PRODUCTION AND OPERATIONS

MANAGEMENT
LECTURE ONE
INTRODUCTION
• Production and operations management concerns itself
with the conversion of inputs into outputs, using physical
resources, so as to provide the desired utility/utilities—of
form, place, possession or state or a combination thereof—
to the customer while meeting the other organizational
objectives of effectiveness, efficiency and adaptability.
• Often, production and operations management systems are
described as providing physical goods or services
INTRODUCTION CONT.
• The essential features of a production and operation
function is to bring together people, machines & materials to
provide goods and services for satisfying customer needs.

• These needs of the target audience is what drives most of

the manufacturing companies to produce quality products
and services.
INTRODUCTION CONT.
• The set of interrelated management activities, which are
involved in manufacturing certain products, is called
production management.
• If the same concept is extended to services management,
then the corresponding set of management activities is
called as operations management.
BACKGROUND OF OPERATIONS AND
PRODUCTIONS MANAGEMENT
• Operations Management (OM) is a function that enables
organizations to achieve their goals through efficient
acquisition and utilization of resources.
• In earlier decades, the term ‘‘Operations Management’’
referred primarily to manufacturing production.
• However, over the period of time it has expanded to include
service systems as well, since operations permeate every
functional area of the organization ranging from marketing,
accounting, purchasing/logistics, information management
to engineering and human resources.
BACKGROUNDA CONT.
• The functions of OM first came into being during the period
of 1890-1920 with the works of Frederick W. Taylor, Frank
and Lillian Gilbrethand Henry L. Gantt.
• This era was later defined as ‘‘scientific management’’.
However, notwithstanding the great depression in 1930s, in
many ways the period from 1920 to 1960 can be considered
as the golden age for the development of industry.
• During this era, the main focus of OM was on the labor
productivity improvements where time and motion studies,
layout, production control, queuing theory were among the
popular techniques to improve labor productivity.
BACKGROUND CONT.
• The period of the 1980s was recognized as an era where OM
has been widely accepted as one of the functional fields of
an organization.
• Increasing competition spurred by the success of Japanese
products in the global markets led OM to focus heavily on
✓improving manufacturing strategies
✓service operations
✓new product development and
✓developing better performance metrics to produce for less.
CONCEPT OF PRODUCTION
• Production is defined as “the step-by-step conversion of one
form of material into another form through chemical or
mechanical process to create or enhance the utility of the
product to the user.”
• Thus production is a value addition process
• Productivity is the ratio between the amount produced and
the amount of resources used in the course of production.
• The resources may be any combination of materials,
machines, men and space.
SCHEMATIC PRODUCTION SYSTEM
INPUT:
• Men, Materials, Machines, Capital, Information

TRANSFORMATION PROCESS:
• Product Design, Process Planning, Production Control,
Maintenance

OUTPUT:
• Products, Services
PRODUCTION CHARACTERISTICS
1. Production is an organized activity, so every production
system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization
system.
4. There exists a feedback about the activities, which is
essential to control and improve system performance.
5. Machinery is laid as per the sequence of production.
6. Procedures, tools and materials handling need proper
attention.
IMPORTANCE OF PRODUCTIVITY
• It helps to cut down cost per unit and thereby improve the
profits.
• Gains from productivity can be transferred to the consumers in
form of lower priced Products or better quality products.
• These gains can also be shared with workers or employees by
paying them at higher rate.
• A more productive entrepreneur can have better chances to
exploit expert opportunities.
• It would generate more employment opportunity.
• Improved competitiveness
WE HAVE FOUR MAIN PRODUCTION SYSTEMS
• Job Shop Production
• Batch Production
• Mass Production 4
• Continuous Production
JOB SHOP PRODUCTION

