Module 3

Nature and Scope of Production and operations Management, its

relationship with other Systems in Organizations, Functions of Production
and material management, Types of 65 production Systems. Forecasting as
a planning tool, Forecasting types and methods. Problems. Facility
Planning: Facilities location decisions, factors affecting facility location
decisions and their relative importance for different types of facilities.
Problems.
INTRODUCTION TO PRODUCTION &
OPERATIONS (IN GENERAL)
• Production and Operations
Management ("POM") is
about the transformation
of production and operational
inputs into "outputs" that,
when distributed it ultimately
meet the needs of customers.
NATURE OF PRODUCTION
MANAGEMENT
Production management is not only related to the
transformation of inputs into goods and services, but it is
also related to other management activities. The nature of
production management can be classified under following
points:
1. Production management assists in planning, organizing,
coordinating, monitoring and controlling all the production
activities. It is a part of general management .
2. It is an inter-subjective approach . Contribution made by
several subjects like, economics, operational research,
mathematics, statistics, human psychology, engineering,
etc. have aided production management to develop a
diverse and distinct approach of management.
3. Production management is not only confined to
production of goods, it also includes management of
service sector where no tangible goods are produced, but
services are provided which are intangible
SCOPE OF PRODUCTION AND
OPERATIONS MANAGEMENT
1. Facility Location - Selecting appropriate location for the production
2. Plant layouts and material handling - Deciding upon the machines,
equipment and necessary devices that leads to desired production. Storage
of material and handling it in most effective way to avoid the wastage.
3. Product design - Designing the product with regards to its production.
4. Process design - Determination of the production process which is most
relevant and efficient in the given state of affairs.
5. Production and planning control – of its various aspects how, when and
where producing a particular product will be done.
CONT..
6. Quality control - Controlling the production and ensuring the quality
by setting the check points and taking the periodic measurements of
the current performance.
7. Materials management - Managing the inventories of raw material,
semi-finished and finished goods such that there is no excessive money
may block.
8. Maintenance Management - Analysis the deviations and formulating
the corrective measures to stay in track with planned quality, time-
schedule and predetermined cost schedules.
PRODUCTION MANAGEMENT V/S
OPERATIONS MANAGEMENT
Factors Production Management
Output: Production management deals with
manufacturing of products like
(computer, car, etc)
Usage of Output Products like computer/car are
utilized over a period of time
Classification of work: To produce products like
computer/car more of capital
equipment and less labour are
required
Customer Contact: There is no participation of
customer during production
Operations Management
Operations management cover
both products and services.
whereas services need to be
consumed immediately
while services require more labour
and lesser capital equipment.
whereas for services a constant
contact with customer is required.
CLASSIFICATION OF PRODUCTION
SYSTEMS
• Job-Shop Production
It is featured by manufacturing one or more quantity of products designed and produced as per the specification of
customers within prefixed time and cost. The distinguishing feature of this is low volume and a high variety of
products. A job-shop comprises of general-purpose machines arranged into different departments. Each job demands
unique technological requirements that demands to process on machines in a certain sequence.
Features of Job-shop Production
• A high variety of products and low volume.
• Use of general-purpose machines and facilities.
• Highly skilled operators who can take up each job as a challenge because of uniqueness.
• Large inventory of materials, tools, parts.
Advantages of Job-shop Production
