Production and Operations Management Unit:I

• Production/operations management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. • Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level. • The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management.

• • Production function is that part of an organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level. 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. At each stage of processing, there will be value addition Edwood Buffa defines production as ‘a process by which goods and services are created’. Some examples of production are: manufacturing custom-made products like, boilers with a specific capacity, constructing flats, some structural fabrication works for selected customers, etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.

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The production system of an organization is that part, which produces products of an organization. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. A simplified production system is shown below.

The production system has the following 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

TYPES OF PRODUCTION SYSTEM • Job Production System • Batch Production System • Mass Production System • Continuous Production System .

Large inventory of materials. 2. furniture company etc Characteristics The Job-shop production system is followed when there is: 1. 4. capacities for each work centre and order priorities. machine shop. Highly skilled operators who can take up each job as a challenge because of uniqueness. .JOB SHOP PRODUCTION • Job shop production are characterised 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 departments. demands processing on machines in a certain sequence. High variety of products and low volume. • Each job demands unique technological requirements. • The distinguishing feature of this is low volume and high variety of products. tools. 5. parts. Use of general purpose machines and facilities. 3. • Example: auto repair. Detailed planning is essential for sequencing the requirements of each product.

2. When there is shorter production runs. When manufacturing lead time and cost are lower as compared to job order production. 3.” It is characterised by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales. When plant and machinery are flexible. • Example : Pharmaceutical company Characteristics Batch production system is used under the following circumstances: 1. 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.BATCH PRODUCTION • Batch production is defined by American Production and Inventory Control Society (APICS) “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. . 4.

Product and process standardisation exists and all outputs follow the same path. components and parts is continuous and without any back tracking. 2. 3. Production planning and control is easy. 6. Dedicated special purpose machines having higher production capacities and output rates. Perfectly balanced production lines. This production system is justified by very large volume of production. Standardisation of product and process sequence. Characteristics Mass production is used under the following circumstances: 1. Lower in process inventory. 9. The machines are arranged in a line or product layout. Material handling can be completely automatic . Shorter cycle time of production. 4. 7. TV factory . • Example: auto factory . 8. Flow of materials. Large volume of products.MASS PRODUCTION • • Manufacture of discrete parts or assemblies using a continuous process are called mass production. 5.

Dedicated plant and equipment with zero flexibility. 3. The items are made to flow through the sequence of operations through material handling devices such as conveyors. 4. transfer devices. Component materials cannot be readily identified with final product. 5. . Material handling is fully automated. • Example: oil refinery . Planning and scheduling is a routine action. etc. Process follows a predetermined sequence of operations. textile mill Characteristics Continuous production is used under the following circumstances: 1.CONTINUOUS PRODUCTION • Production facilities are arranged as per the sequence of production operations from the first operations to the finished product.Chemical plant. 2.


directing and controlling the activities of the production function.PRODUCTION MANAGEMENT • Production management is a process of planning. organizing. • E.S.” . Buffa defines production management as. “Production management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications. in the amount and by the schedule demanded and out of minimum cost. • It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization.

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. RIGHT QUALITY The quality of product is established based upon the customers needs. 2. all attempts should be made to produce the products at pre-established cost. RIGHT QUANTITY The manufacturing organization should produce the products in right number. Hence. 4. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. 1. RIGHT TIME Timeliness of delivery is one of the important parameter to judge the effectiveness of production department. the production department has to make the optimal utilization of input resources to achieve its objective. so as to reduce the variation between actual and the standard (pre-established) cost. leads to shortage of products. 3. RIGHT MANUFACTURING COST Manufacturing costs are established before the product is actually manufactured. The right quality is not necessarily best quality.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’. . So.

” . Ebert define operating system as.” • Ray Wild defines operating system as. It converts physical resources into outputs. • In some of the organization the product is a physical good (hotels) while in others it is a service (hospitals). Bus and taxi services. “An operating system ( function) of an organization is the part of an organization that produces the organization’s physical goods and services. • Everett E. “An operating system is a configuration of resources combined for the provision of goods or services. to provide some utility for the customer. Adam & Ronald J.e..OPERATING SYSTEM • Operating system converts inputs in order to provide outputs which are required by a customer. tailors. the function of which is to satisfy customer wants i. hospital and builders are the examples of an operating system.

