Lecture 1 – Production and Operations Management (Detailed Notes

in Easy Words)

Production

Production means the process of making goods or services by using

resources such as raw materials, machines, human effort, money, and
information. In simple words, production is about changing inputs into
outputs that are useful for customers. Without production, no business can
survive because production is what creates value.

For example, a car factory takes steel, rubber, and glass (inputs) and,
through the use of workers and machines (process), produces a car (output).
Similarly, in a restaurant, vegetables, rice, and spices are combined through
cooking (process) to create meals (output). Production is not limited to
factories; it also exists in services. A hospital “produces” health by using
doctors, medicines, and equipment to treat patients.

Operations

Operations is a wider term that includes all the activities that support
production. Production only means creating something, while operations
means managing the whole process of production and delivery. Operations
include planning how much to produce, buying raw materials, managing
workers, checking quality, transporting goods, and handling customer needs.

For example, in a bakery, baking bread is production, but operations involve

much more. The bakery manager has to buy flour, sugar, and eggs on time,
hire and train bakers, package the bread, deliver it to shops, and make sure
customers are happy. So, operations cover the complete cycle from raw
material to customer satisfaction.

Production System

A production system is the complete structure that shows how inputs are
turned into outputs. It is like a chain where every part plays a role in creating
a product or service. A production system includes suppliers, inputs,
processes, outputs, customers, and managers.
For example, in a hospital’s production system, suppliers provide medicines
and equipment, inputs include doctors, nurses, and patients’ data, the
process is the treatment, the output is healthy patients, customers are the
patients themselves, and managers are the hospital administrators. In a car
factory, suppliers provide raw materials like steel and plastic, inputs include
machines and workers, the process is assembling cars, the output is the final
vehicles, customers are buyers, and managers oversee the entire operation.

Production and Operations Management (P/OM)

Production and Operations Management means managing all the

activities of production. It includes planning, organizing, directing, and
controlling production processes. It also means coordinating with other
departments such as finance, marketing, and human resources so that
production runs smoothly. The main purpose of P/OM is to ensure efficiency,
cost-effectiveness, and quality in production.

For example, in a mobile phone company, P/OM ensures that all parts like
chips and batteries are available on time, the factory works efficiently,
workers are trained, quality checks are performed, and the finished phones
are delivered to customers on schedule. If any one of these activities fails,
the entire production system can collapse.

Role of Operations Manager

The operations manager is like the captain of the production ship. Their role
is not only to ensure that goods and services are produced but also that they
are produced in the right amount, with the right quality, and delivered at the
right time. They are responsible for efficiency, which means making the best
use of resources with minimum waste. They must ensure high quality so that
customers remain satisfied. They also balance supply and demand so that
the company produces enough but not more than needed. Apart from this,
they motivate employees, develop their skills, and adapt to changes such as
new technology or shifting customer needs.

For example, in an airline, the operations manager ensures that flights leave
on time, aircraft maintenance is done regularly, pilots and crew are well
trained, and passengers are satisfied. If operations managers fail, the airline
will face delays, safety issues, and unhappy customers.
Production of Goods and Services

Production can be of two main types: goods and services. Goods are
tangible products that you can touch, store, and transport. Examples include
cars, furniture, clothing, and mobile phones. Services are intangible outputs
that cannot be touched or stored but provide value to customers. Examples
include teaching in a school, treatment in a hospital, or traveling in an
airline.

The difference between the two is that goods can be produced, stored, and
sold later, while services are produced and consumed at the same time. For
example, bread can be baked today and sold tomorrow, but a bus ride
happens at the moment the service is delivered. However, both goods and
services need proper planning, resource management, and quality control.

The Industrial Revolution

The Industrial Revolution was a major turning point in production history. It

started in Great Britain around 1760 and continued until the mid-19th
century. Before the revolution, most goods were made by hand in small
workshops. After the revolution, machines powered by steam and later
electricity replaced manual work, and factories became the main centers of
production.

During this period, industries such as textiles became highly mechanized,

producing cloth at much faster rates than hand weaving. Steam engines,
machine tools, and new methods of iron production transformed industries.
This revolution lowered production costs, increased efficiency, created new
jobs, and encouraged global trade.

