PRODUCTION AND OPERATIONS

MANAGEMENT

Dr. P. AKTHAR
M.A.,M.B.A., M.Phil., Ph.D.
Assistant Professor
KL Business School
Green Fields, Vaddeswaram, 
Guntur District, A.P., INDIA 
PIN: 522 502
Functions of Production and Operations Management
• Location of facilities:

Location of facilities for operations is a long-term capacity decision which involves a long term
commitment about the geographically static factors that affect a business organization. It is an
important strategic level decision-making for an organization. It deals with the questions such as
‘where our main operations should be based?’.

• Plant layouts and material handling:

Plant layout refers to the physical arrangement of facilities. It is the configuration of departments,
work centers and equipment in the conversion process. The overall objective of the plant layout is to
design a physical arrangement that meets the required output quality and quantity most economically.

‘Material Handling’ refers to the ‘moving of materials from the store room to the machine and
from one machine to the next during the process of manufacture’. It is also defined as the ‘art and
science of moving, packing and storing of products in any form’.
• Process design:

Process design is a macroscopic decision-making of an overall process route for converting the raw material
into finished goods. These decisions encompass the selection of a process, choice of technology, process flow
analysis and layout of the facilities.

• Production and planning control:

Production planning and control can be defined as the process of planning the production in advance, setting
the exact route of each item, fixing the starting and finishing dates for each item, to give production orders to
shops and to follow up the progress of products according to orders.

• Quality control:

Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of quality in a
product or service’. It is a systematic control of various factors that affect the quality of the product. Quality control
aims at prevention of defects at the source, relies on effective feed back system and corrective action procedure.

 
• Materials management:

Materials management is that aspect of management function which is primarily

concerned with the acquisition, control and use of materials needed and flow of goods and
services connected with the production process having some predetermined objectives in view.

• Maintenance management:

Maintenance management involves keeping track of assets and parts. The purpose is to
ensure that production proceeds efficiently and the minimum amount of resources are wasted.

 
Manufacturing Operations VS Service Operations
The term "manufacturing operations" refers to a framework in which man, machine and
material come together to produce a tangible product. It deals with all the supply chain activities
such as gathering requirements from customers, procuring raw materials, allocating resources,
scheduling the production, maintaining the inventory, and delivering end products to customers.

Services are intangible and non-physical products offered by one party to another in exchange
for money. As reported in the Harvard Business Review, service-providing operations aim to deliver
an experience that leads to customer satisfaction. Service operations engage a wide range of
teams to deliver services, including professional service teams, customer support teams and
customer experience teams. Organizations that engage in hospitality, travel, media, sports, health
care and entertainment are service-providing organizations. Service-providing operations send
employees to their customers' locations or meet the customers at the company's premises to
facilitate the service provision.
 While manufacturing operations focus on producing goods and storing them at a
warehouse before delivering them to customers, service-providing operations facilitate
simultaneous production and consumption of services. For example, an automobile
company makes a car and keeps it in the warehouse until a customer comes forward to
purchase it. A beauty salon needs to provide haircutting services in the presence of the
customer.
Services cannot be stored for later use. When there is a high demand for services,
service operations should engage additional human resources and modify operational
activities accordingly to manage the supply-demand equation. Due to their nature of
producing and storing finished goods, manufacturing operations don't need to engage
additional resources and modify operational activities when there is a high demand for
products.
Five Differences Between Service and Manufacturing Organizations

• Tangibility of Output

The key difference between service firms and manufacturers is the tangibility of their
output. The output of a service firm, such as consultancy, training or maintenance, for
example, is intangible. Manufacturers produce physical goods that customers can see and
touch.

