,

(^Objectives of Production and Operation Management

^
Production is an organized activity in a manufacturing organization. Each
organized activity must spell out its objectives so that its existence can be justified
on the basis of the degree of the attainment of these objectives. Moreover, such
identification of the objectives increases the consciousness of the personnel
working in the respective organizations in checking their efforts by verifying
whether they are in conformity with the stated objective of the organization. The
objectives of the production function are classified as under:
1) Ultimate objectives, and
2) Intermediate objectives.
1) Ultimate Objectives: The primary responsibility of the manufacturing
activity is to produce a productat:
i) Right Quality: The quality of product is established based upon the customers
needs. The right quality is not necessanly_best quality. It is determinecTby
the^ostjrf the product and theTechnical characteristics as suited to the
specificretpfreTneTfisT
ii) 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 Tfie quantity is produced in short of demand, leads to
shortage of products.
iii) Right Time: Timeliness of delivery is one of the important parameter to judge
the effectiveness of production department. So, the plMuaion'Separtaienthas to
make the optimal utilization of input resources to achieve its objectives.
iv) Pre-established Cost: Manufacturing costs are established before the
productis_actually manufactured. Hence, all attempts should be made to produce
tKe"products at pre-established cost, so as to reduce the variation between actual
and the standard (pre-established) cost.
Thus the ultimate objectives can be sub-classified as under: i) Manufacturing
Costs: The unit cost of the product should be estimated carefully and every effort
should be made to stick to the cost standards. For this purpose, the efforts should
be made to seggregate the costs into two - direct costs and variable costs. Efforts
should be made for the following:
,
r
A
i
a) Reduction in the variable costs.
"H y :ir>tl (,r
\w[
Reduction in the fixed costs.
Increase in the volume of production, so that the fixed costs may
be spread over more production resulting in the reduction in the
per unit absorption.
The allocation of the fixed overheads should be made on scientific basis.

Introduction to Production & Operations Management (Chapter 1)

5
ii) Product Quality: Generally, the product quality standards are often established
by the product specifications or by the consumers. The manufacturing organization
should "Try to translate such quality prescriptions into some measurable
objectjyes. It should be rioted that the product quality comes in conflict with the
manufacturing cost objective and the manufacturing time-schedule. The
maintenanee~of tKe~quality should not result in increase in manufacturing costs or
delayTrTtfrelirwiuction. A proper balance must be malrflained between quality and
cost as well as quality and time-schedule, iii) Manufacturing Schedule: There are
many forces which compel sidetracking in the manufacturing activity. The time
schedule should not be set for the shipment alone; it should be broken up into all
the subsystems like operating cycle time, inventory turnover' rate, machine
utilization rate, direct and indirect man-hours l)CT~unrt, capacity utilization,
machine~~and laboF id!FTuwe7J1et:u^*'repair "arid maintenance time~~etc.
Time schedule objective directly affects the cosfquality and the goodwill of the
business in terms of regularity of shipment.
"
Intermediate Objectives: Production is the result of various types pf inputs,
like^men, materials, machines and manufacturing services. The intermediate
objectives strive to attain" the optimum" utilization of these various types of
inputs. It should be noted that the output resulting out of the inputs is measured in
terms of the cost, quality and time which relate to the prescription of aforesaid
ultimate objecttess. The intermediate goals can be spelled out as under:
i) Machinery and Equipment: The objectives in the area of machinery and
equipment are divided into:
*
a) Acquisition of machinery and equipment.
b) Utilization of machinery and equipment.
The adequacy of the existing machinery should be considered and proper additions
and replacements should be made according to the requirements. Efforts should
also be made to increase the utilization rate of machinery through repair^
maintenance and maximunT occupancy of the machines.

"""""'
ii) Materials: The materials objectives must be prescribed in terms of units, rupee
value and space requirements. The per unit materials costs should be specified and
efforts should be made to increase the inventory turnover of all types of inventories
raw materials, work-in-progress and finished goods.
"~"
iii) Manpower: Manpower is an important as well as typical input in manufacturing
activities. So the objectives of the production activities are as regards manpower

must be closely allied with the objectives of selection, placcjjiei!

t^u^rnjg,xewjrding and utilization of manpower. UsuaTTyTthese objectives are
considered in ternls"oTempT^eelurnover rates, safety measurements, industrial
relations, absenteeism etc."""
iv)manufacturing services: the provision of proper and adequate
services directly effctesthe utilities of other inputs such as men,
machines and materials. Proper objectives should be set for the
installing of important facilities such as power, water supply
,material handing etc. condensed form, it can be sated that he
objectives of the manufacturing activities are- to manufacture a
quality product, on schedule at the lowest possible costs, with
maximum asset turnover, to achieve consumer satisfaction this
statement is closely related to the ultimate and intermediate
objectives of the production function.

