Kristu Jyoti College of Management and Technology

Post Graduate Department of Management studies

OPERATIONS MANAGEMENT
STUDY MATERIAL

Module I |MA HRM | 2nd Semester

Christin Mathew

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 MHRM
INTRODUCTION TO PRODUCTION AND OPERATION FUNCTION
Module -I

Production is a process of combining various material inputs and immaterial inputs

(plans, know-how) in order to make something for consumption (output). It is the act of
creating an output, a good or service which has value and contributes to the utility of
individuals.

Definition of Production:

According to Bates and Parkinson:

“Production is the organized activity of transforming resources into finished products in
the form of goods and services; the objective of production is to satisfy the demand for such
transformed resources”.

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 the production process

E.S.Buffa defines production management as follows: “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”.

Operations management is the administration of business practices to create the highest

level of efficiency possible within an organization. It is concerned with converting materials
and labor into goods and services as efficiently as possible to maximize the profit of an
organization.
According to Barry Shore “operations management is the management of any operational
system which transforms inputs into outputs”.

Basis of Production Management Operation Management

Comparison

Definition Production management is about Operation management is about the

managing activities related to management of overall business
production only operations which includes production
and post-production stages

Area of Related to aspects of production only Related to the regular business

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 Decision- activities in an organization
making

Objective The objective of production The objective of operation

management is to produce the best management is to utilize the
goods or services that are of the right resources in the most optimum way
quality, right quantity at the right time

Found In It is found in enterprises where It is found in places like Banks,

production is undertaken Hospital, Companies etc which are
providing service

Capital More capital requirement initially Fewer capital requirements

Requirement

Objectives of Production/Operations Management:

(i) Maximum customer satisfaction through quality, reliability, cost and delivery time.

(ii) Minimum scrap/rework resulting in better product quality.

(iii) Minimum possible inventory levels (i.e., optimum inventory levels).

(iv) Maximum utilisation of all kinds of resources needed.

(v) Minimum cash outflow.

(vi) Maximum employee satisfaction.

(vii) Maximum possible production (i.e., outputs).

(viii) Higher operating efficiency.

(ix) Minimum production cycle time.

(x) Maximum possible profit or return on investment.

(xi) Concern for protection of environment.

(xii) Maximum possible productivity.

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Scope of Operation Management /Production Management/Production Manager

SCOPE OF PRODUCTION AND OPERATION MANAGEMENT Production and operations

management concern with the conversion of inputs into outputs, using physical resources,
so as to provide the desired utilities to the customer while meeting the other organizational
objectives of effectiveness, efficiency and adaptability. It distinguishes itself from other
functions such as personnel, marketing, finance, etc., by its primary concern for ‘conversion
by using physical resources.’ 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.

1.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. It deals
with the questions such as ‘where our main operations should be based?’

2.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

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of the plant layout is to design a physical arrangement that meets the required output
quality and quantity most economically.

3.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.

4.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.

5.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. 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. 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. Scheduling
determines the programmer 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.

6.Materials management is a core supply chain function and includes supply chain
planning and supply chain execution capabilities. Specifically, materials management is the
capability firms use to plan total material requirements. The material requirements are
communicated to procurement and other functions for sourcing.

7.Maintenance management is defined as the process of maintaining a company's assets

and resources while controlling time and costs, ensuring maximum efficiency of the
manufacturing process

The operation/production system

The production system is the framework in which the conversion of input into output
occurs. At the one end of the production system are the inputs and at the other end,
outputs, inputs, and output are linked by certain operations or processes impact to the
inputs and are called transformation process. Production system consists of three main
components viz., Inputs, Conversion Process and Output. Inputs include raw-materials,
machines, man-hours, components or parts, drawing, instructions and other paper works.
Conversion process includes operations (actual production process).

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Types of operation/production Systems

A production manager will have to choose the most appropriate method for his enterprise.
The final decision regarding any particular method of production is very much affecting by
the nature of the products and the quantity to produce. The types of Production Systems
are grouped under two categories viz., Intermittent production system, and Continuous
production system.

There are two main types of production systems: 1) Continuous System and 2) Intermittent S

Continuous System or Flow System:

According to Buffa,

“Continuous flow production situations are those where the facilities are standardized as to
routings and flow since inputs are standardized. Therefore a standard set of processes and
sequences of the process can adopt.”

Thus continuous or flow production refers to the manufacturing of large quantities of a

single or at most a very few varieties of products with a standard set of processes and
sequences. The mass production is carried on continuously for stock in anticipation of
demand.

