Chapter 1 consumer product.
An example would
Lesson 3
production and operations management
Basics
Lesson introduction
Production and operation
MANAGEMENT
 A product or service is the primary
object of consumer interest in a market.
 The need and want satisfying capacity
of an item determines its value as a
product or service. While most products
are created for an identified need or
want that is yet to exist.
 The process and systems that convert
raw materials to another product are
the core of production and operation
management.
 Production and operations
management involves major areas of
production planning and control,
project management, supply chain
management and inventory
management.
 Production and operation
management finds its value in
connecting consumer demands and the
capacity of business enterprises to
provide such demands through the use
and combination of various economic
resources.
Production and operation
MANAGEMENT processes
 Production and operations
management identifies the process that
transforms raw materials to finished
products and the series of processes
that convert to a service.
 During production and operation, other
types of utilities are formed. These are
place, time, form, service and
knowledge utilities.
 Place utility happens when there is a
change from the place of availability to
the place of use through transportation.
For example, transporting harvested
rice to the brewery for rice wine
production.
 Time utility happens when the input or
the output is stored as part of the
utilization process of the consumers.
An example would be imported meat
products in cold storage.
 Form utility happens when the input
change in size, weight, color, shape or
all at the same as it converts into a
be converting the fiber of a pineapple
fruit to fabric and then to a ready-to-
wear dress.
 Service utility happens when service
is rendered to a client either directly or
indirectly. An example would be
healthcare professionals to COVID-19
patients or computer graphic designers
to online buyers.
 Knowledge utility happens when
information is imparted to customers
through presentations in the form of
advertisements. An example would be
giving information about a vitamin’s
ingredients and health benefits through
the product’s television advertisement.
 Production management encompasses
production planning and development,
production administration,
implementation function and other
allied activities such as standardization,
simplification, specialization, quality
control and research and development.
 Production system on the other hand
deals with the functions of converting
inputs to output using processes, on
demand forecasting and on
manufacturing control.
Lesson Objectives:
 After this lesson, students are expected
to:
 Determine what goes in the creation of
a product or service
 Identify the scope of production and
operations management
 Distinguish the types and systems of
production
 Explain the benefits of production and
operations management, and
 Integrate production and operations
management in the bigger strategic
business analysis
PRODUCTION PROCESS; OPERATION
PROCESS
 Organizations are designed mainly to
produce products or services. If these
organizations must survive and grow,
the operations function must be
undertaken in the most economical
manner possible.
 As most companies are expected to
make profits, any activity, including
those for operations, must be managed
to contribute to the accomplishment of
such objectives.
 Production is about the creation of all
goods and services, regardless of type
or kind.
 Meanwhile, operations refer to any
process that accepts inputs and uses
resources to change those inputs in
useful ways.
 Both production management and
operation management play an
important role in an organization in
increasing efficiency and productivity.
 While operation management is
focused on administration, planning
and execution of operations involved in
production of goods and services and
trying to minimize the resources at the
same time increasing the output,
operation management is more
concerned with input/output and
churning out products in the shape of
desired finished product.
PRODUCTIONS MANAGEMENT;
EFFECTIVENESS & EFFICIENCY
 Production management deals with
planning, control and decision making
necessary for carrying out the
production process. Defined as the
design, operation, and improvement of
the systems that create and deliver the
firm’s primary products and services.
 Foremost in production and operations
management, is the twin issue of
effectiveness and efficiency.
 Effectiveness refers to goal
achievement, whereas efficiency is
related to the cost resource utilization
involved in the production and
operation activity.
 System provides an efficient and
effective framework of activities
necessary to attain an objective. It is a
dynamic arrangement of elements,
each designed to interact with the
other, and thus it is more than just a
static combination.
 Element consists of men, materials,
machines, process and information
network designed and located to
interact harmoniously.
RIGHT QUALITY; RIGHT QUANTITY;
RIGHT TIME; RIGHT MANUFACTURING
COST
 In production and operations
management, emphasis is also given to
the attainment of right quality, which is
based upon the customer’s needs.
