Operations Management

Module - 1
 Module 01 Contents.
Operations Management- an overview
Concept of operation
Production as a system function
Evolution from manufacturing to Operations
Management
Role & importance of OM
Product V/s Services
Historical evolution of OM- Scientific Management,
Moving Assembly Line,
Hawthorne Studies
Operations Research
Global scenario of Industrialization
 Module 01 Contents.
Recent trends in OM
Technological changes in OM
Evolution and impact on management
Production Planning and Control
Basic functions of PPC and its variants in
different systems of manufacture (mass
production,Batch production, Job- shop
production, projects)
Production cycle( Understanding the concepts
only)
 Concept of Operation
Operation is that part of as organization, which is concerned
with the transformation of a range of inputs into the required
output (services) having the requisite quality level.
Management is the process, which combines and transforms
various resources used in the operations subsystem of the
organization into value added 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 management.
 Concept of OM
OM involves the three functions of getting inputs,
conversion and outputs. Inputs consist of
people, material and equipment. The conversion
activity consists of design fabrication, assembly and
storage. The output comprises goods and services.
Operations management means the conversion of
inputs into outputs involves design and
development of products and services, facilities
location, capital equipment, facilities layout, work
design and measurement, production forecasting,
production planning and scheduling, material
management, inventory management and quality
control.
 Production as a System Function
The production system is that part of
an organization, 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
Production as a System Function
 Evolution from manufacturing to
Operations Management
The traditional view of manufacturing management
began in eighteenth century when Adam Smith
recognized the economic benefits of
specialization of labour.
In the early twentieth century, F.W. Taylor
implemented Smiths theories and developed
scientific management.
From then till 1930, many techniques were
developed prevailing the traditional view.
Production Management becomes the acceptable
term from 1930s to 1950s.
Operations Management was a shift in the
service and manufacturing sectors of the
economy. As service sector became more
prominent, the change from production to
 Historical Development
of OM
Pre-Industrial Revolution
Craft production - System in which highly
skilled workers use simple, flexible tools to
produce small quantities of customized goods
Some key elements of the industrial
revolution
Began in England in the 1770s
Division of labor - Adam Smith, 1776
Application of the rotative steam engine,
1780s
Cotton Gin and Interchangeable parts - Eli
Whitney, 1792
 Historical Development of OM
(cont.)
Scientific Management (Frederick W. Taylor)
Systematic approach to increasing worker
productivity through time study,
standardization of work, and incentives.
Viewed workers as an interchangeable asset.
Believed in a science of management based on
observation, measurement, analysis and
improvement of work methods, and economic
incentives.
Management is responsible for planning,
carefully selecting and training workers,
finding the best way to perform each job,
achieving cooperate between management
and workers, and separating management
 Historical Development of OM
(cont.)
Moving Assembly Line (1913)
Labor specialization reduced assembly
time.
Hawthorne Studies
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.
 Historical Development of OM
(cont.)
Operations Research
(Management Science)
Outgrowth of WWII needs for logistics
control and weapons-systems design.
Seeks to obtain mathematically optimal
(quantitative) solutions to complex
problems.
OM Emerges as a Field
19501960, OM moved beyond
industrial engineering and operations
research to the view of the production
 Historical Development of OM
(cont.)
The Marriage of OM and IT
Integrated solutions approaches
Business process reengineering
Supply chain management
Systems integration (SAP)
Operations Management in Services
OM concepts can apply to both manufacturing
and service operations.
Integration of Manufacturing and Services
Conducting world class operations requires
compatible manufacturing and service
operations.
 Recent Trends in OM
1. Flexibility:The ability to adapt quickly to
changes in volumes of demand, in the product
mix demanded, and in product design or
delivery schedules, has become a major
competitive strategy and a competitive
advantage to the firms. This is sometimes
called as agile manufacturing
2. Total Quality Management:TQM approach
has been adopted by many firms to achieve
customer satisfaction by a never ending quest
for improving the quality of goods and services.
3. Time Reduction:Reduction of manufacturing
cycle time and speed to marker for a new
product provide a competitive edge to a firm
over other firms. When companies can provide
 Recent Trends.
4. Worker Involvement:The recent trends is to
assign responsibility for decision making and
problem solving to the lower levels in the
organization. This is known as employee
involvement and empowerment. Examples of
employees empowerment are quality circle and use
of work teams or quality improvement teams.
5. Business Process Re-engineering:BPR involves
drastic measures or break-through improvements
to improve the performance of a firm. It involves
the concept of clean-state approach or starting
from a scratch in redesigning in business processes.
6. Global Market Place:Globalization of business
has compelled many manufacturing firms to have
operations in many countries where they have
 Recent Trends...
7. Operations Strategy:More and more firms
are recognizing the importance of operations
strategy for the overall success of their
business and the necessity for relating it to
their overall business strategy.