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Characteristics of Continuous System:

 The volume of output is generally large (mass production) and goods are produced in
anticipation of demand.
 The product design and the sequence of the operations are standardized i.e. identical
products are produced.
 Special purpose automatic machines are used to perform standardized operations.
 Machine capacities are balanced so that materials are fed at one end of the process and
the finished product is received at the other end.
 Fixed path materials handling equipment is used due to the predetermined sequence of
operations.
 Product layout designed according to a separate line for each product is considered.

Advantages of Continuous System:

 The main advantage of the continuous system is that work-in-progress inventory is

minimum.
 The quality of output is kept uniform because each stage develops skill through
repetition of work.
 Any delay at any stage is automatically detected.
 Handling of materials is reduced due to the set pattern of the production line. Mostly
the materials are handled through conveyor belts, roller conveyors, pipelines, overhead
cranes, etc.
 Control over materials, cost, and output are simplified.
 The work can be done by semi-skilled workers because of their specialization.

The disadvantages of Continuous System:

The continuous system, however, is very rigid and if there is a fault in one operation the
entire process is disturbed. Due to continuous flow, it becomes necessary to avoid piling up
of work or any blockage on the line. Unless the fault is cleared immediately, it will force the
preceding as well as the subsequent stages to be stopped. Moreover, it is essential to
maintain stand by equipment to meet any breakdowns resulting in production stoppages.
Thus investments in machines are fairly high.

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Types of Continuous System:

A)Mass Production:

This production refers to the manufacturing of standardized parts or components on a

large scale. Mass production system offers economies of scale as the volume of output is
large. Quality of products tends to be uniform and high due to standardization and
mechanization. In a properly designed and equipped process, individual expertise plays a
less prominent role.

B)Process Production:

Production is carried on continuously through a uniform and standardized sequence of

operations. Highly sophisticated and automatic machines are used. Process production is
employed in the bulk processing of certain materials. The typical processing Industries are
fertilizers plants, petrochemical plants, and milk dairies which have highly automated
systems and sophisticated controls.

Intermittent System:

According to Buffa,

“Intermittent situations are those where the facilities must be flexible enough to handle a variety
of products and sizes or where the basic nature of the activity imposes a change of important
characteristics of the input (e.g. change. in the product design). In instances such as these, no
single sequence pattern of operations is appropriate, so the relative location of the operation
must be a compromise that is best for all inputs considered together.”

Characteristics of Intermittent System:

 The flow of production is intermittent, not continuous.

 The volume of production is generally small.
 A wide variety of products are produced.
 General purpose, machines, and equipment are used so as to be adaptable to a wide
variety of operations.
 No single sequence of operations is used and periodical adjustments are made to suit
different jobs or batches.
 Process layout is most suited.

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The intermittent system is much more complex than continuous production because every
product has to be treated differently under the constraint of limited resources.

The intermittent system can be-effective in situations which satisfy the following conditions:

 The production centers should be located in such a manner so that they can handle a
wide range of inputs.
 Transportation facilities between production centers should be flexible enough to
accommodate a variety of routes for different inputs.
 It should be provided with the necessary storage facility.

Types of Intermittent System:

Intermittent Production May be of two types;

A) Job Production:

Job or unit production involves the manufacturing of a single complete unit with the use of
a group of operators and process as per the customer’s order. This is a “special order” type
of production. Each job or product is different from the other and no repetition is involved.
The product is usually costly and non-standardised.

Customers do not make a demand for exactly the same product on a continuing basis and
therefore production becomes intermittent. Each product is a class by itself and constitutes
a separate job for the production process. Shipbuilding, electric power plant, dam
construction, etc. are common examples of job production.

Characteristics of Job Production:

 The product manufactured is custom-made or non-standardised.

 The volume of output is generally small.
 Variable path materials handling equipment are used.
 A wide range of general-purpose machines like grinders, drilling, press, shaper, etc. is
used.

Advantages of Job Production:

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It is flexible and can adapt easily to changes in product design. A fault in one operation does
not result in complete stoppage of the process. Besides, it is cost-effective and time-
effective since the nature of the operations in a group is similar. There is reduced material
handling since machines are close in a cell. The waiting period between operations is also
reduced. This also results in a reduced work-in-progress inventory.

The disadvantages of Job Production:

Job shop manufacturing is the most complex system of production e.g. in building a ship
thousands of individual parts must be fabricated and assembled. A complex schedule of
activities is required to ensure the smooth flow of work without any bottlenecks. Raw
materials and work-in-progress inventories are high due to uneven and irregular flow of
work. Workloads are unbalanced, speed of work is slow and unit costs are high.

B) Batch Production:

Batch production pertains to repetitive production. It refers to the production of goods, the
quantity of which is known in advance. It is that form of production where identical
products are produced in batches on the basis of demand of customers’ or of expected
demand for products.