• Production on Demand

Service firms, unlike manufacturers, do not hold inventory; they create a service when
a client requires it. Manufacturers produce goods for stock, with inventory levels aligned to
forecasts of market demand. Some manufacturers maintain minimum stock levels, relying
on the accuracy of demand forecasts and their production capacity to meet demand on a
just-in-time basis. Inventory also represents a cost for a manufacturing organization.
• Customer Specific Production

Service firms do not produce a service unless a customer requires it, although they
design and develop the scope and content of services in advance of any orders.
Service firms generally produce a service tailored to customers’ needs, such as 12
hours of consultancy, plus 14 hours of design and 10 hours of installation.
Manufacturers can produce goods without a customer order or forecast of
customer demand. However, producing goods that do not meet market needs is a
poor strategy.
• Labor Requirements and Automated Processes

A service firm recruits people with specific knowledge and skills in the service
disciplines that it offers. Service delivery is labor intensive and cannot be easily
automated, although knowledge management systems enable a degree of
knowledge capture and sharing. Manufacturers can automate many of their
production processes to reduce their labor requirements, although some
manufacturing organizations are labor intensive, particularly in countries where
labor costs are low.
• Physical Production Location

Service firms do not require a physical production site. The people creating and
delivering the service can be located anywhere. For example, global firms such as
consultants Deloitte use communication networks to access the most appropriate
service skills and knowledge from offices around the world.
Manufacturers must have a physical location for their production and stock
holding operations. Production does not necessarily take place on the
manufacturer's own site; it can take place at any point in the supply chain.
Key Functions of Operations Manager

The operation managers optimise the operations by making judicious use of resources
and capital. They manage all the aspects related to the operations that take place in
businesses. Operation managers are not only found in a company but also in
manufacturing units. They are required to perform various functions as a part of their job
responsibilities.
Some of the key functions of an Operations Manager includes:
• Finance
Finance plays a chief role in operations management. It is essential to ensure that the
organization’s finance has been utilized properly to carry out major functions such as the
creation of goods or services so that the customer’s needs could be satisfied.
• Operation
This function in operation management is mainly concerned with planning, organising,
directing and controlling all the activities of an organisation which helps in converting the
raw materials and human efforts into valuable goods and services for satisfying customer
needs.

• Strategy
Strategy in operation management refers to planning tactics that could help them to
optimise the resources and have a competitive edge over others. Business strategies imply
to supply chain configuration, sales, capacity to hold money, optimum utilisation of human
resources and many more.
• Design of the product
Incorporating innovative technologies play a crucial role in the selling of a product. Thus it is the
duty of operations manager to ensure that the product is designed catering to the market trends
and needs of the customers. The modern-day customers are more concerned about the quality of
the product than its quantity. So, the operation managers focus on producing top-notch quality
products.

• Forecasting
Forecasting refers to the process of making an estimation regarding certain events that might
occur in the future. In operation management, forecasting refers to the estimation of customer’s
demand so that production can be done accordingly. Through this, the manager gets to know what
to produce, when to produce and how to produce in accordance with the customer’s needs.
• Supply Chain Configuration
The main motive of Supply Chain Configuration is to ensure effective management, monitoring
and controlling of all the main activities that are held in a firm. The supply chain configuration starts
from the supply of the raw materials and continues till the production of the final product and then
their selling to the customers which will satisfy their needs and wants.

• Managing the Quality

Quality management plays an imperative role in selling a product. The operation managers
allocate the task of quality management to a team and then supervise their task. The managers
identify project defects and rectify them to ensure quality. For this, certain systems are used that
measure and maintain the quality of the product.
Operations strategy: Frame Work
Operations strategy:

Operations strategy is an aspect of operations management that is concerned with

long term planning for a company’s customer service and business strategies. 

Operational strategies focus on the goals and aspirations of the company, as well as
the actual plans for getting the business to achieve their goals.

Strategic plans should include not only the identification of existing processes and
technologies, but also considerations around the supply chain, their customers, their
competitors, their own strengths and weaknesses, and the business facilities.
Ensuring an appropriate corporate strategy can help ensure a competitive
advantage by:
1. Ensuring quality: 
By creating an operations strategy, businesses can identify the expected quality of their product
or service and then ensure that the goal is being met at every step of the process. This means that
the product operates as expected, and all pieces or steps conform to design and characteristics that
were set as the standard. Quality can also entail that the appropriate aesthetic, the way products and
services look and feel, is met every time. This reduces costs associated with having to remake or
remodel products and services, as well as decreasing returns or complaints when quality
expectations have not been met.  
2. Improving customer experiences:
  Operations strategies should include specific discussions around customers, their
expectations, and how to meet and exceed these expectations. By setting a standard of care,
organizations can clearly lie out the ways that customers should be treated. This helps to
standardize customer’s experiences, so that no one feels like they are being left out or treated
unfairly. This assurance also helps customers to know what they can expect every time they
interact with the organization.

