Productions and Operations

Management

UNIT –I :-INTRODUCTION TO
PRODUCTION AND
OPERATIONS MANAGEMENT
Introduction
Introduction
• Production/operations management is the
process, which combines and transforms various
resources used in the production/operations
subsystem of the organization into value added
product/services in a controlled manner as per the
policies of the organization.
• The set of interrelated management activities, which
are involved in manufacturing certain products, is
called as production management.
• If the same concept is extended to services
management, then the corresponding set of
management activities is called as operations
Historical Evolution of Productions and
Operations Management
Historical Evolution of Productions and
Operations Management
Functions of an Organization
An Organization may consist of the following
functions:
• Production
• Research and Development (often abbreviated to
R&D)
• Purchasing
• Sales and Marketing
• Human Resource Management
• Accounting and Finance.
• Distribution
Production
• Production function occupies the dominant
position in any business activity and it is a
continuous process. The production cycle mainly
depends on the marketing function because
production is justified when they have resulted in
revenues through sales.
• Production function involves heavy investment in
fixed assets and working capital. A firm control
by the finance manager on the investment in
productive assets becomes necessary.
Research & Development (R&D)

• The Research and Development (R&D) function

is concerned with developing new products,
innovations, or processes and improving existing
products/processes. R&D activities must be
closely coordinated with the organization’s
marketing and sales activities to ensure that the
organization is providing exactly what its
customers want in the most efficient, effective,
and economical way.
Purchasing
• The Purchasing function in the business is
concerned with acquiring goods and services for
use by the organization. It will include, e.g., raw
materials and components for manufacturing
and production equipment.
• In buying goods and services, purchasing
managers must take into account several factors,
collectively known as ‘Purchasing Mix’,
namely, Quantity, Quality, Price, and Delivery.
Factors affecting Purchase
• Quantity — Buying in large quantities can
attract price discounts and prevent inventory
from running out. On the other hand, there are
substantial costs involved in carrying a good
inventory.
• Quality — There will usually be a trade-off
between price and quality in acquiring goods
and services. Similarly, Production, R&D, and
Marketing functions will need to be consulted to
determine an acceptable level of quality.
Factors affecting Purchase
• Price — Other things being equal, the
purchasing manager will look for the best price
deal when procuring goods and services,
although price must be considered in
conjunction with quality and supplier reliability.
• Delivery — The time between placing an order
and receiving the goods or services, the lead
time, can be critical for production planning and
scheduling and also has implications for
inventory control.
Sales and Marketing
• To promote the business and reach out to prospects,
potential and existing partners, investors.
• To generate sales and increase brand awareness.
• Researching the market and your target audience
• Monitoring the company’s image on social media
• Creating advertising campaigns, and acquiring new
customers.
• Design brochures and other promotional materials
• Write website content
• Reach out to reporters and journalists.
Sales and Marketing
• Organizations have separate departments for
marketing and sales.
• The sales department, for example, maybe
divided into B2C and B2B sales.
• The marketing department can have several
divisions responsible for web design, digital
advertising, search engine optimization,
customer service, and PR.
Human Resources
• Human Resources(HR) management is one of the most
important business departments for any company with a
large number of employees.
• HR specialists are responsible for attracting talent,
screening potential candidates, managing employee
relations, and maintaining optimum working conditions.
• The HR department ensure compliance with labor and
employment laws, address employee inquiries, and solve
conflicts.
• These experts develop training programs for new employees
to help them get acquainted with the company’s culture and
values.
Accounting and Finance
• The Accounting and Finance function in business is concerned
with the following:
• The Financial record-keeping of all transactions involving
monetary inflows or outflows.
• Preparing financial statements (the income
statement, balance sheet, and cash flow statement) for
reporting to external parties such as shareholders. The
financial statements are the starting point for calculating any
tax due to the business profits.
• Payroll administration, paying wages, salaries, and
maintaining appropriate income tax and national insurance
records.
• Preparing management accounting information and analysis
to help managers to plan, control, and make decisions.
Distribution
• As goods produced are meant for sale, the distribution
function is an important business activity. It is more
important because it provides a continuous inflow of
cash to meet the outflow thereof.
• So while choosing different distribution channels,
media of advertisements, and sales promotion devices,
the cost-benefit criteria should be the guiding factor.
• If cost reduction in distribution function is effected
without compromising efficiency, it will lead to an
increased benefit to the enterprise in the form of higher
profit and to the consumers in the form of lower cost.
Concept of Production
Concept of Production
Concept of Production
• The production system of an organization is that
part, which produces products of an organization. It
is that 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.
Concept of Production
The production system has the following
characteristics:
1. Organized activity
2. Every production system has an objective.
3. System transforms the various inputs to useful
outputs.
4. It does not operate in isolation from the other
organization system.
5. There exists a feedback about the activities, which is
essential to control and improve system
performance.
Classification of Production System

