Chapter

Chapter 11

Production and Operations

Management (POM):
An Introduction

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 Overview
Overview
 Introduction
 Historical Milestones in POM
 Factors Affecting POM Today
 Different Ways of Studying POM
 Wrap-Up: What World-Class Producers Do

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 Introduction
Introduction
 Production and operations management (POM) is the
management of an organization’s production system.
 A production system takes inputs and converts them
into outputs.
 The conversion process is the predominant activity of
a production system.
 The primary concern of an operations manager is the
activities of the conversion process.

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 Organizational
Organizational Model
Model

Finance
Sales HRM

POM
QA
Marketing

MIS
Engineering Accounting

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 Organization Chart-Major Elements

M a n u f a c t u r i n g O r g a n iz a t io n

O p e r a tio n s F in a n c e /A c c o u n t in g M a r k e tin g

F a c i li ti e s D is b u r s e m e n ts S a le s P r o m o t io n
P r o d u c tio n & & C r e d its A d v e r t is in g
I n v e n t o r y o n tr o l F unds M anagem ent S a le s
Q u a li t y A s s u r a n c e C a p i t a l R e q u ir e m e n ts M a rk e t R e s e a rc h
& C o n tro l
P ro c u re m e n t
E n g in e e r in g D e s i g n
I n d u s t r ia l E n g i n e e r in g
P r o c e s s E n g in e e r in g
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 Entry-Level
Entry-Level Jobs
Jobs in
in POM
POM
 Purchasing planner/buyer
 Production (or operations) supervisor
 Production (or operations) scheduler/controller
 Production (or operations) analyst
 Inventory analyst
 Quality specialist

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 Historical Milestones in POM

 The Industrial Revolution

 Post-Civil War Period
 Scientific Management
 Human Relations and Behaviorism
 Operations Research
 The Service Revolution

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 The
The Industrial
Industrial Revolution
Revolution
 The industrial revolution developed in England in the
1700s.
 The steam engine, invented by James Watt in 1764,
largely replaced human and water power for factories.
 Adam Smith’s The Wealth of Nations in 1776 touted
the economic benefits of the specialization of labor.
 Thus the late-1700s factories had not only machine
power but also ways of planning and controlling the
tasks of workers.

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 The
The Industrial
Industrial Revolution
Revolution
 The industrial revolution spread from England to other
European countries and to the United Sates.
 In 1790 an American, Eli Whitney, developed the
concept of interchangeable parts.
 The first great industry in the U.S. was the textile
industry.
 In the 1800s the development of the gasoline engine and
electricity further advanced the revolution.
 By the mid-1800s, the old cottage system of production
had been replaced by the factory system.
 . . . more
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 Post-Civil
Post-Civil War
War Period
Period
 During the post-Civil War period great expansion of
production capacity occurred.
 By post-Civil War the following developments set the
stage for the great production explosion of the 20th
century:

increased capital and production capacity

the expanded urban workforce

new Western U.S. markets

an effective national transportation system

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 Scientific
Scientific Management
Management
 Frederick Taylor is known as the father of scientific
management. His shop system employed these steps:

Each worker’s skill, strength, and learning ability
were determined.

Stopwatch studies were conducted to precisely set
standard output per worker on each task.

Material specifications, work methods, and routing
sequences were used to organize the shop.

Supervisors were carefully selected and trained.

Incentive pay systems were initiated.
 . . . more

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 Scientific
Scientific Management
Management
 In the 1920s, Ford Motor Company’s operation
embodied the key elements of scientific management:

standardized product designs

mass production

low manufacturing costs

mechanized assembly lines

specialization of labor

interchangeable parts

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 Human
Human Relations
Relations
and
and Behavioralism
Behavioralism
 In the 1927-1932 period, researchers in the
Hawthorne Studies realized that human factors were
affecting production.
 Researchers and managers alike were recognizing
that psychological and sociological factors affected
production.
 From the work of behavioralists came a gradual
change in the way managers thought about and
treated workers.

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 Operations
Operations Research
Research
 During World War II, enormous quantities of
resources (personnel, supplies, equipment, …) had to
be deployed.
 Military operations research (OR) teams were formed
to deal with the complexity of the deployment.
 After the war, operations researchers found their way
back to universities, industry, government, and
consulting firms.
 OR helps operations managers make decisions when
problems are complex and wrong decisions are costly.

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 The
The Service
Service Revolution
Revolution
 The creation of services organizations accelerated
sharply after World War II.
 Today, more than two-thirds of the U.S. workforce is
employed in services.
 About two-thirds of U.S. GDP is from services.
 There is a huge trade surplus in services.
 Investment per office worker now exceeds the
investment per factory worker.
 Thus there is a growing need for service operations
management.

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 Today's
Today's Factors
Factors Affecting
Affecting POM
POM
 Global Competition
 U.S. Quality, Customer Service, and Cost Challenges
 Computers and Advanced Production Technology
 Growth of U.S. Service Sector
 Scarcity of Production Resources
 Issues of Social Responsibility

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 Different Ways to Study POM

 Production as a System
 Production as an Organization Function
 Decision Making in POM

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 Production
Production as
as aa System
System

Production System

Conversion
Inputs Outputs
Subsystem

Control
Subsystem

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 Inputs
Inputs of
of aa Production
Production System
System
 External

Legal, Economic, Social, Technological
 Market

Competition, Customer Desires, Product Info.
 Primary Resources

Materials, Personnel, Capital, Utilities

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 Conversion
Conversion Subsystem
Subsystem

 Physical (Manufacturing)
 Locational Services (Transportation)
 Exchange Services (Retailing)
 Storage Services (Warehousing)
 Other Private Services (Insurance)
 Government Services (Federal, State, Local)

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 Outputs
Outputs of
of aa Production
Production System
System
 Direct

Products

Services
 Indirect

Waste

Pollution

Technological Advances

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 Production
Production as
as an
an Organization
Organization Function
Function
 U.S. companies cannot compete using marketing,
finance, accounting, and engineering alone.
 We focus on POM as we think of global
competitiveness, because that is where the vast
majority of a firm’s workers, capital assets, and
expenses reside.
 To succeed, a firm must have a strong operations
function teaming with the other organization
functions.

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 Decision
Decision Making
Making in
in POM
POM
 Strategic Decisions
 Operating Decisions
 Control Decisions

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 Strategic Decisions

 These decisions are of strategic importance and have

long-term significance for the organization.
 Examples include deciding:

the design for a new product’s production process

where to locate a new factory

whether to launch a new-product development plan

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 Operating
Operating Decisions
Decisions
 These decisions are necessary if the ongoing
production of goods and services is to satisfy market
demands and provide profits.
 Examples include deciding:

how much finished-goods inventory to carry

the amount of overtime to use next week

the details for purchasing raw material next month

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 Control Decisions

 These decisions concern the day-to-day activities of

workers, quality of products and services, production
and overhead costs, and machine maintenance.
 Examples include deciding:

labor cost standards for a new product

frequency of preventive maintenance

new quality control acceptance criteria

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 What
What Controls
Controls the
the Operations
Operations System?
System?
 Information about the outputs, the conversions, and
the inputs is fed back to management.
 This information is matched with management’s
expectations
 When there is a difference, management must take
corrective action to maintain control of the system

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 Wrap-Up:
Wrap-Up: World
World Class
Class Practice
Practice
 POM important in any organization
 Global competition forces rapid evolution of POM
 Decision based framework focus of course

Strategic, Operating, and Control

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