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Production and Operations Management (POM): An Introduction


Introduction of Production/Operations (P/O) systems Some Historical Perspectives of P/O Management Basic components of P/O systems Manufacturing versus Service systems Major issues in P/O Management Current Trends

All organizations perform at least three basic functions


M arke ting

Production/ ope rations


Production/ ope rations

M arke ting


Figure The thre e basic functions of busine ss organizations :

Introduction of P/O systems

Marketing: which generates demand or at least takes the order for a product or service Production/operations: which creates the product Finance/ Accounting: which tracks how well the organization is doing, pays bills, and collect the money

Definitions of P/O systems

Production is the creation of goods and services. Production/operation system is any system which transforms input into output and in the mean time creates value

Introduction of P/O systems

In some organizations the product is a physical good (refrigerators, bread, etc.) and the activities creating such tangible product is usually referred to as Production.

In others the product is a service (insurance, health care, catering etc.). The production that takes place to produce a service is called Operations.

Historical Perspectives of POM

The Industrial Revolution Scientific Management Human Relations and Behaviorism Operations Research Influence of Japanese Approach

The Industrial Revolution (18th century)

The industrial revolution developed in England in the 1700s. Adam Smiths The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor. By the mid-1800s, the old cottage system of production had been replaced by the factory system.

Scientific Management (1900s)

Frederick Taylor is known as the father of scientific management. His shop system employed these steps: Each workers skill, strength, and learning ability were determined. Stopwatch studies were conducted to precisely set standard output per worker on each task. Material specifications, work methods, and routing sequences were used to organize the shop. Supervisors were carefully selected and trained. Incentive pay systems were initiated.

Scientific Management

In the 1920s, Ford Motor Companys operation embodied the key elements of scientific management: standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts

Human Relations and Behavioralism

In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production. Researchers and managers alike were recognizing that psychological and sociological factors affected production. From the work of behavioralists came a gradual change in the way managers thought about and treated workers.

Operations Research (Management Science)

During World War II, enormous quantities of resources (personnel, supplies, equipment, ) had to be deployed. Military operations research (OR) teams were formed to deal with the complexity of the deployment. After the war, operations researchers found their way back to universities, industry, government, and consulting firms. OR helps operations managers make decisions when problems are complex and wrong decisions are costly.

Influence of Japanese Approach

Total Quality Management Just In Time Management. Strong employees involvement

Today's Factors Affecting POM

Global Competition Quality, Customer Service, and Cost Challenges Computers and Advanced Production Technology Growth of the Service Sector Scarcity of Production Resources Issues of Social Responsibility

Basic components of Production/ Operation Systems

Diverse organizations as manufacturing companies, financial institutions, health care facilities, etc. all have in common the following basic elements within their operations system: input transformation/ conversion subsystem, output, and control subsystem.

Production as a System

Production System Conversion Subsystem

Control Subsystem



Basic components of Production/ Operation Systems Inputs: All physical and nonphysical resources coming into the system External Legal, Economic, Social, Technological Market Competition, Customer Desires, Product Info. Primary Resources Materials, Personnel, Capital, Utilities

Basic components of Production/ Operation Systems Outputs can be classified as: Direct Goods Services Indirect Waste Pollution Technological Advances

Basic components of Production/ Operation Systems

A pure good is a tangible product that can be stored, transported, and purchased for later use A pure service is an intangible product which cannot be stored since it is consumed as it is produced.

Basic components of Production/ Operation Systems

Transformation/Conversion subsystem: which converts inputs into goods or services. It consists of

Concepts Procedures Non-equipment technologies Rules, Guideline, Steps, etc.

Basic components of Production/ Operation Systems

Control Subsystem: To ensure that the desired outputs are obtained (e.g. it is acceptable in terms of quantity, cost and quality), measurements are taken at various points in the transformation process (feedback) and then compared to previously established standards to determine if corrective action is needed (control)

Entry-Level Jobs in POM

Purchasing planner/buyer Production (or operations) supervisor Production (or operations) scheduler/controller Production (or operations) analyst Inventory analyst Quality specialist

Distinctive Characteristics of Service Operations

Customer as a participant in the service process Simultaneous production and consumption of services Intangibility Difficulty in measuring output Labor intensiveness Time-perishable capacity Site selection dictated by location of customers

Manufacturing versus Service System

Differences Services Intangible No Extensive Short Labor Subjective Goods Tangible Yes Little Long Capital Objective

Output Output Inventoried Customer contact Lead time Intensity Quality

Manufacturing versus Service System

Common issues Concerns for productivity and quality Similar basic components of managerial responsibility In the new world business, a factory is a service operation and service is a factory operation. Intense competition is forcing firms to provide more and better total product (a mix of goods and services).

The service package

The service package is defined as a bundle consisting of the following features: Supporting facility Facilitating goods Explicit services Implicit services

The service package

Supporting facility: The physical resources that must be in place before a service can be offered Examples: an airplane, tennis course Facilitating goods: The material purchased or consumed by the buyer, or the items provided by the customer. Examples: food items, replacement motor parts

The service package

Explicit services: Essential or intrinsic features of the service Examples: smooth-running of motorbike after a tune-up; response time of a fire department Implicit services: Psychological benefits of the service Examples: certificate of a graduate degree from a well-known school, privacy of a loan office

Major Issues in P/O Management Design: Product and service design Process design Facility location and layout Planning/Scheduling Forecasting Planning Scheduling

Major Issues in P/O Management

Materials management Inventory control and management Material requirement planning (MRP) Just-In-Time (JIT) Quality Quality assurance - Standards & Awards Statistical Quality Control Total Quality Management (TQM) Productivity Productivity Measurement Work Measurement and Analysis

Decision Making in POM

Strategic Decisions

Operating Decisions
Control Decisions

Strategic Decisions

These decisions are of strategic importance and have long-term significance for the organization. Examples include deciding: the design for a new products production process where to locate a new factory whether to launch a new-product development plan

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 the amount of overtime to use next week the details for purchasing raw material next month

Control Decisions

These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. Examples include deciding: labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria


POM important in any organization Global competition forces rapid evolution of POM