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Module 1

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Module 1

Uploaded by

Neena R Krishna
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Module 1

Introduction

Operation Management is a part of management sciences. Operation


Management is concerned with the production of quality goods and services and
ensures that the business operations are performed smoothly, efficiently,
effectively. It is a field of management that deals with effective planning,
scheduling, use and control of a manufacturing or service organisation.

Operations management is the business function that plans organises, co-


ordinates, and controls, the resource needed to produce a company’s goods and
services.

Operations Management is the process whereby resources, flowing within a


defined system, are combined and transformed by a controlled manner to add
value in accordance with policies communicated by management.

Definition of Operations Management

The Association of Operation Management defines operation management as


‘the field of study that focuses on the effective planning ,scheduling, use
and control of manufacturing or service organisations through the study of
concepts from design engineering, industrial engineering, MIS, quality
management, production management, industrial management and other
functions as they affect the organisation’.

Operation management is the business function that manages that part of a


business that transforms raw materials and human inputs in to goods and
services of higher value.
Operation management is a business activity that deals with the production of
goods and services. The term operation includes management of materials,
machines, and inventory control and storage functions.

Operations management includes a set of activities performed to manage the


available resources in an efficient manner in order to convert inputs in to
desired outputs.

The value addition to an input can be done in the following ways. They are
mentioned below:

1. Alteration
It refers to the transformation of the state of input. This transformation
can be a physical change in the input to produce goods.
2. Transportation
It refers to physical movement of goods from one location to another.
3. Storage
It refers to preserving goods in a protected environment.
4. Inspection
It refers to the verification of and confirmation towards the requirements
of an entity.
System Concept
The term system denotes plan, method, order and arrangement.
System is an assembly or combination of things or parts forming a
complex or unitary as a whole.
If organizational units are designed and operated as a system, each
segment or subsystem can be viewed as a self contained unit and its
relationship or contribution to the next level can be programmed and
measured.
A  system is an arrangement of components designed to achieve a
particular objective (or objectives) according to plan. The components
may be either physical or conceptual or both, but they all share a unique
relationship with each other and with the overall objective of the system. 

A systems approach to operations management problems places strong


emphasis upon the integrative nature of management responsibilities,
recognizing both the interdependence and the hierarchical nature of
subsystems.   In essence, systems theory stresses the understanding and
relationships of the whole system, recognizing that a combined effect of
components can be greater than the sum total of individual effects, that is,
can be synergistic.
Problems must first be abstracted from the overall (macro) environment,
then they can be broken down into parts (micro), analyzed, and solutions
proposed. But ultimately the components must again be restructured or
synthesized (macro) to discover and evaluate the impact of new
interrelationships that arise from proposed changes in the system.

TYPES OF SYSTEMS

System is  classified in various ways.

1.According to the Creation

 Natural system: Existing naturally- solar system, river system etc.


 Man-made system: Transportation system, lighting system. Man-made
system is designed and operated by man. The man utilizes the inputs
taken from the natural systems.

2. According to the Flexibility


 Flexible system: The system which is adjusting to maintain the balance
or equilibrium between the system and is changing environment.
Example: most of the life forms, economic, political and social systems.
 Rigid system: which cannot be modified or will not adjust for
modification. Example: highway. Even the man tries to build some
flexibility into every system designed or constructed. Example: Building.

3. Based on Human Involvement

 Manual system:  A production system completely man operated one.


Example: Coir thread making.
 Automatic machine system: completely automated.
 To have equilibrium, man-machine relationships exist for production.

4. Based on System Output:

 System that produces: a production system


 System that serves clients/ customers: hospital, restaurant, etc.

COMPONENTS OF SYSTEM

If  units are designed and operated as a system, each segment or subsystem can
be viewed as a self contained unit & its relationships or contribution to the next
level can be performed and measured. Inputs, transformation process and output
are the components of any system. Input and output are mere significant than
the actual transformation process.

‘Black box’ approach is used to demonstrate the relationship let computes and
systems. A component is a basic unit or black box which performs or provides
the facility for performing some part of the transformation process.  A teacher –
component in education or university system, may be taken for medical
illustration as a system with several sub systems. The definition of what is a
system, subsystem, components occurs when the objectives of those systems are
determined.

6 SYSTEM DESIGN

Most managers realize that the independent optimization of individual sub-


systems, such as marketing or production functions, does not necessarily result
in optimization of the objectives of the total system. Production may favour a
steady manufacturing rate and low inventories while marketing is anxious to
meet highly seasonal demands. If any form of total system optimization is to be
achieved, the subsystem objectives must be integrated and coordinated in light
of overall system goals. It makes sense to start with a clearly delineated set of
overall system objectives and to develop a hierarchy of subsystem goals which,
when consistently pursued, will most effectively facilitate the overall objectives.

