Production and

Operation
Management
BBA 209
BBA-3rd Semester
2024-25
Process of Transformation
Meaning of Production
Production is a process of transforming (converting) inputs (raw-
materials) into outputs (finished goods). So, production means the
creation of goods and services. It is done to satisfy human wants.
Thus, production is a process of transformation.
The process of transformation is done in the following
ways:

Disintegration : Here, one input (raw material) is used to

produce many types of output. For e.g. Steel (Input) is
used to produce many types of outputs like spoons,
knives, plates, etc.
Integration or Assembly : Here, many inputs are used to
produce only one output. For e.g. many different inputs
are used to produce a car.
Service : Here, the value of the product is increased by
providing services, for e.g. after sale service for a TV set.
 Production v/s Manufacturing -
• Manufacturing is the process of value addition to the raw material by
transforming it into something else. For example
• transforming wooden blocks into furniture, where the wood still remains
the same and you could use it as fuel by burning it, but still the value of
wood has changed when its shape has been modified into furniture. Same
raw wooden block might have cost ₹100/- but the table carved out of it
might cost ₹500/-
- Transforming flour into bread
-Transforming potato, ghee, spices and flour into aaloo ka parantha.
Production is the creation of goods and services. It is different from
manufacturing in the sense that here creation takes place instead of
transformations. Production is applicable in creation of service and
veterinary and agricultural produce. For Example
- The wood that gets transformed during manufacturing of furniture
is actually production of wood through process of production from seed
- The flour used in bread or potato used in aaloo ka parantha is transformation
of grains and vegetables which are produced in farms through farming
- The ghee is manufactured from milk that is produced by a cow or
buffalo
- Production of movies, serials, theatre plays etc
Concept of Operations:
An operation is defined in terms of the mission it serves
for the organization, technology it employs and the
human and managerial processes it involves. Operations
in an organization can be categorised into manufacturing
operations and service operations. Manufacturing
operations is a conversion process that includes
manufacturing yields a tangible output: a product,
whereas, a conversion process that includes service yields
an intangible output: a deed, a performance, an effort.
Operations Management = OM
 Management of ANY activities/process that create goods and
provide services
» Exemplary Activities: Forecasting, Scheduling, Quality management
 Why to study OM
» At a typical manufacturing company
Profit 5%
OM Cost 21%

Marketing
Cost 26%

Manufacturing
Cost 48%
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Operations Management = OM
The management of systems or processes that create goods and/or
provide services

Organization

Finance Operations Marketing

The distinct –active- role of operations:

Inputs become Outputs after some
Transformation
 Operations example in Manufacturing:
Food Processing
INPUTS PROCESS OUTPUTS

Raw vegetables Cleaning Clean vegetables

Metal sheets Cutting/Rolling/Welding Cans

Energy, Vegetables Cutting Cut vegetables

Energy, Water, Cooking Boiled

Vegetables vegetables
Energy, Cans, Boiled Placing Can food
vegetables
 Operations example in service:
Health care
Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Types of Operations

Operation Examples

Goods producing Farming, mining, construction

Storage/transportation Warehousing, trucking, mail, taxis,

buses, hotels, location
Exchange Trade, retailing, wholesaling, renting,
leasing, loans
Entertainment Radio, movies, TV, concerts, recording

Communication Newspapers, journals, magazines, radio,

TV, telephones, satellite
Production Management:

Production management is a process of planning,

organizing, directing and controlling the activities of
the production function. It combines and transforms
various resources used in the production subsystem
of the organization into value added product in a
controlled manner as per the policies of the
organization.
Definitions:
E.S. Buffa defines production management as,
“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.”

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.”
Definition of Production Management

Production management deals with decision-making

related to the production process, So that the
resulting goods or service is produced accordance
with the quantitative specifications and demand
schedule with minimum cost.
Objectives of Production
Management

1 Right Quality
Ensuring the quality of the product is a crucial objective, as it
directly impacts the product's competitiveness in the market.
Production management must focus on maintaining high-quality
standards to satisfy customer needs.

2 Right Quantity
The manufacturing organization should be able to produce the
right quantity of products to meet customer demand. Effective
production planning and control are essential to achieve this
objective.
3 Right Time
Timely delivery of products is a key performance indicator for the
production department. Production management must ensure that
products are delivered to customers as per their requirements.

