Production and Operation Management

UNIT 1 INTRODUCTION

Production:

Production Meaning: Production is the result of co-operation of four factors of production viz.,
land, labour, capital and organization.

This is evident from the fact that no single commodity can be produced without the help of any
one of these four factors of production.

Therefore, the producer combines all the four factors of production in a technical proportion.

Historical Evolution of Production and Operation Management

1. Industrial Revolution

2. Post-Civil war Period

3. Scientific Management

4. Human Relations Movement

5. Operations Research

6. Service Revolution

7. Computer Revolution

8. Supply Chain Management

9. Electronic Commerce

10. Globalization

Industrial Revolution:

One of the first people to address the issues of operations management was the Scottish
philosopher -- and father of modern economics -- Adam Smith. In 1776 Smith wrote "The
Wealth of Nations," in which he described the division of labor. According to Smith, if
workers divided their tasks, then they could produce their products more efficiently than if the
same number of workers each built products from start to finish. This concept would later be
used by Henry Ford with the introduction of the assembly line.

During the industrial revolution, machinery allowed factories to grow in capacity and greatly
increased their output. Despite this growth, there was considerable inefficiency in production.

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Two individuals helped to overcome these inefficiencies in the early 20th century: Frederick
Winslow Taylor and Ford. Taylor developed a scientific approach for operations management,
collecting data about production, analyzing this data and using it to make improvements to
operations. Ford increased efficiency in production by introducing assembly line production
and improved the supply chain through just-in-time delivery.

Post Civil war Period

Technological developments during the Second World War created new possibilities for
managers looking to improve their operations. Specifically, the development of computational
technology allowed for a greater degree of data to be analyzed by firms. The abilities of
computers have continued to increase exponentially, allowing for a high degree of data
analysis and communication. Modern producers are now able to track their inventory from
raw materials, through production and delivery.

Scientific Management

Frederick Winslow Taylor enunciated his theory of ‘Scientific Management’ in the late 19 th and
early 20th centuries. The basis of “Scientific Management” was focus on machines and the
system of their utilization.

Early in the century, Frank and Lillan Gilberth developed a more systematic and sophisticated
method of ‘time and motion study’, taking into account the limits of human physical and mental
capacity and the importance of a good physical environment.

1900s Alfred P Sloan of General Motors introduced the concept of ‘organizational management’
and Henry Ford Introduced assembly line manufacturing

The Hawthrone Studies by Elton Mayo in 1927, resulted in the Human Resources Movement

Human Relations Movement

The term human relation refers to the ways in which managers interact with their employees.
When a person in management stimulates more and better work, the organization has effective
human relations; when morale and efficiency deteriorates its human relations are said to be
ineffective.

Operation Research

A new multi-disciplinary approach to problem solving called operation research was developed
in 1940. This was a quantitative approach basically concerned with the efficient allocation and
control of resource. Multi-disciplinary operation research groups, largely initiated and founded
by government and quasi-government organizations were formed.

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Service Revolution

One important development of our time is the mushrooming of services in the U.S. economy.
The creation of service organizations accelerated sharply after World war II and is still
expanding today.

Computer Revolution

The 1970s witnessed the advent of the widespread use of computers in business. With computers
many of the quantitative models developed by management science could be used on larger
scale. Data processing was made easier, with important effects of areas such as forecasting,
scheduling and Inventory management.

Supply Chain Management

The central idea of supply chain management apply a total system approach to managing the
flow of information, materials and services from raw material suppliers through factories and
ware house to the end customer.

Electronic Commerce

The quick adoption of the internet and the World Wide Web during the late 1990s was
remarkable. The term electronic commerce refers to the use of the internet as an essential
element of business activity.

Globalization

Globalization increased trade between nations. Greater communication and trade agreements
continue the trend towards more competitiveness among companies and nations.

Production Management

Production management is concerned with the decision making regarding the production of
goods and services at a minimum cost according to the demands of the customers through the
management process of planning, organizing and controlling. In order to attain these objectives,
effective planning and control of production activities is very essential.

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According to H.A. Harding, “Production Management is concerned with those processes which
convert the inputs into outputs. The inputs are various resources like raw materials, men,
machines, methods etc and the outputs are goods and services.”

Operation Management

APICS, The Association for Operations Management also defines operations management as
“the field of study that focuses on the effectively planning, scheduling, use, and control of
manufacturing or service organization through the study of concepts from design engineering,
industrial engineering, management information systems, quality management, production
management, and other functions as they affect the organization”.

Objectives

Objectives o Production Management are classified as under

Ultimate Objective

Intermediate Objective

Ultimate Objective:

The primary responsibility of the manufacturing activity is to produce a product at

1. Right Quality

2. Right Quantity

3. Right Time

4. Pre-established cost

Intermediate Objectives:

The intermediate objectives includes

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1. Machinery and Equipment

2. Materials

3. Manpower

4. Manufacturing Services

Scope of Production Management

Production management mainly associated with the factory management as the problems of
production crept with the development of factory system.

