Production & Operations Management

1. Production &Operations Management

2. UNIT – 1: INTRODUCION TO PRODUCION & OPERATIONS MANAGEMENT • INTRODUCTION • EVOLUTION OF PRODUCTION & OPERATIONS MANAGEMENT • CONCEPT OF PRODUCTION • NATURE OF PRODUCTION • PRODUCTION SYSTEM – PRODUCTS AND ITS TYPES • OPERATING SYSTEM • PRODUCTIN & OPERATIO NS MANAGEMENT • DISTINCTION BETWEEN PRODUCTION & OPERATIONS MANAGEMENT • SCOPE OF PRODUCTIN AND OPERATIONS MANAGEMENT • CHARACTERISTICS OF PRODUCTION & OPERATIONS MANAGEMENT • POM DEPARTMENT • FUNCTIONS OF POM

3. CONCEPT OF PRODUCTION • Production is defined as “the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user.” • Edwood Buffa defines production as ‘a process by which goods and services are created’. • The other word synonymously used with production is manufacturing. Manufacturing is understood to refer to the process of producing only tangible goods, where as production includes creation of both tangible goods as well as intangible services. • The Subject of Production & Operations Management is studied under different Headings-such as Production Planning and control, Production and Inventory control, production and operations control and many more

4. CONCEPT OF PRODUCTION Before we discuss about production management, we have to know about the ‘nature of production’. This will give us a rough idea about production Management and with what a production manager has to deal with.

5. NATURE OF PRODUCTION • ‘Nature of production’ can be better understood if we view the manufacturing function from three angles. • Production as a System • Production as a organizational function • Decision making in Production

6. 1. Production as a system • A system is understood as a whole which cannot be taken apart. It must be studied as a whole. While looking from this perspective we can note that there are three systems. • i) Production System: The production system of an organization is that part, which produces products of an organization. It is that activity where by resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. • Classification of Production System • Job Shop Production • BATCH PRODUCTION • MASS PRODUCTION • CONTINUOUS PRODUCTION

7. 1. Production as a system • ii) Conversion Sub-System: A sub-system of the larger production system where the production process is carried in terms of changing or converting the one form of material to another form. Any department in industry or organization of production process comes under the category of sub-system. • Examples: • Physical (Manufacturing department) • Location Services (Transportation department) • Storage Services (Warehousing department) iii) 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.

8. 2. Production as an organizational function: • The core of a production system is its conversion sub-system, where in workers, materials and machines are used to convert inputs into products and services. This process of conversion is at the heart of production function and is present in some form in all organizations. • It may be stated that every organization, irrespective of its purpose, has a production function where department and personnel play a central role in achieving the objectives of the organization.

9. 3. Decision making in Production: • At each level, operating managers are expected to make decisions and implement them too. • The decisions made by operation managers about the activities of production systems tend to fall into three general categories namely, • Strategic decisions: These decisions relating to products, processes and manufacturing facilities. These decisions are major ones having strategic importance and long – term significance for organization. • Operating decisions: These decisions are relating to production planning to meet demand. These decisions are necessary in order to ensure that the ongoing production of goods and services meets the market demand and provides reasonable profits for the organization. • Control decisions: These decisions are relating to planning and controlling operations. These decisions concern the day to day activities of workers, quality of products and services, production and overhead costs and maintenance of machines.

10. PRODUCTION SYSTEM – PRODUCTS AND ITS TYPES • The output of the production systems are normally called ‘Products’. These products may be ‘tangible goods’, ‘intangible services’ or a combination. • ‘Goods’ are tangible items that can be touched or held production systems that produce goods are often referred to as ‘manufacturing systems’ and the production of goods is called ‘manufacturing’. • Ex: - Goods – chemicals, automobiles, steels, computer, airplanes, packaged food etc… • ‘Services’ are intangible products that satisfy some need of a consumer, production systems that produce services are referred to as ‘service systems’. These products cannot be touched or stored. • Ex: - Services – Health care services, legal assistance, financial services, educational institutions etc… • Products can also be a combination of goods and services. Restaurants produce the tangible product of a meal along with the intangible services of delivery, cleaning of dishes and a pleasant environment.

