PRODUCTION AND OPERATION MANAGEMENT @iOsamazaid

The operations function in organizations

The operation system (function) of an organization is that produce the organization physical goods or services. All
organizations are same in their operations system because they all have the conversion process. Conversion process
is the process of changing inputs of labor, capital, land, and management into outputs of goods and services. Once
goods and services are produced, they are converted into cash (sold) to acquire more resources to keep the
conversion process alive.
For all operating systems the general goal is to create some kind of value added, so that the output are worth more to
consumers. Value added is the blending inputs into a product or service, the increase value of outputs compared to
the sum of the values of inputs.
The random fluctuations consist of unplanned or uncontrollable environmental or organizational influences that
cause planned and actual output to differ.
Feedback provide information to managers without feedback managers cannot control operations because they don't
know the results of their decisions.
Technology of conversion is the level of scientific sophistication in plants, equipment, and skills in the conversion
process.
Manufacturing versus service operations
A conversion process that includes manufacturing or production yields a tangible output is a product. In contrast, a
conversion process that includes intangible output will be services. Distinguishing between manufacturing and
services operations can be difficult. Generally we consider characteristics such as: tangible and intangible nature of
outputs, consumption of outputs, nature of work, degree of customer contact, customer participation in conversion,
measurement of performance.
Manufacturing of products are tangible, customers consume it overtime, jobs that use less labor and more
equipment, little customer contacts, no customer participation in conversion process. Services on the other hand is
characterized by intangible outputs, output that customers consume immediately, jobs that use more labor and less
equipment’s, direct customer contact, frequent customer participation in conversion process.
A system view of operations
System is the collection of objects related by regular interaction and interdependence. A system model of an
organization can be identifies a subsystem. In the organization system there are many subsystems like human
resource management, r&d, finance, operations administration and marketing. These systems are not interdependent
and are interrelated but marketing, finance and operations subsystems are interrelated.
Historical evolution of production and operation management
For over two centuries operation management has been recognized as an important factor, progressing through a
series of names manufacturing, production and operation management all which describes the same discipline. The
traditional view of manufacturing management begin in the eighteenth century when adam smith recognized the
specialization of labor. He break down jobs into subtasks. Frederick w taylor implement smith theories then
production management becomes more widely accepted in 1930.
Administrative management
The process of creating information systems and supervising its flow from and to others within an organization.
Most job functions within a business involve performing some form of administrative management in order to store
and pass on information to those within the company who need to use it in order to contribute to the business.
Classical management
It emphasizes rationalization and standardization of work through division of labor, time and motion studies, work
measurement, and piece-rate wages.
Taylor work on soldering employees and piecework pay system, it has several steps
Developing science for each element of job taylor replaced old rule of thumb.
Scientifically select employees and then train them for his responsibilities
Supervise employees

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Continue to plan work but use the workers to get the work done.
Classical management focuses on the economic efficiency at the production core of the organization s. Economic
efficiency is a term that most of the organizations still use today, refers to a ratio of outputs to inputs. Organization
efficiency refers to a ratio of outputs to land capital or labor inputs.
Efficiency (%) = outputs/inputs x 100
Inputs here is labor efficiency.
Process management
One of several theories of classical management, emphasizing management as a continuous process of planning,
organizing, and controlling to influence the other actions.
Planning includes all activities that established a course of action these activities guide future decision making.
Organizing includes all activities that established a structure of tasks and authorities.
Controlling includes all activities that ensure that actual performance is an accordance with planned performance.
Behavioral management
One of the primary theories of management, emphasizing human relations and the behavioral sciences. Human
relations phenomena state that people are complex and have multiple needs and that subordinate supervisor
relationship directly affects productivity. Behavioral science explore how human behavior is affected by leadership,
motivation, communication, interpersonal relationships and attitude changes. The study intended to measure how
changes in the work environment affects the output.
Modeling as management
The school of modelling management is concerned with decision making and mathematical modeling of these
theories. Mathematical modeling is the creation and using of mathematical representation of management problems
and organizing to predict outcomes of proposed courses of action.
Problems of operation managers
There are various type of challenges there for operation managers like to control cost, and quality these are the basic
problems. These will be achieved through labor efficiency to work more in less time with quality. The
manufacturing future project a study conducted at boston university ask from 160 executives about production. The
respondents showed that many of their firm do planning, organizing and controlling. Production planning defining
manufacturing strategy and product redesigning. Organizing includes labor management and relation and
information system. Inventory control, maintenance improvements, and lead time reduction are controlling
activities.
A strategic perspective
A perspective to understand the strategy influence leading to managing conversion operation and results. This
process guide by competitive and market conditions in industry, which provide basis for determining the
organization's strategy. Where is the industry now, and where it will be in the future? What are the existing and
potential markets and what are market opportunity? To compete competitor it is important to establish among the
following characteristics:
Quality (product performance)
Cost efficiency (low product prices)
Dependability (reliable, timely delivery of orders of customers)
Flexibility (change in outputs according to the market)
Most of the organization s aren't beat in all of these four characteristics.
Operations objectives
The overall objective of operation system is to provide conversion capabilities for meeting the organization's goals
and strategy. The sub goal of operations subsystem then must specify the following:
Product or service characteristics
Process characteristics
Product or service quality