INTRODUCTION
Production involves step by step conversion of one form of material into
another through or mechanical process with a a view to enhance the utility of the
product or services",? Production management deals withconverting raw materials
into finished goods or products .-lt beings together 6m s i.e men, money to
satisfy Machines, Materials, Methods and Markets to satisfy the wants of the
people. Operation Management is the management of the conversion process,
converts land, capital, and
management inputs into desired
outputs of goods and services. It is also concerned with
the design and the operation of systems for manufacture, transport, supply or
services.

Production refers to the use of any process which is designed to transform a set
of input elements into a set of out put elements .
.accroding to butta production is a process by which ggods or services ar
created.
Ways of production
There are three ways of production
i)
Production by disintegration: by separing the contantes of crude oil
or a mixture the desired products and produced. For example the crude
oil is disintegrated into various fule oils, similary salt production is
also example for product produced by disintegration.
ii)
Production by intertion :in this type production various components of
the proudectare assemble together to get the describe product .in this
process, physically and chemically properties of the materials used
may change.
iii) Production by service: in this tye of production chemical and
mechanical properties of materials are improved without any
physically change Exmpale: heat treatment of metals.
Objectives of Production
Production involves the things which are essential for the manufacture of products.
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. To produce right quality: The quality of product is established based upon the
customers 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.
To produce 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.
To maintain 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.

To ensure 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 cost."

Characteristics of Production System

The production system has the following characteristics:
1. The production system transforms the tangible inputs into useful outputs.
2. It does not function in isolation from the other organization system.
3. The system is a feedback about the activities.
4. Production system is a planned activity.
5. Production system is essential to control and improve system performance.

Classification of Production
The production can be classified as follows:
O
re t3 .a a ifc "a
u
A. Job Shop Production
B. Batch Production
C. Mass Production
D. Continuous Production
J
(A) Job Shop Production
(Job shop production refers to the manufacturing facility that produces several
different products in smaller batches. A machine shop is a type of job shop.
Job shop production are characterised 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 jjnjmachmes in a certain sequence./

Features of Job Shop Production

The features of Job-shop production system can be summarised as follows:
1. Job-shop production system helps to produce variety of products.
2. It utilizes of general purpose machines and facilities.
3. Job-shop production system requires skilled operators.
4. Large inventory of materials, tools, parts.
5. It assists for detailed planning is essential for sequencing the requirements of
each product, capacities for each work centre and order priorities/)
Merits of Job Shop Production
The merits of job shop production are as follows:
1. Job-shop production system helps to produce variety of products.
2. Job-shop production system requires skilled operators, as each job gives those
learning opportunities.
----3. Full potential of operators can be utilised.
4. Opportunity exists for creative methods and innovative ideas. )
(Demerits of Job Shop Production
The demerits of job shop production are as follows:
1. Job-shop production system requires skilled operators which lead to higher
operating cost.
2. Job-shop production system leads to 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.)
((B) Batch Production
Batch production refers to the manufacturing process in which components or
goods are produced in groups and not in a continuous stream. It is characterised by
the manufacture of limited number of products produced at regular intervals and
stocked awaiting salesA
( Features of Batch Production
The main features of batch production are as follows:
1. It has shorter production runs.
2. Its plant and machinery are flexible.
3. The plant and machinery set up is used for the production of item in a batch
4. The change of set up is required for processing the next batch.
5. The manufacturing lead time and cost are lower as compared to job order
production. Merits of Batch Production
The merits of batch production system are as follows:
1. It helps for better utilisation of plant and machinery.

2.
3.

It promotes functional specialisation.

Cost per unit is lower as compared to job order production.

Merits of batch production

The merits of batch production system are as follows:
1.
2.
3.
4.
5.
6.

It helps for better utilization of plant and machinery.

