Unit-1 Introduction to Production Management

1.1. Historical Evolution of Production Management

1.2. Production–Meaning, Objectives & Functions of Production Department
1.3. Manufacturing Systems

1.1. Historical Evolution of Production Management:

Production Management - The job of coordinating & controlling the activities required to
make a product, typically involving effective control of scheduling, cost, performance,
quality, and waste requirements.
Operations Management - Operations Mgmt. refers to the administration of business
practices to create the highest level of efficiency possible within an organization. Operations
Mgmt. is concerned with converting materials & labor into goods & services as efficiently as
possible to maximize the profit of an organization. Historical Milestones in Production &
Operations Mgmt.: The Industrial Revolution, Post-Civil War Period, Scientific Mgmt., Human
Relations & Behaviorism, Operations Research, The Service Revolution.
 Industrial Revolution - Prior to 1700, all production took place in cottage industries. The
industrial revolution developed in England in the 1700s. The steam engine (by James
Watt-1764), largely replaced human & water power for factories. Adam Smith’s The
Wealth of Nations in 1776 tought the economic benefits of specialization of labor. From
1770 to early 1800, industrial revolution resulted in 2 major developments -Substitution
of machine power to ‘human power’ & Establishment of the ‘factory system’. The
industrial revolution spread from England to other European countries & to the US.
> In 1790 an American, Eli Whitney, developed the concept of interchangeable parts.
The first great industry in the U.S. was the textile industry.
> In 1800s development of gasoline engine & electricity further advanced the revolution.
 Post-Civil War Period - During the post-civil war period great expansion of production
capacity occurred. By post-civil war the following developments set the stage for the
great production explosion of the 20th century:
> increased capital and production capacity
> the expanded urban workforce
> new Western U.S. markets
> an effective national transportation system
 Scientific Management - Frederick Taylor is known as the father of scientific mgmt. His
shop system employed these steps:
> Each worker’s skill, strength, & learning ability were determined.
> Stopwatch studies were conducted to precisely set standard output per worker.
> Material specifications, work methods & routing sequences were used to organize
the shop.
> Supervisors were carefully selected and trained.
> Incentive pay systems were initiated.
In the 1920s, Ford Motor Company’s operation embodied the key elements of scientific
management: standardized product designs, mass production, low manufacturing costs,
mechanized assembly lines, specialization of labor, interchangeable parts etc.
 Human Relations & Behaviorism - In the 1927-1932, researchers in the Hawthorne
Studies realized that human factors also affects production. They were recognizing that
psychological & sociological factors affects production. From the work of behaviorists
came a gradual change in the way managers thought about & treated workers.
 Operations Research (OR) - During World War II, enormous quantities of resources
(personnel, supplies, equipment…) had to be deployed. Military operations research
teams were formed to deal with the complexity of the deployment.
> After the war, operations researchers found their way back to universities, industry,
government, & consulting firms.
> OR helps operations managers make decisions when problems are complex and
wrong decisions are costly.
> OR greatly helps in solving the following problems:
– Linear Programming, Assignment Problems, Transportation Problems, Queuing
Theory, Decision Theory & PERT and CPM.
 Service Revolution - The creation of services organizations accelerated sharply after
World War II. Today, more than two-thirds of the U.S. workforce is employed in services.
About two-thirds of U.S. GDP is from services. There is a huge trade surplus in services.
Investment per office worker now exceeds the investment per factory worker. Thus
there is a growing need for service operations management.
1.2. Production – Meaning, Objectives & Functions of Prodn. Department:
Definition-
 Operations management (OM) is defined as the design, operation & improvement of the
systems that create & deliver the firm's primary products & services. Like marketing &
finance, OM is a functional field of business with clear line management responsibilities.
(Chase, Jacobs, Aquilano, 2006:9)
 Operations management is the management of processes or systems that create goods
and/or provide services. It encompasses forecasting, capacity planning, scheduling,
managing inventories, assuring quality, motivating employees, deciding where to locate
facilities, buying material and equipment and maintaining them, and more.
(Stevenson, 2002:4)

Meaning of Production Management:

