Industrial Operations Management

EGME3210
Department of Engineering

Chapter 1 Operations
Management Concepts

Dr. Rajakumar Sundaram

Office: ME213
[email protected]
 Chapter 1 Operations Management Concepts

Course Objectives Learning Outcomes

At the end of the semester, this At the end of the semester, the student
course should enable the students who satisfactorily completes the
to: course should be able to:

1. Understand the concept of 1. Identify classification and

manufacturing organization as well component of manufacturing system.
as the technology of production.
3. Be aware of role of operation
4. Define operation management
management in business
concept.
competitiveness.
5. Define operation strategy and
analysis.
1.1 Introduction
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
requisite 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 as per the policies of the
organization.
The set of interrelated management activities, which are involved in manufacturing
certain products is called as production management or manufacturing
management.

If the concepts and activities of production management are extended to services

management, then the corresponding set of management activities is called as
operations management.
1.2 Historical Development
The traditional view of manufacturing management began in eighteenth
century when Adam Smith recognized the economic benefits of
specialization of labour. He recommended breaking of jobs down into
sub-tasks and recognizes workers to specialized tasks in which they
would become highly skilled and efficient.
In the early twentieth century, F.W. Taylor implemented Smith’s
theories and developed scientific management.
Workers were studied in great detail to eliminate wasteful efforts and
achieve greater efficiency. Operations Management was a shift in the
service and manufacturing sectors of the economy. As service sector
became more prominent, the change from ’production’ to operations’
emphasized the broadening of our field to service organizations.
1.3 Concept of Production

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
requisite 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’. Thus production is a value addition process. At each stage of
processing, there will be value addition.

Edwood Buffa defines production as ’a process by which goods and services

are created’.
Some examples of production are: manufacturing custom-made products like, boilers with a
specific capacity, constructing flats, some structural fabrication works for selected customers,
etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television,
etc.
1.4 Production System
Production system is ’that part of an organization, which produces products of
an organization. It is that activity whereby resources, flowing within a defined
system, are combined and transformed in a controlled manner to add value in
accordance with the policies communicated by management’. A simplified
production system is shown below:

Figure 1.1: Schematic production system (Source: Garg, A.K., Production and Operations Management,
McGrawHill, 2012)
The production system has the following characteristics:
1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and
improve system performance.
1.5 Classification of Production Systems
1.5.1 Job-Shop Production

Job-shop production are characterized by manufacturing 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. Job-shop Production is characterized by

1. High variety of products and low volume.

2. Use of general purpose machines and
facilities.
3. Highly skilled operators who can take up
each job as a challenge because of
uniqueness. 4. 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.
Figure 1.3: Example of a Customized job-shop paint work (source:
www.custommotorcycleideas.blogspot.com)
 1.5.2 Batch Production
Batch Production 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 characterized by the manufacture of limited
number of products produced at regular intervals and stocked awaiting sales.
Batch Production is characterized by
1. Shorter production runs.
2. Plant and machinery are flexible.
3. 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.
4. Manufacturing lead-time and cost are lower as compared to job order
production.
Batch Production examples
1.5.3 Mass Production
Manufacturing of discrete parts or assemblies using a continuous process are called Mass
Production. This production system is justified by very large volume of production. The
machines are arranged in a line or product layout. Product and process
standardization exists and all outputs follow the same path. Mass Production is characterized
by
1. Standardization of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output
rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
Mass Production Examples
1.5.4 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.
Continuous Production is characterized by
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final
product.
5. Planning and scheduling is a routine action.
Continuous Production Examples
1.6 Production Management
E.S. Buffa defines production management as follows:

’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’.

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.
1.6.1 Objectives of Production Management
The objective of the production management is ’to produce goods and
services of Right Quality and Quantity at the Right time and Right
manufacturing cost’.
1. Right Quality: The quality of product is established based upon
the customers need. The right quality is not necessarily being the
best quality. It is determined by the cost of the product and the
technical characteristics as suited to the specific requirements.
2. Right Quantity: The manufacturing organization should produce
the products in right number. If they are produced in excess of
demand the capital will block up in the form of inventory and if the
quantity is produced in short of demand, leads to shortage of
products.
3. Right Time: Timeliness of delivery is one of the important
parameter to judge the effectiveness of production department. So,
the production department has to make the optimal utilization of
input resources to achieve its objective.
4. Right Manufacturing Cost: Manufacturing costs are established
before the product is actually manufactured. Hence, all attempts
should be made to produce the products at pre- established cost,
so as to reduce the variation between actual and the standard (pre-
established) cost.
1.7 Scope of Operation Management
Operations Management concern with the conversion of inputs into
outputs, using physical resources, so as to provide the desired
utilities to the customer while meeting the other organizational
objectives of effectiveness, efficiency and adaptability. It distinguishes
itself from other functions such as personnel, marketing, finance, etc.
by its primary concern for ’conversion by using physical resources’.

The activities, which are listed under Production and Operations

Management functions:
Scope of Operation Management
References
1. Everett, E. Adam, Jr., Ronald, J.Ebert, Production and
Operations Management, Prentice-Hall of India Private Limited, 5th
Edition, 1994.
2. R. Pannerselvam, Production and Operations Management,
Prentice-Hall of India Private Limited, 2012.
3. Joseph, G. Monks, Operations Management, McGraw-Hill
International Edition, 3rd Edition.
4. S. Anil Kumar, N. Suresh, Production and Operations
Management, New Age International (P) Limited Publishers, 2nd
Edition, 2008.