A design is simply a predetermined arrangement of components or operating


parameters, such as the set of drawings for a plant expansion or the plans and
procedures for enforcing statewide air pollution controls.   The systems design
process thus involves identifying and bounding the relevant parameters so as to
isolate them from numerous irrelevant variables. Following this, many
considerations enter into the analysis and design (or redesign) stage of a systems
design, such as the economics of use of available resources, level of technology
to be used, safety and reliability of the system itself, and impact of the system
upon the environment outside the organization.

One of the most vital inputs to systems design comes from the consumers or
users. They embody the service objectives of the organization and are also the
ultimate source of funds for the operations. Since the system functions to serve
the consumers, their quantity and cost requirements, as well as quality and other
technological desires, should be incorporated into the production systems
design. Business history has vividly proved that orientation to the consumers is
a key element in an organization's success. This holds true for public and
nonprofit organizations as well as profit-making firms.

The more structured the design is, the less planning and decision making will be
involved in the operation of the system. Similarly, a highly structured design,
although suitable for high-volume production of standardized products, is
inherently less adaptable to meeting competitive pressures of broader product
lines in smaller volumes upon shorter notice from the customer. An increasingly
important consideration in modern systems design arises from the need for
flexibility and adaptability, of the system to meet new and unexpected demands.
Fortunately, both physical equipment and human components can be geared to
accept change, especially if the system has been designed with this inevitability
in mind.

Production systems are often categorized as continuous or intermittent, although


many systems are a combination of the two. In continuous designs, the physical
flow of products is continuous and production is usually in high volumes
accomplished through  line-type operations. Plant layout is arranged to
accommodate the product, such as paper, and specialized equipment is used. In
intermittent designs, the physical flow of products is intermittent and production
is on a batch or job-order basis. Layout is arranged according to process, and
general-purpose equipment is used.

Operations Strategy

Operations strategy  the approach, consistent with the organization strategy, that
is used to guide the operations function. Operations strategy is narrower in
scope, dealing primarily with the operations aspect of the organization.
Operations strategy relates to products, processes, methods, operating resources,
quality, costs, lead times, and scheduling.

In order for operations strategy to be truly effective, it is important to link it to


organization strategy; that is, the two should not be formulated independently.
Rather, formulation of organization strategy should take into account the
realities of operations’ strengths and weaknesses, capitalizing on strengths and
dealing with weaknesses.

Formulation of organization strategy should take into account the realities of


operations’ strengths and weaknesses, capitalizing on strengths and dealing with
weaknesses. Similarly, operations strategy must be consistent with the overall
strategy of the organization, and with the other functional units of the
organization.
Operations strategy can have a major influence on the competitiveness of an
organization. If it is well designed and well executed, there is a good chance
that the organization will be successful; if it is not well designed or executed,
the chances are much less that the organization will be successful

Strategic Operations Management Decision Areas

Operations management people play a strategic role in many strategic decisions


in a business organization. Two factors that tend to have universal strategic
operations importance relate to quality and time.

 Quality-based strategies focus on maintaining or improving the quality


of an organization’s products or services. Quality is generally a factor in
both attracting and retaining customers. Quality-based strategies may be
motivated by a variety of factors. They may reflect an effort to overcome
an image of poor quality, a desire to catch up with the competition, a
desire to maintain an existing image of high quality, or some combination
of these and other factors. Interestingly enough, quality-based strategies
can be part of another strategy such as cost reduction, increased
productivity, or time, all of which benefit from higher quality.
 Time-based strategies focus on reducing the time required to accomplish
various activities (e.g., develop new products or services and market
them, respond to a change in customer demand, or deliver a product or
perform a service). By doing so, organizations seek to improve service to
the customer and to gain a competitive advantage over rivals who take
more time to accomplish the same tasks. The rationale is that by reducing
time, costs are generally less, productivity is higher, quality tends to be
higher, product innovations appear on the market sooner, and customer
service is improved.
Organizations have achieved time reduction in some of the following:
 Planning time: The time needed to react to a competitive threat, to
develop strategies and select tactics, to approve proposed changes to
facilities, to adopt new technologies, and so on.
 Product/service design time: The time needed to develop and market
new or redesigned products or services.
 Processing time: The time needed to produce goods or provide services.
This can involve scheduling, repairing equipment, methods used,
inventories, quality, training, and the like.
 Changeover time: The time needed to change from producing one type
of product or service to another. This may involve new equipment
settings and attachments, different methods, equipment, schedules, or
materials.
 Delivery time: The time needed to fill orders.

 Response time for complaints: These might be customer complaints


about quality, timing of deliveries, and incorrect shipments. These might
also be complaints from employees about working conditions (e.g.,
safety, lighting, heat or cold), equipment problems, or quality problems.
Relevance of Operations Strategy
Operations strategy is longer term. Operations management is largely
concerned with short to medium time-scales while operations strategy is
concerned with more long-term issues.
● Operations strategy is concerned with a higher level of analysis.
Operations management is largely concerned with managing resources
within and between smaller operations (departments, work units etc.)
whereas operations strategy is more concerned with decisions affecting a
wider set of the organisation’s resources and the supply network of which
they are a part.
● Operations strategy involves a greater level of aggregation. Operations
management is concerned with the details of how products and services
are produced. Individual sets of resources are treated separately, as the
component parts of the operation. Operations strategy, on the other hand,
brings together and consolidates such details into broader issues. ●
Operations strategy uses a higher level of abstraction. Operations
management is concerned largely with what is immediately recognisable
and tangible. Operations strategy often deals with more abstract, less
directly observable, issues.