• Production systems can be classified

1. Job Shop,
2. Batch,
3. Mass and
4. Continuous Production systems.
Classification of Production System
JOB SHOP PRODUCTION
• Job shop production are characterized by
manufacturing of one or few quantity of products
designed and produced as per the specification of
customers within prefixed time and cost. The
distinguishing feature of this is low volume and high
variety of products. A job shop comprises of general
purpose machines arranged into different departments.
Each job demands unique technological requirements,
demands processing on machines in a certain sequence
• Example :-Cake Shop
Characteristics of Job Shop Productions
The Job-shop production system is followed when
there is:
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each
job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the
requirements of each product, capacities for
each work centre and order priorities
Advantages
Following are the advantages of job shop production:
1. Because of general purpose machines and
facilities variety of products can be produced.
2. Operators will become more skilled and
competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilized.
4. Opportunity exists for creative methods and
innovative ideas.
Limitations

1. Following are the limitations of job shop

production:
2. Higher cost due to frequent set up changes.
3. Higher level of inventory at all levels and hence
higher inventory cost.
4. Production planning is complicated.
5. Larger space requirements.
BATCH PRODUCTION
• Batch production is defined by American Production
and Inventory Control Society (APICS) “as a form of
manufacturing in which the job passes through the
functional departments in lots or batches and each
lot may have a different routing.” It is characterized
by the manufacture of limited number of products
produced at regular intervals and stocked awaiting
sales.
• Example :- Computer Chips
• Clothing
Characteristics
Batch production system is used under the
following circumstances:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is used for
the production of item in a batch and change of
set up is required for processing the next batch.
4. When manufacturing lead time and cost are
lower as compared to job order production
Advantages
Following are the advantages of batch production:
1. Better utilisation of plant and machinery.
2. Promotes functional specialisation.
3. Cost per unit is lower as compared to job order
production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number
of products.
6. Job satisfaction exists for operators.
Limitations
Following are the limitations of batch production:
1. Material handling is complex because of
irregular and longer flows.
2. Production planning and control is complex
3. Work in process inventory is higher compared
to continuous production.
4. Higher set up costs due to frequent changes in
set up.
MASS PRODUCTION
• Manufacture of discrete parts or assemblies
using a continuous process are called mass
production. This production system is justified
by very large volume of production. The
machines are arranged in a line or product
layout. Product and process standardisation
exists and all outputs follow the same path

• Examples :- House Hold Appliances

Characteristics
Mass production is used under the following circumstances:
1. Standardisation of product and process sequence.
2. Dedicated special purpose machines having higher
production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous
and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
Advantages
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle
time.
2. Higher capacity utilisation due to line
balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low
Limitations

Following are the limitations of mass production:

1. Breakdown of one machine will stop an entire
production line.
2. Line layout needs major change with the
changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest
operation.
CONTINUOUS PRODUCTION
• Production facilities are arranged as per the
sequence of production operations from the first
operations to the finished product. The items are
made to flow through the sequence of operations
through material handling devices such as
conveyors, transfer devices, etc
• Food and Beverage Manufacturers
• Paper Manufacturers
• Cement Manufacturers
• Oil Refineries
Characteristics
Continuous production is used under the following
circumstances:
1. Dedicated plant and equipment with zero
flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of
operations.
4. Component materials cannot be readily
identified with final product.
5. Planning and scheduling is a routine action.
Advantages
Following are the advantages of continuous production:
1. Standardisation of product and process sequence
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilisation due to line balancing.
4. Manpower is not required for material handling as it
is completely automatic.
5. Person with limited skills can be used on the
production line.
6. Unit cost is lower due to high volume of production.
Limitations
Following are the limitations of continuous
production:
1. Flexibility to accommodate and process
number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.
PRODUCTION MANAGEMENT

• 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.
• E.S. Buffa defines production management as,
“Production management deals with decision making
related to production processes so that the resulting goods
or services are produced according to specifications, in the
amount and by the schedule demanded and out of
minimum cost.”
Objectives of Production Management

The objective of the production management is ‘to

produce goods services of right quality and
quantity at the right time and right
manufacturing cost’.
1. RIGHT QUALITY :- The quality of product is
established based upon the customers needs.
The right quality is not necessarily best quality.
It is determined by the cost of the product and
the technical characteristics as suited to the
specific requirements.
Objectives of Production Management

2. RIGHT QUANTITY :-The manufacturing organization

should produce the products in right number. If they are
produced in excess of 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.
3. RIGHT TIME:- Timeliness of delivery is one of the
important parameter to judge the effectiveness of
production department. So, the production department
has to make the optimal utilization of input resources to
achieve its objective
Objectives of Production Management

4. RIGHT MANUFACTURING COST :-

Manufacturing costs are established before the
product is actually manufactured. Hence, all
attempts should be made to produce the
products at pre-established cost, so as to reduce
the variation between actual and the standard
(pre-established) cost.
General Model
Productivity
INTRODUCTION
“Productivity is the ratio of the input facilities to
the output of goods and services – The company
must achieve high total factor productivity which
is the ratio of the market value of its output to
the cost of all the resources required to produce
the output.” – James Dilworth
MEANING OF PRODUCTIVITY
• Relationship between inputs and outputs of an
enterprise.
• It is the quantitative relationship between what
we produce and the resources used.
• The concept of productivity has many
dimensions.
• It can relate to every item/activity on which
money is spent to get the final product.
Productivity
• Productivity is a relationship between the output
(products/services) and the input(resources
consumed in providing them) of a business
system.
• Productivity = Output
Input

• For Survival of an organization this productivity

ratio must be at least 1.
Productivity
• Total productivity of the firm can be defined as :
• Pt = Qt /L+C+R+M
Where
• Pt = Total productivity
• L = Labour Input
• C = Capital Input
• R = Raw material and purchased parts input
• M = Other miscellaneous goods and services
• Qt = Total output
IMPORTANCE OF PRODUCTIVITY
• The concept of productivity is of great
significance for under developed and developing
countries. In both the cases there are limited
resources which should be used to get the
optimum output i.e. there should be tendency to
perform a job by cheaper, safer and quicker
ways. The aim should be optimum use of
resources so as to provide maximum satisfaction
with minimum efforts and expenditure.
IMPORTANCE OF PRODUCTIVITY
• Productivity analysis and measures indicate the
stages and situations where improvement in the
working of inputs is possible to increase the
output. The productivity Indicators can be used
for different purposes viz. comparison of
performances for various organizations,
contribution of different input factors,
bargaining with trade unions etc.
FACTORS AFFECTING PRODUCTIVITY
• INPUT RELATED FACTORS
• OUTPUT RELATED FACTORS
INPUT RELATED FACTORS