The various activities that form scope of production management can be studied in two broad
areas.

1. Activities Relating to Production System Designing

2. Activities Relating to Analysis and Control of Activities

Activities Relating to Production System Designing:

Decision relating to the production system design is the first and foremost activity of the
production management. This activity concerns the production engineering and includes
problems regarding design of tools and jigs, the design, development and installation of
equipment and the selection of the optimum size of the firm.

Apart from these problems, the production system designer should pay full attention to two other
important problems

i. Human factor, i.e the impact of production system on the workers operating it.

ii. Research and development activities.

Activities Relating to Analysis and control of Activities

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The next problem after the designing of the production system is the analysis and control of the
production system. It includes all decisions regarding production administration and therefore all
functions of the management so far as they are applicable to the productions system form the
subject matter of the production management. These are the activities are

 Production Planning

 Production control

 Quality control

Functions of Production Management

 Production planning

 Production Control

 Quality Control

 Industrial Engineering

 Purchasing

 Plant Engineering

 Manufacturing

 Method analysis

 Inventory Control

 Plant Layout and Materials Handlings

 Work Measurement

 Other Functions

Production Planning

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Production management includes production planning. Here, the production manager decides
about the routing and scheduling means deciding the path of work and the sequence of
operations. The main objective of routing is to find out the best and most economical sequence
of operations to be followed in the manufacturing process. Routing ensures a smooth flow of
work means to decide when to start and when to complete a particular production activity.

Production Control

Controlling the production process is the next job of paramount importance, that the production
manager shall handle. The production planning and the actual process shall be tallied and if any
deviations from the actual planning are found, that must be met with necessary steps for its
correction.

Quality Control

Quality and cost control plays a huge role in the company’s upliftment, the buyers want the
products to be of top-notch quality at fair and low prices. The production manager thus has to try
to maintain the quality of the product and should try to lower the production cost, as it shall in
turn lower the cost of the product.

Industrial Engineering

Industrial Engineering is concerned with the determination of methods and process of

manufacturing activities. it also designs tools, zigs, fixtures, gauges and other accessories
required for operations.

Purchasing

Purchasing is partially a production function. It plays a significant role in arriving at make or buy
decisions. Specifications and quality requirements of materials and equipment etc. are laid down
either by staff department or production department. Decisions relating to supplier, price,
delivery date etc. lie in the jurisdiction of purchasing department.

Plant engineering

Plant engineering has the responsibility for maintaining the plant and equipment and services
including light, heat and power.

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Manufacturing

Manufacturing actual process of conversion of materials into output of goods and services.
Industrial Engineering, Plant engineering, production planning and purchasing perform the staff
functions of rendering services and advice to manufacturing.

Method Analysis

There are many alternative methods for manufacturing a product. Some methods are more

economical than others. The production manager should study all the methods in detail by

analysing them in detail and select the best alternative out of them. The process of selecting the

best alternative is known as methods of analysis.

Inventory Control

Inventory control is also part of production management. The inventory level must be monitored
by the production manager. Overstocking and under stocking of inventories are not appropriate.

If there is an overabundance of materials, the working capital will be stifled, and the materials
can spoil, be wasted, or be misused. If there is a shortage of inventory, manufacturing will be
delayed, and deliveries will be disrupted. Thus, the production manager shall effectively control
the inventories.

Plant layout:

Plant layout is primarily concerned with the internal set up of an enterprise in a proper manner. It

is related to orderly and proper arrangement and use of available resources viz., men, money,

machines, materials and methods of production inside the factory. In other words it is concerned

with maximum and effective utilisation of available resources at minimum operating costs.

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(7) Work measurement:

Work measurement methods are concerned with measuring the level of performance of work by

a worker. Time and motion studies techniques can be used for work measurement. If a worker

works below the level fixed by work-measurement techniques, his performance must be

improved through positive or negative incentives.

(8) Other functions:

Apart from the above-mentioned functions, the production Department also carries certain other

functions viz., cost control, standardization and storage, price analysis and provision of wage

incentives to workers etc.

Benefits

The efficient production management will give benefits to the various sections of the society:

1. Benefits to organization

2. Benefits to Consumer

3. Benefits to Investors

4. Benefits to Employee

5. Benefits to Suppliers

6. Benefits to Community

7. Benefits to Nation

Production decisions

Production vs Operation Management

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Here are the primary differences between these two vital factors behind the successful running of
a company –

1. Definition
Production management is part of operations management. However, when you define
production and operation management, you can see that they are two very different concepts
indicating two different purposes. Production management primarily deals with factors
associated with the production of goods and service.

