Production & Operations Management

(Books Stevenson, Buffa, Aswathapa, Adams

or any OM book)
Module 1

Operations Management
Evolution of Operations Management

Production Management

Production and Operations

Management

Operations Management

Production Management
- Main emphasis was on transformation activities
- FW Taylor put emphasis was on
o work measurement
o established procedure to estimate Standard Time for each job
o linked wages paid to the out put of each worker called a fair days wage
o developed different wage incentive schemes to increase labor productivity
- Henri Fayol introduced 14 Principles of Management to manage conversion process effectively.
- Frank Gilberth created the Principles of motion economy and ergonomics. This has improved
productivity of operators doing repeated jobs, reduced their fatigue and occupational ill-health.
- Henry Gantt revolutionized production planning and scheduling activities by creating Gantt
Chart, a Time Output graphical representation of activities and schedules.

Production & Operations management

- In addition to Production Management, importance was given on Operational aspects of the
enterprise
- Emphasis was on HR and motivational and behavioral aspects of employees to increase
productivity

Productivity = Capacity to work x Willingness to work

- Capacity to work come from good machines, training, management system etc
- Willingness to work will come from Motivation
- Elton Mayo Objective factors and subjective factors of motivation
- Abraham Maslow Theory of Need Hierarchy
- Macgregor Theory X- Theory Y
- Vroom Valance Expectancy Theory
- Emphasis was also on efficiency of conversion process from gate (input) to gate (out put) with
in the whole factory.
o Inventory Management/MRP
 o Computerized Production scheduling /MRP 2
o Quality Management system ISO 9000
o Scientific material flow and efficient plant layout
o Preventive maintenance, modern tools, CNC machines, retraining in new technologies etc

Operations Management
- The emphasis goes much beyond the boundaries of the factory.
- Operations and value creation start for raw material stage till the product reaches customer
Supply Chain Management (SCM)
- Shift from activity focused operations to process focused operations that add value to
customer Business Process Reengineering (BPR)
- Emphasis on TQM, 6 sigma quality approach, TPM, SQC etc in assuring quality to the end
product from the production process itself.
- Extensive use of IT for business analysis, operational controls, decision making etc ERP,
Business Intelligence (BI), Electronic Data Interchange (EDI), e- commerce, Web 2- Internet
ERP, e-fund transfer etc.
- Emphasis on customization, customer service and long term association (CRM) Customer
Relations Management
- Emphasis on Global Sourcing for production, design and services to retain competitiveness.
- Gradual shift to R=G, N=1 concept (Resources = Global, focused on individual customer,
Customer =1 : Prof. Prahalad)
- Emphasis on Corporate Social Responsibility (CSR), environmental and regulatory compliance,
HR and knowledge development and retention, good corporate citizen etc

Significance of Operations Management

(Importance of OM in modern businesses)

In any business, Operation Management is very significant because OM is engaged in the following

1. Transformation process
2. Value addition process
3. Value creation process
4. Achieve Corporate Competitiveness through Operational competitiveness

1. Transformation Process

TRANSFORMATION
INPUTS PROCESS OUTPUT

Feed back and control

Environment
back

- Any Operation has

 a. Inputs - raw materials, purchased parts, labor, land, building, capital, machinery and equipments
ie. 4 M money, men, machinery and materials

b. Transformation Process conversion of inputs to out put using resources (4 M) in the most
efficient and productive way.

c. Out put in the form of products or services with expected quality, cost and delivery time.

d. Feed back and Control A system for adequate feed back and control of transformation process
and inputs for optimum results

e. Environment - All Operations take place in accordance with Environment consisting of

- technological changes
- social and environmental requirements
- competitive environment local & global competition
- regulatory requirement local, national and global

2. Value Addition Process

Essence of Operations Function is to Add Value to materials using resources through transformation
processes to an out put of product or services of higher value.

Value Added = Selling Price Material cost

Value addition should be done in the most efficient and productive manner to increase Operational
Profit.

