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Chapter 9
Business operations of a manufacturing organisation

1 - Overview of Manufacturing Company Operations

Focus: Delivering quality products to customers.
Influences: Driven by technological advancements, ongoing competition, and consumer expectations.
Integration with Other Functions: Essential collaboration with departments like sales, marketing, finance,
accounting, procurement, human resources, and legal.
The Transformation Process in Manufacturing.
Objective: Efficient transformation of resources (materials, labor, money, information) into goods or services.
Operations Management Role:
▪ Managing and supervising the conversion process( Production)
▪ Controlling significant assets such as inventories, wages, and benefits.
▪ Collaborating with marketing, finance, accounting, and human resources.
Key Challenges: Producing high-quality goods on time and at a reasonable cost.
Role of the Operations Manager.
Definition: A senior manager directing the transformation process.
Responsibilities:
▪ Overseeing all activities from product conception to finished product.
▪ Managing the process of transforming inputs into outputs.
▪ Ensuring effective production processes and systems.
Operations Management Functions
▪ Collaboration: Working closely with marketing to decide product types.
▪ Resource Allocation: Combining people and resources effectively. 2
▪ Process Involvement: Development and design of goods, and determining production processes.
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What is the primary focus of a manufacturing company's operations?

a) Maximizing employee satisfaction
b) Minimizing production costs
c) Delivering quality products to customers
d) Expanding the company's market share
Answer: c) Delivering quality products to customers

Which factors significantly influence the operations of a manufacturing company?

a) Employee training programs
b) Technological advancements, competition, and consumer expectations
c) Location of manufacturing facilities
d) The company's branding strategies
Answer: b) Technological advancements, competition, and consumer expectations

What is the role of operations management in a manufacturing company?

a) Focusing solely on marketing strategies
b) Supervising the transformation of resources into finished products
c) Managing only the financial aspects of production
d) Overseeing legal compliance only
Answer: b) Supervising the transformation of resources into finished products

What are the key responsibilities of an operations manager in a manufacturing

company?
a) Handling customer service inquiries
b) Overseeing the transformation process from product idea to finished product
c) Directing only the sales and marketing departments
d) Managing the company's investment portfolio
Answer: b) Overseeing the transformation process from product idea to finished
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Operations management in a manufacturing company collaborates closely with

which departments?
a) Only with the human resources department
b) Marketing, finance, accounting, and human resources
c) Exclusively with external suppliers
d) Only with the legal department
Answer: b) Marketing, finance, accounting, and human resources

What is the main challenge for operations management in ensuring the

production of high-quality goods?
a) Limiting employee vacations
b) Reducing the variety of products offered
c) Producing goods on time and at a reasonable cost
d) Focusing only on domestic markets
Answer: c) Producing goods on time and at a reasonable cost

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1.2 Objectives of operation management in Manufacturing

Basic Function of Manufacturers
▪ Core Aim: Efficient transformation of resources (materials, labor, capital,
information) into finished products.
▪ Operational Efficiency: Continual pursuit to improve efficiency in today's rapidly
changing business environment.
▪ Production Adjustments: Regularly revising production processes to maintain
competitiveness and meet market demands.
Key Objectives of Operation Management
▪ Quality Focus: Prioritizing high-quality output to meet consumer expectations
and maintain market reputation.
▪ Cost Minimization: Reducing material and labor expenses to maximize
profitability while maintaining quality.
▪ Value-Added Costs: Eliminating any expenses in the production process that do
not contribute to the product's value.

Responsibilities of Operations Manager.

▪ Procurement & Purchasing: Strategic selection and sourcing of essential materials and
inputs for production.
▪ Production Planning: Four important decisions are, Detailed planning of how and when
goods will be produced, selection of production sites, layout of manufacturing facilities,
and comprehensive resource planning.
▪ Production Control: Ongoing scheduling, monitoring of activities, adjusting processes
based on feedback, managing inventories, and cost control. Three key scheduling tools
are: Gantt charts, the critical path method (CPM), and the program evaluation and review
technique (PERT).
▪ Quality Control: Implementing rigorous quality checks and standards throughout the
production process. TQM and Six Sigma are methodologies focusing on continuous
improvement and quality enhancement within an organization, using holistic and
statistical approaches, respectively. In contrast, ISO 9000 and ISO 14000 are standardized
guidelines, with ISO 9000 focusing on quality management systems and ISO 14000 on
environmental management systems, both offering certification to organizations.
▪ Continuous Development: Constantly seeking innovative and more efficient production
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Key Decision Points in Production Planning Phases.

