CHP. 3 Production and Operation Management

UNIT - III
Production/Operations
Management (7 Hours)
CONTENTS
1. Operations management in corporate profitability

and competitiveness, types and characteristics of
manufacturing systems, types and characteristics of
services systems.
2. Operations planning and Control: Forecasting for

operations, materials requirement planning,
operations scheduling.
Unit Outcomes
At the end of this unit, Students will be able to,
• Identify and define various basics of Operations

management.
• Explain the importance and significance of Operations
management.
• Explain the MRP.
• Explain Scheduling activity operation.

Operations Management
Defining Operations Management
• The management of systems or processes that create goods

and/or provide services.
• Operations management is concerned with converting

materials and labour into goods and services as efficiently as
possible to maximize the profit of an organization.
Types of Transformation
• Physical: as in manufacturing operations

• Location: as in transportation Operations
• Exchange: as in retail operations
• Physiological: as in health care
• Psychological: as in entertainment
• Informational: as in communication
Defining Operations Management
The Evolution of Operations Management
• One of the oldest management technique

• The Pyramids of Egypt
• The Great Wall of China
• The Roads and the Aqueducts of Rome
• Operations Management begin with Industrial Revolution in
the 1700s, when Craft Production is converted into factory
• When a series of industrial inventions and mechanically
powered machines have taken place
Process of Operations Management
The Evolution of Operations Management
How is operations relevant to my major?
• Accounting- “As an auditor you must understand the

fundamentals of operations management.”
• Information Technology - “IT is a tool, and there’s no

better place to apply it than in operations.”
• Management- “We use so many things you learn in an

operations class—scheduling, lean production, theory of
constraints, and tons of quality tools.”
How is operations relevant to my major?
• Economics- “It’s all about processes. I live by flowcharts
and Pareto analysis.”
• Marketing- “How can you do a good job marketing a

product if you’re unsure of its quality or delivery status?”
• Finance- “Most of our capital budgeting requests are from

operations, and most of our cost savings, too.”
Manufacturers v/s Service
Organizations
Services: Manufacturers:
• Intangible product • Tangible product

• Product cannot be • Product is inventoried
inventoried • Low customer contact
• High customer contact • Longer response time
• Short response time • Capital intensive
• Labor intensive
Production and Operations
Management Similarities
• Both use technology
• Both have quality, productivity, & response issues
• Both must forecast demand
• Both can have capacity, layout, and location issues
• Both have customers, suppliers, scheduling and staffing

issues
Growth of the Service Sector
• Service sector growing to

50-80% of non-farm jobs
• Global competitiveness
• Demands for higher quality
• Huge technology changes
• Time based competition
• Work force diversity

Why OM?
• Customers demand better quality, greater speed, and

lower costs
• Companies implementing lean system concepts – a total

systems approach to efficient operations
• Recognized need to better manage information using ERP

and CRM systems
• Increased cross-functional decision making

Advantages of OM?
• Better Product/Service quality
• Customer satisfaction
• Revenue Increase
• Competitive advantage
• Compliance (Smooth DOs and DONTs)
• Motivated employees
Role of Operations Manager
Planning
• Capacity
• Location
• Products/Services
• Make or buy
• Layout
• Projects
• Scheduling
Controlling/Improving
• Inventory
• Quality
• Cost
• Productivity
Organizing
• Degree of centralization
• Process selection
Staffing
• Hiring/laying off
• Use of Overtime
Directing
• Incentive plans
• Issuance of work orders
• Job assignments
Critical decisions of OM
• Product & service design.
• Quality management.
• Process design.
• Capacity & location of facilities.
• Layout of facilities.
• Human resource & Job design.
• Supply-chain management.
• Inventory management.
• Scheduling.
• Maintenance.
Decisions of Operations Manager
Strategic
Tactical
Operational
Strategic Decisions of Operations
Manager
• Senior management responsibility
• More broad in nature
• Determine the success of an organization's strategy,
• Very risky and hard to reverse
• Have significant long-term impact, and less frequent.
Examples:
• How will we make the product?
• Where do we locate the facility?
• How much capacity do we need?
• When should we add more capacity?
Tactical Decisions of Operations
Manager
• Medium- range decisions focus on resource needs, schedules, &
quantities to produce
• Tactical decisions are frequent, must align with strategic
decisions.
• Involves resource allocation and utilization.
• Involves a moderate degree of uncertainty and risk..
• They are the link between lower and high level management
Examples:
• How many workers do we need?
• When do we need them?
• Should we work overtime or put on a second sift?
• When should we have material delivered?
• Should we have a finished goods inventory?
Operational Decisions of
Operations Manager
• Involves a short time horizon.

