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Production and Operations Management

Module 1: Introduction to Production and Operations Management

Products
– Television, Soap, Car , Garments
Services
– Medical treatment, consultancy, Education, Transport

• Products are manufactured


• Services are provided

Some of the characteristic differences between product and Service (there are exceptions!)

Product Service

1. Customer is not associated during 1. Customer associated during service


production
2. Is tangible 2. Is intangible
3. Can be made in anticipation and 3. Cannot be stocked: can be provided on
stocked demand.
4. Requirements can be stated in clear 4. Requirements cannot be stated in clear
terms terms
5. Meeting requirements can be easily 5. Satisfaction can be felt after service is
checked delivered
6. Input material content is relatively high 6. Input material content is relatively low
7. Transformation process normally done 7. Transformation process is normally
by machines or low cost human done by skilled human resource
resource
8. Products have life cycle till discarded 8. Life cycle concept do not exist
( use, Maintenance, servicing,
obsolescence)
9. Products may have residual value 9. Services do not have any
10. Products are pushed to market and 10. Services are normally need driven and
selected by customer based on pulled by customer
requirements / life style

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• Organizations can be manufacturing or Service organizations
• No organisation is pure product oriented or pure service oriented
(Car manufacturers have components like servicing, handling warranty complaints.
Hospitals have components like drugs, diagnosis reports etc)
• Classification is based on whether product orientation is dominant or service

Transformation process

Improvements Defects/ deficiencies


/poor performance

Inputs Transformation Outputs Customer


process

Feedbacks /
Improvements
Complaints

Discuss above for a Scooter manufacturer and Hospital

Typical Transformation activities for products

• Purchasing of Raw materials and Storage


• Production ( conversion )- Cutting, Machining, Fabrication, painting, packing
• Inspection and testing
• Ware housing and delivery

Transformation activities for Services vary greatly depending on type of service.


For Hospital, these activities are
• Out patient services
• In-patient services (eg. ward, ICU, OT)
• Diagnostic service ( eg. X-ray, laboratory, scans)
• Purchase of medicines and Dispensing
• Blood bank activities

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Definition of Production and Operations Management

Production and operation management is defined as the design, operation and improvement
of the transformation process which converts the various inputs into the desired outputs of
products and services

The term “operations management” is widely used now which includes manufacturing and
service organizations.

Critical system elements of production Management


• Product , process and service design
• Facility, capacity, location and layout
• Capacity management
• Materials management
• Production scheduling
• Quality management
• Technology management

Responsibilities of Production manager


1. Planning of geographical location of factory
2. Purchasing production equipment
3. Layout of equipment
4. Process Design
5. Establishment of work standards
6. Capacity planning
7. Production planning and scheduling
8. Production control
9. Inventory management
10. Supply chain management
11. Quality control
12. Industrial relations
13. Equipment Maintenance
14. Health and safety
15. Staff selection and training
16. Budgeting and capital planning

Some factors affecting Production management

1. High Quality level demands by customer ( PPM, 6 sigma)


2. Low lead time for manufacture
3. Large verities
4. Low Batch Quantities
5. Global Competition

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6. Pressure on operating cost reduction ( raising input costs with product prices declining)
Good production management can offer competitive advantage to a firm by:

1. Sorter new-product lead time


2. More inventory terns
3. Sorter manufacturing lead time
4. Higher quality
5. Greater flexibility
6. Better customer service
7. Reduced wastage

Types of production
• Continuous production
– very few verities
– very long production runs
– Eg. Cement , Steel, Plastic
• Semi-continuous production
– Few varieties
– Long production runs
– High volume of output
– Repetitive in nature
– Eg. Automobiles, electronic items, Soaps, White goods

• Intermittent production
– Batch production
• Many verities
• Short production runs
• low volume of output
• Repetitive in nature
• Eg. Standard tools, products to customer specifications, earth moving
machinery
– Job shop
• Few numbers
• Specials
• Not repetitive
• Eg. Specials Tools, custom built cars,

Competitiveness means :
1. Existing demand for products
2. Value for money
3. No threat from competitors
4. No threat of obsolescence
5. Continuous additions to product features insuring future acceptance and demand
6. Quality, pricing meets customer expectations and competitors at a distance
7. High customer satisfaction

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Productivity
Productivity ensures competitive edge
1. Labour productivity
2. Inventory Turn over
3. Return on Investment (ROI)
4. Quick product Design & development
5. Less time to Market
6. Marketing efficiency
7. Supplier rationalization
8. Total Productive Maintenance (TPM)

Strategic management means formulations of long term goals and actions plans to accomplish
those goals. It consists of the following broad steps:
1. Analysis of opportunities and constraints in the market place
2. Formulation of strategies
3. Implementation of the strategies
4. Evaluate and control till objectives are reached

Typical; corporate strategies


• Horizontal integration
• Vertical integration
• Mergers
• Alliances
• Disinvestment

Typical unit level strategies:


• Increase market share by 4%
• Launch 10 new products in next 3 years
• Increase exports by 100%
• Reduce cost by 15%

Some strategy factors:


• Make –buy decisions
• Automation
• Computerization
• Supplier development
• Waste elimination
• Value addition
• Cost reduction
• New product introduction and timing
• Value engineering
• Business process re-engineering

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