UNIT 1 Introduction to Operations Management

OPERATIONS MANAGEMENT Introduction

The operations management basic objective is to produce the product and service which provides
efficient value to the customers. The operation is thought to be a transformation process which takes the
inputs and changes them into outputs that can be goods or services which will drive some value to the
customers. The operations management is important both for manufacturing and service organisation. It
not only produces product and service effectively and efficiently but also all the other forms of outputs.
The operations management works more properly in the operations or production function.

1) Industrial Revolution: Industrial revolution has played an important role in shaping the manner, in
which the goods are produced now. This development is referred to as the Industrial Development.
Industrial revolution had two basic components, viz.:

i) Large-scale replacement of human power with the machine power and water power, and
ii) The establishment of the factory system.

2) Post-Civil War Period: In the middle of the 19h century, a new industrial period emerged in the
United States. The post-civil war period (1865-1877) also known as the reconstruction period, provided
necessary thrust to the large-scale growth potential of production capacity of various industries.

3) Scientific Management: The theory of Scientific Management' was put-forward by the renowned
American mechanical engineer Frederick Winslow Taylor (1856-1915). The focal point of his theory
was machines and the system of their use. His theory was based on certain postulations, known as the
Taylor's postulations, which stipulates the following:

i) Any kind of work is governed by the scientific laws; the scientific methods may be put to use for the
proper analysis of the work,
ii) Each worker performs with different ability; their potential needs to be identified and matched with
their jobs. This may be followed by imparting appropriate training to them, so that their full
potential can be utilised,
iii) Self-interest of an employee is the strongest motivational force; this may be used to encourage the
employees for better performance, and
iv) There should be segregation of responsibilities of workers and managers.

Meaning and Definition of Production Management

Production management may be defined as a division of management concerning itself with the
production task.
Production management is the process which converts such inputs into output which includes finished
and semi-finished goods as well as services, using various processes such as planning controlling and
scheduling, etc. Production management relates to making decisions regarding production of goods and
services, incurring a minimum costs. It uses managerial method of planning, organising and controlling
while meeting the specifications provided by the customers.

Meaning and Definition of Operations Management

Operations Management' is an inclusive term which comprises both manufacturing and services
organisations. Operations management sheds light on the significance of the service industry in the
prevailing business environment. It can be explained as process of designing, operating and improving
the conversion process, which aids the transfiguration of different inputs into various products and
services.
According to APICS, The Association for Operations Management, "Operations management is the
field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or
service organisation through the study of concepts from design engineering, industrial engineering,
management information systems, quality management, production management, inventory
management, accounting, and other functions as they affect the organisation"

Need of Operations Management

1) Having better management of material stock for production process.
2) Planning budgets for various plans.
3) For having improved efficiency in the production and distribution of products and service,
organisations require operations management.
4) Logistic management for product supply.
5) Addressing the problems of customers rapidly and effectively.
6) Performing interviews of different candidates and monitoring the map

Nature of Operations/Production Management

1) Transformational Process: The transformation of raw material is the main task of production
management.
2) Offer Value Addition: Every succeeding level adds some value to the preceding one. As an instance
construction process leads to value addition to inputs such as sand.
3) System Itself: It entails a comprehensive logical process which requires following a definitive
sequence of activities.
4) Exist for Certain Objectives: The first step is to set an objective and for meeting that specific
objective, the whole procedure needs to be tracked.
5) Carried Out in Part of Organisation: It shows that production is not the sole function executed by the
organisation. It performs other functions such as research and development, finance, etc.
6) Interrelationship among the System: A system cannot work in seclusion and its success depends on
its interaction with other systems. Various systems co-exist.
7) Stratum Formulation: A production system exists through various levels of hierarchy in an
organisation. Each level of the organisation benefits from it.
8) Specialisation of Function: Various functions may be executed separately and the individuals may
attain specialisation in them as they perform them repeatedly.
9) Increase in Entropy: This entails dilapidation of the matter and energy existing in the universe until it
reaches the final stage. For slowing down the momentum of the degradation, new methods need to be
introduced.
10) Increase in Productivity: With specialisation, the time required to complete the work decreases.

Scope of Operations/Production Management

Production management deals with factory management and is concerned with the management of
difficulties encountered during the process of production. The evolution of industrial age led the
production process to have big problems which required constant attention. It not only concerns itself
with making the best use of production amenities but also of human resources, latest technology and
quality control techniques.
Following are the main activities which form the crux of production function:
1) Activities Connected to the Design of Production System: The main function of production system is
to take decisions related to the production system design. This movement deals with production
engineering. It includes designing of jigs and tools, decisions regarding designing, developing and
installing various equipment. Decision concerning the scope of the firm is also an important one. For
these decisions, production manager and his staff need to have high level of expertise. Production
system design also deals with the selection of techniques to be used for work. It undertakes motion
study, process analysis, time study and decides optimal layout for the plant.
Following are the two main problems which the production system designers deal with:
i) Human factor which defines the way the system affects the workers using it
ii) Research and development activities.
Production system is designed keeping these two factors in mind.

2) Activities Related to Analysis and Control of Activities: Once the production system is designed,
there is need to analyse and control it. This relates to decisions concerning production management a
consequently all other functions of management. The concerned activities include:

i) Production Planning: The production planning function deals with preparing short term production
schedule, planning for the maintenance of records of raw materials, and finished and semi-finished
stocks. It also specifies how various production resources should be used to meet forecasted demand 1ot
goods and services.

ii) Production Control: Apart from planning, production function deals with the control of production
plans. For ensuring the best utilisation of resources, the production manager regulates work assignment,
reviews work progress and eliminates inconsistencies between planned and actual performance. The
production manager supervises the production control undertakings at the following three levels:

a) It deals with controlling the static inventory including raw materials, supplies, purchased parts and
finished goods by employing various inventory control methods.
b) It controls movement of materials into the plant using proper purchase techniques.
c) It controls work in progress using production control.

ii) Quality Control: Production manager also deals with quality control issues. Product quality is the
function of manufacturing and engineering which establishes the extent of the product meeting the
anticipations of the clients. Quality is controlled through the use of various statistical quality control
techniques and inspection techniques.