This method is generally similar to job production except for the quantity of production.
Instead of making one single product as in case of job production, a batch or group of
products are produced at one time. It should be remembered here that one batch of
products may not resemble with the next batch.

Advantages of Batch Production:

The batch production method possesses the following advantages;

 The work is of a repetitive nature.

 There is a functional layout of various manufacturing processes.
 One operation is carried out on the whole batch and then is passed on to the next
operation and so on.
 The same type of machines is arranged at one place.
 It is generally chosen where trade is seasonal or there is a need to produce a great
variety of goods.

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The disadvantages of Batch Production:

Work-in-progress inventory is high and large storage space is required. Due to frequent
changes in product design, no standard sequence of operation can be used. Machine set-ups
and tooling arrangements have to be changed frequently. The main problem in batch
production is the idle time between one operation and the other. The work has to wait until
a particular operation is carried out on the whole batch

C) Project Production System

In project production flows, company accepts a single, complex order or contract. The
order must be completed within a given period of time and at an estimated cost. Examples
of project production flows mainly include, construction of airports, dams, roads, buildings,
shipbuilding, etc

Difference Between Intermittent And Continuous Production System

Intermittent Production System
Continuous Production System

Same product is not produced continuously.

Same product produced continuously

Items produced for order

Items produced for stock

Production process flexible

Process not flexible

Equipment used for limited time

Regular use of equipment

Wide range of products can be manufactured

Only particular type of product is produced

Smaller scale of production

Large scale production

Planning and control operations complicated and tedious

Planning and control operations simple and easy

More detailed and too many instructions are required for operations
Single set of instructions are sufficient for operations

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Capital investment may be low
Capital investment is high

Per unit cost of production is high

Per unit cost of production is low

Less security of jobs

More security of jobs

Function type of organization

Divisional type of organization

Requires staff of high technical skill and ability

Requires more managerial capability and better coordination

Control not ‘in line’ of production

Control in line’ of production

Storage is required at each operation

Storage required only at limited locations

Change in location easy

Change in location difficult

Product and the process not standardized

Product and process standardized

Accuracy low
Accuracy high

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 productThe main objectives of quality control are: To improve the companies
income by making the production more acceptable to the customers i.e., by providing long
life, greater usefulness, maintainability, etc. To reduce companies cost through reduction of
losses due to defects. To achieve interchange ability of manufacture in large scale
production. To produce optimal quality at reduced price. To ensure satisfaction of
customers with productions or services or high quality

Assembly Lines Production System.

Assembly line a type of flow production which is developed in the automobile industry in
the USA. A manufacturing unit prefers to develop and employ an assembly line because it

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helps to improve the efficiency of production. In an assembly line, each machine must
directly receive material from the previous machine and pass it directly to the next
machine.Machine and equipment should be arranged in such a manner that every operator
has free and safe access to each machine. Space should be provided for free movement of
forklifts, trucks, etc. which deliver materials and collect finished products.

Cellular manufacturing -Cellular manufacturing is a manufacturing process that produces

families of parts within a single line or cell of machines operated by machinists who work
only within the line or cell. A cell is a small scale, clearly-defined production unit within a
larger factory.

Five P’s of Production

1. Product
The ultimate link between the production and marketing processes of a company is the
product manufactured by it. A customer demands a product but at the same time, the
organization must also be capable of producing it effectively.

2. Process
There are many occasions when an established method/process may lead to effective
production but fail to achieve other objectives. To face such issues effectively, the manager
keeps an alternative to every method. He then chooses the best alternative which can
accomplish the objectives.

3. Plant
One of the most important assets of a production firm is a manufacturing plant. An
operational plant allows continuous production without bottlenecks. On the other hand,
the non-operational plant may hamper the production process.

A plant must be effective so as to achieve the product, market, and organizational needs.
Furthermore, financial constraints, building’s design and layout, equipment maintenance,
etc are different concerns about establishing a plant.

4. People
Manpower or people are the biggest assets for manufacturing firms. The production is
highly affected by people/manpower and their hard work.

