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Production/Operations management is the process which combines and transforms various resources used in the Production/Operations subsystem of the organization into value added products/services in a controlled manner as per the policies of the organization.
The conversion process is the predominant activity of a production system. 5 .Introduction 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 primary concern of an operations manager is the activities of the conversion process.
Organizational Model Finance Sales HRM OM Marketing MIS QA Engineering Accounting 6 .
Operations as a System Production System Conversion Subsystem Control Subsystem Inputs Outputs 7 .
Product Info. Capital.Inputs of an Operations System External Legal. Social. Technological Market Competition. Personnel. Utilities 8 . Primary Resources Materials. Economic. Customer Desires.
Conversion Subsystem Physical (Manufacturing) Locational Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services (Federal) 9 .
Outputs of an Operations System Direct Products Services Indirect Waste Pollution Technological Advances 10 .
11 . which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level. Production function is that part of an organization.
12 . At each stage of processing. there will be value addition.´ Thus production is a value addition process. Production is defined as ³the step-by-step conversion step-byof one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user. Edwood Buffa defines production as µa process by µa which goods and services are created¶.
It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. 1. The right quality is not necessarily best quality. RIGHT QUALITY The quality of product is established based upon the customers needs.Importance of the production management The objective of the production management is µto produce goods services of right quality and quantity at the right time and right manufacturing cost¶. 13 .
14 . 2. RIGHT QUANTITY The manufacturing organization should produce the products in right number. 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. leads to shortage of products.
3. the production department has to make the optimal utilization of input resources to achieve its objective. RIGHT TIME Timeliness of delivery is one of the important parameter to judge the effectiveness of production department. So. 15 .
4. RIGHT MANUFACTURING COST Manufacturing costs are established before the product is actually manufactured. so as to reduce the variation between actual and the standard (pre(preestablished) cost. all attempts should be made to produce the products at prepre-established cost. 16 . Hence.
Historical Milestones in OM 17 .
Historical Milestones in OM The Industrial Revolution Scientific Management Human Relations and Behaviorism Operations Research The Service Revolution 18 .
MAKE or BUY DECISION
An automobile company has extra capacity that can be used to produce gears that the company has been buying for rs.300 each. if the company makes the gears, it will incur materials cost of rs.90 per unit, labour cost of Rs.120 per unit and variable overhead cost of rs.30 per unit. the annual fixed cost associated with the unused capacity is rs.2,40,000. demand over the next year is estimated at 4000 units.
MAKE or BUY DECISION
A manufacturer of motor cycles buys side box at Rs.240 each. in case he makes it himself, the fixed and variable costs would be Rs.3,00,000 and Rs.90 per side box, respectively. Should the manufacturer make or buy the side box if there is a demand over the next year is estimated at 2500 side boxes?
MAKE or BUY DECISION
An item has yearly demand of 1000 units.the different costs with regard to make and buy options are as follows. Buy 6.00 10.00 «. 1.32 «. Make 5.90 «. 50.00 1.30 6000 units
Particulars Item cost/unit Procurement cost/order Set up cost / set up Annual carrying cost/item/year (22% of item cost) Production rate/year
00 10. 50.90 «.00 «.00 1.32 «.30 6000 units 25 Particulars Item cost/unit Procurement cost/order Set up cost / set up Annual carrying cost/item/year (22% of item cost) Production rate/year . 1. the different costs with regard to make and buy options are as follows. Buy 6.MAKE or BUY DECISION An item has yearly demand of 1500 units. Make 5.
Thus the late-1700s factories had not only machine latepower but also ways of planning and controlling the tasks of workers. labor. invented by James Watt in 1764. 26 . The steam engine.The Industrial Revolution The industrial revolution developed in England in the 1700s. Adam Smith¶s The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor. largely replaced human and water power for factories.
Eli Whitney. more 27 .The Industrial Revolution The industrial revolution spread from England to other European countries and to the United Sates. system. . developed the concept of interchangeable parts. By the mid-1800s. parts. . In 1790 an American. . 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. 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 28 .
Scientific Management Frederick Taylor is known as the father of scientific management. Supervisors were carefully selected and trained. Stopwatch studies were conducted to precisely set standard output per worker on each task. management. and learning ability were determined. strength. Incentive pay systems were initiated. 29 . His shop system employed these steps: Each worker¶s skill. Material specifications. and routing sequences were used to organize the shop. work methods.
Scientific Management In the 1920s. 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 30 .
Human Relations and Behavioralism In the 1927-1932 period. researchers in the 1927Hawthorne Studies realized that human factors were affecting production. From the work of behavioralists came a gradual change in the way managers thought about and treated workers. 31 . Researchers and managers alike were recognizing that psychological and sociological factors affected production.
equipment.Operations Research During World War II. government. After the war. and consulting firms. supplies. operations researchers found their way back to universities. 32 . «) had to be deployed. industry. OR helps operations managers make decisions when problems are complex and wrong decisions are costly. enormous quantities of resources (personnel. Military operations research (OR) teams were formed to deal with the complexity of the deployment.
twoThere is a huge trade surplus in services. About two-thirds of the US GDP is from services. Today. 33 . Investment per office worker now exceeds the investment per factory worker. more than two-thirds of the US workforce is twoemployed in services.The Service Revolution The creation of services organizations accelerated sharply after World War II. Thus there is a growing need for service operations management.
better decisions over greater distances 34 .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.
finance.Production as an Organization Function US companies cannot compete with marketing. We focus on OM as we think of global competitiveness. accounting. and expenses reside. and engineering alone. To succeed. 35 . capital assets. a firm must have a strong operations function teaming with the other organization functions. because that is where the vast majority of a firm¶s workers.