Objectives of Operations/Production Management

1) Ultimate Objectives: The main function of the manufacturing activities is to produce goods and
services with following qualities:

i) Right Quality: The appropriate quality standard for a product is determined keeping in view the
requirements of the customer. It may or may not be the best quality as the production management
needs to keep costs and other technical features in mind as well.

ii) Right Quantity: The production should be done in right quantity to ensure that there is no significant
under or over production. In case of over production, the capital is unnecessarily tied up in
inventories while in case of under production, the supply will not be enough to meet the demand.

iii) Right Time: Another factor to determine the efficacy of production division is related to its ability
to deliver the goods and services on timely basis. For this purpose, it is important to make optimal
utilisation of resources.

iv) Pre-Established Cost: The determination of manufacturing costs is done before the actual
manufacturing is done. The firm should endeavour to stick to the predetermined costs and not have
much variation.
2) Intermediate Objectives: Following are the main intermediate objectives:

i) Machinery and Equipment: The main objectives in this regard are a) Procurement of machinery
and apparatus and b) Utilisation of machinery and equipment. There should be proper
availability of machines. The efficiency of machines can be maintained or enhanced through
proper maintenance, Occupancy and repair.
ii) Materials: This objective should be presented with regard to units, monetary units or space units.
Costs should be enumerated on per unit basis. It should be endeavoured to increase the inventory
turnover rate for all kinds of inventory.
iii) Manpower: Human resources are a vital input. For this purpose, proper attention must be paid to
the process of selecting, placing, training, compensating and utilising manpower. The efficiency
of these processes can be measured using safety measurements, employee turnover rate,
absenteeism and industrial relations.
iv) Manufacturing Services: Utilisation of various inputs including materials, machines and
manpower resources is determined by the provision of adequate and proper services. The
appropriate aims should be fixed for maximum efficiency.

Functions of Operations/Production Management

1) Production Planning: Production programmes both short-term as well as long-term- like routing,
scheduling, preparation of orders, and preparation of demand schedules are handled by the production
planning. They are discussed in the following points:
i) Routing: It chalks out the requisite work operations and orders thereof
ii) Scheduling: It stipulates the beginning and completion time of different activities concerned with the
production work,
iii) Preparation of Work Orders: It is nothing but the authorisation to go ahead with the production
programme simultaneously at various locations, and
iv) Preparation of Demand Schedules: Demand schedules in respect of various requisite materials power
and necessary amenities, which may be required at various locations from Time-to- Time.

2) Production Control: To have an adequate control over various production processes is another
significant function of the Production and Operations Management responsibility of which lies with the
Production Manager. In this regard, necessary steps are required to be taken with a view to ensure that
resources and other factors are used in an optimal and efficient manner with the following objectives.

i) Cost of production is kept at the bare minimum,

ii) The production of finished goods is in accordance with the specifications stipulated by the customer,
ii) The requisite quantity of the product is delivered to the customer before or on the scheduled date, and
iv) Satisfaction level of the customer should be the priority.

Scheduling of the work is of paramount importance as far as this function is concerned.

3) Quality Control: The production manager has been entrusted with the responsibility of maintaining
the quality of the final products according to the specifications stipulated by the customer. It is,
therefore, necessary that a system be put in place to ensure that no deficient products are shipped to the
customer. Such defective goods, if produced, need to be segregated and disposed off separately.

4) Industrial Engineering: Industrial engineering may be defined as a branch of engineering which

provides solutions as to how to optimise various complex processes or systems. It ensures elimination of
different forms of wastage of resources (e.g. time, money, materials, man-hours, machine-hours, energy
and other resources not generating any value). In order to achieve its objective, it also covers designing
of tools, zigs, fixtures, gauges, and other requisite accessories. Further, through the time and motion
studies, it ascertains the standards of performance, which may act as the basis of various incentive
schemes.
5) Purchasing: Purchasing of materials and equipment forms the part of the production function. The
decision regarding specifications in the matter of their quality aspects are taken either by the Production
department or the staff department. However, the decision regarding their quantity and frequency of
their purchase are generally taken by the material department, with due consultation with the production
manager. Purchase department is empowered to take decisions with regard to the supplier, price,
delivery date, etc.

6) Plant Engineering: Function of the plant engineering relates to planning, designing, specifying,
installing, modifying and maintaining plant amenities/services like light, heat and power.

7) Manufacturing: Manufacturing is the core process, through which the raw materials are converted
into finished goods and services. Industrial engineering, plant engineering, production planning and
purchasing together play an important role in performing the staff functions of providing services and
advising manufacturing wing. They facilitate the actual manufacturing processes by:

i) Providing production programmes, schedules, routes and work orders.

ii) Spelling out the methods, processes and standards of operations.
ii) Ensuring the maintenance of plants and equipment, and
iv) Ensuring the uninterrupted supplies, including that of the raw materials to the plant.

8) Method Analysis: A number of alternative methods are available for manufacturing any product.
Each method has some merits and demerits especially with reference to the economic viability, cost
effectiveness, etc. There is a need to undertake a thorough analysis of each method and their
comparative study, on the basis of which the decision to select the best method may be taken. This
exercise is known d Method Analysis; its objective is to ensure:
i) An improvement in the productivity, and
ii) Reduction in the cost of production.
9) Inventory Control: Controlling the cost of production is the responsibility of the production manager.
He does it by managing various resources (men and materials) in a prudent manner, including bringing
down the wastage level thereof. As part of this exercise, it is necessary to establish the economic-lot
size, economic-order quantity, re-order levels (minimum, maximum, and danger level of the stock) of
various materials, which would ensure that the cases of over-stocking or under-stocking do not take
place. Physical and financial control of materials should be exercised by the production manager.

10) Plant Layout and Materials Handling: Machines and equipment should be arranged in the plant in
such a manner that the production cycle keeps on going without any hindrance. In an efficient plant
layout, through a proper material handling mechanism, the cost of production may be curtailed
drastically, as they (efficient plant layout and proper material handling) ensure the minimum wastage of
men and material.

11) Work Measurement: There are different methods of work measurement (the level of a worker's
performance). One of such methods is Labour Cost per Unit', which differs accordingly with the
different levels of production. It is the responsibility of the production manager to monitor, control and
maintain the same (Labour Cost per Unit) at the minimum possible level.

12) Other Functions: Other functions performed by a production manager includes engineering
economics, cost control, maximisation of the labour efficiency, standardisation and storage, price
analysis, wage incentives to workers, etc.
Relationship with Other Functional Areas
An organisation is run on the basis of a system, which may be termed as the main system. In addition to
that main system there are a number of other smaller systems, which may be referred to as sub-systems.
There exists a relationship between the production and operations management with those systems
(discussed above) in the organisation, which may be explained as follows:

1) Production and Operations Management-Marketing Interface: Marketing is one of the most important
departments of an organisation, which is responsible for the following functions:

i) Undertaking the study of customers' requirements in a fast-changing market scenario,

ii) Creating a demand for the company's products in the existing markets and maintenance thereof,
iii) Entering into new markets with the potential products,
iv) Satisfying the overall customers' requirements,
v) A company's market share and its decision with regard to its strategy to increase the same is one of
the guiding factors to formulate its manufacturing and operations strategy.
vi) Marketing is an important link between the operations and the markets. The vital information
regarding, customers' preference is the deciding factor regarding the type of products, which need to
be manufacture.

2) Production and Operations Management-Finance Interface: Production and operations management

interface with financial decision includes capital equipment, cost-control policies, price-volume
decisions and inventor Acquiring the assets and their management is considered an important part of
decision-making exercise and as such Finance and Operations must work in tandem, in order to
encourage the nature of technology used in operations and the practice-performance gap prevailing in
the organisation Various data, especially thy pertaining to the product and service costs, are provided by
Finance Department': such data facilitate managers in evaluating the operational performance. The
success and efficacy of operational planning at budgeting, to a large extent, is directly proportional to
the level of co-ordination between these two departments.