It promotes functional specialization.
Cost per unit is lower as compared to job order production.
Lower investment in plant and machinery
Flexibility to accommodate and process number of products
Job satisfaction exists for operators

Demerits of Batch Production

The demerits of batch production are as follows:
Its material handling is complex because of irregular and longer flows. Production
planning and control is complex.
Work in process inventory is higher compared to continuous production. Higher set
up costs due to frequent changes in set up/
1.
2. 3. 4.
(C)(wiass Production
Manufacturing or processing of uniform products in large quantities using
interchangeable parts and machinery. It is either a wholly automated process or a
series of short, repetitive procedures. Mass production is a system of
manufacturing based on principles such as the use of interchangeable parts, largescale production, and the high-volume assembly line. J
(^Features of Mass Production
The features of mass production can be summarized as follows:
1. This system leads for standardisation of product and process sequence.
2. Mass production contributes special purpose machines having higher
production cap :cities and output rates.
3. It leads to the 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 simple J Merits of Mass Production
(jhe merits of mass production are:

1.
2. 3. 4.
5.
Mass production leads to higher rate of production with reduced cycle time. \-^
Mass production leads to higher capacity utilisation due to line balancing.
Less skilled operators are required.
Low process inventory.
Production and operation cost per unit is low J
Demerits of Mass Production
The demerits of mass production are as follows:
1. Line design needs major change with the changes in the product design.
2. High investment in production facilities.
3. The breakdown of one machine will stop an entire production line.
4. The cycle time is determined by the slowest operation. )

(D)f Continuous Production

Continuous production is a method used to manufacture, produce, or process
materials without interruption. Continuous production is called a continuous
process or a continuous flow process because the materials, either dries bulk or
fluids that are being processed is continuously in motion, undergoing chemical
reactions or subject to mechanical or heat treatment.
Features of Continuous Production
The features of continuous production area are as follows:
1. Continuous Production offers plant and equipment with zero flexibility.
2. Material handling is fully computerized.
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.
Merits of Continuous Production
The merits of continuous production are:
1. Higher rate of manufacture with reduced cycle time.-""
2. Higher competence utilisation due to line balancing.
3. Standardisation of product and process sequence.
4. Material handling, 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.
Demerits of Continuous Production
The demerits of continuous production are as follows:

1. Flexibility to contajn and process number of products does not exist.

2. The investment for setting flow lines is high.
3. Product differentiation is limited J
'
Production Management
(^Production management deals with decision-making regarding the quality,
quantity, cost, etc., of production. It applies management principles to production.
Production management is a part of business management. Production
management is slowly being replaced by operations management. It brings
together the 6M's i.e. Men, Money, Machines, Materials, Methods and Markets to
satisfy the wants of the people
Meaning of the production management
Production management refars to the job cording and controlling the activities
required mqking a product typically involving effcitve control of scheduling
cost, performance, quality and waste requirement .
Production mangent means planning ,organizing, directing and cantroling of
production activities it it deal with convering raw metiriyals into finished goods
or production.
According to e.f. brech production management is the process of effectively
planning and regulating the operators of that part of an enterprise which is
responctively for autual transformation of metirials into finished products .

Objectives of Production Management

i) Orhe main objective of production management is to produce goods of the right
quality, right quantity, at the right time and at minimum cost.
ii) To ensure optimum utilisation of available production capacity.
iii) To ensure optimum use of resources at optimal cost.
iv) To produce in required quantities of required quality as per schedule.
v) To consider the minimum lead time.
vi) To ensure the maximum capacity utilization.
vii) To consider flexible working conditions.

viii) To ensure minimum raw material cost, labour cost and maintenance costs.
ix) To consider minimum storage, material handling and inspection.
x) To improve productivity of all inputs.
Scope of Production Management
Scope of production management concentrates on three basic concepts such as:
Scope of
Production
Management
t.
w

i) Production
Engineering

^
w

ii) Production
Planning

fc. iii) Production

w Control
_______________.......;
/i) Production Engineering
Production engineering is a combination of manufacturing technology with
management science. A production engineer typically has a wide knowledge of
engineering practices and is aware of the management challenges related to
production. The goal is to accomplish the production process in the smoothest,
most-judicious and most-economic way. Production engineering encompasses the
application of castings, joining processes, metal cutting and tool design, metrology,
machine tools, machining systems, automation, jigs and fixtures, and dies and
mould design)
ii) Production Planning
(Production planning means to fix the production goals and to estimate the
resources which are required to achieve these goals. It prepares a detailed plan for
achieving the production goals economically, efficiently and in time. It forecasts
each step in the production process. It
forecasts the problems, which may arise in the production process. It tries to
remove these problems. It also tries to remove the causes of wastage.

