Basic Definitions

• Operation is that part of an organization, which is concerned with the transformation

of a range of inputs into the required output (services) having the required quality
level.

• Management is the process, which combines and transforms various resources used
in the operations subsystem of the organization into value added services in a
controlled manner according to the policies of the organization.

• The set of interrelated management activities, which are involved in manufacturing

certain products, is called production management.
 Basic Definitions
• If the same concept is extended to services management, then the corresponding set
of management activities is called operations management.

• Production function is the part of an organization, which is concerned with the

transformation of a range of inputs into the required outputs (products) having the
required quality level.

• Production is defined as the step-by-step conversion of one form of material into

another form through chemical or mechanical process to create or enhance the utility
of the product to the user.
 Production System
• Production system is ‘that part of an organization, which produces products of an
organization. It is the activity where resources, flowing within a defined system, are
combined and transformed in a controlled manner to add value in accordance with
the policies set by management’.
Inputs: Transformation Processes: Outputs:
• Materials • Product Design • Products
• Machines • Process Planning • Services
• Information • Production Control
• Capital • Maintenance

Control:
• Inventory
• Quality
• Cost
 Production Systems

Continuous
Production

Production/ Mass Production

Operation
Volume

Batch Production

Job-Shop Production

Output/Product Variety
 Job-Shop Production
• Job-shop production is characterized by
manufacturing of one or few quantity of products
designed and produced as per the specification of
customers within prefixed time and cost.

• 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 center and order priorities.
 Batch Production
• Batch Production is a form of manufacturing
in which the job pass through the functional
departments in lots or batches and each lot may
have a different routing.

• The manufacture of limited number of products produced at regular intervals and

stocked awaiting sales.
• Shorter production runs.
• Flexible plant and machinery.
• Plant and machinery set up is used for the production of items in the batch and
change of set up is required for processing the next batch.
• Manufacturing lead-time and cost are lower compared to job-order production.
 Mass Production
• Manufacture of discrete parts or assemblies
using a continuous process.

• This production system is justified by very

large volume of production, machines are arranged
in a line or product layout, product and process standardization exists and all outputs
follow the same path.
• Standardization of product and process sequence.
• Dedicated special machines having higher production capacities and output rates.
• Shorter cycle time of production.
• Lower in-process inventory.
• Perfectly balanced production lines.
• Continuous flow of materials, components and parts.
• Production planning and control is easy.
• Material handling can be completely automated.
 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.
• 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.
 Production Management
Production management deals with decision-making related to production processes so
that the resulting goods or services are produced according to specifications, in the
amount and by the schedule demanded and out of minimum cost.

Objectives of Production Management

• Right Quality – the quality of product is established based upon the customers
need.
• Right Quantity – the manufacturing organization should produce the products in
right number.
• Right Time – timeliness of delivery is one of the important parameter to judge the
effectiveness of production department.
• Right Manufacturing Cost – manufacturing costs are established before the
product is actually manufactured.
 Operations System
Random Fluctuations:
• Late Delivery
• Labor Turnover
Inputs:
• Land Outputs:
• Labor • Serviced
Transformation Processes
• Building Customer
• Information
• Capital

Feedback:
• Inventory Levels
• Labor Efficiency
• Sales Volume
A Framework for Managing Operations
 Basic Definitions
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 set by management.

• Resources are the human, material and capital inputs to the production process.
• Systems are the arrangement of components designed to achieve objectives
according to the plan.
• A systems approach to operations management recognizes the hierarchical management
responsibilities.
• System design is a predetermined arrangement of components.
• System control consists of all actions necessary to ensure that activities conform to
preconceived plans or goals.
• Transformation and value-adding activities
• The productivity refers to the ratio between values of output per work hour to the cost of
inputs.
 Objectives of Operations Management
• Customer Service – Specification, Cost, Timing
Customer Wants
Function
Primary Considerations Other Considerations
Goods of a given, requested Cost, i.e. purchase price or cost of obtaining goods. Timing, i.e.
Manufacturing or acceptable specification delivery delay from order or request to receipt of goods.
Management of a given, Cost, i.e. cost of movements. Timing, i.e.
Transport requested or acceptable 1. Duration or time to move.
specification 2. Wait or delay from requesting to its commencement.
Goods of a given, requested Cost, i.e. purchase price or cost of obtaining goods. Timing, i.e.
Supply or acceptable specification delivery delay from order or request to receipt of goods.

Treatment of a given, Cost, i.e. cost of movements. Timing, i.e.

requested or acceptable 1. Duration or time to move.
Services specification 2. Wait or delay from requesting to its commencement.
 Objectives of Operations Management
• Resource Utilization
• Customer service must be provided with the achievement of effective operations through
efficient use of resources.
• Operations management is concerned essentially with the utilization of resources, i.e.
obtaining maximum effect from resources or minimizing their loss, under utilization or
waste.
• Operations management is concerned with the achievement of both satisfactory
customer service and resource utilization.