3) Production and Operations Management-Design Interface: The demand on the product development
process is generally triggered by the shortening of product life-cycle. This fact has been proved true
especially in the case of industries with high-clock speed. The increasing frequency of introduction of
new products call for a close co-ordination between the Design' and 'Operations Management' functions
of an organisation. Further, the production methods necessary to create new products depend upon the
process development and engineering. This function has substantial footprint on operations.

4) Production and Operations Management-Human Resource Interface: Human resource function plays
an important role in the conduct of any successful operation. This is acknowledged by each Plant
Manager. This function includes those aspects, which are mainly dependent upon the human inputs, e.g.
operation’s approaches such as continuous improvement and total quality management. Decisions
regarding human resources and the management of the operational functions interact significantly with
the structural as well as infrastructural decisions.

5) Production and Operations Management-Information Systems: Of late, Information Systems have

gained a lot of significance. It fulfils the wants of operations pertaining to analysis and co-ordination of
information. The two most important factors, which directly influence the operations in a major way, are
the distributed processing environment and the growth and evolution of ERP (Enterprise Resource
Planning) systems. Business organisations become capable of gathering relevant information and also
creating requisite information, if and when needed. Most of the business sub-systems don't operate on a
standalone basis; they are inter-linked and dependent upon each other. In this connection, following
points are worthwhile to underline:
i) Marketing functions can't bring the desired results, if the manufacturing process (production) fails to
deliver the products according to the market expectations and customers' preference.
ii) Production would be adversely affected, if the required level of working capital is not made available
for buying raw materials,
iii) In the absence of skilled manpower, the entire planning would go haywire, and
iv) The overall functioning of a business organisation in an efficient manner warrants a close co-
ordination between various sub-systems.

Recent Trends in Operations Management

1) Global Focus: Today's world is termed as a global village due to the lowering of communication and
transportation costs which has facilitated the free movement of goods and services across the national
boundaries. Evolvement of the global market has simultaneously resulted into the resources such as
capital, material, talent, labour, etc., and also becoming global. Countries of this new global order aspire
for their economic growth coupled with the industrial development. All these phenomena pose a major
challenge before the operation managers who are expected to meet the challenge through innovative
ideas and out-of-the-box thinking which facilitate the processes pertaining to production, marketing,
research & development, etc.

2) Lean Manufacturing: Lean manufacturing techniques removes difficulties encountered during the
management of supply chain. It is inclusive of manufacturing processes (push scheduling in particular)
as well; and use out-dated planning and execution practices resulting into wrong outcomes. It
acknowledges the fact that priorities under the manufacturing operations keep on changing frequently,
the demands for product not being in simultaneous with forecasts, delays in deliveries from suppliers,
issues pertaining to product specification, capacity disparities, disruptions in material flow, unrealistic
practices in relation to the introduction of a new product, long cycle times and the support systems not
in tune with the changing times. However, one of the striking features of the lean philosophy is that it
lays emphasis on correcting the manufacturing processes, whether external or internal to the
manufacturing process.

3) Just-In-Time (JIT): It is a management concept, which was originated in Japan and applicd in
production processes. It involves the following elements:

i) Right items.
ii) Right quality and quantity.
iii) Right place.
iv) Right time.
From the above, Just In Time' may be defined as the philosophy that focuses attention on eliminating
waste by purchasing or manufacturing just enough of the right items just in time". It is also referred to as
JIT - hand to mouth approach to production. It ensures that during the assembly process of a product, its
quality components arrive at appropriate quantity at appropriate time (without any delay or early
arrival). The objective of JIT is to focus on small quantity, repetitive process with only one unit of
work-in-process (WIP) at time, and almost no inventories of finished goods.

4) Group Technology or Cellular Manufacturing: The underlying principle of Group Technology (GT)
is that most of the problems faced during the manufacturing exercise have lot of similarities, and if they
are assembled together, a common or single solution which is time and effort saver and is possible to
find out. Under this concept, there is grouping of various parts having similar geometry, manufacturing
processes and functions, with a view to having a better assimilation between the designs and
manufacturing functions of an organization. A group comprising of similar components is termed as
'Machine Cell', In this connection, it is possible, although not necessary, for every component of a part
family to undergo process by each machine of corresponding machine cell. The manufacturing, which
involves production of a part family by a machine cell is known as Cellular Manufacturing. Group
Technology facilitates enhancement of manufacturing efficiency, which is due to the fact that the
requisite operations take place only in a small cell, and as such transportation of in-process parts is
eliminated.

5) World Class Manufacturing: The essential of the new pattern of production is world class
manufacturing lies in the fact that logistics are framed in a manner so as to make things adaptable. There
is lot of difference from the traditional system of mass-production. In order to fulfil the demand of
versatile and ever-changing market, production is carried out in small batches. Management of
inventories is done on the principles of JIT, and the flow of production through the entire plant takes
place as a single unit (and not in the form of large batches). The pace of machine changeover is
normally very fast, and the machines used are characterized by their simplicity and flexibility.

6) Mass Customization: The term and concept of mass-customization was first used by the author Alvin
Toffler in his famous book Future Shock'. It was subsequently described in detail by Davis in his book
Future Perfect, according to which the concept of mass customization is different from mass-production.
However, the implications of mass-customization vary according to the varying products and sectors.
The methodology use and procedural aspects pertaining to mass-customization also differ for different
products and sectors. While some products may be customized at the level of retail outlet or dealer
(post-production customization), other may be customized at the end-users level. For example, the
intelligent system available in some new models of cars which enable the vehicle to adapt to the driving
pattern of the vehicle owners.

Mass customization may further be characterized by the low-cost production of goods and service
promptly which is capable of meeting the customers' expectations in a speedy manner. It is the thing in
vogue almost replacing mass-production, which has lost its relevance in the present day context
characterized by volatility, growing product variety, and expanding opportunities for e-commerce.
Mass- customization is capable of meeting all the challenges posed by the present-day market may be its
product variety, volatility of the market or selling various products either over the counter or through the
internet.

7) Re-Engineering: The concept of Division of Labour' propagated by Adam Smith, which was relevant
during those times, is no longer relevant in today's business world and market. The business processes
are undergoing lots of changes in the form of their re-engineering. By the operation managers, we have
substantial improvements in various measures of performance, viz. costs, quality, speed, services, etc.
Reengineering essentially predicts reorganizing various business processes de-novo in a systematic
manner. Once the fragmented processes after reorganization reappear as integrated processes, the role of
bureaucracy starts declining. Fragmented processes and bureaucracy go hand in hand and if one is
eliminated, the other cannot exist.

8) Supply Chain Initiatives: Information Technology plays a crucial role in simplifying various business
processes. Today the manufacturers are in a position to keep a track of orders on real-time basis which
enables them to match production level with the market demand. Inventory management has become
more efficient with better coordination between inventory replenishment with upstream and downstream
supply chain partners. Electronic Data Interchange (EDD), Efficient Consumer Response (ECR) and
Vendor Managed Inventory (VMI) are some of the common tools used in this regard.

