BBM Semester IV

Production & Operations Management

MODULE 1 INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT

Content of module: Introduction to production and operations management, definition of production and operations management, meaning, scope and history of evolution.

Production is the process by which raw materials and other inputs are converted into finished products. Production and operations management (POM) is the management of an organizations production system. A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production system. The primary concern of an operations manager is the activities of the conversion process. Production Management and Operations Management Production management refers to the application of management principles to the production function in a factory. In other words, Production management involves application of planning, organizing, directing and controlling the activities of the production process. Production function is conversion of raw material into finished goods. Operations management is the process in which resources /inputs are converted into more useful products Production management and operations management are differentiated based on tangibility of finished goods/services. Product: product can be defined from many perspectives: a) from the consumers view- product is a combination of or optimal mix of potential

utilities. Consumer identifies the product in term of its uses. b) For a product manager: product is the combination of various surfaces and process and

operations. Planning is required to produce the production in the best and cheapest methods to face competition in the market. c) For financial manager: product is a mix of various cost elements as he is responsible for

the profitability of the product.

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BBM Semester IV d)

Production & Operations Management

For the HR manager: product is mix of various skills, as he responsible to select and train

the personnel to meet the demands of the skill. Product is bundle of tangible and intangible attributes which along with service is meant to satisfy the customers want. Production: Production is the conversion of raw materials to end products by using processes, machines, men, tools. It is the process by which goods and services are created by application of process (technology) to the raw materials to add the use and economic values to arrive at the product by the best method, without sacrificing the desired quality. Three ways of production:
1. 2. 3.

Production by Disintegration: separating the contents of mixture to get desired products. e.g. Crude oil, salt products, gold, coal. Production by Integration: various components of production are assembled together to get desired product. Eg. Watch, two-wheeler, cycle. Etc. Production by Service: It is combination of above methods where chemicals and mechanical properties are improved Production Management: Definition Production management deals with decisions making related to production process so that the resulting goods and services are produced according to specification in amounts and by schedules demanded at minimum costs. - E.S. Buffa Production Management is function of management related to planning, coordinating and controlling the resources required for production to produce specified products by specified methods by optimal utilization of resources. Production management ensures the optimum utilization of resources in order to attain the objective. It is multidisciplinary involving materials management, man management, planning methodology, scheduling technique, Quality Management, cost control, budget, maintenance management and host of tools technique and technologies. Nature of production: a. b. c. Production as a system. Production as an organizational function. Production as conversion/ transformation process.
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BBM Semester IV d. Production as means of creating utility.

Production & Operations Management

Production as a System

Production and operations management (POM) is the management of an organizations production system. A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production system. The primary concern of an operations manager is the activities of the conversion process.

Production system model comprises: Production system, Conversion sub-system and Control sub-system.

A Production System Model

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BBM Semester IV

Production & Operations Management

A Production System Model consists of the following: Production as a System Inputs of a Production System External - Legal, Economic, Social, Technological Market - Competition, Customer Desires, Product Info. Primary Resources - Materials, Personnel, Capital, Utilities

Conversion Subsystem

Physical (Manufacturing/ mining) Locational Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance, Finance, Utilities, Real Estate, Health etc.) Government Services (State, Local)

Outputs of a Production System Direct Products and Services Indirect Waste, Pollution and Technological Advances

Controls sub system

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BBM Semester IV

Production & Operations Management

Information about the outputs, the conversions, and the inputs is fed back to management. This information is matched with managements expectations. When there is a difference, management must take corrective action to maintain control of the system Decision making in Production Companies cannot compete using marketing, finance, accounting, and engineering alone. We focus on POM as we think of global competitiveness, because that is where the vast majority of a firms workers, capital assets, and expenses reside. To succeed, a firm must have a strong operations function teaming with the other organization functions. Operation managers are required to make a series of decisions in the production function. The decisions made by operation managers about the activities of production systems tend to fall into three general categories, viz.
Strategic Decisions (Planning products, processes & facilities).