Four perspectives on operations strategy Just as there is no overall


agreement about what ‘strategy’ means, there is no universal agreement
on how ‘operations strategy’ should be described. Different authors have
slightly different views and definitions of the subject. Between them, four
‘perspectives’ on the subject emerge. 1 Operation strategy is a ‘top-down’
reflection of what the whole group or business wants to do. 2 Operations
strategy is a ‘bottom-up’ activity where operations improvements
cumulatively build strategy. 3 Operations strategy involves translating
‘market requirements’ into operations decisions. 4 Operations strategy
involves exploiting the capabilities of ‘operations resources’ in chosen
markets.

Operations Startegy Formulation Process

Competitive Dynamics at Order Winning &


the Marketplace Order Qualifiers

Generic Competitive
Priorities: Quality,
Strategic Options for
Cost, Delivery,
Sustaining Competitive
Flexibility
Advantage

Firm Level Strengths


Corporate Strategy
and Weakness

Measures for
Strategic Decisions for Operational Excellence
Operations System Operations Strategy
Step 1: Understand the Competitive Market Dynamics:
Any strategy-making exercise begins with scanning the marketplace and
understanding its dynamics. Market dynamics direct the organisation
toward the issues it should consider while formulating its operations
strategy. It provides useful information on competitors, the nature of
offerings that they make to the customer, customer expectations, missing
links between expectations and current offerings, and the intensity of
competition.

And analysis of this information will enable an organisation to identify


which aspects of its products and services can provide it a unique
positioning and a competitive advantage over its competitors.

Step 2: Identify Order-Qualifying and Order Winning Attributes:


Order-qualifying attributes are the set of attributes that customers expect
in the product or service they consider for purchase. The absence of any
of these attributes will result in the customer removing the product or
service from his or her list of items under consideration. The mere
presence of these attributes, however, does not guarantee that the
customer will buy the product. It only indicates the minimum threshold
level of requirements for considering the product.

The presence of order-winning attributes in a product/service helps the


customer to differentiate it from the competitors' offerings. It also
favourably influences the customers' buying decision with respect to the
product/service. The more the number of such attributes that a customer
perceives in a product/service, the greater is the chance that the customer
may buy the product/service.

Step 3: Identify Strategic Options for Sustaining Competitive


Advantage:
Competition analysis may indicate that the organisation will do better by
providing high-quality goods, or that a wider variety of options will bring
success. It could also indicate convenience in usage in some cases. Such
an exercise often points to more than one possible attribute for order
winning. These attributes also help an organisation to develop appropriate
operational measures of excellence.

Step 4: Devise the Overall Corporate Strategy:


Organisations may not be in a position to make use of all the strategic
options available to them. This is because they face constraints in
operating with the resources available to them. For example, the top
management may have certain preferences and views on how desirable
the options are from an internal perspective. Moreover, the organisation's
culture and values may not permit it to exploit the available. options
fully. Therefore, the next critical step is to match the strategic options
available for sustaining the competitive advantage with the available
resources and constraints and to develop an appropriate strategic plan that
fulfils the organisations' objectives, taking into consideration its strengths
and weaknesses. The outcome of this exercise is the overall corporate
strategy.

Step 5: Arrive at the Operations Strategy:


Once the corporate strategy is arrived at, it serves as the basis for the
operations strategy. For example, if the overall strategy of an organisation
is to provide low cost goods, then the choices made in operations will be
consistent with this overall strategy. For example, large capacities will be
built to exploit scale economies. Procurement and supply-chain functions
will develop appropriate methods for locating low cost, high-quality
suppliers and devise systems for continuous cost reduction of input
material. Production planning and control will emphasize on continuous
cost improvement, productivity maximisation, and cost control and
management.

Step 6: Measures for Operational Excellence:


The outcome of the operations strategy formulation process is the
development of measures for operational excellence and the selection of
specific options for configuring the operations system. In order to
configure an effective operations system, knowledge of the alternatives
available for operations systems and measures of excellence is
imperative.

Functions of operations management

Key Functions

 Finance- Finance plays a main function in operations management.


The operation manager should not waste finance in unproductive
tasks. He should ensure that all finance of the organization is
utilized for the manufacturing of useful goods or services which
may satisfy consumer wants.
 Operation– The function of operation management is basically
concerned with planning, organizing, directing and controlling of
daily routine operations of an organization. The operation manager
ensures that all activities are going effectively and efficiently.
 Strategy– The strategy formulation is also the main function of
operation management. The operation manager should have pre-
planned tasks. Formulation of plans and tactics helps the
organization in optimizing their resources and developing a
competitive edge over competitors.
 Product Design–  It is the duty of operations manager to design
the product according to the market trends and demands. He should
ensure that innovative techniques are incorporated within the
product and its quality is maintained. 
 Maintaining Quality–  Operations managers should ensure a
better quality of products. The manager should not compromise
with the quality of Products. They should work on quality
management and should supervise all tasks. If any defects are
found they should take steps to rectify such defects.

