1 INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT Introduction All organisations exist to fulfil the needs of the society, or we may say the needs of customers. The fulfillment of these needs is done through products and services. The organisations are engaged in the manufacture of products or the provision of services. The operation or production activity employs the bulk of the assets, most of the manpower and large portion of the capital. It is imperative that these resources are managed properly. The success of an organisation depends on the success of its production or operations. If production operations fail, the organisation loses its reason for existence. Expertise in marketing, finance and human resources alone is not enough to run a successful organisation. Among all the functional areas of management, production and operation is considered to be crucial in any industrial organisation. Concept of Operations Management The term ‘production and operations’ management is being increasingly replaced by simply operations management. Operations management is a broad term which includes manufacturing as well as service organisations. Operations management designs and operates productive systems. Since its ambit extends toa large variety of functions, forming a comprehensive definition is difficult. However, it may be defined as under : Operations management is the planning, scheduling and controlling of activities that transform inputs by way of raw-materials, capital, machinery, labour, information and time into outputs in the form of products and services of higher value than inputs. Tt may also be viewed as @ value addition process. Some definitions of operations management are as under : “Operations management Is concerned with the efficient conversion of an organisation's resources into the goods and services that it has been set up to provide.” —Barnett “Operations management is concerned with creating, operating and controlling a transformation system which takes inputs of a variety of resources and produces outputs of goods and services which are needed by the customer.” —Naylors Introduction to Production and Operations Management 2 sagement of systems or processes that create goods and/or provide “Tt is the manag cae Se management is concerned with all activities involved in making a Product “Operations mane nL ice : itis responsible for the transformation of various kinds of inputs or providing a servic rt rs to useful outputs. The most of the definitions emphasise the transformational aspects of operations he me management Concept of Production Management ction management refers to the application of management principles to ms en R a factory. In other worlds, production management involves application of planning, organising, directing and controlling to the Production Process. The meaning of the term “production management” is clarified in the following definitions : According to E.S. Buffa, "Production management deals with decision-making related to production processes so that the resulting goods or service is produced according to specifications, in the amounts and by the schedule demanded and at minimum cost, The definition given by Buffa is simple, clear and exhaustive. It explains the following aspects of production management : i) It is a decision-making managerial function. _Siiy The decisions are made regarding the production processes required for converting inputs (raw-materials) into finished products, and (ili) The production should be according to specifications. “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.” The word ‘production management arrived first with the emergence of manufacturing industry and the necessity to manage it as such. However, these days manufacturing and service organisations fall in the scope of production management. Thus production management which was formerly considered as manufacturing Management only, now after inclusion of services into its scope, is broadly known as operations management. Difference between Production Management and Operations Management Operations management is often used alongwith production management in literature on the subject. By rending the concepts of production management and operations management it seems that there is hardly any difference between these two terms. But there are some points of difference between Production management and operations management. These are as under : 1. The term ‘production management is more used for a system where tangible goods are produced, The term ‘operations mana igement’ is more frequently used where various inputs are transformed into intangible services,Introduction to Production and Operations Management 3 2. The rein ‘operations management’ is being used now-a-days. The term ‘production management’ precedes operations management in the historical growth of the subject. 3. The management of manufacturing of products is referred to as production management, The functions dealing with the operations of services are covered under operations management. However, the tasks involved in the production of products and provision of services have So much similarity that the principles applied are common. Therefore, term “operations management is used to cover both production management and operations management. Objectives of Operations Management Every system (or organisation) has a purpose, certain objectives and goals to achieve. Since the objectives of an organisation have hierarchical structure, sub-goals lead to accomplishment of goals which contribute to the achievement of ‘objectives and eventually the purpose or mission of an organisation. It is very important that these objectives should be unambiguously identified, properly structured and explicitly stated. In general terms, the objectives of an organisation may be to produce the goods/or services in required quantities and of quality as per schedule and at a minimum cost. Thus quantity, quality and time schedule are the objectives that determine the extent of customer satisfaction. If an organisation can provide for these at a minimum cost then the ‘value’ of goods created or services rendered enhances and that is the only way lo remain competitive. Thus various objectives can be grouped as—performance objectives and cost objectives. . Performance Objectives—The performance objectives may include: H(i) Efficiency or productivity as output per unit of input. (ii) Effectiveness—t concerns whether a right set of outputs is being produced. Where efficiency may refer to ‘doing things right’, effectiveness may mean ‘doing the right things’. (iii) Quality—Quality is the extent to which a product or service satisfies the customer needs. The output has lo conform to quality specifications laid down before it can be accepted. yer Cpe Dgewrel WY]0o Rot Y completion oF 0. (iv) Lead fimes—Mahufacturing lead time or throughput time is the time ela| in the conversion process. Minimisation of idle time, delays, waiting etc. will reduce throughput time. Cate (v) Capacity utilisation—Percentage utilisation of manpower, machines etc. Flexibility: If the conversion process has the flexibility of producing a combination of outputs, it is possible to satisfy a variety of customer needs. 2. Cost Objectives—Attaining high degree of customer satisfaction on performance front must be coupled with lower cost of producing the goods or rendering a service.