Decision Making in OM Strategic Decisions Operating Decisions Control Decisions 36 .
Strategic Decisions These decisions are of strategic importance and have longlong-term significance for the organization. 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 37 .
Operating 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 finishedthe amount of overtime to use next week the details for purchasing raw material next month 38 .
Control Decisions These decisions concern the day-to-day activities of day-toworkers. Examples include deciding: labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria 39 . and machine maintenance. production and overhead costs. quality of products and services.
Production/Operations Management .Functions Forecasting Location and layout techniques Product design and analysis. work study Production control techniques Aggregate planning Master production schedule Materials requirements planning Capacity planning 41 .
Production/Operations function Scheduling and control Line balancing Line of balance Single machine scheduling Flow shop scheduling Job shop scheduling 42 .
Production/Operations Management Maintenance management Feedback and control techniques Quality control Inventory control 43 .
TYPES OF PRODUCTION SYSTEM 45 .
The distinguishing feature of this is low volume and high variety of products. A job shop comprises of general purpose machines arranged into different 46 .TYPES OF PRODUCTION SYSTEM 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.
High variety of products and low volume. 4. parts. Detailed planning is essential for sequencing the requirements of each product. tools. capacities for each work centre and order priorities. Highly skilled operators who can take up each job as a challenge because of uniqueness.TYPES OF PRODUCTION SYSTEM Characteristics The Job-shop production system is followed when there is: 1. 47 . 3. 5. Large inventory of materials. Use of general purpose machines and facilities. 2.
2. as each job gives them learning opportunities. Because of general purpose machines and facilities variety of products can be produced. Operators will become more skilled and competent. 4. 3. Full potential of operators can be utilised. 48 . Opportunity exists for creative methods and innovative ideas.TYPES OF PRODUCTION SYSTEM Advantages Following are the advantages of job shop production: 1.
2. Production planning is complicated. 3. 49 .TYPES OF PRODUCTION SYSTEM Limitations Following are the limitations of job shop production: 1. 4. Larger space requirements. Higher level of inventory at all levels and hence higher inventory cost. Higher cost due to frequent set up changes.
´ It is characterised by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales.TYPES OF PRODUCTION SYSTEM BATCH PRODUCTION Batch production is defined by American Production and Inventory Control Society (APICS) ³as 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. 50 .
3.TYPES OF PRODUCTION SYSTEM Characteristics Batch production system is used under the following circumstances: 1. 4. When plant and machinery are flexible. When there is shorter production runs. 51 . 2. 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. When manufacturing lead time and cost are lower as compared to job order production.
6. 2. 52 . 4. Better utilisation of plant and machinery. Lower investment in plant and machinery. Cost per unit is lower as compared to job order production. Job satisfaction exists for operators. 5. Promotes functional specialisation.TYPES OF PRODUCTION SYSTEM Advantages Following are the advantages of batch production: 1. 3. Flexibility to accommodate and process number of products.
Work in process inventory is higher compared to continuous production.TYPES OF PRODUCTION SYSTEM Limitations Following are the limitations of batch production: 1. Material handling is complex because of irregular and longer flows. 4. Higher set up costs due to frequent changes in set up. 53 . 3. 2. Production planning and control is complex.
Product and process standardisation exists and all outputs follow the same path 54 . This production system is justified by very large volume of production.TYPES OF PRODUCTION SYSTEM MASS PRODUCTION Manufacture of discrete parts or assemblies using a continuous process are called mass production. The machines are arranged in a line or product layout.
TYPES OF PRODUCTION SYSTEM Characteristics Mass production is used under the following circumstances: 1. Perfectly balanced production lines. Standardisation of product and process sequence. 3. Large volume of products. Dedicated special purpose machines having higher production capacities and output rates. components and parts is continuous and without any back tracking. Lower in process inventory. 5. Production planning and control is easy. 7. 4. Flow of materials. 55 . 9. 6. 8. Material handling can be completely automatic. Shorter cycle time of production. 2.
3. 2. 56 . Less skilled operators are required. 4. Higher rate of production with reduced cycle time. Manufacturing cost per unit is low. Low process inventory. Higher capacity utilisation due to line balancing.TYPES OF PRODUCTION SYSTEM Advantages Following are the advantages of mass production: 1. 5.
2. 57 .TYPES OF PRODUCTION SYSTEM Limitations Following are the limitations of mass production: 1. Breakdown of one machine will stop an entire production line. Line layout needs major change with the changes in the product design. 4. High investment in production facilities. The cycle time is determined by the slowest operation. 3.
The items are made to flow through the sequence of operations through material handling devices such as conveyors. transfer devices. etc.TYPES OF PRODUCTION SYSTEM CONTINUOUS PRODUCTION Production facilities are arranged as per the sequence of production operations from the first operations to the finished product. 58 .
TYPES OF PRODUCTION SYSTEM Characteristics Continuous production is used under the following circumstances: 1. Process follows a predetermined sequence of operations. Planning and scheduling is a routine action. 3. Dedicated plant and equipment with zero flexibility. 5. 59 . Material handling is fully automated. 4. Component materials cannot be readily identified with final product. 2.
3. 5. Manpower is not required for material handling as it is completely automatic. 2. 60 . 4. Advantages Following are the advantages of continuous production: 1. Standardisation of product and process sequence. Higher capacity utilisation due to line balancing. 6. Higher rate of production with reduced cycle time. Person with limited skills can be used on the production line. Unit cost is lower due to high volume of production.
Product differentiation is limited. 2. 61 . Limitations Following are the limitations of continuous production: 1. Flexibility to accommodate and process number of products does not exist. 3. Very high investment for setting flow lines.