EDI: It allows direct transmission of orders, invoices and payments through computers;
ECR: It envisages logistic planning for linking suppliers and distributors, which facilitates product
innovation, their promotion, and replenishment by using information pertaining to Point of Sale (PoS):
VMI: It enables the suppliers (and also make them responsible) to manage the inventories of customers
There are some sub-categories of VMI, viz. Retail Managed Inventories (RMI), Jointly Managed
Inventories (JMI), and consignment selling.

9) Kanban System: It is a production control system which is related to lean manufacturing and Just-in-
Time (JIT) production. It ensures production with smaller inventories. The term Kanban is a Japanese
term, which means "virtual record" (Kan means"Virtual" and Ban means "card or board'"), It is a
common word in Japan, meaning "signboard, or billboard". Kanban, over a period of time has become a
powerful tool to facilitate the operations of production system in a holistic manner. Further. It has also
been used efficiently to promote improvements as problem areas are underlined by the reduction in the
number of Kanbans.

10) Toyota System: This system, also referred to as the Toyota Production System (TPS), was
developed by Toyota. It is an integrated socio-technical system consisting of management philosophy
and practices of Toyota. This system is used by automobile manufacturers for various purposes
pertaining to manufacturing and logistic aspects, especially interaction with suppliers and customers.
The TPS is characterized by the following objectives:

i) Design out overburden (muri);

ii) Design out inconsistency (mura); and
iii) Eradication of waste (muda).

10) Computer Aided Design (CAD) / Computer Aided Manufacturing (CAM): As evident from the
nomenclatures, technology is used for designing in CAD, whereas it is used for manufacturing in CAM.
way back in early 1970, CAD comes to the help of design engineers for undertaking designing activities
The present day technology is the cumulative result of what was developed (interactive graphics) at MIT
essential for the finalization of engineering designing including creation of parts in 3D, their assembly
and production of engineering drawings, through computer graphics and various other software’s.

14) Computer integrated Manufacturing (CIM): Under the CIM, there is total automation of
manufacturing unit; each and every operation and process takes place under the keen and continuous
monitoring and control of computers in an integrated manner. This system was created and developed in
the year 1980 by Marine Tool Manufacturers, and is markedly distinct from "light out" factory concept.
It represents a business model which is integrated by a common data base.

Following components are the essential elements of CIM:

i)Computer Aided Design (CAD)

ii) Computer Aided Manufacturing (CAM)
iii) Computer Aided Process Planning (CAPP)
iv) Computer Numerical Control (CNC) Machine Tools
v) Direct Numerical Control (DNC) Machine Tools
vi) Flexible Machining Systems (FMS)
vii) Automated Storage and Retrieval System (ASRS)
vii) Automated Guided Vehicles (AGV)
ix) Use of robotics and automated conveyance
x) Computerized scheduling and production control

13) Information Technology: With the rapid growth of Information and Communication Technology
(ICT), the manner of management processes and overall conduct of business has been undergoing
radical changes.

However, this phenomenon has posed new challenges before the management of various organizations
in the form of global competition, due to diminishing trade blockades between various countries.
Business organizations, of late, have developed a tendency to inculcate more flexibility and
responsiveness to new developments.

This has become possible only due to the improvements in their capabilities with regard to recording,
summarizing, analysing and communicating data efficiently, which has resulted in elimination of
multiple management layers and making the organizations flatter.
Here it would be relevant to make a mention of Enterprise Resource Planning (ERP) system, which has
become a unified data base for the organizations. ERP system may be further empowered with
additional capabilities also, such as forecasting, demand planning, inventory planning, supply chain
integration software, etc.

14) Plant Automation: Automation has played a significant role in the development of manner in which
the manufacturing processes take place. In past, machines were powered and controlled by men.

At present, most of the machines are powered by electricity and their performance is monitored and
controlled by computers. The human intervention is being eliminated by automated manufacturing,
which is characterized by more flexibility and versatility.

15) Sharing Demand Information: Sharing of demand information is very important for the suppliers of
goods. They are in an advantageous position as they can reduce costs if the demand information is
shared by their customers (retailers) at the right time. This is partly due to the fact that it results in the
reduction in variation of the suppliers lead time demand.

Customers and retailers are not always beneficiaries of sharing the demand information with the
suppliers. It is, therefore, necessary from the retailer’s perspective to ascertain if the sharing of demand
information is in their favour (beneficial to them). If it is not in their favour, they can demand for an
appropriate compensation in monetary terms from their Suppliers. Alternatively, they can demand
higher and better service levels.

Role of Production and Operations Managing

1) Planning: This function involves setting the path for future. Under this step, production manager set
the objectives of the operations and various policies and procedures to achieve them. The manager is
also required to clarify the roles assigned to different people and the expected outcomes. Other tasks
undertaken at this stage are the product planning and facility designing.

2) Organising: These are the activities which help in forming a framework for the activities to be
undertaken. A proper structure placing different roles at designated slots is designed. It also enumerates
all the activities required to be undertaken for carrying out the production process.

3) Controlling: This part tracks down that the activities are performing as per the set plan. It also ensures
that sub-systems of the operational plan perform accordingly. The control may be exercised through the
use of various tools comparing actual performance with the set standard. Similar control is also
exercised over other factors such as cost, time and quality.

4) Behaviour: Operation managers are also concerned with the well-being of their workforce and seek to
examine the impact of their policies and procedures upon their performance. They are particularly
interested in examining decision making behaviour.

5) Models: Operation managers carry out planning, organising and controlling functions and are
required to take several decisions to solve various issues. Such repetitive processes may be standardised
by drawing decision models, Various tools and techniques used for this purpose are breakeven analysis,
line programming and simulations.
Responsibilities of Operations Manager

1) Operations Manager Should Concern Himself with Production Planning: In almost each organisation,
the delivery of the product is looked after by the operation manager. The various decision which are
associated with the production planning, e.g., raw material record, maintenance plans, stock of semi-
finished and material, short-term production plan, briefing the employee about the different production
resources available 1 the industry in order to execute in future as per the predicted product and service
demand.

2) Production Control: The effective utilisation or resources should be ensured by the operation manager
along with the operations control for on time delivery. In order to accomplish this, routing, scheduling
and inspection are performed during the production process.
3) Operations Manager Should Concern Himself with Quality Control: Various kinds of methods should
be used for reducing the defects in production. As per the demand of the customers for different product
and services, production must be done by the operation manager. By inspecting the finished products,
the quality maintenance can be done.

4) Purchasing: The various decisions relating to the supplier, price, delivery date, etc. is decided by
purchasing department. Production function and purchasing both are interconnected. Whether to buy or
make the raw material is an important decision which has to be considered. The specifications or quality
requirements of different equipment and material is judged by the production department. The decision
regarding purchase frequency and the requirement of the material is taken by both the material
department and the operation manager.
5) Proper Inventory Control: The operation manager is also responsible of planning the purchase in
economic lot size and suitable timing of purchase must be ensured so that the total inventory cost can be
minimised. To accomplish this, the evaluation of the economic lot size and reorder point is necessary.

