FUNDAMENTALS OF PRODUCTION AND OPERATIONS MANAGEMENT (FPOM)

Unit-1: Historical Evolution of Production and Operations Management

For over two centuries operations management has been recognized as an important factor in a
country’s economic well-being.
Progressing through a series of names – manufacturing management, production
management, and operations management – all of which describe the same general discipline,
the evolution of the term reflects the evolution of modern operations management. The
traditional view of manufacturing management began in the eighteenth century when Adam
Smith recognized the economic benefits of specialization of labour. He recommended breaking
jobs down into subtasks and reassigning workers to specialized tasks in which they would become
highly skilled and efficient. In the early twentieth century, Fredrick W. Taylor implemented
Smith’s theories and advocated for scientific management throughout the vast manufacturing
complex of his day. From then until about 1930, the traditional view prevailed, and many
techniques we still use today were developed.
Production management became the more widely accepted term from the 1930s. As
Taylor’s wok became more widely known, managers developed techniques that focused on
economic efficiency in manufacturing. Workers were “put under a microscope” and studied in
great detail to eliminate wasteful efforts and achieve greater efficiency. At this same time,
however, management also began discovering that workers have multiple needs, not just
economic needs. Psychologists, sociologists, and other social scientists began to study people
and human behaviour in the work environment. In addition, economists, mathematicians, and
computer scientists contributed newer, more sophisticated analytical approaches.
With the 1970s emerges two distinct changes in our views. The most obvious of these,
reflected in the new name – operations management – was a shift in the service and
manufacturing sectors of the economy. As the service sector became more prominent, the
change from “production” to “operations” emphasized the broadening of our field to service
organisations. The second, more subtle change was the beginning of an emphasis on synthesis,
rather than just analysis, in management practices. Spearheaded most notably by Wickham
Skinner, American industry was awakened to its ignorance of the operations function as a vital
weapon in the organization’s overall competitive strategy. Previously preoccupied with an
intensive analytical orientation and an emphasis on marketing and finance, managers had failed

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to integrate operations activities coherently into the highest levels of strategy and policy. Today,
the operations function is experiencing a renewed role as a vital strategic element. Consequently,
organizational goals are better focused to meet customers’ needs throughout the world.

Operating Systems:
An operating system is a configuration of resources combined for the provision of goods or
services.
Operating systems convert, using physical resources, to create outputs, the function of which is
to satisfy customer wants, i.e. to provide some utility for the customer.

Resources in operating systems:

Materials: These physical items consumed or converted by the system, e.g. raw materials, fuel,
indirect materials, etc.
Machines: Those physical items utilized by the system, e.g. plant, tools, vehicles, buildings, etc.
Labour: Those persons who necessarily provide or contribute to the operation of the system,
without whom neither machines nor materials are effectively used.

Functions of Operating Systems

The function of an operating system is a reflection of the purpose it serves for its customer, i.e.
the utility of its output to the customer. Four principal functions can be identified:
(1) Manufacture: in which the principal common characteristic is that something is physically
created, i.e. the output consists of goods which differ physically, i.e. in form, content, etc.
from those materials input to the system. Manufacture, therefore, requires some physical
transformation, or a change in form utility of resources.
(2) Transport: in which the principal common characteristic is that a customer, or something
belonging to the customer, is moved from place to place, i.e. the location of someone or
something is changed. The system utilizes its resources primarily to this end, and such
resources will not normally be substantially physically changed. There is no major change
in the form of the resources, and the system provides primarily for a place utility.
(3) Supply: in which the principal common characteristic is that the ownership or possession
of goods is changed. Unlike manufacture, goods output from the system are physically
the same as those of input. There is no physical transformation and the system function
is primarily the change in possession utility of resource.

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 (4) Service: in which the principal common characteristic is the treatment or accommodation
of something or someone. There is primarily a change in state utility of a resource. Unlike
supply systems the state or condition of physical outputs will differ from inputs by virtue
of having been treated in some way.