Every organization has management principles, & the application of those principles to
production function is the term ‘Production Management.’ The management concept
involves planning, scheduling, supervising & control of the activities that concern the
production of goods to meet the needs of consumers & also generate profit for the business.
Production mgmt. involves using resources judiciously, to create acceptable products. The
production manager is in charge of area of the business decisions such as - quantity, quality,
design, packaging etc., he also ensures that the output matches the specifications. At the
most fundamental level, operations mgmt. is about getting the work done by the supervisor.
A no.of pioneers also contributed heavily to this movement, including the following:
 Frank Gilbreth – He was an industrial engineer who is often referred to as the father of
motion study. He developed the principles of motion economy that could be applied to
incredibly small portions of a task.
 Lillian Gilbreth - A psychologist and the wife of Frank Gilbreth, worked with her husband,
focusing on the human factor in work. (The Gilbreths were the subject of a classic 1950s
film, Cheaper by the Dozen.) Many of her studies in the 1920s dealt with worker fatigue.
 Henry Gantt - Recognized the value of non-monetary rewards to motivate workers, and
developed a widely used system for scheduling, called ‘Gantt charts’. Henry Ford, the
great industrialist, employed scientific management techniques in his factories.
Objectives of Production Management –
Production is the functional area responsible for turning inputs into finished outputs through
a series of production processes. The Production Manager is responsible for making sure
that raw materials are provided and made into finished goods effectively.
 To produce the goods as per quality demanded by customers in most economic manner.
 To make improvement in existing goods and services by regular innovations.
 To maintain inventory at such levels that, there is no blockage of working capital due to
excessive stock & the production may not hamper due to unavailability of stock.
 To ensure uninterrupted supply of goods & services in right quantity at right time & at
right place.
 To keep proper maintenance of plant and machinery.

Functions of Production Management –

Functions of production mgmt. are not confined to conversion of inputs into output, rather it
deals with the creation of goods & services through the application of the business concept
to all the activities connected with production. When we talk about ‘production’, it brings in
the things in mind - factories, machines, tools, equipment, assembly lines which are related
to mfg. They are also vital in both service and manufacturing firms. Production has a primary
objective, which is to employ the various resources to produce goods & services to fit the
market. This post highlights the definitions, importance, and function of both management
concepts.

In the earlier days focus was on manufacturing management, which further changed into
production management. Production concepts and techniques are applied to a number of
activities which have little or nothing to do with factories or manufacturing. These activities
do not produce goods but produce services like banking, recreation services, hotel
management, telecommunication, health services, transportation, education, etc. Due to the
widening of the scope, the name was changed from manufacturing management to
production and operations management, where the concepts, tools and techniques are
applied on diverse nature of activities

The role of Production Mgmt. is quite elaborate. But the sole aim is to ensure the business
produces quality products that can satisfy the needs of customers on a regular basis.
The components or functions of production management are as follows:
1. Selection of Product and Design,
2. Selection of Production Process,
3. Selecting Right Production Capacity,
4. Production Planning,
5. Production Control,
6. Quality and Cost Control,
7. Inventory Control, and
8. Maintenance and Replacement of Machines

1. Selection of Product & Design - Production management first selects the right product for
production. Care must be taken while selecting product & design because the survival &
success of the company depend on it. The product must be selected only after detailed
evaluation of all the other alternative products. The design must be according to the
customers' requirements. It must give the customers maximum value at the lowest cost.
So, production mgmt. must use techniques such as value engineering & value analysis.
2. Selection of Production Process - Production management must select the right
production process. They must decide about the type of technology, machines, material
handling system, etc.
3. Selecting Right Production Capacity - Production management must select the right
production capacity to match the demand for the product. This is because more or less
capacity will create problems. The production manager must plan the capacity for both
short and long term's production. He must use break-even analysis for capacity planning.
4. Production Planning - The production manager decides about the routing & scheduling.
– Routing means deciding the path of work & the sequence of operations. The main
objective of routing is to find out the best & most economical sequence of operations
to be followed in the manufacturing process. Routing ensures a smooth flow of work.
– Scheduling is critical in every organization. It has to do with planning when the actual
production would begin and ends.
5. Production Control - Production management also includes production control. The
manager has to monitor and control the production. He has to find out whether the
actual production is done as per plans or not. He has to compare actual production with
the plans and finds out the deviations. If there are deviations, the production manager
has to take the right steps to correct them.
6. Quality and Cost Control - Quality and Cost Control are given a lot of importance in
today's competitive world. Every company knows how essential quality control and price
are. Customers are not just looking for the best products. But they also want to have
them at the lowest possible price. To satisfy this demand of consumers, the production
manager must continuously improve the quality of his products. Along with this, he must
also take essential steps to reduce the cost of his products.
7. Inventory Control - Production management also includes inventory control. The
production manager must monitor the level of inventories. There must be neither over
stocking nor under stocking of inventories.
– If there is an overstocking, then the working capital will be blocked, and the materials
may be spoiled, wasted or misused.
– If there is an understocking, then production will not take place as per schedule, and
deliveries will be affected.
8. Maintenance and Replacement of Machines - Production management ensures proper
maintenance and replacement of machines and equipments. The production manager
must have an efficient system for continuous inspection (routine checks), cleaning, oiling,
maintenance and replacement of machines, equipments, spare parts, etc. This prevents
breakdown of machines and avoids production halts
1.3. Manufacturing Systems:
Introduction: This unit deals with different types of production and manufacturing systems.
Manufacturing systems convert a set of raw materials into a specified set of outputs. The
inputs include such elements as labor, raw materials, machines and equipment, and financial
resources. The inputs are processed to produce the marketed goods or services. Here
material flow encompasses raw materials, pieces of equipment, people, paper forms or
products. The manufacturing systems may therefore be viewed as an interdependent system
of subsystems, each related to its successor, each performing a different function though yet
united with others for achievement of the overall systems objectives. It interacts with both
internal and external environment. The internal system can be a combination of marketing,
accounts, personnel, and finance activities. Marketing and logistics has a very sensitive
interface and unless properly designed it can be a perpetual source of conflict between two
departments due to their conflicting interests. The external environment can be a
combination of customers, competitors, labor union, and stockholders.