6) Work Study: For having the better understanding of the relationship between the output (goods and
service) and input (human resources and raw material), the use of method study and work measurement
is done. Different effective methods must be identified by the operation manager for performing the
different activities of production in order to ensure the effective utilisation of resources and improved
productivity.

7) Motivate Workers: By providing the monetary rewards to the employees for improved labour
productivity, they can be motivated by the operation manager.

8) Cost Control: With the change in the production methods, the cost of production also gets changed. It
is the responsibility of the operation manager to perform as per the systematic methods so that the
capital cost and different other types of expenses can be curtailed in order to accomplish the targeted
profit level.

PRODUCTION/MANUFACTURING SYSTEM

Manufacturing: When different things are produced either for use or for sale with the help of various
machines, tools and labour, it is regarded as manufacturing. This term can include a Wide variety of
human activities including high technology to hand craft but it is more frequently used for the industrial
production where the raw material i converted into the finished products at a huge level. These products
can be used for the production of either more Sophisticated or complex products for example mobile
phones, automobiles, can be sold to wholesalers which in turn are sold to retailer and finally it reaches to
the customer who is the end user of the product.

Types of Manufacturing System

 Continuous or Flow Manufacturing Systems
 o Mass Production
o Assembly Lines
o Continuous Flow
 Synthetic Production
 Analytic Production
 Intermittent Flow System
o Job Order/Job Shop Production
o Batch Production
o Project
Continuous or Flow Manufacturing System Continuous or flow production process creates specialized
manufacturing of similar products, which keeps the machines and equipment totally busy. This is done
with a view to ensuring reduction in distance and costs during material handling. Such an arrangement is
known as Production Line' or more popularly 'Assembly Line'.

Characteristics of Continuous Manufacturing System

1) There is standardization of product design, the conversion process and the sequencing of
operations. In other words, production of similar goods is undertaken.
2) Production layout pattern is the guiding factor for the arrangement of machines and equipment’s.
3) Standardized operations are carried out with the help of special purpose machines, which are
fully automatic.
4) Output is generally voluminous, and goods are produced in bulk the expectation of huge demand
in the market.
5) As the operations are carried out in a pre-decided sequential order fixed path material handling
equipment is utilized.
6) Machine capacities are balanced in such a manner that the feeding of materials at one end of the
process and receipt of the finished goods at the other end takes place in an incessant manner.

Suitability of Continuous Manufacturing System

1) Continuous Demand: The absence of continuous demand would result in piling up of finished
goods and storage problem associated therewith.
2) Standardized Product or Process: Standardization of a product or process is a must, as the intrinsic
nature of the flow-line is inflexibility, and as such no variations can be accommodated.
3) Specified Task Sequence: Materials used need to be checked strictly as per the specifications, and
their delivery should be ensured within the stipulated time frame.
4) Task Must Be Defined: To ensure that the flow-line maintains i balance, it is necessary that all
operations remain constant. It possible only if there is a system in place to maintain a detailed
record of various operations.
5) Work Must Conform to Quality Standards: Conformation with the quality standards may be
compromised, to some extent, under the job or batch method, because any mistake at one stage may
be rectified or compensated for by additional work at the next stage.
6) Right kind of Plant and Equipment at Each Stage: Availability of the right kind of plants and
equipment’s is an absolute necessity to ensure that the flow-line remains balanced, and the entire
sequence goes smoothly without any interruption.
7) Maintenance must be by Anticipation, not Default: Any breakdown of an equipment and machinery
would result in the stoppage of the process in totality.
8) Synchronized Operations: One operation needs to be planned in synchronization with other
operations of the process. Otherwise, the entire flow-line would be disturbed.

Following are the types of continuous manufacturing system:

1) Mass Production: Mass production may be explained as large scale manufacturing of Standardized
goods or components. The basic characteristics of mass production are: standardization of materials,
machines, products as well as processes. The volume of mass production is indirectly proportionalto
the direct labour cost per unit; higher the volume of mass production, lower is the direct labour cost
per unit.
Mass production is characterized by the following features:
a) In mass production of goods, the same manufacturing set-up is use by each product. Each raw-
material is required to be passed through the same machine in the same sequential order.
b) It involves processing of just one homogenous product. Production planning, therefore, has to
ensure an uninterrupted flow of items to be used as inputs for the production exercise.

Advantages of Mass Production

a) Rate of production is high, whereas the cycle time is low.
b) Capacity utilization is at a higher level, because of the time balancing
c) Operators are not expected to have a high level of expertise; even semi-skilled operators can
perform the desired task;
d) Requisite process inventory is low; and
e) Production cost per unit tends to be low.

Disadvantages of Mass Production

a) Breakdown of a single machine in the sequence results in the total stoppage of the production
process.
b) Any change in the product design would necessitate major change in the line layout.
c) Heavy investment is called for in production facilities.
d) The slowest operation is the determinant of the cycle time.

2) Continuous Flow
Under the continuous or process production method, processes are closely linked with each
other, and production takes place on a continuous basis by following a standardized and uniform
manner in a sequential order.

Continuous flow or process production may be of the following two types:

1) Analytical Process: Analytical process proceeds with breaking down of the raw-material into
various products. For example, analysis of crude oil into gas petrol, diesel, and kerosene, etc.
Gas
Petrol
Diesel
Crude oil
Kerosene
Wax

2) Synthetic Process: It proceeds with synthesis of a new product by mixing two or more basic
materials. For example, lauric ac myristic acid, plasmitic acid, stearic acid, linoleic acids
synthesized to manufacture a new product, viz. Soap.

Lauric Acid
Myristic Acid
Plasmitic Acid Finished Product (Soap)
Stearic Acid
Linoleic Acid

3) Assembly Lines
Assembly line combines the two or more components to produce a finished product. The history of
assembly lines may be traced back to the USA, where it was introduced and developed in the
automobile industry.

Characteristics of Assembly Lines

a. The twin objectives of high rates of output and low unit costs is achieved with the help of
specialized machines and skilled manpower;
b. Restricted flexibility is associated with assembly line;
c. Consistency is maintained as far as the quality level is concerned.

Part 1

P2 Finished Goods

P3

Intermittent Manufacturing System

The system of intermittent production process does not envisage on-going manufacturing for storage
purpose; manufacturing activities takes place only to meet an order of product-specific. Flow of raw-
material is not continuous, and production facilities are extremely flexible, designed to take care of a
wide-range of products. Machine shops, hospitals and general offices, where the basic nature of inputs
keeps on changing with the changing design of the product, are Some of the examples of intermittent
production process.

Characteristics of Intermittent Manufacturing System

1) Under this process, wide-ranging products are handled, general purpose machines and equipment’s
are used;
2) Production process is not continuous, as periodic breaks take place in between;
3) Sequence of operations is not uniform; it differs from one job or batch to another.
4) Functional or process layout is required to be adopted
5) The production of components is on a standardized basis.
6) Production level is generally not voluminous

Types of Intermittent Manufacturing System

 Job Order/Job Shop Production
 Batch Production
 Project

1) Job Order/Job Shop Production

a) A hairdresser, who cuts, washes, dyes and perms his customer’s hairs.
b) A tailor, who cuts and stitches the entire dress.
c) Construction of a bridge by a team of engineers, Overseers, managers and labourers.
d) Installation of machinery in a factory by a team of engineers, managers and labourers.
e) Ship-building by a team of engineers, managers and labourers.

