PRODUCTION & OPERATION
MANAGEMENT
Engr. Roderick L. Calaguio
Presenter/Discussant MME Student
ME 201 Strategic Management of an
Engineering Enterprise
Introduction
Production/operations management is the process, which
combines and transforms various resources used in the
production/operations subsystem of the organization into value added
product/services in a controlled manner as per the policies of the
organization. Therefore, it is that part of an organization, which is
concerned with the transformation of a range of inputs into the required
(products/services) having the requisite quality level.
The set of interrelated management activities, which are involved
in manufacturing certain products, is called as production management. If
the same concept is extended to services management, then the
corresponding set of management activities is called as
operations management.
Historical Evolution of Production
and Operations Management
For over two centuries operations and production management
has been recognised as an important factor in a country‟s
economic growth.
The traditional view of manufacturing management began
in eighteenth century when Adam Smith recognised the
economic benefits of specialisation of labour. He recommended
breaking of jobs down into subtasks and recognises workers to
specialised 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. From then
till 1930, many techniques were developed prevailing the
traditional view. Brief information about the contributions to
manufacturing management is shown in the Table 1.1.
Table 1.1 Historical summary of operational management
Date Contribution Contributor
1776 Specialization of labour in manufacturing Adam Smith
1799 Interchangeable parts, cost accounting Eli Whitney and others
1832 Division of labour by skill; assignment of Charles Babbage
jobs by skill; basics of time study
1900 Scientific management time study and work Frederick W. Taylor
study developed; dividing planning and
doing of work
1900 Motion of study of jobs Frank B. Gilbreth
1901 Scheduling techniques for employees, Henry L. Gantt
machines jobs in manufacturing
1915 Economic lot sizes for inventory control F. W. Harris
Date Contribution
Contributor
1927 Human relations; the Hawthorne studies Elton Mayo
1931 Statistical inference applied to product W. A. Shewart
quality: quality control charts
1935 Statistical sampling applied to quality H. F. Dodge and
control: inspection sampling plans H. G. Roming
1940 Operations research applications in World P. M. Blacker and
War II Others.
1946 Digital Computer John Mauchlly and
J. P. Eckert
1947 Linear Programming G. B. Dantzig, William
& others.
1950 Mathematical programming, on-linear and A. Charnes, W. W.
stochastic processes Cooper & others
1951 Commercial digital computer: large-scale Sperry Univac
computations available.
Date Contribution Contributor
1960 Organizational behaviour: continued study L. Cummings, L. Porter
of people at work
1970 Integrating operations into overall strategy W. Skinner J. Orlicky
and policy, Computer applications to and G. Wright
manufacturing, Scheduling and control,
Material requirement planning (MRP)
1980 Quality and productivity applications from W. E. Deming and
Japan: robotics, CAD-CAM J. Juran
Concept of Production
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.
Outputs:
Inputs: Transformation
• Men Process:
• Product Design • Product
• Materials • Product Planning • Services
• Machines • Production Control
• Information • Maintenance
• Capital
Continuous:
•Inventory
•Quality
•Cost
Environment Feedback Information
www.newagepublisher.co Fig. 1.1 Schematic Production System
m
Production System
The production system of an organization is that part, 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 above.
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.
Production systems can be classified as Job Shop, Batch, Mass and
Production Continuous
systems.
Continuous Production
Mass Production
Batch
Production
Job-Shop
Production
www.newagepublisher.co Output / Product Variety
m Fig. 1.2 Classification of Production Systems
Job Shop Production
Job shop production are characterised by manufacturing of 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.
Characteristics
The Job-shop production system is followed when there is:
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.
5.Detailed planning is essential for sequencing the requirements of
each product, capacities for each work centre and order priorities.
Advantages
Following are the advantages of job shop production:
1.Because of general purpose machines and
facilities variety of products can be produced.
2.Operators will become more skilled and competent, as each
job gives them learning opportunities.
3.Full potential of operators can be utilised.
4.Opportunity exists for creative methods and innovative ideas.
Limitations
Following are the limitations of job shop production:
1.Higher cost due to frequent set up changes.
2.Higher level of inventory at all levels and hence higher inventory
cost.
