Chapter 10

MANAGING PRODUCTION
AND SERVICE OPERATIONS
By: Zirach Gilbert M. Magno and Sajedh Pormalejo
What is Operation?
• Operations refers to “any process that accepts inputs
and uses resources to change those inputs in useful
ways.” The inputs include land, labor, capital, and
entrepreneurship. The transformation process converts
the inputs into final goods or services.
• Examples of f in al goods and services are industrial
chemicals, services, electrical products, electronic
produ c ts , mec h an ic al dev ic es an d en gin eerin g
consultancy services.
What is Operations Management?
• Operations is an activity that needs to be managed by
competent persons. Aldag and Stearns accurately
def in ed operations management as “the process of
planning, organizing, and controlling operations to
reach objectives efficiently and effectively.
• Ef ficiency is related to “the cost of doing something, or
the resource utilization involved.
• Effectiveness refers to goal accomplishment.
• Operation s man agemen t mu s t be per formed in
coordination with the other functions like those for
marketing and finance.
Operations and the Engineer Manager
• The engineer manager is expected to produce some
output at whatever management level he is. If he is
assigned as the manufacturing engineer, his function is
“to determine and def in e the equipment, tools, and
processes required to convert the design of the desired
product into reality in an efficient manner.”
• The engineer in charge of operations in a construction
f ir m is responsible for the actual construction of
whatever bridge or road his company has agreed to put
up.
• The engineer, as operations manager, must find ways to
contribute to the production of quality goods or
services and the reduction of costs in his department.
• The typical operations manager is one with several
years of experience in the operations division and
posseses an academic background in engineering.
Types of Transformation Process
1. Manufacturing processes
a. Job shop
b. Batch flow
c. Worker-paced line flow
d. Machine-paced line flow
e. Batch/continuous flow hybrid
f. Continuous flow
2. Service processes
a. Service factory
b. Service shop
c. Mass service
d. Professional services
Manufacturing Processes
• Manufacturing processes are those that refer to the
making of products by hand or with machinery.
• A job shop is one whose production is “based on sales
orders for a variety of small lots. Job shops produce
c u s tom p rodu c ts , i n g e n e ral . Produ c ts may b e
manufactured within a short notice. The equipment
used are of the general purpose type. The type of layout
used by job shops is the process layout, where similar
machines are grouped together.
Batch Flow
• The batch f lo w process is where lots of generally own
designed products are manufactured. It is fur ther
characterized by the following:
1. There is flexibility to produce either low or high volumes.
2. Not all procedures are performed on all products.
3. The type of equipment used are mostly for general purpose.
4. The process layout is used.
5. The operation is labor intensive, although there is less
machine idleness.
6. The size of operation is generally medium-sized.
Worker-Paced Assembly Line
• An assembly line refers to a production layout arranged
in a sequence to accommodate processing of large
volumes of standardized products or services.
• The quality and output in a worker-paced assembly line
depends to a great extent to the skill of the labor utilized.
• The worker-paced assembly line is characterized by the
following:
1.The products manufactured are mostly standardized.
2. There is a clear process pattern.
3. Specialized equipment is used.
4. The size of operation is variable.
5. The process is worker-paced.
6. The type of layout used is the line flow.
7. Labor is still a big cost item.
Machine-Paced Assembly Line
• This type of production process produces mostly
standard products with machines playing a signif icant
role. Among its other features are as follows:
1. The process is clear, rigid pattern.
2. Specialized type of equipment is used.
3. The line flow layout is used.
4. Capital equipment is bigger cost item than labor.
5. Operation is large.
6. The process is machine-paced.
Continuous Flow
• The continuous f low processing is characterized by
“the rapid rate at which items move through the system.”
Its other characteristics are:
1. There is economy of scale in production, resulting
to low per unit cost of production.