SHOE
FACTORY
JOB SHOP PRODUCTION
• Job shop production are characterized by manufacturing of
one or few quantity of products designed and produced as
per the specification of customers within prefixed time and
cost.
• A job shop comprises of general purpose machines arranged
into different sections. Each job demands unique
technological requirements, demands processing on
machines in a certain sequence.
CHARACTERISTICS OF JOB SHOP
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a
challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for the requirements of each
product, capacities for each work center and order
priorities.
ADVANTAGES OF JOB SHOP
1. As a result of general purpose machines and facilities
variety of products can be produced.
2. Operators will become more skilled and competent, as
each job gives them learning opportunities.
3. Full potential of operators can be utilized.
4. Opportunity exists for creative methods and innovative
ideas.
5. Easily adaptable to change
6. Very flexible
DISADVANTAGES OF JOB SHOP
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher
inventory cost.
3. Production planning is complicated.
4. Larger space requirements
5. Material handling costs
Batch Production

CANNED
FOOD
BATCH PRODUCTION
“As a form of manufacturing in which the job passes through
the functional departments in lots or batches and each lot
may have a different routing.”

This basically means that the raw materials move through the
production line in batches, so that there is a pause between
each step as a batch moves through.
CHARACTERISTICS
Batch production system is used under the following
circumstances:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is used for the
production of item in a batch and change of set up is
required for processing the next batch.
4. When manufacturing lead time and cost are lower as
compared to job order production.
ADVANTAGES OF BATCH PRODUCTION
Following are the advantages of batch production:
1. Better utilization of plant and machinery.
2. Promotes functional specialization.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of
products.
6. Job satisfaction exists for operators.
DISADVANTAGES OF BATCH PRODUCTION
Following are the limitations of batch production:
1. Material handling is complex because of irregular and
longer flows.
2. Production planning and control is complex.
3. Work in process inventory is higher compared to
continuous production.
4. Higher set up costs due to frequent changes in set up.
MASS PRODUCTION

COCACOLA
DRINK
MASS PRODUCTION
• Manufacture of discrete parts or assemblies using a
continuous process are called mass production.

• This production system is justified by very large volume of

production. The machines are arranged in a line or product
layout. Product and process standardization exists and all
outputs follow the same path.
CHARACTERISTICS
Mass production is used under the following circumstances:
1. Standardization of product and process sequence.
2. Large volume of products.
3. Shorter cycle time of production.
4. Lower in process inventory.
5. Perfectly balanced production lines.
ADVANTAGES MASS PRODUCTION
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilization due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.
DISADVANTAGES MASS PRODUCTION
Following are the limitations of mass production:
1. Breakdown of one machine will stop an entire production
line.
2. Line layout needs major change with the changes in the
product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.
CONTINUOUS PRODUCTION
• Production facilities are arranged as per the sequence of production
operations from the first operations to the finished product.

• The items are made to flow through the sequence of operations

through material handling devices such as conveyors, transfer
devices, etc.
CHARACTERISTICS
Continuous production is used under the following
circumstances:
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final
product.
5. Planning and scheduling is a routine action.
ADVANTAGES OF CONTINUOUS PRODUCTION
Following are the advantages of continuous production:
1. Standardization of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Manpower is not required for material handling as it is
completely automatic.
4. Person with limited skills can be used on the production
line.
DISADVANTAGES OF
CONTINUOUS PRODUCTION
Following are the limitations of continuous production:
1. Flexibility to accommodate and process number of
products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.
THANK YOU
 PRODUCTION AND
OPERATIONS MANAGEMENT
LECTURE TWO
FRAMEWORK FOR MANAGING OPERATIONS

CLASSICAL
3 BEHAVIORAL
MODELING
CLASSICAL MANAGEMENT
• Classical approach of management holds the view that
employees have only economical and physical needs and
that , social needs and need for job satisfaction does not
exist or unimportant.
• It also advocates high specialization of labour, centralized
decision making and profit maximization.
• It mainly strive to increase efficiency of workers and this
approach has been the oldest formal school of thought
which begun around the 1900’s.
CLASSICAL
APPROACH
CLASSICAL MANAGEMENT
• The school of process management views management as a
continuous process of

planning,

Organizing and

controlling.
PLANNING
• The operations manager defines
the objectives for the operations
subsystem of the organization and
the policies, and procedures for
achieving the objectives.

