Chapter 1

UNIVERSITY OF GONDAR
INSTITUTE OF TECHNOLOGY
SCHOOL OF MECHANICAL AND INDUSTRIAL
ENGINEERING
INDUSTRIAL ENGINEERING PROGRAM

Production Planning and Control I

Target group 3rd year regular IE students

By Tibebu A.
 Chapter 1

Introduction to production & Operations Management

Introduction
Cha- 1
• Before we set the working definition of
operation management, it is important to clarify
the following key terms/phrases:
• Production is a process of transforming
(converting) inputs (raw-materials) into outputs
(finished goods). So, production means the
creation of goods and services. It is done to
satisfy human wants. Thus, production is a
process of transformation.
 Historical evolution of production and operations Cha-1
management introdn. cont.….

For over the last centuries POM has been recognized as an

important factor in a country’s economic growth.
The traditional view of manufacturing management began
in 18th century when Adam Smith recognized the
economic benefits of specialization of labour. He
recommended breaking of jobs down into subtasks and
recognizes workers to specialized tasks in which they
would become highly skilled and efficient.
How about todays specialization is?
Historical evolution of POM cont.…..
 Introduction cont.….
The term ppc

Production Planning: is concerned with thinking in

advance what is to be produced, how it is to be
produced and by what time should it be
produced. It prepares a detailed plan for
achieving the production goals economically,
efficiently and in time.
 Introduction cont.….
The term ppc

Production Control: It is the task of predicting,

planning and scheduling work, taking into account
manpower, materials availability and other
capacity restrictions, and cost so as to achieve
proper quality and quantity at the time it is
needed and then following up the schedule to see
that the plan is being carried out, using whatever
systems have proven satisfactory for the
purpose.
 Production system
It is an activity whereby resources, flowing within a
defined system, are combined and transformed in a
controlled manner to add value in accordance with
the policies communicated by management.

Figure 1.2 Schematic production system

 Characteristics of production system

1. Production is an organized activity, so every

production system has an objective.
2. The system transforms the various inputs to
useful outputs.
3. It does not operate in isolation from the other
organization system.
4. There exists a feedback about the activities,
which is essential to control and improve system
performance.
 Production management
Is a process of planning, organizing, directing and
controlling the activities of the production function. It
combines and transforms various resources used in the
production subsystem of the organization into value
added product in a controlled manner as per the policies
of the organization.
Objective:
The objective of the production management is ‘to produce
goods & services of;
 right quality and quantity at the right time and right
manufacturing cost.’
 To achieve desired share of the market.
 To achieve the desired level of profit.
 To develop alternative plans in order to meet any
emergency or contingency.
 Operating system

Operating system converts inputs in order to provide

outputs which are required by a customer.
It converts physical resources into outputs, the
function of which is to satisfy customer wants i.e., to
provide some utility for the customer. In some of the
organization the product is a physical good (hotels)
while in others it is a service (hospitals). Bus and taxi
services, tailors, hospital and builders are the
examples of an operating system.
 Concept of Operations

An operation is defined in terms of the mission it

serves for the organization, technology it employs
and the human and managerial processes it involves.
Operations in an organization can be categorized
into.
Manufacturing operations: is a conversion process
that includes manufacturing yields a tangible
output: a product, whereas,
service operations: a conversion process that
includes service yields an intangible output: a deed,
a performance, an effort.
Distinction between Manufacturing Operations and
Service Operations