2. The process is clear and very rigid.
3. Specialized equipment are used.
4. The line flow layout is used.
5. Operations are highly capital intensive.
6. The size of operations is very large.
7. Processing is fast.
Batch/Continuous Flow Hybrid
• This method of processing is a combination of the
batch and the continuous f low. Two distinct layouts are
used, one for batch and for the continuous f low. The
typical size of operation is also very large giving
opportunities for economies of scale.
Service Processes
• Service processes are those that refer to the provision of
services to persons by hand or with machinery.
• A service factory offers a limited mix of services which
results to some economies of scale in operations.
• The process layout preferred by the service factory is the
rigid pattern of line flow processing.
• A service shop provides a diverse mix of services. The
layout used are those for job shops or f ixed position and
are adaptable to various requirements.
• A mass service company provides services to large
number of people simultaneously.
• The process layout used is typically f ix ed position
where customers move through the layout.
Professional Services
• These are the companies that provide specialized
services to other f ir ms or individuals. Examples are
engineering or management consulting services,
design services, advertising agencies, legal services,
data processing services, and health services.
• Professional service f irms are, oftentimes, faced with
delivery problems brought about by nonuniform
demand. Strategies that may be used depending on the
situation are as follows:
1. The use of staggered work-shift schedules.
2. The hiring of part-time staff.
3. Providing the customer with opportunity to select
the level of service.
4. Installing auxiliary capacity or hiring subcontractors.
5. Using multiskilled floating staff.
6. Installing customer self-service.
Product Design
• Product designs refers to “the process of creating a set
of product specifications appropriate to the demands of
the situation.”
• Companies wanting to maintain or improve its market
share keeps a product design team composed of
engineers, manufacturing, and marketing specialists.
Production Planning and Scheduling
• Production planning may be def ined as “forecasting the
future sales of a given product, translating this forecast
into the demand it generates for various production
facilities, and arranging for the procurement of these
facilities.”
• Scheduling is the “phase of production control involved
in developing timetables that specify how long each
operation in the production process takes.”
Purchasing and Materials Management
• Firms need to purchase supplies and materials required
in the various production activities. The management of
purchasing and materials must be undertaken with a
high degree of ef ficiency and effectiveness specially in
firms engaged in high volume production.
• Materials management refers to “the approach that
seeks ef ficiency of operation through integration of all
materials acquisition, movement, and storage activities
in the firm.”
Inventory Control
• Inventory control is the process of establishing and
maintaining appropriate levels of reserve stocks of
goods. As supplies and materials are required by f irms
in the production process, these must be kept available
when they are needed.
• These are ways of achieving proper inventory control:
1. Determining reorder point and reorder quantity
2. Determining economic order quantity
3. The use of just-in-time(JIT) method of inventory control
4. The use of the material requirement planning(MRP) method
of planning and controlling inventories.
Work-Flow Layout
• Work-f lo w layout is the process of determining the
physical arrangement of the production system. In the
transformation process, the f low of work may be done
either haphazardly or orderly.
• The job of the operations manager is to assure that a
cost-effective work-f low layout is installed. A good work
-flow layout will have the following benefits:
1. Minimize investment in equipment.
2. Minimize overall production time.
3. Use existing space most effectively.
4. Provide for employment convenience, safety, and
comfort.
5. Maintain flexibility of arrangement and operation.
6. Minimize material handling cost.
7. Minimize variation in types of material-handling
equipment.
8. Facilitate the manufacturing (or service) process.
9. Facilitate the organizational structure.
Quality Control
• Quality control refers to the measurement of products
or services against standards set by the company.
Certain standard requirements are maintained by the
management to facilitate production and to keep
customers satisfied.
• Poor quality control breeds customer complaints,
returned merchandise, expensive lawsuits, and huge
promotional expenditures.
Summary
• The management of operations is very crucial to the
survival of f ir ms. Operations refer to the changing of
inputs into useful outputs. In the effort to manufacture
products (or services), operations management must
contribute its share in the accomplishment of the
company’s objectives.