INTRODUCTION TO PRODUCTION AND OPERATON MANAGEMENT

INTRODUCTION
Production/operations management is the process, which combines and transforms various resources used
in the production/operations subsystem of the organization into value added product/services in a controlled
manner as per the policies of the organization. Therefore, it is that part of an organization, which is
concerned with the transformation of a range of inputs into the required (products/services) having the
requisite quality level.
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.

HISTORICAL EVOLUTION OF PRODUCTION AND OPERATIONS MANAGEMENT

For over two century’s operations and production management has been recognized as an important factor
in a country’s economic growth.
The traditional view of manufacturing management began in eighteenth century when Adam Smith
recognized the economic benefits of specialization of labor. He recommended breaking of jobs down into
subtasks and recognizes workers to specialized tasks in which they would become highly skilled and
efficient. In the early twentieth century, F.W. Taylor implemented Smith’s 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. As
F.W. Taylor’s works become more widely known, managers developed techniques that focused on
economic efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful efforts and
achieve greater efficiency. At the same time, psychologists, socialists and other social scientists began to
study people and human behavior in the working environment.
In addition, economists, mathematicians, and computer socialists contributed newer, more sophisticated
analytical approaches.
With the 1970s emerges two distinct changes in our views. The most obvious of these, reflected in the new
name 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 ‘operations’ emphasized the
broadening of our field to service organizations. The second, more suitable change was the beginning of
an emphasis on synthesis, rather than just analysis, in management practices.

CONCEPT OF PRODUCTION
Production function is that part of an organization, which is concerned with the transformation of a range of
inputs into the required outputs (products) having the requisite quality level.
Production is defined as “the step-by-step conversion of one form of material into another form through chemical or
mechanical process to create or enhance the utility of the product to the user.” Thus production is a value addition
process. At each stage of processing, there will be value addition.
Edwood Buffa defines production as ‘a process by which goods and services are created’. Some examples
of production are: manufacturing custom-made products like, boilers with a specific capacity, constructing
flats, some structural fabrication works for selected customers, etc., and manufacturing standardized
products like, car, bus, motor cycle, radio, television, etc.
Schematic Production System
PRODUCTION SYSTEM
The production system of an organization is that part, 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. A simplified
production system is shown above.

The production system has the following characteristics:

1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve system
performance.

Classification of Production System

Production systems can be classified as Job Shop, Batch, Mass and Continuous Production
Systems.

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.

Characteristics
The Job-shop production system is followed when there is:
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
center and order priorities.
Advantages
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 utilized.
4. Opportunity exists for creative methods and innovative ideas.
Limitations
Following are the 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
Batch production system is used under the following circumstances:
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
Following are the advantages of batch production:
1. Better utilization of plant and machinery.
2. Promotes functional specialization.
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
Following are the 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
Mass production is used under the following circumstances:
1. Standardization 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
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilization due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.
Limitations
Following are the 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
Continuous production is used under the following circumstances:
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
Following are the advantages of continuous production:
1. Standardization of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilization 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
Following are the 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.

PRODUCTION MANAGEMENT

Production management is a process of planning, organizing, directing and controlling the activities of the
production function. It combines and transforms various resources used in the production subsystem of the
organization into value added product in a controlled manner as per the policies of the organization.
E.S. Buffa defines production management as, “Production management deals with decision making
related to production processes so that the resulting goods or services are produced according to
specifications, in the amount and by the schedule demanded and out of minimum cost.”

Objectives of Production Management

The objective of the production management is ‘to produce goods services of right quality and quantity at
the right time and right manufacturing cost’.
1. RIGHT QUALITY
The quality of product is established based upon the customer’s needs. The right quality is not necessarily
best quality. It is determined by the cost of the product and the technical characteristics as suited to the
specific requirements.
2. RIGHT QUANTITY
The manufacturing organization should produce the products in right number. If they are produced in excess
of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand,
leads to shortage of products.
3. RIGHT TIME
Timeliness of delivery is one of the important parameter to judge the effectiveness of production
department. So, the production department has to make the optimal utilization of input resources to achieve
its objective.
4. RIGHT MANUFACTURING COST
Manufacturing costs are established before the product is actually manufactured. Hence, all attempts
should be made to produce the products at pre-established cost, so as to reduce the variation between
actual and the standard (pre-established) cost.