1. Planning Phases
2. Production Processes
3. Production Timing
4. Location Decision
5. Layout Design
6. Layout Types
7. Resource Planning and Supply Chain
8. Information Systems

1- Planning Phases in Production Planning.

Long-Term Planning (3 to 5 Years)
Focus:
▪ Determining which goods to produce.
▪ Deciding on the quantity of production.
▪ Identifying production locations.
Objective: Establishing themain production goals and strategies.
2. Medium-Term Planning (About 2 Years)
Focus:
▪ Designing the layout of factories or service facilities.
▪ Sourcing and procurement of necessary resources for production.
▪ Addressing labor-related issues.
Objective: Preparing for operational efficiency and resource management.
3. Short-Term Planning (Within 1 Year)
Focus:
▪ Translating long-term and medium-term goals into specific production plans.
▪ Developing materials management strategies.
Objective: Implementing and executing the detailed plans for production.
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2- Types of Production Process in Manufacturing

1. Mass-Production.
Definition: Manufacturing many identical goods simultaneously.
Characteristics: Products made sequentially in large quantities.
Emphasis on low manufacturing costs through uniformity and standardized processes.
Examples: Breads, soft drinks, canned goods, over-the-counter drugs, household
appliances.
Evolution: Increased complexity in products (like automobiles) has made mass production
more sophisticated.
2. Mass-Customization
Definition: Combines mass-production techniques with customization.
Characteristics: Products are mass-produced up to a point, then tailored to individual
customer needs or desires.
Examples: Dell computers, American Leather furniture.
Process: Basic components are standardized, but final product is customized (like furniture
frames with custom leather).
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Types of Production Process in Manufacturing.

3. Customization (Bespoke Production)
Definition: Producing goods one at a time, tailored to the specific needs of each customer.
Characteristics: Each product or service is unique.
Examples: Building individual houses, print shops with varied projects.
Also known as a job shop in a manufacturing context.

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Types of Production Process in Manufacturing

Process Manufacturing
▪ Definition: Basic inputs are converted into one or more outputs.
▪ Example: Converting wheat into flour, Chemicals, food, and pharmaceuticals.
Assembly Manufacturing
▪ Definition: Basic inputs are combined or transformed into the output.
▪ Example: Assembling thousands of parts to create an airplane, Electronics,
automotive, and appliances.

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3- Production Timing
1. Continuous Process
▪ Nature: Involves long production runs without stopping equipment for extended periods.
▪ Duration: May last for days, weeks, or even months.
▪ Suitability: Ideal for high-volume, low-variety products with standardized parts.
▪ Examples of Products: Production of nails, glass, paper, and other uniform items.
▪ Characteristics:
▪ High efficiency in production.
▪ Lower per-unit costs due to economies of scale.
▪ Limited flexibility in terms of product variety.
2. Intermittent Process
▪ Nature: Involves short production runs for different products.
▪ Production Changes: Equipment is often shut down to change setups for different products.
▪ Suitability: Best for low-volume, high-variety products.
▪ Examples: Utilized in mass customization, bespoke customization, and job shops.
▪ Characteristics:
▪ Greater flexibility in product variety.
▪ Higher per-unit costs due to smaller production runs and changing setups.
▪ Suitable for customized or specialized products. 14

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4- Location Decision
▪ Influencing Factors: Access to production resources, proximity to markets, and benefits of
industrial zones.
▪ Strategic Importance: The location choice affects operating costs, shipping expenses,
product pricing, and competitive ability.

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5- Understanding Layout in the Production Process:

▪ The layout of a manufacturing facility is the arrangement of the machinery, equipment,
and workspace.
▪ A well-designed layout ensures a smooth flow of work, materials, and information
through the system.
▪ The choice of layout can significantly impact the speed and efficiency of the production
process. For example, a U-shaped line might be more efficient than a straight line
because it allows for quicker movement and easier communication among workers.