Controlling costs. and the policies. They also want to know how the behaviour of subordinates can affect management’s planning. Their interest lies in decision-making behaviour. This stage includes clarifying the role and focus of operations in the organization’s overall strategy. • • • . and control affect human behaviour. organizing. Operation managers establish a structure of roles and the flow of information within the operations subsystem. quality. The operations manager defines the objectives for the operations subsystem of the organization. and schedules are the important functions here. CONTROLLING : Activities that assure the actual performance in accordance with planned performance. ORGANIZING : Activities that establishes a structure of tasks and authority. the operations manager must exercise control by measuring actual outputs and comparing them to planned operations management. and procedures for achieving the objectives. To ensure that the plans for the operations subsystems are accomplished. and controlling actions. BEHAVIOUR : Operation managers are concerned with how their efforts to plan. organize. facility designing and using the conversion process. They determine the activities required to achieve the goals and assign authority and responsibility for carrying them out.Framework for Managing Operations • PLANNING : Activities that establishes a course of action and guide future decision-making is planning. It also involves product planning.

. Quality control 7. Process design 5. so as to provide the desired utilities to the customer while meeting the other organizational objectives of effectiveness and efficiency. finance. marketing. Materials management 8.’ Following are the activities which are listed under production and operations management functions: 1. Location of facilities 2. etc. Production and planning control 6. Product design 4. It distinguishes itself from other functions such as personnel. by its primary concern for ‘conversion by using physical resources.SCOPE OF PRODUCTION AND OPERATIONS MANAGEMENT • • Production and operations management concern with the conversion of inputs into outputs. . Plant layouts and material handling 3. using physical resources. Maintenance management.


It deals with the questions such as ‘where our main operations should be based?’ The selection of location is a key-decision as large investment is made in building plant and machinery.LOCATION OF FACILITIES • Location of facilities for operations is a long-term capacity decision which involves a long term commitment about the geographically static factors that affect a business organization. An improper location of plant may lead to waste of all the investments made in plant and machinery equipments. diversification plan for the products. • • • . Hence. The purpose of the location study is to find the optimal location that will results in the greatest advantage to the organization. It is an important strategic level decision-making for an organization. location of plant should be based on the company’s expansion plan and policy. changing sources of raw materials and many other factors.

‘Material Handling’ refers to the ‘moving of materials from the store room to the machine and from one machine to the next during the process of manufacture’. Material handling devices increases the output. packing and storing of products in any form’. It is the configuration of departments. material handling equipments and all other supporting services along with the design of best structure to contain all these facilities”.PLANT LAYOUT AND MATERIAL HANDLING • • • Plant layout refers to the physical arrangement of facilities. It is also defined as the‘art and science of moving. storage space. It is a specialized activity for a modern manufacturing centres and equipment in the conversion process. This cost can be reduced by proper selection. speeds up the deliveries and decreases the cost of production. operating equipment. According to James Moore. improves quality. material handling is a prime consideration in designing new plant and several existing plants • • • • • . operation and maintenance of material handling devices. “Plant layout is a plan of an optimum arrangement of facilities including personnel. with 50 to 75% of the cost of production. Hence. The overall objective of the plant layout is to design a physical arrangement that meets the required output quality and quantity most economically.

• Every business organization have to design. • Product design and development provides link between marketing. • Product development translates the needs of customers given by marketing into technical specifications and designing the various features into the product to these specifications. Developing the new products and launching them in the market is the biggest challenge faced by the organizations. develop and introduce new products as a survival and growth strategy. customer needs and expectations and the activities required to manufacture the product. product development.PRODUCT DESIGN • Product design deals with conversion of ideas into reality. . • The entire process of need identification to physical manufactures of product involves three functions: marketing. • Manufacturing has the responsibility of selecting the processes by which the product can be manufactured. manufacturing.