OPERATING SYSTEM
Operating system converts inputs in order to provide outputs which are required by a customer.
It converts physical resources into outputs, the function of which is to satisfy customer wants i.e., to provide
some utility for the customer. In some of the organization the product is a physical good (hotels) while in
others it is a service (hospitals). Bus and taxi services, tailors, hospital and builders are the examples of an
operating system.
Everett E. Adam & Ronald J. Ebert define operating system as, “An operating system (function) of an
organization is the part of an organization that produces the organization’s physical goods and services.”
Ray Wild defines operating system as, “An operating system is a configuration of resources combined for
the provision of goods or services.”

Concept of Operations
An operation is defined in terms of the mission it serves for the organization, technology it employs and the
human and managerial processes it involves. Operations in an organization can be categorized into
manufacturing operations and service operations. Manufacturing operations is a conversion process that
includes manufacturing yields a tangible output: a product, whereas, a conversion process that includes
service yields an intangible output: a deed, a performance, an effort.

Distinction between Manufacturing Operations and Service Operations

Following characteristics can be considered for distinguishing manufacturing operations with service
operations:
1. Tangible/Intangible nature of output
2. Consumption of output
3. Nature of work (job)
4. Degree of customer contact
5. Customer participation in conversion
6. Measurement of performance.
Manufacturing is characterized by tangible outputs (products), outputs that customers consume overtime,
jobs that use less labor and more equipment, little customer contact, no customer participation in the
conversion process (in production), and sophisticated methods for measuring production activities and
resource consumption as product are made.
Service is characterized by intangible outputs, outputs that customers consumes immediately, jobs
that use more labor and less equipment, direct consumer contact, frequent customer participation in the
conversion process, and elementary methods for measuring conversion activities and resource
consumption. Some services are equipment based namely rail-road services, telephone services and some
are people based namely tax consultant services, hair styling.

OPERATIONS MANAGEMENT

A Framework for Managing Operations

Managing operations can be enclosed in a frame of general management function as shown in
The figure below Operation managers are concerned with planning, organizing, and controlling the activities which
affect human behavior through models.
PLANNING
Activities that establishes a course of action and guide future decision-making is planning.
The operations manager defines the objectives for the operations subsystem of the organization, and the policies, and
procedures for achieving the objectives. This stage includes clarifying the role and focus of operations in the
organization’s overall strategy. It also involves product planning, facility designing and using the conversion process.
ORGANIZING
Activities that establishes a structure of tasks and authority. Operation managers establish a structure of roles
and the flow of information within the operations subsystem. They determine the activities required to achieve the goals
and assign authority and responsibility for carrying them out.
CONTROLLING
Activities that assure the actual performance in accordance with planned performance. To ensure that the plans
for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual
outputs and comparing them to planned operations management. Controlling costs, quality, and schedules are the
important functions here.
BEHAVIOUR
Operation managers are concerned with how their efforts to plan, organize, and control affect human behavior. They
also want to know how the behavior of subordinates can affect management’s planning, organizing, and controlling
actions. Their interest lies in decision-making behavior.
MODELS
As operation managers plan, organize, and control the conversion process, they encounter many problems and must
make many decisions. They can simplify their difficulties using models like aggregate planning models for examining
how best to use existing capacity in short-term, break even analysis to identify break even volumes, linear programming
and computer simulation for capacity utilization, decision tree analysis for long-term capacity problem of facility
expansion, simple median model for determining best locations of facilities etc.

Objectives of Operations Management

Objectives of operations management can be categorized into customer service and resource utilization.