3. Value Creation Process

At the same time the company has to Create Value to the Customer by satisfying his needs and
expectations through product and services ie. Provide value for the money he paid.

4 Achieve Corporate Competitiveness through Operational Competitiveness in following areas

(How OM increases Corporate Competitiveness)

The significance of OM is that the company can achieve Corporate Competitiveness mainly through
achieving Operational Competitiveness in the transformation, value addition and value creation
processes.

1. Product and service design by way of product features, technology and with much reduced
time-to-market (lead time) for new products
2. Production Cost Provide higher quality with lower production cost and with higher
productivity than the competitors
3. Location cost effective selection of location with convenience to customer and access to
market.
4. Quality meet and exceed the quality needs and expectations of the customer at reduced cost
using ISO 9000, TQM, 6 Sigma etc
5. Quick response Production/Service Operations which can respond quickly to the market needs
succeed in the business. This is done by integrating CRM with SCM/ERP
 6. Flexibility Build flexibility into Operations and achieve capability to change product mix as
per market demand. This increases competitiveness, .
7. Inventory Management Put in place good inventory management which effectively match the
supplies/inventories with the demand with out adding to cost, using MRP/ERP/SCM
8. Supply chain management It coordinate external and internal operations (suppliers to the
company to the customers) to achieve timely flow of materials, information and funds through
the entire system Integrate SCM with ERP
9. Service Quality After sales service like warranty work, technical support, spare parts delivery,
service call etc reflect the Service Quality of the firm. OM has an important role to increase
Service Quality of the company.
10. Employees large number of employees in Operational areas compared to other functional
areas are assets to the company. They are to be motivated and nurtured properly to enhance
firms competitiveness. Participative management, Continuous skill enhancement, Employee
stock option etc are to be used

Relationship of Operations Mgmt with other Business Functions

- Any Business has 4 major Functions

Marketing,
- Operations
- HR and
- Finance.
- Mission and Objectives of the company constitute the foundation for these functions

Operations

HR

Finance
Marketing

Mission and Objectives

OM has very high interrelations with all other functional areas of Business

- Relations with Marketing are in the areas of

1. OM should have clear understanding of customer wants, needs and expectations as

required by Marketing
2. OM should ensure that Product / Service design and performance meet customer /
Marketing requirements.
3. OM should provide value for the money for the product/service as per customer/Market
expectations.
4. OM should control costs to be with in affordable price expected by the Marketing
department
5. Product or Service must meet and exceed customer/market expectations in terms of
quality, price and delivery
Relations with Finance are in areas of
1. OM should use the money provided by Finance department efficiently for financing the
operations for raw materials, salary, transportations etc
2. OM & Finance should together to do the Techno/Economic evaluation of capital investments in
new production facilities before putting the proposal to the management
3. OM & Finance should prepare Operational Budget and establish Budgetary control of all
operations under it.
4. OM & Finance should ensure to generate adequate profit for growth of the company as per
corporate plan
5. OM & Finance should ensure continuity of business with necessary capital investments in R &D.

Relationship with HR
1. OM & HR should ensure that all workmen and supervisors are adequately trained in their area of
operation by the HR department
2. OM should identify the need to retrain them in emerging technologies as and when requires and
arrange retraining by HR.
3. OM & HR should provide multi skill training for all employees to have flexibility to meet
changes in market demand.
4. OM & HR should together keep employees highly motivated through suitable programs to
increase productivity.
5. OM & HR together should make plans to retain the knowledge and skill gained by employees
from operations with in the organization itself (even after their departure) with proper
documentation and knowledge bank.