3.Production planning is complicated.
4.Larger space requirements.
Batch Production
Batch production is defined by American Production and
Inventory Control Society (APICS) “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 characterised by the manufacture of
limited number of products produced at regular intervals and stocked awaiting
sales.
Characteristics
Batch production system is used under the following circumstances:
1.When there is shorter production runs.
2.When plant and machinery are flexible.
3.When 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.When manufacturing lead time and cost are lower as compared to job
order production.
Advantages
Following are the advantages of batch production:
1.Better utilisation of plant and machinery.
2.Promotes functional specialisation.
3.Cost per unit is lower as compared to job order production.
4.Lower investment in plant and machinery.
5.Flexibility to accommodate and process number of products.
6.Job satisfaction exists for operators.
Limitations
Following are the limitations of batch production:
1.Material handling is complex because of irregular and longer
flows.
2.Production planning and control is complex.
3.Work in process inventory is higher compared to continuous
production.
4.Higher set up costs due to frequent changes in set up.
Mass Production
Manufacture 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 standardisation exists and all outputs follow
the same path.
Characteristics
Mass production is used under the following circumstances:
1.Standardisation 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.
Advantages
Following are the advantages of mass production:
1.Higher rate of production with reduced cycle time.
2.Higher capacity utilisation due to line balancing.
3.Less skilled operators are required.
4.Low process inventory.
5.Manufacturing cost per unit is low.
Limitations
Following are the limitations of mass production:
1.Breakdown of one machine will stop an entire production line.
2.Line layout needs major change with the changes in the product
design.
3.High investment in production facilities.
4.The cycle time is determined by the slowest operation.
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.
Characteristics
Continuous production is used under the following circumstances:
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.
Advantages
Following are the advantages of continuous production:
1.Standardisation of product and process sequence.
2.Higher rate of production with reduced cycle time.
3.Higher capacity utilisation due to line balancing.
4.Manpower is not required for material handling as it is completely
automatic.
5.Person with limited skills can be used on the production line.
6.Unit cost is lower due to high volume of production.
Limitations
Following are the limitations of continuous production:
1.Flexibility to accommodate and process number of products does
not exist.
2.Very high investment for setting flow lines.
3.Product differentiation is limited.
Production Management
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.”
Objectives of Production Management
The objective of the production management is „to produce goods
services of right quality and quantity at the right time and right manufacturing
cost‟.
1.Right Quality
2.Right Quantity
3.Right Time
4.Right Manufacturing Cost
Operating System
Operating system converts inputs in order to provide outputs which are
required by a customer. It converts physical resources into outputs,
the function of which is to satisfy customer wants i.e., to provide some
utility for the customer. In some of the organization the product is
a physical good (hotels) while in others it is a service (hospitals).
Bus and taxi services, tailors, hospital and builders are the examples
of an operating system.
Everett E. Adam & Ronald J. Ebert define operating system as, “An
operating system ( function) of an organization is the part of an
organization that produces the organization’s physical goods
and services.”
Ray Wild defines operating system as, “An operating system is a
configuration of resources combined for the provision of goods or
services.”
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.
Distribution between Manufacturing Operations and
Service
Operations
Following characteristics can be considered
for distinguishing
manufacturing operations with service operations:
1.Tangible/Intangible nature of output
2.Consumption of output
3.Nature of work (job)
4.Degree of customer contact
Manufacturing is characterised by tangible
outputs (products), outputs that customers consume
overtime, jobs that use less labour and more equipment,
little customer contact, no customer participation in the
conversion process (in production), and
sophisticated methods for measuring production
activities and resource consumption as product are
made.
Operations Management
A Framework for Managing Operations
PLANNING
Activities that establishes a course of action and guide future decision-
making is planning. The operations manager defines the objectives for the
operations subsystem of the organization, and the policies, and procedures
for achieving the objectives. This stage includes clarifying the role
and focus of operations in the organization‟s overall strategy. It also
involves product planning, facility designing and using the conversion
process.
ORGANIZING
Activities that establishes a structure of tasks and authority.
Operation managers establish a structure of roles and the flow of
information within the operations subsystem. They determine the activities
required to achieve the goals and assign authority and responsibility for
carrying them out.