 The right quality is not necessarily the
best quality. It is determined by the cost
of the product and the technical
characteristics as suited to the specific
requirements.
 Likewise, having the right quantity is
also important, emphasizing that the
manufacturing organization should
produce the products in the right
number. If they are produced more
than demand, the capital will block up
in the form of inventory and if the
quantity is produced in short of
demand, leads to shortage of products.
 In a similar vein, producing within the
right time is also an important
parameter to judge the effectiveness of
a production department, which must
aim to make the optimal utilization of
input resources to achieve its objective.
 Finally, the right manufacturing cost
must be established before the product
is manufactured. Hence all attempts
should be made to produce the
products at pre-established cost, to
reduce the variation between actual
and the standard pre-established cost.
PRODUCTIONS AND OPERATIONS
MANAGEMENT
 It is also in production and operations
management that the locations of
facilities is given important
consideration.
 Location of facilities for operations is
a long-term capacity decision, which
involves a long-term commitment about
geographically related factors that
affect a business organization.
 The purpose of the manufacturing
location study is to find the optimal
location that will result in the greatest
advantage to the organization.
 Layout decisions include the capacity
of the organization to make substantial
investments in money and effort, its
commitment to maintain the facility and
a full evaluation of cost efficiency to the
operations.
LAYOUT DECISIONS
 Some of the more practical reasons
behind modifications in an
organization’s decision for its
operations layout are shown in the
diagram below:
 overall process route for converting the
PRODUCT DESIGN
 Productivity is the aim in
production and operations
management.
 The efficient combination of land,
labor, capital and management to
optimally produce goods and
services determines the level of
operational productivity. Before an
enterprise is organized, product
design is decided.
 Having a single product creates a more
focused posture on production and
operations management and the single
product success can be the
springboard for developing a whole
product line in the future.
 The design of the product remains to
be a critical decision for a business
owner.
 The uniqueness of a product or
service determines its market success.
 Similarly, product design is dynamic
in the context of changes in consumer
preferences, economic situation,
sociological and demographic factors,
as well as political and legal
challenges.
 Product design deals with conversion
of ideas into reality and every business
organization must 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. Process design is a
macroscopic decision-making of an
raw materials into finished goods.
 These decisions encompass the
selection of a process, choice of
technology, process flow analysis and
layout of the facilities.
 Hence, the important decisions in
process design are to analyze the
workflow for converting raw materials
into finished product and to select the
workstation for each included in the
workflow.
PRODUCTION PROCESS
 Production processes can be
classified in three categories, flow
production, batch production or unit
production.
 Flow production, which is also refers
to a mass production. denotes a
production process that runs in
sequence. This type of production
process is suitable for high demand
goods, where a steady flow of
operation is necessary. Quality control
can be ensured in the type of raw
materials used in the manufacturing
system before the final product is
brought out of the manufacturing
facility.
 Batch production divides production
output in component parts. In this
category, the whole production process
is divided in parts, with the unfinished
product in the form of various finished
parts. Batch production is applicable for
a product that uses a different
machines and tools depending on the
parts to create. Quality can be checked
at every batch production and
production parts can be made available
at another functional area.
 Unit production happens when
production is made according to when
the customer specifically requires it.
Production processes of this nature
follow a standard, quality and
specification in size, weight, form, color
and packaging. This type of production
process is best used for products that
do not require repetitive steps, nor has
 high demand. Its cost concerns also
limit its use.
PRODUCTION PLANNING AND CONTROL
 Production planning and control is
about implementing plans in terms of
job schedule, machine appropriation,
and actual workflow.
 As production requires the successful
conversion of raw materials to finished
goods whether in parts or as a whole,
the role of a production manage
becomes critical.
 The production manager ensures that
the process is rolled out as planned in
accordance to earlier decisions on
what, how, and when to produce.
Similarly, plans are to be carried out
with the optimum cost efficiency and
utmost quality standard.