Supporting functions of Operations

1. Purchase/stores/logistics
2. Quality Assurance
3. Management Information system
4. Accounting and costing
5. Public Relations
6. Legal etc

Two major Operations are

1. Manufacturing operations
2 Service operations

Difference between Manufacturing and Service Operations

Area Manufacturing operations Service operations

Orientation Product oriented Act oriented

Customer Low occur away from High occur at the point of consumption
contact customer

Inputs Highly non-uniform Almost uniform

Labor content Low - per Rupee out put High per Rupee out put

Out put Low variability High variability

variability
Productivity Generally measurable against Only comparable. Highly subjective to the
measurement certain bench mark and assessor
standards

Quality Quality is quantifiable. Perception of quality is highly subjective. It

Assurance Quality can be built into the has reference to different customer
system expectations

Inventory level High level of inventories Very low level of inventories

Investments High on infrastructure and Low on infrastructure and facilities

facilities

Functions of Operations Management

(Scope of Operations Management)

1. Planning function
1. Plan and design the products required by the customers based on market forecast
2. Plan the factory location, production facilities, production processes and machinery required
to produce the products.
3. Plan the requirements of personnel with different skills and experience needed for operations.
4. Plan & design the work system to manufacture products at specified quality, quantities, cost
and time.
5. Plan production schedule to meet the customer delivery requirements

2. Organizing Function
1. Organize resources for the operations ie. men, materials, money and machinery.
2. Train workmen in skills required to maximize productivity.
3. Design the Organization Structure of the Operations Department with necessary delegation of
authority and responsibility, rules, regulations, instructions etc
4. Establish Quality Management System like ISO 9000,to ensure that quality in built into the
system

3. Transformation function
1. Transform the inputs/raw materials to value added out put/products using resources most
efficiently
2. Bring in flexibility in transformation process to meet changing customer demand quickly with
out loss of profitability.
3. Motivate and empower employees to enhance productivity, innovation and creativity
4. Continuously improve transformation process to enhance competitiveness

4. Monitoring function
1. Monitor all aspects of operations to ensure that every thing goes as per plan i.e. quality,
cost, time, inventory, productivity and profit.

5. Controlling function
1. Ensure effecting corrective and preventive actions are taken where ever deviations are
observed as per plan and requirements, especially with respect to quality, cost, time,
inventory, productivity and profit

6. Development function
1. Ensure that the products and operations are at par with industry standard
 2. Develop new products and new technologies to stay ahead of competition.
3. Modify products, operations and technology to meet changing statutory and environmental
requirements.

Decision areas of Operations Management

- Several alternatives are available for Operations Managers to achieve the mission and
objectives of the organization
- Primary role of an Operation manager is planning and decision making
- decision making is a continuous process

Decisions involve
1. what resources are needed and how they are to be deployed
2. when they are needed schedule of their requirements
3. where the resources are to be deployed
4. how these resources are utilized i.e. process and service design
5. who will convert these resources (inputs) to out put.
6. monitor & control, decisions on monitoring, controlling and corrective mechanisms of all the
operations on a continuous basis.

Decision Areas

Decision area Areas affected by decision

Product/Service design Cost, quality, liability, environmental issues

Production capacity Cost structure, flexibility

Process selection and plant Cost, flexibility, skill requirement, capacity

layout

Work design Work environment, safety, productivity

Location Costs, visibility

Quality Ability to meet customer needs

Inventory Cost, shortage

Maintenance Cost, process reliability, productivity

Scheduling Flexibility, efficiency

Supply chain Costs, quality, shortages, vendor relations

OPERATIONS STRATEGIES

1 Features
1. Operations strategies are to be in line with organization strategies.
 2. Operations strategy shall be consistent with strategies of other functions like Marketing, Finance
and HR.

3. It mainly deals with operational aspects of the organization.

4. It generally relate to the products, processes, methods, resources, quality, cost, accounting,
schedule etc.

5. Well designed and implemented operations strategy can enhance competitiveness of the
organization.

Eg. In 70s and 80s USA gave more thrust on marketing and finance and ignored operations
strategies, which gave Japan, a foot hold in US manufacturing sector including automobile
manufacturing.