 Forecasting - Forecasting is the process in which software makes


an estimate of certain events that may occur in the future. In
operations management, forecasting can take an estimate of
consumer demand, which correlates with production through
creating an accurate amount of product needed within a given time.
Overall, forecasting plays a crucial role within the production
process.

Major Functions

1) Production Planning: Production programmes. both short-term as well


as long-term like scheduling, preparation of orders, and routing of
demand schedules are handled by the production planning. They are
discussed in the following points

i )Routing: It chalks out the requisite work operations and orders thereof.

ii) Scheduling: It stipulates the beginning and completion time of different


activities concerned with the production work,

iii) Preparation of Work Orders: It is nothing but the authorisation to go


ahead with the production programme simultaneously at various locations,
and

iv) Preparation of Demand Schedules: Demand schedules in respect of


various requisite materials, manpower and necessary amenities, which may
be required at various locations from time-to-time.

2) Production Control: To have an adequate control over various production


processes is another significant function of the Production and Operations
Management, responsibility of which lies with the Production Manager. In this
regard, necessary steps are required to be taken with a view to ensure that
resources and other factors are used in an optimal and efficient manner with the
following objectives:

i) Cost of production is kept at the bare minimum.

ii) The production of finished goods is in accordance with the specifications


stipulated by the customer,

iii) The requisite quantity of the product is delivered to the customer before or
on the scheduled date, and

iv) Satisfaction level of the customer should be the priority.


3) Quality Control: The production manager has been entrusted with the
responsibility of maintaining the quality of the final products according to the
specifications stipulated by the customer. It is, therefore, necessary that a
system be put in place to ensure that no deficient products are shipped to the
customer. Such defective goods. if produced, need to be segregated and
disposed off separately.

4) Industrial Engineering:

Industrial engineering may be defined a branch as of engineering which


provides solutions as to how to optimise various complex processes or systems.
It ensures elimination of different forms of wastage of resources (e.g. time,
money, materials, man hours, machine-hours, energy and other resources not
generating any value). In order to achieve its objective, it also covers designing
of tools, zigs, fixtures, gauges, and other requisite accessories.

5) Purchasing: Purchasing of materials and equipment forms the part of the


production function. The decision regarding specifications in the matter of their
quality aspects are taken either by the Production department or the staff
department. However, the decision regarding their quantity and frequency of
their purchase are generally taken by the material department, with due
consultation with the production manager.Purchase department is empowered to
take decisions with regard to the supplier, price, delivery date, etc.

6) Plant Engineering: Function of the plant engineering relates to planning,


designing, specifying, installing, modifying and maintaining plant
amenities/services like light, heat and power.

7) Manufacturing: Manufacturing is the core process, through which the raw


materials are converted into finished goods and services. Industrial engineering,
plant engineering, production planning and purchasing together play an
important role in performing the staff functions of providing services and
advising manufacturing wing. They facilitate the actual manufacturing
processes by:

i) Providing production programmes, schedules, routes and work orders,

ii) Spelling out the methods, processes and standards of operations,

iii) Ensuring the maintenance of plants and equipment, and 1

iv) Ensuring the uninterrupted supplies, including that of the raw materials to
the plant.

8) Method Analysis: A number of alternative methods are available for


manufacturing any product. Each method has some merits and demerits
especially with reference to the economic viability, cost effectiveness, etc.
There is a need to undertake a thorough analysis of each method and their
comparative study, on the basis of which the decision to select the best method
may be taken. This exercise is known as Method Analysis; its objective is to
ensure: i) An improvement in the productivity, and ii) Reduction in the cost of
production.

9) Inventory Control: Controlling the cost of production is the responsibility


of the production manager. He does it by managing various resources (men and
materials) in a prudent manner, including bringing down the wastage level
thereof. As part of this exercise, it is necessary to establish the economic-lot
size, economic-order quantity, re-order levels (minimum, maximum, and danger
level of the stock) of various materials, which would ensure that the cases of
over-stocking or under-stocking do not take place. Physical and financial
control of materials should be exercised by the production manager.

10) Plant Layout and Materials Handling: Machines and equipment should
be arranged in the plant in such a manner that the production cycle keeps on
going without any hindrance. In an efficient plant layout, through a proper
material handling mechanism, the cost of production may be curtailed
drastically, as they (efficient plant layout and proper material handling) ensure
the minimum wastage of men and material.

11) Work Measurement: There are different methods of work measurement


(the level of a worker's performance). One of such methods is 'Labour Cost per
Unit', which differs accordingly with the different levels of production.

It is the responsibility of the production manager to monitor, control and


maintain the same (Labour Cost per Unit) at the minimum possible level.