CUSTOMER SERVICE
The first objective of operating systems is the customer service to the satisfaction of customer wants. Therefore,
customer service is a key objective of operations management. The operating system must provide something to a
specification which can satisfy the customer in terms of cost and timing. Thus, primary objective can be satisfied by
providing the ‘right thing at a right price at the right time’.
These aspects of customer service—specification, cost and timing—are described for four functions in Table
below. They are the principal sources of customer satisfaction and must, therefore, be the principal dimension of the
customer service objective for operations managers.
Generally an organization will aim reliably and consistently to achieve certain standards and operations manager will
be influential in attempting to achieve these standards. Hence, this objective will influence the operations manager’s
decisions to achieve the required customer service.
RESOURCE UTILISATION
Another major objective of operating systems is to utilize resources for the satisfaction of customer wants effectively,
i.e., customer service must be provided with the achievement of effective operations through efficient use of resources.
Inefficient use of resources or inadequate customer service leads to commercial failure of an operating system.
Operations management is concerned essentially with the utilization of resources, i.e., obtaining maximum
effect from resources or minimizing their loss, under-utilization or waste. The extent of the utilization of the resources’
potential might be expressed in terms of the proportion of available time used or occupied, space utilization, levels of
activity, etc. Each measure indicates the extent to which the potential or capacity of such resources is utilized. This is
referred as the objective of resource utilization.
Operations management is also concerned with the achievement of both satisfactory customer service and
resource utilization. An improvement in one will often give rise to deterioration in the other. Often both cannot be
maximized, and hence a satisfactory performance must be achieved on both objectives. All the activities of operations
management must be tackled with these two objectives in mind, and many of the problems will be faced by operations
managers because of this conflict. Hence, operations managers must attempt to balance these basic objectives.
The Table below summarizes the twin objectives of operations management. The type of balance established
both between and within these basic objectives will be influenced by market considerations, competitions, the strengths
and weaknesses of the organization, etc. Hence, the operations managers should make a contribution when these
objectives are set.

The customer service objective. The resource utilization objective. To achieve

To provide agreed/adequate levels of customer service adequate levels of resource utilization (or productivity)
(and hence customer satisfaction) by providing goods or e.g., to achieve agreed levels of utilization of materials,
services with the right specification, at the right cost and machines and labor.
at the right time.

MANAGING GLOBAL OPERATIONS

The term ‘globalization’ describes businesses’ deployment of facilities and operations around the world. Globalization
can be defined as a process in which geographic distance becomes a factor of diminishing importance in the
establishment and maintenance of cross border economic, political and socio-cultural relations. It can also be defined
as worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking
institutions that are not accountable to democratic processes or national governments.
There are four developments, which have spurred the trend toward globalization. These are:
1. Improved transportation and communication technologies;
2. Opened financial systems;
3. Increased demand for imports; and
4. Reduced import quotas and other trade barriers.
When a firm sets up facilities abroad it involve some added complexities in its operation.
Global markets impose new standards on quality and time. Managers should not think about domestic markets first
and then global markets later, rather it could be think globally and act locally. Also, they must have a good understanding
of their competitors. Some other important challenges of managing multinational operations include other languages
and customs, different management style, unfamiliar laws and regulations, and different costs.
Managing global operations would focus on the following key issues:
 To acquire and properly utilize the following concepts and those related to global operations, supply chain,
logistics, etc.
 To associate global historical events to key drivers in global operations from different perspectives.
 To develop criteria for conceptualization and evaluation of different global operations.
 To associate success and failure cases of global operations to political, social, economical and technological
environments.
 To envision trends in global operations.
 To develop an understanding of the world vision regardless of their country of origin, residence or studies in
a respectful way of perspectives of people from different races, studies, preferences, religion, politic affiliation,
place of origin, etc.
SCOPE OF PRODUCTION AND OPERATIONS MANAGEMENT
Production and operations management concern with the conversion of inputs into outputs, using physical resources,
so as to provide the desired utilities to the customer while meeting the other organizational objectives of effectiveness,
efficiency and adoptability. It distinguishes itself from other functions such as personnel, marketing, finance, etc., by its
primary concern for ‘conversion by using physical resources.’ Following are the activities which are listed under
production and operations management functions:
1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.
LOCATION OF FACILITIES
Location of facilities for operations is a long-term capacity decision which involves a long term commitment about the
geographically static factors that affect a business organization. It is an important strategic level decision-making for an
organization. It deals with the questions such as ‘where our main operations should be based?’
The selection of location is a key-decision as large investment is made in building plant and machinery. An improper
location of plant may lead to waste of all the investments made in plant and machinery equipments. Hence, location of
plant should be based on the company’s expansion plan and policy, diversification plan for the products, changing
sources of raw materials and many other factors. The purpose of the location study is to find the optimal location that
will results in the greatest advantage to the organization.
PLANT LAYOUT AND MATERIAL HANDLING
Plant layout refers to the physical arrangement of facilities. It is the configuration of departments, work centers and
equipment in the conversion process. The overall objective of the plant layout is to design a physical arrangement that
meets the required output quality and quantity most economically.
According to James Moore, “Plant layout is a plan of an optimum arrangement of facilities including personnel,
operating equipment, storage space, material handling equipments and all other supporting services along with the
design of best structure to contain all these facilities”.
‘Material Handling’ refers to the ‘moving of materials from the store room to the machine and from one machine
to the next during the process of manufacture’. It is also defined as the ‘art and science of moving, packing and storing
of products in any form’. It is a specialized activity for a modern manufacturing concern, with 50 to 75% of the cost of
production. This cost can be reduced by proper section, operation and maintenance of material handling devices.
Material handling devices increases the output, improves quality, speeds up the deliveries and decreases the cost of
production. Hence, material handling is a prime consideration in the designing new plant and several existing plants.
PRODUCT DESIGN
Product design deals with conversion of ideas into reality. Every business organization have to design, develop and
introduce new products as a survival and growth strategy. Developing the new products and launching them in the
market is the biggest challenge faced by the organizations.
The entire process of need identification to physical manufactures of product involves three functions:
marketing, product development, and manufacturing. Product development translates the needs of customers given by
marketing into technical specifications and designing the various features into the product to these specifications.
Manufacturing has the responsibility of selecting the processes by which the product can be manufactured. Product
design and development provides link between marketing, customer needs and expectations and the activities required
to manufacture the product.
PROCESS DESIGN
Process design is a macroscopic decision-making of an overall process route for converting the raw material into
finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis
and layout of the facilities. Hence, the important decisions in process design are to analyze the workflow for converting
raw material into finished product and to select the workstation for each included in the workflow.
PRODUCTION PLANNING AND CONTROL
Production planning and control can be defined as the process of planning the production in advance, setting the exact
route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow
up the progress of products according to orders.