•  Because of the general-purpose machines and facilities, a variety of products can be produced.
• Operators will become more skilled and competent, as each job gives them learning opportunities.
• The full potential of operators can be utilized.
• An opportunity exists for Creative methods and innovative ideas. Production Planning and Control
Limitations of Job-shop Production:
• Higher cost due to frequent setup changes.
• A Higher level of inventory at all levels and hence higher inventory cost.
• Production planning is complicated.
• Larger space requirements.
• Batch Production
Batch Production is a form of manufacturing in which the job pass through the functional departments in lots or batches and
each lot may have a different routing. It is characterized by the manufacture of a limited number of products produced at
regular intervals and stocked stored for sales.
Features of Batch Production
• Shorter production runs.
• Plant and machinery are flexible.
• Plant and machinery set up are used for the production of the item in a batch and change of set up is required for processing
the next batch.
• Manufacturing lead-time and cost are lower as compared to job order production.
Advantages of Batch Production:
• Better utilization of plant and machinery.
• Promotes functional specialization.
• A Cost per unit is lower as compared to job order production. 4. Lower investment in plant and machinery.
• Flexibility to accommodate and process a number of products.
• Job satisfaction exists for operators.
Limitations of Batch Production
• Material handling is complex because of irregular and longer flows.
• Production planning and control is very complex
• 3. Work in process inventory is higher compared to continuous production.
•  4. Higher set up costs due to frequent changes in set up.
• Mass Production
The manufacturer of discrete parts or assemblies using a continuous process is called Mass Production. This production system is
justified by a very large volume of production. The machines are arranged in a line or product layout. Product and process
standardization exists and all outputs follow the same path.
Features of Mass Production
• Standardization of product and process sequence.
• Dedicated special purpose machines having higher production capacities and output rates.
• A large volume of products.
• The shorter cycle time of production.
• Lower in process inventory.
• Perfectly balanced production lines.
Advantages of Mass Production:
• The Higher rate of production with reduced cycle time.
• Higher capacity utilization due to line balancing.
• Less skilled operators are required.
• Low process inventory.
• The manufacturing cost per unit is low.
Limitations of Mass Production:
• . The breakdown of one machine will stop an entire production line.
• The line layout needs a major change with the changes in the product design.
• High investment in production facilities.
• The cycle time is determined by the slowest operation
• Continuous Production
Production facilities are arranged as per the sequence of production operations from the first operations to the finished
product. The items are made to flow through the sequence of operations through material handling devices such as conveyors,
transfer devices, etc.
Features of Continuous Production
• Dedicated plant and equipment with zero flexibility.
• Material handling is fully automated.
• The process follows a predetermined sequence of operations.
• Component materials cannot be readily identified with the final product.
• Planning and scheduling is a routine action.
Advantages of Continuous Production
• Standardization of product and process sequence.
• The Higher rate of production with reduced cycle time.
• Higher capacity utilization due to line balancing.
• Manpower is not required for material handling as it is completely automatic.
• A person with limited skills can be used on the production line.
• Unit cost is lower due to the high volume of production.
Limitations of Continuous Production
• Flexibility to accommodate and process a number of products does not exist.
• Very high investment for setting flow lines.
• Product differentiation is limited.
Forecasting as a Decision-making Tool
Classification of Forecasting Process
Based on Database Type

