PRODUCTION & OPERATION MANAGEMENT (POM)

UNIT I: Nature and Scope of Production and Operations management, Operation

Strategy, Innovation & new product development; Types of Manufacturing
Systems; Layouts, plant location.
Production: production is the process by which raw materials and other inputs are
converted into finished products.
Nature of production can be better understood if we view the manufacturing
function from three angles, production as a system, production as an
organisational function and decision making in production.
Fundamentals of Operation Management
1. Design: This involves the initial planning and creation of processes,
systems, and resources necessary for producing goods or delivering
services. Designing operations entails defining the organization's
objectives, understanding customer needs, designing processes to meet
those needs efficiently, and establishing appropriate infrastructure and
resource allocation. Key activities include product and process design,
facility layout planning, capacity planning, and supply chain design.

2. Operate: Once the design phase is complete, the focus shifts to executing
and managing the day-to-day operations according to the established plans.
Operating involves coordinating resources, monitoring performance,
managing inventory, scheduling production, and ensuring quality control.
It's about implementing the designed processes effectively to produce
goods or services that meet customer requirements while optimizing
resources such as labour, materials, and equipment.

3. Improvement: Continuous improvement is a cornerstone of operations

management, driven by the need to adapt to changing market conditions,
technological advancements, and competitive pressures.Improvement
initiatives aim to enhance efficiency, quality, flexibility, and
responsiveness within operations. This involves identifying areas for
improvement through performance analysis, benchmarking against
industry standards, implementing best practices such as lean management
or Six Sigma, and fostering a culture of innovation and learning.
Improvement efforts can also involve process reengineering, technology
 adoption, and organizational change to drive greater effectiveness and
competitiveness.
System view of Operations: Elements

Production system receives inputs in the form of materials, personnel, capital

utilities and information. These inputs are changed into a conversion sub-system
in two desired products and services, which is called the outputs. A portion of the
output is maintained in the control subsystem to determine if it is acceptable in
terms of quantity, cost and quality. If the output is acceptable, no changes are
required in the system. If, however, the appropriate standards are not met,
managerial corrective action is required. The control sub-system ensures a
uniform level of system performance by providing feedback information so that
corrective action may be taken by managers.
System view of Operations: Elements
1. Input
2. Transformation
3. Output
4. Control [As per sir Slide]
Important Key points
1. Operation Management concentrates on effectiveness rather than
efficiency.
2. Focuses on firm’s strategic decision.
3. Analyses the present system and suggest improvement.

Operations Management in the Organisation Chart (Production as an

organisational function)
The core of a production system is its conversion sub-system, wherein workers,
materials and machines are used to convert inputs into products and services. This
process of conversion is at the heart of production function and is present in some
form in all organisations. It may be stated that every organisation, irrespective of
its purpose, has a production function where departments and personnel play a
central role in achieving the objectives of the organisation.

Core Service: Basic things that customer wants from product that theu purchase.
Example: The core service of university is education.
Value Added Service: Addition to the basic service. Eg: tuition.
Core Product: The basic product. Example – Steel

OPERATION STRATEGY
Breaking up of plan to reach the goal is operation strategy.
Strategic management may be understood as the process of formulating,
implementing and evaluating business strategies to achieve organisational
objectives. A more comprehensive definition of strategic management is "that set
of managerial decisions and actions that determines the long-term performance
of a corporation. It involves environmental scanning, strategy formulation,
strategy implementation, evaluation and control." The study of strategic
management therefore emphasises monitoring and evaluating environmental
opportunities and threats in the light of a corporation's strengths and weaknesses.
Strategic management involves five steps as shown below and as illustrated in
Exhibit 2.1.
Step 1: Select the corporate mission and major corporate goals.
Step 2: Analyse the opportunities and threats or constraints that exist in the
external environment. Also analyse the strengths and weaknesses that exist in
internal environment.
Step 3: Formulate strategies that will match the organisation's strengths and
weaknesses with the environment's threats and opportunities.
Step 4: Implement the strategies.
Step 5: Evaluate and control activities to ensure that the organisation's objectives
are achieved.
Operation Strategy is developed at three levels:
1. Corporate Level

2. Business Level

3. Functional Level
Core Competencies: Core competencies are the defining characteristics that make
a business or an individual stand out from the competition.
Operation Strategy as a Competitive Weapon
1. Product/ Process Expertise (Core Competencies): This involves
excelling in the knowledge and execution of your products and
processes. Companies can differentiate themselves by being experts in
their field, offering unique features, or delivering superior quality.
2. Quick Delivery (Quick Service): Providing fast delivery of products or
services can be a significant competitive advantage, especially in
industries where customers value speed and efficiency.
3. Shorter Product Cycle: Companies that can innovate and bring products
to market quickly can capture market share before competitors.
Shortening the product cycle involves efficient product development,
testing, and launch processes.
4. Production Flexibility: Flexibility in production allows companies to
adapt quickly to changing market demands, customize products for
specific customer needs, or adjust production volumes without
significant disruptions.
5. Low-Cost Process: Implementing cost-effective processes throughout
the value chain enables companies to offer competitive pricing while
maintaining profitability. This can involve lean manufacturing, efficient
supply chain management, or technological innovations that reduce
production costs.
6. Convenience and location: Accessibility and convenience can be
powerful competitive weapons, particularly in retail or service
industries. Being situated in prime locations or offering convenient
delivery options can attract and retain customers.
7. Product Variety and Facility Size: Offering a wide range of products or
services tailored to different customer preferences can attract a diverse
customer base. Additionally, having facilities of appropriate size and
capacity ensures efficient operations and scalability.
8. Quality: Maintaining high-quality standards in products or services
builds customer trust and loyalty. Consistently delivering superior
quality can be a significant competitive advantage, leading to positive
brand perception and customer satisfaction.
ELEMENTS OF OPERATION STRATEGY
1. Design the Production System
a) Product Design:
-Customize Product Design: This involves tailoring products to meet specific
customer requirements or preferences. Customization allows companies to offer
unique solutions and cater to niche markets.
-Standard Product Design (Mass Production/Bulk Production): Standard product
design refers to the creation of products with uniform specifications that can be
produced in large quantities efficiently. Mass production or bulk production
methods are often employed to manufacture standardized products cost-
effectively.
b) Production system
-Product-Focused System: In a product-focused production system,
manufacturing processes are organized around specific product lines or types.
This allows for specialized equipment, dedicated workforce, and optimized
workflows for each product.
-Process-Focused System: In contrast, a process-focused production system
organizes manufacturing processes based on similar production methods or
equipment requirements. This approach facilitates flexibility and efficiency by
allowing different products to be produced using the same equipment and
resources.
c) Finished Goods Inventory Policy
-Product-to-Stock Policy: With a product-to-stock inventory policy, companies
produce goods based on forecasted demand and stockpile inventory to fulfill
orders promptly. This approach ensures product availability and reduces lead
times, although it may lead to excess inventory and carrying costs if demand
forecasts are inaccurate.