OPERATIONS MANAGEMENT -

I
UNIT - I
 UNIT – I

• Nature of Production
– Process by which raw materials and other inputs are converted into
finished products.
• Production as a System
– Production system
– Conversion sub-system
– Control sub-system
 Production as a System
Concept Definition
1. Production system • A system whose function is to convert a
set of inputs into a set of desired outputs
• Receives inputs in the form of materials,
personnel, capital, utilities and
information
2.Conversion sub- A sub-system of the larger production
system system where inputs are converted into
outputs

3.Control sub-system • A sub-system of the larger production

system where a portion of the output is
monitored for feedback signals to provide
corrective action if required.
• Acceptable in terms of quantity, cost and
quality.
 A Production System Model
Inputs Conversion Sub-system Outputs

Environment
Legal/Political, Social,
Physical
Economic,
(Manufacturing, Mining)
Technological
Local Services
(Transportation) Goods or
Market Exchange Services Services
Competition (Retailing/ Wholesaling)
Product Identification Storage Services
Customer Desires (Warehousing)
Other Private Services
Primary Resources (Insurance, Finance, Utilities, Feedback
Materials & Supplies Real Estate, Health, Business information
Personnel Services & Personal Service)
Capital Assets Government Services
Capital (Money) (Local, State, Central)
Utilities

Control Sub-system
Production Management Vs Operations Management
Production Management Operations Management
The application of management The process in which
principles to the production function resources/inputs are converted into
in a factory more useful products
Application of planning, organizing, A process that is designed to achieve
directing and controlling to the the pre-decided objective. It consists
production process. of tactics such as scheduling work,
assigning resources including people,
equipment, managing inventories,
assessing quality standards and
process type decisions.
It is used for a system where tangible It is used where various inputs are
goods are produced. transformed into intangible services
Production management precedes Operations management is the term
operations management in the that is used nowadays.
historical growth of the subject.
Objectives of Production and Operations Management
• Effectiveness objective - Producing the right kind of goods and services that
satisfy customers’ needs
• Efficiency objective - Maximizing output of goods and services with
minimum resource inputs.
• Quality objective - Ensuring that goods and services produced conform to
pre-set quality specifications
• lead time objective - Minimizing throughput-time – the time that elapses in
the conversion process- by reducing delays, waiting time and idle time.
• Capacity utilization objective –Maximizing utilization of manpower,
machines, etc.
• Cost objective - Minimizing cost of producing goods or rendering a service.
Characteristics of Modern Production and Operations Management
• Manufacturing as Competitive Advantage
– Total Quality Management (TQM)
– Time-Based Competition
– Business Process Re-engineering (BPRE)
– Just-in-Time (JIT)
– Focused Factory
– Flexible Manufacturing Systems (FMS)
– Computer Integrated Manufacturing (CIM)
• Services Orientation
– Intangible and perishable nature of the services
– Constant interaction with clients or customers
– Small volumes of production to serve local markets
– Need to locate facilities to serve local markets
Characteristics of Modern Production and Operations Management

• Disappearance of Smokestacks
– Protective labour legislation
– Environment movement
– Gradual emergence of knowledge based organizations
– Environment friendly

• Small has become beautiful

– E.F. Schumacher in his famous book “Small is Beautiful”
– Opposed giant organisations and increased specialization
– Intermediate technology based on smaller working units, community
ownership and regional workplaces utilizing local labour and resources.
 Key Elements of Operations Management

• Product selection and design

• Process selection and planning
• Facilities (Plant) location
• Facilities (Plant) layout and materials handling
• Capacity Planning- Break even analysis
•  Production Planning and Control (PPC)
• Inventory control
• Quality assurance and control
• Work-study and job design
• Maintenance and replacement
• Cost reduction and cost control
 Key Functions of Operations Management

• Finance
• Operation
• Strategy
• Design of the product
• Forecasting
• Supply Chain Configuration
• Managing the Quality
 Challenges of Operations Management

• Globalization
• Sustainability - Three Pillars of Sustainability which are
social, environmental, and economic
• Ethical Conduct
• Effective Communication
• System Design
• “Producing quality goods and services in demanded
quantities in acceptable time frames.”
Scope of Production and Operations Management

•Commencing with the selection of location

•Acquisition of land
•Constructing buildings
•Procuring and installing machinery
•Purchasing and storing raw materials
•Converting into saleable products
•Other areas
Quality management
Maintenance management
Production planning and control
Methods improvement
Work simplification
 Need for Operations Management
• All businesses need operations management in order to
function
– function that turns an organization’s resources (materials, labor) into
products and services