Service Operations

According to Zeithmal and Bitner, services are 'deeds, processes and


performances'. Here, deeds are the actions of the service provider, processes are
the steps in the provision of service, and performance is the customer's
understanding of how the service has been delivered.

According to American Marketing Association,"Activities, benefits and


satisfactions that are offered for sale or provided in connection with the sale of
goods".

Characteristics of Services Operations

For most service operations, the following characteristics makes it different


from manufacturing operations:

1) Intangibility: Unlike physical products, services are intangible; they can not
be seen, touched, or smelt. Also, the consumer cannot sample a service in
advance.
Accordingly, it becomes difficult for the consumer to judge a service before it is
bought; he has no tangibles' to go by for judging the service in advance; he
cannot know its exact outcome in advance. The person getting a face lift cannot
see the exact results before the purchase, and the patient in the psychiatrist's
office cannot know the exact outcome.

2) Inseparability: Inseparability is the next unique feature of services. Some


experts refer to it by the term immediacy". In fact, services are marked by two
kinds of inseparability:

i) Inseparability of production and consumption

ii) Inseparability of the service from the person who possesses the skill and
performs the service

3) Individuality/Heterogeneity/Variability: Services are also marked by


variability / individuality / heterogeneity. This is so because of three reasons:

i) The inseparability of the service from the provider leads to some variability,
the provider of the service being inseparable from the service, variability
automatically enters the picture, depending on the person performing the
service.

ii) Services are highly people intensive. And, anything that is people intensive is
bound to be marked by variability. Services are often categorized on the basis of
the type of people who provide them like unskilled services, skilled services,
and complete professional services. In the case of physical products, who
produces the product is immaterial.

iii) In services, the effect varies dependent on when and where the service is
provided. As a combined result of the three factors, services are marked by a
high degree of variability/individuality/ heterogeneity.
4) Inventory/Perishability: Services are perishable as well. They cannot be
stored. Like inseparability/immediacy, this is also an offshoot of the fact that
services are produced and consumed simultaneously. There are no inventories
in case of a service. It is because of its perishability that, often a client is billed
even if he does not avail of the service after having booked it.

5) Service is a Performance: While products are produced, services are


performed. In most cases, the latter are totally unconnected to any physical
product.

6) Simultaneity: Services cannot be delivered to customers or users. Services


do not move through the channel of distribution. For availing the services, it is
essential that the users are brought to the providers or the providers go to the
users. It is right to say that the services have limited geographical areas.

Types of Service Operations

 Production-Line Approach/Quasi manufacturing


 Self-Service Approach/Customer as Participants
 Personal Attention Approach/Customer as Product

1) Production-Line manufacturing Approach/Quasi

The approach has been pioneered by McDonald's where the delivery of fast
food is treated as a manufacturing process rather than as a service process. The
approach overcomes some of the inherent drawbacks of services. Service
implies subordination of the server to the served. Manufacturing, on the other
hand concentrates on things rather than people. McDonald's orientation is
towards the efficient production of results and not on the attendance on others.
It aims at the rapid delivery of a uniform, high quality mix of prepared foods in
an environment obvious cleanliness, order and cheerful courtesy. Everything is
built into the system through attention to total design and facilities planning.
The attendant has no other choice but to operate it exactly as the designers
intended. McDonald's can be classified as a face to-face service with tight
specifications.

2) Self-Service Approach/Customer as Participants:

In this approach, there is a high degree of customer involvement in the


process of generating the service. For example, Automatic teller machines,
salad bars, buffet counters and so on shift some of the burden of service to
the customer. The customer feels that he is in control, but the customer has
to be trained in what to do as they act as a partial employee of the
organization. The customer should also be able to correct himself in case
they make a mistake. ATM machines give elaborate instructions to the
customer and provide him ample opportunity to correct himself in case of
making an error.

3) Personal Attention Approach/Customer as Product:

Hotel services provided to guests is a typical example of personal attention


approach. Good hotels treat the customer as king and look after all his
requirements. The Marriot Hotel advertisement slogan sums it up rather well
"Our new desk clerk lent his cufflinks to a guest for a crucial meeting.
Instantly we knew that we hired the right guy." Some businesses create
personal customers, making note of their birthdays and wedding
anniversaries and send cards and flowers to their customers on such
occasions. The 'feel good' that is created in the customer goes a long way to
promoting the business.A well designed service system is consistent with the
operating focus of the organization. It is robust, user-friendly and offers
consistent performance.
Evolution from Manufacturing to Operations Management

1. Craft Production
2. Mass Production
3. Lean Production

1. Craft Production

In the earliest days of manufacturing, goods were produced using craft


production - highly skilled workers using simple, flexible tools produced goods
according to customer specifications. Goods were produced in small shops by
craftsmen and their apprentices.

Craft production had major shortcomings. Because products were made by


skilled craftsmen who custom-fitted parts, production was slow and costly. And
when parts failed, the replacements also had to be custom made, which was also
slow and costly.