i) Production Control

Production control activities involved in handling materials, parts, assemblies, and

subassemblies, from their raw or initial stage to the finished product stage in an
organized and efficient manner. It may also include activities such as planning,
scheduling, routing, dispatching, storage, etc.)
Importance of Production Management
The importance of production management can be summarised as follows:
1. Accomplishment of firm's objectives: Production management helps the
business firm to achieve all its objectives. It produces products, which satisfy the
customers' needs and wants^ So, the firm will increase its sales and it helps to
achieve its objectives.
2. Reputation, Goodwill and Image: Production management helps the firm to
satisfy its customers. This increases the firm's reputation, goodwill and image. A
good image helps the firm to expand and grow.
3. Helps to introduce new products: Production management helps to introduce
new products in the market. It conducts Research and Development. This helps the
firm to develop newer and better quality products. These products are successful in
the market because they give full satisfaction to the customers.
4. Supports other functional areas: Production management supports other
functional areas in an organisation, such as marketing, finance, and personnel. The
marketing department will find it easier to sell good-quality products, and the
finance department will get more funds due to increase in sales. It will also get
more loans and share capital for expansion and modernisation. The personnel
department will be able to manage the human resources effectively due to the
better performance of the production department.
5. Helps to face competition: Production management helps the firm to face
competition in the market. This is because production management produces
products of jright^ quantity, right quality, and right price and at the right time.
These products are delivered to the customers as per their requirements.
6.
Optimum utilisation of resources: Production management facilitates
optimum utilisation of resources such as manpower, machines, etc. So, the firm can
meet its capacity utilisation objective. This will bring higher returns to the
organisation.
7. Minimises cost of production: Production management helps to minimise the
cost of production. It tries to maximise the output and minimise the inputs. This
helps the firm to achieve its cost reduction and efficiency objective.
8. Expansion of the firm: The Production management helps the firm to expand
and grow. This is because it tries to improve quality and reduce costs. This helps
the firm to earn higher profits. These profits help the firm to expand and grow.

9. Higher standard of living: Production management conducts continuous

research and development (R&D). So they produce new and better varieties of
products. People use these products and enjoy a higher standard of living.

10. (Generates employment: Production activities create many different job

opportunities in the
country, either directly or indirectly. Direct employment is generated in the
production area, and indirect employment is generated in the supporting areas such
as marketing, finance, customer support, etc.
11. Improves quality and reduces cost: Production management improves the
quality of the products because of research and development. Because of largescale production, there are economies of large scale. This brings down the cost of
production. So, consumer prices also reduce.
12. Spread effect: Because of production, other sectors also expand. Companies
making spare parts will expand. The service sector such as banking, transport,
communication, insurance, BPO, etc. also expand. This spread effect offers more
job opportunities and boosts economy.
13. Creates utility: Production creates Form Utility. Consumers can get form
utility in the shape, size and designs of the product. Production also creates time
utility, because goods are available whenever consumers need it.
14. Boosts economy: Production management ensures optimum utilisation of
resources and effective production of goods and services. This leads to speedy
economic growth and well-being of the nation./
Advantages of Production Management
The advantages of production management are as follows:
1. (Availability of raw materials: A strong production management department is
able to analyze
the different options available for the raw materials and resources necessary for
production and to procure materials of the right quality and at the right price. The
optimal materials for a company are not necessarily the highest quality or lowest
price available but are instead the materials best suited for a company's production
model}).
2. {^Managing the production process: Managing the production process is the
most important
function of a production management department. The department must decide
how many workers are necessary, which equipment should be used, and what

process will provide the best product to meet customer needsy(A strong production
management department will streamline the production process so that it costs the
least amount of money while still maintaining the necessary level of quality^
3. ^Ensure customer satisfaction: By ensuring a quality product, keeping costs
low and delivering
products in a timely manner, a successful production management team helps a
company attract and retain customers. Adding to a company's customer base brings
in profits and is the primary benefit of effective management of the production
process^
4. \Contributes to the profitability of a company: Because effective production
management
contributes to the profitability of a company, it lends that company an image of
success and contributes to investor confidence) ^fstrong production management
makes a business successful because it attracts money through both profits and
investment, j
Disadvantages of Production Management
The disadvantages of production management are as follows:
i) ( Implementing production management often demands jijugnificant change is
an organization's attitude, which can be very challenging if an organization is not
well slated to deal with the changes.
ii) In order to be effective, an organization must be prepared with an efficient and
united workforce that is willing to accept changes.
iii) As a result of proc^s^improyement initiatives, the overall quality of a
company's product is also improved in the process. Since production management
systems are aimed at simplification and waste elimination, employees eventually
have more time to focus on quality and fewer resources to provide detailed
attention.
iv) Another fundamental element of production management, which is. the
jdeji_thaLXS inventory, will not be maintained in order to fulfil customer
orders. However, with this approach, a business must be able to rely on accurate
delivery times from suppliers in order to meet their own customer's demands since
inventory is not maintained to fulfil orders.^
Five P's of Production Management
(Five P's of Production Management are given below:

Five

1. Product
//
2. Plant

ManagementP's of Production

3. Process
^
4. Programmes
5. People

J
1. Product
( Marketers in a business must ensure that a business sells products that meet
customer needs and wants. The role of Production and Operations is to ensure that
the business actually makes the required products in accordance with the plan.
Production arid Operations Management therefore concerns areas such as:
i) Performance
ii) Quality
iii) Reliability
iv) Quantity
v) Production costs
vi) Delivery dates^
2. Plant
\ To make product, plant of some kind is needed. This will comprise the bulk of the
fixed assets of the business. In determining which plant to use, management must
consider areas such as:
i)
Future demand (volume, timing) ii) Design and layout of factory,
equipment, offices iii) Productivity and reliability of equipment iv) Need for
(and costs of) maintenance v) Health and safety (particularly the operation of
equipment) vi) Environmental issues (e.g. creation of waste products)j
3. Process
' There are many different ways of producing a product. Management must choose
the best process, or series of processes. They will consider:
i)
Available capacity
ii) Available skills
iii) Various types of production
iv) Layout of plant and equipment
v) Safety

vi) Production costs

vii) Maintenance requirements/
4. Programmes
(The production programme Concerns the dates and times of the products that are
to be produced and supplied to customers. The decisions made about programme
will be influenced by factors such as:
i) Purchasing patterns (e.g. lead time), Cash flow, ii)' Availability of storage,
Transportation,
5. People
Production depends on people, whose skills, experience and motivation vary. Key
people-related decisions will consider the following areas:
i) Wages and salaries
ii) Safety and training
.
iii) Work conditions
iv) Leadership and motivation
v) Unionization
vi) Communication J

^Operating management is defined as the design operation and Improvement of the

production systems that Creates the firm's primary product and services.y
('Operations management is the effective Management of the conversion process,
which converts land, labor, capital, and management inputs into desired outputs or
goods and services.
The operations manager's job is to manage the process of converting inputs into
desired outputs. Our definition of operations management is, then, the management
of the conversion process, which converts land, labor, capital, and management
inputs into desired outputs of goods and services. In doing so, the manager- uses
various approaches from the classical, behavioral, and modeling views of
management.^)
Meaning of Operation Management
(Operations Management refers to the process of design, execution, arid control of
operations that convert resources into desired goods and services, and implement a
company's business strategy.
Operations Management is that activity where the resources, flow within a defined
system, are transformed in a controlled manner to add value in accordance with
policies communicated/ desired by the management. J

Objectives of Operation Management

1. / To improve the productivity by better utilization of resources like men,
material, methods,
machines.
2. To have less defects/no defects.
3. To utilize its plant and machinery effectively and efficiently.
4. Improvised material handling equipments.
5. Proper utilization of Production space.
6. To have proper control on raw materials, semifinished goods and finished
goods.
7. Proper cash management.
8. Enhancement of Production staff with respect to their salary, wages etc. J
Importance of Operation Management
The importance of operation management can be summarised as follows:
t) f Towards Customers: These are the most obvious people who will be affected by
any business.
What the mater goes on to call the five operations performance objectives apply
primarily to
this group of people.
//) Towards Suppliers: Operations can have a major impact on suppliers, both on
how they prosper themselves, and on how effective they are at supplying the
operation.
Hi) Towards Shareholders: Better the operation is at producing goods and services,
the more likely the whole business is to prosper and shareholders will be one of the
major beneficiaries
of this.
M
Towards Employees: Similarly, employees will be generally better off if the
company is prosperous; if only they are more likely to be employed in the future.
However operation responsibilities to employees go far beyond this. It includes the
general working conditions which are determined by the way the operation has
been designed.
v) Towards Society: Although often having no direct economic connection with the
company, individuals and groups in society at large can be impacted by the way its
operation managers behave. The most obvious example is in the environmental
responsibility exhibited by operation managers.)
Scope of Operation Management
The scope of operations management can be summarised as follows:
I) (JProduct selection and design: The product selection makes our system
efficient or inefficient. So it is very important to select.right product keeping the

mission and overall objectives in mind. Design is the most important thing as it
makes competitive or non-competitive and we is used operation in management to
find suitable design to fulfil the requirement with
controlled cost.
U)
m
Process selection and planning: Selection of process involves taking decisions
jibout tedmology^machines and equjpm^._Process planning, detailing
thestages_of^ .the process, gives the idea of optimum automation and
mechanization.
Lcoation facilities: It is the most important facility. As it looks for a long term
decision, a