3. Ensuring reliability: 
A large aspect of operations strategies lies in setting a standard and holding to it.
Regardless of the product or service being offered, the company should be confident that it
works as expected. Proper reliability relies on proper testing, and operational strategies should
include specific instructions about the testing and research that should be completed at every
development stage, as well as information regarding how to use this information for future
developments.
 Operations Strategy Examples With the rapidly changing marketplace in recent years, some
companies have excelled in part due to their strong operations strategies.
Here a few examples:
Amazon:
Once known for books, Amazon is now known as the go-to platform for online shoppers of any
product. Its distribution network is widely touted and even includes experiments with drone delivery.
Apple Computers:
Apple is long recognized in operations circles for its operational excellence and supply chain
management.
Walmart:

This retailing giant managed to undercut many competitors on the price and variety of a
wide range of products.

FedEx:

FedEx made speed of delivery its calling card, achieving it with excellent
operations.

IKEA: The world’s largest furniture retailer undercut many home goods
competitors.
Hill framework for Operations Strategy Formulation

Hill (2005) provides an iterative framework that links together the corporate objectives; which
provide the organisational direction, the marketing strategy; which defines how the organisation will
compete in its chosen markets, and the operations strategy; which provides capability to compete in those
markets.
The framework consists of five steps:

1. Define corporate objectives

2. Determine marketing strategies to meet these objectives

3. Assess how different products win orders against competitors

4. Establish the most appropriate mode to deliver these sets of products

5. Provide the infrastructure required to support operations

Step 1 Corporate Objectives

Involves establishing corporate objectives that provide a direction for the organisation
and performance indicators that allow progress in achieving those objectives to be
measured. The objectives will be dependent on the needs of external and internal
stakeholders and so will include financial measures such as profit and growth rates as well
as employee practices such as skills development and appropriate environmental policies.

For example

Switzerland based Rolex watch companies are facing a threat from smart watches. so switz
watch companies are offering around 85 %of price value to clear unsold watches until to
generate revenue, to keep their sales volume and keep their profitability in much lower way.
 These kinds of strategies will evolve reduction in sales volume finalized goods industry
as well as to revive an clock watches prices at par with smart watches Analog watch
incorporates digital version along with added value features compete with smart watches.
Step 2 Marketing Strategy

This involves identifying target markets and how to compete in these markets.

For example

Adidas covers the market for youngsters sport persons are the target market so their strategy
evolves a product range pricing comfortless and value for money which attracts the target
segment their advertisement and promotional strategies where used sport personalities to
attract the target age group .
Step 3 How Do Products Win Orders in the Market Place
This is the crucial stage in Hill’s methodology where any mismatches between the
requirements of the organization’s strategy and the operations’ capability are revealed. This
step provides the link between corporate marketing proposals and the operations processes
and infrastructure necessary to support them.
This is achieved by translating the marketing strategy into a range of competitive
factors (e.g. price, quality, delivery speed) on which the product or service wins orders.
These external competitive factors provide the most important indicator as to the relative
importance of the internal operations performance objectives.
 The five basic internal operation’s performance objectives allow the
organization to measure its operation’s performance in achieving its strategic goals.
The performance objectives are Quality, Speed, Dependability, Flexibility and Cost.

At this stage it is necessary to clarify the nature of the markets that operations
will serve by identifying the relative importance of the range of competitive factors
on which the product or service wins orders.
Hill distinguishes between the following types of competitive factors which relate to
securing customer orders in the marketplace.

 Order-winning factors – They are key reasons for customers purchasing the goods or
services and raising the performance of the order-winning factor may secure more business

 Qualifying factors – Performance of qualifying factors must be at a certain level to gain

business from customers, but performance above this level will not necessarily gain
further competitive advantage.

From the descriptions above it can be seen that it is therefore essential to meet both
qualifying and order-winning criteria in order to be considered and then win customer
orders.
Step 4 Delivery System Choice (Structural Decisions)

Process Types are ways of describing the general approach taken to designing
and managing processes.