Operating System redefined:

An operating system is a configuration of resources combined for the function of manufacture,
transport, supply or service.
We can divide manufacturing processes in two traditional ways –
Firstly, we can identify continuous, repetitive, and intermittent manufacturing processes.
Continuous Process: theoretically runs for 24 hours a day, 7 days a week and 52 weeks a year.
Whilst this degree of continuity is often the objective, it is rarely achieved. Examples –
steelmaking, petrochemicals, electricity generation, etc.
Repetitive Process: is one in which the product(s) is processed in lots, each item of production
passing through the same sequence of operations, e.g. in the assembly of motor vehicles.
Intermittent Process: is one in which very small lots, or even single products, are made in
response to separate customer orders.
The second and similar classification divides manufacturing processes into mass, batch and
jobbing. Process or mass manufacture involves the continuous production of a commodity in
bulk, often by chemical rather than mechanical means. Mass manufacture is conceptually similar
to process manufacture, except that discrete items such as motor cars and domestic appliances
are usually involved. A single or a very small range of similar items is manufactured in very large
numbers.
Batch production occurs when the number of discrete items to be manufactured in a period is
insufficient to enable mass production to be used. Similar items are, wherever possible,
manufactured together in batches.
Finally, jobbing manufacture, although strictly consisting of the manufacture of different
products in unit quantities, in practice corresponds to the intermittent process mentioned
earlier.
The principal function of transport systems is that of changing the location of someone or
something. Within manufacturing organizations, transport systems may be employed for moving
work-in-progress between manufacturing departments, removing waste materials, etc.

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Supply systems have the principal function of changing the ownership or possession of item(s)
which are otherwise physically unchanged. At an organization level, a retail shop, warehouse,
petrol pump and broker may be seen to have the principal function of supply. Within
organizations, supply systems may be evident as internal stores, etc.
A dentist, fire service, laundry, hospital ward and motel may be considered to have the principal
function of service, i.e. the function of treating or accommodating something or someone. Within
organizations a similar function may be performed by systems such as welfare departments, rest
rooms, etc.

Operations Management:
Operations management is concerned with the design and the operation of systems for
manufacture, transport, supply or service.

A Framework of Concepts for Operations Management

Structure of Principal
Operating Problem Areas
System of Operations
Management

Operating
System
Operations Problem
Management Characteristics
Objectives

Operations
Management
Strategies

Role of Operations
Management
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The function of the operating system, and the nature of customer influence (i.e. whether customers
‘push’ or ‘pull’), will determine the appropriateness of structure (for example, there will be only
four appropriate structures for manufacture and supply situations and only three for transport and
service situations). Given appropriateness, feasibility will be determined by the nature of customer
demand, in particular the predictability of the nature of demand.

Structure of Operating Systems

Function
Inputs (Manufacture, Outputs
Transport,
Supply,
Materials, Machines, Goods, Services
Service)
Labour

A Simple System Model

System Notation:

Function (Manufacture, transport, supply, service)

Physical storage or inventory (or in some cases queue)

Physical input or output flow

Customer for system

Four simple structures for manufacturing systems are –

(a) ‘Make from stock, to stock, to customer’, i.e. all input resources are stocked, and the
customer is served from a stock of finished goods.

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 (b) ‘Make from source, to stock, to customer’, i.e. no input resource stocks are held, but goods
are produced to stock.

(c) ‘Make from stock, direct to customer’, i.e. all input resources are stocked, but goods are
made only against and on receipt of customers’ orders.

(d) ‘Make from source, direct to customer’, i.e. no input resource stocks are held and all good
are made only against and on receipt of customers’ orders.

