Introduction to

Production & Operations

Management
 Production
Production is the creation of goods and services.

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.

OM presents interesting career

opportunities.
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
GOODS SERVICES
Tangible Intangible
Consistent product Inconsistent product
definition definition
Production usually Produced & consumed at
separate from same time.
consumption Cant be inventoried
Can be inventoried High customer interaction
Low customer interaction Often unique
 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
– Capacity
– Location – Process selection
– Products & services Staffing
– Make or buy –
Hiring/laying off
– Layout
– Projects Directing
– Scheduling
– Job assignments
Controlling/Improving
– Inventory
– Quality
– Costs
 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
focus • Just-in-time

• Batch shipments • Supply chain

• Low bid purchasing partnering

• Lengthy product • Rapid product
development development.
• Standard products • Mass customization
• Job specialization • Empowered
employees, teams
• Low cost
• Environmental
sensitive
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 much finished-goods inventory to carry
 the amount of overtime to use next week
 the details for purchasing raw material next month
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:

 labor cost standards for a new product
 frequency of preventive maintenance
 new quality control acceptance criteria