‘ ction and Operations Mana, troduction to Prod em, 7 a jective. Costs can be exp . tems objective. Costs Car Plicit (y Thus cost minimisation is an important sys! gible in economic terms o (Visit ang jr ) 2), These could be t ved supplies, cts der both the visible laints etc, While Manag: or implicit (hidden or invisible ‘and invisible, tangible and inp. 99 Mange iTsocial cost terms—such as dela production systems we must cofisic costs, Some examples of these costs are: (i) Explicit (visible) costs : * Material cost - * Direct and indirect labour cost ~ * Scrap/rework cost * Maintenance cost -~ (ii) Implicit (invisible/hidden) costs : * Cost of carrying inventory ~ * Cost of stockouts, shortages, back-logging, lost sales ie * Cost of delayed deliveries — * Cost of material handling - * Cost of inspection - * Cost of grievances, dissatisfaction —~ * Downtime costs * Opportunity costs ~ For the purpose of managerial decision-making, we should consider the total relevant systems costs including visible and invisible. A longer term cost implications rather than only short-term will help in arriving at better decisions. Objectives of Production Management Production is an organized activity of a manufacturing organization. Each activity must tell its objectives so that its existence can be justified on the basis of the degree of the attainment of these objectives. The objectives of production function can be classified as under : Objective of Production Management [+] Acquisition of machinery & equipments. Ultimate Objectives Produce at pre-established cost. 2) Produce according to pre-decided ilisatic it i ee ee 3.] Produce at minimum cost. 3.| Optimum utilisation of materials and manpower, 4, Produce according to pre-decided schedule, a Provide proper & adequate services.Introduction to Production and Operations Management 5 Ultimate Objectives tat i , qeohh Al The primary responsibility of manufac ‘turing activity is to produce a product-at pre- established cost, according to specified quality and within a stipulated time period. The ultimate objectives of production may be discussed as under: 1, To Produce at Pre-established Costs—The Major objective of the production management is to produce goods and services at pre-decided costs. Anticipated cost of a product is calculated-before- commencing the production of goods. The production managers responsible to produce the product according to standards fixed in order to provide the goods-at reasonable price to the customers. The unit cost of the product should be estimated carefully and every effort should be made to stick to the cost standards, 2 2, To Produce Quality Products—Generally, product quality standards are established by the products specifications or by the consumers. The manufacturing organization should try to achieve prescribed quality of the product. It should be noted that the product quality comes in conflict with the manufacturing cost objective and manufacturing time-schedule. However, the maintenance of qualit wuld not ré in increase in manufacturing costs or delay in production, 3. To Produce at Minimum Costs—Production manager must try to produce at minimum cost. For this purpose, the efforts should be made to divide the costs into two- direct cost and variable costs. Efforts should be made for the following : (i) reduction in variable costs (ii) reduction in fixed costs .~ (iii) increase in volume of production, so that the fixed costs may be spread over more production resulting in the reduction in cost per unit. (iv) allocate fixed overheads scientifically. 4. To Produce according to Schedule—Another important objective of production management is to maintain manufacturing schedule. Because, time schedule objective, directly affects the cost, quality and the goodwill of ization. A production manager must keep the following points in finalizing the schedule : (i) Operating cycle time Jt-e awe FF fewest fe Seu, te (ii) Machine set up time —4dweto cet 4 f sean je mec ke wrothine (iii) Idle time fer anaes (iv) Repair and maintenance time (v) Capacity utilization. Intermediate Objectives Production is the result of various types of inputs like men, materials, machines and manufacturing services. The intermediate objectives try to attain the optimum utilization of these various types of inputs. The intermediate objectives may be spelled out as under 7perey, weston Li wees ore mnatetdl, ee et phe Introduction to Productidh and Opetations Management 6 i ts—Various types of machines and i: chinery and equipmen : BN ret sed produce a product, Therefore, production management has equipments are neede . of existing machinery and equipment. In other words, adequacy Toc unapeeneniriemt te ew and proper additions and replacements e accordit requirements. ; agi easetior e wana nd equipments—Another interned late objective 7 ement is to ensure proper utilization of existing machinery and Ps aah Ge ape efforts should be made to mipimize machine idle time, alae rai up time etc. UbicaioT Te ORY eu Tepe, alten ag enon alee of materials and manpower—The materials objectives must be prescribed in terms of units, rupee value and space requirements, The efforts should be made to increase the inventory turnover of all types of inventories-raw materials, work in progress and finished goods. Manpower is an important as well as typical input in manufacturing activities. So the objectives of the production activities are as regards manpower must be closely allied with the objectives of selection, placement, , training rewarding and utilization of manpower, Generally, these objectives are considered in terms of employee turnover rates, safety measurement, industrial relations, absenteeism etc. 4. Provide manufacturing services—The Provision of proper and adequate Services directly affects the utilization of other inputs such as men, materials, and machines. Proper objective should be set for installation of important facilities such as Power, water supply, material handling etc. In brief, it can be stated that the objectives of the production activities are-to manufacture a quality product, on Schedule, at the lowest possible Costs, with maximum asset turnover, to achieve consumer satisfaction. To summarize, Production Management has to 1. Make sure that it devel with the correct quality, 2. Produce the Product in correct quantity. ~ 3. Deliver the product in time and to the right place. 4. Perform these functions at the tight price, ‘Ops a product which can function as expected, i.e. product Operations Managemen Operations Mana respect to a Produ Satisfaction at lowe: 1. Strategic (long-term) Deci: ions—A is 3 ecisi decision is sai itegic if it ati 'Mpact; influences @ larger Part of the eos ae a ae reo implemented. These decisions in the Context of production systems i - are essentially those it Decisions gement is €ssentially a function Concerning decision. ction/operation system so a Ss to render St cost, = making with the necessary customerIntroduction to Production and Operations Management 7 which deal with the Design and Planning (long-range or intermediate range) aspects Some examples of these decisions are: (i) Product selection and design—What products of services are to be offered constitute a crucial decision. A wrong choice of product or poor design of the praduct may render our systems’ operations ineffective and non-competitive, A careful evaluation of product/service alternatives on the multiple objective basis can help in choosing rig! . product(s). Techniques of value engineering can be Userur WY creating @ Good design which does not incorporate unnecessary features and can attain the Intended funetions at lowest