Major Operational Strategies are

1. Strategies based on SWOT Analysis,
2. Quality focused strategies
3. Time focused strategies
4. Productivity focused strategies
5. Cost focused strategies

1. Strategies based on SWOT Analysis

SWOT Analysis
1. It is an analysis of the Strength (S), Weaknesses (W), Opportunities (O) and Threat (T) on the
business

2. Analysis of Strength and Weakness pertain to the internal environment of the firm. Its focus is
mainly on the Operations and HR functions of the business

3. Analysis of Opportunities and Threat pertain to the external environment of the business. Its
focus is mainly on Marketing functions of the business

4. Finance function is also analyzed in both internal factors and external factors.

SWOT based strategies

Strategies are formulated
1. To enhance Strength to increase competitiveness
2. To over come Weaknesses of the firm
3. To capitalize on the Opportunities to expand business
4. To convert Threats to Opportunities.

For reading
Internal scanning factors for S & W of the firm.

The following areas are analyzed and evaluated to study their ability to enhance the competitiveness and
efficiency of the firm.

Human Resources
- qualifications, skills, talents, experience, loyalty, dedication, teamwork etc of all workers and
managers.

Facilities and equipments

production facilities, capacities, age, maintenance cost, replacement cost etc.

Financial resources
capital investment, interest and debt repayment, cash credit and working capital, cash flow,
inventories etc.

Customers
- knowledge about the wants and needs of customers, brand loyalty, customer relationship etc.

Product and services

competence of existing product and services to meet customer present and future needs and
expectations.

Technology
Existing technology and capacity to integrate future technologies in to the product as well as
production processes.

Suppliers
relationship, dependency, quality, flexibility and competence to meet present and future requirements
of the firm.

Others
corporate image, public relationship, product image, patents, access to resources etc.

External scanning factors for O & T of the firm

Market
size, location, growth potential, long term stability etc

Competitors
strength of domestic and international competitors in the areas of technology, price, variety, market
share etc

Technology
technology changes in the country and the world in the firms area of business

Economic condition
General health and direction of the countrys economy, inflation, interest rate, taxes, exchange rate,
duties, laws that has impact on the business.

Political condition
stability, attitude, encouragement and incentives given by local and central government.

Legal environment
regulatory law, compliance laws, trade restrictions, import export restrictions

SWOT Analysis Exercise

SWOT analysis is a brain storming exercise of middle and senior managers to analyze all the above
factors.

All ideas and suggestions relating to Strength, Weaknesses, Opportunities and Threats are recorded.

The most relevant and important suggestions numbering 7 to 10 in each of S,W, O and T are identified
and tabulated in the order of priority, after discussions and consensus in the SWOT Format

Strength Weaknesses
1. Highly skilled workforce 1. Poor R&D facilities
2.Good production facilities 2. Inadequate quality for
3. Reputed domestic export.
customers 3. Low on export
4. Etc 4. High overhead expenses
5. etc

Opportunities Threats
1. Fast growing economy 1.Increasing competition
2. Good export demand for 2.Fast changing technologies
quality products 3.Increasing legal and
3. Availability of low cost environmental requirements
funds for investment 4.etc
4. etc

2 Quality focused strategies

1. Quality focused strategies are to transform the Products and Services of the company from
Order Qualifiers to Order winners

2. Order qualifiers are the characteristics which make a product eligible for purchase by the
customer with respect to it quality and characteristics.

3. Order winners are the additional characteristics that is perceived by a customer better than the
competitors product, thus resulting in purchase by a customer.

4. Different customers have different perceptions of additional characteristics he looks for.

5. The strategy is to identify and enhance the Order winning quality characteristics

3. Time focused strategies

1. Strategies to Reduce the Response time to meet the changing customer needs. New products are
introduced as fast as possible

2. Time reduction is focused on reducing time for design, manufacturing and delivery of all the
products needed by the customers.

3. Supply Chain Management is an approach to reduce end to end time from Raw material to
customer through integration, optimization and cost reduction in all the stages of supply chain.
4. Productivity focused strategies

Strategy is to shift the emphasis from productivity of activities to productivity of processes.

