Introduction to production and Operations Management

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Production management
It refers to application of management principles to the production(manufacturing) function in a factory. It(PM) involves application of planning, organising , directing and controlling to the production process. Production management deals with converting raw materials into finished goods or products. It brings together the 6M's i.e. men, money, machines, materials, methods and markets to satisfy the wants of the people(customer)
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Operations management
Operations are purposeful actions or activities which are done methodically as part of a plan of work by a process that is designed to achieve the pre-decided objective. It consists of tactics such as scheduling work, assigning resources including people, equipment, managing inventories, assessing quality standards, process type decision. Operations management is understood as the process whereby resources or inputs are converted into more useful products.
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Operations Management
Operations Management is: The management of systems or processes that create goods and/or provide services

Operations Management affects:

Companies ability to compete Nations ability to compete internationally

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The Organization
The Three Basic Functions
Organization

Finance

Operations

Marketing

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Value-Added Process
The operations function involves the conversion of inputs into outputs
Value added
Inputs Land Labor Capital Transformation/ Conversion process
Feedback

Outputs Goods Services

Control
Feedback Feedback

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Value-Added & Product Packages

Value-added is the difference between the cost of inputs and the value or price of outputs. Product packages are a combination of goods and services. Product packages can make a company more competitive.

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Food Process
Inputs
Raw Vegetables Metal Sheets Water Energy Labor Building Equipment

Processing
Cleaning Making cans Cutting Cooking Packing Labeling

Outputs
Canned vegetables

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Hospital Process
Inputs
Doctors, nurses Hospital Medical Supplies Equipment Laboratories

Processing
Examination Surgery Monitoring Medication Therapy

Outputs
Healthy patients

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Production of Goods vs. Delivery of Services

Production of goods tangible output Delivery of services an act

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Production of Goods vs. Delivery of Services

Key Differences
1. Customer contact 2. Uniformity of input 3. Labor content of jobs 4. Uniformity of output 5. Measurement of productivity

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Key Differences
6. Production and delivery 7. Quality assurance 8. Amount of inventory

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Goods vs Service
Characteristic Customer contact Uniformity of input Labor content Uniformity of output Output Measurement of productivity Opportunity to correct problems Inventory Evaluation Goods Low High Low High Tangible Easy High Much Easier Service High Low High Low Intangible Difficult Low Little Difficult
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Scope of Operations Management

Operations Management includes:
Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities Supply chain management And more . . .
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Types of Operations
Operations
Goods Producing

Examples

Farming, mining, construction, manufacturing, power generation Storage/Transportation Warehousing, trucking, mail taxis, buses, airlines Exchange Retailing, wholesaling, renting, leasing, library Films, radio and television, concerts Newspapers, radio and television telephone, satellites
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Entertainment
Communication

Challenges of Managing Services

Service jobs are often less structured than manufacturing jobs Customer contact is higher Worker skill levels are lower Employee turnover is higher Input variability is higher Service performance can be affected by workers personal factors

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Key Decisions of Operations Managers

What
What resources are required / in what amounts

When
It is Needed/scheduled/ordered/demand

Where
Work to be done

How
Design of product /services

Who
To do the work/ assignment of task
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Decision Making
System Design
capacity location arrangement of departments product and service planning acquisition and placement of equipment

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Decision Making
System operation
personnel inventory scheduling Project management quality assurance

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Decision Making
Models Quantitative approaches Analysis of trade-offs Systems approach Establishing Priorities

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Models
A model is an abstraction of reality.
Physical Schematic Mathematical

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Models Are Beneficial

Easy to use, less expensive Increase understanding of the problem Enable what if questions Consistent tool for evaluation and standardized format

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Limitations of Models
Quantitative information may be emphasized over qualitative Models may be incorrectly applied and results misinterpreted Nonqualified users may not comprehend the rules on how to use the model Use of models does not guarantee good decisions

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Quantitative Approaches
Linear programming Queuing Techniques Inventory models Project models Statistical models

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Analysis of Trade-Offs
Increased cost of holding inventory

(compromise)

Decision on the amount of inventory to stock Vs.

Level of customer service

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Systems Approach
The whole is greater than the sum of the parts.

Suboptimization

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Pareto Phenomenon
A few factors account for a high percentage of the occurrence of some event(s). 80/20 Rule - 80% of problems are caused by 20% of the activities.

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Ethical Issues
Financial statements Worker safety Product safety Quality Environment Hiring/firing workers Closing facilities Workers rights

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Business Operations Overlap

Operations

Marketing

Finance

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Operations Interfaces
Industrial Engineering Maintenance

Distribution

Purchasing

Operations

Public Relations

Legal

Personnel
Accounting MIS
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Trends in Business
Major trends
The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility(quick and easy) Ethical behavior

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Management Technology
Technology: The application of scientific discoveries to the development and improvement of goods and services Product and service technology Process technology Information technology

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Simple Product Supply Chain

Suppliers Suppliers

Direct Suppliers

Producer

Distributor

Final Consumer

Supply Chain: A sequence of activities and organizations involved in producing and delivering a good or service

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A Supply Chain for Bread

Stage of Production
Farmer produces and harvests wheat
Wheat transported to mill Mill produces flour Flour transported to baker

Value Added
$0.15
$0.08 $0.15 $0.08

Value of Product
$0.15
$0.23 $0.38 $0.46

Baker produces bread

Bread transported to grocery store Grocery store displays and sells bread Total Value-Added

$0.54
$0.08 $0.21 $1.14

$1.00
$1.08 $1.29

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Other Important Trends

Operations strategy Working with fewer resources Revenue management Process analysis and improvement Lean production

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Transformation Process
a series of activities along a value chain extending from supplier to customer activities that do not add value are superfluous and should be eliminated

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Transformation Process
Physical: as in manufacturing operations (raw material to finished good) Locational : as in transportation or warehouse operations Exchange: as in retail operations Physiological: as in health care

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Operations as a Transformation Process

INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS OUTPUT Goods Services

Feedback & Requirements

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Productivity
Productivity
ratio of output to input

Output
sales made, products produced, customers served, meals delivered, or calls answered

Input
labor, investment in equipment, material usage etc

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Measures of Productivity

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Duties and Responsibilities of operations manager

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