence on the level of productivity.
These include the following:
i Size and capacity of plant
ii Product design and standardization
iii Production planning and control
iv Plant layout and location
v Materials handling system
vi Inspection and quality control
vii Machinery and equipment used
viii Research and development

(B) Uncontrollable Factors:

Uncontrollable factors are known as external factors and these factors are beyond the control of
the individual industrial organization.
 Uncontrollable factors are:

1. Economic, Political and Social Changes: There are economic, social and political factor that
affects the productivity.
i. Economic Factors like Size of the market, banking and credit facilities, transport and
communication systems, etc. is important factors influencing productivity.
ii. Political Factors like Law and order, stability of government, harmony between states etc.
are essential for high productivity in industries Taxation policies of the government influence
willingness to work, capital formation, modernization and expansion of plants etc. Industrial policy
affects the size, and capacity of plants. Elimination of sick and inefficient units also helps to
improve productivity.
iii. Social Factors like Social customs, traditions and institutions influence attitudes towards
work and job. For instance, bias on the basis of caste, religion, etc., inhibited the growth of modern
industry in some countries. The joint family system affected incentive to work hard in India. Close
ties with land and native place hampered stability and discipline among industrial labour.

2. Natural Resources: Natural factors such as physical, geographical and climate conditions
exert considerable influence on productivity, particularly in extreme climates (too cold or too
hot) tends to be comparatively low. Natural resources like water, fuel and minerals influence
productivity.

3. Government Factor: Government policies and programs are significant to productivity

practices of government agencies, transport and communication power, and fiscal policies
(interest rates, taxes) influence productivity to the greater extent

17. What are the ways to improve productivity?

It is vital to develop a high rate of productivity because it is the foundation of the business’s
future growth.
There are many ways by which productivity can be increased:
i. Adoption of up to date technology in machines and equipment.
ii. Implementing a proper system of managerial planning and control.
iii. Effective time management.
iv. Maintenance of work facilities in factories.
v. Standardization and automation for mass production.
vi. Empower employees by providing training and an environment conducive for personal
is well as organizational growth.
vii. Let workers participate in management.
viii. Provide a flexible work schedule instead of rigid working hours.
ix. Clear communication should be there between management and workers.
18. Explain Pareto phenomena or 80/20 rule.

The 80-20 rule, also known as the Pareto Principle, is an aphorism which asserts that 80% of
outcomes (or outputs) result from 20% of all causes (or inputs) for any given event. In business, a
goal of the 80-20 rule is to identify inputs that are potentially the most productive and make them
the priority. For instance, once managers identify factors that are critical to their company's
success, they should give those factors the most focus.

For example, if 80 percent of profits come from 20 percent of customers, or 80 percent of sales get
produced by 20 percent of the sales team, you can't ignore less productive customers or stop
developing the vast majority of your sales representatives. That's the 80/20 principle gone array,
and it's bad for business.

19. Short notes:

A) Agility: Business agility refers to rapid, continuous, and systematic evolutionary adaptation
and entrepreneurial innovation directed at gaining and maintaining competitive advantage.
Business agility is the ability of an organization to:
 Adapt quickly to market changes - internally and externally
 Respond rapidly and flexibly to customer demands
 Adapt and lead change in a productive and cost-effective way without
compromising quality
 Continuously be at a competitive advantage

B) Mass production: Mass production is the manufacturing of large quantities of standardized

products, often using assembly lines or automation technology. Mass production facilitates the
efficient production of a large number of similar products.

C) Craft production: Craft production is a method of creating goods by hand, often with simple
tools. This type of one-off production was widely used prior to the industrial revolution, and is still
practiced around the world. Unlike mass production, craft production results in items that are each
unique in small ways, since they are made by hand one at a time.

D) Lean production: Lean production is a systematic manufacturing method used for eliminating
waste within the manufacturing system. This approach sets out to cut out or minimize activities
that do not add value to the production process, such as holding of stock, repairing faulty product
and unnecessary movement of people and product around the business. The word “lean” in the
term simply means no excess, so lean production can be translated simply into minimal waste
manufacturing.
 E) Division of labor: Division of labor, the separation of a work process into a number of tasks,
with each task performed by a separate person or group of persons. It is most often applied to
systems of mass production and is one of the basic organizing principles of the assembly line
A very basic example of division of labor could be seen in food gathering. In early societies, men
would be the hunters, women and children would prepare the food and collect berries. The idea
was that it was a very simple division of labor to enable the best use of different skill sets

20. Explain productivity in service sector.

Productivity measures the efficiency and effectiveness with which resources are used in
economic activity. Productivity measurement in service is difficult because it is hard to
standardize the inputs and outputs which are highly heterogeneous. Quality in the service sector is
very important because customers usually evaluate a given service by its quality. . Unlike the
manufacturing sector, which measures its output by quantity units and increases the amount of
production by raising output, service sector output often has less interest in the quantity aspect and is
normally increased by the attempt to provide higher quality services to the customer, making customer
more satisfied
Quantity of output and Quality of output
Service Productivity =
Quantity of input and Quality of input

The quality of the service sector consists of humanistic and technical aspects. The output
consists of a total service offered in terms of quality and the input includes both tangible and
intangible elements

21. Objective of the production management.

The objective of the production management is ‘to produce goods services of right quality and quantity at the right
time and right manufacturing cost’.

1. RIGHT QUALITY: The quality of product is established based upon the customer’s needs. The right quality is
not necessarily best quality. It is determined by the cost of the product and the technical characteristics as suited to
the specific requirements.

2.RIGHT QUANTITY: The manufacturing organization 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.

3. 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.

4.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.