costs. (i) Process selection and planning—Choosing optimal (best under the circumstances and for the purpose) process of conversion systems is an Important decision concerning choice of technology, equipment and machines, Process planning pertains to careful detailing of processes of resource conversion required and their sequence, Included in such decisions are the aspects of mechanisation and automation, (ii) Facilities location concerns decision regarding location of production system or its facilities. A poor location may spell operating disadvantages for all times to come, Therefore it is important to choose a right focatioh which will minimise total ‘del to-customer’ cost (production and distribution cost) by virtue of location, Evidently such decision calls for evaluation of location alternatives against multiplicity of relevant factors considering their relative importance for the system under consideration, (\v) Facilities layout and materials handling—Facilities layout planning problems are concerned with relative location of one department (activity centre) with another in order to facilitate material flow, reduce handling cost, delays and congestian, provide good house-Keeping, facilitate coordination etc. A detailed layout plan gives a blueprint of now actual factors of production are to be integrated. The types of layout will depend upon the nature of production systems. Most of the concepts used in layout planning models are based-on the importance of locating departments close to each other in order to minimise the cost of materials handling. Proper chcice of the material handling equipment such as fork-lift truck, conveyors etc. is a related decision in layout planning. There are large number of computer packages developed such as CRAFT (Computerised Relative Allocation of Facilities Techniques), CORELAP (Computerised Relationship Layout Planning) etc. to help in layout planning for process based layouts. Balancing the production or assembly line and line-design including provision of inter-stage storage capacity are some relevant issues in the product-based layouts. t Newer technologies, particularly computer-based, are significantly altering the traditional concepts in layout planning. More recently the concepts in Group Technology (GT), Cellular Manufacturing Systems (CMS) and Flexible Manufacturing Systems (FMS) have influenced the layout planning and material handling policies significantly. (v) Capacity planning—t concerns the acquisition of productive resources. Capacity may be considered as the maximum available amount of output of the canversion process over some specified time span. Capacity planning may he over short-term as well as oneS ee troduction to production and Operations Management Introduc fi si tems the concept of capac ity and hence capacity planning eae sg pacity planning includes expansion and Long-term ca . jities required in conversion process, determination of economics ‘litre ak even analysis is a valuable tool for capacity planning, 1, linear programming and decision tree are also a long-term basis. In se is a bit more difficult problem contraction of major fac ; of multiple shift operation etc. Bre’ Other techniques like learning curves Js in capacity planning. . ; a . pe mentioned five decision areas will be de scribed in detail in the units his one. LG g a al (ort-tarT) Decisions—Operation level decisions deal with short- i ning and control problems. Some of these are: ; es aeactice planning, scheduling and control—in operation scheduling we wish to determine the optimal schedule and sequence of operations, economic batch queitty, machine assignment and despatching priorities for sequencing. Production control is a complementary activity to production planning and involves follow up of the roduction plans. : Ahi i A /—This problem deals with determination of (ii) Inventory planning and control ; optimal inventory levels at raw material, in-process and finished goods stages of a production system. How much to order, when to order are two typical decisions involving inventories. Materials requirement planning (MRP) is an important upcoming concept in such a situation. (ii) Quality assurance—Quality is an impotent aspect of production systems and we must ensure that whatever product or service is produced it satisfies the quality requirements of the customer at lowest cost. This may be termed as quality assurance. Setting standards of quality, control of quality of products, processes are some of the aspects of quality assurance. Value engineering considerations are related issues in - Quality assurance. : (iv) Work and job design—These are problems concerning design of work methgds, systems and procedures, methods improvement, elimination of avoidable delays, work measurement, work place layout, ergonomic considerations in job design, work and job restructuring, job enlargement etc. Design and operation of wage incentives is an associated problem area. (v) Maintenance and replacement—These include decisions regarding optimal policies for preventive, scheduled and breakdown maintenance of the machines, repair policies and replacement decisions, Maintenance of manpower scheduling and sequencing of repair jobs; preventive replacement and condition monitoring of the equipment and Pea a a oie aa bib cea involving equipment maintenance. Such as ours because it is only through Ve we can improve capacty utilkation ig a aa effective maintenance management that Salhi rte and keep our plant and machinery productive and (vi) Cost re zs pon Cra an on-going production system the role of use through effective control of total cost of production,Introduction to Production and Operations Management 9 we can offer more competitive products and services, Cost avoidance and cost reduction can be achieved through various productivity techniques. Value engineering Is a prominent technique available for cost reduction, Concepts like standard costing and budgetary control help in monitoring and controlling the costs of labour, material etc. and suggest appropriate follow up action to keep these costs within limits, Monitoring and Feedback Control In every system, the actual accomplishment of objectives may not be as planned for various reasons, It is therefore very important to monitor the actual performance by measuring the actual output or some performance indicators. Basic elements of monitoring and feedback control—be it control of quantity, quality, time, inventory or cost—are: 1, Establish standards of performance or outputs. 2. Measure actual performance. 3. Compare the difference between the actual and planned. 4, Take appropriate remedial actions by changing inputs; revising plans, changing priorities, expediting the progress etc. Design of an appropriate feedback control system is therefore vital for all production/ operations management problems. Control is complementary to planning. Without monitoring and control, planning may not be effective; without planning, control may not be effective. Thus planning and control are two sides of the same coin. In the design of control systems, we should consider cost-benefit aspect of control in mind. If cost of control exceeds its benefits, it becomes counter-productive. Thus selective controls must be exercised employing the exception principle or Pareto’s Law. Amore effective control could be self-control or cybernetic or steering control but it may be difficult to design such controls in a large and complex organisation. Scope and Functions of Production and Operations Management The scope of operations management is very vast. It commences with the selection of location and covers many activities such as acquisition of land, construction of building, procuring and installing machinery, processing and storing raw materials and converting them into finished products for sale. The scope of operations management covers the following activities. 