11. Significant differences exist between goods and services: i) Goods are tangible while services are intangible. Ex: Hard technology & soft technology ii) Customers participate in many service processes, activities & transactions. Ex: Self service in restaurants, customer service, bank payments at counter. iii) The demand for services is more difficult to predict than the demand for goods. iv) Services cannot be stored as physical inventory. Ex: A hospital must have adequate supply of beds for the purpose of meeting unanticipated patient demand and a float pool of nurses

12. Significant differences exist between goods and services: v) Service facilities typically need to be in close proximity to the customer. Ex: Post offices, hotels and bank branches they must be located convenient to customers vi) Service management skills are paramount to a successful service encounter. • Service providers require service management skills such as knowledge and technical expertise, cross selling other products and services and good human interaction skills (HR). vii) Patents do not protect services Ex: restaurant chains are quick to copy new menu items or drive through concepts.

13. OPERATING SYSTEM • Operating system converts inputs in order to provide outputs which are required by a customer. • It converts physical resources into outputs, the function of which is to satisfy customer wants i.e., to provide some utility for the customer. • Everett E. Adam & Ronald J. Ebert define operating system as, “An operating system (function) of an organization is the part of an organization that produces the organization’s physical goods and services.” • Ray Wild defines operating system as, “An operating system is a configuration of resources combined for the provision of goods or services.”

14. PRODUCTION & OPERTIONS MANAGEMENT • “Production & Operations management” is a combination of two management principles ‘Production Management’ & ‘Operations Management’.

15. Production Management: • ‘Production management refers to the application of management principles to the production function in a factory’. In other words production management involves application of planning, organizing, directing and controlling to the production process. • E.S. Buffa defines production management as, “Production management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded and out of minimum cost.”

16. Production Management: • The application of management to the field of production has been the result of at least ‘three’ developments. • ‘First’ is the development of factory system of production. Until the emergence of the concept of manufacturing, there was no such thing as management as we know it. It is sure that people operated business of one type or another, but for the most part these people were owners of business and did not regard themselves as managers as well. • The ‘Second’ essential stems from thee first, namely ‘the development’ of the large corporation with many owners and the necessity to hire people to operate the business. • The ‘third’ reason stems from the work of many of the pioneers of scientific management who were able to demonstrate the value, form a performance and profit point of view of some of the techniques they were developing

17. Objectives of Production Management: • The objective of the production management is ‘to produce goods and services of right quality and right quantity at right time and right manufacturing cost’. • Right Quality: The quality of product is established based upon the customer’s needs. The right quality is not necessarily best quality. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. • Right Quantity: The manufacturing organization should produce the products in right number. If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of products. • Right Time: Timeliness of delivery is one of the most important parameter to judge the effectiveness of production department. So, the production department has to make the optimal utilization of input resources to achieve its objective. • Right Manufacturing Cost: Manufacturing cost are established before the product is actually manufactured. Hence, all attempts should be made to produce the products at pre-established cost, so as to reduce the variation between actual and the pre-established cost.

18. Operations Management: • ‘Operations management is often used along with production management in literature on the subject’. It is therefore, useful to understand the nature of operations management. • Operations are purposeful actions or activities which are done methodically as part of a plan of work by a process that is designed to achieve the pre-desired objectives. • ‘Operations management’ is understood as the process whereby resources or inputs are converted into more useful products.

19. Framework of Operations Management: • Operations managers are concerned with planning, organizing and controlling the activities which affect human behavior through models. • Planning: Activities that establishes a course of action and guide future decision making is planning. The operations manager defines the objectives for the operations sub-system of the organization and the policies and procedures for achieving the objectives. This stage includes clarifying the role and focus of operations in the organizations overall strategy. It also involves product planning, facility designing and using the conversion process. • Organizing: Activities that establishes a structure of tasks and authority. Operation mangers establish a structure of roles and flow of information within the operations sub-system. They determine the activities required to achieve the goals and assign authority and responsibility for carrying them out. • Controlling: Activities that assure the actual performance in accordance with planned performance. To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual outputs and comparing them to planned operations management. Controlling costs, quality and schedules are the important functions here.

20. Framework of Operations Management: • Behaviour: Operations managers are concerned with how their efforts to plan, organize and control affect human behaviour. They also want to know how the behaviour of sub ordinates can affect management’s planning, organizing and controlling actions. Their interest in decision making behavior. • Models: As operation mangers plan, organize and control the conversion process, they encounter many problems and must make many decisions. They can simplify their difficulties using models like aggregate planning models for examining how best to use existing capacity in short-term, break even analysis to identify break even volumes, linear programming and computer simulation for capacity utilization, decision and analysis for ling term capacity problem of facility expansion, simple median model for determining best locations of facilities etc.

