Production & Operations

Management

UNIT 1
By Dr. Nitya Khurana
Assistant Professor
IITM, Janak Puri
Production Meaning
• Production function of an organisation is the part that produces
organisation’s product. In some organisation the product is physical
goods (refrigerators, breakfast cereals etc.), while in other it is a
service (insurance, healthcare etc.).
Production Meaning
• Production is the process by which raw materials are converted into
finished products. The end product of any production activity is the
creation of goods and service for human wants.
Production Function

Inputs
Outputs

Men Conversion
Machine Process
Material Goods &
Money Services
Management

Comparison
Actual Vs. Desired
Management Meaning
• Management as a process consist of planning organising actuating
and controlling to determine and accomplish the objectives by the
use of people and resources.
• If we combine the concept of production and management we can
say that production management involves application of planning,
organising, directing and controlling to the production process.
• In other words “the management of transformation process of inputs
into output is production management.”
Production Management
• According to H.A. Harding – “production management is concerned
with those processes which convert inputs into outputs. The inputs
are various resources like raw materials men, machines, methods etc,
and outputs are goods and services.”
Production Management
• According to E. S. Buffa - “production management deals with
decision making related to production processes so that the resulting
goods and services is produced according to specifications, in the
amounts and by the schedule demanded and at minimum cost.”
Operations Management
• It refers to the direction and control of the process that transform
inputs in to finished goods and services.
• This function is essential for systems that goods and services in both
profit and non-profit organization.
• Operation Management consists of techniques such as proper work
scheduling, assignment of jobs to workers and machines, managing
inventories, maintaining quality standards, sequencing of individual
items in product mix.
Difference between Production and
Operations
PRODUCTION OPERATIONS
• Manufacturing • Service
• Tangible output • Intangible output
• Can be inventoried • Can’t be inventoried
• Capital intensive • Labor intensive
• No direct customer contact • Direct customer contact
• Demand can be predicted • Demand can not be predicted
• Easy to automate • Difficult to automate
Objectives of Production and
Operations Management
• Cost
• Quality
• Flexibility
Output Flexibility
Variety
Volume
Input Flexibility
• On-time delivery
Decision Making in POM
• Type of Decisions • Areas of Involvement

Strategic Decisions Production processes

Production technology
Plant layout
Allocating resources
Long range capacity planning
Decision Making in POM
• Type of Decisions • Areas of Involvement

Technical Decisions Production planning system.

Resource requirements planning
system.
Control at each work centre.
Material management
Decision Making in POM
• Type of Decisions • Areas of Involvement

Operational Decisions Productivity and employees.

Total quality control.
Project planning and control
techniques.
Maintenance management and
reliability
Relationship of Operation
Management with Other
Functional Areas

Accounting

Finance
Marketing Operations

Human
Resource
Engineering
Scope and Functions of Production
and Operation Management
• Product selection and Design
• Process selection and planning
• Facility Location
• Layout Planning and Material Handling
• Capacity Planning
• Production Planning
• Production Control
• Inventory Control
• Quality Control
• Method Study
• Maintenance and Replacement
• Cost reduction and control
30 minutes delivery promise by
Domino’s Pizza
• When a customer calls, the order is flashed on the kitchen screen.
• 4 min are required for dough stretching, saucing and cheesing
depending on the nature of the order.
• 6 min are required in oven to bake.
• 5 min are required for cutting, packing and pick-up make up.
• 8 min are the delivery time.
• Total time is 23 min. 7 min extra are given to the delivery man for
unforeseen traffic and rain.
 System concept of Production
• A system is a logical arrangement of interrelated activities.
• A system may have components and variation in one component is
likely to affect the other components of the system e.g. a change in
rate of production will affect inventory, overtime hours, etc.
• Production system is the framework within which the production
activities of an organization are carried out
• At one end of the system are inputs and at the other end output.
Input and output are linked by certain processes or operations. These
processes or operation may be called production system
 Input Output Model of
Production System

Men

Material

Plant and Goods and

Money
Facilities services

Machines

Management
 Elements of a Production
System
• Inputs- physical and human resources utilized in the production process
• Conversion Process- series of operations performed on input material
• Output- products or completed parts resulting from the conversion
process
• Storage- storage of inputs, WIP and output
• Transportation- inputs are transported from one operation to another
in the production process
• Information- provides systems control through measurement,
comparison, feedback and correction
 Types of Production Systems

Types of
Production
Systems

Continuous Intermittent
Production Production

Mass
Process Assembly Job Batch
Production
Production Line Production Production
 Continuous or Flow Production