4 Right Cost
Minimizing the manufacturing cost is a critical objective, as it can be
a major differentiating factor for the product. Production
management must strive to optimize the use of resources and
reduce costs.
Scope of Production Management

Product Design Process Design Facility Location

Production management Production management The selection of the production

involves the conversion of ideas determines the overall process facility's location is a critical
into physical products. This route for converting raw decision, as it involves
includes decisions on the materials into finished goods, significant investments in land,
product's features, ensuring efficiency and cost- buildings, and machinery.
specifications, and effectiveness.
manufacturing processes.
Scope of Production Management (Con

Plant Layout and Production Planning Quality Control

Material Handling and Control
Production management must
Production management is This involves the advanced implement systems to maintain
responsible for the physical planning of production, setting the desired level of product
arrangement of production schedules, and monitoring the quality, ensuring customer
facilities and the efficient progress of products through satisfaction and a competitive
movement of materials during the manufacturing process. advantage.
the manufacturing process.
Importance of Production Management
1 Achieving Organizational Objectives
Production management helps businesses achieve
their goals by producing high-quality products that
satisfy customer needs and increase sales.

2 Enhancing Reputation and Goodwill

Effective production management leads to customer
satisfaction, which in turn enhances the firm's
reputation, goodwill, and image in the market.

3 Supporting Other Functional Areas

Production management supports other departments,
such as marketing, finance, and human resources, by
providing them with the necessary resources and
information.
Importance of
Production
Management
(Continued)
1 Facing Competition
Production management helps businesses stay
competitive by ensuring the timely delivery of
high-quality products at the right price, meeting
customer requirements.
2 Optimizing Resource Utilization
Production management facilitates the efficient
use of resources, such as labor and machinery,
to maximize output and minimize costs.

3 Expanding the Business

Effective production management, with its focus
on quality improvement and cost reduction,
helps businesses earn higher profits and expand
their operations.
Importance to Customers and Society
Higher Standard of Living

Production management drives the development of

new and improved products, which enhances the
standard of living for consumers.

Job Creation
Production activities generate both direct and indirect
employment opportunities, contributing to economic
growth and development.

Improved Quality and Lower Costs

Production management's focus on research and
development, as well as economies of scale, leads to better
quality products at lower prices.

Boosting the Economy

Efficient production management drives economic

Production Management in Action

Product Design
The production team works closely with the R&D
department to translate ideas into tangible
products that meet customer needs.

Process Planning
The production team determines the most
efficient manufacturing processes, ensuring
quality, cost-effectiveness, and on-time delivery.

Production Scheduling
The production team creates detailed schedules
to coordinate the flow of materials, labor, and
equipment, optimizing the overall production
process.
Quality Assurance
The production team implements rigorous quality
control measures to maintain high standards and
address any issues that arise during
manufacturing.
The Future of Production Manage

Automation and Robotics

Advancements in automation and robotics are transforming production
processes, improving efficiency, quality, and safety.

Data-Driven Decision Making

The increasing use of data analytics and smart manufacturing technologies
is enabling production managers to make more informed, data-driven
decisions.

Sustainability and Lean Production

Production management is embracing sustainable practices and lean
manufacturing principles to reduce waste, conserve resources, and
minimize environmental impact.