For example, a weaving loom powered by steam could make cloth in a few
hours, which a hand weaver would take days to produce. This shift marked
the birth of modern industrial society.

Contributions of Key Thinkers and Innovators

Several important thinkers and innovators shaped production and operations.

Adam Smith introduced the idea of division of labor in his book The Wealth of
Nations (1776). Division of labor means breaking a large job into smaller
tasks so workers can specialize. For example, in a pin factory, one worker
draws the wire, another cuts it, and another sharpens it. Together they
produce thousands of pins, compared to only a few if each worked alone.

Eli Whitney introduced interchangeable parts, meaning that identical parts

could be used in any product of the same type. For example, if one part of a
gun broke, it could be easily replaced with another identical part, making
repairs faster and production cheaper. Henry Ford expanded on this idea by
creating the assembly line system, where cars moved along a conveyor belt
and each worker performed a specific task repeatedly. This made mass
production of affordable cars like the Ford Model T possible.

Charles Babbage studied how to reduce costs by dividing work between

skilled and unskilled workers. For example, expert engineers handled
complex tasks, while unskilled workers handled simple ones, which saved
money. Frederick Winslow Taylor, known as the father of Scientific
Management, believed that work could be studied scientifically to find the
best and most efficient way to do tasks. He used time and motion studies to
measure how long each step of work took and eliminated wasteful steps.
Finally, Walter Shewhart and George Edwards introduced modern quality
assurance at Bell Laboratories, using statistical tools to monitor and improve
production quality.

Functions of Management in Production and Operations

Production and Operations Management relies on the general functions of

management, which are planning, organizing, directing, controlling, and
staffing. Planning involves deciding what, when, and how much to produce.
Organizing means arranging resources like workers, machines, and money to
carry out production. Directing means guiding and motivating workers to
achieve targets. Controlling involves checking whether actual performance
matches the plan and correcting any mistakes. Staffing means hiring,
training, and placing the right people in the right jobs.

Planning also happens at three levels. Strategic planning is long-term and

focuses on big goals, such as expanding internationally in five years. Tactical
planning is medium-term, focusing on resource allocation, such as opening
two new factories in the next two years. Operational planning is short-term
and deals with daily activities, such as producing 200 units per day.
Lecture 2 – Planning and Management in Production and Operations
(Easy Words)

Functions of Management

In Production and Operations Management, managers perform five basic

functions: planning, organizing, directing, controlling, and staffing. Planning
means deciding in advance what should be done. Organizing is about
arranging resources like workers, machines, and money so that work can be
done smoothly. Directing means guiding and motivating workers to achieve
goals. Controlling is checking if the work is done according to the plan and
fixing any problems. Staffing means hiring the right people, giving them
training, and putting them in the right jobs.

For example, in a car company, planning means deciding how many cars
should be produced in a year. Organizing is assigning workers and machines
to different production areas. Directing is encouraging workers to meet
targets. Controlling is checking if the cars meet quality standards. Staffing is
hiring skilled mechanics and engineers.

Levels of Planning (Hierarchical Planning)

Planning happens at three levels: strategic, tactical, and operational. Each

level has a different time period and focus.

Strategic Planning is long-term planning, usually for 5–10 years. It includes

big decisions like what products to make, which markets to enter, and where
to build factories. These decisions are made by top managers and involve a
lot of risk. For example, when Toyota decided to produce electric cars and
sell them worldwide, that was a strategic plan.

Tactical Planning is medium-term planning, usually for 1–3 years. It focuses

on how to use resources to achieve the long-term goals. This is done by
middle managers and has moderate risk. For example, if a company decides
to buy new machines in the next two years to increase production, this is a
tactical plan.

Operational Planning is short-term planning, usually for daily, weekly, or

monthly activities. It focuses on routine tasks like worker schedules, machine
use, inventory control, and quality checks. These decisions have little risk.
For example, a manager planning the work shifts of workers for the next
week is doing operational planning.

Areas of Planning and Decision Making in POM

Production and Operations Management requires careful planning and

decision making in many areas.

One area is Business Strategy. Managers must decide what the company’s
main plan is, how operations will support this plan, what products will be
made, where they will be made, and how they will reach customers. For
example, Apple decided to locate factories in China to support its global
strategy of fast and cheap production.