Characteristics of Job-Order Production

1. A number of general purpose machines are used, e.g. grind press, sharpener, etc.
2. Only customized or 'made to order products are manufactured;
3. Output level is normally low, and
4. Fixed-position layout is used for arranging the machines equipment’s, i.e., they are assembled at
one place.

Advantages of Job-Order Production

1) Use of general purpose machines and equipment’s which helps manufacturing of wide-variety of
products;
 2) Each job provides a learning opportunity to workers and operators and the level of their skills
and competencies is taken to a higher level
3) Optimal utilization of operator’s potential is ensured; and
4) There is enough scope for creativity and innovation.

Disadvantages of Job-Order Production

1) Set-up is required to be changed in a frequent manner, which leads to higher costs;
2) Inventory level needs to be kept at a higher level at all the stages of production, which results in
high inventory cost;
3) Production planning is a complex process, and needs to be undertaken meticulously; and
4) Spacious premises are required for job production.

2) Batch Production Under the batch production, production of several items of same ty takes place.
Each batch is required to go through a common stage in production chain before it moves on to the next
one. With the grown a business organization, the volume of activities handled by it also grows, to keep
pace with such growth and for the sake of convenience the batch production method is adopted by it.
Characteristics of Batch Production
1) Batch production method is rather difficult to be adopted by a business organization;
2) Manpower with special skills and expertise are required under the technique;
3) Equipment utilization is at its maximum extent;
4) Flow of work is likely to be poor; and
5) Value-addition and completion of work is slow.

Advantages of Batch Production

1) Plants, machineries, equipment’s, etc. are put to use in an efficient and optimal manner;
2) Functional specialization is encouraged;
3) Under the batch production, cost per unit tends to be lower in comparison with the job order
production;
4) Capital investment in plants and machineries is comparatively low;
5) Technique is flexible enough to undertake and process several products simultaneously; and
6) Operators have an elated feeling of job satisfaction.

Disadvantages of Batch Production

1) Due to irregular and longer flows, it becomes a complicated affair to handle materials;
2) An elaborate and complicated planning and control is required for the smooth functioning of the
production department;
3) The level of Work-in-Process (WIP) inventory is generallyhigher level; and
4) Repetitive Installation of Machinery and Equipment causes high setup costs.

3) Project technology handles the customized products, which are made to order to fulfil the specific
demand of a customer. The concept may be better appreciated with the example of a construction
company, which undertakes the projects of various sizes and types. As such a company deals with
varied projects, which can't be standardized, a lot of flexibility is required from the conversion process
with regard to its equipment capabilities, human skills, and procedures.
Characteristics of Projects
a. Number of tasks associated with a project is the deciding factor with regard to its size, viz. small,
medium, or large;
b. There is no inventory of finished goods in a project, because outcome itself is the project;
c. The field worker in a project should be necessarily possess good Communication skill, so that any
problem may be identified sorted out by them in a timely manner
d. Quality control assumes paramount importance in a project. It would become extremely difficult to
make any amendment at a later date, after the completion of the entire project; and
e. Available manpower needs to be deployed in a flexible manner.
THEORY OF CONSTRAINTS (TOC)

TOC is generally used for improving the operational efficiency of an organisation, through problem
solving and management/decision making tools termed as Thinking Processes (TP).

Application of TOC by any organisation starts with the answers of following questions in a methodical
and rational manner in order to bring about sustainable improvement in any process:
1) What to change?"
2) "What to change to?"
3) "How to initiate the change?"

TOC has been presented as a theory with a robust scientific support but it has not been able to get the
requisite recognition amongst the academicians, although the profit-seeking organisations have accepted
the theory and practice with open arms. TOC has facilitated business organisations in achieving their
objective of maximising their profits and making more money.

There are three ways to achieve the above objective:

1) Enhancement in the output;
2) Maintenance of a lowest possible level of inventory; and
3) Reduction in operating expenses.

TOC as a management philosophy may be viewed as following three separate, although inter-related
areas, viz. logistics, performance evaluation, and rational thinking:

1) Logistics is inclusive of drum-buffer-rope scheduling, buffer management, and VAT analysis;

2) Performance measurement is inclusive of output, inventory & operating expenses, and the five
focusing steps; and
3) Logical thinking process tools are significant in recognising the fundamental problem (current reality
tree), identification and expansion of win-win solutions (evaporating cloud and future reality tree), and
development of implementation plan, (prerequisite tree and transition tree).

TOC is also referred to as Constraint (s) Management, Synchronous Flow Manufacturing (SFM),
Synchronous Production (SP), and Optional Practical Training (OPT), although there is a marked
difference between these terms and the TOC, inasmuch as these terms are used to describe the earlier
components of TOC, instead of the more recent ones, such as the "Thinking Processes". According to
the Theory of Constraints, each business entity has to face at least one constraint, at any stage during its
lifetime. Such constraints act as major obstacles in the way of achieving that entity's objective.

They may be categorised as:

1) Internal Constraints; and
2) External/Market Constraints.

Process of TOC
1) Identify: Identification of the constraint is the foremost step in the process of TOC. There are several
methods to identify a constraint. One of the typical indicators of a constraint is the level of work in
queue before a specific operational activity.
2) Exploit: After the identification of a constraint, the next step is its exploitation, i.e. taking initiatives
to improve the process or give necessary support to it, so that its performance may reach to the highest
possible level. Without incurring any expenditure in major changes/upgrades. In short, the constraint is
exploited.
3) Subordinate: During the exploitation of a constraint, i.e. when the constraint is performing at its best,
other sub-ordinate processes are required to perform at a speed, which is in tune with the speed/capacity
of the constraint. In this connection, it is acceptable, if individual productivity of some processes is
compromised in the larger interest/bene fit of the entire system. In a value system, generally the sub-
ordinate processes are found ahead of the constraints. Processes after the constraints are not considered
significant. In all possibility their capacities are already underutilised, as they have no option but to wait
on the constraining process.

4) Elevate: In case the overall output of the system continues to be unsatisfactory, there is a need to step
up the efforts to bring about the desired improvement. Under such a scenario, the organisation may
consider major changes in the management of the constraint, which may include capital infusion.
Reorganisation of other major expenditures of time or money. This 1s referred to as elevating the
constraint or taking appropriate measures for the management (removal) of constraints.

5) Repeat: Consequent upon the successful management or removal of a constraint, certain other
processes or parts of the system take the shape of new constraints. The same procedure, viz.
identification, exploitation, ordination, and elevation, needs to be followed now for the management or
removal of those new constraints. By following the above processes, some positive impact on the flow
time of the products/services through the system becomes visible. Once the wastages in constraints are
brought down, various outputs in terms production and time savings are improved. With the perceptible
improvement in a constraint, there is substantial reduction in variations and improvement in o quality.
TOC is altogether different from most of the process improvement programmes, which is similar to a
mass/'one size fits all' approach for improvement.