• Involves very little uncertainty and risk.
Examples :
• What jobs do we work on today or this week?
• To whom do we assign what task?
• What jobs have priority?
OM Decisions
Strategic Tactical Operational
• Longer term • Medium term •Shorter term
decisions decisions Decisions
• Responsibility of the • Responsibility of •Responsibility of

senior management middle and senior
middle and senior managers
managers
• High capital •These decisions
investment • Narrow in scope concern the day-today
activities of workers
• Broad in nature
Operational Decisions of
Operations Manager
• OM plays an important, although not always obvious,

role in societies in which we live.
• It is responsible for the food we eat and even the table
on eat it; it provides us with the clothing we wear,
with vehicles we use for transportation, and with the
"toys" we use for recreation, from baseballs and bats
to computer games.
• In other words, operations management affects nearly
all aspects of our day-to-day activities.
OM's contributions to society
(A)- Higher Standard of Living
(B)- Better Quality Goods and Services
(C)- Concern for the Environment
(D)- Improved Working Conditions

OM's contributions to society
The ever-changing world of OM
• Operations management is continuously changing to meet

the new and exciting challenges of today's business
world.
• This ever-changing world is characterized by increasing

global competition and advances in technology. Emphasis
is also shifting within the operations function to link it
more closely with both customers and suppliers.
Competitiveness
Competitiveness:
How effectively an organization meets the wants and
needs of customers relative to others that offer
similar goods or services
Organizations compete through some combination of
their marketing and operations functions
• What do customers want?
• How can these customer needs be best satisfied?
Competitive Edges and Priorities
1. Cost
2. Quality
3. Response time
4. Customer service
Competitive Priorities
Delivery of Service
1) Fast delivery 2) On-time delivery
Some Ways of Creating

a) larger finished-goods inventory
b) faster production rates
c) quicker shipping methods
d) more-realistic promises
e) better control of production of orders
f) better information systems
Manufacturing Systems
Definition
“A collection of integrated equipment and human resources,
whose function is to perform one or more processing and/or
assembly operations on a starting raw material, part, or set of
parts”
Equipment includes
• Production machines and tools
• Material handling and work positioning devices
• Computer systems
• Human resources are required either full-time or periodically
to keep the system running
Mass Production
Batch Production
Job Production
Project
Classification
It is classified into two groups
1. Continuous Production System
2. Intermittent Production System

Classification
It is then sub classified into
1. Continuous Production System
Mass Production
Process Production
2. Intermittent Production System
Job Production System
Batch Production System
Project Production System
Intermittent Production System
• Intermittent means something that starts (initiates)

and stops (halts) at irregular (unfixed) intervals (time
gaps).
Intermittent Production System
• In the intermittent production system, goods are produced
based on customer's orders.
• These goods are produced on a small scale.
• The flow of production is intermittent (irregular). In other
words, the flow of production is not continuous. In this
system, large varieties of products are produced.
• These products are of different sizes. The design of these
products goes on changing. It keeps changing according to the
design and size of the product. Therefore, this system is very
flexible.
Characteristics
• The flow of production is not continuous. It is intermittent.