They are based on two important factors in process design:

the volume and variety of the products and services that an organisation processes.
Step 5 Provide the infrastructure required to support operations
Planning and Control in Operation is about reconciling market requirements (demand)
with the operation’s resources (supply). Planning determining the timing and nature of
actions that should take place in the future. Control is when as the operation is ongoing,
determining what action to take if there is a significant deviation from what should be
happening.

In reality planning and control activities are intertwined in an ongoing organization.

Competitive strategy and customer prioritizes.
Operation Strategy – Competitive Challenges
Most small-business managers have a fairly clear idea of the company strategy and mission.
Whether your staff has the same understanding, and whether business operations are set to
maximize strategic advances is a different question. Without consistent alignment of operations and
strategy, your small business will face problems executing the core mission of the organization.

• Strategy Development

Strategy development must also focus on the long-term goals of the company -- addressing
only short-term concerns is problematic and doesn't consider the overall mission of the business.
• Communication

Even if an operational strategy exists, it is useless if staff are unaware of the company
approach. Ensuring a cohesive strategy is more difficult when the business is segregated into
separate divisions. In turn, failing to understand the operational strategy and how each of the pieces
fits together to carry out that strategy can lead to a lack of communication and cooperation between
divisions. Simply communicating the strategy is not enough -- employees must understand the
details. Check understanding on a regular basis through staff meetings and open discussion of the
strategy.
• Resources
One significant problem with operational strategy is the lack of available resources to
implement the strategy. In this context, "resources" does not necessarily mean supplies or funding,
although it can be both those things. People are the most critical resource essential for successful
execution. Failure to recruit and retain qualified workers will result in a significant hardship for the
organization. Even if your small business has experienced, capable staff, if they are not trained on
how to implement the operational strategy, it is unlikely to be executed correctly.
• Ongoing Assessment
Follow up to ensure the execution is taking place as planned. Seek input from staff at all levels
and throughout various divisions of the company. Without frequent communication with -- and
feedback from -- staff, the business can't adjust course when necessary. Continuous assessment and
follow-up is essential to maintain a competitive advantage. Frequently adjust the operational
strategy in response to significant internal and external opportunities and threats.
Trends in Operations Management
Career Choices in POM
Operations management is vital to nearly all industries, including banking
systems, hospitals, suppliers, e-commerce, technology companies and
more. Based on the industry, the role would involve managing the production of
manufactured goods or services.

For example, operations management in pharmaceuticals would involve overseeing the

production of raw materials into drugs ready to be shipped to hospitals or retailers.
Operations managers overseeing the manufacture of products are also known as production
managers.

An airline would require operation managers to oversee the transportation of

passengers.
 The qualifications generally remain the same for the different roles, as an overall
degree in Operations Management will qualify you for any entry-level position. Further
specialisation can help you if you have a particular area of interest.

 Supply Chain & Logistics Management

Supply chain refers to the overall network of organisations and processes that result in
the final product or service provided to the consumer. Supply chain management
coordinates between the different production activities to achieve the best possible
efficiency.
Logistics management oversees the procurement, supply, and management of raw
materials for the company. It forms a part of overall supply chain management.
 Inventory Control Manager

While the supply chain and logistics managers oversee the entire procurement and raw
materials process, an inventory control manager is specifically focussed on maintaining the
quality and supply of raw materials. As an inventory control manager, you would be
conducting regular reviews and solving any inventory problems that crop up.

 Process Managers

As indicated by the name, process managers supervise the production timeline,

coordinating the development process that takes place while processing raw materials into
the final product. Process managers also evaluate the performance of the production
process, identifying changes and deviations, and implementing suitable solutions.
Delivery and Returns Managers

Once the internal production process is complete, the delivery and return managers
supervise the delivery of the final product (or service) to the customer. This role involves
considerable customer dealing and is also responsible for maintaining customer relations
and handling feedback/returns as needed.

Operations Manager

An operations manager is generally a senior role. An operations manager oversees the

entire production process, manages overall operations, and ensures that the production
process is time-efficient, cost-effective and meets required quality standards. Junior roles as
operations management executives are also available.