8. Lean production:Production system have

become lean production systems which have
minimal amount of resources to produce a
high volume of high quality goods with some
variety. These systems use flexible
manufacturing systems and multi-skilled
workforce to have advantages of both mass
production and job production.
 Recent Trends...
9. Just in time production:JIT is a pull
system of production, so actual orders
provide a signal for when a product should be
manufactured. Demand-pull enables a firm to
produce only what is required, in the correct
quantity and at the correct time.This means
that stock levels of raw materials,
components, work in progress and finished
goods can be kept to a minimum. This
requires a carefully planned scheduling and
flow of resources through the production
process. For example, a car manufacturing
plant might receive exactly the right number
and type of tyres for one days production,
and the supplier would be expected to deliver
 Recent Trends...
10. Computer Aided Manufacturing:Computer-
aided manufacturing (CAM) is the use of computer-
based software tools that assist engineers and
machinists in manufacturing or prototyping product
components. CAM is a programming tool that
makes it possible to manufacture physical models
using computer-aided design (CAD) programs. CAM
creates real life versions of components designed
within a software package. CAM was first used in
1971 for car body design and tooling.
11. Computer Aided Design:Computer-aided
design (CAD) is the use of computer technology to
aid in the design and particularly the drafting
(technical drawing and engineering drawing) of a
part or product, including entire buildings. It is both
a visual(or drawing) and symbol-based method of
 Recent Trends...
12. E-Supply Chain Management:E-Supply chain
management is a series of Internet enabled value-
adding activities to guarantee products created by
a manufacturing process can eventually meet
customer requirements and realize returns on
investment. Supply chains have advanced in the
last two decades with improved efficiency, agility
and accuracy. The recent advancement of Internet
technology has brought more powerful support to
improving supply chain performance. In this
context, e-supply chain management becomes a
new term that distinguishes itself by net-centric
and real-time features from traditional supply
chain management.
 Recent Trends...

13. Enterprise Resource Planning:Enterprise

resource planning (ERP) is an enterprise-wide
information system designed to coordinate all the
resources, information, and activities needed to
complete business processes such as order fulfillment
or billing.
14Environmental Issues:Todays production managers
are concerned more and more with pollution control
and waste disposal which are key issues in protection
of environment and social responsibility. There is
increasing emphasis on reducing waste, recycling
waste, using less-toxic chemicals and using
biodegradable materials for packaging.
Production Planning and
Control
Planning direction and co-ordination of
the firms facilities to achieve the
predetermined production objectives in
the most economical manner.
The highest efficiency in the production
is obtained by manufacturing the
required quantity of products, of the
required quality, at the required time,
by best and cheapest method.
 PPC.
Four Factors
- Quantity
- Quality
- Time
- Cost
Encompass the production system of which
production PPC is the nerve center or the brain.
Three Stages in PPC :
- Planning
- Operations
- Control
 Objectives of PPC
To plan production facilities in the best possible
manner along with the proper systematic
planning of production activities.
Providing men, machines, materials etc. of
right quality, quantity and also providing them
at the right time forms a very important factor.
To inform, about the difficulties or the various
awkward positions expected to crop up later,
to the management beforehand.
 Importance of PPC
Utilizes resources effectively.
Makes flow of production steady.
Estimates production resources.
Maintains necessary stock levels.
Coordinates departmental activities.
Minimizes wastage of resources.
Improves labor efficiency.
Helps to face competition.
Provides better work environment.
Facilitates quality improvement.
Customer satisfaction.
Reduces production costs
 Functions of PPC
The main functions of PPC are the coordination of
all the activities, which exist during production or
manufacturing
 PPC Functions
Materials : This function is concerned with ensuring that
the Raw material, standard finished parts, finished parts of
products must be available while starting the operation
within the time.
Methods : This function is concerned with the analysis of all
methods of manufacturing and selecting the best
appropriate method according to the given set of
circumstances and facilities.
Machines and Equipments: It is important that methods
of manufacturing should to be related to the available
production facilities coupled with a detail study of
equipment replacement policy. This function is concerned
with the detailed analysis of the production facilities,
maintenance procedures and equipment policy.
Routing: It refers to the flow of sequence of operation and
 PPC Functions..
Estimating: This function is concerned with
estimation of operations time. The operation time can
be worked Out once the overall method and sequence
of operation is fixed and process sheet for each
operation is available.
Loading & Scheduling: It is important that machine
should be loaded according to their capabilities
performance the given and according to the capacity.
It is concerned with preparation of machine loads and
fixation of starting and completion dates for a
particular operation.
Dispatching: It means the assignment of work to
different machines or work places which involve
authorities to start of production activities in order of
their priority as determined by scheduling.
Expediting: It is also called Follow Up or Progress.
Follow up which regulates the progress of materials
 PPC Functions..
Inspection : It is an important control tool. Its
assessment is important in the execution of current
program and planning stage of undertaking when the
limitations of the processor, method and manpower are
known. It forms a basis for future investigations with
respect to method, process etc. which is useful for
evaluation phase.
Evaluating : This is the integral part of control
function. The evaluating function is concerned with
providing a feedback mechanism on the long term basis
so that the past experience can be evaluated with the
aim of improving utilization of method and facilities.
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: Machine shop, which may make parts for local
industrial machinery, farm machinery and implements,
boats and ships etc
 Characteristics of Job Shop
Production
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 of Job Shop
Production
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 utilised.
4. Opportunity exists for creative methods and
innovative ideas.
 Limitations of Job Shop
Production
1. Higher cost due to frequent set up
changes.
2. Higher level of inventory at all levels
and hence higher inventory cost.
3. Production planning is complicated.
4. 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.
 Characteristics of Batch
Production
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 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 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
standardization exists and all outputs
follow the same path.
 Characteristics of Mass
Production
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 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 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.
 Characteristics of Continuous
Production
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 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 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.
 PPC in Different Production
systems
1) P.P.C. in Job Production
Job production involves manufacture of
products to meet specific customer
requirements of special orders. The
quantity is usually small. Examples of job
production are manufacture of large
turbo generators, boilers, steam
engines, processing equipments, material
handling equipments, ship building etc.
 Job production..
Under job production we may have three
types according to regularity of manufacture
namely,