• These decisions encompass the selection of a process. choice of technology. process flow analysis and layout of the facilities. . • Hence.PROCESS DESIGN • Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. the important decisions in process design are to analyse the workflow for converting raw material into finished product and to select the workstation for each included in the workflow.

to give production orders to shops and to follow up the progress of products according to orders. • setting the exact route of each item. • The principle of production planning and control lies in the statement ‘First Plan Your Work and then Work on Your Plan’. scheduling. routing. dispatching and follow-up. . fixing the starting and finishing dates for each item. • Main functions of production planning and control includes planning.PRODUCTION PLANNING AND CONTROL • Production planning and control can be defined as the process of planning the production in advance.

The function of follow-up is to report daily the progress of work in each shop in a prescribed proforma and to investigate the causes of deviations from the planned performance. how to do it. which has already been planned under ‘Routing’ and ‘Scheduling’. Routing may be defined as the selection of path which each part of the product will follow. Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape. It makes it possible for things to occur which would not otherwise happen. to where we want to go. • • • . which being transformed from raw material to finished products.PRODUCTION PLANNING AND CONTROL • • Planning is deciding in advance what to do. Therefore. when to do it and who is to do it. dispatching is ‘release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts’. Dispatching is concerned with the starting the processes. Planning bridges the gap from where we are. Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it determines the sequence of operations to be followed. Scheduling determines the programme for the operations. It gives necessary authority so as to start a particular work.

To reduce companies cost through reduction of losses due to defects. Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of quality in a product or service’. To ensure satisfaction of customers with productions or services of high quality level. maintainability. etc. To make inspection prompt to ensure quality control. relies on effective feed back system and corrective action procedure. to build customer goodwill. The main objectives of quality control are: To improve the companies income by making the production more acceptable to the customers i. greater usefulness. confidence and reputation of manufacturer. Quality control aims at prevention of defects at the source. It is the entire collection of activities which ensures that the operation will produce the optimum quality products at minimum cost. To produce optimal quality at reduced price. 2. 7. To check the variation during manufacturing .e. 6.QUALITY CONTROL • • • • 1.. To achieve interchangeability of manufacture in large scale production. by providing long life. 3. Quality control can also be defined as ‘that industrial management technique by means of which product of uniform acceptable quality is manufactured’. 4. 5.

5. etc. transport and store materials efficiently and to reduce the related cost. To cut down costs through simplification. 2. value analysis.MATERIALS MANAGEMENT • Materials management is that aspect of management function which is primarily concerned with the acquisition. standardization. To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios. 4. The main objectives of materials management are: 1. To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply at reasonable rates. receive. To purchase. control and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view. . 3. import substitution. To minimize material cost.

Therefore. equipment and machinery are a very important part of the total productive effort. 3. buildings and services required by other sections of the factory for the performance of their functions at optimal return on investment. . The main objectives of maintenance management are: 1. To ensure the availability of the machines. Hence.MAINTENANCE MANAGEMENT • In modern industry. their idleness or downtime becomes very expensive. 2. it is very important that the plant machinery should be properly maintained. To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost. To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption.


. It must decide where that facility should be located.FACILITY LOCATION Once a firm has decided to open a new facility or relocate an existing facility.

to remove the drawbacks of the present location or to gain the benefits of a still better location. .Need for selecting a suitable site or location • While starting a new factory • During the expansion of the existing plant • When the existing plant is to be relocated at some other place.

How to solve the problem of location The problem of site selection of a factory can be solved in the following three stages: • Selection of the region • Selection of the locality • Selection of Actual Site .

Factors affecting size of the firm • • • • • • • Availability of capital Entrepreneurial Ability & Efficiency Risk of Uncertainties Type of Organization Availability of Inputs Nature of Product Government Regulation or Licensing Policy of Government .

FACILITY LOCATION • Facility location problem involves the evaluation of various sites for a new facility. • There are various factors that influence the Facility Location Decision and they can be divided into the main two categories: Primary Factors Secondary Factors .