• Wide varieties of products are produced.
• The volume of production is small.
• General purpose machines are used. These machines can be
used to produce different types of products.
• The sequence of operation goes on changing as per the design
of the product.
• The quantity, size, shape, design, etc. of the product depends
on the customer's orders.
Continuous Production System
• Continuous means something that operates constantly

without any irregularities or frequent halts.
Continuous Production System
• In the continuous production system, goods are

produced constantly as per demand forecast. Goods
are produced on a large scale for stocking and selling.
They are not produced on customer's orders. Here, the
inputs and outputs are standardized along with the
production process and sequence.
Characteristics
• The flow of production is continuous. It is not

intermittent.
• The products are standardized.
• The products are produced on predetermined quality
standards.
• The products are produced in anticipation(An
expectation) of demand.
• Standardized routing sheets and schedules are prepared
Mass Production Systems
• Here, company produces different types of products on a

large-scale and stock them in
• warehouses until they are demanded in the market.
• The goods are produced either with the help of a single
operation or uses a series of operations.
• E.g. of mass production is the production of toothpastes,
soaps, pens, etc.
Mass Production Systems
Characteristics
• There is a continuous flow of production. However, this

depends on the demand in the market.
• Here, there is limited work-in-progress.
• Supervision is easy because only few instructions are
necessary.
• The material handling is done mostly by machines, i.e.
conveyors and automatic transfer machines.
• The flow of materials is continuous. There is little or no
queuing at any stage of production
Process Production Systems
• Here, a single product is produced and stocked in

warehouses until it is demanded in the market. The
flexibility of these plants is almost zero because only
one product can be produced.
• Examples of these plants include, steel, cement,
paper, sugar, etc.
Process Production Systems
Characteristics
• There is a highly mechanized system for handling materials.

Conveyors and automatic transfer machines are used to move
the materials from
• one stage to another.
• Low-skilled labour and skilled technicians are required.
• There is very less work-in-progress because material flow is
continuous.
• The production planning and scheduling can be decided well
in advance.
• The full production system is designed to produce only one
specific type of item.
Project Production Systems
• Here, 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.
Project Production Systems
Characteristics
• The requirement of resources is not same (it varies). Generally,
the resource requirement at the beginning is low. Then in mid
of production, the requirement increases. Finally, it slows
down when the project is near its completion phase.
• Many agencies are involved in the project. Each agency
performs specialized jobs. Here, coordination between
agencies is important because all jobs are interrelated.
• Delays take place in completion of projects due to its
complexity and massiveness.
• As routing and scheduling changes with fresh orders, proper
inspection is required at each stage of production.
Job Production Systems
• Here, in jobbing production flows, company accepts a contract

to produce either one or few units of a product strictly as per
specifications given by the customer. The product is produced
within a given period and at a fixed cost. This cost is fixed at
the time of signing the contract.
• Examples of such jobbing production flows include, services
given by repair shops, tailoring shops, manufacturer of special
machine tools, etc.
Job Production Systems
Characteristics
• The production of items takes place in small lots. Sometimes

only one product is produced at one time.
• The items are manufactured strictly as per customer's
specifications.
• Highly skilled labour is required to perform specialized jobs.
• There is disproportionate manufacturing cycle time. For e.g.
the time needed to design the product may be more than the
manufacturing time.
Batch Production Systems
• In batch production flows, the production schedule is decided

according to specific orders or are based on the demand
forecasts. Here, the production of items takes place in lots or
batches. A product is divided into different jobs. All jobs of
one batch of production must be completed before starting the
next batch of production.
• Examples of batch production flows include, manufacturing of
drugs and pharmaceuticals, medium and heavy machineries,
etc.
Batch Production Systems
Characteristics
• The products are made and kept in stock until their demand
arises in the market.
• General purpose machines and handling equipments, which
can do many different jobs quickly are installed. This is
because large varieties of items are to be produced.
• There is a possibility of large work-in-progress due to many
reasons.
• There is a need for detailed production planning and control.
Service Sector
Definition
• Services are intangible outputs that are consumed in the