On the other hand, operations management comprises managing production as well as the
administration of a business. It ensures a smooth production and delivery system of products at
minimum cost without compromising on quality.

2. Scope of Operation
Scope of operation is a significant point of difference between production and operation
management. Production management’s operational scope is limited to production. With its help,
a production manager creates a compelling production strategy in an attempt to maximise a
company’s potential.

Contrarily, the scope for operation management is much broader as it deals with every aspect of
a company. An operations manager is responsible for formulating a strategy that will ensure the
proper use of every company resource. Moreover, he/she has to look after non-production areas
like product design, human resources, inventory, logistics, waste management, etc.

3. Objective
Objectives of production and operation management are crucial to their difference. Production
management aims to provide the best quality product at minimal cost and on time. In contrast,
the objective of operations management is to ensure the best use of company resources.

4. Where It is Prevalent
Production management is found in companies that manage a production unit. Whereas,
operations management is found in every business, whether it has a production unit or not.
There are several differences between these two concepts, as mentioned above. However,
the importance of production and operation management is unquestionable for a business to
attain success.

While production management takes care of the entire production unit and ensures its efficient
performance. Operations management, at the same time, manages the other non-production
factors also.
It ensures that the company delivers the best product at the best prices. Therefore, for a company
to become successful in a highly competitive market, these two aspects have to work for hand in
hand and effortlessly.

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UNIT 1 INTRODUCTION

Production System

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Types of Production System

The types of production system are grouped into two categories, namely:
1. Intermittent production system
2. Continuous production system

1. Intermittent production system:

Intermittent means something that starts and stops at irregular intervals (time intervals). In the
intermittent production system, goods are produced according to customer orders. These
products are produced on a small scale. The production flow is intermittent (irregular). In other
words, the production flows are not continuous.

In this types of production system, large varieties of products are produced. These products are
of different sizes. The design of these products keeps changing. It keeps changing based on
product design and size. Therefore, this system is very flexible.

The following are examples of the intermittent production system:

(i) The work of a goldsmith is based exclusively on the frequency of customer orders. The
goldsmith manufactures goods (ornaments) on a small scale according to the requirements of his
client. Here, ornaments are not made continuously.

(ii) Similarly, a tailor’s work is also based on the number of orders he receives from his clients.
The tailor sews the garments for each client independently according to measurement and size.

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Products (sewn clothing) are manufactured on a limited scale and is proportional to the number
of orders received from customers. Here, sewing is not done continuously.

Characteristics of an intermittent production system are listed below:

(i) The production flow is not continuous. It is intermittent.

(ii) Wide varieties of products are produced.
(iii) The production volume is small.
(iv) General-purpose machines are used. Different types of products can be produced by the use
of these machines.
(v) The sequence of operations continues to change according to the product design.
(vi) The quantity, size, shape, design, etc. Product depends on customer orders.

The types of intermittent production system include:

i. Project production flows,

ii. Jobbing production flows, and
iii. Batch production flows.

i. Project production flows:

Here, in the project’s production flows, the company accepts a single complex order or contract.
The order must be completed within a certain period of time and at an estimated cost. Consider
making a boat. Such products are never manufactured in large quantities. Labor, facilities and
other resources focus on these products. Therefore, each product can be treated as a project,
which requires the sequencing of certain activities, either in series or simultaneously.
PERT/CPM or network analysis is a useful technique to plan and control such projects.
Examples of project production flows mainly include the construction of airports, roads,
buildings, shipbuilding, dams, etc.

Characteristics of project production flows:

1. A resource requirement varies with the production phases.
2. Many agencies are involved and their jobs are interrelated.
3. Generally. Delays take place at the end of the project.
4. As routing and programming changes, inspection is required.

ii. Jobbing production flows:

In the job production flows, the company accepts a contract to produce one or a few units of a
product strictly according to the specifications given by the customer. The product is produced
within a certain period and at a fixed cost. This cost is fixed at the time of signing the contract.

Examples of such job production flows include services provided by clothing workshops, repair
shops, manufacturers of special machine tools, etc.

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Characteristics of jobbing production flows:

1. The production of items takes place in small batches.
2. Items are manufactured according to customer specifications.
3. Highly skilled labor is needed for specialized jobs
4. There is a disproportionate manufacturing cycle time.

iii. Batch production flows:

In batch production flows, the production schedule is decided according to specific orders or is
based on demand forecasts. Here, the production of items takes place in lots or lots. A product is
divided into different jobs. All jobs in a production batch must be completed before starting the
next production batch.
Examples of batch production flows include, manufacture of drugs and pharmaceuticals, medium
and heavy machinery, etc.

Characteristics of batch production flows batch instruction:

1. Products are manufactured and stored until demand arises.
2. General-purpose machines and equipment are installed.
3. There is a possibility of major work in progress.
4. You need detailed production planning and control.