A small number of products produced only

once.
A small number of products produced
intermittently when the needed arises.
A small no of products produced periodically
at known interval of time.
 PPC function is relatively difficult in
job production because of the following
reasons
Every job order is of different nature and has
different sequence of operations. There is no
standardization routing for job orders.
Specific job orders are assigned to different
workstations as per availability of capacity.
Production schedules drawn depend on the
relative priority assigned to several of job
orders.
Scheduling is dependent on assessment of
production times and estimating is based on
judgment.
 2. P.P.C. in Batch
Production
Batch production is the manufacture of
a number of identical articles either
to meet a specific order or to satisfy
continuous demand. The decision
regarding tooling and jigs and
fixtures are dependant on the
quantities involved in the production
batch.
In batch production too there can be
three types namely:
A batch produced only once
A batch produced at repeatedly at
irregulars interval, when the need
arises
A batch produced periodically at known
intervals, to satisfy continuous
demand.
Here again planning and control become more
simplified as quantities increase and as manufacture
becomes more regular. Two problems that may arise
in batch production are due to size of batch and due
to scheduling of production.

The solution to this problem depends on whether the

production is governed by
1) External customer orders only
2)Whether the plant is producing for internal
consumption i.e. a subassembly used in the final
product.
Characteristics of P.P.C. function
in Batch production:
a) Before issuing manufacturing order, need for
new raw material and tools, overloading and
underloading of particular machines or work
centers must be anticipated.
b) As products are diversified and several orders
are handled simultaneously in different work
centers scheduling and follow up becomes
difficult task.
c) Dispatching has to be done efficiently to
avoid delays and bottlenecks in the production
process.
 3. P.P.C. in Continuous
Production:
Continuous production is normally
associated with large quantities of
production and with a high rate of
demand. Continuous production is
justified when the rate of production
can be sustained by the market. Two
types of Continuous Production can be :
Mass production
Flow production
 In mass production, a large number of identical
articles are produced, in set of advanced
mechanization and tooling, the equipment need to
be specially designed for the component to be
manufactured.
In flow production, the plant and equipment and
layout have been primarily designed to
manufacture a particular product. A decision to
switch over to a different kind of product needs
basic changes in the equipments and layout,
especially when special purpose machines and
complex material handling systems are used.
 PPC in Continuous production is
usually far simpler that in job or
batch production. Extensive effort is
required for detailed planning before
production starts but both scheduling
and control need not be elaborate
usually. The output is either limited
by available capacity or regulated
within even limits to conform to
production targets based on periodic
 4. Production Planning and
control in Process industry:
PPC in process industry is relatively simple. Routing is
automatic and uniform. Standards processes and
specialized equipments are used. As the products are
standardized and goods are produced to stock and sell,
scheduling is easy. Departmental schedules are derived
from master production schedules. Dispatching involves
issue of repetitive orders to ensure a steady flow of
materials throughout the plant.