• Manufacturing large quantities of a single or at most few varieties of

products with a standard set of processes and sequences.
• Processing is done through a sequence of operations which form a
continuous movement or flow.
• The work flows through a series of interconnected operations in such
a way that material passes from one stage to another without waiting
or interruption
 Characteristics of Continuous
Production
• Volume of production very large
• Production of standardized products using standardized procedure
• Special purpose automatic machines
• Fixed path material handling equipment due to predetermined
sequence of operations
• Machines and equipment are arranged according to product layout
pattern
• Machine capacities are balanced so that materials fed at one end of
the process and finished product is received at the other end
Merits of Continuous Production
• Uniform quality of output
• Any delay at any stage is automatically detected
• Work in progress is minimum on account of sequence balancing
• Handling of materials is reduced due to set pattern of production line
• Repetitive nature of work makes control over material, cost and output simple
• Overhead per unit is reduced due to spreading of cost over large volumes of
output.
However, this method of production is very rigid. Fault in one
procedure will disturb the entire process
 Suitability of Continuous
production
• Standardized products
• High volume of production
• Uniform demand
• Material flow
• Preventive maintenance
 Types of Continuous Production
MASS PRODUCTION- Manufacturing of standardized parts or
components on large scale. Products are stocked in warehouses until
they are demanded in the market. The goods are produced either with
the help of a single operation or uses a series of operations.
• Parts manufactured are usually combined in assembly line for making different
products
• High degree of mechanization and automation
• Economies of scale due to large output volume
• Quality of output uniform
• In properly designed production processes individual expertise plays less
prominent role
• E.g. FMCG products, electronics, automobiles parts
 Types of Continuous Production
(Cont’d)
PROCESS PRODUCTION- Production is carried on continuously through
uniform and standardized sequence or process. single product is produced
and stocked in warehouses until it is demanded in the market. The flexibility
of these plants is almost zero because only one product can be produced
• Highly sophisticated and specialised machines Conveyors and automatic
transfer machines are used to move the materials from one stage to another.
• Low-skilled labour and skilled technicians are required.
• There is very less work-in-progress because material flow is continuous.
• The production planning and scheduling can be decided well in advance.
• The full production system is designed to produce only one specific type of
item
 Types of Continuous Production
(Cont’d)
• Types of process production
1. Analytical process- process of production in which raw material is
broken into different components. E.g. crude oil is analysed into gas,
kerosene, petrol, diesel
2. Synthetic process- involves mixing of two or more materials to
manufacture a product. E.g. lauric acid, myristic acid, plasmatic acid,
stearic acid, linoleic acid, etc., are synthesized to manufacture soap
 Analytical Process of
Production
Raw Material is broken into different products

Finished Product 1
l gas
a
Co
Raw Material Ammonical Liquor
Finished Product 2
Coal
Coa
l ta
r

Finished Product 3
 Synthetic Process of
Production
Mixing of two or more materials to manufacture a product.

Raw
sod Mater
a ial 1
- Cau Soap
stic
Raw Material 2- Finished Product
acids
al 3-
i
ater
w M
R fume
a
pe r
 Types of Continuous Production
(Cont’d)
• ASSEMBLY LINES- Two or more components are combined to
manufacture finished product. E.g. bicycles, televisions, automobiles
• In each assembly line machines must directly receive material from
the previous machine and pass it on directly to next machine.
Therefore machines must be arranged keeping the following
considerations in mind:
• Machines must be placed in accordance to sequence of operations
• Machines must be arranged such that every operator has a free and safe
access to each machine
• Space should be provided for movement of folk lifts, trucks, etc.
• The passage should not be blocked, and workers should not be in danger of
being hit by moving trollies
 Assembling Process of
Production
• Two or more components are combined to manufacture a
finished product.
Raw Material Parts
1 1
2
3 Finished Product
2
4

5 3

6
 Intermittent Production
• Intermittent production situations are those where the
facilities must be flexible enough to handle a variety of
products and sizes, or where the basic nature of activity
imposes change of important characteristics of the input
• No single sequence pattern of operations is appropriate.
• Product design changes from time to time
 Characteristics of Intermittent
Production
• Flow of production is not continuous
• Volume of production is generally small
• A wide variety of products are produced
• General purpose machines are used so as to be adaptable to wide
variety of operations
• Sequence of operations is not fixed, periodic adjustments are made to
suit different jobs
• Components are produces/procured for inventory, but they are
assembled as per customers orders
 Examples of Intermittent
Production
• The work of a goldsmith is purely based on the frequency of his
customer's orders. The goldsmith makes goods (ornaments) on a small-
scale basis as per his customer's requirements. Here, ornaments are not
done on a continuous basis.