Agile and Flexible Production

Production management is becoming more agile and responsive to
changing market demands, allowing for faster product development and
customization.
 Objectives of Production Management
• Right quality: The quality of the product is a very important parameter for every
organization without quality the product cannot establish itself in the competitive
market. Today’s the market is a buyer’s market so one has to be very conscious
about the quality aspect.
• Right quantity: The manufacturing organization should always be in the position
to produce the product in the right number to the required quantity to satisfy the
customer needs.
• Right time: The time factor is very important in business timeliness of delivery is
an important parameter as it judges the effectiveness of the production
department.
• Right manufacturing cost: Manufacturing cost was established before the product
is actually manufactured because it can be a major distinguishing feature of the
product.
Production is an intentional act of producing something in an organized manner. It is
the fabrication of a physical object through the use of men, material and some
function which has some utility e.g. repair of an automobile, legal advice to a client,
banks, hotels, transport companies etc. The main inputs are information,
management, material, land, labor, and capital
 Scope of Production Management
Production Management is a vast concept it involves a huge chain.
Production starts with input and ends with output i.e. finished
product.
• Product Design: Product design deals with the conversion of the
ideas about the product into the reality
• Process Design: It is the decision making on overall process route
for converting the raw material into the finished goods
• Location of Facilities: The selection of location is a key decision as
large investment is made in building, land, and machinery.
• Plant Layout & material handling: Plant layout refers to the
physical arrangement of facilities. Material handling refers to the
moving of material from the storeroom to the machine & from
machine to the next during the process of manufacturing.
 Scope of Production Management
• Production Planning & Controlling: P.P.C can be defined as the
process of planning the production in advance, setting the exact
route of each item, fixing the starting & finishing dates for each
item to give production orders to shops & to follow up the
progress of products according to the orders
• Quality Control: Quality control may be defined as a system that is
used to maintain a desired level of quality in a product & service
• Material Handling: Material management is that aspect of
management function which is primarily concern with the
acquisition control & use of the needed material.
• Maintenance Management: Maintenance deal with taking care of
factory layout, types of machinery. This is essential for equipment
& machinery which are a very important part of the total
production process
 Importance of Production Management
The importance of production management to the business firm

1. Accomplishment of firm's objectives: Production management helps

the business firm to achieve all its objectives. It produces products,
which satisfy the customers' needs and wants. Therefore, the firm will
increase its sales. This will help it to achieve its objectives.
2. Reputation, Goodwill and Image: Production management helps the
firm to satisfy its customers. This increases the firm’s reputation,
goodwill and image. A good image helps the firm to expand and grow.
3. Help to introduce new products: Production management helps to
introduce new products in the market, it conducts Research and
development (R&D). This helps the firm to develop newer and better
quality products.
These products are successful in the market because they give full
satisfaction to the customers.
4. Supports other functional areas: Production management
supports other functional areas in an organization, such as
marketing, finance, and personnel. The marketing department will
find it easier to sell good-quality products, and the finance
department will get more funds due to increase in sales. It will
also get more loans and share capital for expansion and
modernization. The personnel department will be able to manage
the human resources effectively due to the better performance of
the production department.
5. Help to face competition: Production management helps the
firm to face competition in the market. This is because production
management produces products of right quantity, right quality,
and right price and at the right time. These products are delivered
to the customers as per their requirements.
6. Optimum utilization of resources: Production
management facilitates optimum utilization of resources
such as labor, machines, etc. Therefore, the firm can meet its
capacity utilization objective. This will bring higher returns to
the organization.
7. Minimize cost of production: Production management
helps to minimize the cost of production. It tries to maximize
the output and minimize the inputs. This helps the firm to
achieve its cost reduction and efficiency objective.
8. Expansion of the firm: The Production management helps
the firm to expand and grow. This is because it tries to
improve quality and reduce costs. This helps the firm to earn
higher profits. These profits help the firm to expand and
grow.
The importance of production management to customers and
society

1. Higher standard of living: Production management conducts

continuous research and development (R&D). Therefore, they
produce new and better varieties of products. People use these
products and enjoy a higher standard of living.
2. Generate employment: Production activities create many
different job opportunities in the country, either directly or
indirectly. Direct employment is generated in the production
area, and indirect employment is generated in the supporting
areas such as marketing, finance, customer support, etc.
3. Improves quality and reduces cost: Production management
improves the quality of the products because of research and
development. Because of large-scale production, there are
economies of large scale. This brings down the cost of
production. Therefore, consumer prices also reduce.
4. Spread effect: Because of production, other sectors also expand.
Companies making spare parts will expand.
The service sector such as banking, transport, communication,
insurance, BPO, etc. also expand. This spread
effect offers more job opportunities and boosts economy.
5. Create utility: Production creates form utility. Consumers can
get form utility in the shape, size and designs of the product.
Production also creates time utility, because goods are available
whenever consumers need it.
6. Boosts economy: Production management ensures optimum
utilization of resources and effective production of goods and
services. This leads to speedy economic growth and well-being of
the nation.
Problems of Production and Operation Management

• Problem of Location of the Plant

• Problem of Plant Layout
• Problem of Product Design
• Problem of Inventory and production control
• Problem of Quality Control
• Problem of Labour Control
• Problem of cost control and improvement