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Process Layout:
▪ Characteristic: Grouping of similar processes or functions, with workers performing similar
tasks together.
▪ Ideal for: Facilities that produce small batches of different products using general-purpose
machines.
▪ Example: Custom machinery manufacturers, where different products may require different
production processes.
▪ Advantage: Flexible and capable of handling a variety of products and product designs.
▪ Limitation: May not be the most efficient in terms of material movement as it caters to a
diverse range of products.
Product (or Assembly Line) Layout:
▪ Characteristic: Linear arrangement of equipment and workstations following the sequence of
operations.
▪ Suitable for: Mass production of a single product or a few similar products in large quantities.
▪ Example: Automobile and appliance manufacturers, and food-processing plants that require
continuous or repetitive processes.
▪ Advantage: Highly efficient for large-scale production with minimal movement between
stages.
▪ Limitation: Less flexible and can be challenging to adapt to product changes. 17

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Fixed Position Layout:

▪ Characteristic: The product remains stationary, and resources such as workers and
machinery are brought to it.
▪ Used for: Large, bulky, or complex projects that cannot be moved due to their size.
▪ Example: Shipbuilding, large aircraft assembly, and construction projects.
▪ Advantage: Accommodates the construction or assembly of large items in a fixed location.
▪ Limitation: Can be less efficient in terms of worker and material movement as everything
must come to the product's location.
Cellular Manufacturing:
▪ Characteristic: A modular approach where workstations are arranged in cells, each capable
of handling a complete process or part of a product.
▪ Combines: Aspects of both process and product layouts, grouping machines based on the
sequence of operations for specific product families.
▪ Example: A manufacturing unit that produces various types of electronics, with cells
dedicated to assembling different components or product types.
▪ Advantage: More flexible than a pure product layout and can be more efficient than a
process layout, especially for moderate variety and volume.
▪ Flexibility: Can quickly adjust to changes in production volume or product variety without
the need for significant layout changes.
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6-Resource planning and supply chain management are critical components of the
overall operational strategy for any manufacturing or service company.
They involve a series of strategic decisions and practices to optimize the flow of materials,
information, and finances as they move from supplier to manufacturer to wholesaler to
retailer to consumer.
Resource Planning:

▪ Forecasting: Predicting the quantity of finished goods to determine the required raw
materials, parts, and components.
▪ Make-or-Buy Decisions: Determining whether it is more cost-effective and efficient to
produce a component in-house or to purchase it from an external supplier.
▪ Outsourcing: Contracting out certain tasks or operations to external companies when
they can be performed more efficiently or at a lower cost than in-house.
▪ Inventory Management: Balancing the need to keep stock on hand to meet demand
while minimizing inventory costs, which involves decisions about inventory levels,
storage, and replenishment.

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Supply Chain Management (SCM):

▪ Smoothing Transitions: Ensuring a seamless flow of goods and materials from
suppliers through to customers, which includes managing logistics, transportation,
and distribution.
▪ Customer Satisfaction: Aligning supply chain operations with the goal of delivering
quality products and services to customers when and where they need them.
▪ Supplier Relationships: Developing strong relationships with suppliers to ensure
reliability and quality of supply. This can include reducing the number of suppliers to
manage closer relationships and negotiating better terms.
▪ Added Services and Pricing: Working with suppliers to obtain more services (like
just-in-time delivery (JIT) , quality checks) or better pricing in exchange for long-
term commitments and larger volume orders.
Effective resource planning and SCM require coordination across various departments
within a company, as well as with external entities. It's a complex balancing act that must
consider multiple factors such as cost, quality, delivery times, and flexibility to adapt to
changes in demand and market conditions. Advanced information systems, like Enterprise
Resource Planning (ERP) and Supply Chain Management systems, are often employed to
support these activities, providing real-time data and analytics to aid decision-making.
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8- Information systems are pivotal in managing the intricate details of resource planning and
inventory control. They provide the backbone for modern supply chain operations, allowing
businesses to forecast, plan, and execute their operational strategies effectively.
Material Requirements Planning (MRP):
▪ Purpose: To ensure that materials are available for production and products are
available for delivery to customers. It aims to maintain the lowest possible level of
inventory.
▪ Advantages: Reduces waste by purchasing only what is needed and when it is needed.
Manufacturing Resource Planning (MRPII):
▪ Purpose: An expansion of MRP, MRPII integrates additional data such as employee and
machine scheduling, resulting in a comprehensive planning tool that covers all aspects
of the manufacturing process.
▪ Advantages: Provides a more holistic approach to production planning and offers
greater control over the manufacturing process.
Enterprise Resource Planning (ERP):
▪ Purpose: To integrate all the aspects of a business's operations, including planning,
purchasing, inventory, sales, marketing, finance, human resources, and more.
▪ Advantages: Improves efficiency and effectiveness by providing a unified view of the
business operations, which can lead to better strategic planning and management.
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What is the primary goal of manufacturers in transforming resources?