• To manage the daily activities seamlessly

• To make good use of its resources like labor, raw material,
money and other resources.
• To improve the overall productivity
• To align with customer’s requirements
Duties and Responsibilities of Production Managers
in Manufacturing Organization
1. Planning the geographical location of the factory
2. Purchasing production equipments
3. Layout of equipments within the factory
4. Designing production processes and equipments
5. Product design
6. Designing production work and establishing work standards
7. Capacity planning
8. Production planning and scheduling
9. Production control
10.Inventory management
11.Supply Chain Management
12.Quality control
13.Production equipment maintenance and repair
14.Measurement and monitoring of productivity
15.Industrial relations
16.Health and safety
17.Staff selection and liaisoning
18.Budgeting and capacity building
Emerging Role of the Production and Operations Manager
• Take part in strategic decision making of the company
• Take part in the implementation and use of Enterprise Resource
Planning in the company
• Automate processes as per the requirements of the company
• Enhance the Research and Development effort in developing
self-relevant new technologies
• Reduce lag in implementation of projects (new
products/services launching: expansion of facilities) due to
increased competition
• Protect the environment by implementing environment and
pollution norms established by the Government from time to
time.
Emerging Role of the Production and Operations Manager
• Act as a member of the concurrent engineering teams in new
product design and old product development
• Develop long-term strategic relationship with supplies by acting
as supply chain managers
• Give more attention to technology management, in view of
joint ventures of multinational companies with domestic
companies
• Be an internal quality auditor in quality certification
programming such as ISO 9000 series and ISO 14000
 Decision-Making in Production
Decision-Making

Strategic Decisions Operating Decisions Control Decisions

•Relating to planning
•Relating to products, •Relating to planning
and controlling
processes and production to meet
operations.
manufacturing facilities demand
•Day-to-day activities of
•Long-term Significance •Ongoing production of
workers, quality of
goods and services
products and services,
meet the market
maintenance of
demand and provides
machines.
reasonable profits for
the organization.
 Types of Decisions and their Applications
Types of Decisions Area of Involvement Nature of Activities
I Strategic Decisions 1. Production Processes Developing long range production
(Planning products, plans including process design.
Processes and Facilities)
2. Production Technology Selecting and managing
production technology.

3. Facility Layout Planning the arrangement of

facilities.

4. Allocating Resources to Planning for the optimal

Strategic Alternatives distribution of scarce resources
among product lines or business
units.

5. Long Range Capacity Answering the ‘how much’ and

Planning and Facility ‘where’ questions about long
Location range production capacity.
II Operating Decisions 1. Production Planning Aggregate planning and master
(Planning production to System production scheduling.
meet demand) 2. Independent Demand Planning and controlling finished
Inventory Systems goods inventories.
 Types of Decisions and their Applications
Types of Decisions Area of Involvement Nature of Activities
II Operating Decisions 3. Resource Requirements Planning materials and capacity
(Planning production to Planning Systems. requirements.
meet demand)
4. Shop Floor Planning and Short range decisions about what
Control at each work to produce and when to produce.
centre.

5. Materials Management Managing all facets of materials

III Control Decisions 1. Productivity
(Planning and Operations) Employees
2. Total Quality Control
3. Project Planning and
Control Techniques.
system.
and Planning for the effective and
efficient use of human resources
in operations.
Planning and controlling the
quality of products and services.
Planning and controlling projects

4. Maintenance Planning for maintaining the

Management and machines and facilities of
Reliability production.
 Recent Trends in Production/Operations Management
1. Global Market Place
- Increase in the level of competition
2. Production/Operations Strategy
-Overall business strategy

3. Total Quality Management (TQM)

- Quality of goods and services
4. Flexibility
- Changes in volume of demand, Product design or in delivery schedules
5. Time Reduction
- Quicker delivery
6. Technology
- Advances in technology
 Recent Trends in Production/Operations Management
7. Worker involvement
- Employee involvement and empowerment

8. Re-engineering
- Break-through improvements to improve the performance of the firm
9. Environmental issues
- Protection of environment and social responsibility
10. Corporate Downsizing (or Right Sizing)
- Need for improved profit and for higher dividend payment to shareholders
11. Supply-Chain Management
- Reduce the cost of transportation, warehousing and distribution

12. Lean Production

- Minimal amount of resources to produce a high volume of high quality of
goods