Another area is Product Design and Development. Managers must decide

what kind of product to make, what features it should have, and how it
should be produced. For example, when Samsung designs a new mobile
phone, it decides the size, style, functions, and technology to use.

Capacity Planning and Facility Location are also important. Capacity

planning means deciding how much the company should be able to produce
in the future. Facility location means choosing where to set up factories or
warehouses. For example, Amazon builds warehouses close to cities so that
deliveries are faster.

Reliability, Maintenance, and Human Resources

Machines and equipment must work properly and consistently for production
to run smoothly. This is called reliability and maintenance. Managers must
plan regular servicing and repairs to avoid breakdowns. For example, in a
biscuit factory, machines must be cleaned and maintained regularly to make
sure biscuits are produced safely and on time.

Human resources are also very important. Job design means deciding what
tasks each worker should do and how the work should be organized. HR
planning means hiring the right people and giving them proper training. For
example, in a call center, job design ensures each employee answers
customer calls, while HR ensures they are trained to handle customers
politely and efficiently.
Inventory and material management is another key area. Managers must
decide how much raw material to keep, when to buy it, and how to store it. If
inventory is too much, money is wasted on storage. If it is too little,
production may stop. For example, a clothing company must plan fabric
inventory so that production does not stop but costs also remain under
control.

Aggregate Production Planning and Scheduling

Aggregate production planning is about making medium-term plans for total

production. It matches supply with demand, making sure resources are used
effectively. Master production scheduling takes these plans and makes them
specific by deciding how many units of each product will be produced at
what time.

For example, a furniture company may decide to produce 20,000 chairs in six
months (aggregate plan). Then, the company prepares a schedule to produce
3,000 chairs every month (master schedule). This helps in balancing work
and meeting customer demand.

Material Requirement Planning, Project Management, and Quality

Control

Material Requirement Planning (MRP) helps managers know exactly what raw
materials are needed, how much is required, and when it should be ordered.
This prevents shortages and avoids waste. For example, a mobile company
uses MRP to order batteries, screens, and chips at the right time to assemble
phones without delay.

Project management is used for big, complex projects that involve many
activities. Managers make sure tasks are done in the right order, within
budget, and on time. For example, building a new airport is a project that
requires coordination of construction, electricity, safety systems, and
communication networks.

Quality assurance and control are also very important. Quality assurance
ensures that products are designed and made in a way that satisfies
customers. Quality control means checking finished products to make sure
they meet standards. For example, in a pharmaceutical company, every
batch of medicine is tested to make sure it is safe and effective before being
sold.

Case Example: COVID-19 and Supply Chains

The coronavirus pandemic caused serious problems for supply chains all over
the world. Factories were closed, transport was delayed, and customer
demand changed suddenly. Some goods like masks, ventilators, and
sanitizers were in very high demand, while services like travel and tourism
collapsed. Companies struggled to keep goods moving.

This crisis showed that companies must have strong and flexible planning
systems. Many businesses adapted quickly by changing their production. For
example, clothing factories started making masks, and car companies began
producing ventilators. This shows how planning and decision making in
operations must be flexible to deal with unexpected challenges.

Lecture 3 – Capacity Planning in Production and Operations

Introduction to Capacity

Capacity means the maximum amount of goods or services that a production

system can produce in a given time. It sets the upper limit for what a factory,
hospital, restaurant, or any other organization can deliver. In simple words,
capacity answers the question: “How much can we produce?”

For example, a textile factory may be able to produce 10,000 shirts per
week. A cinema may have 300 seats, so its capacity is 300 viewers at one
time. A hospital with 100 beds has the capacity to admit 100 patients.
Without understanding capacity, managers cannot match production with
customer demand.

Strategic Capacity Planning

Strategic capacity planning is the process of making long-term decisions

about how much capacity a company will need in the future. These decisions
are usually made for 5–10 years and are linked with the overall business
strategy. Strategic capacity planning ensures that resources like workers,
machines, and facilities are enough to meet future demand.
For example, Tesla’s decision to open new factories in Germany and China is
a strategic capacity planning decision. It matches their long-term goal of
increasing electric car production globally. If Tesla had underestimated
demand, customers would have faced long waiting times. If it had
overestimated, money would have been wasted on unused factories.