a) Maximizing employee productivity
b) Achieving operational efficiency
c) Focusing solely on customer service
d) Reducing the number of suppliers
Answer: b) Achieving operational efficiency

What is a key objective of operation management in manufacturing?

a) Increasing the number of products offered
b) Minimizing costs of materials and labor
c) Expanding the company's global presence
d) Prioritizing automated processes over manual ones
Answer: b) Minimizing costs of materials and labor

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Which responsibility is part of an operations manager's role?

a) Directing marketing strategies
b) Overseeing procurement and purchasing
c) Managing customer relationships
d) Designing the company's website
Answer: b) Overseeing procurement and purchasing

What does production planning in manufacturing involve?

a) Deciding only on the types of products to produce
b) Focusing exclusively on short-term goals
c) Determining production processes, site selection, and facility layout
d) Limiting production to customized products only
Answer: c) Determining production processes, site selection, and facility layout

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Which production method is characterized by producing large quantities of

standardized products?
a) Mass customization
b) Customization
c) Mass production
d) Process manufacturing
Answer: c) Mass production

What distinguishes mass customization in manufacturing?

a) Products are completely standardized
b) Products are tailored to individual customer needs at a certain production stage
c) It involves handcrafting each product
d) Production is exclusively automated
Answer: b) Products are tailored to individual customer needs at a certain production
stage

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In which type of production process is each product unique and made to specific
customer requirements?
a) Mass production
b) Mass customization
c) Customization
d) Assembly manufacturing
Answer: c) Customization

What is a critical aspect of the continuous production process?

a) Producing a variety of products in short runs
b) Having long production runs without equipment shutdowns
c) Focusing on handmade and bespoke items
d) Producing goods in multiple locations simultaneously
Answer: b) Having long production runs without equipment shutdowns

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Which factor is crucial in deciding the location of a manufacturing facility?

a) The personal preference of the CEO
b) Proximity to entertainment venues
c) Access to production resources and market
d) Availability of large parking spaces
Answer: c) Access to production resources and market

What is the purpose of implementing an Enterprise Resource Planning (ERP) system in

manufacturing?
a) To manage employee attendance only
b) To focus exclusively on customer feedback
c) For integrated enterprise-wide resource management
d) To handle online marketing strategies
Answer: c) For integrated enterprise-wide resource management

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Key Decision Points in Production Planning

1-Planning Phases:
Long-term (3-5 years): Focus on product types, quantities, and production locations.
Medium-term (2 years): Concerns factory layout, resource procurement, and labor.
Short-term (1 year): Specific production plans and materials management.
2-Production Processes:
Mass-production: High-volume, identical goods, e.g., bread, soft drinks.
Mass-customization: Standardized up to a point, then tailored, e.g., Dell computers.
Customization: Unique, one-off production, e.g., individual houses, job shops.
Process vs. Assembly Manufacturing: Transforming inputs into outputs versus assembling
parts into products.
3-Production Timing:
Continuous Process: Long runs without stops for high-volume, standardized products.
Intermittent Process: Short runs for varied products, ideal for custom and low-volume items.
4-Location Decision:
Influences operating/shipping costs and competitiveness.
Consider access to resources, market proximity, and manufacturing zones.
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5-Layout Design:
Efficient design for the production process.
Types: Process, product/assembly-line, fixed position, and cellular layouts.
6-Layout Types:
Process Layout: Grouping similar tasks for varied products.
Product Layout: Line arrangement for continuous production.
Fixed-Position Layout: Product fixed; workers and machinery move as needed.
7-Resource Planning and Supply Chain:
Determine raw materials and components needed.
Key decisions: make-or-buy, outsourcing, inventory management.
Supply chain management focuses on smoothing transitions and satisfying customers.
8- Information Systems:
Key systems: Material Requirement Planning (MRP), Manufacturing Resource Planning II
(MRPII), Enterprise Resource Planning (ERP).