Another shortcoming was that production costs did not decrease as volume
increased; there were economies of scale, which would have provided a no
major incentive for companies to expand. Instead, many small companies
emerged, each with its own set of standards.

2. Mass Production

Mass production systems are systems where lower skilled workers use
specialised machinery to produce high volumes of standardised goods. Henry
Ford introduced the mass production to the automotive industry, a system of
production in which large volumes of standardised goods are produced by low
skilled or semi-skilled workers using highly specialised, and often costly,
equipment. Ford was able to do this by taking advantage of a number of
important concepts.
Perhaps the key concept that launched production interchangeable parts, Ford
was mass accomplished this by standardising the gauges used to measure parts
during production and by using newly developed processes to produce uniform
parts. A second concept used by Ford was the division of labour, Together,
these concepts enabled Ford to tremendously increase the production rate at his
factories using readily available inexpensive labour.

Advantages of Mass production

 Increased productivity: Mass production makes it possible to


manufacture large volumes in less time. There’s no need for workers to
run around to gather supplies or tools when manufacturers use mass
production techniques. To illustrate this point, consider iPhones. At a
manufacturing site in China, it takes about 400 steps to assemble an
iPhone. Nevertheless, the plant can produce half a million iPhones a day,
or about 350 a minute. Without the use of assembly lines and advanced
technology, would it be humanly possible to produce over 300 phones a
minute?
 Uniformity: Mass production helps ensure each product is the same. As a
result, manufacturers have greater control over quality, and consumers
know what to expect. On the contrary, if a product is made by hand,
consumers might get a product that has greater flaws than the next.
Although this may not be a concern with decor items or certain
accessories, consumers do not want cars or medical equipment that are
not of the highest standardized quality.
 Lower cost: Mass production enables companies to produce larger
quantities with fewer workers. Instead of having to pay several workers to
complete a task by hand, manufacturers use machines to produce goods
much faster. This allows companies to sell their products at a lower cost
without losing profit.
 Higher quality of life: Due to mass production, more people can afford
products that make life easier and more comfortable. Consumers can
afford new shoes, clothes, household items and other goods when they
need them rather than having to wait to save up enough money. When
common goods are less expensive, people can save money and build their
wealth in other ways.
 Faster production: When companies use machinery and mass
production techniques, they can develop and produce products much
faster. This means they can beat competitors in a race to distribute and
market new products, giving them an edge they might not have otherwise.
 Less error: Machines are designed to perform specific tasks, and they are
less likely to make mistakes than humans during production. Consider
how a machine doesn’t get distracted or won’t perform poorly due to lack
of sleep. Machines help reduce the cost of error.
 Job specialties: The Industrial Revolution and mass production have led
to the creation of specialized jobs. For example, factory workers are
trained to perform highly specialized tasks. Employers benefit from
hiring skilled and efficient employees, and employees develop
marketable skill sets. Employees with specific skills may also feel more
secure in their careers because they are harder to replace. Mass
production has also helped create jobs for individuals to teach special
skills and train workers. Lastly, mass production has created jobs
for workers to repair machinery or make improvements.

Disadvantages

 Initial costs: It takes a lot of capital and time to build a factory equipped
with specialized machinery. Specialized machinery costs a lot of money,
and so does the factory floor space needed to hold assembly-line
machinery. Initial costs can make it hard for smaller businesses to mass
produce their products. However, it’s a worthwhile investment for
companies who are confident their sales and productivity can cover initial
costs.
 Less flexibility: Factory managers can’t walk up to a machine and ask it
to stop what it’s doing and complete a different task. Specialized
machinery used in mass production is designed to do one specific job.
This level of inflexibility can sometimes be problematic. For example, if
there’s an error in production, companies may have to redesign their
process. This can be costly. Or, if regulations change, manufacturers may
have to make significant adjustments. Lastly, it can be hard to keep up
with ever-changing consumer demands if a company does not have the
means to be flexible.
 Energy consumption: Factories that mass produce goods use powerful
machinery which requires substantial amounts of energy. According to
the U.S. Energy Information Administration, the industrial sector was
responsible for 22.4 percent of energy consumption in 2017. As natural
resource conservation is a concern across the globe, companies need to
consider ways to maximize energy efficiency when using mass
production techniques.
 Pollution: Simply said, factories cause pollution. During the Industrial
Revolution, for example, factories polluted the water and air by burning
coal and producing metals and chemicals. They also directly released
pollutants into rivers and streams. Industrial pollution is still an issue
today. For example, according to UNESCO, just about all manufacturing
activities create pollutants as byproducts, and water pollution is on the
rise around the world. In the United States alone, the automobile industry
is responsible for the release or transfer of millions of pounds of
lead each year.
 Affects employees’ wellbeing: Mass production and assembly lines
involve repetitive work. Factory employees may spend their entire shift
standing in the same spot, doing the same tasks over and over. This can
leave employees feeling unmotivated, bored or isolated. Repetitive
motions can also lead to conditions like carpal tunnel syndrome. When
employees feel unappreciated or unfulfilled, factories face high turnover
rates.
 Lack of product uniqueness: Mass-produced goods lack uniqueness. In
today’s world, many consumers want customized products that feel
personal and express their identity. Some manufacturers offer customized
products, while others do not have the capabilities to mass produce
custom goods. As consumer demand for customized products continues
to grow, manufacturers will need to adopt new technology, like 3-D
printers, to evolve.
 Inventory buildup: Mass production creates large quantities at once. As
a result, products may build up before they can be sold. Excess inventory
requires a large amount of warehouse space which costs money and
energy to maintain. Although manufacturers can sell extra stock to
discount retailers, they can also benefit from limiting inventory as much
as possible.