Eg: Productivity of activity Packing time reduced by 1 day does not add value to customer
Productivity of Process Order fulfillment time reduced by 5 days add value to customer

Processes are end to end activities spread across several departments in an organization that add value
to customer. e.g. Order fulfillment process (read BPR)

Firm can add value to customer only by improving the processes.

Establish tangible goals for improving process productivity eg. order fulfillment time to be reduced
from 8 days to 4 days

Strategy to extend the scope of Productivity Improvement for all processes in supply side and delivery
side of supply chain to add more value to customer

Productivity = Out put/Input

- Productivity can be increased by increasing out put, decreasing inputs or by both.

5. Cost focused strategies

1. All strategies are focused to reduce cost and eliminate waste in the entire operations to enhance
competitiveness.
2. Focus on global sourcing because it is economical compared to local sourcing
3. Focus on reduction in operational cost within the factory using ERP to manage end to end
business process efficiently.
4. Focus on Supply Chain Cost on supply and delivery side of supply chain to reduce cost further
using SCM and CRM modules with ERP

Production Systems

Different production systems are

1. Continuous or Flow Production system
2. Repetitive or Mass Production system
3. Intermittent Production system
i. Batch Production
ii. Job order Production (Job Shop)
iii. One off order Production
 Continuous Flow
Prodn
Mass
High run
Prodn.
run
Medium Batch
Qty/
Production
run
Low Job order

1 One off order

1 low medium high very

high
Quantity/year

1. Flow Production System (Continuous Production)

Processing
Equipments

Raw Material
Finished
Product
Material and process flow

Features
1. Used in process industries like petroleum, petrochemicals, fertilizer etc which produce
standardized products with high demand.
2. Volume of production is very high
3. One or more raw material inputs under go continuous changes as they flow thro different
processing equipments.
4. All processing machinery are arranged in a particular sequence as per process design.
5. Material flow is automatic with almost fixed through put time.
6. Manpower requirement is very low.
7. Quality and process parameters are automatically regulated.
8. Machineries are specific for the designated processes, volume and flow speed.
9. Unit production cost is low

Limitations
1. Very high capital investment
2. Product specifications cannot be changed substantially.
3. Preventive maintenance is very important

Application
Used for production of standardized products like chemicals, petroleum products, fertilizers etc with
very high demand.
2. Mass production System (Repetitive Production)

Chassis

Car

Cam shaft

Body

Production m/cs

Product line
Assembly line

Features
1. Manufacturing is in high volume.
2. Operations are repetitive in nature.
3. Quantity per production run is high
4. Products are generally standardized
5. Material flow is steady and continuous from raw material to finished product
6. All production machines are arranged in a line or in several lines converging into an assembly
line depending upon the type of product ( eg. Cigarette manufacturing line, Car production lines)
7. Machines are lined as per sequence of operation of each major part.
8. All the machines are automatic or semi automatic.
9. Material flow is generally by conveyors or in special bins from machine to machine
10. Work flow is highly balanced
11. Work cycles are short and repetitive in nature
12. Consistency in quality. Quality control is generally automatic with the use of statistical process
control.
13. Low WIP and production cycle time.
14. It offers lowest production cost per unit

Limitations
1. Very high capital investment
2. Low flexibility for implementing major design changes to meet changing customer
requirements
3. Breakdown of one machine will stop the entire line preventive maintenance is very
essential

Application
Used for production of standardized products like cars, motor bikes, cigarette, soft drink, electronic
goods etc
3 Intermittent production
3.1 Batch Production System

M/c M/c M/c M/c

group group group group
Turning Milling Drilling Grinding

M/c M/c M/c M/c

group group group group
Welding X Y Z

Assembly

Features
1. It is a common type of production.
2. Volume of production is medium
3. Quantity/run is also medium
4. Products are made in batches as per specific order. eg. Garments. Machinery, pumps,
compressors etc
5. Machines are arranged by the process they perform. ( eg. all Drilling m/cs in one place)
6. Product improvement can be made easily from batch to batch.
7. Production can be increased continuously if required by incremental capacity addition and out
sourcing.
8. Manual, semiautomatic and automatic and semi automatic machines are used.

