Introduction to Production & Operations

Management
Dr. Naresh Dembla

INTRODUCTION

According to Waters, Operation management concerns all the activities involve in making a
product or providing a service: it is responsible for the transformation of the various kinds of inputs
to useful outputs.

• Operations management (OM) is the administration of business practices to create

the highest level of efficiency possible within an organization.

• Operations management is concerned with converting materials and labor into

goods and services as efficiently as possible.

• Corporate operations management professionals try to balance costs with revenue

to maximize net operating profit.

INTRODUCTION

Production Management

• 1. According to E. L. Brech, “Production management is the process of effective

planning and regulating the operations of that section of an enterprise which is
responsible for the actual transformation of materials into finished products."

• 2. According to E. S. Buffa, “Production management deals with decision making

related to production process so that the resulting goods or service is produced
according to specifications, in the amounts and by the schedule demanded and at
minimum cost.”

Inputs and Outputs

• Inputs to the system may be labour, material, equipment (machines), facilities,
energy, information and technology.

• Other inputs to the operating system can be customers in a bank, patients in a

hospital commuters to a public transport system, files and papers to an office
situation, and programs to be run in a computer center, etc.
• Similarly outputs from a system may be in terms of finished products, transported
goods, delivered messages, cured patients, serviced customers etc.

• Productivity = Output/input

• For example, Materials may be waiting in the form of inventory in stores, waiting to
be loaded on the machine. All these waiting delays in inventories are non-productive
events and any drive to improve productivity must aim at eliminating or at least
reducing such idle time, waiting, etc.

Objectives in Operation Management

The objectives of an organization may be to produce the goods/or services in
required quantities and of quality as per the schedule and at a minimum cost.

Thus various objectives can be grouped as-

o Performance objectives and

o Cost objectives

• Performance Objectives
The performance objectives per unit include
• Efficiency or productivity as output per unit of input.
• Effectiveness: It concerns whether the right set of outputs is being produced.
• Quality: Quality is the extent to which a product or service satisfies the customer's
needs.
• Lead times: Minimization of idle time, delays, waiting, etc. will reduce throughput
time.
• Capacity utilization: Percentage utilization of manpower, machines, etc.
• Flexibility: Flexibility of producing a combination of outputs, to satisfy a variety of
customer needs

• Cost Objectives

Explicit Costs:
• Material cost Direct and labor cost
• Scrap/rework cost
Maintenance cost

Implicit Costs:
• Cost of carrying inventory
• Cost of stockouts, lost sales
• Cost of delayed deliveries
 • Cost of material handling
• Cost of inspection
• Cost of grievances, dissatisfaction
• Downtime costs
• Opportunity costs

Function/Scope of OPM

• The Process of Management

All the decisions concerning the production system could be divided as:
• Periodic decisions- include the selection, design, and updating of resources,
structures, systems, and procedures,
• Continual decisions- required in day-to-day operation and control of production
systems

Types of Production System

The production system can be grouped into the following categories:

• Mass production or flow line production system

• Batch production system

• Job shop

• Unit manufacture of projects.

• Group Technology (GT)

• Optimised Production Technology (OPT)

• Mass Production or Flow Line Production Systems

Facilities are arranged according to the sequence of operations where the output of
one stage becomes the input of the next stage. The whole system is cascaded. Major
production management problems in mass production systems will result in
increased throughput time and poor capacity utilisation, thus contributing to low
productivity. Hence a production or assembly line should be designed such that its
workload is as evenly balanced as possible.

• Job Shop
Material flow in job shop like situation is quite complex. A dynamic job shop where
even customer orders come' in a random fashion is a very difficult system to analyse
at least from the point of view of production, planning and control. The main
problem is despatching priority rule to determine the sequence in which various
waiting job orders are to be processed on manufacturing facilities

• Batch Production System

 The batch production concept is adopted when a product is made in a certain
quantity called the batch quantity on a machine, and after a while, it is discontinued
and another product is scheduled in a certain batch quantity Material flow in such
systems is more complex than in mass production systems. Accordingly, the planning
and control aspects are relatively more difficult. Some prominent problem areas are:

• Optimal layout planning for the production system;

• Aggregate production planning to absorb demand fluctuations

• Machine-job allocation problem:

• Determination of economic batch quantity, and economic,

• Scheduling and sequencing of operations.

• Unit Manufacture or Projects

• Suppose we want to make a ship. Obviously, due to the large size of the product, the entire
concept of material flow should change. In the previous three cases the manpower and
facilities were fixed and product (or material) was moving from place to place. Here product
remains fixed and manpower/facilities put work on it some chosen sequence. Since such
products are not made in large number and have long throughput time, we can treat each
product as a project. Thus project planning. scheduling and monitoring techniques based on
network models such as PERT/CPM can be used for planning and control of such production
systems.

• Group Technology (GT)

• GT is the relatively new concept in production operations management. The objective of GT
is to take advantage of mass production systems in smaller batch production systems. The
idea of GT is to classify parts into families so that efficient mass plant layouts can be
designed for these families of parts.