3. Lean Production

A number of Japanese manufacturers developed or refined management


practices that increased the productivity of their operations and the quality of
their products. This made them very competitive, sparking interest in their
approaches by companies outside Japan.
Lean production systems are so named because they use much less of certain
resources than mass production systems use less space, less inventory. and
fewer workers to produce a comparable amount of output. Lean production
systems use a highly skilled workforce and flexible equipment.

In effect, they incorporate advantages of both mass production (high volume,


low unit cost) and craft production (variety and flexibility). And quality is
higher than in mass production. Lean production is a broad approach to just-in-
time.

Advantages

1. Waste Minimization

Lean manufacturing can efficiently minimize waste within a production facility.


This is arguably the most significant benefit of lean manufacturing. Waste is
defined by any activity that does not add value to the process. Common waste
areas include: motion, inventory, waiting, overproduction, defects,
transportation, and over-processing. As companies sit on large amounts of
inventory and waste, this process eliminates outdated or aged inventory. In
addition, this process reduces the costs within the operation.

2. Enhanced Customer Relationships

Lean focuses on loyal customers' concerns and suggestions to cut some wasteful
processes. Rather than focusing on the needs of all customers, companies are
able to focus on their loyal customers to build strong and reliable relationship.
This way, your customer interactions will improve and the relationships with
your trusted customers will offer a steady flow of revenue coming in.
3. Lean Infrastructure

A lean infrastructure means that you are only dealing with a few components:
building, tools, supplies, equipment, and labor to fulfill near-term inventory
demand. The facility does not waste space within the operation and enables the
facility to come as close as it can to production efficiency. 

Disadvantages

1. Equipment Failure

Lean has very little room for error. Equipment or labor failure can lead to major
inconsistencies and can make the entire operation fall behind. In other mass
production facilities, employees could move from one machine to another in the
event of a breakdown. In lean, there are not many other places for employees to
move to because everything within the operation is being utilized. In addition,
the breakdown of a machine must be fixed immediately as there are usually no
alternative resources that can do the work. This is why it is important to stay on
top of all machine maintenance and inspections. 

2. Delivery Inconsistencies

In correlation with equipment failure, lean manufacturing can lead to delivery


inconsistencies. Using lean techniques means that you have a smaller error
margin. If your supply deliveries are late, you may not have enough raw
materials to meet your customer demands, leading to late deliveries. This
disadvantage can hinder customer relationships, push customers towards your
competitors, and cost you revenue.
3. Employee Dissatisfaction

Adopting lean manufacturing processes requires change among employees to


more efficient production processes to ensure that quality products are being
made. This can be risky if employees reject the new methods. Having good
managers that can help support and persuade the change from one technique to
another can be helpful.

JOB SHOP PRODUCTION

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 on machines in a certain sequence.

Characteristics The Job-shop production system is followed when there is:

 High variety of products and low volume.


 Use of general purpose machines and facilities.
 Highly skilled operators who can take up each job as a challenge
because of uniqueness.
 Large inventory of materials, tools, parts.
 Detailed planning is essential for sequencing the requirements of
each product, capacities for each work centre and order priorities.

Advantages:

1. Because of general purpose machines and facilities variety of products can be


produced.
2. Operators will become more skilled and competent, as each job gives them
learning opportunities. 3. Full potential of operators can be utilised.

4. Opportunity exists for creative methods and innovative ideas.

Limitations

1. Higher cost due to frequent set up changes.

2. Higher level of inventory at all levels and hence higher inventory cost.

3. Production planning is complicated.

4. Larger space requirements.

BATCH PRODUCTION

Batch production is defined by American Production and Inventory Control


Society (APICS) “as a form of manufacturing in which the job passes through
the functional departments in lots or batches and each lot may have a different
routing.” It is characterised by the manufacture of limited number of products
produced at regular intervals and stocked awaiting sales.

Characteristics Batch production system is used under the following


circumstances:

 When there is shorter production runs.


 When plant and machinery are flexible.
 When plant and machinery set up is used for the production of item
in a batch and change of set up is required for processing the next
batch.
 When manufacturing lead time and cost are lower as compared to
job order production.

Advantages:
1. Better utilisation of plant and machinery.