The principle of production planning and control lies in the statement ‘First Plan Your Work and then Work on Your
Plan’. Main functions of production planning and control includes planning, routing, scheduling, dispatching and follow-
up.
Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap
from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen.
Routing may be defined as the selection of path which each part of the product will follow, which being transformed
from raw material to finished products. Routing determines the most advantageous path to be followed from department
to department and machine to machine till raw material gets its final shape.
Scheduling determines the programmed for the operations. Scheduling may be defined as ‘the fixation of time and
date for each operation’ as well as it determines the sequence of operations to be followed.

Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a particular work,
which has already been planned under ‘Routing’ and ‘Scheduling’.
Therefore, dispatching is ‘release of orders and instruction for the starting of production for any item in acceptance with
the route sheet and schedule charts’.
The function of follow-up is to report daily the progress of work in each shop in a prescribed proforma and to investigate
the causes of deviations from the planned performance.

QUALITY CONTROL
Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of quality in a product or
service’. It is a systematic control of various factors that affect the quality of the product. Quality control aims at
prevention of defects at the source, relies on effective feedback system and corrective action procedure.
Quality control can also be defined as ‘that industrial management technique by means of which product of
uniform acceptable quality is manufactured’. It is the entire collection of activities which ensures that the operation will
produce the optimum quality products at minimum cost.
The main objectives of quality control are:
 To improve the companies income by making the production more acceptable to the customers i.e., by
providing long life, greater usefulness, maintainability, etc.
 To reduce companies cost through reduction of losses due to defects.
  To achieve interchangeability of manufacture in large scale production.
 To produce optimal quality at reduced price.
 To ensure satisfaction of customers with productions or services or high quality level, to build customer
goodwill, confidence and reputation of manufacturer.
 To make inspection prompt to ensure quality control.
 To check the variation during manufacturing.
MATERIALS MANAGEMENT
Materials management is that aspect of management function which is primarily concerned with the acquisition, control
and use of materials needed and flow of goods and services connected with the production process having some
predetermined objectives in view.
The main objectives of materials management are:
 To minimize material cost.
 To purchase, receive, transport and store materials efficiently and to reduce the related cost.
 To cut down costs through simplification, standardization, value analysis, import substitution, etc.
 To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply
at reasonable rates.
 To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory
turnover ratios.
MAINTENANCE MANAGEMENT
In modern industry, equipment and machinery are a very important part of the total productive effort. Therefore, their
idleness or downtime becomes are very expensive. Hence, it is very important that the plant machinery should be
properly maintained.
The main objectives of maintenance management are:
1. To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost.
2. To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity
without interruption.
3. To ensure the availability of the machines, buildings and services required by other sections of the factory for the
performance of their functions at optimal return on investment.