• Similarly, the work of a tailor is also based on the number of orders he

gets from his customers. The clothes are stitched for every customer
independently by the tailor as per one's measurement and size. Goods
(stitched clothes) are made on a limited scale and is proportional to the
number of orders received from customers. Here, stitching is not done
on a continuous basis.
 Suitability of Intermittent
Production
• Production centers should be located in such a manner so that they
can handle a wide range of products
• Transportation facilities between production centers should be
flexible enough to accommodate variety of routes for different inputs
• A continuous flow of operations is difficult to maintain. Therefore
centers of production must have sufficient storage location
Types of Intermittent Production
• JOB PRODUCTION- Involves the manufacturing of a single complete
unit with the use of a group of operators and processes as per
customer’s orders. E.g. construction of house
Here, company accepts a contract to produce either one or few units
of a product strictly as per specifications given by the customer.
The product is produced within a given period and at a fixed cost. This
cost is fixed at the time of signing the contract
Types of Intermittent Production
(Cont’d)
Characteristics of job productions
• The product manufactured is custom-made and non-standardized
• Volume of output is generally very small
• Variable path material handling equipment are used
• A wide range of general purpose machines like grinders, drilling
machine, press, etc. are used
• Highly skilled labour is required to perform specialized jobs.
• There is disproportionate manufacturing cycle time. e.g. the time
needed to design the product may be more than the manufacturing
time.
Types of Intermittent Production
(Cont’d)
BATCH PRODUCTION- The manufacture of a product in small or large
batches or lots at intervals by a series of operations, each operation
being carried out on a whole batch before subsequent operation is
performed.
Thus, the work on any product is divided into operations and each
operation is completed for the whole batch before moving on to the
next operation
It is a mixture of mass production and job production,
In batch production flows, the production schedule is decided
according to specific orders or are based on the demand forecasts
Types of Intermittent Production
(Cont’d)
Characteristics of Batch Production
• A large variety of products are manufactured in lots or batches
• Both general purpose and special purpose machines are required
• Variable path material handling equipment is used
• Machines and equipment are arranged according to the sequence of
operations i.e. process layout is used
 Transformation Process
Environmental factors like customers,
government, competitors, economy, technology

Inputs
Transformation system
Capital Output
Alteration
Labor Goods
Transportation
Material Services
Storage
Equipment
Inspection