2. Promotes functional specialisation.

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

4. Lower investment in plant and machinery.

5. Flexibility to accommodate and process number of products.

6. Job satisfaction exists for operators.

Limitations:

1. Material handling is complex because of irregular and longer flows.

2. Production planning and control is complex.

3. Work in process inventory is higher compared to continuous production.

4. Higher set up costs due to frequent changes in set up.

CONTINUOUS PRODUCTION

Production facilities are arranged as per the sequence of production operations


from the first operations to the finished product. The items are made to flow
through the sequence of operations through material handling devices such as
conveyors, transfer devices, etc.

Characteristics Continuous production is used under the following


circumstances:

 Dedicated plant and equipment with zero flexibility.


 Material handling is fully automated.
 Process follows a predetermined sequence of operations.
 Component materials cannot be readily identified with final
product.
 Planning and scheduling is a routine action.
Advantages:

1. Standardisation of product and process sequence.

2. Higher rate of production with reduced cycle time.

3. Higher capacity utilisation due to line balancing.

4. Manpower is not required for material handling as it is completely


automatic.

5. Person with limited skills can be used on the production line

. 6. Unit cost is lower due to high volume of production.

Limitations:

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

2. Very high investment for setting flow lines.

3. Product differentiation is limited.

Project Production

Project production is characterized by complex sets of activities that must be


performed in a particular order within the given period and within the estimated
expenditure. Where output of a project is a product, such products are generally
characterized by immobility during transformation. Operations of such products
are carried out in “fixed position assembly type of layout” which can be
observed in production of ships, locomotive and aircraft, construction of roads,
buildings, etc.

Characteristics of Project Production


1. Definite beginning and definite end: Each project has a definite
beginning and a definite end.
2. “Fixed position” layout: Where the output of a project is a product, such
products are generally characterized by immobility during transformation.
Operations on such products are carried out in “fixed position assembly
type of layout” which can be observed in production of ships, locomotive,
aircraft, construction of roads/ buildings, etc.
3. High cost overruns: Often delays take place in the completion of the
projects. Such delays are generally very expensive due to escalation in the
cost of factors of production and incident of penalties.
4. Personnel problems: Project production has many personnel related
problems namely:

 When there is a fast build up, staff is either borrowed from other
departments or hired for short duration. Therefore, personnel
involved in the project have limited (or short lived) interest in the
project.
 Since each project has a limited duration, the staff starts spending
more time forgetting prepared for the next project.
 Site for the project may be in the underdeveloped region and it may
change from project to project which causes dislocation of the
normal life.

Advantages

 Unique, high quality products are made.

 Workers are often more motivated and take pride in their work.

 Products are made according to individual customer needs and


improve customer satisfaction.
 Production is easy to organize.

Disadvantages

 Very labor-intensive, so selling prices are usually higher.

 Production can take a long time and can have higher production
cost, (e.g., if special materials or tools are required).

Repetitive Manufacturing
Repetitive manufacturing is the factory process function in which products are
produced for rapid production flow. A distinguishing property of repetitive
manufacturing is its primary utilization of assembly and/or production lines,
specializing in repetitive production. 

Producers use this manufacturing method when they are mass-producing


products that are similar in layout and function. If there are any variations in
product design, they’re marginal and won’t make for major changes in the
creation process. Using this process in conjunction with discrete
manufacturing can also help production rates. However, with marginal changes,
this means that the repetitive manufacturing process is not befitting for someone
producing products with more creative variety, such as a crafter, maker, or
artist. For one of those three producers, a more traditional and hands-on method
of manufacturing is better suited for production. For artists, the products being
made are typically more unique or customizable and their production requires
more attentiveness to the finer details. This is something much more difficult to
achieve in repetitive manufacturing.
A strict schedule is used for repetitive manufacturing in order to attain a set
production rate and keep a certain level of quality. These production rates are
typically set with a daily, weekly, or monthly target in mind.

Because the items being produced are so similar, the setup time is significantly
lower than compared to other manufacturing methods. This allows for a shorter
manufacturing lead time.

To run efficiently, manufacturers need a master production schedule. This will


help to stay ahead of production needs as the production here is done prior to
customers placing orders.

Examples of production companies utilizing a repetitive manufacturing process


would be durable goods, cars, and electronic products.

Advantages

 This is an extremely cost-efficient method of production.


 Use of the machinery typically requires low skill levels, potentially
allowing for a lower entry point for future employees.
 You’ll be able to easily monitor the manufacturing process (performance
visibility) from one location, from the beginning to the end of production.
 With this method, you’ll be freeing up employee time, as their main
responsibility will be to maintain machinery. 
 Using repetitive manufacturing makes tracking real-time manufacturing
analytics an easier and more straightforward process.

Disadvantages

 Teardowns, when a different item begins manufacturing or how the item


is manufactured changes, can be costly for the company. 
 Because this process produces mass-produced items, customers are less
likely to be able to personalize or customize their orders.
 Low skill levels is a pro and a con in repetitive manufacturing. The work
is usually monotonous and repetitive, typically leaving employees feeling
uninspired by their daily activities.
 With mass-production, there’s always the possibility of either not
meeting customer demand or overestimated demand for the product.

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