Operation Management

Production/Operation
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Management & Systems

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1. Production Management-Introduction, Objectives, Difference

between product & Services, Difference between manufacturing &
operation.
2. Production Systems-Types, production to stoc, role of production
manager.

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 Product

For a consumer: It is a combination of or optimal mix of potential utilities. This is because a

consumer expects some use from the product. Hence he always identifies the product in terms
of uses.
For a Production Manager: It is a combination of various surfaces and operations. This is
because the production manager is solely responsible for producing the product. While
planning he has to see that the required surface is produced by the best and cheapest method,
so that the product can face challenges in the market.
For a Financial Manager: It is a combination of various cost elements as he is responsible for
the profitability of the product.
For a personnel Manager: It is a mix of various skills, as he is the person who selects and train
personnel to meet the demand of the skill to produce the product.

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 Production

Production means application of processes to the raw material to add the use and economic
values to arrive at desired product by the best method, without sacrificing the desired quality.
There are 3 ways of production-
Production by Disintegration: By separating a mixture the desired product is produced. For
example the salt is produced by disintegration.
Production by Integration: Various components of the products are assembled together to get
the desired product. For example two wheelers four wheelers etc.
Production by Service: It is the process of delivering service to the consumers. For example
financial services, IT services, hospitality services etc.

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 Production Management

Production Management Every organization has management principles. And the application of
that principle to production function is the term “production management.” This management
concept involves planning, scheduling, supervising and control of the activities that concern the
production of goods to meet the needs of consumers and also generate profit for the business.
Raw materials are being transformed into value-added products efficiently. The production
manager is also in charge of this area of the business. In other words, decisions such as
quantity, quality, price, design, packaging style and material for the product, among others, are
made by the production manager. He also ensures that the output matches the specifications.

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 Function Of Production Management Department
◉ Production Control – Here the manager supervises and directs the production process. He
or she also must find out and ensure the right production plan is followed during the
production process. If there are deviations, the production manager has to take the right
steps to correct them.
◉ Scheduling – This function is critical in every organization. It has to do with planning when
the actual production would begin and ends.
◉ Cost and Quality Control – Every company knows how essential quality control and price
are. Customers are not just looking for the best products. But they also want to have them
at the lowest possible price. Quality control is an essential duty the production manager
has to perform. It entails multiple checks performed on the product to ensure quality is
intact.
◉ Maintenance of Machines – Production management also entails making sure that
instruments used are in good working condition. And that means replacing the ones that
are underperforming or changing damaged parts to enable the machine to function 7
optimally.
 Function Of Production Management Department

◉ Helps the Firm to Accomplish its Objectives: Production management helps the firm to
achieve its sales and business objectives by producing goods and services that meet the
need of consumers. Sales and profit will increase if the product produced satisfies the
customers’ needs.
◉ Boost Business Reputation and Goodwill: A satisfied customer will undoubtedly want to
repeat patronage. That’s why businesses should ensure that quality products are
delivered continuously. Making sure that your customers are always happy can also boost
business reputation.
◉ Reduces the Cost of Production: Production management ensures that resources are used
judiciously, without compromising on quality. In other words, the business will continue
to deliver quality products and sell at a convenient price to customers. But this can only
be possible in a situation where the input and output are maximized.
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 Operation Management

Operations management is an area of management concerned with designing and controlling

the process of production and redesigning business operations in the production of goods or
services.
The sole aim is to deliver the desired products and services to clients while also ensuring that
all parties involved are adhering to the policies presented by the management of the company.
The focus is also to make sure that there is little or no wastage during and after the production
process, through the effective use of the firm’s resources.

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 Functions Of Operation Management

◉ Finance: Operation management’s responsibility is to make sure that the company’s

resources are used in the right manner to generate goods that satisfy its customers.
◉ Strategy: Operations managers also help in the development of plans or tactics that could
lead to the maximization of resources and production of products that gives the company
a competitive edge over its competitors.
◉ Product Design: It is the operations manager’s responsibility to come up with product
design that not only caters to the needs of customers but follows the market trend.
◉ Forecasting: Operation management also predicts the performance of products or
services in the future. In other words, he critically analyses what customers’ demand for
certain products would be in the future.

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 Production/Operation Management
Difference Between Production and Operation Management:
Production Management Operation Management

Output Production management deals operations management cover both

with manufacturing of products products and services.
like (computer, car, etc.)
Usage of Output Products like computer/car are services need to be consumed
utilized over a period of time. immediately.

