OPERATION

MANAGEMENT

By- MR. LAKSHAY GUPTA

IBMR FACULTY
1. Production Economics: Introduction , Evaluation .

2. Short Term Decisions & Long Term Decisions .

3. Production Meaning & Types of Production Systems .

4. Production To Order & Production To Stock .

5. Plant Location & Factors Affecting Location And Evaluating Different

Locations.
What is Short-Term Planning?
Short-term planning is defined by the characteristics of an organization, such as skills. In the
workplace, managers devise strategies on how to improve these characteristics in the short-
term to meet long-term goals. For example, issues with company equipment like computers,
or the quality of content provided by employees, need to be addressed to meet short-term
deadlines set by management.

Short-Term Planning Factors :-

 Cash flow
 Budget
 Savings of capital
 Investments of stock
 Organization
 Communication
 Ability to network
What is Long-Term Planning?
Long-term planning displays how your business can be successful over a continued period.
The goals set in long-term planning are less likely to be changeable due to the consensus a
management team needs when creating them initially.

Long-Term Planning Factors:-

 Sales
 Brand awareness of your product
 Public reputation
 Number of staff members
 Social and digital media presence
 SEO traction
 Attendance at industry events
What are the differences between Short- and Long-term Planning?

Short-term planning evaluates your progress in the present and creates an action plan to
improve performance daily. However, long-term planning is a comprehensive framework that
comprises of goals to be met within a four- to five-year period.

 Here are two key differences between Short-Term and Long-Term Planning :-

1. Scope
Ideally, a short-term goal should tie into a long-term goal. However, daily adjustments are
required to ensure that you're working efficiently to meet your goals and that operations are
smooth. Thus, the scope of short-term planning may change daily compared to long-term
planning, where their goals are finite after they're discussed with key employees.

2. Execution
The execution of short-term planning depends on current operations that can determine if an
organization is completing projects. The execution of long-term planning is based on if short-
term goals can be met. For example, if your long-term goal is to hire 50 more staff members
within the next four to five years, you can set short-term goals for which positions need to get
filled quickly.
Manufacturing vs. Production Manufacturing Production

Manufacturing is the process of producing

 Production is the process of making an
final goods with the help of men,
Definition machinery, raw materials, chemicals, and
output that is meant for consumption with
the help of various resources.
tools.

 Raw materials are procured and  The company owns the raw material,
Concept of the terms processed to get finished goods. which is processed to get output.

Output The result is the goods. The result can be goods or services.

 The process of production can be tangible

Nature of Input The process of manufacturing is tangible.
or intangible.

For manufacturing labor, machinery and

Compulsory Requirements material set up are essential.
Machinery may or may not be required.

Manufacturing results in goods that are  Production results in utility that can be
End Result ready to be sold; used immediately or later.

Every type of production may not be  Every type of manufacturing comes under
Inclusions manufacturing. production.

Manufacturing helps in the transformation Production is that process where inputs

Process requirement of raw materials into finished goods. are converted into outputs .
 TYPES OF
There are three common types of basic production PRODUCTIONS
systems :-

 The Batch System

 The Continuous System

 Mass Production or Flow production

1. Batch System :-used to produce small quantities of output (goods or services) with specifications that vary
greatly from one batch to the next. This type of  Production most commonly used in consumer durables, FMCG like
Biscuits, confectionaries, packaged food items etc. or other such industries where there are large variety of products with
variable demands are required such as in Medicines , hardware , consumer durable. Batch production takes place in batches in
such a way that the manufacturer already knows the number of units they needs to be manufacture in a one batch.
Features of Batch production
•Production is done in batches
•The total number of units required is decided before the batch production starts
•Once a batch production starts, stopping it midway may cost a huge amount to the
company.
•Demand plays a major role in a batch production. Example – seasonality of products.
2. In the continuous system, items to be processed flow through a series of steps, or operations,
that are common to most other products being processed. Since large volumes of throughput are
expected, specially designed equipment and methods are often used so that lower production costs can
be achieved. Frequently the tasks handled by workers are divided into relatively small segments that
can be quickly mastered and efficiently performed.
Examples include consumer products such as televisions, washing machines, and personal
computers etc
Continuous production systems are often referred to as assembly systems or assembly line systems 
 There is a lot of confusion between mass production and continuous production. It can be differentiated
by a single element. The amount of mechanical work involved. In Mass production, both machines and
humans work in tandem. However, in continuous production, most of the work is done by machines
rather than humans. In continuous production, the production is continuous,24×7 hours, all days in a year.

 There are many chemicals which are manufactured in the form of a continuous process due to the
huge demand across the world. Similarly, the Plastic industry is known to adopt the continuous
production methodology where production can go continuously for weeks or months depending on
the demand. Once the production starts, you only need to feed in the raw material, and the machines
turn out the finalized products.
 Features of Continuous Production

 Majority of the work is done by machines rather than humans .

 Work is continuous in nature. Once production starts, it cannot be stopped otherwise it

will cause huge loss.

 A very controlled environment is required for continuous production.

 3. Mass Production or Flow production

 Mass production is also known as flow production or assembly line production. It is one of the
most common types of products used in the automobile industry and is also used in industries
where continuous production is required.