2. Continuous production system:

Continuous means something that operates constantly without irregularities or frequent stops. In
the continuous production system, goods are constantly produced according to the demand
forecast. The goods are produced on a large scale for storage and sale. They are not produced at
the customer’s request. Here, the inputs and outputs are standardized together with the
production process and the sequence.

The following are examples of the continuous production system.

(i) The production system of the food industry is based solely on the demand forecast. Here a
large-scale food production takes place. It is also a continuous production.

(ii) Similarly, the production and processing system of a fuel industry is also based solely on the
demand forecast. Crude oil and other raw sources are continuously processed on a large scale to
obtain a usable form of fuel and
offset global energy demand.

The characteristics of a continuous production system are listed below:

(i) The production flow is continuous. It is not intermittent
(ii) The products are standardized.
(ii) Products are produced with predetermined quality standards.
(iv) Products are produced in anticipation of demand.
(v) Standardized roadmaps and schedules are prepared.

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The types of continuous production systems include:

1. Mass production flows
2. Process production flows.

1. Mass production flows:

Here, the company produces different types of large-scale products and stores them in
warehouses until they are demanded in the market. Products are produced with the help of a
single operation or use a series of operations.
E.g. Mass production is the production of toothpaste, soaps, pens, etc.

Characteristics of mass production flows:

1. Continuous production flow, depends on market demand.
2. Here, there is limited work in progress.
3. Supervision is easy: few instructions are necessary.
4. The material is mainly handled by machines.
5. The flow of materials is continuous with little or no glue.

2. Production processes:
Here, a single product is produced and stored in warehouses until it is demanded in the market.
The flexibility of these plants is almost nil because only one product can be produced.
Examples of production process flows include steel, cement, paper, sugar, etc.

Characteristics of process production flows:

1. Highly mechanized system for material handling.
2. Low skilled labor and skilled technicians are required.
3. Very little work in progress, since the flow of material is continuous.
4. Production planning and programming can be decided in advance.
5. The complete production system is designed to produce a single item.

Role of Production and Operation Manager

Major responsibilities of a production manager are:

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(1) Production planning

(2) Production control
(3) Quality control
(4) Method analysis
(5) Inventory control
(6) Plant layout
(7) Work measurement
(8) Other functions

Automation Meaning

The word ‘Automation’ is derived from Greek word “Auto” (Self), “Matos” (moving).
Automation therefore is the mechanism for system that “move by itself”. However part from his
original sense of word, automated system also achieve significantly superior performance than
what is possible with manual systems in terms of power, precision and speed of operation.

The term automation refers to the phenomenon where a job is performed without the help of any
human interference.

Benefits

Lower operating costs

Robots can perform the work of three to five people, depending on the task. In addition to
savings on the cost of labor, energy savings can also be significant due to lower heating
requirements in automated operations. Robots streamline processes and increase part accuracy,
which means minimal material waste for your operation.

Improved worker safety

Automated cells remove workers from dangerous tasks. Your employees will thank you for
safeguarding them against the hazards of a factory environment.

Reduced factory lead times

Automation can keep your process in-house, improve process control and significantly reduce
lead times compared to outsourcing or going overseas.

Faster ROI
Automation solutions are based on your unique needs and goals and pay for themselves quickly
due to lower operating costs, reduced lead times, increased output and more.

Ability to be more competitive

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Automated cells allow you to decrease cycle times and cost-per-piece while improving quality.
This allows you to better compete on a global scale. Additionally, the flexibility of robots
enables you to retool a cell to exceed the capabilities of your competition.

Increased production output

A robot has the ability to work at a constant speed, unattended, 24/7. That means you’ve got the
potential to produce more. New products can be more quickly introduced into the production
process and new product programming can be done offline with no disruption to existing
processes.

Consistent and improved part production and quality

Automated cells typically perform the manufacturing process with less variability than human
workers. This results in greater control and consistency of product quality.

Smaller environmental footprint

By streamlining equipment and processes, reducing scrap and using less space, automation uses
less energy. Reducing your environmental footprint can save real money.

Better planning
Consistent production by robots allows a shop to reliably predict timing and costs. That
predictability permits a tighter margin on most any project.

Reduce need for outsourcing

Automated cells have large amounts of potential capacity concentrated in one compact system.
This allows shops to produce parts in-house that have previously been outsourced.

Optimal utilization of floor space

Robots are designed on compact bases to fit in confined spaces. In addition to being mounted on
the floor, robots can be mounted on walls, ceilings, rail tracks and shelves. They can perform
tasks in confined spaces, saving you valuable floor space.

Easy integration
Productivity will work with you to provide a complete system – hardware, software and controls
included. Your cell will be proven out at Productivity and shipped production-ready – allowing
you to start making parts as soon as it’s installed in your shop.

Limitation

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