Action Action data data

Monitoring and Controlling

 What is Transformation Process
• Transformation process is an activity or group of activities that takes
one or more inputs, transforms and adds value to them and provides
output fir customers. Transformation processes include
1. Changes in physical characteristics of material (e.g. manufacturing)
2. Changes in location of material, information or customers (e.g.
transportation)
3. Changes in the ownership of material or information (e.g. retailing)
4. Storage or accommodation of material, information or customers
(e.g. warehouse)
5. Changes in physiological and psychological state of customer (e.g.
health care
 Lean Manufacturing
• Lean manufacturing is a systematic approach to identify and eliminate
wastes of all non value added activities through continuous improvement
that is adopted by world class, high performance firms.
• In lean, the traditional thinking of ‘cost + profit= selling price’ has been
changed to ‘selling price - cost= profit’. Under this redefined scenario the
only way to survive in market is to decrease cost by eliminating all forms of
waste.
• Specifically, lean focusses on
Reduction in cycle time
On time deliveries
Reduction in wip
Improvement in quality
Reduction in rework/wate
 Lean Manufacturing (Cont’d)
• Some of the common wastages that must be reduced are:
Overproduction
Defects
Unnecessary processing
Wasting human time and talent
Too many steps or moving around
Excessive transportation
Excessive inventory
• In lean, all the processes are analyzed in depth to identify non value
adding and avoidable steps that can be removed to improve the
efficiency of the transformation process
 Case study (Lean)
A LEADING BANK USES A LEAN APPROACH TO TRANSFORM ITS TARGET OPERATING
MODEL
A leading bank in Europe is in the process of a multiyear transformation of its operating
model. Prior to this effort, a benchmarking analysis found that the bank was lagging
behind its peers in several aspects. Branch employees handled fewer customers and sold
fewer new products, and back-office processing times for new products were slow.
Customer feedback was poor, and rework rates were high, especially at the interface
between the front and back offices. Activities that could have been managed centrally
were handled at local levels, increasing complexity and cost. Harmonization across borders
—albeit a challenge given that the bank operates in many countries—was limited.
However, the benchmark also highlighted many strengths that provided a basis for further
improvement, such as common platforms and efficient product-administration processes.
 Case study (Lean)
To address the gaps, the company set the design principles for a target operating model for its
operations and launched a lean program to get there. Using an end-to-end process approach, all the
bank’s activities were broken down into roughly 250 processes, covering everything that a customer
could potentially experience. Each process was then optimized from end to end using lean tools. This
approach breaks down silos and increases collaboration and transparency across both functions and
organization layers.
Employees from different functions took an active role in the process improvements, participating in
employee workshops in which they analyzed processes from the perspective of the customer. For a
mortgage, the process was broken down into discrete steps, from the moment the customer walks into
a branch or goes to the company website, until the house has changed owners. In the front office, the
system was improved to strengthen management, including clear performance targets, preparation of
branch managers for coaching roles, and training in root-cause problem solving. This new way of
working and approaching problems has directly boosted both productivity and morale.
 Case study (Lean)
The bank is making sizable gains in performance as the program rolls through the
organization. For example, front-office processing time for a mortgage has decreased
by 33 percent and the bank can get a final answer to customers 36 percent faster. The
call centers had a significant increase in first-call resolution. Even more important,
customer satisfaction scores are increasing, and rework rates have been halved. For
each process the bank revamps, it achieves a consistent 15 to 25 percent increase in
productivity.
And the bank isn’t done yet. It is focusing on permanently embedding a change mind-
set into the organization so that continuous improvement becomes the norm. This
change capability will be essential as the bank continues on its transformation
journey.
 Case study
Location of a plant has direct relevance to raw materials, market, human resources, civic
amenities transportation etc.
Around 1970 Government of India mooted the idea of expanding steel production under public
sector units to be established at suitable locations. A committee of eminent personalities was
formed to go through claims of (i) Vijaynagar Steel plant near Bellary in Karnataka, (ii) Salem Steel
in TN and (iii)Vishakapatam steel plant in A.P. Since it was under PSU the political pressure was
going on and if it was under private sector, there would not have been any kind of political
pressure.
The most important raw materials for steel plant are iron core power and coal. Again in iron ore
the iron percentage should be preferably more than 60% and ash content in coal should be less
than 30%. These factors enable production of iron and steel at competitive price. From experts’
reports the following brief was available:
 Case study
(a)Vishakhapatnam – The Iron ore is rich with 65% Iron and coal can be arranged from
MP and Bihar and Vishakhapatnam is well connected by broad gauge railway line to all
important cities and the place has sea port and airport. Hence this place has more
natural advantage than other cities.
(b)Salem – Iron ore was having 60 to 65%. Iron content and hence be economically
exploited. The coal is in lignite form which is low quality coal. Hence this needs to
be converted as coke for use. The place has broad gauge line and Madras sea port and
airport are nearby. This place was considered second preference.
(c)Vijaynagar – Bellary belt has Iron ore of 60% iron but coal has to come from
AP (Singareni Colliery). The place had meter gauge railway line and hence not well
connected to all India network. The seaport and airports were far away and hence this
place was not found suitable.
.
 Case study
As per the expert committee report steel plant work started Vishakhapatnam and
Salem and these plants came up as per the plan and are doing well. However, to
everyone’s surprise the them PM, Smt. Indira Gandhi, did foundation stone laying in
1971 at Toranagallu in Bellary district for Vijaynagar steel plant also. This ultimately
proved to be an election gimmick to please the votes, though the PSU unit did not
come up there at all. This is a clear example of how
politician try to fool gulliable voters by way of inaugurations/foundation stone laying
Steel plants are quite huge with township having about 50,000 to 1,00,000 people.
Hence requirements of housing, electricity, water, hospitals, education, institutions,
entertainment facilities are very essential. The investment is huge and this helps to
develop the surrounding area quite well and there is abundant scope for ancillary
units, engineering services and employment inside and outside the steel plant.
 Case study
Both Vishakhapatnam and Salem got these advantages and production standard
as per the plan and these industries continue to run profitably. The expert
committee had made comment on Vijaynagar proposal that, the unit can be
viable if it uses latest foreign technology. In this method oxygen is injected to
force oxidation of ores instead of natural air. Though PSU was not started as a
private enterprise, Jindal Group took interest and applied for license to the
Central Government. By the year 1990 they obtained license and Vijaynagar Steel
plant with foreign technology and decided to make only sheet products, which
fetch higher prices. They also kept bare minimum workforce and executives to
make it economical right from inception. By this time broad gauge lines were
formed and nearest seaport was Goa and hence some problems were taken care.
This unit became operative in about 3 years and is also running profitably.
 Questions
• 1. What are essential factors for locating a Steel plant and why?
• 2. Explain how political pressures and pulls effect decision making
and delays in starting industries.
• 3. Explain how it was possible to make Vijaynagar plant visible.
• 4. Technology, HR, natural facilities play vital role to start new
enterprise. Explain your views.