Limitations
1. Labor content is high
2. Skilled labor is essential to maintain quality and quantity
3. WIP is high
4. Manual production control is difficult computer production control is a must.
5. Production cycle time and cost per unit is high.

Application
Used for batch production of garments, machineries, medicines etc

3.2 Job Order Production System

Features
1. Each job order is different from the earlier orders in terms of specification, quantity, quality,
delivery and price.
2. Different orders will have different sequence of operations.
3. Volume of production and qty/run is also low
4. Flow of material from raw material to finished product is intermittent
5. General purpose machines and flexible plant lay out is used.
6. Job order shops generally have low sales turnover and low investments.
7. Some Job shops are for specialized operations eg. Electroplating, Powder coating etc
Limitations
1. Highly skilled labor is necessary.
2. Dependence on manual skill for quality.
3. Low level of automation
4. Production planning and scheduling is difficult
5. Close supervision is required

Application
Used for production of different products in small quantities with the available facilities.
They are generally suppliers and sub contractors of parts and components to large companies
Eg. Forging units, Sheet metal units, plastic molding unit etc

2.3 One Off Order Production System

Production facility

Large
Size
Product

Production facility

Features
1. Used for production of large size products that do not move e.g. ships, aircraft etc.
2. The specification of one ship will be different form another ship.
3. Usually a fixed position layout is used in the factory the product stays at one place till it is
completely built.
4. Parts are made around that product.

Limitation
1. facility is designed for one family of product e.g. ships
2. high investment
3. Long manufacturing time
4. High WIP

Application
- Used for production of large size products like ships, aero planes etc
 Service System

Input Transformation process Out put

(patient) (Case history (cured
Examination, Tests Patient)
Prescription
Treatment)

Features
1. It is act oriented.

2. The inputs are customer themselves. Eg. A patient visiting a hospital

3. The out put is an altered state of customer e.g. a person cured of the disease.

4. The productive process that transform a customer are input like labor, knowledge,
technology, information etc.

5. Operations manager can design, mix and control these inputs in an optimum manner

6. Services are intangible out put that are consumed in the process of production

7. A Service system can be represented as follows

Classification of Service Systems

Service sector cater to highly heterogeneous group of customers. Hence designing a single system
appropriate for all services is not feasible.

Hence service systems are further sub-classified as follows

1. Stagnant Personal Service

- Have direct contact between customer and service provider e.g. patient and patient,

- service quality is generally proportional to the time spend on the customer.

- substantial reduction in time to increase productivity is not possible with out compromising on quality.

- Operations manager has to satisfy customers through other means e.g. Patients waiting room with AC,
TV. Magazines, drinking water etc.

2. Substitutable personal service

- Require direct contact with like in Stagnant personal service

- But the service can be replaced by application of technology

e.g. Guard at the gate being replaced CCTV and remote gate opening system

- It will result in substantial productivity and customer satisfaction.

- Even though the initial investment is high, in the long run the system is very cost effective.

3. Progressive services
- These services have labor content that can progressively reduced by using technology

- However labor content cannot be eliminated beyond a certain level

e.g. typing service can be made substantially productive using computer instead of a type writer.

e.g. Diagnosing or Surgical service of a doctor can be made more productive using electronic devices

4. Explosive services
- There is virtually no contact between customer and service provider.
e.g. Mobile telephone service provider, On line air ticket booking,
- Technology can substantially increase productivity and quality of service.

Capacity Planning

Concept of capacity planning

- Capacity is defined as the upper limit of the output of an operating unit with in a given time frame.

- Capacity planning is a strategic decision making process, to decide what kind of capacities, how
much and when they are needed.

- Key inputs to capacity decisions are Forecasts on all key areas associated with the product or
services, like demand, product variety, technology, machinery, facilities, cost, price, manpower etc.