Primary Factors • • • • • • Supply of Raw Material Nearness to Market Transport Facilities Labour supply Availability of Power Supply of Capital .

Secondary Factors • • • • • • • Facilities Natural Factors Political Factors Government Subsidies & Facilities Historical & Religious Factors Initial Start & Goodwill Personal Factors .

FACILITY LOCATION • There are many analytical techniques that can be used in facility location decision. . • Some of these are: 1) Factor Rating 2) Cost-Profit-Volume analysis 3) Transportation Method 4) Simulation Models.

first we must identify the Most Important Factors in evaluating alternative sites for the new facility. • Then we should assign a weight between 0 and 100 to each of these factors.Method of Factor Rating • In factor rating method. .

.Method of Factor Rating Each alternative location will then be rated based on these factor weights. The most weighted alternative is selected as the best alternative.

the Managers have Narrowed the list of Important Selection Criteria down into three major Factors. is considering three alternative sites for its new facility. and . . .Example • Samson Ltd.Proximity to the firm’s markets.Availability of skilled labor .Availability of Raw materials. • After evaluating the firm’s Needs.

Example • Weights reflecting the relative importance of each factor have been assigned as follows: .

the three Alternative sites were scored between 0 and 100 points: .Example • Based on these criteria.

Example • Now we will multiply each score by its corresponding factor weight: • Weighted scores are calculated as: (Site Score)x(Factor Weight) .

It appears to be the best location.Example • From these results. . the largest total weight is for Site A.

Raw Materials: 0. Lets use the following factor weights: • Skilled labor: 0. and Market: 0.40.45.Example • What happens if we change the factor weights.15 • Then the following results are obtained: .

Example .

• Therefore.Example • In this case. factor rating method is very sensitive to the weights assigned to each factor. Site C appears to be the best choice with largest weight score. .

the managers should be very careful in selecting these items and numbers. and assigned scores are all determined subjectively. selected factors.Example • Since factor weights. .

.Cost-Profit-Volume Analysis When the fixed and variable costs for each site differ. Cost-profitvolume analysis can be used to identify the location with the lowest cost.

is considering three alternative sites for its new production facility.Example • Foster Paper Ltd. That is: . • The Annual Production Cost associated with each alternative is a linear function of the production volume.

• And further assume that: • (x: production volume = 250.000 units.000) .Example Total Production Cost = (Fixed Cost) + (variable unit cost) x (annual production volume) • Assume that The expected annual production volume is 250.

000. Which site has the lowest cost? .000.000.Example For Site A: Prod. Cost = 60.000 + 50 x • Based on these information.000 + 150 x For Site C: Prod.000 + 250 x For Site B: Prod. Cost = 10. Cost = 25.

Example • At a production volume of 250.000 + 150 (250.000. Cost = 10.000 + 250 (250.000) = 72.000 + 50 (250.000. Cost = 60. because • For Site A: Prod. Cost = 25.500.000) = 62.000) = 72. site B has the lowest cost.000.000 units.500.000 .500.000 • For Site B: Prod.000 • For Site C: Prod.

Transportation Model A special form of linear programming. . can be used to compare the total transportation cost associated with each alternative site. that is Transportation Model.

Transportation Model • The transportation model technique can be used to determine how many units should be shipped from each plant to each warehouse To Minimize Total Transportation Cost. .

Simulation Models Firms often Consider many variables and Factors when they choose a facility location. .

In these kinds of Dynamic Situations. Simulation may be the best modeling technique. .Simulation Models These variables are often difficult to estimate and they also change in time.

Simulation Models Simulation models allow managers to examine a range of Scenarios AND are well suited to open-ended problems. However. . Also. the determination of the parameters in a simulation is also a challenging task. developing a simulation model may take considerable time and effort.

Recent Trends in the Location of Industries • Priority for the suburban Areas • Industrial development in the notified backwards areas • Establishment of industrial estate • Decentralization of industries • Increased role of the Government in the decision of location of industries • Competition between Government & institutions .


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