• Quantitative or Statistical Forecasting

These methods include a more scientific approach and historical data. It
uses mathematical tools or models for processing the information.
Qualitative methods provide an estimation of future demand by using
numerical tools and previous effects. These are objective in nature and
dependability on mathematical calculations is quite high in this method.
• Qualitative or Subjective Forecasting
These methods depend highly on observation, opinion, and listening
skills. In other words, qualitative forecasting includes factors that are
more subjective, opinion-oriented.
Based on Forecast Time Horizon

• Short-term Forecast
This includes a short time frame and is based on the nature and type of the industry. Short-
term forecasting is usually done for a period of six months and up to one year. In most cases,
this type of forecasting is utilized in tactical decisions and day-to-day planning processes related
to production, workforce applicability, inventory, etc.
• Medium-term Forecast
This forecast includes a time frame of one year to three years and is useful in cash budget
planning, layout planning, capital budget planning, production planning, sales & marketing
planning, etc.
• Long-term Forecast
This forecast is done for a longer duration and generally covers a time horizon of more than
three years. It facilitates long-term strategic planning decisions related to expansion planning of
plant, capacity planning while opening a new manufacturing unit, etc.
Based on the Economy

• Forecasting at Macro-level
This includes general economic environment forecasting of a country’s economy and is
focused on business conditions across a nation’s whole economy. This is measured by the
national income or expenses, industrial production, general employment level, etc.
• Forecasting at Industry-level
This is concerned with the overall demand for the products of a whole industry and
includes analyzing statistical trends. Trade associations prepare an industry-level forecast.
Forecasting cement and cloth demand of a country are a few examples of this forecast
method.
• Forecasting at Firm-level
This covers the demand forecasting of the products of a specific firm.  Few examples
include forecasting the demand for Asian paints, Amul milk, etc.
Based on the Methodology

• Time-series Methods
• This is useful when the historical data of a product or product line for past years
are available and there is a clarity of trends and relationships of different
variables.
• Quantitative or Casual Methods
• These methods of forecasting include the assumption that the variable of
forecasting is connected with non-dependent/ independent variable(s) through a
cause-effect relationship.
• Predictive or Qualitative Methods
• In case of non-availability of any statistical data, qualitative methods that are
based on opinion may be considered.
Forecasting Methods
Facilities planning
• Facilities planning is a complex and broad subject that employs
several disciplines and determines how a corporate’s tangible fixed
assets best support achieving the objectives, such as
• effectively utilizing all resources (people, equipment, space, energy)
• improved material handling, material control
• minimizing capital expenditure
• being adaptable to changing requirements
Facility Planning
• Facility planning is the systematic process that smart organizations use to
ensure they have the facilities and related resources necessary to meet
both their short and long term goals. Sometimes referred to as strategic
facility planning, it’s the key decision-making that companies use to
future-proof their workspaces. 
• Steps of Facility Planning
• Understanding.
• Analyzing.
• Planning.
• Acting.
• Understanding.
• Many organizations follow a balanced scorecard of 4 key
measurements: financial performance, customer knowledge; internal
business processes; and learning and growth.
• Analyzing
• Second, exploration of the range of possible futures and triggers is
needed to analyze your organization’s facility needs using analytical
techniques — such as systematic layout planning (SLP), strengths,
weaknesses, opportunities and threats analysis (SWOT), strategic
creative analysis (SCAN), or scenario planning.
• Analysis Tools
• Several tools may be used to compare, analyze, coordinate, and clarify this gap and the
alternatives, scenarios, and recommendations that are made.
• Planning
• once the analysis is completed, plans for potential responses and periodic updates to
existing plans in response to changes in the market need to be developed to meet the
long-range needs of your specific organization.
• Develop plans that meet the long-range needs of the organization.
• At a minimum, the SFP should be reviewed annually and further updated periodically as
conditions require.
• As a result of the analyses performed, decisions will become apparent, or recommended
courses of action can be supported by the completed analysis.
Acting / Action

• Take action as planned to implement the strategic facility planning

successfully.
• Take actions as planned and implement the SFP. Feedback from
actions taken can be incorporated into the next plan and/or project to
provide continuous improvement to future SFPs.
• After approval, the SFP is then ready for implementation.
• Implementation of an SFP typically requires the development of a
specific project or project to deliver new, altered, or reconfigured
space to meet the organizational need. This specific project is a
unique process that is supplemental to the SFP.
Facilities location decisions
• Facility Location is the right location for the manufacturing facility, it
will have sufficient access to the customers, workers, transportation,
etc. 
Factors Influencing Facility Location

• Customer Proximity: Facility locations are selected closer to the customer as to reduce

transportation cost and decrease time in reaching the customer.
• Business Area: Presence of other similar manufacturing units around makes business area
conducive for facility establishment.
• Availability of Skill Labor: Education, experience and skill of available labor are another
important, which determines facility location.
• Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing
facility by providing incentives in custom duties and levies. On another hand free trade
agreement is among countries providing an incentive to establish business, in particular, country.
• Suppliers: Continuous and quality supply of the raw materials is another critical factor in
determining the location of manufacturing facility.
• Environmental Policy: In current globalized world pollution, control is very important, therefore
understanding of environmental policy for the facility location is another critical factor.