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Introduction Production & Operations Management

Production is the process by which, raw materials & other inputs are converted into finished products. (& services) Manufacturing , the process of producing only tangible goods.


Introduction Historical Milestones in OM Factors Affecting OM Today Different Ways of Studying OM WrapWrap-Up: What World-Class Producers Do World-


Operations management is the management of an organization¶s productive resources or its production system. A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production system. The primary concern of an operations manager is the activities of the conversion process.

Organizational Model Finance Sales HRM OM Marketing MIS QA Engineering Accounting .

Finance. L. S. Utilities Governmental Services / Control National. Primary Resources Locational Services (Tpt) Exchange Services (Ret. State Control Sub System Goods Or Services Outputs 5 . T Market Competition Product Inf. Real Estate Health.A production system model Inputs Conversion sub-system Physical (Mfr. Mining) Environment P. WS) Storage Services (warehousing) Insurance. E.

They plan. Operation Mangers are required to make a series of decisions in the production function.g. materials.Production as Organisation Function Decision Making in Production Conversion sub system is the core of production. organise. wherein workers. direct and control all the activities in the process of converting all the inputs into finished goods. e. and Machines are used to convert inputs into products and services. staff. Operating & Control decisions 6 . Strategic.

Strategic Decisions Area of Involvement Production Processes Nature of Activities Long Range production/Process Plan Selecting & Managing Plan arrangement Optimal dist. Of scarce resources Planning Product Prod.POM Decision & Their Applications Type of Decisions 1. Processes & Facilities Planning Facilities Allocate Resources Capacity Planning & How Much & Where Facility Location Prod Capacity 7 . Tech.

Plan Materials & Capacity Reqmt What & when to produce Manage Materials Move. 8 . planning Shop Floor Plan Materials Mgmt. Plan & Control finished goods Inv.POM Decision & Their Applications Type of Decisions Area of Involvement Nature of Activities 2. Schedule Independent Demand Inventory Resources Req. Operating Decisions Planning Production To meet demand Production Planning Aggregate Plan Systems Master Prod.

Of Machines & Facilities 9 3. /Services Plan Materials & Capacity Reqmt Plan for Maint.POM Decision & Their Applications Type of Decisions Area of Involvement Productivity and Employees Total Quality Control Project Plan & Control Techniques Maint. & Reliability Nature of Activities Efficient & Effective Use of HR Plan & Control the Quality of Prod. Control Decisions Planning and Controlling Operations . Mgmt.

10 .Importance of Production Function High Productivity is key to high standard of living ³Production makes significant contribution to society¶s well being´ As for Industry. it is what creates national wealth. the common national basis without which no country can exist. anyone who has created something with his own hands knows that production is neither capitalist nor socialist but one thing only . The best brain & hands in the country should concentrate on creating & producing innovative products.

theft/pilferage and misconduct Eliminate accidents Effective Grievance Handling Efficient training and Team Building Minimise Inventory & Achieve better yields Enhance customer satisfaction TQM Business Process Re.In order to improve productivity Improve Volume of Production Reduce the rejection rate Minimise Re-work rate Maintain delivery schedule Control Idle Machine & Manpower hours Control Overtime hours Improving Industrial Engineering norms & Standards Updating Processes and Procedures Maintain accuracy and timeline of MIS Decrease Machine set-up time Good house keeping Check Absenteeism.Engineering Automation 11 .

It has emerged from the concept of manufacturing of large quantity of products.Production Management It is the application of management principles in a factory. 12 . from a performance and profit point of view. The development of large corporations with many owners created the need for managers. Many of the pioneers of scientific management demonstrated the value of some management techniques.

Army & Educational institutes etc. Production Management is used more for a system where tangible goods are produced.Operations Management It is the process whereby resources or inputs are converted into more useful products. Popularly. 13 . Secondly. operations management became more fashionable after the stupendous growth of services sector. Such as Bank. Pollution control. Whereas. Airlines. Police. Insurance. Operations Management is more frequently used where inputs are transformed into intangible services.

Historical Milestones in OM       The Industrial Revolution PostPost-Civil War Period Scientific Management Human Relations and Behaviorism Operations Research The Service Revolution .

largely replaced human and water power for factories. .The Industrial Revolution     The industrial revolution developed in England in the 1700s. invented by James Watt in 1764. Adam Smith¶s The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor. Thus the late-1700s factories had not only machine latepower but also ways of planning and controlling the tasks of workers. The steam engine.