Manufacturing: characterized by tangible

outputs (products),
 outputs that customers consume overtime,
 jobs that use less labour and more equipment,
 little customer contact,
 no customer participation in the conversion
process (in production), and
 sophisticated methods for measuring
production activities and resource
consumption as product are made.
Distinction between Manufacturing Operations and
Service Operations cont.…..
Service Operations: characterized by intangible
outputs,
 outputs that customers consumes immediately,
 jobs that use more labour and less equipment
 direct consumer contact, frequent customer
participation in the conversion process, and
 elementary methods for measuring conversion
activities and resource consumption.
Some services are equipment based namely rail-road
services, telephone services and some are people
based namely tax consultant services, hair styling.
 Operations Management
• Operations are purposeful actions (or activities)
methodically done as part of a plan of work by a
process that is designed to achieve practical ends
and concrete objectives.
• Operations can be described using different
verbs and object phrases such as pressing
Production and Operations Management Systems
and turning metal (on a lathe), cutting paper,
sewing clothes, sawing and drilling wood,
sandblasting glass, forming plastics, shaping clay,
heat-treating materials, soldering contacts,
weaving fabric, blending fuels, filling cans, and
extruding wires.
 Operation Management cont.…

• OM is Systematic direction, control, and evaluation

of the entire range of processes that transform
inputs into finished goods or services.
• It Refers to the management of the production
system that transforms inputs into finished goods
and services.
• It seeks to increase the quality, efficiency, and
responsiveness of the firm.
Seeks to provide a competitive advantage.
 Operation Management cont.…

Objectives: categorized in to customer service and

resource utilization.
1. Customer service: The first objective of OM is
to the satisfaction of customer wants. It must
provide something to a specification which can
satisfy a customer in terms of cost and timing.
2. Resource utilization: OM must utilize resources
for the satisfaction of customer wants effectively,
i.e., customer service must be provided with the
achievement of effective operations through
efficient use of resources.
 Why we study OM ?
• To learn how people organize themselves to
be productive and profitable at their chosen
enterprise.
• To learn how goods and services are produced.
• To learn what operations managers do so it
can be put to use in numerous opportunities.
• To learn what makes it such a costly part of
an organization, and how to manage those
costs through informed decisions.
 What Operations Managers Do ?

• Operation managers the following

activities ( management functions):
Planning
Organizing
Staffing
 leading and
controlling.
 What Operations Managers Do ?

1.Planning: Activities that establishes a course

of action and guide for future decision-making.
The operations manager defines the objectives
for the operations subsystem of the
organization, and the policies, and procedures
for achieving the objectives. This stage includes
clarifying the role and focus of operations in the
organization’s overall strategy.
 What Operations Managers Do ?

2.Organizing:Activities that establishes a

structure of tasks and authority. Operation
managers establish a structure of roles and the
flow of information within the operations
subsystem. They determine the activities
required to achieve the goals and assign
authority and responsibility for carrying them
out.
3.Staffing: In this case operations managers
are responsible in hiring/laying off and Use of
Overtime when they found it necessary.
 What Operations Managers Do ?

4.Leading: Leading is the 4th step that is accomplished by

communicating, motivating, inspiring, and encouraging
employees to achieve a higher level of productivity.
 "Leading is the use of influence to motivate employees to
achieve organizational goals" (Richard Daft).

5.Controlling: Activities that assure the actual performance

in accordance with planned performance. To
ensure that the plans for the operations subsystems are
accomplished, the operations manager must exercise control
by measuring actual outputs and comparing them to planned
operations management. Controlling costs, quality, and
schedules are the important functions here.
 Managing global operations

The term ‘globalization’ describes businesses’

deployment of facilities and operations
around the world.
 Challenges of OM
• Globalization
 Operation managers face competition from the
company across the street, as well as, from
across the country and across the world.
 companies who compete with others abroad will
have to improve quality while lowering prices to
remain competitive.
 This falls on the operations manager as he or she
is the one who engages in the four functions of
planning, organizing, leading, and controlling to
ensure that the product or service remains
competitive in the market.
Scope of production and operations management

Production and operations management

concern with the conversion of inputs into
outputs.
It distinguishes itself from other functions
such as personnel, marketing, finance, etc.,
by its primary concern for ‘conversion by
using physical resources.
 Scope of POM Cont.…
’Following are the activities which are being carried out under
production and operations management functions:

Fig. 1.4 Scope of production and operations management

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