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Types of Human Resource in a Manufacturing Set-Up

1. Executive Management
▪ Roles: Top-level management including CEO, COO, President.
▪ Responsibilities: Ultimate responsibility for manufacturing strategy and overall direction of
departments.
▪ Decision-Making: Seeks input from technical managers for strategy formulation.
▪ Accountability: Responsible for the outcomes of the manufacturing strategy.
2. Manufacturing or Production Manager
▪ Role: Leader of production workers and supervisors.
▪ Responsibilities: Manages the production process, implements directives from executive
management.
▪ Communication: Reports successes or failures of manufacturing strategy to executive management.
▪ Collaboration: Seeks feedback from line supervisors and production employees.
3. Production Line Supervisors
▪ Role: Middle-management, liaison between production workers and the production manager.
▪ Responsibilities: Oversees specific production or assembly lines.
▪ Function: Essential in relaying manufacturing strategy from production manager to workers.
4. Production Workers
▪ Role: Base of the manufacturing organizational chart.
▪ Importance: Crucial for the success or failure of the manufacturing strategy.
▪ Reporting: Answer to the production line supervisors. 30

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2. A TYPICAL STRUCTURE OF A MANUFACTURING COMPANY

2.1 The Organization Structure
The structuring or organizing process is generally accomplished by three primary
decisions:
1. Division of labor: determining job duties and responsibilities
2. Departmentalization: grouping jobs together
3. Delegation: assigning authority and responsibilities

An organizational structure describes the relationships of resources within a

company. It begins with people but also includes materials, money, and
information.

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Division of Labour
Division of Labour means that the main process of production is split up into
many simple parts and each part is taken by different workers who are
specialized in the production of that specific part.
Different workers perform different parts of production on the basis of their
specialization. The result is that goods come to the final shape with the co-
operation of many workers. For example – in a large-scale readymade garment
factory, one person cut the fabric, the second person stiches it with machines,
the third buttons, the fourth perform folding and packing, etc.
Adam Smith (1723–1790), an economist, was the first person to introduce the
concept of division of labour in his famous book The Wealth of Nations in 1776.
He illustrated the way goods or services are produced when divided into a
number of tasks that are performed by different workers, instead of all the tasks
being done by the same person.
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Key advantages of division of labour in a manufacturing concern are:

▪ Increased efficiency
▪ Improvement in quality
▪ Utilisation of specialised skills and talents of workers
▪ Economies of scale
▪ Faster training of workers
Disadvantages of division of labour
▪ Boredom (dullness)
▪ Lack of creativity
▪ Redundancy due to new technology
▪ Lack of responsibility and interdependence

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Departmentalization
Manufacturing companies typically use traditional structures for organizing
their resources. These almost always involve departmentalization so that
similar tasks can be grouped together. Traditional structures are quite rigid,
grouping employees by one or more of the following criteria:
▪ Function
▪ Products
▪ Processes
▪ Customers
▪ Regions

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Two other types of business structures are contemporary and team structures.
These are more flexible than traditional structures, allowing management to
move employees as needed to respond to dynamic working environments.
Project-based companies, like software companies and service companies, for
example, would often benefit from these more-flexible types of structures.

A typical manufacturing company department structure would, for the sake of

example, consist of a few core departments and some support functions. A vice
president would oversee each of these divisions and report to the company
president, who is responsible for all three divisions and is normally at the top of
a manufacturing company organizational chart.