 The control functionality can be seen
in producing better quality products at
the best reasonable price within the
most systematic manner. Planning in
production is in foreseeing probable
glitches in the production process and
finding remedies for their early solution.
 A well-oiled production, planning and
control system ensures that production
schedules are met, that materials, men
and machines are efficiently maintained
and optimally functioning, that the
production process is well integrated
for efficiency and economy and that
workload is regulated.
PRODUCTION PLANNING AND
CONTROL SYSTEM
 A production planning and control
system is created with the aim of
maximizing the use of economic inputs,
determining the requirements of
production in men, machines and
materials and ensuring that production
is done at the right time with the right
quantity and quality.
 The availability of products in
accordance with the requirements of
the marketing department of an
organization is also ensured in
production planning and control, in as
much as adequacy of stocks is
monitored for contingencies and
information is gathered to guide in
policy and future decision making.
 The scope of production planning
and control encompasses those that
concern production materials,
manpower, methods, machines and
equipment, routing of work,
establishment and estimation of work
standards, leading and scheduling,
dispatching, expediting, inspection,
evaluation and cost control.
 Challenges in production planning and
control would be how to combine
functions, how to follow-up on
production backlogs and when to
proceed with a re-planning.
 Production planning and control varies
depending on products, manufacturing
facilities and organizational nuances.
 The best type of production is one that
requires little or no control at all.
 As a management tool, controls need
not be elaborate and complex but
simple enough yet able to create an
efficient operation of optimal production
at the least cost.
GANTT’S CHART & FAYOL’S FIVE
MANAGEMENT FUNCTIONS
 Project management evolved from
Henry Gantt’s famous Gantt chart and
Henri Fayol’s Five Management
Functions of planning, organizing,
commanding, coordinating and
controlling.
 A project is an organized initiative that
has a concept phase, a project initiation
phase, planning, execution, monitoring
and control and a project closure. While
it may appear to be overwhelming to an
inexperienced individual, project
management systems are meant to
simplify and break down milestones for
time and resource use efficiency.
 A good knowledge of project
management presupposes an
appreciation of work integration, scope,
time, cost, quality, procurement, human
resource needs, communication and its
channels, risk and stakeholder
management.
 Supply chain management is the
management of a network of business
activities and processes that includes
procurement, manufacturing,
transportation of finished goods,
warehousing, distribution and inventory
management. With a global business
scenario, the expanse of supply chain
management is magnified and
characterized by geographically distinct
markets, by diversely obtained raw
materials, by more efficient
manufacturing and procurement
 processes elsewhere, and by cheaper
labor markets abroad.

SUPPLY CHAIN MANAGEMENT

 Supply chain management involves a

broad function that sees planning,
design, control and implementation of
processes related to procurement,
manufacturing, distribution and sales
functions of an enterprise.
 The network of service providers of the
supply chain process, called vendors,
are efficiently coordinated and
integrated by supply chain managers to
ensure that the production and
distribution and all other activities in
between will not be vulnerable to the
risks of distance and time.
 Not to be confused with simple
logistics, supply chain management
goes beyond the management of the
flow of goods as it also deals with
securing and exchanging information,
data and documents between
transacting parties.
 Logistics acts as the post-procurement
function of delivering raw materials
from the source to the production plant
and the transportation of finished goods
from the production to the various
points of distribution.

WAREHAOUSE MANAGEMENT
 Warehouse management completes
the logistics process in ensuring the
security and safety of goods, finished
or unfinished, at any stage of raw
materials procurement, production and
distribution.
 Normally outsourced or performed by a
third party, the value of warehousing
activities and companies would be in
extent of their reach and multi-location
presence, especially when one speaks
of global production and distribution.
 Production and operations
management is continuously
influenced by an ever-changing global
environment and must therefore adjust
to the challenges, trends, and
developments in this area.
 Adaptation to the global context, in
entering in supply chain partnership, in
just-in-time performance and real-time
monitoring, to mass and high valued
and diverse workforce, production and
operations management will remain a
dynamic area that is worthy of focus in
doing strategic business analysis.