process of their production.
Service Sector
Main characteristics of service are –
• Intangibility
• Perish ability
• Inseparability
• Heterogeneity
• Ownership
• Quality Measurement
• Nature of demand
Service Sector
Intangibility
• Services are intangible we cannot touch them are not physical
objects. According to Carman, a consumer feels that he has
the right and opportunity to see, touch, hear, smell or taste the
goods before they buy them. This is not applicable to services.
The buyer does not have any opportunity to touch smell, and
taste the services. While selling or promoting a service one has
to concentrate on the satisfaction and benefit a consumer can
derive having spent on these services. e.g. An airline sells a
flight ticket from A destination to B destination. Here it is the
matter of consumer’s perception of services than smelling it or
tasting it.
Service Sector
Perishability
• Services too, are perishable like labor; Service has a high

degree of perishability. Here the element of time assumes a
significant position. If we do not use it today, If labor stops
working, it is a complete waste. It cannot be stored. Utilized or
unutilized services are an economic waste. An unoccupied
building, an unemployed person, credit unutilized, etc. are
economic waste. Services have a high level of perish ability.
Service Sector
Inseparability
• Services are generally created or supplied simultaneously.

They are inseparable. For an e.g., the entertainment industry,
health experts and other professionals create and offer their
service at the same given time. Services and their providers are
associated closely and thus, not separable. Donald Cowell
states ‘Goods are produced, sold and then consumed whereas
the services are sold and then produced and consumed’.
Therefore inseparability is an important characteristic of
services which proves challenging to service management
industry.
Service Sector
Heterogeneity
• This character of services makes it difficult to set a standard

for any service. The quality of services cannot be standardized.
The price paid for a service may either be too high or too low
as is seen in the case of the entertainment industry and sports.
The same type of services cannot be sold to all the consumers
even if they pay the same price. Consumers rate these services
in different ways. This is due to the difference in perception of
individuals at the level of providers and users. Heterogeneity
makes it difficult to establish standards for the output of
service firm.
Service Sector
Ownership
• In the sale of goods, after the completion of process, the goods

are transferred in the name of the buyer and he becomes the
owner of the goods. But in the case of services, we do not find
this. The users have only an access to services. They cannot
own the service. e.g. a consumer can use personal care
services or medical services or can use a hotel room or
swimming pool, however the ownership remains with the
providers.
Service Sector
Quality Measurement
• A service sector requires another tool for measurement. We

can measure it in terms of service level. It is very difficult to
rate or quantify total purchase. E.g. we can quantify the food
served in a hotel but the way waiter serves the customer or the
behaviour of the staff cannot be ignored while rating the total
process. Hence we can determine the level of satisfaction at
which users are satisfied. Thus the firm sells good atmosphere
convenience of customers, consistent quality of services, etc.
Service Sector
Nature of Demand
• Generally, the services are fluctuating in nature. During the

peak tourist seasons there is an abnormal increase in the
demand of services. Therefore, while identifying the salient
features of services one cannot ignore the nature of demand.
E.g. tourists go to hill stations during summer season wherein
public transport utilities are used substantially. This indicates
that flexibility is the important feature of service.
Service Sector
Types of Service Sector
• According to Baumol (1984), Types of service sectors are
1. Stagnant personal services
2. Substitutable personal services
3. Progressive services
4. Explosive services
Service Sector
1. Stagnant personal services: Here there is a direct contact

customer and service provider. These services offer low
innovation potential and are difficult to standardize. Low
chances of improvements.
ex: Haircut, Doctors

Service Sector
2. Substitutable personal services: Here some actions can be

replaced with technological or other alternatives.
ex: Security guards are replaced by CCTV, Personal tutors are

replaced by mobile apps.
Service Sector
3. Progressive services: Here, It has been divided into two
subtypes, Less labor intensive, High labor intensive.
ex: In movie making, we use cameras, softwares, computers.