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Functional Departmentalization
Functional departmentalization bases the departments on the primary
functions conducted by the company.
Functions could include
▪ Manufacturing,
▪ Engineering,
▪ Legal,
▪ Finance,
▪ Human resources,
▪ Sales and marketing.

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Product Departmentalization
Product departmentalization divides company resources based on the products
being manufactured.
A good example of product departmentalization is witnessed in an automobile manufacturing
company. In such a company, we generally see departments like a two-wheeler department,
three-wheeler department, four-wheeler department, heavy motors department.

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Process Departmentalization
Process departmentalization divides departments based on the work being
done.

Best example of process departmentalization can be seen in a textile mill where we may
have a spinning department, weaving department, dyeing department, printing
department, etc. Here, inside a textile mill, all activities, which are directly or indirectly
related with spinning are grouped together to make a spinning department.

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Customer Departmentalization
Customer departmentalization usually involves different units based on the
type of customers being served.

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Customer Departmentalization
In customer departmentalization, departments are separated from each other based on the
types or groups of customers to be handled or dealt with.
For example, customers can be classified under types such as, international or foreign
customers, inland or domestic customers, bulk purchasing or wholesale customers, retail
customers, etc.

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Customer Departmentalization
For example, one manufacturing unit would be catering to products being sold
to industrial consumers and another manufacturing unit would be churning out
products for household consumers.
Another example is for a lubricants manufacturing company where a specific
manufacturing facility would be making lubricants for large scale machinery
and another would be making specialized products for cars and other
automotive.
Marketing could be further divided into different marketing efforts, such as
online marketing and retailer relations. Sales departments are often divided
into units based on internal and external sales forces or different types of
clients or customers.

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Geographic Departmentalization
When a manufacturer has more than one location, it's often advantageous
to divide the company by region. How this is done depends on the size of the
company and the work being done in each location. At one end of the
spectrum, a large manufacturer with independent operations in different
countries, like an auto manufacturer, could have separate companies in each
country. A smaller company may have a plant manager at each location,
each reporting to the VP of operations.

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Geographic Departmentalization
When a manufacturer has more than one location, it's often advantageous to
divide the company by region. How this is done depends on the size of the
company and the work being done in each location. At one end of the spectrum,
a large manufacturer with independent operations in different countries, like an
auto manufacturer, could have separate companies in each country. A smaller
company may have a plant manager at each location, each reporting to the VP
of operations.
Ford Motor Company, for example, has three global divisions: Americas, Asia-
Pacific, Europe, Middle East and Africa. An executive VP is in charge of each of
these divisions. These are in addition to the company's functional groups, which
operate at a global level.

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Delegation
If all organisational activities, strategic and routine, could be managed by the
top executives, the need for a formal organisational structure with functional
departments, staffed with people of different calibre, carrying out different
activities would not have arisen. Since it is not possible, because of physical
and mental limitations, for one person to perform all activities with respect to
all functional areas, it becomes necessary that he gives part of his workload
to subordinates along with commensurate authority to carry out the assigned
task. This concept is called delegation.
Delegation is a process the manager uses in distributing work to the
subordinates.

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2.2 Combining Business Structures For exceptionally large manufacturers, it

doesn't make much sense to limit the company's organization structure to just
one model.
For example, Procter & Gamble's "four pillars" refer to four departmentalization
models, which it uses at the same time.
1. First Pillar: Global business units organize the company by its product lines,
such as baby products, beauty products, fabric and home care, etc.
2. Second Pillar: Selling and marketing operations groups are arranged with the
geographical model for North America, Latin America, North America, Latin
America, Asia-Pacific, Europe, China, India, the Middle East and Africa.
3. Third Pillar: Global business services division also uses a geographic model to
support its other business units in areas like accounting, information
technology, payroll and facilities management.
4. Fourth Pillar: Corporate functions, using the functional model, provides the
company with resources such as human resources, legal, marketing, research
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and development and business development.
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5. Fifth Pillar: Global business services division also uses a geographic model to
support its other business units in areas like accounting, information technology,
payroll and facilities managemen
2.3 Choosing an Organizational Structure
A small manufacturing unit with a limited workforce may be able to work
efficiently as a functional structure. However, when the company grows, when
more products are added to production facilities and when a second or third plant
is needed, the questions surrounding organizational structure become much more
complex.
It is important to align the choices in organizational structure with the company’s
strategies. This involves asking critical questions such as:
• Should manufacturing responsibility be centralized, or should decisions be
made locally to account for regional differences?