24
Production and Operations Management
wrong decision can makes it pay a lot. To select that particular location where
distribution cost and production cost is less and it is possible only with'--the_.lieJrjL_pf._operations management.
Layout and material handling facilities/ Layout means positioning of machinery.
The machines should be so arranged that the_flow_ofproduction remains smooth.
There should be a proper choice of .material handling equipmentsJ
Capacity planning: (Capacity refers to a level of output of the conversion process
over a period of time. Process industry creates challenging problems in capacity
planning, requiring in the long run, expansionand contraction of major facilities in
the conversion process, Some tools thatlielpln capacity planning are marginal
costing, linear programming etcj
iv)
v)
Advantages of Operations Management
The advantages of operations management are given below:
i) I Smooth operation: Operations management focuses on the tools and techniques
a manufacturing firm uses to ensure a smooth, effective production process. If the
company provides services, operations administration indicates to top leadership
the factors that can prop up customer loyalty and sales.
ii) Better profitability management: (Sound operations management causes
corporate leadership to challenge conventional wisdom or employees' sense of
what's operationally correct. In fact, companies with experienced, competent

operation managers are generally adapt at monitoring their revenues and

expenses .J
Hi) {Competitive Advantage: Businesses adequately manage their operations to get
a handle on key internal and external factors. Internal factors include
opej^tinjyDoJicjesJi^ the average attrition rate. This reflects the number of
employees leaving as a result of resignaTibTiirrelireme^ and deaths. Forced
workforce reductions, such as terminations, do not count as attrition-rate
components. Intellectual capital represents various abilities, expertise and
knowledge that a firm has gathered over time. External -factors that operations
managers heed include the state of the economy and rivals' strategies. By helping a
firm understand its internal and external conditions, operations management
improves the company's competitive standing.
iv) (Manufacturing Edge: Operations management allows a manufacturing firm to
change or improve the way it produces goods, as well as how it stores items such
as raw materials, work-in process merchandise and completely finished
products^)^[his important benefit helps the manufacturer prevent deterioration in
debt affordability, which may happen if the firm incurs losses and cannot repay its
existing liabilitiej(^Manufacturing tools used in operations management include
computer-aided production software, defect-bracking programs, warehouse
management software and process re-engineering applications!)
v) (Regulatory Compliance: By studiously analyzing operating activities,
corporate management Vwaves good-bye to the days of hefty government fines
and adverse regulatory decisions. Department heads and segment chiefs set
adequate internal controls to make sure rank-and-file personnel perform tasks in
accordance with the law.)
WdSS
Introduction to Production and Operations Management
25
Disadvantages of Operations Management
The disadvantages of operations management are given below:
i) / Operations management depends on many different components within the
organization working together to achieve success.
ii) Operations management implements an effective plan, if operation management
does not carry out thejtlajLprpperly, the plan will most likely fail.
iii) Within an organization, mistakes often occuf during the chain of events from
manufacturing to sale.
*
iv) Operation management requires the c^ordmatioiLof o^atipj^func^ions^marke
finance, accounting, engineering, information systems and human resources to
have success within the organization.

v) Operation management will have limited success within the organization. J

Definition of Production and Operation management
{According to Professor S. N. Chary, "Production and operation management" as
"one which concerns itself with the conversion of inputs into outputs, using the
physical resources, so as to provide the desired utility or utilities of forums, place,
possession or state or a combination these off to the customer while meeting the
other organisational goals of effectiveness efficiency and adaptability. It
distinguishes itself from other functions sucluas personnel, marketing etc., by its
primary concern for conversion by using physical resources".)
(production and Operation Management concerns with conversion of inputs into
outputs by using physical resources to meet the organizational objectives i.e.
(effectiveness, efficiency & adaptability)v
Production and Operation Management is about the transformation of production
and operational inputs into "outputs" that, when distributed, meet the needs of
customers.
Meaning of Production and Operation Management
( Production and operation management refers to the management of the
conversion process which converts land, labour, capital and management inputs
into desired outputs of goods and service^/
( Need for Production and Operation Management
The need for production and operation management is to produce goods of right
quality and quantity at the right time and right manufacturing cost'.J
7. / Produce right quality of product: 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 cost.