We also have artists, crew members, technicians. Cost of
cameras, softwares are decreasing and qualities of those are
also increasing. On other side cost of artists, technicians are
increasing day by day.
Service Sector
4. Explosive services: Virtually there is no contact between

customers and production systems.
ex: Mobile services, Internet services, Google. In this, Huge

potential of improvement can be seen.
Production, Planning and Control
• “Production planning of industrial operations
involves Three considerations, namely, what work
shall be done, how the work shall be done and lastly,
when the work shall be done.” (by – Kimball)
• “Production control refers to ensuring that all which

occurs is in accordance with the rules established and
instructions issued.” (By – Henry Fayol)
Characteristics
• Inputs like materials, men and machines are efficiently used.
• Factors of production are integrated to use them economically
• Division of work is undertaken carefully so that every
available element is properly utilised.
• Work is regulated from the first stage of procuring raw
materials to the stage of finished goods
• Questions like what, when and how to be manufactured are
decided.
It involves
• Preparation of production budget
• Devising manufacturing methods and sequence of operations
• Deciding type of machines and equipments
• Preparation of operation sheets and instruction cards
• Estimating men, machine and material requirements
• Undertaking time and motion studies
• Preparing master schedules
Production, Planning and Control-
Process
PLANNING
It is the first element of production planning and control.

Planning means deciding in advance what is to be done in
future. An organizational set up is created to prepare plans and
policies. Various charts, manuals and production budgets are
also prepared. Planning provides a sound base for control. A
separate department is set up for this work.
ROUTING
Routing is determining the exact path which will be

followed in production. It is the selection of the path from
where each unit have to pass before reaching the final
stage. The stages from which goods are to pass are decided
in this process.
ROUTING PROCEDURE
• Deciding what part to be made or purchased

• Determining Materials required
• Determining Manufacturing Operations and Sequences
• Determining of Lot Sizes
• Determining of Scrap Factors
• Analysis of Cost of the Product
• Preparation of Production Control Forms
SCHEDULING
Scheduling is the determining of time and date when each

operation is to be commenced or completed. The time and date
of manufacturing each component is fixed in such a way that
assembling for final product is not delayed in any way.
TYPES OF SCHEDULES
• Master Scheduling – It is the breakup of production
requirements. It is the start of scheduling. It is prepared by
keeping in view the order or likely sales order in near future.
• Manufacturing Scheduling – It is used where production

process is continuous. The order of preference for manufacture
is also mentioned in the schedule for a systematic production
planning.
• Detail Operation Scheduling – It indicates the time required

to perform each and every detailed operations of a given
process.
LOADING
• The next step is Loading which is execution of the scheduled

plan as per the route chalked out. It includes the assignment of
the work to the operators at their machines or work places. So
Loading determines who will do the work.
DISPATCHING
Dispatching refers to the process of actually ordering the work

to be done. It involves putting the plan into effect by issuing
orders. It is concerned with starting the process and operation on
the basis of route sheets and schedule charts.
DISPATCHING PROCEDURES
• Centralized Dispatching – Under this, orders are directly

issued to workmen and machines. It helps in exercising effective
control.
• Decentralized Dispatching – Under this procedure all work

orders are issued to the foreman or dispatch clerk of the
department or section. It suffers from difficulties in achieving
co-ordination among different departments.
FOLLOW UP & EXPEDITING
Progress may be assessed with the help of routine reports

or communication with operating departments. The follow
up procedure is used for expediting and checking the
progress.
INSPECTION
• Inspection is the process of ensuring whether the products
manufactured are of requisite quality or not.
• Inspection is undertaken both of products and inputs. It is
carried on at various levels of production process so that pre-
determined standards of quality are achieved.
• Inspection ensures the maintenance of pre-determined quality
of products.
CORRECTIVE MEASURES :
• Adjusting the route
• Rescheduling of work
• Changing the workloads
• Repairs and Maintenance of machinery or equipment
Control over inventories
• Certain personnel decisions like training, transfer, demotion
etc.
• Alternate methods may be suggested to handle peak loads.
PPC : LIMITATIONS
• Assumption based
• Rigidity
• Difficult for small firms
• Costly
• Dependence on external factors
• Team work is a must
• Demands high level of co-ordination & efficiency
SUMMARY
Production planning and Control represents the beating