• Optimised Production Technology (OPT)

• OPT comprises two parts:

• i) The conceptual base of the system

• ii) The software package (OPT/SERVE) which support the system.

• The principles of OPT philosophy have universal applicability consequently they help
enhance existing control systems and the effective management of the Production
Operations Manager.
Function of Production/Operation Manager
• Need to be Focused - Production Manager is responsible for producing the required
quantity of the product in time in accordance with the delivery date.

• Production Control- Regulate the operation in such a way that the desired delivery
schedule is maintained

• Quality Control - To manufacture the goods and services within the desired
specifications

• Analysis & Selection of Production Method - Production manager should select the
most efficient and economical method to perform the operation.

• Plant Layout and Material Handling - The material handling system and the plant
layout should be most efficient for the given situation.

• Motivation - Production manager should be able to generate the interest of the

workers to increase their efforts by providing them wage incentives. This will result,
an increase in labor productivity.

• POM Functions and Differences

Functions of P&O Manager: -
The functions of a production/operations manager encompass a range of responsibilities to ensure
efficient and effective processes within an organization. These functions include:
1. Planning: Developing strategies and plans for production processes, resource allocation, and
goal achievement.
2. Organizing: Structuring resources, personnel, and activities to implement the production plan
effectively.
3. Directing: Leading and guiding the workforce to execute tasks in alignment with the production
plan.
4. Controlling: Monitoring and adjusting processes to ensure they align with the established goals
and standards.
5. Coordinating: Facilitating collaboration among various departments and stakeholders to
optimize overall operational efficiency.
6. Decision-Making: Making informed and timely decisions related to production schedules,
resource allocation, and problem-solving.
7. Quality Control: Implementing measures to ensure that products or services meet established
quality standards.
8. Inventory Management: Overseeing the procurement, storage, and utilization of materials to
maintain optimal inventory levels.
9. Technology Integration: Utilizing technology and automation to enhance production processes
and efficiency.
10 Continuous Improvement: Identifying opportunities for optimization, cost
reduction, and process enhancement to achieve ongoing improvement

Differences b/w Production and Operations Manager:

The terms "production manager" and "operations manager" are often used interchangeably, but they
can have distinct responsibilities depending on the industry and organizational structure. Here are
some general differences between the two roles:
1. Scope of Responsibility:
o Production Manager: Typically focuses on the specific tasks related to
manufacturing or creating goods. This role may be more narrowly focused on the
production process itself.
o Operations Manager: Has a broader scope, overseeing various aspects of the
entire operations, including production, supply chain, quality control, and sometimes
other functions like facilities management.
2. Function within the Organization:
o Production Manager: Primarily concerned with the efficient conversion of raw
materials into finished goods. This role is often found in manufacturing-centric
industries.
o Operations Manager: Manages the overall operations of a business, which may
include production but extends to other areas such as logistics, procurement, and
sometimes even strategic planning.
3. Responsibility for Innovation:
o Production Manager: Typically implements established
processes and procedures, focusing on maintaining
consistency and efficiency.
o Operations Manager: Often involved in driving innovation within the
organization, seeking new ways to improve overall business performance, adopt new
technologies, and enhance processes.
4. Interdepartmental Coordination:
o Production Manager: Works closely with departments directly involved in the
production process, such as manufacturing, quality control, and maintenance.
o Operations Manager: Collaborates with various departments, including
production, marketing, finance, and human resources, to ensure overall business goals
are met.

Productivity
Productivity – the amount of output per unit of input

According to Peter Drucker, “Productivity means balance between all factors of

production that will give the maximum output with the smallest effort.”
 • Productivity signifies the ratio between the input and output with respect to given
resources, i.e., the ratio of the outputs achieved from an activity to the inputs
consumed to make those outputs.

Productivity = Output/Input

• When more is produced with the same expenditure of resources, it may be termed
as effectiveness; when the same amount is produced at less cost, it may be termed
as efficiency.

• Productivity aims at the maximum utilization of resources for yielding as many goods
and services as possible, desired by consumers at lowest possible cost. Productivity
is the ratio of output in a period of time to the input in the same period time.

Various Kinds of Productivity Measures

Various Kinds of Productivity Measures

• Labour Productivity: Labour productivity is a single-factor productivity measure is

only based on observations of volume product outputs and inputs for labour. Labor
productivity is the quantity of output produced by one unit of production input in a
unit of time

• Multiple Factor Productivity: Multiple factor productivity accommodates more than

one input factor and more than one output factor when calculating overall
productivity. With multiple factor productivity, the outputs can be measured either
in money terms or the number of units produced, provided the units can be
measured in the same units.

• Multiple Factor Productivity = Output (units or value of units)/[Labor + capital +

materials + energy + other]

• When more than one input is used for each factor, it is called ‘partial’
 Various Kinds of Productivity Measures
• Total Factor Productivity: Total Factor productivity is the year-by-year change in the
output where several factors are considered. It is the attempt to construct a
productivity measure for an aggregation of factors. These other factors consist not
only of investment for education, training, research and development, but also of
non quantifiable factors such as the labour relations, climate and worker and
management attitudes towards productive efficiency and competitiveness.