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• How can you best ensure technology standards are implemented across all
business units?
• Should units like engineering, asset management and maintenance be
integrated into manufacturing or separated from it?
• How much responsibility will plant managers have?
• How will responsibility be organized below the plant manager?
Overall, a manufacturing business functions best when its facilities, technologies,
and policies are integrated with recognized priorities of corporate strategy.
That’s how a manufacturing business gain efficiency by improving its operations
and productivity.
The manufacturing organizational structure also needs to be consistent with the
corporate priorities. However, simplicity of design is the main element, which in
turn requires to have a balance between two extreme structures such as either a
product- or a process-focused form of organization. The proper selection of an
optimal organization structure can smooth a company’s growth by lending
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stability and efficiency to its operations.
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Product vs. Process-Based Structures:

Product-Based Organization:
▪ Cost or Profit: Each product group manages its own cost or profit.
▪ Corporate Staff Size: Smaller, because many responsibilities are handled by
individual product groups.
▪ Evaluating plant performance based on profit.
Process-Based Organization:
▪ Cost or Profit: The entire company, at a corporate level, manages cost or profit.
▪ Corporate Staff Size: Larger, because more responsibilities are centralized.
▪ Evaluating plant performance based on cost.

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3. Key Departments of a Manufacturing Company:

▪ Production: Responsible for planning, scheduling, supervising, maintaining quality
control, maintaining equipment, controlling inventory, and deciding production
methods. Collaboration with other departments is essential for effective production.
▪ Research and Development (R&D): Focuses on developing new products or processes
and improving existing ones, closely coordinated with marketing.
▪ Purchasing: Handles sourcing and procurement of all raw materials and resources for
production, ensuring optimal material quality and cost.
▪ Marketing and Sales: Communicates product or service information to the target
audience, manages advertising, promotions, public relations, and drives sales through
customer interaction.
▪ Human Resource Management (HRM): Deals with payroll, administrative work,
mediating between management and workers, and ensuring a skilled workforce.
▪ Accounting and Finance: Manages financial record keeping, prepares financial
statements, administers payroll, and provides management accounting information for
production decisions.
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4. Manufacturing and Operations Management:

▪ Role in Design, Development, and Production: Manufacturing companies are
involved in creating goods from raw materials for distributors or retailers. This
process includes design, development, and production stages.
▪ Monitoring and Improving Production Processes: Manufacturing operations
management focuses on continually monitoring and improving these production
processes.
▪ Optimization of Efficiency: The central goal is to optimize efficiency, ensuring the
best quality products are produced at the lowest possible prices.
▪ Management of Business Resources: This includes managing resources like people,
technology, equipment, and other resources to enhance efficiency and productivity.
▪ Harmonious Functioning of Equipment and User Interface: Ensuring that physical
equipment and user interfaces work well together, blending human and automated
activities.

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Benefits of Manufacturing Operations Management:

▪ Competitive Advantage: Managing internal and external factors such as intellectual
capital, operating policies, market changes, and political or economic conditions to
gain a competitive edge.
▪ Increased Profitability: Smooth operations allow for more time to generate and
implement new ideas, leading to increased sales and income.
▪ Efficiency and Quality Improvement: Enhances the efficiency of manufacturing
processes and raw material storage, reducing losses and improving product quality.
▪ Compliance with Regulations: Ensures that all tasks are performed lawfully,
protecting the company from potential fines and regulatory issues.
▪ Customer Satisfaction: Maintains high standards and efficiency through quality
management programs, leading to increased customer satisfaction and retention.
▪ Waste Reduction: Utilizes manufacturing systems that reduce waste production and
improve inventory management.
▪ Teamwork Enhancement: Requires collaboration among different departments,
improving overall business productivity and meeting customer expectations.
▪ Employment of Innovative Technology: Involves using innovative technology and
regular statistical control methods to achieve company goals and objectives. 51
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