Classification/Types of Manufacturing Systems:

Manufacturing systems can be classified into-
1. Intermittent system
a) Job production
b) Batch production
2. Continuous system
c) Mass production
d) Process production

1. Intermittent system: In this system, the goods are manufactured specially to fulfill the
orders made by customers rather than stock. Here the flow of material is intermittent.
These systems are those where the production facilities are flexible to handle a wide
variety of product and sizes. These can be used to manufacture those products where the
basic nature of input changes with the change in the design of product and the
production process requires continuous adjustments. Considerable storage between
operation is required, so where individual operations can be carried out independently
for the further utilization of men and machines.
 Examples of intermittent system are shops, hospitals, general offices etc. the following
are characteristics of Intermittent system. The intermittent manufacturing system allows
companies to make different types of goods using the same production line. Therefore,
the manufacturing facility is designed to handle different product sizes and requirements.
Generally, the goods are processed in lots to fulfill orders. This system is commonly
referred to as a ‘job shop’ due to its popularity in countries with relatively cheap labor
making products for multinationals based thousands of miles away. The goods made
using this manufacturing method are produced in small quantities, so they may not be
suitable for stock. Customization is typically done post-purchase.

This type of system is designed for production runs that happen intermittently, hence the
name, or products that don’t require high volumes. It uses general purpose machines and
requires highly skilled labor.

Characteristics of intermittent system

 Most products are produced in small quantity.
 Machines and equipment are laid out by process.
 Workloads are generally unbalanced.
 Highly skilled operators are required for efficient use of machines and equipment.
 In process inventory is large
 Flexible to suit production varieties.

Classification of Intermittent system:

a) Job production
b) Batch production

a) Job production: Job production is the production of single complete unit by one operator
or a group of operators e.g. bridge building , ship building, dam construction etc. here
whole project is considered as one operation and work is completed on each project
before passing on to the next. Each product is a class by itself and requires a distinct and
separate job for production process. The systems require versatile and highly skilled labor
with high capital investment. Control of operations is relatively high. In this system the
goods are produced on definite customer’s orders. There is no assurance of continued
demand for specific item and the manufacturing depends on receipt of orders from
customers.
b) Batch production: In the system of batch production any product is dividing into parts or
operations and that each operation is too completed throughout the whole batch before
the next operation is undertaken. In other words here after the production of on each
batch, plant and the machine become available to other batch of similar type of
production. One can employ number specialized labor for each operation with
comparatively low investment but organization and planning is more complicated in this
system. It is characterized by the irregularity in the work added to the basic material. The
best example of batch production system is of chemical industry, where different
medicines are manufactured in batches. Other examples can be production of electronic
instruments, machine tools for printing press etc. Here the production schedule can be
chalked out according to specific orders or on the basis of demand forecasts. The items
are processed in lots or batches unlike job type system new batch are undertaken only
when the work on all items of a batch is complete. In fact job type production can be
considered as an extension of job type systems.

