PRODUCTION & OPERATION
MANAGEMENT
UNIT - 1
CH - 1
INTRODUCTION
CONCEPT OF OPERATIONS MANAGEMENT
• Operations Management is concerned with the efficient conversion of an
organisation’s resources into the goods and services that it has been set up to
provide.” - Barnet
• “Operations Management is concerned with creating, operating and controlling a
transformation system which takes inputs of a variety of resources and produces
outputs of goods and services which are needed by the customer.” - Naylor
• “It is the management of systems or processes that create goods and/or provide
services.” - Stevenson
• Operations management is the planning, scheduling and controlling of activities that
transform inputs by way of raw- materials, capital, machinery, labour, information
and time into outputs in the forms of poducts and services of higher value than
inputs.
CONCEPT OF PRODUCTION MANGEMENT
• Production Management refers to the application of management principles to
production function in a factory. In other words, production management involves
application of planning, organising, directing and controlling to the production
function.
• According to E.S. Buffa, “ Production Management deals with decision making
related to production processes so that the resulting goods or services is produced
according to specifications, in the amounts and by the schedule demanded and at
minimum cost”.
• According to H.A. Harding, “Production Management concerned with those
processes which convert the inputs into output. The inputs are various resources like
raw- material, men, machines, methods etc. and the outputs are goods and services.”
5M’s of Production
1) Men - Human Resource
2) Money - Financial Resource
3) Material - Natural Resource
4) Machine - Tools & Equipment
5) Management - Process of
controlling all elements of
production.
DIFFERENCE BETWEEN PRODUCTION MANAGEMENT
AND OPERATIONS MANGEMENT
S.NO PRODUCTION MANAGEMENT OPERATIONS MANAGEMENT
1 The term “Production Management” is The term “Operations Management” is more
more used for a system where tangible frequently used where various inputs are
goods are produced. transferred into intangible services.
2. The term “Production Management” The term “Operations Management” is being
preceds operation management in the used now a days.
historical growth of the subject.
3. The management of manufacturing of The functions dealing with the operations of
products is referred to as production services are covered under operations
management. management.
4. Founded in Enterprises where Founded in Banks, Hospitals, Companies
production is undertaken. including production companies, Agencies etc.
OBJECTIVES OF OPERATIONS MANAGEMENT
2 COST OBJECTIVES - The cost minimisation is
1 PERFORMANCE OBJECTIVES an important system objectives.Costs can be Explicit (
a) Efficiency visible) or implicit (hidden or invisible.
EXPLICIT COST
b) Effectiveness
i. Material cost
c) Quality ii. Direct & Indirect labour Cost
d) Lead Times iii. Maintenance cost
iv. Scrap/Rework Cost
e) Capacity utilisation
IMPLICIT COST
i. Cost of carrying inventory
ii. Cost of delayed deliveries
iii. Cost of inspection
iv. Downtime cost
v. Opportunity cost
OBJECTIVES OF PRODUCTION MANAGEMENT
1. ULTIMATE OBJECTIVES 2. INTERMEDIATE
a) Produce at pre- established OBJECTIVES
cost a) Acqisition of machinery &
b) Produce according to Equipment
pre-decided quality b) Utilisation of machinery and
c) Produce at minimum cost equipment
d) Produce atccording to pre- c) Optimum utilisation of
decided schedule materials and manpower
d) Provide proper & adequate
services.
OPERATIONS MANAGEMENT DECISIONS
1. STRATEGIC DECISIONS 2. OPERATIONAL
(Long Term) DECISIONS (Short term)
a) Product Selection & Design a) Production planning,
b) Process selection and schedule & Control
planning b) Inventory planning and
c) Facilities Location control
d) Facilities layout & materials c) Quality Assurance
handling d) Work & Job design
e) Capacity Planning e) Mantenance & Replacement
f) Cost Reduction & Control
MONITORING AND FEEDBACK CONTROL
• Basic elements of monitoring feedback and control - be it
control of quality, quantity, time, inventory or costs are-
1. Establish performance standard
2. Measure actual performance
3. Compare the difference between the actual &
planned
4. Take appropriate remedial actions
Scope & Functions of Production & Operations
Management
1. Selection of plant location
2. Plant Layout Activities
3. Designing the Prodution System
4. Production planning
5. Inventory control
6. Quality Control
7. Work Study
8. Maintenance & Replacement
9. Production Control
IMPORTANCE OF PRODUCTION & OPERATION
MANAGEMENT
1. High Productivity
2. Higher Quality
3. Reduce of wastage
4. Shorter Manufacturing Lead Time
5. Plant Utilities
6. Safety & Health
7. Better customer Service
8. Use of Latest Technology
Difference between Product & Services
S.No Products Services
1. The end Product is tangible Services are intangible and perishable consumed
in the process of their production
2. These can be produced for stock Services are non- inventoriable
3. There is a little contact with the ultimate There is a high contact with clients or customers
consumers
4. The production process is complex and There is a simple processing
interrelated
5. Here the market served are regional, Market served by production system are usually
national and international. local
6. There are large units to produce Relatively small units to serve local markets.
products, that can take advantage of
economies of scale.