These decisions are of strategic importance and have long-term significance for the organization. Examples include deciding: where to locate a new factory, whether to launch a new-product development plan etc.
Operating Decisions (Planning production to meet demand. )

Its deals with production planning systems, resource requirement planning systems, material mgmt etc. Examples include deciding: how much finished-goods inventory to carry, the amount of overtime to use next week, the details for purchasing raw material next month etc.
Control Decisions (It deals with total quality control, project planning & controlling

techniques, maintenance mgmt.) These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. Examples include deciding: labor cost standards for a new product, frequency of preventive maintenance etc. POM Decisions and their Applications

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BBM Semester IV

Production & Operations Management

Scope of Production Management: Scope of PM is very vast, starting from selection of location till the end product involving different stages such as land acquisition, building, construction, selection, processing and installation of machines, purchasing, receiving, storing, issuing raw materials and converting the raw materials into required products. a) Activities related to production system designing Production engineering Plant location Production system design Materials handling

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BBM Semester IV a) Activities relating to analysis and control Production planning Production control Quality control

Production & Operations Management

b) Human factor c) Research and Development activities Production Management covers the entire concept of production manufacturing, services organization, and project organization.

5 Ps in production Management PRODUCT: Produce the product in accordance with the plan. The role of PRODUCT in POM therefore concerns areas such as: performance, aesthetics, quality, reliability, quantity, production costs and delivery dates PLANT: To make PRODUCT, plant of some kind is needed. PROCESSES: Management must choose the best process, series of processes. Consider factors like:- available capacity, available skills, type of production, layout of plant and equipment, safety, production costs and maintenance requirements PROGRAMMES: Concern the date and time of the product that are to be produced and supplied to customers. The role of PROGRAMMES in POM therefore concerns areas such as: purchasing patterns, cash flow, need for /availability of storage and transportation. PEOPLE: consider the following areas: wages and salaries, safety and training, work conditions, leadership and motivation, unionization and communication.

Functions of Production Manager

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BBM Semester IV

Production & Operations Management

Production Techniques: Equipment design, process design, plant layout, shop layout, design of materials handling systems. Capacity management: Forecasting demand, delivery commitment, facility location and resource allocation. Industrial engineering: (Work study) methods study, work measurement. Machine and equipment- suitable machinery, process maintenance policy, layout of machines. Materials know how: Production manager must have sound knowledge of materials and their properties. Production planning and control: Estimating, forecasting TQC, routing, scheduling, loading, dispatching, expediting, progressing. Loading and scheduling: The production management department has to draw the timetable for various production activities, specifying when to start and when to finish the process required.

Inventory Control: Purchasing, storing, controlling inventory level, and materials issues. Quality control: Inspection, Quality circles, Quality assurance, reliability, SQC. Inspection: is concerned with the inspection activities during production. There are chances of deleting the defective parts. Maintenance: Servicing, repairing, breakdown, preventive maintenance, spare parts, inventory control, and equipment replacement.

History of POM The Industrial Revolution The industrial revolution developed in England in the 1700s. The steam engine invented by James Watt in 1764, largely replaced human and water power for factories. Adam Smiths The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor. Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers. The industrial revolution spread from England to other European countries and to the United Sates. In the 1800s the development of the gasoline engine and electricity further advanced the revolution. By the mid-1800s, the old cottage system of production had been replaced by the factory system. Post-Civil War Period

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BBM Semester IV

Production & Operations Management

During the post-Civil War period great expansion of production capacity occurred. By post-Civil War the following developments set the stage for the great production explosion of the 20th century: increased capital and production capacity, the expanded urban workforce and an effective transportation system Scientific Management Frederick Taylor is known as the father of scientific management. His shop system employed these steps: Each workers skill, strength, and learning ability were determined. Stopwatch studies were conducted to precisely set standard output per worker on each task. Material specifications, work methods, and routing sequences were used to organize the shop. Supervisors were carefully selected and trained. Incentive pay systems were initiated. Human Relations Movement Human relations refers to the ways in which managers interact with their employees. In the period between 1927-1932, researchers in the Hawthorne Studies realized that human factors were affecting production. Researchers and managers alike were recognizing that psychological and sociological factors affected production. Operations Research Quantitative decision making technique. The computers are used extensively. During World War, enormous quantities of resources (personnel, supplies, equipment etc.) had been deployed. Military operations research (OR) teams were formed to deal with the complexity of the deployment. After the war, operations researchers found their way back to universities, industry, government, and consulting firms. OR helps operations managers make decisions when problems are complex and wrong decisions are costly. The Service Revolution The creation of services organizations accelerated in 20th century. About 49.9% GDP is from services in 2005. Investment per office worker now exceeds the investment per factory worker. Thus there is a growing need for service operations management.

Reference Text Book

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BBM Semester IV

Production & Operations Management

1. Production and Operations Management by K Aswathappa and K. Shridhara Bhat. 2nd revised edition. Himalaya Publishing House 2008. Note: Modules are the guidelines for learning the syllabus. For further detail reference, refer the recommended reference books.

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