Basics of production management

Module 11-Basics of production management

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Operations
The way an organization transforms inputs (labor, money, supplies, equipment) into outputs (products and services)  Manufacturing - form of production in which raw and semi-finished materials are processed, assembled, or converted into finished products  Service - activities of value that do not result in the ownership of anything tangible

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Types of organization
(according to output produced)
Production organizations those that produce tangible goods that can be mass produced and stored for later consumption  Service organizations - those that produce intangible goods that require consumer participation and cannot be stored

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Production organizations
Car manufacturers  Soap manufacturers  Pharmaceutical  Watch makers firms  Furniture makers  Petroleum refineries  Film studios  Breweries  Paper  Semiconductor firms manufacturers  Packaging  Chemical firms companies  Plane  Printing presses manufacturers

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Service organizations
Theaters  Travel agencies  Beauty parlors  Banks  Schools  Hospitals  Insurance agencies  Law firms

Internet service providers  Web page developers  Human resource management services  Financial services providers  Management consulting services

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Module 11-Basics of production management

Characteristics of products/services
Product •Output •Output consumption •Nature of work •Customer contact •Customer participation •Tangible •Over time; can be stored •Producer intensive •Minimal, indirect •Little or none Service •Intangible •Immediate; can’t be stored •Labor intensive •Direct •Essential

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Operations system model
External Environment Inputs
Human Capital (Land, Equipment Building) Technology Information

Outputs Transformation or Conversion Process
Goods Services Ideas Others

Feedback
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Production management
Aims to supply goods or services in adequate quantity, of specified quality, on the promised date, at an equitable price

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Manufacturing activities
Purchasing parts or raw materials  Storing parts or raw materials until needed  Assembly of parts or processing of raw materials  Packaging of finished goods for eventual shipping, storing, and distribution  Maintaining equipment  Training people to operate equipment

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Concerns in production
Building Plant layout Equipment layout Process Repair and maintenance; ventilation; noise; lighting; utilities; employee facilities Rent/lease; renovation; expansion; construction Product/line; process; combination

Analytic, synthetic, extraction, fabrication, repetitive or non-repetitive Raw materials Purchase and handling Method Work improvement; work measurement
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Module 11-Basics of production management

Concerns of production manager

Designing an operations system involves deciding on five aspects, namely: • What to produce • How many to produce • How to produce • Where to produce • Who will do the work
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Module 11-Basics of production management

Product development
(What to produce)
 The

process of creating or improving a product or service

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Steps in product development
 Develop

an idea for a new product that customers want to buy  Turn the idea into a workable product design  Produce the product and make it available to consumers at a price they are willing to pay

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Product design
 Design

for manufacture (DFM) technique that involves streamlining the design of products to simplify assembly  Computer-aided design (CAD) - design and drafting performed interactively on a computer

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Capacity planning
(How much to produce)
Operations decision concerned with the quantity of goods or services to be produced  A process of forecasting demand and then deciding what resources will be needed to meet that demand

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4 phases of technological decisions (How to produce)
 Major

technological choice  Minor technological choice  Specific-component choice  Process-flow choice

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Major technological choice
 Does

technology exist to produce the product?  Are there competing technologies?  Should innovations be licensed from elsewhere, such as foreign countries?  Should an internal effort be made to develop the technology?
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Minor technological choice
 Assembly-line

process  Continuous process  Job-shop process

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Module 11-Basics of production management

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Module 11-Basics of production management

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Module 11-Basics of production management

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Types of technology
 Woodward’s

typology  Thompson’s typology  Perrow’s typology

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Woodward’s typology
 Unit

or small batch  Large batch or mass production  Continuous processing

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Thompson’s typology
 Long-linked

technology  Mediating technology  Intensive technology

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Perrow’s typology
 Routine  Craft  Engineering  Non-routine

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Specific-component choice
What type of equipment (and degree of automation) should be used?  Should the equipment be dedicated (tied to a specific purpose) or general purpose (leaving open the possibility of using it to make other products)?  To what degree should machines replace people in performing and controlling work?

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Process-flow choice
How should the product or service flow through the operations system?  Tools: assembly drawings, assembly charts, route sheets, and process flow charts  Possible decisions: resequencing, combining, or eliminating operations to reduce materials-handling and storage costs

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Locating the business
(Where to produce)
 Availability

of raw materials  Transportation methods  Supply and cost of energy and water  Land and building costs  Labor supply  Location of customers  Economic and legal factors
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Job design issues
(Who will do the work?)
 Worker

skills  Worker safety  Workplace collaboration

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Production planning
 Identifying

all of the resources required to produce the product and estimating when each will be needed and in what quantity

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Production planning
 The

advance programming of manpower, machinery, materials, methods, money to achieve a given output for a definite market
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Module 11-Basics of production management

Production planning activities

Inventory management

Planning the quantities of materials and supplies needed for production and the amount of finished products required to meet customer orders Determining the types of jobs required for each part of production, the number of people needed for each job, and the skills each person will need in order to do the job Identifying the steps required in a manufacturing process, the time required to complete each step, and the sequence of the steps

Human resource planning

Production scheduling

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Inventory
Inventory - supply of raw materials, work in progress, and finished goods an organization maintains to meet its operational needs  Raw materials - materials that are in their natural state, and have not been processed  Work in progress - partially finished goods  Finished goods - goods that are ready to be sold

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How to minimize inventory costs

MRP or Materials Requirements Planning - the operational planning system in which end products are analyzed to determine the materials needed to produce them MRPII - operational planning system that extends MRP by comparing needs to known resources and calculates unit costs; can also be used with other computer programs to handle order entry, invoicing, and other operations tasks JIT or Just-in-Time Inventory - inventory system in which production quantities are ideally equal to delivery quantities, with materials purchased and finished goods delivered just in time to be used (also kanban)
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Module 11-Basics of production management

Operations system model
External Environment Inputs
Human Capital (Land, Equipment Building) Technology Information

Outputs Transformation or Conversion Process
Goods Services Ideas Others

Feedback
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Productivity
 Ratio

between the value of the output and the value of the input

P = (Output / Input) x 100%

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Inputs (5 Ms)
 Manpower  Machinery  Materials  Methods  Money

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Forms of transformation
 Physical  Locational  Exchange  Information

Manufacturing firms Transportation and communication firms Retailing and wholesaling Legal and accounting services
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Module 11-Basics of production management

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