CONTROLLING
Activities that assure the actual performance in accordance with planned
performance. To ensure that the plans for the operations subsystems
are accomplished, the operations manager must exercise control by
measuring actual outputs and comparing them to planned operations
management. Controlling costs, quality, and schedules are the important
functions here.
BEHAVIOUR
Operation are concerned with how their efforts to
managers
plan, organize, and control affect human behaviour. They also want
to
know how the behaviour of subordinates can affect
planning, organizing, and management‟s
controlling actions. Their interest lies in
decision-making behaviour.
MODELS
As operation managers plan, organise, and control the conversion process,
they encounter many problems and must make many decisions. They can
simplify their difficulties using models like aggregate planning models for
examining how best to use existing capacity in short-term, break
even analysis to identify break even volumes, linear programming
and computer simulation for capacity utilisation, decision tree analysis
for long-term capacity problem of facility expansion, simple median model
for determining best locations of facilities etc.
Fig. 1.3 General model for managing operations
nd
eduling Conversion Process
Models Behaviour
Controlling
Material Control
•Inventory control
Material requirement planning
anaging for World-Class Comp
anese manufacturing
or quality
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Objectives of Operations Management
Objectives of operations management can be categorised into customer
service and resource utilisation.
Customer Service
The first objective of operating systems is the customer service to the
satisfaction of customer wants. Therefore, customer service is a key objective
of operations management. The operating system must provide something to
a specification which can satisfy the customer in terms of cost and
timing. Thus, primary objective can be satisfied by providing the „right
thing at a right price at the right time‟.
These aspects of customer service—specification, cost and timing— are
described for four functions in Table 1.2. They are the principal sources of
customer satisfaction and must, therefore, be the principal dimension of
the customer service objective for operations managers.
TABLE 1.2 Aspects of customer service
Principal Function Principal customer wants
Primary Considerations Other Considerations
Manufacture Goods of a given, Cost, i.e., purchase price or
requested or acceptable cost of obtaining goods.
specification Timing, i.e., delivery delay
from order or request to
receipt of goods.
Transport Management of a given, Cost, i.e., cost of
requested or acceptable movements. Timing, i.e.,
specification 1.Duration or time to
move.
2.Wait or delay from
requesting to its
commencement.
Principal Function Principal customer wants
Primary Considerations Other Considerations
Supply Goods of a given, Cost, i.e., purchase price or
requested or acceptable cost of obtaining goods.
specification Timing, i.e., delivery delay
from order or request to
receipt of goods.
Service Treatment of a given, Cost, i.e., cost of
requested or acceptable movements. Timing, i.e.,
specification 1.Duration or time required
for treatment
2.Wait or delay from
requesting treatment to its
commencement.
TABLE 1.3 The twin objectives of operations
management
The customer service objective. The resource utilisation
objective.
To provide
agreed/adequate levels of To achieve adequate
customer service (and hence levels of
customer satisfaction) by resource utilisation (or
providing goods or services with productivity) e.g.,
the right specification, at to
the right cost and at the right achieve agreed levels
time. of utilisation
of materials, machines
and labour.
Scope of Production and Operations
Management
Production and 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 adoptability. It distinguishes
itself from other functions such as personnel, marketing, finance, etc., by
its primary concern for „conversion by using physical resources.‟
Following are the activities which are listed under production and
operations management functions:
1.Location of facilities
2.Plant layouts and material handling
3.Product design
4.Process design
5.Production and planning control
6.Quality control
7.Materials management
8.Maintenance management.
LOCATION OF FACILITIES
Location of facilities for operations is a long-term capacity decision
which involves a long term commitment about the geographically static
factors that affect a business organization. It is an important strategic
level decision- making for an organization. It deals with the questions
such as „where our main operations should be based?‟
PLANT LAYOUT AND MATERIAL HANDLING
Plant layout refers to the physical arrangement of facilities. It is
the configuration of departments, work centres and equipment in the
conversion process. The overall objective of the plant layout is to
design a physical arrangement that meets the required output quality
and quantity most economically.