Importance of Capacity Planning

Capacity planning is very important because it directly affects customer

satisfaction and company costs. If a company’s capacity is too low, it will not
be able to meet demand, and customers will turn to competitors. If capacity
is too high, resources will remain unused, and money will be wasted.

For example, an airline must plan the number of flights and seats available. If
there are fewer flights than passengers, customers will be frustrated. If there
are too many flights but not enough passengers, the airline will face heavy
losses. Good capacity planning ensures a balance between demand and
supply, reduces costs, and helps the company remain competitive.

Capacity Planning in POM

In Production and Operations Management, capacity planning is not only

about the amount of output but also about choosing the right type of
capacity. This includes deciding the size of facilities, number of workers,
type of machines, and technology to be used. Managers also need to plan for
future growth and unexpected changes in demand.

For example, a fast-food restaurant must decide how many ovens, fryers,
and drink machines it needs for daily operations. If customer demand
increases during weekends or holidays, managers must plan for extra staff or
equipment. This shows that capacity planning is both about the present and
the future.

Types of Capacity

There are two main ways to understand capacity: design capacity and
effective capacity.
Design Capacity means the maximum output a system is designed to
produce under ideal conditions. It assumes that everything runs perfectly
with no delays, no breakdowns, and no mistakes.

Effective Capacity means the actual output that can be produced under
normal working conditions. It considers real-world problems like machine
breakdowns, maintenance, worker breaks, or rework.

For example, a machine may be designed to produce 1,000 bottles per day
(design capacity). But in real life, due to cleaning, maintenance, and worker
rest times, it produces only 850 bottles (effective capacity). Managers always
use effective capacity for planning because it shows the realistic output.

Capacity Measurement: Theoretical vs. Demonstrated Capacity

Another way of measuring capacity is by comparing theoretical capacity

and demonstrated capacity.

Theoretical capacity is the maximum possible output assuming perfect

conditions. Demonstrated capacity is based on actual past performance,
considering delays, defects, or machine stoppages. Demonstrated capacity is
always less than theoretical capacity.

For example, a workshop is designed to produce 500 units per shift, 5 days
per week. Theoretical capacity is 500 × 5 = 2,500 units per week. But if 10%
of time is lost due to maintenance and setup, the actual demonstrated
capacity is 0.90 × 2,500 = 2,250 units per week.

This shows that theoretical capacity is like the “dream output,” while
demonstrated capacity is the “real output.”

Steps in Capacity Planning

Managers usually follow several steps when planning capacity. First, they
estimate future demand by looking at customer needs, market trends,
and sales forecasts. Next, they measure current capacity to see how
much can be produced. Then, they compare capacity with demand. If
demand is greater, new capacity must be added. If capacity is greater,
resources should be reduced or reallocated. Finally, they make long-term
decisions about facilities, technology, and workers.
For example, if a laptop company expects sales to double in the next 5 years,
it must check if current factories can meet this demand. If not, it may build a
new plant, buy more machines, or outsource part of production.

Numerical Examples of Capacity

Let us take examples from a fast-food restaurant:

1. One grill can cook 2,700 ounces of burgers per hour. If the restaurant
expects demand of 4,000 ounces per hour, the number of grills needed
is 4,000 ÷ 2,700 = 1.48. This means at least 2 grills are required.

2. A fryer can cook 40 pounds of fries per hour. If the restaurant needs
250 pounds per hour, the number of fryers needed is 250 ÷ 40 = 6.25.
So, 7 fryers are needed.

3. One drink spout can serve 3,000 ounces per hour. If customers need
12,000 ounces per hour, then 12,000 ÷ 3,000 = 4. So, 4 spouts are
needed.

These examples show how capacity planning calculations help businesses

decide the right number of machines or equipment to meet customer
demand.

Challenges in Capacity Planning

Capacity planning is not always easy because the future is uncertain.

Demand may increase or decrease suddenly due to changes in customer
preferences, economic conditions, or global events. Technology may also
change, making old machines outdated.

For example, during the COVID-19 pandemic, many companies faced sudden
changes in demand. Hospitals needed more ventilators, while airlines faced
very low passenger numbers. Companies that had flexible capacity planning
were able to adjust quickly, while others suffered losses.