21. Framework of Operations Management:

22. Objectives of Operations Management: • Customer Service: The first objective of operating systems is the customer service to the satisfaction of customer wants. Therefore, customer service is a key objective of operations management. • Resource Utilization: Another major objective of operating systems is to utilize resources for the satisfaction of customer wants effectively, i.e., customer service must be provided with the achievement of effective operations through efficient use of resources. • Operations management is concerned essentially with the utilization of resources, i.e., obtaining maximum effect from resources or minimizing their loss, under utilization or waste. • Operations management is also concerned with the achievement of both satisfactory customer service and resource utilization. An improvement in one will often give rise to deterioration in the other.

23. DISTINCTION BETWEEN PRODUCTION & OPERATIONS MANAGEMENT: • There are at least two points of distinction between production management and operations management. • First, the term production management is more used for a system where tangible goods are produced. Whereas operations management is more frequently used, where various inputs are transformed in to intangible services. Viewed from this perspective, operations management will cover such service organizations as banks, airlines, utilities, pollution control agencies, super bazaars, educational institutions, libraries, consultancy firms and police departments in addition of course to manufacturing enterprises. • The second distinction relates to the evolution of the subject operations management from production management. Operations management is the term that is used now days. Production management precedes operations management in the historical growth of the subject.

24. Scope of Production and operations management:

25. Scope of Production and operations management: • Following are the activities which are listed under production and operations management functions: 1. Location of facilities 2. Plant layouts and material handling 3. Product design 4. Process design 5. Production and planning control 6. Quality control 7. Materials management 8. Maintenance management.

27. 1. 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. • The selection of location is a key-decision as large investment is made in building plant and machinery. • The purpose of the location study is to find the optimal location that will results in the greatest advantage to the organization.

28. 2. 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’. • It is a specialized activity for a modern manufacturing concern, with 50 to 75% of the cost of production.

29. 3. Product design • Product design deals with conversion of ideas into reality. • Every business organization have to design, develop and introduce new products as a survival and growth strategy. • Developing the new products and launching them in the market is the biggest challenge faced by the organizations. • The entire process of need identification to physical manufactures of product involves three functions: • marketing, • product development, • manufacturing.

30. 4. 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. • Hence, the important decisions in process design are to analyze the workflow for converting raw material into finished product and to select the workstation for each included in the workflow.

31. 5. 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. • The principle of production planning and control lies in the statement ‘First Plan Your Work and then Work on Your Plan’. Main functions of production planning and control includes planning, routing, scheduling, dispatching and follow-up. • Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen. • Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products. Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape.

32. 5. Production and planning control • Scheduling determines the programme for the operations. Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it determines the sequence of operations to be followed. • Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a particular work, which has already been planned under ‘Routing’ and ‘Scheduling’. Therefore, dispatching is ‘release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts’.

33. 6. 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 can also be defined as ‘that industrial management technique by means of which product of uniform acceptable quality is manufactured’. • It is the entire collection of activities which ensures that the operation will produce the optimum quality products at minimum cost.

34. 7. 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. • To minimize material cost. • To purchase, receive, transport and store materials efficiently and to reduce the related cost. • To cut down costs through simplification, standardization, value analysis, import substitution, etc. • To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply at reasonable rates. • To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios.

35. 8. Maintenance management. • In modern industry, equipment and machinery are a very important part of the total productive effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very important that the plant machinery should be properly maintained. • To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost. • To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption. • To ensure the availability of the machines, buildings and services required by other sections of the factory for the performance of their functions at optimal return on investment.

36. CHARACTERISTICS OF PRODUCTION & OPERATIONS MANAGEMENT: • Manufacturing as Competitive Advantage: • In the past production was considered to be like any other function in the organization. When demand was high and production capacities were inadequate, the concern was to somehow must all inputs and use them to produce goods which would be grabbed by market. But today’s scenario is constraining. Plants have excess capacitates, competition is mounting and firms look and gain competitive advantage to survive and succeed. • by implementing the techniques like, • Total quality management (TQM) • Just – in – time (JIT) • Focused factory • Flexible manufacturing systems (FMS) • Computer integrated manufacturing (CIM)

37. CHARACTERISTICS OF PRODUCTION & OPERATIONS MANAGEMENT: 2. Services Orientation: • The entire manufacturing needs to be geared to serve, • 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

38. CHARACTERISTICS OF PRODUCTION & OPERATIONS MANAGEMENT: 3. Disappearance of Smokestacks: • Commencing from industrial revolution till the middle of the 20th century, production system was dominated by smokestacks. These smokestacks represented industrial establishments which ejected thick smoke polluting the environment around. Smokestacks not only disgorged reek, they produce nauseating smell, generated dust, created sound and in general were resembling ghosts. Not that they have become extinct but are disappearing gradually. 4. Small Has Become Beautiful: • It was E.F.Schumacher who said that, ‘Small is Beautiful’ opposed giant organizations and increased specialization. He advocated instead, intermediate technology based on smaller working units, community ownership and regional workplaces utilizing local labour and resources.