heart of any manufacturing process and are essential for
customer delight and overall success of an organization.
FORECASTING
•Forecasting is essential for number of planning decisions and
often provides a valuable input on which operations of the
business enterprises depend.
•Forecasting is a process of estimating a future event by casting

forward past data. The past data are systematically combined in
a predetermined way to obtain the estimate of the future.
•Prediction is a process of estimating a future event based on

subjective considerations other than just past data; these
subjective considerations need not be combined in a
predetermined way.
TYPES OF FORECASTS
Organizations use three major types of forecasts in planning
future operations.
• Economic forecasts: It addresses the business cycle by
predicting inflation rates, money suppliers, housing starts, and
other planning indicators.
• Technological forecasts: These are concerned with rates of
technological progress, which can result in the birth of exciting
new products, requiring new plants and equipments.
• Demand forecasts: These are projections of demand for a
company’s products or service. These are forecasts, also called
sales forecasts, drive a company’s production, capacity, and
scheduling systems and serve as inputs to financial, marketing,
and personnel planning.
STEPS IN THE FORECASTING SYSTEM
Forecasting follows seven basic steps. We use Disney World as
an example of each step:
1. Determine the use of the forecast:
2. Select the item to be forecasted:
3. Determine the time horizon of the forecast:
4. Select the forecasting model:
5. Gather the data needed to make the forecast:
6. Make the forecast
7. Validate and implement the result:
Material Requirement Planning
Definition: It is the scientific method of ordering and usage of

material at various levels of production and monitoring
inventories. It is both
- Inventory control technique
- Scheduling technique
Objectives:
1. Material requirement planning is processed which production
planning and inventory control system, and its three objectives are
as follows:
2. Primary objective is to ensure that material and components are
available for production, and final products are ready for dispatch.
3. Another primary objective is not only to maintain minimum
inventory but also ensure right quantity of material is available at
the right time to produce right quantity of final products.
4. Another primary objective is to ensure planning of all manufacturing
processes, this scheduling of different job works as to minimize or
remove any kind of idle time for machine and workers.
Advantages
• It helps in maintain minimum inventory levels.
• With minimum inventory levels, material planning also

reduces associated costs.
• Material tracking becomes easy and ensures that economic

order quantity is achieved for all lot orders.
• Material planning smoothens capacity utilization and allocates

correct time to products as per demand forecast.
Advantages
• It helps in maintain minimum inventory levels.
• With minimum inventory levels, material planning also

reduces associated costs.
• Material tracking becomes easy and ensures that economic

order quantity is achieved for all lot orders.
• Material planning smoothens capacity utilization and allocates

correct time to products as per demand forecast.
When to use MRP

• Job Shop Production
• Complex Products
• Assemble-to-Order Environments
• Discrete and Dependent Demand Items

When to use MRP

• Job Shop Production
• Complex Products
• Assemble-to-Order Environments
• Discrete and Dependent Demand Items

What can MRP do?
• Reduce Inventory Levels
• Reduce Component Shortages
• Improve Shipping Performance
• Improve Customer Service
• Improve Productivity
• Simplified and Accurate Scheduling
• Reduce Purchasing Cost
• Improve Production Schedules
• Reduce Manufacturing Cost
• Reduce Lead Times
• Less Scrap and Rework
• Higher Production Quality
What can MRP do?
• Improve Communication
• Improve Plant Efficiency
• Reduce Freight Cost
• Reduction in Excess Inventory
• Reduce Overtime
• Improve Supply Schedules
• Improve Calculation of Material Requirements
• Improve Competitive Position
MRP Inputs
• Product Structure File (BOM)
• Master Production Schedule
• Inventory Master File

Bill of Materials:
• It is a materials list that provides information useful

to reconstruct the manufacturing process. It is the
master product definition that contains “as designed”
information
Bill of Materials:
• It provides a list of materials and their quantities required to

produce the end items.
• It contains the list of finished products, material needed for
each finished products in units, assembly structures, sub
assemblies, parts and materials.
• BOM file is revised every time there is a change in product
design or specification.
Master Production Schedule
• Master production scheduling (MPS) has become an essential

component of current manufacturing operations. This system
enables manufacturers to develop a plan for products to be
produced within a given time period.
MRP Inputs
• It is the list of items, indicating end products to be produced.
This contains item name, item code, quantity to be produced,
and the timing for completing the production
• It is based on estimation of production demand (Sale forecast).