 An Assembly line or mass production plant typically focus on specialization. There are multiple
workstations installed and the assembly line goes through all the workstations turn by turn. The
work is done in a specialized manner and each workstation is responsible for one single type of
work. As a result, these workstations are very efficient and production due to which the whole
assembly line becomes productive and efficient .
 PRODUCTION TO ORDER VS PRODUCTION TO STOCK

 PRODUCTION TO ORDER –Also known as MTO i.e. Make to order.

In this Approach manufacturing of any goods start only after customer order is received .
This is Pull type of supply chain operation , because the manufacturing is performed when demand is
confirmed, i.e. being pulled by demand .

Examples :- Construction , Bridges , Aircraft , Vessels, Software development etc…

Other type of production to order models are such as ATO(Assemble to order) ,

BTO(Build to Order) , ETO(Engineer to order) etc…
 PRODUCTION TO
STOCK
PRODUCTION TO STOCK , also called as Make to Stock (MTS) .

In this Approach products are manufactured based on demand forecasts . Since

accuracy of forecasts will prevent excess inventory and opportunity
loss due to stockout .

Make to Stock is regarded as Push Type of production strategy .

Example:- Food processing Industry , Retail Industry , Train Schedule etc…

 PLANT LOCATION & FACTOR AFFECTING PLANT
LOCATION

 Keeping in view the type of industry and volume of production, different type of layout

to be selected is to be decided from the following :-

1. Product or Line Layout

2. Process or Functional Layout.

3. Fixed Position Layout.

4. Combination type of Layout.

1. Product or Line Layout:
 If all the processing equipment and machines are arranged according to the sequence of
operations of the product, the layout is called product type of layout. In this type of layout, only
one product of one type of products is produced in an operating area. This product must be
standardized and produced in large quantities in order to justify the product layout.

 The raw material is supplied at one end of the line and goes from one operation to the next
quite rapidly with a minimum work in process, storage and material handling shows product
layout for two types of products A and B.
Advantages offered by Product Layout or Line Layout :-

(i) Lowers total material handling cost.

(ii) There is less work in processes.

(iii) Better utilization of men and machines,

(iv) Less floor area is occupied by material in transit and for temporary storages

v) Greater simplicity of production control.

(vi) Total production time is also minimized.

Limitations of Product Layout:

(i) No flexibility which is generally required is obtained in this layout.
(ii) The manufacturing cost increases with a fall in volume of production.
(iii) If one or two lines are running light, there is a considerable machine idleness.
(iv) A single machine break down may shut down the whole production line.
(v) Specialized and strict supervision is essential.
2. Process or Functional Layout:
The process layout is particularly useful where low volume of production is needed.
If the products are not standardized, the process layout is more low desirable, because it
has creator process flexibility than other. In this type of layout, the machines and not
arranged according to the sequence of operations but are arranged according to the nature
or type of the operations. This layout is commonly suitable for non repetitive jobs.

Same type of operation facilities are grouped together such as lathes will be placed at one
place, all the drill machines are at another place and so on. For process layout. Therefore, the
process carried out in that area is according to the machine available in that area.
Advantages of Process Layout:

(i) There will be less duplication of machines. Thus, total investment in equipment purchase

will be reduced.

(ii) It offers better and more efficient supervision through specialization at various levels.
(iii) There is a greater flexibility in equipment and man power thus load distribution is easily controlled.

(iv) Better utilization of equipment available is possible.

(v) Break down of equipment can be easily handled by transferring work to another machine/work station.

(vi) There will be better control of complicated or precision processes, especially where much inspection is

required.
 Limitations of Process Layout:

(i) There are long material flow lines and hence the expensive handling is required.

(ii) Total production cycle time is more owing to long distances and waiting at various points.

(iii) Since more work is in queue and waiting for further operation hence bottle necks occur.

(iv) Generally, more floor area is required.

(v) Since work does not flow through definite lines, counting and scheduling is more tedious.

(vi) Specialization creates monotony and there will be difficult for the laid workers to find job in other industries.
3. Fixed Position Layout:

 This type of layout is the least important for today’s manufacturing industries. In this

type of layout the major component remain in a fixed location, other materials, parts,

tools, machinery, man power and other supporting equipment’s are brought to this

location.

 The major component or body of the product remain in a fixed position because it is too

heavy or too big and as such it is economical and convenient to bring the necessary

tools and equipment’s to work place along with the man power. This type of layout is

used in the manufacture of boilers, hydraulic and steam turbines and ships etc.
Advantages Offered by Fixed Position Layout:

(i) Material movement is reduced

(ii) Capital investment is minimized.

(iii) The task is usually done by gang of operators, hence continuity of operations is ensured

(iv) Production centers are independent of each other. Hence, effective planning and loading

can be made. Thus total production cost will be reduced.

(v) It offers greater flexibility and allows change in product design, product mix and production volume.
Limitations of Fixed Position Layout:
(i) Highly skilled man power is required.
(ii) Movement of machines equipment’s to production centre may be time consuming.
(iii) Complicated fixtures may be required for positioning of jobs and tools. This may increase the cost of
production.
4. Combination Type of Layout:

Now a days in pure state any one form of layouts discussed above is rarely found. Therefore,

generally the layouts used in industries are the compromise of the above mentioned layouts.

Every layout has got certain advantages and limitations. Therefore, industries would to like use

any type of layout as such.

Flexibility is a very important factory, so layout should be such which can be molded according to

the requirements of industry, without much investment. If the good features of all types of layouts

are connected, a compromise solution can be obtained which will be more economical and

flexible.
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