Production Management v/s Operations Management

A high level comparison which distinct production and operations management can be done on following
characteristics:
Output: Production management deals with manufacturing of products like (computer, car, etc) while
operations management cover both products and services.
Usage of Output: Products like computer/car are utilized over a period of time whereas services need to be
consumed immediately
Classification of work: To produce products like computer/car more of capital equipment and less labour are
required while services require more labour and lesser capital equipment.
Customer Contact: There is no participation of customer during production whereas for services a constant
contact with customer is required.
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.
BATCH PRODUCTION It is a form of manufacturing in which the job passes through the functional departments
in lots or batches and each batch may have a different routing. It is characterized by the manufacture of limited
number of products produced at regular intervals and stocked awaiting sales.

A good product design has following common features:

Utility: The product design should make product utility as per expectation of customers and provide steady
performance through the product life.
Aesthetics: Product aesthetics is important in success of the product. The product aesthetics is dependent on
market and end customer.
Producible: Product design should enable effective production of product through available production
methods.
Profitability: Product design should make economic sense as to deliver value to customer and sustainability
to the organization.
Differentiable: A good product design should enable product to be differentiate among its competition. This
can be achieved by attractive packaging and also by providing additional service on the product.
Factors for company location
For a company which operates in a global environment; cost, available infrastructure, labor
skill, government policies and environment are very important factors. A right location
provides adequate access to customers, skilled labors, transportation, etc. A right location
ensures success of the organization in current global competitive environment.

Inventory Management

In any business or organization, all functions are interlinked and connected to each other and are often
overlapping. Some key aspects like supply chain management, logistics and inventory form the backbone of
the business delivery function. Therefore these functions are extremely important to marketing managers as
well as finance controllers.
Inventory management is a very important function that determines the
health of the supply chain as well as the impacts the financial health of the
balance sheet. Every organization constantly strives to maintain optimum inventory
to be able to meet its requirements and avoid over or under inventory that can impact
the financial figures.
Inventory is always dynamic. Inventory management requires constant and careful evaluation of external and
internal factors and control through planning and review. Most of the organizations have a separate
department or job function called inventory planners who continuously monitor, control and review
inventory and interface with production, procurement and finance departments.
Defining Inventory
Inventory is an idle stock of physical goods that contain economic value, and are held in
various forms by an organization in its custody awaiting packing, processing,
transformation, use or sale in a future point of time.
Any organization which is into production, trading, sale and service of a product will
necessarily hold stock of various physical resources to aid in future consumption and sale.
While inventory is a necessary evil of any such business, it may be noted that the
organizations hold inventories for various reasons, which include speculative purposes,
functional purposes, physical necessities etc.
All organizations engaged in production or sale of products hold inventory in one form or
other.
Inventory can be in complete state or incomplete state.
Inventory is held to facilitate future consumption, sale or further processing/value
addition.
All inventoried resources have economic value and can be considered as assets of the
organization.
Need for Inventory Management - Why do Companies hold Inventories ?
Inventory is a necessary evil that every organization would have to maintain for various
purposes. Optimum inventory management is the goal of every inventory planner. Over
inventory or under inventory both cause financial impact and health of the business as well
as effect business opportunities.
Inventory holding is resorted to by organizations as hedge against various external and
internal factors, as precaution, as opportunity, as a need and for speculative purposes.

1. Meet variation in Production Demand

2. Cater to Cyclical and Seasonal Demand
3. Economies of Scale in Procurement
4. Take advantage of Price Increase and Quantity Discounts
5. Reduce Transit Cost and Transit Times

Inventory Management and Just In Time (JIT)

Inventory Costs
There are three broad categories of cost associated with inventory; holding cost, ordering cost and set up cost.
Holding costs are carrying cost associated with inventory over a period of time. They include insurance,
warehousing, interest, extra head-count, etc.
Ordering costs are cost associated with purchasing of raw material and receiving raw materials. They include
forms, order processing, office maintenance supplies and staff associated with ordering.
Set Up Cost are cost associated with installation of machine for production. They include clean- up cost, retooling cost and adjustment cost.

Just In Time (JIT)

Just In Time is set of strategic activities, which are formulated to achieve maximum production with minimal
maintenance of inventory. JIT as philosophy is applicable to various types of organization but on implement
side it is more relevant with manufacturing operations.
For JIT system to be successful, there are two critical elements, attitude of workers/management and practice.
Fundamentals of JIT
JIT is based on the following fundamentals:
JIT manufacturing and ordering
Elimination of waste
Lean management

With the above fundamentals in place, JIT delivers the following:

Continuous improvement of production and order processing.
Elimination of non-value added activities and procedures.
Simplification and advancement of the existing systems.
Creation of safety environment and ensuring total quality management.
Creation crossed skilled workers.
80 per cent of the income and wealth were concentrated in the hands of about20 per cent of the population. This
80-20 relationship also holds good in most cases of inventories where it may be found that about 20 per cent of the
total number of items are responsible for about 80 per cent of the value.

Limitations of the EOQ formula

In practice, unit cost of purchase of an item varies, lead times are uncertain and also requirements or demands of
inventory items are not perfectly predictable in advance. Rate of consumption varies greatly in many cases. As
such, the Application of the formula often becomes difficult and complicated. Price Breaks or Quantity Discounts.

The purvey of OM ranges from strategic to tactical and operational levels.

Representative strategic issues include determining the size and location of

manufacturing plants, deciding the structure of service or telecommunications
networks, and designing technology supply chains.
Tactical issues include plant layout and structure, project management methods, and
equipment selection and replacement.
Operational issues include production scheduling and control, inventory
management, quality control and inspection, traffic and materials handling, and
equipment maintenance policies.

From problem-faced to problem-solved

The PDCA Cycle is a checklist of the four stages which you must go through to get from `problem-faced' to
`problem solved'. The four stages are Plan-Do-Check-Act, and they are carried out in the cycle illustrated
below.

The concept of the PDCA Cycle was originally developed by Walter Shewhart, the pioneering statistician
who developed statistical process control in the Bell Laboratories in the US during the 1930's. It is often
referred to as `the Shewhart Cycle'. It was taken up and promoted very effectively from the 1950s on by
the famous Quality Management authority, W. Edwards Deming, and is consequently known by many as
`the Deming Wheel'.