According to James Moore, “Plant layout is a plan of an optimum
arrangement of facilities including personnel, operating equipment,
storage space, material handling equipments and all other supporting
services along with the design of best structure to contain all these facilities”.
„Material Handling‟ refers to the „moving of materials from the store room to
the machine and from one machine to the next during the process of
manufacture‟. It is also defined as the „art and science of moving, packing
and storing of products in any form‟. It is a specialised activity for a
modern manufacturing concern, with 50 to 75% of the cost of production.
PRODUCT DESIGN
Product design deals with conversion of ideas into reality. Every
business organization have to design, develop and introduce new products as
a survival and growth strategy. Developing the new products and launching
them in the market is the biggest challenge faced by the organizations.
PROCESS DESIGN
Process design is a macroscopic decision-making of an overall process route
for converting the raw material into finished goods. These
decisions encompass the selection of a process, choice of technology,
process flow analysis and layout of the facilities.
PRODUCTION PLANNING AND CONTROL
Production planning and control can be defined as the process of planning the
production in advance, setting the exact route of each item, fixing the starting
and finishing dates for each item, to give production orders to shops and to
follow up the progress of products according to orders.
Planning is deciding in advance what to do, how to do it, when to do it and
who is to do it. Planning bridges the gap from where we are, to where we
want to go.
Routing may be defined as the selection of path which each part of the
product will follow, which being transformed from raw material to
finished products.
Scheduling determines the programme for the operations.
Scheduling may be defined as „the fixation of time and date for each
operation‟ as well as it determines the sequence of operations to be followed.
Fig. 1.4 Scope of Location
Production and Of
Operations Maintenance Facilities Plant Layout
Management Management & Material
Handling
Material Production/ Product
Management Operations Design
Management
Quality Process
Control Design
Production
Planning and
Control
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Dispatching is concerned with the
starting the processes. It gives necessary
authority so as to start a particular work, which
has already been planned under „Routing‟ and
„Scheduling‟.
QUALITY CONTROL
Quality Control (QC) may be defined as „a system that is used to maintain a
desired level of quality in a product or service‟. It is a systematic control of
various factors that affect the quality of the product. Quality control aims at
prevention of defects at the source, relies on effective feed back system and
corrective action procedure.
Quality control can also be defined as „that industrial management
technique by means of which product of uniform acceptable quality is
manufactured‟. It is the entire collection of activities which ensures that the
operation will produce the optimum quality products at minimum cost.
The main objectives of quality control
are:
• To improve the companies income by making the production more
acceptable to the customers i.e., by providing long life, greater
usefulness, maintainability, etc.
•To reduce companies cost through reduction of losses due to defects.
•To achieve interchangeability of manufacture in large scale production.
•To produce optimal quality at reduced price.
•To ensure satisfaction of customers with productions or services or
high quality level, to build customer goodwill, confidence and reputation
of manufacturer.
•To make inspection prompt to ensure quality control.
•To check the variation during manufacturing.
MATERIAL
MANAGEMENT
Materials management is that aspect of management function which is
primarily concerned with the acquisition, control and use of materials needed
and flow of goods and services connected with the production process having
some predetermined objectives in view.
The main objectives of materials management are:
• To minimise material
cost.purchase, receive, transport and store materials efficiently and to
• reduce
To the related cost.
•To cut down costs through simplification, standardisation, value analysis,
import substitution, etc.
•To trace new sources of supply and to develop cordial relations with them
in order to ensure continuous supply at reasonable rates.
•To reduce investment tied in the inventories for use in other
productive
purposes and to develop high inventory turnover ratios.
MAINTENANCE MANAGEMENT
In modern industry, equipment and machinery are a very important part of the
total productive effort. Therefore, their idleness or downtime becomes
are very expensive. Hence, it is very important that the plant machinery
should be properly maintained.
The main objectives of maintenance management are:
1.To achieve minimum breakdown and to keep the plant in good
working condition at the lowest possible cost.
2.To keep the machines and other facilities in such a condition that permits
them to be used at their optimal capacity without interruption.
3.To ensure the availability of the machines, buildings and services required
by other sections of the factory for the performance of their functions at
optimal return on investment.
END OF
PRESENTATION
Reference:
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