MRP Inputs
Based on Master Production Schedule, this MRP system:
• Will create schedules identifying specific parts and materials

required to produce and items.
• Determine exact number of units needed
• Determine the dates when orders for those materials should be

released based on lead times.
• Main functions include the following:
• Translating Plans - This portion determines the level of

operations that balance market demand with material, labor,
and equipment capabilities. This is because the master
schedule translates the plan into a specific number of items
that are needed to be produced within a given time.
• Evaluating Alternative Schedules - The master schedule
produces trial and error schedules that give production
alternate routes to follow. This accounts for any unexpected
mishaps within production to be taken care off immediately.
• Produce Capacity Requirements - This aid capacity planning
through establishing capacity requirements. Capacity
requirements are directly received through master production
scheduling and therefore correlate with capacity planning.
• Facilitating Information Processing - The master schedule
determines whenever deliveries are needed to be made. This
coordinates with various management information systems such
as marketing, finance, and others.
• Utilization of Capacity - Master production scheduling
software establishes load and utilization requirements for
machines and equipment. This allows for the absolute best
capacity utilization and a much more efficient flow of production.
Inventory status file
• It provides a computerized record of each material,

physically held in the system.
• There will be only one inventory status for individual
material, even if it is used at different levels of
production or in different end products.
Inventory status file
• It indicates:
a. Material code
b. Material name
c. Inventory on hand (physically available)
d. Inventory on hand (ordered but yet to arrived)
e. Customer order for item

Sequencing
• Operations scheduling is critical to the success of an
organization; however, it can be a very complicated task.
Effective schedules are needed to meet promised customer
delivery dates or inventory targets.
• It covers the following areas in particular:
- assign job to a particular work centre/ machine
- time of assignment of job and completion
- allocation of resources like manpower and materials
- time sequence of operations
- feedback and control function to take care of deviations
Sequencing
• Operations scheduling is critical to the success of an
organization; however, it can be a very complicated task.
Effective schedules are needed to meet promised customer
delivery dates or inventory targets.
• It covers the following areas in particular:
- assign job to a particular work centre/ machine
- time of assignment of job and completion
- allocation of resources like manpower and materials
- time sequence of operations
- feedback and control function to take care of deviations
Sequencing
• From the manager’s perspective, identifying the performance
measures to be used in selecting a schedule is important. If the
overall goals of the organization are to be achieved, the
schedules should reflect managerially acceptable performance
measures. The following list describes the most common
performance measures used in operations scheduling.
• Job Flow Time: The amount of shop time for the job is called
job flow time. It is the sum of the moving time between
operations, waiting time for machines or work orders, process
time (including setups), and delays resulting from machine
breakdowns, component unavailability, and the like.
Sequencing
• Makespan: The total amount of time required to complete a
group of jobs is called makespan.
• Past Due: The measure past due can be expressed as the
amount of time by which a job missed its due date (also
referred to as tardiness) or as the percentage of total jobs
processed over some period of time that missed their due
dates.
• Work-in-Process Inventory: Any job in a waiting line, moving
from one operation to the next, being delayed for some reason,
being processed, or residing in component or subassembly
inventories is considered to be work-in-process inventory.
Sequencing
• Total Inventory: The sum of scheduled receipts and on-hand

inventories is the total inventory.
• Utilization: The percent of work time productively spent by a
machine or worker is called utilization. These performance
measures often are interrelated.
• An understanding of the interactions of job flow time,
makespan, past due, WIP inventory, total inventory, and
utilization can make scheduling easier.
Objectives of Operations Scheduling
• Making efficient use of the labour.
• Making best possible use of the equipments that are available

for the use.
• Increasing the profit.
• Increasing the output.
• Improving the service level.