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Efficiency: cost control labor, cost control of material, cost control in facility utilization
Customer’s services: production quality to meet expected demand, time delivery of goods or services, adaptability
for future survival.
Strategic planning
A process of thinking though the organization's current mission and environment and then setting forth a guide for
tomorrow decisions and results.
Strategic planning for production and operations
In the production or operation function strategic planning is broad, executives who head the production or operation
management are actively involved strategic planning. Developing the plan consists firm overall strategies as well as
marketing’ finance accounting functions. Production and operation strategic plans are the basis for: operation
planning for facilities and operation planning for using these facilities.
Planning for operations: establishing a program of action for converting resources into goods or services.
Planning the conversion system: establishing a program of action for acquiring the necessary physical facilities to
the used in the conversion process.
Strategic planning approaches for production/operations:
There are three contrasting modes of strategic planning.
1. Entrepreneurial mode
In entrepreneurial mode, strategic planning is done by one person. He takes the full responsibility of planning for the
production department. That is, he does production planning on behalf of the production department. He has
entrepreneurial skills. That is, he is good in planning, organizing, motivating, etc. He is also a strong and bold leader.
2. Adaptive mode
In adaptive mode, the production managers go on changing his plans according to the changes in the environment.
He first makes a big plan, then he breaks it into smaller plans. This is done to adjust with the dynamic environment.
Then he tries to combine all these plans to make a strategic production plan. In this method, the production manager
is not at peace. He works in a disorganized environment. Therefore, his planning is also disorganized.
3. Planning mode
In planning mode, the production manager makes the plan after analyzing the objectives and resources of the
organization. He carefully considers all the factors before making the plan. In this method, his approach is very
rational. He gives prime importance to management science. Therefore, his plan is very logical.
Forecasting
Use of past data to determine future events an objective computation. Forecast is the estimate of future events
achieving by systematically combining and casting forward in a predetermined way that about the past.
A prediction is an estimate of future event achieved through subjective consideration need not occur in any
predetermined way.
Forecasting and operation subsystem
The aggregate demand forecast is normally obtained by estimating expected volume of sales and then converting the
sales into homogeneous production units. It can then be subdivided into components and converted into labor or
material requirements. Forecast are necessary for planning, scheduling and controlling the system for effective and
efficient output of goods and services.
Planning [designing] the system
In planning the system, manager need to forecast aggregate demand so they can design or redesign processes
necessary to meet demand. It include process design, product design and equipment investment and replacement
capacity planning.
Scheduling the system
When deciding how best to use the existing conversion system accurate demand forecast are very important. Which
can be achieved through production planning and scheduling.
Controlling the system
Managers need forecast of demand to make decision about controlling inventory, production, labor and overall cost.
Accurate forecast are needed for the immediate future.