planning. The operation manager^defines the objectives for the operations

subsystem of the
organization, and the poikies^and procedures for achieving the objectives. This
stage includes cljuifyjnj^j^rojejandJ^usjrf^Berations in the organization's overall
strategy. It also involves product planning, facility_desigmng and using the
conversion process.
ii) 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.
iii) Controlling: Activities that assure the actual performance in accordance with
planned performancjg. 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.
iv) Behaviour: Operation managers are concerned with how their efforts to plan,
organize, and control affect human behaviour. They also want to know how the
behaviour of subordinates can affect management's planning, organizing, and
controlling actions. Theirinterest lieTin decision-making behaviour. ~"
"
-----____,,
v) Models: As operation managers plan, organize, and control the conversion
process, they encounter many problems and mu'sflnakelnany decisions. They can
sirripiiiy~trieir difficulties using models likejiggregate 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 jree analysis for long-term capacity problem of
facility expansion, simple median model for determining best locations of facilities
1. f Location of Facilities: Selecting appropriate location for the production and
operation
management activities is important. The appropriate location should ensure the
availability of power supply, water supply, better road conditions, nearness of raw
materials, skilled labors etc.
2. Plant Layouts and Job Design: Deciding upon the machines, equipment and
necessary devices which could lead to effectual and desired production in the most
economic way. Prepare of plant layout for the establishment of machines in the
required sequenced Prepare a job design to organize machines, tasks into a unit of
work to achieve a certain objectives.
3. Material Handling: Material handling is the process of ensuring the
movement of raw materials and semi-finished goods inside the factory. Storage of

material and handling it in most effective way to avoid the wastage arid delivery at
the work centres as and when required.
4. Product Design: Designing the product and conceive the idea about its
production. Product design considers the product size, weight, colour etc.

production process. This determines the production process which is most relevant
and efficient in the given state of affairs.
6. Production and Planning Control: Production planning and control may be
defined as the coordination of a series of functions according to a plan which will,
economically utilize the plant facilities and regulate the orderly movement of
goods through their entire manufacturing cycle.
7.
Quality Control: Quality control is a staff function concerned with the
prevention of defects in manufacturing so that, items may be made right way and
ensure the quality standard. Controlling the production and ensuring the quality by
setting the check points and taking the periodic measurements of the current
performance.
8. Inventory Management: Inventory refers to the stock on hand at a particular
time of raw materials, semi-finished goods and finished goods to meet the demand
of manufacturing units and market. Inventory management is the process of
maintaining proper records of raw materials, semi-finished goods and finished
goods in a way that neither excessive money may block in this non-productive
operation nor the required material.
9. Maintenance management: Maintenance management refers to the process of
formulating the corrective measures to stay in track with planned quality, timeschedule and predetermined cost schedules. The floor space should be properly
cleaned and the proper ventilation facilities should ensure inside the factory. After
completion of each shift of work, the maintenance department should check all the
machines and put lubricating oil.
10. Automation: Automation refers to the technique of operating or controlling a
productive process by electronic devices and reducing human intervention to the
minimunu
i) f Creation of goods or services: The foundation of every production and
operations department Ms the creation of goods or services. Traditionally,
production included the physical assembly of goods, but production can also
include data-based goods such as websites, analysis services and order processing
services.

ii) Customer Service: In many companies, the production and operations

department contains the customer-facing customer service department that
addresses the needs of the customer after the purchase of goods or services. The
support function usually is served through phone, online or mail based support.
Hi) Profit: The main function of the production and operations department is to
produce a product or service that creates profit and revenue for the company.
Actualization of profit requires close monitoring of expenses, production
methodology and cost of inputs.
iv) Evaluation: Every production and operations department must function as selfevaluating entity that monitors the quality, quantity, and cost of goods produced.
Analysis usually takes the form of statistical meters, production evalbuation and
routine reporting.

Book-2
/ Among all the functional areas of management, production is considered to
De^crucial in any industrial organisation. Production is the process by which raw
materials and other inputs are converted into finished productsjThe other word
synonymously used with production is manufacturing. Some people try to draw
distinction between two terms: production and manufacturing. Manufacturing
isunderstood toxefer to the process of producing only tangible goods,
whereaspmduction includes creation of both tangible goods as well as Intangible
services
/ A system is understood as a whole which cannot be taken apart. It must bf Studied
in total. While looking from this perspective, we may note that Ihcre ar^e three
systems: Ji) production system, (ii) conversion sub system, nd (iiij control subsystem^Read Table 1.1 for definitions of the three concepts.
( I Production system receives inputs in the form of materials, personnel, Capital,
utilities and information. These inputs are changed in a conversion tlib-system into

desired products and services, which are called the outputs. A portion of the output
is- maintained in the controlzsub-system to determine if N to acceptable in terms of
quanitity, cost and quality)
Table 1.1 Production System Concepts
Concept
Definition
1. Production system A system whose function is to convert
2. Conversion suba set of inputs into a set of designed
system
outputs.
3. Control sub-system A sub-system of the larger production
system where inputs are converted into
outputs.
A sub-system of the larger production
system where a portion of the out put is
monitored for feedback signals to
provide corrective action if required. )
-$>
( Inputs j
Environment
Legal/Political Social Technological Economic
Market
Competition Product Information Customer Desires
Primary Resources
Materials & Supplies Personnel Capital Assets Capital (Money) Utilities
Conversion^ sub-system^
Physical (Manufacturing, Mining)
Locational Services (Transporation) Exchange Services (Retailing / Wholesaling)
Storage Services (Warehousing)
Other Private Services (Insurance, Finance, Utilities, Real Estate, Health, Business
Service & Personal Service)
Government Services (Local, State, Control)
Control Sub System
(Outputs j
Goods or Services
Fig. 1.1 A Production System Model J