Customer service objective Resource utilization objective

i.e. to provide agreed/adequate levels of i.e. to achieve adequate levels of resource
customer service (and hence customer utilizations (or productivity) e.g. to achieve
satisfaction) by providing goods or services agreed levels of utilizations of materials,
with the right specification, at the right cost machines and labor.
and at the right time.
 Strategic Perspective
• Quality (product performance).

• Cost efficiency (low product price).

• Dependability (reliable, timely delivery of orders to customers).

• Flexibility (responding rapidly with new products or changes in volume).

 Operations Objectives
1. Product/service characteristics.
2. Process characteristics.
3. Product/service quality.
4. Efficiency
a. Effective employee relations and cost control of labor.
b. Cost control of material.
c. Cost control in facility utilization.
5. Customer service (schedule)
a. Producing quantities to meet expected demand.
b. Meeting the required delivery date for goods or services.
6. Adaptability for future survival.
• Strategic planning is the process of thinking through the current mission of the
organization and the current environmental conditions facing it, then setting forth a
guide for tomorrow’s decisions and results.

• Production and operations strategic plans are the basis for

 operational planning of facilities (design)
 operational planning for the use of these facilities.
 Strategic Planning Operations Model
Environment and Corporate Corporate
Industry Strategy Strategy

Efficiency, Dependability, Quality, Flexibility

Facility Mission

Process Capacity Facilities Vertical Infrastructure

• Automation • Loading • Size • Integration • Planning and
• Product/Service • Lead/Lag • Location • Supplier Control Control
• Specificity • Customer Control • Workforce
• Interconnectedness • Quality Control
 Information and Non-Manufacturing Systems
Manufacturing Operations vs Service Operations
• Tangible/Intangible nature of output
• Production and consumption
• Nature of work (job)
• Degree of customer contact
• Customer participation in conversion
• Measurement of performance
• Quality of output
• Inventory accumulated
 Basic Definitions
• Productivity is defined in terms of utilization of resources, like material and labor. In
simple terms, productivity is the ratio of output to input.
• Productivity can be improved by
 controlling inputs
 improving process so that the same input yields higher output
 by improvement of technology
Dynamic Concept of Productivity
Competition

Higher Productivity
Higher Share of
Market

Better Value for Customers

 Factor Productivity and Total Productivity
• When productivity is measured separately for each input resource to the production
process it is called factor productivity or partial productivity
• When productivity is measured for all the factors of production together, it is called
total factor productivity

Productivity Analysis

• Trend analysis
• Horizontal analysis
• Vertical analysis
• Budgetary analysis
 Factors Affecting Productivity
• Capital/Labor Ratio
• Scarcity of some Resources
• Workforce Changes
• Innovations and Technology
• Regulatory Effects
• Bargaining Power
• Managerial Factors
• Quality of Worklife
 Location of
Facilities

Plant Layout
Maintenance
& Material
Management
Handling

Production
Materials Product
Operations
Management Design
Management

Quality Process
Control Design

Production
Planning and
Control
 Location of Facilities
• the selection of location is a key decision as large investment is made in building
plant and machinery
• location of plant should be based on the company’s expansion plan and policy,
diversification plan for the products, changing sources of raw materials and many
other factors.
• the purpose of the location study is to find the optimal location that will results in
the greatest advantage to the organization
Plant Layout and Material Handling
• the overall objective of the plant layout is to design a physical arrangement that
meets the required output quality and quantity most economically
• plant layout is a plan of an optimum arrangement of facilities including personnel,
operating equipment, storage space, material handling equipment and all other
supporting services
• material handling – moving of materials from the store room to the machine and
from one machine to the next during the process of manufacture
 Product Design
• the entire process of need identification to physical manufactures of product
involves three functions – Design and Marketing, Product Development, and
Manufacturing
• product design and development provides link between marketing, customer needs
and expectations and the activities required to manufacture the product

Process Design
• the important decisions in process design are to analyze the workflow for converting
raw material into finished product and to select the workstation for each included in
the workflow
 Production Planning and Control
• the process of planning the production in advance, setting the exact route of each
item, fixing the starting and finishing dates for each item, to give production orders
to shops and to follow-up the progress of products according to orders

• Planning is deciding in advance what to do, how to do it, when to do it and who is
to do it
• Routing is the selection of path, which each part of the product will follow, which
being transformed from raw material to finished products
• Scheduling determines the program for the operations
• Dispatching is concerned with the starting the processes
• Follow-up reports daily the progress of work in each shop in a prescribed proforma
and to investigate the causes of deviations from the planned performance
 Quality Control
• a system that is used to maintain a desired level of quality in a product or service
• it is a systematic control of various factors that affect the quality of the product
• quality control aims at prevention of defects at the source, relies on effective
feedback system and corrective action procedure

Materials Management
• the aspect of management function, which is primarily concerned with the
acquisition, control, and use of materials needed and flow of goods and services
connected with the production process having some predetermined objectives in
view

Maintenance Management