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Figure
Characteristics of demand over time
To systematically analyze historical data for forecasting, manager commonly use a time series analysis - analysts
plot demand data on a time scale, study the plots, and look for consistent shapes or patterns.
Demand pattern
General shape of a time series usually constant, trend, seasonal, or some combinations of these shapes.
In pattern low noise mean all or most of the points lie very close to the pattern. High noise mean many of the points
lie relatively far away from the pattern.
Demand stability: tendency to time series to retain the same general pattern over time.
Noise: dispersion of demand about a demand pattern.
Dependent vs independent demand
Demand for an item that can be link to the demand for another item. E.g. When dollar increases the price of petrol
also increases.
Demand for an item that occur separately of demand for any other item.
Only independent demand needs forecasting.
Forecast error
Forecast error is the most commonly use score keeping mechanism. It is the numeric difference of forecasted
demand and actual demand.
Mad [mean absolute deviation]
A forecast error measure that is the average forecast error without regard to direction: calculated as the sum of
absolute value of forecast error for all period divided by the total number of periods evaluated.
Mad= sum of absolute value of forecast error for all period / n
= summation [forecast error / n] = summation [forecasted demand - actual demand] / n
SMAD
Smooth mean absolute deviation is used to estimate standard deviation.
Bias
A forecast error measure that is the average of forecast error with regard to direction and shows any tendency
consistently to over or under forecast; calculated as the sum of actual forecast error for all period divided by the total
number of periods evaluated.
Bias= sum of absolute value of forecast error for all period / number of periods
=summation [forecasted error/n] = summation [forecasted demand - actual demand]/n
Forecasted demand 500
Actual demand= 400, 560, 700
Mad= [500-400] + [500-560] + [500-200] / 3 = 100 + 60+ 200 / 3 = 120units
Bias= [500-400] + [500-560] + [500-200] / 3 = 100-60-200/3 = -53 units
Intuitive or formal approaches
Intuitive forecasted
Forecasted that essentially are manager guesses and judgments concerning future events; qualitative forecasting
methods.
Statistical forecasting model
Casting forward past data in some systematic method; used in time series analysis and projection.
Causal forecasting models
A statistical forecasting model based on historical demand data as well as on variables believed to influence demand.

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Useful forecasting models for operations

The less analytical qualitative forecasting methods are frequently used for longer-range strategic planning and
decisions.
The more analytical, quantitative time series analysis models are frequently used for operational [short-term]
planning. Such as decision making for production and inventory control.
Causal forecasting techniques are used for a variety of planning situation especially helpful in intermediate-term
planning.
Qualitative models
Delphi method
A qualitative forecasting technique in which a panel of experts working separately in not meeting arrive at a
consensus through the summarizing of ideas through skilled coordinator.
Nominal group techniques:
A qualitative forecasting techniques in which a panel of experts working together in a meeting arrive it a consensus
through discussion and ranking of ideas.
Historical data
Makes analogies to the past in a judgmental manner.
Quantitative models
Simple average
It is average of demands occurring in all previous periods. The demands of all periods are equally weighted.
Simple avenger = sum of demand of all periods / number of periods = summation di/n
= d1+d2+..dn/n
Simple moving average
It is average of demands occurring in several of the most recent periods most recent years are added and most old
ones are dropped to keep calculation current.
Ma= sum of demands for period/chosen number of period = 1/n d1 + 1/n dn
Weighted moving average
An average method that allows for varying weighting of old demand.
Designing products, services, and processes

New product design [product development] the origin of new product

Entrepreneurs frequently form new business on the basis of a unique product idea or needed services. As
competitors infringe on the market, replicating products or services or as the useful product life diminishes. Firm
bring out new product or services.
Product life cycle
The demand for a product - its market acceptance – generally tend to follow a predictable pattern called the product
life cycle. Product goes through a series of stages beginning with low demand, proceeding, through growth, maturity
and finally decline. The time span of stages vary from birth to death some products have short time as a few months
while some products time is longer as decades.
Operation issues in the products life cycle:
Model
Phasing multiple products: a general strategy of phasing new products in and phasing old products out. As existing
products are demanded less new products are developed and produced so output capacity can remain stable.
Research and development: organizational efforts directed towards products innovation include stages of basics
research, applied research, development and implementation.