1. Selection of Plant Location—It is the function of determining where plant should be located for maximum effectiveness. A selection on pure economic corfsiderations will ensure an easy and regular supply of raw materials, labour force, efficient plant layout, proper utilization of production capacity and reduced cost of production. However, an ideal location may not guarantee success, but it certainly contributes to the smooth and efficient working of an organization. A bad location, on the other hand, is a severe handicap for any enterprise and it finally bankrupts it. It is, therefore, very essential to Pw_—. * & 10 Introduction to Production and Operations Manager, eng give due care to the selection of location, Once a mistake is made in locating a Plant, becomes extremely difficult and costly to correct it 2. Plant Layout Activity—After deciding the location of plant, Operation, management is to decide the internal arrangements for manufacturing a Product, Why a new plant is set up, the question of the placement of machinery at different Dla / the location of stores, inspection cabins, tool rooms, maintenance rooms, paint sho, j toilets, canteens, etc. receive a priority consideration. All this affects the efficiency flow of production, A good deal of expertise is used by managements to secure @ Proper layout for new or existing plants. Plant layout topic has been discussed in detail later in this book. 3, Designing the Production System—This is the foremost activity of Production management. This activity is related to the production engineering and includes Problems regarding the design of tools and equipments. Operation manager has to install the equipment and machinery. All this requires the technical expertise. The production system 's concerned with the techniques which are to be used in designing and Producing the product. Operation manager has to decide and apply production system according to the nature of product in factory. Apart from this, production manager Pays attention to human factor, research and development activities etc, 4. Production Planning and Control—The various activities involved in Production planning are designing the product, determining the equipment and Capacity requirements, designing the material handling system and deciding the sequencing of operations. Thus, it involves the organization of an overall manufacturing/operating system to produce a product. 5. Inventory Control—The term inventory include raw-materials finished goods, spares and others stocked in order to meet an unexpected demand or distribution in future. Inventory control deals with the control over raw materials, work in Progress, finished products, stores supplies, tools etc. The management of these items is closely related with production function and so is included in operation management. Store 6. Quality Control—The long run success of a business largely depends on its ability to maintain the quality standards as decided by the management and accepted by customers. The need for quality needs no special emphasis. Better quality means reduced costs for repairs, instruction, scrap, rework and Product warranties. Quality also results in sustained profits. The operation manager, therefore, has to maintain the quality of product, Quality Control is a management function concerned with the Prevention of defects in manufacturing. 7. Work Study—Also called as ‘work design’, ‘method study’, ‘operation analysis’ and methods Engineering is concerned with finding the new techniques which could help produce goods or required quality at reasonable Costs. It is closely related with theIntroduction to Production and Operations Management 11 functions of work measurement. Work study has contributed to the search for better methods of higher productivity. Work study is a management tool to achieve higher productivity in any organization, whether manufacturing tangible products or offer:ag services to its customers. 8. Maintenance and Replacement—In this we cover preventive methods to avoid machine breakdown, and breakdown maintenance, policies regarding repair and replacement decisions. Maintenance department is to be set up and manpower is to be scheduled for repair and maintenance jobs. Operation manager has to keep close eyes on the condition of the machine in order to prevent machine breakdown. 9, Production Control—Control is a management technique which aims to see that the activities are carried out in accordance with the predetermined standards. Production control involves the following stages: (a) Planning-setting targets on production (b) Routing-to decide the route of production activity (c) Dispatching-to compares the actual production with targeted production. Deviations are find out and corrected. Importance of Production and Operation Management The standard of living of people depends on production of goods and services. In this way, production makes a significant contribution to the well being of society. More the production, higher the standards of living of the people. Production function/ management can offer competitive advantage to a firm in the following areas : 1. High Productivity—It has been recognized that high productivity is one of the keys to high standard of living and is the backbone of a nation’s economic progress. Japan's economic prosperity and a greater standard of living of Japanese may be due to high productivity. Production management bring out more out put from a given input at reasonable cost. High productivity is achieved through controlling the machine and manpower idle time, reducing wastage and minimizing re-work rate etc. 2. Higher Quality—The need for quality is felt more in our country than anywhere. For too long, we have been the victims of poor quality goods. We should realize that we are facing competition from foreign brands. Higher quality is the only weapon to fight competition. Production management is responsible to produce goods of better quality. Production manager must see that products must meet the specifications-size, colour, finish, appearance, weight and other characteristics. 