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CHAPTER 1

Introduction to Production and Operations Management

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Definition• Production

– Step by step conversion of one form of material to other through chemical or mechanical process.

• Production Management– Planning, organizing, directing and controlling the

activities of the production function.• Operation Management

– Service oriented industry is broadly known as operations management.

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Why study Operations Management?

•  find tools and information to become the best manager possible.

• many of the management tools learned in operations management may be applied to personal life and other disciplines.

• learn basic business ideas and their implementations.• Study will give you information on why some things

work and some things do not work.

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Historical Development • Adam Smith is the first person who introduced

Production Management in 1776.–Emphasized the division of labour–This effected in turn for improving the quality &

quantity of goods.• Charles Babbage in 1883 introduced the principle of

limiting skills as a basis for pay fixation.• Also agreeing on Adam Smith’s theory.

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Historical Development • Management techniques by F M Taylor.

– The workers should not be allowed to evolve their own operations.

– Proper selection, training and development programmers given to workers to get the best result.

– Close cooperation and understanding between workers and management.

– Importance of specialization & expertise to carry different operations.

• Short Comings on Taylor technique– Production Management was very slow.– Study materials were unavailable.– Output depended on man, job and job conditions.

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Production and Operations Management

• Production and operations management (POM) is the management of an organization’s production system.

• A production system takes inputs and converts them into outputs.

• The primary concern of an operations manager is the activities of the conversion process.

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Organising chart for a bank

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Organising chart for manufacturing

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Simplified Organizational Chart

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Information Flows

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Functional relationship with other departments

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Types of Production Systems

1. Flow Process 2.Intermittent Production

A. Mass Production

B. Assembly production

A. Job Production

B. Batch Production

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A production process, such as those used by chemical plants or refineries, that runs for very long periods without the start-and-stop behavior associated with intermittent production.Enormous capital investments are required for highly automated facilities that use special-purpose equipment designed for high volumes of production and little or no variation in the type of outputs

Continuous/Flow Production Processes

Intermittent Production SystemProduction is performed on a start-and-stop basis, such as for the manufacture of made-to-order products. Done to produce small volume and high diversity products.

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Mass ProductionA special type of flow production process using standardized methods and single-use machines to produce long runs of standardized items. Usually used to produce large volume and low diversity products.

Assembly ProductionIt is a type of Production system in which the assembly of different equipment takes place to produce the final product. Exp- Manufacturing of car.

Flow/Continuous System

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Intermittent SystemJob - With Job production, the complete task is handled by a single worker or group of workers. Jobs can be small-scale/low technology as well as complex/high technology.Low technology jobs: hairdressers; tailoringHigh technology jobs: film production; large construction projects (e.g. the Millennium Dome)

•In Batch production batches are produced in different time by same machineries. Exp- tablet production in pharmaceutical industries.

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Role of Operations Strategy Provide a plan that makes best use of resources

which; Specifies the policies and plans for using organizational resources and Supports Business Strategy .

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Importance of Operations Strategy• Companies often do not understand the differences between operational

efficiency and strategy– Operational efficiency is performing tasks well, even better than

competitors– Strategy is a plan for competing in the marketplace

• Operations strategy is to ensure all tasks performed are the right tasks• A business strategy is developed after taking into many factors and

following some strategic decisions such as;– What business is the company in (mission)– Analyzing and understanding the market (environmental scanning)– Identifying the companies strengths (core competencies)

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Three Inputs to a Business Strategy

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Developing an Operations Strategy

• Operations Strategy is a plan for the design and management of operations functions

• Operation Strategy developed after the business strategy• Operations Strategy focuses on specific capabilities which give it a

competitive edge. Common priorities include: – Cost: low production costs enables the company to price its product below

competitors– Quality: higher performance or a more consistent product can support a price

premium– Time: faster delivery or consistent on-time delivery can support a price premium– Flexibility: highly customized products or volume flexibility can support a price

premium

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SWOT Analysis

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Porter’s Five Forces Model

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Criteria of performance for production and operations management system

• Customer Satisfaction

• Efficiency (Doing the thing right)

• Effectiveness (Doing the right thing)

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Jobs/ Decisions of production and operation managementLong Term Intermediate Short TermProduct DesignQuality PolicyProcess selectionTechnology selectionSite selectionMachinery selectionPlant selectionManpower trainingWarehouses arrangementsEffluent and waste disposal systemsSafety and maintenance systemsSupply chain and outsourcing

ForecastingQuality implementation, inspection and control methodsMachinery and plant facility loading decisionsDeployment of manpowerOvertime decisionsShift working decisionsTemporary hiring or lay offPurchasing policyMake or buy decisionTransport and delivery arrangements

Production/operation schedulingMaterials allocation and handlingScheduling of manpowerBreakdown maintenanceTemporary manpowerProgress checkSupervisionImmediate attention to problem areas in labour, materials, machines, etc

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Classification of decision areas

• Technology selection and management

• Capacity management

• Scheduling/Timing/Time allocation

• System maintenance

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New ways of looking at decision areas

• Movement from traditional to modern classification

• Traditional orientation was on product and processes i.e. focus was internal or on the operations of the company

• Product centric approach/ self centric• Transition from product to people centric

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Transition from product to people centric

Target people

Decision type Affected aspect

Employees Hr Decisions Quality, productivity, safety and security

Business associates

Supply decisions

Supplies and capacities

Customers Timing decisions

Production/ operation planning and scheduling; Technology/ process

All the above Spatial decisions

Location of plants/facilities, location of business associates; layoffs

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Thank you