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5. Programmes

In a manufacturing unit, there should be a proper time schedule for the implementation
and completion of various progammes. To accomplish different situations, different
programmes are organized. These are related to:

 Storage
 Purchasing
 Transport
 Maintenance

Interaction of operations management with other

functional areas of management/ Key Functions within
Operations Management
Key functions of operations management include the following:

 Finance - Finance is a crucial component within operations management. It is

essential to make sure that all finances have been utilized to their fullest extent and
are being properly carried out to ensure for optimized creation of goods and
services. Proper utilization of finances will allow for a product or service to be
created that will satisfy overall consumer needs.
 Strategy - When utilizing strategy within operations management, this refers to
planning tactics that can aid through optimized resources and development of a
competitive edge over other businesses. Many business strategies include supply
chain configuration, sales, capacity to hold money, and optimum utilization of
human resources.
 Operation - This function of operations management is concerned with planning,
organizing, directing, and overall control of all activities within the organization.
This is the primary function of operations management and will effectively aid in
converting raw materials and human efforts into a durable good and service that
consumers will be able to utilize.
 Product Design - With new technology becoming available, the selling of a product
become much more simple. One of the main duties of operations management is to
ensure that a product is designed properly and caters to market trends and needs of
consumers. Modern-day consumers are concerned about quality instead of quantity,
which is why it is so crucial to develop a durable and top-notch quality product.
 Forecasting - Forecasting is the process in which software makes an estimate of
certain events that may occur in the future. In operations management, forecasting
can take an estimate of consumer demand, which correlates with production
through creating an accurate amount of product needed within a given time. Overall,
forecasting plays a crucial role within the production process.

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Components or Elements of Operations Strategy

“Operations strategy is the total pattern of decisions which shape the long-term
capabilities of any type of operations and their contribution to the overall strategy,” they
write. Technology and business models are rapidly changing, so businesses must keep pace
and look to the future.

Components of Operations Strategy include below main six components:

1. Designing and Positioning the Production System

This element includes choosing the type of processing system, production design, and
finished goods inventory plan, etc. for each main line of product in the business plan.

The two main types of Product design are

Custom Product Design- The custom design is the one when there is a low volume and
special features are already present or inbuilt. These types of products are designed as per
the requirements of individual customers. For example, different products such as boilers,
turbines, air compressors, etc. come under this category.

Standard product Design- This is related to a universal design that is used to provide a
wide acceptance of the product among its customers. Both quantity and demand are high in
such a design. This is useful in quite large batches as it helps in meeting the stable demand
for the long-term. Fans, televisions, air conditioners, etc. are a few examples of standard
product design.

Production systems are of two types i.e.

Systems focused on products- This type of production system is used in mass production
through a group of machines such as computers, automobiles, beverages, etc.

Systems focused on processes- This includes product designing on a single activity or

task such as packaging, painting, etc.

2. Focusing Production/ Manufacturing and Service Facilities

One of the important elements of operations strategy is to plan for different production
facilities to achieve some sort of specialization in each of them. This allows the production
facility to gain a command over achieving specific objectives because the equipment,

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procedures, and supporting systems can focus on certain limited tasks for a particular set
of customers.

So, we can say that some specialization in production facilitates an organization to offer
different benefits to its customers on products such as reduce cost, quicker delivery,
flexibility, timely delivery, high quality of the product. Also, there will be a few overheads
and the organization is able to perform better than its competitors.

An organization should consider continuous demand patterns and economies of scale at

the time of making a plan of specialized product lines.

3. Design and Development of Product/ Service

Different stages or phases that are involved in designing and developing a product or
service include

 Idea generation
 Making the feasibility reports
 Prototype designing and testing
 Preparation of a production model
 Evaluation of production-related economies of scale
 Market-based testing of the product
 Taking feedback
 Developing final design and initiating the production

In new product development, activities such as marketing, operations, engineering, etc. are
considered. The product designing process creates a great impact on the inventory level,
quality of the product, production cost, and the total number of suppliers.

4. Selection of Technology and Process Development

To determine the way of producing products is considered one of the essential aspects of
operations strategy. This includes making decisions and plans on every detail of processes
and facilities in production.

To achieve the optimum level of production, the analysis of the selected product for
production is conducted for the process and appropriate technology. Operations managers
face various challenges in taking such decisions due to the availability of lots of options or
alternatives.

5. Resource Allocation

Usually, organization resources are limited for production purposes and so, the continuous
problems are faced by production units in the allocation of limited resources such as cash,
capital, workforce, machines, materials, capacity, equipment, services, etc. The allocation of

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these resources must be in a way that helps in achieving the goals of operations up to a
maximum extent.

Also, allocating these resources at the right time and place of production shows the
efficiency level of production managers. Economical production can be achieved by
utilizing resources in an optimal way. A sound operations strategy is required to obtain
superior quality products, minimize wastage and optimum utilization of available
resources.

6. Planning of Capacity, Facility, and Layout

The key decision areas of an operations manager are to create layout, facilities, and location
for the production as these are considered critical areas to achieve competitive advantage.
The expansion of the manufacturing unit in the future also depends on this decision.

Decisions include in this are related to the land and equipment acquisition for production,
location of new manufacturing units.

At the time of evaluation of different alternatives, the operations manager also considers
market access, and availability of materials, etc. Huge capital is needed for production
capacity.

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