Advantages of TOC
1) Improving Productivity: It is capable of improving the productivity of an organisation considerably
without effecting any major changes in its operational systems;
2) Cost-Effective Technique: It is considered to be a robust and cost-effective technique for bringing
about improvement in the production capacity;
3) Simple to Use: Its application is very simple, and may be communicated easily to down the level staff
appropriate for shop floor teams;

4) Promote Team Spirit: Good for developing and inculcating the team spirit amongst the staff, as their
awareness regarding the constraints and the need to work as a team in the process or management of
TOC grows;
5) Motivating Personnel: The TOC process acts as a motivating 1 force for the personnel making efforts
for improvement, as its results are in the form of prompt and tangible advantages to the organisation;
and
6) Optimum Utilisation of Resources: It leads to improved productivity and turnover without resorting
to additional resources (staff, space, funds, etc.)

Disadvantages of TOC

1) It is Not a Part of Mainstream Business Education: Application of TOC process, no doubt, is

beneficial for factory operations, project management, and supply chain; it is not considered as a part of
conventional Operational Research programs. The validity of this technique therefore has some
disadvantages. The contention that TOC process is based on earlier academic knowledge and complains
has not been acknowledged by Dr. Goldratt and the TOC community.

2) Effectiveness of Drum-Buffer-Rope: Although, TOC is positively comparable with linear

programming techniques, the DBR methodology is considered as inferior to the other competing
methodologies.
3) Unacknowledged Debt: TOC supporters do not acknowledge the concepts borrowed from the systems
dynamics developed by Forrester in fifties, and the statistical process control of World War II, although
a number of important concepts in TOC "have been topics in management accounting textbooks for
decades'".
JUST-IN-TIME (JIT)
Just-in-time is a mechanism developed in Japan emphasising on having the right items of right quality at
the right time at the right place in the right quantity. This approach is also called as "hand-to-mouth
approach" of production. The JIT theory reduces the wastages in an organisation by putting constant
towards minimising waste, simplifying the work and improving timeliness. The overall focus of JIT is
on improving the quality, productivity and flexibility. It is an approach which does not believe in
keeping stocks or increasing inventory costs. It believes in purchasing or manufacturing just the specific
quantity which is ready to go in assembly lines.

Just-1n-Time production is defined as a "philosophy that focuses attention on eliminating waste by

purchasing or manufacturing just enough of the right items just in time".

According to APICS (American Production and Inventory Control Society), "JIT is a philosophy of
manufacturing based on planned elimination of all waste and continuous improvement of productivity.
It encompasses the successful execution of all manufacturing activities required to produce a final
product, from engineering to delivery and including all stages of conversion from raw materials
onwards".

Features of JIT

1) Pull Method of Material Flow: It refers to a system of production in which customer demand
activates productions of the item. Stock will come only when next order is placed.

2) Consistently High Quality: JIT maintains quality at source with workers acting as their own quality
inspectors. So it maintains high quality consistently by eliminating scrap and rework.

3) Small Lot Sizes: JIT maintains lot sizes as small as possible to cut lead time and to help achieving
uniform operating system work load.

4) Short Setup Times: The enterprises with low set up times can use JIT as it conforms with continuous
flow of production.

5) Close Supplier Ties: JIT system maintains a close, reliable and dependable relationship with the
supplier so as to get uninterrupted supply of desired quality materials.

6) Flexible Workforces: JIT depends on having orders thus workforce shall vary with the requirements
of production.

7) Uniform Work Station Loads: JIT can only be achieved when available work stations are being given
uniform work load to maximise production.

8) Standardised Components and Work Methods: It requires continuous and uninterrupted production
and therefore work methods and equipments are standardised and being familiar with the workforce

9) Product Focus: The system takes primary care to maintain quality product with the overall desired
service systems.

10) Preventive Maintenance: The system operates with the policy of preventive maintenance of quality
equipment, workforce, operating system and materials to ensure continuous production

11) Automated Production: The JIT system requires automated productions system so that there shall be
least interruption with delay for any technical graphs.
Objectives of JIT
1) To have only the required inventory when needed such that vast amount of inventory holding cost is
reduced.
2) To reduce the requirement of storage space.
3) Companies that are short on capital can adopt JIT as it requires smaller investment.
4) To maintain quality to the extent of zero defects.
5) To run efficient production process in the company.
6) Helps in reducing set-up times, queue lengths and lot sizes which result in reduction of lead times.
7) To regularly upgrade the operations to achieve the cost minimizations.
8) To eliminate waste, is to minimise the amount of equipment, materials, parts, space, and workers
time, which adds value to the product.

Some of the advantages of implementation of JIT concept are listed below:

1) Reduced lead time enables meeting customer requirement. Customer is able to reduce his inventory
and reduce the product cost.
2) Exact delivery schedule is possible with JIT practices. This helps in image building of the company.
3) Customers prefer to order from a firm reliable on maintaining delivery schedules.
4) Quality of product is improved by following JIT. This helps in capturing more market share.
5) Lower defect rates enable less efforts and lower cost on inspection; thus, reducing the overall costs
and lead time.
6) JIT enables the management of the operations with lower raw material inventory. Especially, it is of
great advantage to firms which import some of the raw materials. For example, most of the cement
manufacturers in Saudi Arabia import bauxite from India, as one of the raw materials. Some of the
manufacturers have reduced their raw material inventory of bauxite from 4-6 months to 2-3 months only
by better management and reducing waste.
7) Waiting time is greatly reduced by implementing JIT, which results in less work-in-process
inventory. The need for work-in-process inventory is actually reduced with the help of JIT.
8) Satisfying the market demand without delay in deliveries with the help of JIT philosophy enables less
finished goods inventory.
9) Flexibility in utilisation of manpower is a great advantage of JIT as workers are trained to do many
jobs and are utilised optimally resulting in reduced worker idle time. Other advantages of flexible
workforce are reduced overheads, fewer lay-offs due to fluctuations in specific product lines and
increased responsiveness.
10) JIT reduces the need for computer systems. Although computers add to the efficiency, JIT
encourages utilising the contribution of workers, supervisors and managers to achieve the best results
11) JIT controls the system variability and helps in quality products and services.
12) JIT helps in effective communication and reduces the waste.

Limitations of JIT

1) Cultural differences have been cited as possible limitation of JIT. The benefit associated with JIT
may be culturally bound and somewhat limited to Japanese environment.
2) Loss of individual autonomy is another possible shortcoming of JIT. Reduced cycle time forces the
workers to adjust immediately to changes in demand, significantly reducing the idle time of the workers
resulting in greater amount of stress and pressure placed upon the workers to perform.
3) The success of JIT production system depends upon co-operation between employer-employee, daily
workstation rotation, training of operators for different kinds of jobs and system adaptability to market
function, etc.
4) There is no flexibility-only first come first served' principle is applied by manufacturing items in
order of releasing Kanbans.
5) There is no safety stock to offset inaccurate demand forecasts.
6) JIT production is effective only when the daily demands are fairly stable.
LEAN MANUFACTURING SYSTEM
Lean production is a manufacturing philosophy that is the crux of a new system design.
Lean manufacturing systems leads in productivity profits by emphasising on the waste. It leads to an
increase in the quality profit by showing the problems wherever it is arising and by taking the help of
internal customers these problems are resolved and is also prevented from Occurring again.