- Periodic capacity changes may be required to maintain and enhance competitiveness of product or
services.

Types of Capacities

1. Designed Capacity: It is the maximum out put for which the production or service processes are
designed.

2. Effective Capacity: It is Designed Capacity minus the allowance for maintenance/servicing, workmen
absenteeism etc.

3. Utilized Capacity: It is the actual out put from the operating unit.

Actual Output
Efficiency = ----------------------
Effective Capacity

Actual Output
Utilization = ----------------------
Design Capacity

Operations managers are concerned with both efficiency and utilization

- High efficiency need not give high utilization.

e.g.
Design capacity = 50 trucks/day
Effective capacity = 40 ,,
 Actual Output = 36 ,,
Efficiency = 36/40 = 90 % - looks good
Utilization = 36/50 = 72 % - bad
situation

Capacity Planning Strategies

1. Short range capacity planning

Time frame is generally one year

Strategies to increase capacities

- over time to workmen

- subcontracting/out sourcing

- increase operator efficiency by revised methods engineering and efficient tools.

- increase utilization by preventive and efficient maintenance to reduce machine down time

- employ temporary workmen.

2. Medium range capacity planning

-Time frame is 1 to 3 years

Strategies to increase capacity

- adding few balancing machines

- retraining and multi skill training of workmen.

- addition of few more workmen

- out sourcing and sub contracting on larger scale

3. Long range capacity planning

1. Estimate future capacity requirement

It is based on analysis of the demand forecast for a time span of 3 to 5 years for small operations and 5
to 15 years for mega projects.

2. Evaluate present capabilities and facilities

3. Identify various alternative plans including make or buy decisions to meet the increasing demand.

4. Carry out technical, financial and quality evaluations of all alternatives.

5. Select the most suitable plan.

6. Decisions will require investments in land, building, machinery and workmen.

7. Implement the plan with adequate monitoring and controls to meet the objective

Capacity Addition strategies

Advanced capacity
Addition (4)
Future Capacity
requirements

Capacity
Capacity addition in
3 years (2)
Delayed cap. Addn (3).

Present Capacity Annual capacity

addition (1)

Years

Capacity can be added by

1. By small increments every year
2. Or by large one time increase in every 3 three year
3. Capacity can be added after the market demand has increased (delayed capacity addition)
4. Or before the actual increase in market demand (advanced capacity addition)

Influence of Automation & Technology (A&T) on Operations Management

1. Influence of A &T on the production organization ie. size, type etc

The choices before operations manager are predominantly
- capital intensive operations or
- labor intensive operations

Capital Intensive operations require

- High capital investment
- Superior production technology
- Lower number of workmen
- Higher skill requirement
- High volume production
- Excellent quality
- Faster delivery

Labour intensive operations require

- Lower capital investment
- Large number of workmen
- Lower technology and automation
- Very close supervision needed
- Lower quality and volume of production
- Slower response to market needs

2. Influence of A&T on production strategy

- High tech and automated operations will have low WIP, smooth production flow, automated
quality and process controls and high production volume
 - Low tech operations will have high WIP, intermittent production flow, high dependence on the
skill of operators for quality and volume of production.

3. Influence of A&T on organization structure

- Automated system require high integration of human effort with various automated production
system. Eg, in a car assembly line, all operators will have to work in the same pace as the speed
of assembly conveyor.
- Skill requirement of operators should match with the automated system to maintain quality and
time
- In low cost operations, human efforts are independent of the machine operations.
- The organization structure will be a Flat Structure in automated production compared to
Pyramidal structure in low cost operations.

Impact of automation
Criteria Manual Automation
Technology level Low High
No. of workmen High Low
Vol. of production Low High
Skill requirements High Medium
Engineering support Medium High
Work pace Independent of production flow In pace with automated
production flow
Workmen fatigue Low High
Quality control Manual Automatic
Quality level Medium High
Rejections High Very low
Batch size Low High