Objectives of Operations Scheduling
• Maximizing the delivery performance i.e. meeting the delivery
dates.
• Minimizing the inventory.
• Reducing the manufacturing time.
• Minimizing the production costs.
• Minimizing the worker costs.

Functions of Operations Scheduling
• Allocation of the resources.
• Shop floor control.
• Making maximum use of the plant at minimum possible cost.
• Ensure that the needs of the manpower are optimum.
• Determination of the sequence of the jobs.

Functions of Operations Scheduling
• Specifying the start and the end time for each job (actively
scheduled).
• Getting quick feedback from the shops regarding the delays and
the various interruptions.
• Possess up – to – date information for the availability of the
materials, expected delivery dates etc.
• Possess up – to – date data on the machine regarding its
breakdown, servicing etc.
Types of Operations Scheduling
1. Forward operations scheduling –

• Classified on the basis of the time.
• All the activities are scheduled from the date of the planned
order release.
• First task of the job is scheduled.
• Its subsequent task is scheduled on the scheduled completion
of the first task.
• Like this, accordingly all the tasks of the job are scheduled.
Types of Operations Scheduling
2. Backward operations scheduling –

• Also classified on the basis of the time.
• Activities are scheduled from the date or the planned receipt
date.
• The last activity is scheduled first.
• Time of the start of the last task is considered as the time for
the start of the previous activity.
Conclusion
• Scheduling is the allocation of resources over a period of time
to accomplish a specific set of tasks.
• The impact of scheduling can be increased by focusing on the
schedules of bottleneck resources so as to maximize the flow
of total value-added funds.
• If the operations scheduling is carried out in an efficient
manner, then there occurs a considerable improvement in the
performance in the delivery.
• It helps in the achievement of the goals that have been set by
the company.
Courtesy: Prof. S R Khishte

CHP. 3 Production and Operation Management

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UNIT - III

1. Operations management in corporate profitability

2. Operations planning and Control: Forecasting for

At the end of this unit, Students will be able to,

• Identify and define various basics of Operations

• Explain Scheduling activity operation.

• The management of systems or processes that create goods

• Operations management is concerned with converting

• Physical: as in manufacturing operations

• One of the oldest management technique

• Accounting- “As an auditor you must understand the

• Information Technology - “IT is a tool, and there’s no

• Management- “We use so many things you learn in an

• Marketing- “How can you do a good job marketing a

• Finance- “Most of our capital budgeting requests are from

• Intangible product • Tangible product

• Both have quality, productivity, & response issues

• Both must forecast demand

• Both can have capacity, layout, and location issues

• Both have customers, suppliers, scheduling and staffing

• Service sector growing to

• Demands for higher quality

• Huge technology changes

• Time based competition

• Work force diversity

• Customers demand better quality, greater speed, and

• Companies implementing lean system concepts – a total

• Recognized need to better manage information using ERP

• Increased cross-functional decision making

• Better Product/Service quality

• Compliance (Smooth DOs and DONTs)

• Involves a short time horizon.

• Responsibility of the • Responsibility of •Responsibility of

• OM plays an important, although not always obvious,

(A)- Higher Standard of Living

(B)- Better Quality Goods and Services

(C)- Concern for the Environment

(D)- Improved Working Conditions

• Operations management is continuously changing to meet

• This ever-changing world is characterized by increasing

Some Ways of Creating

It is classified into two groups

1. Continuous Production System

2. Intermittent Production System

• Intermittent means something that starts (initiates)

• The flow of production is not continuous. It is intermittent.

• Continuous means something that operates constantly

• In the continuous production system, goods are

• The flow of production is continuous. It is not

• Here, company produces different types of products on a

• There is a continuous flow of production. However, this

• Here, a single product is produced and stocked in

• There is a highly mechanized system for handling materials.

• Here, in project production flows, company accepts a

• Here, in jobbing production flows, company accepts a contract

• The production of items takes place in small lots. Sometimes

• In batch production flows, the production schedule is decided

• Services are intangible outputs that are consumed in the