39. POM DEPARTMENT: • The POM department is headed by a senior vice president, who organizes the department with the help of plant manager as well as staff heads, who are reporting to him/her. • Duties And Responsibilities Of Production Managers In Manufacturing Organizations: • Planning the geographical location of the factory. • Purchasing production equipments. • Layout of equipments within the factory. • Designing production processes and equipments.

40. POM DEPARTMENT: • Product design • Capacity planning • Production planning and scheduling. • Production control • Inventory management • Supply chain management • Quality control • Production equipment maintenance and repair. • Measurement & monitoring of productivity. • Industrial relations • Health and safety • Staff selection and Liaoning • Budgeting and capacity planning.

41. Emerging Role of the Production and Operations Manager: The following are the new responsibilities of production and operations managers in India: • 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 like 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. • 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 and internal quality auditor in quality certification programming such as ISO 9000 series and ISO 14000.

42. CLASSIFICATION OF PRODUCTION SYSTEM OR TYPES OF MANUFACTURING SYSTEMS Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems.

43. JOB SHOP PRODUCTION • Job shop production are characterized by manufacturing of one or few 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 high variety of products. • A job shop comprises of general purpose machines arranged into different departments. • Each job demands unique technological requirements, demands processing on machines in a certain sequence.

44. JOB SHOP PRODUCTION • Characteristics 1. High variety of products and low volume. 2. Use of general purpose machines and facilities. 3. Highly skilled operators who can take up each job as a challenge because of uniqueness. 4. Large inventory of materials, tools, parts. 5. Detailed planning is essential for sequencing the requirements of each product, capacities for each work center and order priorities. • Advantages 1. Because of general purpose machines and facilities variety of products can be produced. 2. Operators will become more skilled and competent, as each job gives them learning opportunities. 3. Full potential of operators can be utilised. 4. Opportunity exists for creative methods and innovative ideas. • Limitations 1. Higher cost due to frequent set up changes. 2. Higher level of inventory at all levels and hence higher inventory cost. 3. Production planning is complicated. 4. Larger space requirements.

45. BATCH PRODUCTION • Batch production is defined by American Production and Inventory Control Society (APICS) “as a form of manufacturing in which the job passes through the functional departments in lots or batches and each lot may have a different routing.” • It is characterised by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales.

46. BATCH PRODUCTION • Characteristics 1. When there is shorter production runs. 2. When plant and machinery are flexible. 3. When plant and machinery set up is used for the production of item in a batch andchange of set up is required for processing the next batch. 4. When manufacturing lead time and cost are lower as compared to job order production. • Advantages 1. Better utilisation of plant and machinery. 2. Promotes functional specialisation. 3. Cost per unit is lower as compared to job order production. 4. Lower investment in plant and machinery. 5. Flexibility to accommodate and process number of products. 6. Job satisfaction exists for operators. • Limitations 1. Material handling is complex because of irregular and longer flows. 2. Production planning and control is complex.

47. MASS PRODUCTION • Manufacture of discrete parts or assemblies using a continuous process are called mass production. This production system is justified by 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.

48. MASS PRODUCTION • Characteristics • Mass production is used under the following circumstances: 1. Standardization of product and process sequence. 2. Dedicated special purpose machines having higher production capacities and output rates. 3. Large volume of products. 4. Shorter cycle time of production. 5. Lower in process inventory. 6 Perfectly balanced production lines. 7. Flow of materials, components and parts is continuous and without any back tracking. 8. Production planning and control is easy. 9. Material handling can be completely automatic.

49. MASS PRODUCTION • Advantages • Following are the advantages of mass production: 1. Higher rate of production with reduced cycle time. 2. Higher capacity utilisation due to line balancing. 3. Less skilled operators are required. 4. Low process inventory. 5. Manufacturing cost per unit is low. • Limitations • Following are the limitations of mass production: 1. Breakdown of one machine will stop an entire production line. 2. Line layout needs major change with the changes in the product design. 3. High investment in production facilities. 4. The cycle time is determined by the slowest operation.

50. 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.