A slightly different situation applies in respect of both transport and service. All structures which
require function in anticipation or in advance of receipt of customer order are infeasible, since in
the case of both transport and service, no physical output stock is possible. One important
structural difference is evident in the case of transport and service systems. Since function of
transport and service is to ‘treat’ the customers (whether a thing or a person), the customer is a
resource input to the system, i.e. the beneficiary of the function is or provides a major physical
resource input to the function. Thus, transport and service systems are dependent upon
customers not only taking their output and, in some cases, specifying what that output shall be,
but also for the supply of a major physical input(s) to the function without which the function
would not be achieved.
Unlike manufacture and supply, transport and service systems are activated or ‘triggered’ by an
input or supply. The customer exerts some ‘push’ on the system. In manufacture and supply the
customer acts directly upon output – he ‘pulls’ the system, in that he pulls goods out of the system
whether direct from the function (structures (c) and (d)) or from output stock (structures (a) and
(b)). In transport and service, the customer pushes the system – he acts directly on input. In these
‘push’ systems the customer controls an input channel, and we must therefore distinguish this
from that controlled by operations management when developing models of systems.
Basic system structures for transport and service are:

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 (e)

Function from stock and from customer

(f)

Function from source and from customer queue

(g)

Function from stock and from customer queue

Customer queues are physical stocks in the customer input channel, although they cannot be
utilized by operations management in the same way as other resource stocks, for they are usually
beyond their control. Queues comprise those customers who have “arrived” at the system and
await service or transport. They are the customers who at any one time have asked to be “treated”
by the system. The queue, therefore, represents known and committed future demand.
In total, therefore, we have seven basic structures for operating systems. They are simple system
descriptions. For example, they deal only with single channels for input and output. However, this
type of approach can be used to more complex systems. Furthermore, these basis system models
can be used to describe operating systems at any level of detail – the organization, a division, a
department, a section, etc.

Operations Management Objectives: The objective of operating systems is the conversion of inputs
for the satisfaction of customer wants.
Primary Objective: Customers want the outputs of the operating system.
Secondary Objective: Costs and timing.
Customer Service: To provide customer satisfaction by providing the ‘right thing at the right price
and at the right time’.
Resource Productivity: Efficient utilization of resources.
Operations management is concerned with the achievement of both satisfactory customer service
and resource productivity. Either inefficient use of resources or inadequate customer service is
sufficient to give rise to the ‘commercial failure’ of the operating system.

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 Seven Basic System Structures

Nature of function Is structure

and of customer influence appropriate?
(i.e. push or pull)

Appropriate Basic Structures

Factors external Predictability of Is structure

to Operations Nature of demand feasible?
Management

Feasible Basic Structures

Operations management Is structure

objectives desirable?

Factors internal to System Structure 1

Operations
Management
Will structure
Change/be changed?

System Structure 2 Etc.

Fig. Factors Influencing System Structure

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Aspects of Customer Satisfaction:

Principal Customer Wants

Principal Function
Primary Considerations Secondary Considerations
Cost, i.e. purchase price or cost of
Goods of a given, requested obtaining goods.
Manufacture
or acceptable specifications Timing, i.e. delivery delay from order
or request to receipt of goods.
Cost, i.e. cost of movement.
Movement of a given,
Timing, i.e. (i) duration or time to
Transport requested or acceptable
move. (ii) wait, or delay from
specifications
requesting to its commencement.
Cost, i.e. purchase price or cost of
obtaining goods.
Goods of a given, requested
Supply Timing, i.e. delivery delay from order
or acceptable specifications
or request to supply, to receipt of
goods.
Cost, i.e. cost of treatment.
Treatment of a given,
Timing, i.e. delivery delay from order
Service requested or acceptable
or request to supply, to receipt of
specifications
goods.

Operations managers must attempt to balance these two basic objectives. An improvement in one
will often give rise to a deterioration in the other. Often both cannot be maximized, hence a
satisfactory performance must be achieved for both.

Scope of Operations Management:

Problem Areas
Design and Planning Involvement in design/specification of the goods/
service Design/specification of process/system
Location of facilities
Layout of facilities/resources and materials handling
Determination of capacity/capability
Design of work/jobs
Involvement in determination of remuneration system
and work standards
________________________________________________________________________________
Operation and Control Planning and scheduling of activities
Control and planning of inventories
Control of quality
Scheduling and control of maintenance
Replacement of facilities
Involvement in performance measurement
________________________________________________________________________________