• This stage includes clarifying the

role and focus of operations in the
organization’s overall strategy.
ORGANIZING
• Operation managers establish a
structure of roles and the flow of
information within the
operations subsystem.
• They determine the activities
required to achieve the goals and
assign authority and
responsibility for carrying them
out.
CONTROLLING
• To ensure that the plans for the operations subsystems are
accomplished, the operations manager must exercise control by
measuring actual outputs and comparing them to planned operations
management.

• Controlling costs, quality, and schedules are the important functions

here.
BEHAVIORAL MANAGEMENT
• Behavioral management approach relies on the notion that
managers will better understand the human aspect to
workers and treat employees as important assets to achieve
goals.
• Management taking a special interest in workers makes them
feel like part of a special group.
• Human relations phenomenon recognized by behavioral
scientists that people are complex and have needs and that
the subordinate-supervisor relationship directly affect
productivity.
GOOD
EMPLOYEE
RELATIONS
MODELING MANAGEMENT
• Modeling management is concerned with decision making
and systems theory and mathematical modeling of these
theories.
• The decision making orientation considers making decisions
to be the central purpose of management.
• System theory stresses the importance of studying
organizations from a “total system” point of view.
• According to this, identifying subsystem relationships,
predicting effects of changes in the system, properly
implementing system change are all part of managing the
total organization.
WHAT IS THE BEST APPROACH?
OBJECTIVES OF PRODUCTION MANAGEMENT
• The objective of the production management is ‘to produce
goods/services of right quality and quantity at the right time
and right manufacturing cost’.
RIGHT QUALITY
• The quality of product is established based upon the
customers needs.
• The right quality is not necessarily best quality.
• It is determined by the cost of the product and the technical
characteristics as suited to the specific requirements
RIGHT QUANTITY
• The manufacturing organization should produce the
products in right number.
• If they are produced in excess of demand the capital will
block up in the form of inventory and if the quantity is
produced in short of demand, leads to shortage of products.
RIGHT TIME
• Timeliness of delivery is one of the important parameter to
judge the effectiveness of production department.
• So, the production department has to make the optimal
utilization of input resources to achieve its objective.
RIGHT MANUFACTURING COST
• Manufacturing costs are established before the product is
actually manufactured.
• Hence, all attempts should be made to produce the products
at pre-established cost, so as to reduce the variation
between actual and the standard (pre-established) cost.
• When the manufacturing cost is low, the product becomes
very competitive in the market.
PRODUCTIVITY
• Productivity is a relationship between the output
(product/service) and input (resources consumed in
providing them) of a business system.

• Productivity = output/Input

Labor productivity Index/

Measure = Output in unit
Man hours worked
PRODUCTIVITY CONT.
Management productivity Index/ Land productivity Index/
Measure = Output Measure = Total output
Area of Land used
Total cost of management
Partial Measure = Output
Machine productivity Index/ Labour
Measure = Total output
Machine hours worked
Competitiveness, Strategy,
Productivity
Competitiveness
• How effectively an organization meets the wants and
needs of customers relative to others that offer
similar goods or services.
Businesses Compete Using Operations
1. Product design
2. Cost
3. Location
4. Quality
5. Quick response
6. Inventory management
7. Supply chain management
8. Service
9. Managers and workers
What functions can affect competitiveness?
• Marketing:
• Identifying consumer wants/needs
• Pricing
• Advertising and promotions
• Operations
• Product and service design
• Cost
• Location
• Quality
• Quick response
OPERATIONS STRATEGY
• Operations strategy – The approach, consistent with
organization strategy, that is used to guide the operations
function.
DEVELOPING OPERATIONS STRATEGY

Corporate Mission
Assessment Distinctive
of Global Competencies
Business Business Strategy or
Conditions Weaknesses
Product/Service Plans

Competitive Priorities

Operations Strategy
TO BE CONTINUED…
Developing Operations
Strategy
LECTURE THREE
Developing Operations Strategy

Corporate Mission
Assessment Distinctive
of Global Competencies
Business Business Strategy or
Conditions Weaknesses
Product/Service Plans

Competitive Priorities

Operations Strategy
Corporate Mission
• A company's mission constitutes the future picture of how
you want the company to develop.
• The mission is the management's view of what the company
wants to achieve in the future.
• Sometimes it is developed with the entire organization
participating in order to establish it.
• The purpose of the mission is to motivate and involve all
employees and managers, while setting out a framework for
the formation of goals and strategies.
Mission Strategy Tactics

ARE THEY THE SAME ?