3. Reduce of Wastage—Waste here refers to waste of all kinds of resources, but especially the materials which is a significant portion. Some waste is inevitable in any conversion process of inputs into outputs. To reduce waste, production management ensures maximum use of resources. Production manager, first of all recognizes the Stages at which waste is generated, after recognizing the stages, waste reduction Programme is implemented by planning, correcting action and eliminating the cause of wastage.ction and Operations Manageme, 12 Introduction to Produ nt aducing the manufacturing lead time ad TimeBy I¢ : in time to the customer. Manufacturing leaq ot up time, making raw materials available sction rate, by updating Processeg 4, Shorter Manufacturing Lead’ production manager can deliver the gooes ced by reducing mé of right quality, reducing rede ing re-work rate etc s to such services as lighting, ventilation, air. ‘All these need due consideration from ager has to ensure that proper achine se time can be redu iC in time in sufficient quantity py minimiz _plant utilities refers sning, sanitation and noise control etc, operations management. Production man factory or not. of employees throughout the world lose their day. Much blood flows in sewers of industria} afety, therefore assumes greater importance in industrial concerns, Safety refers to the protection of workers from the danger of industrial accidents, Production manager must ensure the availability of safety measures. Heath is wealth for employees as well as for employers. Health of employees is affected by surroundings, job stress, noise, drug abuse etc. The protection of health of workers is a legal requirement too. Hence, realizing the need for healthy employees, organizations take necessary steps to prevent causes which result in ill health to workers, 7, Better Customer Service—Quick response to the complaints of customers, free replacement, during guarantee period, repair and maintenance facility, etc. are some of the examples of services to the customers. Quality assurance must be given to the customer, Quality assurance refers to the assurance to customers that the products, parts, components, tools etc. In other words, quality products must be provided to the customers and a provision for after sale services should be there. 8, Use of Latest Technology—Selection and acquisition of production technology is 2 significant part of production and operations management. In order to fight competition, production management has to select and acquire suitable production technology-use of automated machines, use of computer numerically controlled (CNC) machines, Computer Aided Design System (CAD), Computer Aided manufacturing (CAM) etc. Automation is being largely used in industrial establishments. Automation refers to the technique of operating a productive process by electronic devices and reducing human efforts to the minimum. and procedures, b 5, Plant Utilities conditio production plant utilities are available in the 6, Safety and Health—Thousands 1s, eves, limbs, even their lives, every establishments. S« Products and Services ‘To some extent, all industries may be treated as services industries. Because, even purely manufacturing organizations do not just sell their product but provide one form ae such as aftersales service, advice, warranty, repair, installation etc. On the aed , even in ‘pure’ service industries such as banks, hospitals, education and ncies, there is often a product which change hands. For example, banks talksIntroduction to Production and Operations Management 13 about new product development because they do have products-loan schemes, deposit schemes, various types of credit cards and other types of monetary instruments. Hospitals provide products to the patients in the form of diagnoses and prescription reports. Similarly, consultancies provide report of their findings, analysis, and recommendations to clients organizations. In an educational set up, a student may see the degree or diploma as the end product. Some organizations may be considered as offering a hybrid of products and services to its customers. For example, in a restaurant, a customer expects good preparation of food offered (a product) and good behaviour and quick service on the part of the waiter (a service). Similarly, while flying in an Aeroplane, a customer gets a product for use (a seat in the plane) and services such as medical aid, refreshments, etc. from the hostesses. Difference between Products and Services (POM View Point) The output of an operations system may be in terms of employment-physical goods such as automobiles or rendering a service such as in transportation, hospitals, educational institutions, cinema-halls etc. Rendering a service may involve physical goods (or facilitating goods) such as dentist making a set of false teeth while rendering dental care. In manufacturing, we get a tangible and identifiable product, which is obtained as 2 result of a series of transformation processes subjected to it. In services, the end product is often intangible-amusement in a theme park, hospitality in a hotel, good education etc. but it is just a real. When we buy a television, we ignore its manufacturing processes but focus only upon the features of the end product. The main difference is that in services it is the customer that has been processed. In the service industry, it is often processes that are bought rather than the product. The difference between products and services (from POM view point) can be presented in the form of a table as under : Table : Difference between Products and Services Services are intangible and perishable; consumed in the process of their production. Services are non-inventoriable. The end product is tangible. 2. | These can be produced for stock. 3. | There is little contact with ultimate | There is high contact with clients or consumer. customers. 4. | The production process is complex and | There is a simple processing. interrelated. 5. | Here the markets served are regional, | Market served by production system are national and international. usually local.wy troduction to Production and Operations Managem, Im fue 14 ‘ Relatively small units to Serve loc Juce large units to proc arge that can take advantage of | markets = x< weekly, | Demand for services commonly variate aerenm s, | on hourly, daily and weekly basis, tian of manufacturing industry may | Location is dependent on the location . a adhd navonal and international. | of local customers, clients and users, ° — seal ng is Capital intensive. Operations may be labour intensive, Pp ict. Quality can be easily | Service quality is determined with difficulty. mined h ; it requires long lead times. It requires short lead times. monthly a able on seasonal basi ariable on seasonal be jonthly and ve Why to Study POM? * Why 2 general reader should study production and operations management (POM) 's@ relevant question. The following paragraphs answer the question. Factories occupy unigue place in our country. They are the temples of modern India. Next to agriculture, it is the factories which are the largest employers. Thousands of families look up to the plants for support. It is the industrial establishments which produce the various goods anc services for our day-to-day consumption. Factories are great institutions which bring about desired changes in our socio-economic outlook. Our incomes, living standards, wants, motives, thoughts, actions, life-styles and pattern are influenced by factories, * A study about factories helps us appreciate the role played by people in Producing goods and service. When a product is turned out by a plart, it is the result of the efforts and services of scientists, engineers, technician, managers, workers and Janitors. Factory 'S not merely buildings and machines. Factory is people. The best of automation may result in the reduction of number of People working in a plant, but the presence and Contribution of human beings cannot be completely denied, © The total picture the about factory becomes clear by a close study of the subject. Contrary to the popular belief, factory is not a sinner that has eaten the handicrafts. Factory is not a monster out to disrupt ecology. © Factory study helps in selecting a career, As Was mentioned earlier, factories are Potential employers, They offer attractive positions for effective executives, brilliant, Scientists, financial wizards, creative artists, skilled technicians and hard-working applications and attending interviews will follow later, - ee a close look at the Subject by practising Managers