Decision-making in Production^)
I CQES^SSUSSS^SL?" re"uired t0 makff ^"I'ndlonToTall tt

I each level, operations managers are expected 10 implement them too. )

,*..*.<
/The decisions fnade by operations managers about the activites of production
systems tend to fall into three general categor.es v.z, '
.
Strategic
decisions relating to products, processes and manufacturing fggfrke-dedsions
are major ones having strategy .mportance and long-term significance for the
organisation.
. C^H^nojledsions relatin9 to P,anninS ^t^ fttftte ai^and These~dedsions are
necessary in order to ensure that the oZng production of goods and services
meets the market demand and provides reasonable profits for the
organisation.
.' Control decisions relating to planning and controlling operations.
T^et&concern the day to day activities of workers, quality If products and
service^ production and overhead costs and
Maintenance of machine.
1. 2. 3. 4. 5. 6. 7.
Improving volume of production
Reducing rejection rate
Minimising rework rate
Maintaining delivery schedules
Controlling idle machine and manpower hours
Establishing/updating/improving/setting industrial engineering norms
Updating processes and procedures
8. Maintaining accuracy and timeliness of MIS
9. Decreasing machine set-up time
10. Controlling overtime 11.,Good house - keeping
12. Checking absenteeism, thefts/pilferage and misconduct
13. Eliminating accidents
14. Effective grievance - handling
15. Efficient traning and team building
16. Minimising inventory and achieving better yields
17. Enhancing customer satisfaction
18. Total Quality Management (TQM)
19. Business Process Reengineering (BPRE)
20. Automation
Operations management is understood as {he process whereby resources or inputs
are converted into more useful products] A second reading of the sentence reveals
that there is hardly any difference between the terms production management and

operations management. But there are atleast two points of distinction between
production management and operations management (see Table 1.4).
Table 1.4 : Distinction between Production Management and Operations
Management
Point of Difference
Production Management
1. Evolution of subject
2. Term Usage
1. It precedes the operations management
2. It is used for a system where tangible goods are produced
Operation Management
1. It is recent origin, and used now-a-days
2. It used for a system where inputs are transferrec! into intangible services .
^Manufacturing as Competitive Advantage :(ln the past production was
considered to be like any other function in the organisation. When demand was
high and production capacities were inadequate, the concern was to somehow
muster all inputs and use them to produce goods which would be grabbed by
market) But today's scenario is contrasting. Plants have excess capacities,
competition is mounting^ and firms look and gain competitive advantage to
survive and succeed. Interestingly, production system offers vast scope to gain
competitive edge and firms intend to exploit the potential. Total Quality
Management (TQM), Time-Based Competition, Business Process Reengineering
(BPRE), Just in Time (JIT), Focused Factory (Revised), Flexible Manufacturing
Systems (FMS), Computer Integrated Manufacturing (CIMjJ)
2. Services Orientation : As was stated earlier, service sector is gaining greater
relevance these days. The production system, therefore, needs to be organised
keeping in mind thepeculiar requirements of the service componet)

disappearanceof Smokestacks : Commencing from Industrial Revolution t,l the

middle of the 20th century, production system waTdorn.na ed by smokestacks.
These smokestacks (the term used by Alvin Toffle in hTbook Power Shlft) represented
industria, establishments whjch
thic'
polluting the environment around. Smokestacks not only d sgoraed eeMhey
produced nauseating smell, generated dust, created sound and in oeneral were

resembling ghosts. Not that they have become ext"nVt but are disappearing
gradually.
extinct but are
Protective labour legislation, environmental movement and gradual emergence of
knowledge based organisations have brought tota transformation in the
production system.
4. Small has Become Beautiful :(jt was E.E Schumacher who in hisfamous book
small is beautiful, opposed gaiant organization increced
specialisation. He advocated, instead, intermediate technology based on smaller
working units, community ownership, and regional workplaces utihstagTca
labour and resources.
increasing productivity should be a national challenge, and it behoves all
<anagers to do their utmost to achieve ever increasing levels