Differences between:
•Mission
The reason for existence for an organization
•Mission Statement
Answers the question “What business are we in?”
•Strategies
Plans for achieving organizational goals
•Goals
Provide detail and scope of mission
•Tactics
The methods and actions taken to accomplish strategies
Business Strategy
• A business strategy is the combination of all the decisions
taken and actions performed by the business to accomplish
business goals and to secure a competitive position in the
market.
• It is the backbone of the business as it is the roadmap which
leads to the desired goals.
• Any fault in this roadmap can result in the business getting
lost in the crowd of overwhelming competitors.
Elements of Operations Strategy
• Positioning the production system
• Product/service plans
• Outsourcing plans
• Process and technology plans
• Strategic allocation of resources
• Facility plans: capacity, location, and layout
Strategy and Core competences
• Core competences (strengthes) are the natural basis for
choosing a strategy
• Price
• Quality
• Time
• Flexibility
• Service
• Location
Distinctive competencies
• Environmental scanning
• SWOT
• Order qualifiers (customer requirements)
Key External Factors
• Economic conditions
• Political conditions
• Legal environment
• Technology
• Competition (competitors, the basis of competition, ease of
entry)
• Markets
Key Internal Factors
• Human resources
• Facilities and equipment
• Customers (loyalty, understanding)
• Products and services (existing & potential)
• Technology
• Suppliers
• Other (patents, labor relations etc.)
SWOT ANALYSIS

SWOT ANALYSIS
HELPS TO
DIAGNOSE THE
PROBLEMS FOR
EFFECTIVE
STRATEGY
Factors Affecting Productivity
• Labour
• Capital
• Technology
• Quality of production
• Management/Supervision
• Supply of raw materials
• Knowledge and skills
• Demand of the product
• Competition
LECTURE FOUR
SCOPE OF PRODUCTION AND
OPERATIONS MANAGEMENT
Production & operations management
functions
• Location of facilities
• Plant layouts
• material handling
• Product design
• Process design
• Production and planning control
Location of Facilities
• There are many factors that can determine where an
organization will locate its facilities.
• For any given situation, some factors become more
important than others in how facility location affects an
organization’s performance.
• For example, when a company needs to open a new
manufacturing facility, there are several factors that
determine which location reduces the company’s operating
costs while providing a great level of responsiveness to the
market.
Location of Facilities
• The selection of location is a key-decision as large investment
is made in building plant and machinery.
• It is not advisable or not possible to change the location very
often.
• So an improper location of plant may lead to waste of all the
investments made in building and machinery, equipment.
Location of Facilities

• Before a location for a plant is selected, long range

forecasts should be made anticipating future needs of
the company.
Key Factors in Facility Location
CONTROLLABLE FACTORS
1. Proximity to markets
2. Proximity to sources of supply
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
Key Factors in Facility Location
UNCONTROLLABLE FACTORS
1. Government policy
2. Climate conditions
3. Supporting industries and services
4. Community and labour attitudes
5. Community Infrastructure
PLANT LAYOUT
Plant Layout
• Plant layout refers to the physical arrangement of facilities.
• It signifies the arrangement of machines, work areas,
material handling equipment’s, transport, and storing of
different materials, products, tools and fixtures etc.
• Proper plant layout is one of the keys of success in factory
management.
• The layouts for the same product may be numerous, but
which costs less in the long run is the best.
Plant Layout
• Layout should be such that, it can be changed without much
difficulty due to expansion, diversification, change in product
design or change in technology.
• A good layout minimizes the handling time and efforts, saves
the floor space, shortens the travel of materials, increases
production and reduces cost by utilizing labour more
efficiently.
• If the layout is setup any how, the products will not be
economical and cost may be very high resulting in losses.
Factors to be Considered for Plant Layout
• Location of Departments
• Type of Product, method of production, production
process
• Production capacity
• Material flow pattern
• Space requirement for machines, work area, storage etc.
• Safety factors
• Provision for future expansion etc.