helps them in atleast me YS. First, it has been recognised that, high productivity has been One of the keys high standard of living. Productivity is the backbone of a nation’s €conomic progress, 1,introduction to Production and Operations Management 15 particularly those countries, where productivity is high and living standards are also hgh. Increasing productivity should be a national challenge problems of Operations Management In production and operations management, mainly two types of decision are to be taken—one for the design of the system and the other related to the operation and control of the system. The operation and control functions of the production management poses several problems which are faced by the production manager. We will have to emphasise on the factors of cost service and reliability of both functional and time performance that depend on the basic purposes of the whole concern and general 2 of production of goods and services. The main problems faced by production anager in an industry may be summarised as below : 1, Problem of location of the plant—The first and foremost problem of production planning is to take decision about the location of the plant and system. There may be more than one possible locations out of which the best would have to be chosen taking nto account various factors like nearness of market, nature and sources of raw material, comparative transportation, costs, availability of manpower and motive power, banking and transports facilities etc. Cost and service factors should be well considered. Whatever be the location, it should be such which would not pose any problem in marketing the goods and services and in procuring the raw materials so that the flow of production may not be stopped. 2. Problem of plant layout—The next problem is that of plant layout. For this purpose, management should design the operation and equipment in such a way that may reduce the overall material handling cost or meet the needs of the more complicated criterion. Many detailed problems are connected with each other so as to specify sufficiently the layout of production system. These problems include heating, lighting and other utility needs, the allocation of storing space and the design of the building to accommodate the layout etc. In order to overcome these problems, process charts, diagrams and scale models are extensively used. 3, Problem of product designing—The selection of the design of the product is another problem of the operations management. Any change in the design of the product will affect the design of the plant and its layout that may be costly and complex for the enterprise. So, the design problem should be considered in advance. 4. Problem of inventory and production control—The problem of inventory and finished stock control is also very important for the proper flow of production process. For inventory control, decisions regarding Economic Order Quantity (EOQ), reorder level and ABC technique of inventory control are to be taken with a view to maintain the process of production and to have a minimum possible investment in raw materials. Production should also be controlled taking in view the production capacity, demand of the product and the inventory policy of the concern, 5. Problem of quality contral—It should be borne by the operation management in mind that the quality of the product should be in consistent with what is required byrations lanage, tion to Production and Operations Manag, Men, Introductic . er specification sey ad as per spec N set lity of the product must es cerhrelals nieces the customers, The quality ¢ MOrorvec bythe customers, C ome : by the haaatenent We rs ie sae todutt Inspection, statistical qualty cml ad, For this purpos Should not be allowed, For techniques should be followed Probt f la 4 2 rce |S also one labour control—Controlling the labour for hn of ° jem of la Ee a on because it is a major cost-element especially in sery problems in production bece ce | and so much efforts are needed to develop production planning needs labour appraisal J Pa wy e y stems, Sy cee crore aa rnd tanec een ere aim of the Operation Hatoeel Raley i um production at minimum cost, In order to SRT Cees ante is to take various decisions controlling the accomplish this objective, mana ' canter inate Wastages of materials and labour by maintaining a fair balance betwee! r ial and overhead costs, " 8 incblans regarding socio-economic environment—Most of the problems Of production and operation management are related to the ogni envi ast Various decisions are taken by the management to fulfil its responsil ii ao Is the Society such as decision to produce the goods and services in demand, farious social Problems such as industrial disputes, changes in demand due to change in fashion, improvement in plant and automation, unemployment and social standard of living of the public etc. affect the production decisions and management should take care of them. ; The relative importance of the above problems may vary from industry to industry Or from system to system, So production manager should take various decisions Considering the relative importance of various problems in mind. History of Operations Management Historically speaking, the field of operations management has evolved ma very short span of time. Its roots, however go back to the Concept of ‘division of labour’ advocated by Adam Smith in his book “The Wealth of Nations” in 1776, In 1832, Charles Babbage, a mathematician extended Smith's work by recommending the use of scientific methods for analysing factory problems, However, the era of Scientific management as it is Now known started with the work of FW, Taylor in 1878 who Subsequently came to be Fecognised as the ‘Father of Scientific Management’, Taylor ig credited with recognising the potential improvements to be gained from analysing the work Content of a job and designing the Job for maximum efficiency, His experiments conducted on the shop floor ht about significant and rapid increases in Productivity, He xplained the four Principles Of scientific management in the following way; (a) Development of a science for each element of a i 'S Work replacit the old rule of thumb methods, aia dave * (b) Selection of the best worker for each task a n leveloping workman on individual basis, sie omens mIntroduction to Production and Operations Management 17 (c) Striving for cooperation between management and the workers to simultaneously obtain both maximum production and high worker wages (d) Dividing the work between management and workers so that each is working on what they are most proficient in doing Taylor described his management philosophy in a-book “The Principles of Scientific Management” published in 1911. This event, more than any other, can be considered as ginning of the field of Operations Management. The colleagues, contemporaries and followers of Taylor were many and included the following people. Frank Gilbreth and his wife Lillian Gilbreth are recognised for their contributions to mation study. Gilbreth developed the concept of Therbligs’ and *Chronocyclegraphs’ for motionstudy in 1911. Lillian Gilbreth wrote her book “The Psychology of Management’ which was one of the earliest works concerning the human factor in organisations. In 1913, Henry Ford developed the concept of mass production and arranged work stations into an assembly line with moving belt. In 1913 also, Henry Gantt made his best known contribution in charting the production schedules using a visuai-diagrammatic