7. Demands for products varies weekly, Demand for services commanly variable on
monthly and variable on seasonal basis. hourly, daily and weekly basis.
Cont....
S.No Products Services
8. Location of manufacturing industry may be Location is dependent on the location of local
reginal, national & international. customers, clients and users.
9. Manufacturing is Capital incentives Operations may be Labour incentives
10. Product Quality can be easily determined. Service Quality is determined with difficulty
11. It requires long lead time it requires short lead times.
PROBLEMS OF OPERATION MANAGEMENT
1. Problem of location of the plant
2. Problem of plant layout
3. Problem of product designing
4. Problem of inventory and production control
5. Problem of quality control
6. Problem of labour control
7. Problems of cost control & improovement
8. Problems regarding socio-economic environment
EMERGING ROLE OF OPERATION MANAGEMENT
• After 1991 the liberalisation in the country has brought about major changes
in the Indian economy or business scenario. The interview multinational
corporations into almost every fare of industry has created a sense of
competition in the Indian industry.
• Thus the role of production and operation managers in India has increased
manifold. New dimensions which have been added to the responsibilities of
the production and operations managers in India today or as under:-
1. To take part in strategic decisions making in the organisation
2. To take part in the implementation and use of ERP software in the
organisation
3. The automate processes according to the requirements of the organisations.
4. To enhance the research and development efforts of the organisation for
becoming self-reliant in developing new technologies
CONT.....
5. To implement the environment in pollution norms
established by the government from time to time
6. Any juice in maintaining long term strategy relationships
with suppliers
7. To act as internal quality auditors in certification
programmes such as ISO 9000
8. Increased attention to timely implementation of projects.
9. Increased attention to technology management in view of
joint ventures of multinational corporations with domestic
companies
TRENDS & CHALLENGES IN PRODUCTION &
OPERATIONS MANAGEMENT
1. Productivity improvement
2. Global Competition
3. Rapid Technological change
4. Ethical issues
5. Work force Diversity
6. Environmental issues
MANAGEMENT PRACTICE IN INDIA
• Mohanty and Nair in 1986 conducted a survey of 100
Indian companies that have been an annual turnover
rupees 6 lakh from various sectors both private and public
including chemicals engineering fertilizers and textiles.
• The objective was to identify the critical decision areas in
production management and to create responsibility for
Indian production manager.
Some interesting findings of the survey are as under
:-
1. The prime objective of most operation managers is to ensure customer
satisfaction by meeting the due dates and reducing the cost of production
2. The major problem faced by operation managers seems to be production
scheduling and capacity planning
3. Operation managers in all industry have maximum responsibility in the areas
of production planning scheduling and production control and spend their
maximum time in these areas
4. For a large number of operation managers the most important part of the job
is to ensure efficient utilisation of all resources, be it equipment, human
resources.
5. For a large number of operation managers, computers are not yet perceived
as important tool for decision making
HISTORY OF OPERATIONS MANAGEMENT
Year/ Period Concept/Tools and System used Developers/ Originators
of Concept
14-16 Century Evolution of Production Management
18th Century New Technology of Production Process Adam Smith & Charles Babbage
management
1895 Scientific management principles (Work F.W. Taylor, Frank & Lillian, Gilberth
Study), Motion study for psychological factors Henry Gantt
activity scheduling chart
1935 Hawthorne studies of worker motivation Elton Mayo
1950's Operation research for decision making (long Many Researchers
term medium term short term decisions) by
Critical Path Method (CPM),Program
Evaluation and Review Technique
(PERT),Waiting Line Theory
1970’s Computers for Inventory Control, Material IBM, Joseph Orlicky, Oliver wieght
Resource Planning (MRP)
Year/ Period of Concept/Tools and System used Developers/ Originators
Concept
1980's Just In Time (JIT), Total Quality Montrol (TQM), TOYOTA
Kanban system CAD/CAM, COMPUTER
INTEGRATED MANUFACTURING (CIM)
FLEXIBLE MANUFACTURING SYSTEM (SMS)
1990's TOTAL QUALITY MANAGEMENT TQM, Asqc (U.S.) IOS, (England)
CONCURRENT CIM ENGINEERING VALUE Michael Hammer, Oracle, SAP
ENGINEERING (Germany)
BUSINESS PROCESS ENGINEERING
SUPPLY CHAIN MANAGEMENT
2000s Logistics enterprise resource planning (ERP),
E-Commerce, E-business
Relationship of Operations Management with other
Functional Areas
• The relationships of operations management can be understood with the help
of following discussion:
1. Planning
2. Organising
3. Controlling
4. Direction
5. Coordination
6. Resources
7. Behaviour
