Introduction to

Production &
Operations
Management
 Production

Production is the creation of goods

Operations Management
(O.M.)
O.M. is the set of activities that create value
in the form of goods and services by
transforming inputs into outputs.
Operations Management
Definition
An operations system is defined as one in which
 several activities are performed
 to transform a set of inputs into useful output
 using a transformation process.

Operations Management is
 a systematic approach to
 address all the issues pertaining to
 the transformation process that converts some inputs
into output that are useful, and
 could fetch revenue to the operations system
 Production

Production is the creation of goods

Operations Management
(O.M.)
O.M. is the set of activities that create value
in the form of goods and services by
transforming inputs into outputs.
 Operations Management

The management of systems or processes

that create goods and/or provide services
 Organizational
Functions

Marketing
 Gets customers
•Operations
•creates product or service

•Finance/Accounting
•Obtains funds
•Tracks money

© 1995 Corel Corp.

 Why study OM?

OM is one of three major functions

(marketing, finance, and operations) of any
organization.

We want (and need) to know how goods and

services are produced.

We want to understand what operations

managers do.
 Why study OM?.. Contd
A business education is incomplete
without an understanding of modern
approaches to managing operations.

OM provides a systematic way of looking

at organizational process.
Value Addition - Concept
 Production system
A production system uses operation resources to
transform inputs into desired outputs
Operation resources- 5 P’s

OPERATIONS MANAGEMENT

People Plants Parts Process

Inputs Outputs
Planning and controlling system

PRODUCTION SYSTEM
Manufacturing or Service?

Tangible Act
Goods V/s Services Characteristics
G OODS SERV I C E S

Tangible Intangible
Inconsistent product definition
Consistent product
definition Produced & consumed at
same time.
Production usually
Cant be inventoried
separate from
High customer interaction
consumption
O ften unique
Can be inventoried
Low customer interaction
 Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
100% 75 50 25 0 25 50 75 100%
| | | | | | | | |

Percent of Product that is a Good Percent of Product that is a Service

 Responsibilities of Operations
Manager
Planning Organizing
– C apacity
– Location – P rocess selection
– P roducts & services Staffing
– Make or buy – Hiring/laying off
– Layout
Directing
– Scheduling
– Job assignments
Controlling/Improving
– Inventory
– Quality
– C osts
 Key Decisions of
Operations Managers
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
 New Challenges in OM
From To
• Local or national • Global focus
• Just-in-time
focus
• Large shipments

• Lengthy product • Rapid product

development development.
• Standard products • Mass customization
• Job specialization • Empowered
• Low cost employees, teams
• Environmental
sensitive
 Past Causes Future
Local or Low-cost, reliable worldwide Global Focus
national communication and
focus transportation networks
Batch (large)
Cost of capital puts pressure on
J ust-in-time
shipments reducing investment in shipments
inventory
Low-bid Quality emphasis requires thatSupply -chain
purchasing suppliers be engaged in productpartners
improvement
Lengthy Shorter life cycles, rapid Rapid product
product international communication, development,
development computer-aided design, and alliances,
international collabora
tion collaborative
designs
 Past Causes Future
Standardized Affluence and worldwide markets; Mass
products increasingly flexible production customization
processes
J ob Changing sociocultural milieu. Empow ered
specialization Increasingly a knowledge and employees,
information society. teams, and lean
production
Low cost Environmental issues, ISO 14000, Environmentally
focus increasing disposal costs sensitive
production,
Green
manufacturing,
recycled
materials,
remanufacturing
Decision Making in OM
Strategic Decisions
Tactical Decisions
Operational Decisions
 Strategic Decisions
Long-term significance for the organization.
Become the fixed conditions or operating
constraints for intermediate or short term
decisions.

Examples include deciding-

 How will we make the product?

 Where to locate a new factory?

 How much capacity do we need?

 Tactical Decisions
These decisions are necessary if the ongoing
production of goods and services is to satisfy
market demands and provide profits.

Examples include deciding:

 How many workers do we need?
 when do we need them ?
 how much finished-goods inventory to carry
The tactical decisions, in turn, become the operating
constrains under which operational planning and
control decisions are made.
Operational Decisions
These decisions concern the day-to-day activities
of workers, quality of products and services,
production and overhead costs, and machine
maintenance.

Examples include deciding:

 What jobs do we work on today or this week?
 Whom do we assign to what task?
 What jobs have priority?
 Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Refrigerator manufacturing
Inputs Processing Outputs
Raw material Assemble Refrigerators with
Machines Polishing -good cooling
Tools Fabrication -less consumption
Labor of electricity
Capital - genuine prices

Office -new advanced

features
 MBA Institute
Inputs Processing output
Raw minds lectures -decision
Faculty presentations making
Classrooms assignments -improved
Library case studies communication
Lab role plays good analytical
Projector,LCD ability.
Furniture computer skills
stationary
 Functions -
Manufacturer
Manufacturing

Finance/
Marketing Operations
Accounting

Manufacturing Production
Purchasing Quality
Control Control
 Functions-Bank

Commercial Bank
© 1984-1994
T/Maker Co.

Finance/
Marketing Operations
Accounting

Teller Check Transactions

Security
Scheduling Clearing Processing
 Functions Airline
Airline

Finance/
Marketing Operations
Accounting

Flight Ground Facility

Catering
Operations Support Maintenance