Dynamic Productivity Change

Why does productivity change?

Productivity increases when:

• more output is produced without increasing the input

• the same output is produced with less input.

Productivity decreases when:

• less output is produced without decreasing the input

• the same output is produced with more input

Productivity is not the same as production or output.

Productivity can increase or decrease when output increases.

For example, working more hours increases total output, not necessarily output per hour.

What affects labor productivity?

A change in labor productivity reflects a change in output that is not explained by the change in
hours worked.

Output per hour can increase over time due to:

• Technological advances

• Improved worker skills

• Improved management practices

• Economies of scale in production

• Increases in the amount of non-labor inputs used

What affects multifactor productivity?

A change in multifactor productivity reflects the change in output that is not

explained by the change in measured inputs.

Many of the same factors that affect labor productivity affect multifactor
productivity, but NOT increases in other measured inputs, such as capital

Factors Affecting Productivity

1)Man Power:

• Selection- selection of the right man for a specific job

• Training- Consider training needs, whether training takes place at the plant itself or
outside the unit at other domestic or foreign plants or training institutes.

• Number of personnel required - man power requirement planning in each of the

departments of required skill.

2) Equipment and Machines: The number of machine tools, their capacity and
accessories required, replacement policy of the organization and maintenance
schedules etc.

3) Input Materials:

a)Appropriate quality of materials. b)Material requirement planning (M.R.P.)

c)Substitute of materials being used

4) Time:
 a) Inspection of input materials b) Time for inspection of finished products c)
Production time

d) Time for repair and maintenance of machines and equipment.

5) Power or Energy:

i. Maintenance of equipment for saving energy

ii. Use of renewable energy devices

iii. Use of biogas, photovoltaic cells, solar energy and other non conventional
techniques.

6) Floor Area or Space:

i. Total area covered by the administrative block, production shop and inspection &
quality control departments etc.

ii. Location of different departments and shops etc.Other space covered by plant
layout

7)Finance:

Finance is required to maintain all the above requirements. The management should
be for minimum rather optimum finance.

8) Movement of Man and Materials:

i. The required motion of manpower within the plant.

ii. The motion of raw material semi finished and finished products/items within the
plant.

Components of Productivity
• Price efficiency: Price efficiency is an important factor in productivity. Good quality material
at the lowest possible cost reduces the overall cost of the product

• Allocative efficiency: Operations manager has required to consider an optimal mix of factors
of production. A trade-off between capital and labor is necessary to maximize productivity.

• Technical efficiency: Productivity can be increased either by increasing the output with the
same number of inputs or by producing the same output using fewer inputs. This increase is
termed technical efficiency.

• Scale efficiency: The volume or size of operations has an impact on the productivity of the
organizations. All the fixed costs make this impact.
• Types of Production System
• Continuous or Flow Shop Production

➢ Mass

➢ Process – Analytical and Synthetic

➢ Assembly

• Intermittent Production

➢ Job

➢ Batch

• Continuous or Flow Shop Production - This is a conversion process in which

successive units of output undergo the same sequence of operation using specialized
equipment usually position along a production line,

• For Example- auto assembly, assembly of television sets, etc.

The continuous system can be divided into three types of production:

❖ Mass Production

❖ Process Production

❖ Assembly Production

Mass Production System - Mass production system is generally used to manufacture

particular parts or components of an item. These parts are assembled together by the
enterprise to get the final product.
 Advantages:

Different combinations of parts can be used to manufacture different kinds of products.

Specialization and standardization in manufacturing single components also lead to
economies in production and product diversification to meet the specific demands of
consumers.

Process Production
This method is used for manufacturing those items whose demand is continuous and high
e.g., petroleum products, a particular brand of medicines, heavy chemical industries, plastic
industries, etc. Here single raw material can be transformed into kinds of products at
different stages of the production

Assembly Production
Assembly line is particularly useful when a limited variety of similar products is to be
produced on a mass scale or in fair batches on a regular or continuous basis. The most vital
decision in any production system is the proper layout of the assembly line which involves
the proper balancing of technology and other manufacturing facilities so as to develop a
rational approach for the optimization of results

Intermittent Production
Intermittent productions are those where the facilities must be flexible enough to handle a
variety of products and sizes, or where the basic nature of the activity imposes a change of
important characteristics of the input (e.g.: change in production design).

➢ Under intermittent production, the basic product design changes from time to time

Intermittent production may be of two types:

(a) Job/Unit Production

(b) Batch Production

Job Production:
• Here whole project is considered as one operation and work is completed on each product
before passing on to the next.

• Each product is a class by itself and requires a distinct and separate job for production
purposes.

• The system requires versatile and highly skilled labor with high capital investments.

• In this system goods are produced to definite customer orders.

• A fault in one operation does not result in a complete stoppage of the entire process.

Batch Production:
• After the production of one batch, the plant and machines become available to another
batch of a similar type of production.

• It is characterized by the irregularity in the increase of work added to the basic material.

• The items produced here are subjected to definite customer orders and not for stock.

❖ For Example: Pharmaceutical Industry