. In 1790 an American. . developed the concept of interchangeable parts. . In the 1800s the development of the gasoline engine and electricity further advanced the revolution. the old cottage system of midproduction had been replaced by the factory system. By the mid-1800s. Eli Whitney. more .The Industrial Revolution       The industrial revolution spread from England to other European countries and to the United Sates. The first great industry in the US was the textile industry.

PostPost-Civil War Period   During the post-Civil War period great expansion of postproduction capacity occurred. By post-Civil War the following developments set the poststage for the great production explosion of the 20th century: increased capital and production capacity the expanded urban workforce new Western US markets an effective national transportation system     .

His shop system employed these steps: Each worker¶s skill.      . Stopwatch studies were conducted to precisely set standard output per worker on each task. work methods. Incentive pay systems were initiated. and routing sequences were used to organize the shop.Scientific Management  Frederick Taylor is known as the father of scientific management. strength. and learning ability were determined. Supervisors were carefully selected and trained. Material specifications.

Ford Motor Company¶s operation embodied the key elements of scientific management: standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts       .Scientific Management  In the 1920s.

. researchers in the 1927Hawthorne Studies realized that human factors were affecting production. Researchers and managers alike were recognizing that psychological and sociological factors affected production.Human Relations and Behavioralism    In the 1927-1932 period. From the work of behavioralists came a gradual change in the way managers thought about and treated workers.

and consulting firms.Operations Research     During World War II. Military operations research (OR) teams were formed to deal with the complexity of the deployment. OR helps operations managers make decisions when problems are complex and wrong decisions are costly. enormous quantities of resources (personnel. industry. «) had to be deployed. operations researchers found their way back to universities. After the war. government. equipment. supplies. .

The Service Revolution       The creation of services organizations accelerated sharply after World War II. Thus there is a growing need for service operations management. Today. . more than two-thirds of the US workforce is twoemployed in services. About two-thirds of the US GDP is from services. twoThere is a huge trade surplus in services. Investment per office worker now exceeds the investment per factory worker.

better decisions over greater distances .The Computer Revolution       Explosive growth of computer and communication technologies Easy access to information and the availability of more information Advances in software applications such as Enterprise Resource Planning (ERP) software Widespread use of email More and more firms becoming involved in EEBusiness using the Internet Result: faster.

and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources SocialSocial-Responsibility Issues . Customer Service.Today's Factors Affecting OM       Global Competition Quality.

EntryEntry-Level Jobs in OM       Purchasing planner/buyer Production (or operations) supervisor Production (or operations) scheduler/controller Production (or operations) analyst Inventory analyst Quality specialist .

Studying Operations Management   Operations as a System Decision Making in OM .

Operations as a System Production System Conversion Subsystem Control Subsystem Inputs Outputs .

Product Info. Social. Economic. Personnel. Utilities    . Capital. Primary Resources Materials. Technological Market Competition.Inputs of an Operations System    External Legal. Customer Desires.

Conversion Subsystem       Physical (Manufacturing) Locational Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services (Federal) .

Outputs of an Operations System   Direct Products Services Indirect Waste Pollution Technological Advances      .

accounting. To succeed. and engineering alone. finance. We focus on OM as we think of global competitiveness. . because that is where the vast majority of a firm¶s workers. and expenses reside.Production as an Organization Function    US companies cannot compete with marketing. a firm must have a strong operations function teaming with the other organization functions. capital assets.

Decision Making in OM    Strategic Decisions Operating Decisions Control Decisions .

Examples include deciding: the design for a new product¶s production process where to locate a new factory whether to launch a new-product development plan new   .Strategic Decisions   These decisions are of strategic importance and have longlong-term significance for the organization.

Examples include deciding: how much finished-goods inventory to carry finishedthe amount of overtime to use next week the details for purchasing raw material next month    .Operating Decisions   These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits.

Control Decisions   These decisions concern the day-to-day activities of day-toworkers. quality of products and services. and machine maintenance. Examples include deciding: labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria    . production and overhead costs.

What Controls the Operations System?    Information about the outputs. management must take corrective action to maintain control of the system . and the inputs is fed back to management. This information is matched with management¶s expectations When there is a difference. the conversions.

and Control  . Operating.WrapWrap-Up: World Class Practice    OM important in any organization Global competition forces rapid evolution of OM Decision based framework focus of course Strategic.