tool which is popularly known as ‘Gantt-Chart’ and is an effective practical tool even today. In 1913, Harrington Emerson applied Taylor's ideas to develop organisation structure and suggested the use of experts in organisations to improve efficiency. Wilson developed the concept of Economic Order Quantity (EOQ) in 1928 which is still recognised as the classical work in the scientific analysis of inventory systems and works of subsequent researchers were essentially further refinements of Wilson’s lot size formula. In 1931, FH. Dodge, H.G. Roming and W. Shewhart developed the concept of sampling inspection and published statistical tables. Earlier in 1924, W. Shewhart pioneered the concept of statistical quality control and developed control charts for monitoring the quality of production processes. In 1933, Elton Mayo conducted his famous experiments at Western Electric’s Hawthorne plant looking into human and social aspects of work. This paved the way for the ‘behavioural school’ of management. Mayo felt that scientific management often emphasised technical skills at the expense of adaptive skills. Some other notable developments in these lines include the concept of ‘managerial grid’ developed by a Robert Blake and Maslow’s hierarchy of needs and Doughlas McGregor’s Theory X and Theory Y in management. In 1937, L.H.C. Tippett developed the concept of work sampling to gauge the level of machine and manpower utilisation and for setting work standards. Inand around 1950 two major developments that influenced operations management were the emergence of techniques of ‘Operations Research’ beyond military context and developments in engineering offered by L.D, Miles, The OR is application of scientific methods 10 study and devise solutions to managerial problems in decision-making. Using mathematical models and the systems approach OR has helped solve resource the bes, — to Production and Operations anagem, Introduction e ntory, location, layout and contro! Probie inventory, ntly identifying the unnecessary ¢. essing, I heduling, processing sii Techniques of value engineering ie eS cea a nace erfor < and systems could pe a so that product ~ sie led to computerised pean tines i Eg re Developments in co duction management problems. e' MIS and g Sen i fillip to the developments in Opera, od a further stp CPM and PERT were developed for ANalysis a twork based techniques of Proje, allocation, sc and OR technique: Decisi support Syste! In 1958 the management, In 1958 ; since then a number of ne large projects and een ee er researchers in the field began to generalise In the late 1950s ns ee management to other Production eos ene hemical and other process industries leading to the a pelseniperi management’ as a functional Management et In the late 1960s the concept of ‘Operations Management’ expanded to Include the service sectors as well. Only recently the service sector has received as Much attention as production sector from the point of view of scientific management of systems IONS. Areas approach taking a holistic (integrated) look at the problems of Operating systems emerged in the 1970s which considered the inter-play of various sub-systems in organisations. Developments in the computer simulation of integrated production- inventory systems are some of the current thrusts in modelling of production management problems. In the more recent past there has been a major thrust on the adoption of. Japanese management techniques like the ‘just in time (JIT) system’ or ‘Kanban system’ for production scheduling and inventory control and the concepts in quality circles (QC), ‘These concepts have apparently done well in Japanese context but should be Cautiously adopted in other situations only if external work environment and work ethos make them appropriate elsewhere too. Other notable developments in recent past have been group technology (GT) or cellular manufacturing systems (CMS), flexible manufacturing systems (FMS), computer-aided design/manufacturing (CAD/CAM) etc. Thus future of operations managements books bright. Emerging Role of Operation Managers in India After 1991, the liberalization in the country has brought about major changes in the Indian conomy/business scenario, The entry of multinational Corporations into almost Every sphere of industry has created a Sense of competition in the Indian industry. Thus, the role of Production and operations Managers in India has increased manifold. New dimensions which have been responsibiliti added to the les of the production and Operations managers in India today are as under : o 1. To take part in strategic decisions making of the organization. 2. To take part in the implementation and use of ERP Software in the organization.jntroduction to Production and Operations Management 19 3. To automate processes according to the requirements of the organization, 4, To enhance the Research and Development effort of the organization for becoming self-reliant in developing new technologies. 5. To implement the environment and pollution norms established by the government from time to time. 6. To act as supply chain managers in maintaining long term strategic relationships with suppliers. 7, To act as internal quality auditors in certification programme such as 1sO 9000. 8, Increased attention to timely implementation of projects. 9. Increased attention to technology management in view of Multinational Corporations with domestic companies. joint ventures of Trends and Challenges in Production and Operations Management Several business trends are currently having great impact on production and operations management such as : 1. Productivity Improvement 2. Global competition 3. Rapid Technological change 4, Ethical Issues 5. Work force Diversity 6. Environmental issues. These have been discussed as under : i 1. Productivity Improvement—Productivity is the value of outputs (services and products) produced divided by the values of input resources (wages, cost of equipment and the like) used. It is a basic measure of performance for economies, industries, firms and processes. Output Input e that productivity is increasing in service sector rapidly even sed investment in information technology by service providers will increase productivity. Manager must examine productivity at each level of process. The challenge is to increase the value of out put relative to the cost of input. If processes can generate more ‘out put with the same amount of input., their productivity improves. 2. Global Competition—Business accept the fact that, to prosper, they must view customers, suppliers, locations and competitors in global terms. Most products today are global composites of materials and services from throughout the world. Productivity = It is interesting to not after more employment. The increas. fe 20 Introduction to production and Operations Man, 29em, e world you liv x bay > face internationa’ e in, if you | compet services or pr Glo) Regardless of which area of th the challenge is to produce oducts that can competes on a market. ; 3. Rapid Technological Change—An important trend in production and opera, : It affects the design of new file management is increasing technological change. a e and services. Many new opportuniti E-commerce is changing sales an technology be used to its greater advanta introducing new technology involves ris' right choice and effective management of tec advantage. / ‘ 4, Ethical Issues—Business face more ethical questions than ever before, intensifieg by an increasing rapid technological change. Companies are locating new Operations, and have more suppliers and customers, in other countries. Some countries are More sensitive than others about lavish entertainment, conflicts of interest, bribery, discrimination against women, poverty, minimum wage levels, unsafe workplaces, ang workers rights. Managers must decide in such cases whether or not to design ang operate processes that do more than just local standards. 