LECTURE TWO

PRODUCTION AND
OPERATIONS
MANAGEMENT FUNCTION
 Objectives
 Understand the concept of Production and Opera-
tions Management (POM)
 Understand the concept of Production system
 Elucidate the role of POM in business
 Describe the decisions that operations managers
make
 Elucidate the historical developments POM
 The Concept of Production and Operations
 Production implies the creation of goods and services to satisfy human
needs.
 It involves conversion of inputs (resources) into outputs (products).
 It is a process by which, raw materials and other inputs are converted
into finished products. Any process which involves the conversion of
raw materials and bought-out components into finished products for
sale is known as production.
 Such conversion of inputs adds the value or utility of the products
produced by the conversion or transformation process. The utility or
added value is the difference between the value of outputs and the
value of inputs.
 The term “operations” refers to a function or system that transforms
inputs into outputs of greater value.
 Operations are often defined as a set of transformation or conversion
process wherein inputs such as materials, machines, labor and capital
are transformed into outputs in a productive system.
 if the outputs are strictly tangible goods, such a system is referred to
as a “production system” and the transformation process is referred to
as “production”.
 The service system in which the output is predominantly a service or
even a pure service, is also treated as a productive system and often
referred to as an “operating system” instead of a “production system”.
 PRODUCTION SYSTEM

 A “Production System” is a system whose function is to

transform an input into a desired output by means of a
process (the production process) and of resources.
 organizations transform (or convert) a set of inputs (such
as materials, labor, equipment, energy etc.) in to one or
more useful outputs through a production system which is
also known as “Input-Output-Model”.
 Input Output Model

Value added
Inputs
Outputs
Transformation/
Land, Labor, conversion process Goods/ser-
Capital
vices

Feedback

Control
Measurement & Feedback
Measurement & Feedback
 Feedback = measurement taken at various point in
transformation process
 Control= the comparison of feedback against pre-
viously established standards
 The value of product/service = performance/cost
 Performance = f(functionality, quality, speed,
timeliness, flexibility)
 Intermittent Production System

 Intermittent means something that starts (initiates) and stops

(halts) at irregular (unfixed) intervals (time gaps).
In the intermittent production system,
 Goods are produced based on customer's orders and on a
small scale.
 The flow of production is not continuous.
 In this system, large varieties of products are produced.
The system is very flexible to accommodate changing.
Types of Intermittent Production System
Continuous Production System
Goods are constantly produced according to the demand
forecast on a large scale for storage and sale.
Continuous means something that operates constantly
without irregularities or frequent stops.
Goods are not produced at the customer’s request.
Here, the inputs and outputs are standardized together with
the production process and the sequence.
Examples -
(i) Food industry
(ii) Fuel industry
Types of Continuous Production System
 Production and Operations Management

 POM is the management of system or process that create

goods and/or services
 It is concern with the conversion of inputs into outputs,
using physical resources, so as to provide the desired util-
ities to the customer while meeting organizational objec-
tives
 Managing people and machinery in converting materials
and resources into finished goods and services
 Companies can not compete using marketing, accounting or
engineering etc. alone
 On POM is where vast majority of firm’s workers, capital asset
and expenses reside and make the company compete globally
 To succeed, a firm must have strong operations function team-
ing with other organizations function
 Responsibility of POM Manager
 The key responsibility of a production manager is to look into five
"P"s;
 Product: Product is the direct interface between the production and
market. It is meant for the customers in the market. A product should
be qualitative, low price, reliable, easy availability, smooth delivery,
easy handling, after sales service and have good and long performance.
 Plant: Dealing with the plant includes building, equipment, machinery
and the other related aspects of the plant. Ensuring the plant have the
capacity to meet the present and future requirements, be cautious about
the maintenance issues, safety in installation of machinery, operational
efficiency of the equipment and environmental protection.
 Process: Transformation of input into output is the responsibility of
a production manager. look into all the processes so that the product
can be available in time.
 Programs: It includes the production schedule. Each production,
the number of process it needs, layout of the product, safety in each
operation and the cost involved in each and every product should
be produced with a schedule.
 People: Look into the skill, knowledge and expertise of the
workmen, intelligence of the managerial personnel which is crucial
and critical for a qualitative product. Efficient an effective
utilization of people who are engaged in production process is
crucial for production sustainable.
5P’s Responsibilities will lead to;

 Meeting requirements of quality demanded by customers.

 Establishing realistic delivery or completion dates.
 Producing the required volume of products to meet the
demand.
 Selection and application of most economic methods or
processes.
 Controlling the cost of inputs and conversion process and
thereby keeping the cost of outputs within the desired
limits.
 POM Managers’ Decisions
 Strategic Decisions: Decisions about products, processes and
facilities. These decisions are strategically important and have long-
term significance for the organization.
 Operating Decisions: Decisions about planning production to meet
demand. These decisions must help to resolve the issues concerned
with planning production to meet customers’ demands for products
and services and to achieve customer satisfaction at reasonable costs.
 Control Decisions: Decisions about controlling operations concerned
with day-to-day activities of the workers, quality of products and
services, production costs, overhead costs and maintenance of plant
and equipment.
 The Framework of POM
 Operation managers are concerned with planning, organizing,
and controlling the activities which affect human behavior
through models.
 PLANNING
 ORGANIZING
 CONTROLLING
 STAFFING
 DIRECTING
 Activities of POM Manager

 Facility locations decisions.