The main task of PPC in process industry is to maintain a

continuous and uniform flow of work at the
predetermined rate in order to utilize the plant and
equipments fully and to complete the production in time.
Requirements of effective Production
Planning And Control System:

Sound organizational structure with

mechanism for proper delegation of
authority and fixation of responsibility at
all levels.
Information feed back system should
provide reliable and up-to-date information
to all persons carrying out PPC functions.
Standardization of materials, tools,
equipments, labour, quality, workmanship
etc.
Trained personnel for using the special
 Requirements of
effective PPC..
Flexibility to accommodate changes and
bottlenecks such as shortage of materials,
power failure, machine breakdowns and
absenteeism of employees.
Appropriate management policies
regarding production and inventory levels,
product mix and inventory turnover.
Accurate assessment of manufacturing
lead times and procurement lead time.
Plant capacity should be adequate to meet
the demand. The plant should be flexible
to respond to the introduction of new
PRODUCTION CYCLE
PRODUCTION CYCLE
Production cycle (procedure) starts
with the customer and ends up with
satisfying the need of the customer
by delivering their required product.
Its a frame work which describe how
and from where the production
started and when the various
operations are interrelated to each
other and how one is depend on
other and from where its returns to
its first step where it is initiated.
 Engg dept.
Budget prepares
preparation detailed
plan
Production
Sales planning
forecasts activity

Production Dispatc
Delivery to Plan hing
customer

Progressing

Stock
Evaluation Inspecti
on
STEPS OF PRODUCTION
CYCLE
THE PRODUCTION CYCLE/PROCEDURE INVOLES THE
FOLLOWING STEPS
SALES FORECAST
PREPARATION OF BUDGET
ENGG: DEPT: PREPARE DETAILS
PLANNING ACTIVITY
DISPATCH
PROGRESSING
INSPECTION
EVALUATION
STOCK
DILIVERY OF CUSTOMER
 SALES FORCASTING/ MARKET RESEARCH

It is the very first or initial method i-e the sales enquiry is

received by sales department.
This enquiry may come from company's sales men, from
agents, company's advertisement in order to get the
customer need and necessities.
This information give the limiting dimension in design and
consumer relation to modification.
The sales-forecast report is prepare and submitted to the top
management.
 PREPARATION OF BUDGET &
ENGG: DEPT: PREPARE DETAIL

The finance department prepares production budget in

construction with the production department.
The proposed budget by finance department and sales
forecasts, are closely interrelated and management takes
decision through these two regarding the annual or semi
annual quantity to be produced.
The engg: department is instructed to prepare drawing, part list
and specification or check or modify existing one.
The manufacturing budget is then adjusted accordingly
 PRODUCTION PLANNING
ACTIVITY
As the technical information is received from engg:
department (including drawing, part list,
specifications, standards etc) the production, planning
and control activity.
The basic function of this activity is to well informed
about availability of material and expected delivery of
material which is already order.
The production planning activity is concerned with the
make of detailed schedule of activity.
It is also concerned to check the inventory levels in
order to determine the procurement of material and
standard parts that have to be issued.
DISPATCHING

The production planning section supplies complete

data on methods, machine loading, and utilization, as
well as production schedules, to the control section for
dispatching
It is the process of setting production activities in
motion through release of orders and instructions.
Its authorizes the start of production activities by
releasing material, components, tools, fixture and
instruction sheet to the operator.
 INSPECTION
At this stage the material process and assembling is
inspected by quality control department.
It gives details of specification and if specification are
not made accordingly than the product is rejected
and if the specification is OK than the product is
ready or accepted.
Final inspection of the parts carried out before
product leaves the shop and moves to the finished
parts or products store.
 PROGRESSING
When the detail production orders specifying how
when, where the operation should be perform by the
production control section the control function are
carried out through out the manufacturing period,
and progress is constantly compared with the
planned schedule so that the suitable modification
can be considered and incorporate when required.
Its gives a permanent contact b/w the control section
and the manufacturing departments, to facilitate the
a constant flow of information and instructions.
 EVALUATION

Evaluation of the production operation is the main

pillar of the control function and has to carried out
both during and after these operations.
Inspection reports are one facility of Evaluation, they
form a basis for corrective actions in the processes
or methods, and sometimes even for modifications
in the specifications of raw materials.
STOCK AND DILIVERY TO CUSTOMER
When the product is completely made then finish product is
transferred after inspection to stock for selling purpose in
the local as well as international markets or regular
customers.
The last stage of production cycle at which the product is
deliver to the customer.
And the customer his self after comparing the product
characteristic with of its competitors and with his exceptions
is ready to contribute his views and reactions to market
research means again production start thats why it is called
production cycle