5. Work force Diversity—Leading companies have found that work force diversity can provide a forum for unique perspective and solutions. People from different regions, of different cultures and religions come together to a workplace. It poses a challenge for production manager to bring them together to get the work done. 6. Environmental Issues—Environmental issues, such as Toxic wastes, poisoned drinking water, air quality and global warming are getting more emphasis. Interest in clean and healthy environment is increasing. Industrial nations have a particular burden because they consume 70 percent of all resources and produce almost half of all harmful ies are coming from advance in computer technology, d purchasing processes. How can - ge? How must process be redesigned? Fy, k; and employee resistance. However 4,’ hnology can give a firm Competitive gases. Management Practice in India Mohanty and Nair, in 1986, conducted a survey or one hundred Indian companies having an annual turnover over % 6 lacs from various sectors both private and public including chemicals, engineering, fertilizers, and textiles. The objective was to identify the critical decision areas in production management and to create responsibility for Indian Production manager. Some interesting findings of the survey are as under : e The prime objectives of rnost operation managers are to ensure customer satisfaction by meeting the due dates and reducing the costs of production. For example, production managers in Fertilizer Industry are generally found to be interested in minimizing wastage and ensuring better conditions for production employees. @ The major problems faced by operation managers seen to be production scheduling and capacity planning. Despite the popular notion that availability of energy is 2 iti factor for industrial growth in India, they do not take it as a major problem.Introduction to Production and Operations Management 24 5 in the areas @ Operation managers in all industries have maximum responsibilities ¢ production planning, scheduling and production control, and spend their maximum time in these areas . : Generally, operation manages are not involved in product design, with some eptions in the textile industry. exceptions in ‘Fora large number of operation managers, the most important part of their job is nsure efficient utilization of all resources, be it equipment, human resources. For a large number of operation managers, computers are not yet perceived as mportant too! for decision making. toe Relationship of Operations Management with Other Functional Areas Operations managers are an integral part of the organisational strategy in many companies. This provides some indication of their overall importance for the development he organisations for which as a system having several sub-systems, Marketing sub- m has to make available the products to consumers. It receives sales orders, which are sent to production sub-system. Production utilizes raw-materials, which are processed on plant and product. Production function organises resources, finance function makes available finance necessary to carryout their functions to all other functional areas. In this way, all business sub-systems are interlinked and inter-dependent. The relationship of operations management can be understood with the help of following discussion : 1. Planning. The operations manager defines the objectives for the operations sub-system of the organisation, and the policies programmes and procedures for achieving the objectives. This stage includes clarifying the role and focus of operations in the organisation’s overall strategies. It also involves product planning, facilities designing and using the conversion process. = 2. Organising. Operations managers establish a structure of roles and the flow of information within the operations sub-system. They determine the activities required to achieve the operations objectives. They establish a structure of tasks and authority. 3. Controlling. To ensure that the plans for the operations sub-system are accomplished, the operations manager must also exercise control by measuring actual outputs and comparing them to planned outputs. Controlling costs, quality, and schedules are at the very heart of operations management. Me ein Operations managers ensure that all departments are completing f ry function by meeting productivity goals and budgetary guidelines. They Provide directions to various managers. acl chia Operations managers also help in the achievement of y coordinating the activities between various departments within their companies. They improve efficiency and focus on im; roving relations betweer 5 proving relations5 2 Introduction to production and Operations Manage, gers must be able to assess the resources ary or otherwise, and ensure that the resoy sctive operations manager can assess Mat 6. Resources. Operations manag organisation, whether they be monet are used as efficiently as possible, Aneffe or not resources are being used wisely. 4 with how thelr efforts tp 7, Behaviour. Operations agers are connectes . Operations managers ¢ c ise, and contro! al humal Wiour. want to know how the b n, organise, and control 3 fect human behaviour. hey also vant to know how the Dla of subordinates can affect management's planning, organising and controlling tine Questions Short Answer Type Questions 1. What is operations management? 2. Define production management. 3. Differentiate between the term “product and service.” 4, What are the problems of operations management? 5. What are the objectives of operations management? 6. Explain similarities between product and service. 7. 8 Why to study POM? Discuss. What is difference between production management and operations management? Long Answer Type Questions 1. What is operation management 2. Define operation management. State the 3. Trace the evolution of operation management. 4. Define operation management and its activities. it? Discuss the importance of operation management, 1e objectives of operation management. ‘Also mention the responsibilities and duties of operation manager. Give a brief history of the development of operation management. Explain the emerging role of operation manager in India today. 7. “Business trends have great impact on operation management.” Discuss. [Hint : Trends and challenges) Discuss the activities and problems of operation management. 9. Write a note on evolution of operation management. 10. Explain the following : 7 (i) Scope of operation management. (ii) Objectives of operation management. (iii) Challenges of operation management. (iv) Emerging role of operation management. 11. What is operations management? What is production management? Bring out the differences between the two. 12. Bring out the scope of operation management. 13. What activities are undertaken by operation management? Discuss. 14. Why there is @ need to study production and operations management? Explain. 15. What are the similarities between products and services. Discuss. 16. Explain the term “products and services” Bring out the difference between the two from POM viewpoint. aa