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Components of innovation
Basic research
Basic research is for the advancement of scientific knowledge that is not intended for commercial uses.
Applied research
Research for the advancement of scientific knowledge that has specific commercial uses.
Development
It is technical activity concern with translating basic or applied research results into product or process.
Implementation
It is the activity concern with designing and building pilot models, from research and development.
Organization of research and development
The centralize R&D has only one central location from this location R&D can serve all the economic needs of all
divisions and avoid duplicated efforts. In decentralize R&D efforts duplicated each geographic location has its own
regional R&D. And the third one is the combination of these both which has the characteristics of both centralize
and decentralize.
The product development process
Developing a new product is a major undertaking that has identifiable stages:

Needs identification:
Once the product idea surfaces, it must be demonstrated that the product fulfill some consumer needs, that existing
product do not fulfill.
Advance product planning
Advance product planning include market analysis. As the important result from this stage of development is the
conceptual design of the product. It is also called the product concept or design concept.
Advance design
Basic and applied researcher investigate technical feasibility and identify in greater detail the tradeoff in product
design.
Detail engineering design
This stage is a series of engineering activities to develop a detail definition of a product including its sub system and
components, material, size, shapes, and so on.
Production process design and development
This step include preparing plans for materials, production, warehousing, transportation and distribution. This stage
also involve planning and controlling.
Product evaluation and improvement
Most products are continuously reevaluated for improvement possibilities throughout their lives.
Product use and support
An important stage of product development considers support for the consumer who use the product. Support system
might include: educate users and provide warranty and repair service and also upgrade the product with the design
improvement.
Elements of control system
Controlling is a process by which some aspects of system is modified to achieve a desire change in system
performance. Conceptually many kinds of system have control subsystems that shares certain elements. These
includes input, conversion process, outputs, a sensor, a comparator, activator and memory.
Inventory: it is storage of goods and stocks, including raw materials, work in process, finish products or supplies.
Stock keeping items are items of inventory.
Stock storage point is location of inventory
Inventory control is activities that maintain stock keeping items at desire level.

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Return on investment
Marginal efficiency of capital
A concept from finance espousing that a firm should invest in opportunities whose return is greater than the cost of
capital.
Graph
Markup is ratio of profit to sale and turnover is the ratio of sales to assets. When rio increases then turnover will be
also increases
Buffer stock
Inventories to protect against the effect of unusual product demand and uncertain lead time.
Lead time
The time passing between ordering and receiving goods
Decoupling
Using inventories to break apart operations so that the supply of one operation is independent of the supply of
another.
Avoid shortage of material
Schedule manage

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Production smoothing
Inventories can also help to level production thus high cost of production rate and workforce level change can be
avoided.
Material handling
In continuous manufacturing automated material handing system or designed to reduce overall handling cost
resulting in less work in process.
Bulk purchases
With bulk purchases quantity discounts can be arranged thus a cost advantage of materials inventories is released,
more and more material purchased at a time.
Inventory system concept
Multistage inventories: parts stocked at more than one point of the sequence production process.
Multi echelon inventories: products stocked at various levels factory, warehouse, retailer, costumer in a distribution
system.

Reaction to demand changes

An operation system should not have to react to increasing demand by increasing the level of inventory in direct
proportion to the increase in demand.
The operating doctrine
Operations managers must make two basic inventory policy decisions: when to reorder stock and how much stock to
reorder. These decisions are referred to as the inventory control operating doctrine.
Reorder point: as part of the operating doctrine, the inventory level at which stock should be reordered.
Order quantity: as part of the operating doctrine, the amount of stock that should be reordered.
Inventory systems
Q/r inventory system
An operating doctrine for which an optimal reorder point r [the trigger level] and optimal order quantity q [the
economic order quantity (eoc)] are fixed.

Periodic inventory system

An operating doctrine for which reorder points and order quantities vary; stocks are replenished up to a fixed based
stock level after a fixed time period has passed.

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Project management
Project: a onetime only set of activities that has a definite beginning and ending point in time.
Project planning: activities that established a course of action for project, the first step in this process is hiring.
Project scheduling: activities that establish time and the sequence of project tasks.
Project scheduling models
There are two models: Gant chart and pert [program evaluation and review techniques]
Gant chart
It is the scientific management process by Henray Gant it include some bar chart for the planning of project
activities. A bar chart showing the relationship of project activities in time.

[Stand for start of an activity

] stand for end of an activity
[--] actual progress of an activity
V points in time where the project is now
Network modeling: analyzing the precedence relationship of project activities and depicting them graphically
Network of nodes and arc model
Arc: in network modeling in arrowed line segment the symbol for project activity.
Nodes: in network modeling a circle at one end of an arc the symbol for beginning or ending of project activity it
may be number or in better.