Features of Lean Production

1) Multi-Skilled Workforce: Skilled workers are important for performing the functions in the best
possible Way. It IS also important that the workers are able to perform different number of tasks as the
workers specializing in a single task lead to under-utilization of resources. Lean production system can
change the work schedules to take care of changes in demand. If the demand is low then the additional
time may be used for rest or for performing other tasks such as preventive maintenance.

2) Reduces Set-up Time: This system strives to shorten the time period between change-overs. Only
those items are produced which are demanded by the customers. It also uses other concepts such as
quality circles to reduce the time to minimum.

3) Employee Involvements and Empowerment: The workers are organized in different teams and are
given appropriate training. Such training may pertain to activities related to equipment repair, house-
keeping and so on.
4) Supplier Involvement: The manufacturers and suppliers generally form long-term relationship. This
partnership is important for reducing machine breakage and inventory set-up.

5) Improved Quality through Immediate Feedback: Batch method of production was used before lean
production. Under the previous system, the defects were only identified once the batch was completed.
This made the process more expensive as the entire batch needed to be discarded once the defect was
found. Lean manufacturing leads to smooth flow of goods. The system helps in immediate detection of
defects and thus improves quality. It is also helpful in reducing rejection.

The main components required for lean production process are enumerated below:

1) Pull Production System: Lean production uses pull system for process flow. This system entails that
the customer demand is the main driver of production. It is the opposite of pushing goods to the users.
For example, a customer making an order in a restaurant is an example of pull system. For such
approach, the manufacturing concern needs to keep all the required equipment and material on hand to
fulfill the demand as and when it arises. Different industries use this system. For example, Wal-Mart
shares data with all its Points of Sales and suppliers. Goods are taken from suppliers only when the
demand arises. It helps in reducing inventory costs. Similar concept is used by the computer company
Dell

2) Push Production System: This type of system estimates consumer demand and produces accordingly.
It helps in achieving economies of scale as the items are produced in bulk. This system is used by most
of the concerns as it helps in reducing costs. Goods sold in super markets come under push production
system.

Principles of Lean Manufacturing

1) Recognition of Waste: The first phase of the process is related to the recognition of various factors
which create value for the customers. Any action or material not required for creating value is
considered to be unnecessary waste and therefore is required to be eliminated. For example, the wasteful
activities related to transportation of material may be taken off.
2) Standard Processes: Lean manufacturing system uses elaborate production guidelines. Such
guidelines are referred to as 'Standard Work.' The guidelines are related to the sequencing, material
required, time requirement and the results of the various processes. The implementation of this system
helps in standardizing the work.

3) Continuous Flow: Lean manufacturing system is related to the implementation of a continuous

production run which is free from obstacles, unnecessary wait time and wasteful movements. In many
cases, elimination of wasteful elements can cut the production time by 90 percent.

4) Pull Production: This system is also known as Just-In-Time. This system implies that only the goods
which are demanded get manufactured. The downstream work-station pulls the production and each
work- station is required to produce only those items which are required by the next work-station.

5) Quality at the Source: Lean manufacturing is concerned with removing the defects as and when they
occur. It also makes quality inspection a part of the job description of the workers.

6) Continuous Improvement: Lean manufacturing requires the achievement of perfection by removing

wastage as and when those are found out. This requires workers to be highly involved in the given task.

Steps in Lean Production

1)) Identify Value: Proper analysis of customers ' viewpoints help in determining the various aspects of
goods and services which contribute most and least value. This shows how the product fulfils the
requirements of the customers.

2) Identification of Value Stream: It is important to identify the activities which contribute the highest
value. The set order in which activities are performed is known as value stream. The assessment of this
value stream is made to determine the activities which are not necessary. Necessary activities are those
activities which are prerequisite for other value adding activities. Some values may not add direct value
but still are essential for the process. For example, support activities such as human resource
management fall under this category.

3) Improved Flow: Once non-essential activities are identified, it is important to schedule the essential
activities in such a way that there are no unnecessary obstructions. It also takes proper care of things
such as queuing, batch processes and transportation. Proper management of such buffers helps in
making the process more efficient and quicker.

4) Allow Customer Pull: Once above steps are completed, the attention is paid towards the customers to
pull the goods or services. The process should be flexible enough to respond to the required changes
dictated by the changes in the consumers' tastes.

5) Work towards Perfection: This stage involves the repetition of above tasks. It further improves the
quality of process. Lean production method eliminates waste activities and makes the entire process
faster and more economical. It also makes the process simpler.

Advantages of Lean Production Following are the main advantages of lean production method:

1) Customer Satisfaction: This helps in eliminating wastage, thereby increasing the value delivered to
the customer.
2) Productivity: Productivity enhances as the steps are taken to improve the process by removing
wastage.
3) Change of Attitude: Implementation of lean production asks for the change in overall attitude of the
organization. At times, this can be a challenging task.
4) Increase in Quality: Implementation of this program helps in increasing the quality of the goods and
services.
5) Delivery Time: Since this production style puts emphasis on efficiency, the delivery time is adhered
to leading to better customer satisfaction.
6) Minimum Waste: Lean manufacturing aims at minimizing the waste n the process. This helps in
Curtailing costs. It also aids in minimizing the inventory levels to avoid wastage and obsolescence.

Disadvantages of Lean Production

1) Customer Dissatisfaction Problems: Lean production method depends on suppliers to provide quality
material. Any breakdown in supply chain may disrupt the entire lean production process., It can also
lead to various marketing problems.

2) Productivity Costs: Making a process more efficient requires certain costs to be incurred. This may
results in higher wages paid to skilled workers etc. It may also require upfront costs.

3) Lack of Acceptance by Employee: Lean manufacturing process may require the complete change in
the work process. Such drastic changes may not be acceptable to employees as they may be required to
leam new work and process. It may also be difficult to find managers with appropriate kind of
knowledge.

4) High Cost of Implementation: This process may also require physical changes as in new machinery
and plant. This may increase the cost of carrying out operations.

5) Supply Problems: As this system requires only minimal inventory, it is important to have a steady
flow of material. However, if the company is not able to set up an efficient supply chain, it may be
difficult to implement this system.

6) Equipment or Labor Failure: This system offers a little margin for error. If there is higher requirement
for labor or capital, then the processes may lag behind the schedule. It also denotes that there may not be
spare tools lying around to be used in case of breakdowns.

7) Missed Delivery Dates: Since this process lacks flexibility, any sudden change or breakdown may
cause the management to miss meeting its delivery schedule. Any consistent failure in meeting
deadlines may lead to lost business.