 Facility layout decisions.
 Production Planning and control.
 Quality Control and Assurance.
 Material planning and management.
 Job design and work measurements.
 Motivating and training employees.
 Product , process and capacity design. etc.
Objectives Of Production/Operations Management

 Maximum utilization of all kinds of resources needed.

 Maximum possible productivity.
 Maximum customer satisfaction through quality,
reliability, cost and delivery time.
 Maximum possible profit or return on investment.
 Concern for protection of environment.
 The Concept of Productivity

 Productivity is a relationship between the output (product/service) and

input (resources consumed in providing them) of a business system. It
is the ratio of aggregate output to the aggregate input.
Productivity = Output/Input
 For survival of any organization, productivity ratio must be at least
1.If it is more than 1, the organization is in a comfortable position.
The ratio of output produced to the input resources utilized in the
production.
 Productivity is the crucial performance measure of organization
sustainability.
 Productivity Measurement
 Productivity may be measured either on aggregate basis or
on individual basis (total and partial measure).
Total productivity Index/measure =

 Partial productivity indices, depending upon factors used, it

measures the efficiency of individual factor of production.
Partial Measure = or or
 Strategies for improving productivity

 Increased output for the same input.

 Decreased input for the same output.
 Proportionate increase in the output is more than the
proportionate increase in the input.
 Proportionate decrease in the input is more than the
proportionate decrease in the output.
 Simultaneous increase in the output with decrease in the
input.
 Factors Affecting Productivity

Productivity stands tall on following four important pillars

responsible for positively as well as negatively affecting the
Productivity of the Organization.

• CAPITAL
• QUALITY
• TECHNOLOGY
• MANAGEMENT
• CORPORATE STRATEGIES
 Operations Management Ethics

 Financial statement: accurately representing the organiza-

tions financial condition.
 Product safety: providing products that minimizes risk of
injury to users or damage to property or environment.
 Quality: having warranties, avoiding hidden effect.
 The environment: not doing things that will harm the en-
vironment.
 The community: being a good neighbor.
 Hiring and firing workers: don’t hinder false pretense, e.g;
promising a long-term job when that is not what is intended.
 Closing facilities: taking into account the impact on commu-
nity and honoring commitment that have been made
 Workers rights: respect worker’s rights, dealing with worker
problems quickly and fairly.
 Historical Background of Operations Management
 Operations management has obviously known as industrial manage-
ment, management science/Operations research, Production manage-
ment etc.
 The history of Operations Management evolved in various era of hu-

man economic Development

 Prior to 1900

◦ Prior industrial revolutions good were produced by craftsmen

◦ Industrial revolution began in 1770s.
◦ Machine power replaced man power.
◦ Mass production in factories
◦ Industrial Revolution spread from Europe to USA in 19th century.
 Scientific Management (Frederick W. Taylor)
◦ Systematic approach to increasing worker productivity through time
study, standardization of work, and incentives.
◦ Planning, carefully selecting and training workers, finding the best
way to perform each job, achieving cooperation between management
and workers.
 Other Management Pioneers
◦ Frank and Lillian Gilbreth
 Motion study and industrial psychology
◦ Henry L. Gantt
 Scheduling and the Gantt chart
 Moving Assembly Line (1913)
◦ Labor specialization reduced assembly time.
 Hawthorne Studies (human relations)
◦ Yielded unexpected results in the productivity of Western Electric
plant workers after changes in their production environment.
◦ Led to recognition of the importance of work design and employee
motivation.
 Operations Research (Management Science)
◦ Outgrowth of WWII needs for logistics control and weapons-sys-
tems design.
◦ Seeks to obtain mathematically optimal (quantitative) solutions to
complex problems.
 OM Emerges as a Field
◦ 1950–1960, OM moved beyond industrial engineering and opera-
tions research to the view of the production operation as a system.
 The Marriage of OM and IT

◦ Integrated solutions approaches

 Business process reengineering
 Supply chain management
In general the evolution of OM is through the following stages;
 Industrial revolution: craft production system, highly skilled labor use

simple, flexible too to produce small quantities.

 Scientific management: make emphasis on technical aspect on work

design.
 Human relation movement.
 Decision models and management science.

Note: Read more about evolution of operations management

 IN SUMMARY

 Production and operations management is conversion of input into output

according to demand of the consumers in the market. The purpose of production
management is to produce maximum product with a minimum cost. Production
function refers to creation of various utility in order to satisfy large number of
consumers in the market. Production system refers to optimum utilization of
production elements like labors, material, machine, capital and management in
production process so that qualitative production can be possible with a minimum
cost.
 Production management system ensures benefit to the consumers, suppliers,
employees, organization and society. The duties and responsibilities of a
production manager is to look after plant, product, process, program and people so
that the product can be available in time in a desirable cost. It is necessary to take
different decisions during production system. The decisions are strategic decisions,
operational decisions and controlled decisions which can help the production
manager on producing qualitative product with a minimum lowest cost.