2. Continuous system: Continuous manufacturing systems are designed to enable the mass
production of a single product. In this system the items are produced for the stocks and
not for specific orders. Before planning manufacturing to stock, a sales forecast is made
to estimate likely demand of the product and a master schedule is to prepare to adjust
the sales forecast according to past orders and level of inventory. Here the inputs are
standardized & a standard set of processes & sequence of processes can be standardized
after setting of master production schedule (MPS), a detailed planning is carried on. Basic
manufacturing information & bills of materials (BoM) are recorded. Information for
machine load chart, equipment, personnel & material needs is tabulated. The product
goes through an assembly line with different stations where parts are added or worked
on a little further. In continuous manufacturing systems, each production run in large lot
sizes & the production process is carried on in definite sequence of operations in
predetermined order. In process, storage is not necessary which in turn reduces material
handling & transportation facility. FIFO priority rules followed in the system. This method
first arose during the Industrial Revolution and is most closely associated with the Ford
Company, which employed the system to produce Model Ts in the 1920s. This type of
production system is ideal when a company has very high volume targets since it reduces
the unit cost of the product. It does, however, require a massive capital injection at
startup due to the investment in equipment and labor required.
‘Continuous system’ can be again classified into
c) Mass production
d) Process production

c) Mass production: Standardization is the fundamental characteristics of this system. Here

items are produced in large quantities and much emphasis is not given to consumer
orders. Standardization is there with respect to materials and machines. Uniform and
uninterrupted flow of material is maintained by predetermined sequence of operations
required to produce the product. The system can produce only one type of product at a
time. These days, mass production is generally used to manufacture sub-assemblies of
particular parts/components of an item. These parts are assembled together by the
enterprise to get the final product.
d) Process production: This system is analogous to mass production system with more stress
on automation in production process. The volume of production is very high. This method
is used for manufacturing those items whose demand is continuous and high e.g.
petroleum products, Medicinal brands, heavy chemical industries, plastic industries etc.
Here single raw material can be transformed into different kinds of products at different
stages of production process e.g. in processing of crude oil in refinery one gets kerosene ,
gasoline etc. at different stages of production.

Distinction between Intermittent and Continuous production:

INTERMITTENT CONTINUOUS

Capital investment may be low Capital investment is high

Per unit cost of production is high Per unit cost of production is low

Less security of jobs More security of jobs

Functional type of organization Divisional type of organization

Requires staff of high technical skill and Requires more managerial capability and
ability better coordination

Control not ‘ in line’ of production Control ‘in line’ of production

Storage is required at each operation` Storage required only at limited locations

Change in location is easy Change in location is difficult

The Product and the Process are not The Product and the Process are
standardized standardized

Accuracy is low Accuracy is high

In the world of manufacturing, there are a lot of systems to choose from, each with its ideal
use case and set of advantages and drawbacks. Having the appropriate manufacturing
system for your product can yield a variety of benefits, including the ability to maintain the
high quality of your goods, being more efficient in your production processes and saving
money across the board. The right system can also help you produce higher volumes,
thereby meeting your production volume targets. According to the book Handbook of
Design, Manufacturing, and Automation by Richard C. Dorf and Andrew Kusiak.

There are Various types of manufacturing systems Such as custom manufacturing, and
flexible manufacturing.

 Custom Manufacturing Systems: Custom manufacturing is by far the oldest and most
popular type of manufacturing system in existence. It also happens to be associated with
both the highest-quality products and the lowest-volume efficiency.
In the custom manufacturing system, each item is produced by a single craftsperson, who
works solely by hand or with the help of a machine. When machines are used, they tend
to be highly specialized to their task and cannot produce more than one item at a time.

This system will tend to have the highest unit cost for the product manufactured. As a
result, custom-manufactured products are of the highest quality but are also the most
expensive products in the market.

 Flexible Manufacturing Systems: Flexible manufacturing is a modern manufacturing

system that has become very popular. It involves a significant investment in machinery,
although it reduces labor costs by implementing robots eschewing human labor
altogether. These machines can easily be reconfigured to manufacture different products
in different quantities, and the whole process is automatic. This method is called flexible
manufacturing due to the flexibility in the variety of high-volume goods it can produce.
Due to the automated process, quality control is a lot easier, and unit costs are low.
BUSINESS OPERATIONS - Types of Manufacturing Systems
By: Nicky LaMarco; Reviewed by: Elisa Shoenberger, M.B.A., Updated November 28, 2018

End of Unit - 1