Classification of work To produce products like services require more labor and
computer/car more of capital lesser capital equipment.
equipment and less labor are
required.
Customer Contact There is no participation of services a constant contact with
customer during production. customer is required.
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 Product & Services

Difference Between Products and Services from POM point of view:

Products Services

A product is tangible, it is physical and can be held, A service is intangible, can only be felt and not
seen and movable touched

Product value is derived by the customer Value of service is offered by the service provider

A service is perishable and cannot be stored for

A product can be stored for future use
later use or sale
A service cannot be owned by the consumer once
A product can be owned
payment has been made
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 Product & Services

Difference Between Products and Services from POM point of view:

Products Services

Quality of a service depends on the service

The quality of a product depends its nature
provider who shapes it

A product can be returned to the seller A service cannot be returned to the seller

It is difficult to compare the quality of services

It is easy to compare quality of products
offered
Products can be quantified numerically Services cannot be quantified in terms of numbers

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

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 Classification Of Production System

Production systems can be classified as

• Job Production
• Batch Production
• Continuous Production

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 Job Production
◉ In this system products are manufactured to meet the requirements of a specific order. The quantity
involved is small and the manufacturing of the product will take place as per the specifications given by
the customer ex- restaurants or premium companies like Harley Davidson etc. This system may be
further classified as:
(i) The job produced only once: Here the customer visit the firm and book his order. After the completion
of the product, he takes delivery of the product and leaves the firm. The firm has to plan for material
once the order is placed by the customer. The firms has no scope for pre planning the production of
the product.
(ii) The job produced at irregular intervals: Here the customer visits the firm to place order of the same
product at irregular intervals. The firm will not have any idea of customer’s visit. So, here also planning
for materials, process and manpower is will start only after the order is placed by customer.
(iii)The job produced at regular intervals: In this system, the customer arrives at the firm to place the
orders for the same type of product at regular intervals. Here firm knows very well that the customer
visits at regular intervals, it can plan for materials, process and order the firm can start production. If
the volume of the order is considerably large and the number of regularly visiting customers are large
in number, the Job production system slowly transform into Batch production system. 16
 Job Shop Production
Features of Job Production
◉ Depends a lot on skill
◉ Dependency is more on manual work than mechanical work
◉ Customer service and customer management plays and important role
Advantages
◉ Because of general purpose machines and facilities variety of products can be produced.
◉ Operators will become more skilled and competent, as each job gives them learning opportunities.
◉ Full potential of operators can be utilized.
◉ Opportunity exists for creative methods and innovative ideas.
Limitations
◉ Higher cost due to frequent set up changes.
◉ Higher level of inventory at all levels and hence higher inventory cost.
◉ Production planning is complicated. 17
 Batch Production
◉ It is one of the types of production most commonly used in consumer durables, FMCG or other such
industries where there are large variety of products with variable demands. Batch production takes
place in batches. The manufacturer already knows the number of units he needs to a manufacturer and
they are manufactured in one batch. This system may be further classified as:
(i) The batch produced only once: Here the customer places order with firm which is bigger than job
production order. The firm plan for the resources after customer’s order is placed.
(ii) The batch produced at irregular intervals: As frequency is irregular the firm will not have any idea of
customer’s visit. So, here also planning for materials, process and manpower is will start only after the
order is placed by customer.
(iii)The batch produced at regular intervals: Here the firm receives the order from customer at regular
intervals. It has well designed plans, material requirement and instructions for the reference. It can also
purchase material in advance. As the frequency of Batch production system increases it becomes Mass
production system.

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 Batch Production
Features of Batch production
◉ Production is done in batches
◉ The total number of units required is decided before the batch production starts
◉ Once a batch production starts, stopping it midway may cost a huge amount to the company.
◉ Demand plays a major role in a batch production. Example – seasonality of products.
Advantages
◉ Better utilization of plant and machinery.
◉ Cost per unit is lower as compared to job order production.
Limitations
◉ Material handling is complex because of irregular and longer flows.
◉ Production planning and control is complex.
◉ Higher set up costs due to frequent changes in set up.
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 Continous Production
◉ In continuous production, most of the work is done by machines rather than humans. In continuous
production, the production is continuous, 24×7 hours, all days in a year. Plastic industry is known to
adopt the continuous production methodology where production can go continuously for weeks or
months depending on the demand. Once the production starts, you only need to feed in the raw
material, and the machines turn out the finalized products.
(i) Mass Production: In Mass production identical products are produced in large numbers. If the demand
falls or ceases, the machinery and equipment, after slight modification be used for manufacturing
products of similar nature. Ex- component of industrial products.
(ii) Flow Production: In Flow production, the plant and equipment is designed for a specified products. If
the demand falls or ceases, the plant cant be used for manufacturing other products. It is to be
scraped. Ex- Cement factory, Sugar factory, oil refineries etc.
Features of Continuous production
◉ Majority of the work is done by machines rather than humans
◉ Work is continuous in nature. Once production starts, it cannot be stopped otherwise it will cause huge
loss.
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◉ A very controlled environment is required for continuous production.
 Continous Production
Advantages
◉ Standardization of product and process sequence.
◉ Manpower is not required for material handling as it is completely automatic.
◉ Person with limited skills can be used on the production line.
◉ Unit cost is lower due to high volume of production.

Limitations
◉ Flexibility to accommodate and process number of products does not exist.
◉ Very high investment for setting flow lines.
◉ Product differentiation is limited.

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Thanks!

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