• Primary factors : These are effort and working capacity of

an individual as we say that the productivity is a state of
mind. One who believe in productivity can take the stock of
the situation that how one will ensure the productivity.
• Organisational factors : These are related to the design and
transformation process required to produce some items, the
nature of training and other skills imparted to workers to
perform certain operations in a production process, control
and various other incentives.
• Conventions and traditions of the organisation : The
activities of labour unions, medical facilities, workers and
executives understanding, etc. are part of this.
OUTPUT RELATED FACTORS
• Research and development techniques,
improvement in technology and efficient sales
strategy of the organisation will lead to
improvement in output.
• Efficient use of resources, better stores control,
production control policy, maintenance of
machines etc. will minimise the cost of production.
• Quality improvement process will ensure the
minimum wastage and intern better productivity.
Strategic management:
• The word "Strategy" and "Management"
combined to from Strategic Management.
• Strategic management begins with the
formulation of mission statement and setting up
of objectives for the organisation.
• Then a portfolio of business or business model is
prepared and ends at conducting functional
activities to achieve the pre-established
objectives and goals.
Definitions -
• According to Lloyd L. Byars :
• "Strategic Management is concerned with making decisions about
organisation future direction and implementing those decisions".

• According to Glueck :
• "Strategic management is a stream of decisions and action which leads
to the development of an effective strategy or strategies to help achieve
corporate objectives".

• According to Ansoffs :
• "Strategic management is a systematic approach to a major and
increasingly important responsibility of general management to position
and relate the firm to its environment in a way which will assure its
continued success and make it secure from surprises".
Concept of Strategic management
• Strategic management is not a one-time process but it
re-evaluated and implemented periodically.
• It is a holistic approach that ensure that there is
harmony between the organisation and its
environment.
• Strategic Management is concerned with different
organisation wide activities such as
• Analysing the environment,
• Providing direction,
• Developing and implementing strategies
• Applying strategic control measures.
Four Phases in Strategic Management Process -
The Advantages of Strategic Management

• Helps in Measuring the Progress

• Improves Stability
• Fulfillment the Responsibilities of the Board
Member
• Provides an Organisational Viewpoint
• Helps in Assessing the Objectives
• Strengthens Brand Management
• Identifies SWOT
• Strong Labour Supply
• Develops Decision Making Framework
The Disadvantages of Strategic
Management
• Limited to Set of Rules
• The Future Doesn’t Unfold as Anticipated
• It Can be Expensive
• Long Term Benefit vs. Immediate Results
• Impedes Flexibility
• Time Consuming
• Poor Adaptability
• Challenging Process
• Unexpected Outcomes
• Absence of Short Term Benefits
Strategic Management Framework:
• Stage 1: Where are we now? Analysis of present
situation
• Stage 2: Where we want to go? Setting goals and
objectives for future
• Stage 3: Analyses of various alternatives to achieve
the goals and objectives
• Stage 4: Selecting best alternatives in line with
strengths of organization
• Stage 5: Implementing and executing the selected
alternatives and monitoring of the same overtimes
Strategic Management Framework
Strategic Management Framework
Questions
1. What do you mean by ‘Production’?
2. What do you mean by production system?
3. Mention the different types of production systems.
4. What is job shop production?
5. What is batch production?
6. What is mass production?
7. What is continuous production?
8. Mention any four advantages of job shop production.
9. Mention any four limitations of job shop production.
10. Mention any four advantages of batch production.
11. Mention any four limitations of batch production.
12. Mention any four advantages of mass production.
13. Mention any four limitations of mass production.
14. Mention any four advantages of continuous production.
15. Mention any four limitations of continuous production.
16. Define production management.
17. Mention any four objectives of production management.
18. What is Productivity?
19. What do you mean by Strategy Management?
Long answer type Questions
1. Briefly explain the production system and its characteristics.
2. What is job shop production? What are its characteristics, advantages
and limitations?
3. What is batch production? What are its characteristics, advantages
and limitations?
4. What is batch production? What are its characteristics, advantages
and limitations?
5. What is mass production? What are its characteristics, advantages
and limitations?
6. What is continuous production? What are its characteristics,
advantages and limitations?
7. Explain in brief the objectives of production management.
8. What is Productivity? What are the factors affecting Productivity?
9. What do you mean by Strategy Management? Discuss the framework
of Strategic Management.
10. What do you mean by Strategy Management? Discuss the advantages
UNIT I FINISHED