PRODUCTION & OPERATIONS

MANAGEMENT
INTRODUCTION
 What is POM?
• Production and operations management seeks to
ensure that goods (or services) are made in the
required quantity, to the required standard, at
the right time and in the most economically
efficient manner.

• If the marketing manager makes decisions

relating to what is produced, the production
manager has responsibilities in relation to how it
is made.
 Production management vs.
Operations management
• Production management
– for firms engaged in primary production (mining,
oil drilling, and forestry) and secondary
production (manufacturing).

• Operations management
– for firms in the tertiary or service sector
 MAJOR DECISIONS IN PRODUCTION

• WHAT TO PRODUCE
• HOW TO PRODUCE
• WHEN TO PRODUCE
• LOCATION
 WHAT TO PRODUCE?
• A new product, that no other business has
produced?
• An adaptation of its own or its competitor’s
product?
 WHAT TO PRODUCE?
• Two diverse approaches in taking the decision
of what to produce:
1. Market orientation
– knowing what the market wants and producing
products to meet consumer needs that have
been identified.

2. Product Orientation
– producing what the business is best at.
 WHEN TO PRODUCE?
• When should a business produce products?
• Is there a season for production?
• The timing of production depends on a
number of factors:
– Perishability/durability
– Demand patterns
– Costs of storage
– Tangible good or service
 LOCATION
• The decision about
where to locate is crucial
to many businesses.
• Location can affect the
following: • Sales
• Costs
• Profitability
• Survival
 FACTORS AFFECTING LOCATION
• Site Costs – These are the most important
fixed costs of location and include purchase or
rent of land and property.
• Transport Costs – These are particularly
important for manufacturing businesses as
they need to transport raw materials and
components as well as finished goods.
• Labour Costs – The local average wage rate
being paid has to be taken into consideration.
 FACTORS AFFECTING LOCATION
• Regional Incentives – Certain regions are able
to offer financial or other support such as
grants and rent-free accommodation.

• Revenue Generation – Certain locations give

the business the opportunity to both increase
sales volume – due to market proximity – and
to add value to sales on account of the
prestige of the area.
 FACTORS AFFECTING LOCATION
• Infrastructure – The quality of local infrastructure
especially transport and communication links.
• Environmental and Planning Considerations – a
business might be reluctant to set up in an area
that is particularly sensitive from an
environmental viewpoint.
• Management Preferences – senior manager
often influence a location decision if there is an
option to set up in an area with substantial
‘quality of life’ benefits.