Production Operations Management and TQM

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Introduction to Production and Operations Management

Module 001 Introduction to Production and

Operations Management

At the end of this module, you are expected to:

1. Be oriented with the different strategic management process.
2. Determine the importance of production management to business
organization
3. Examine the functions and importance of production management
4. Analyze the different types of productivity
5. Examine the activities related to operations management

Introduction to Production Management

Production is an act of creating something useful and according to Deepu2000 Follow.
(2016, December 01). Production management. Retrieved from
https://www.slideshare.net/deepu2000/production-management-69710952, production
management refers to the planning, acquisition, utilization, and control of physical resources
employed in the provision of goods and services. To produce useful goods and services that will
satisfy customers' needs and wants and earn profit for the company, planning, organizing, directing,
and controlling the manufacturing activities is involved in the process.

According to Production Management System (n.d.) Retrieved from

https://www.sjf.tuke.sk/transferinovacii/pages/archiv/transfer/28-2013/pdf/036-038.pdf, the
importance of production management to the business organization are as follows:
1. It helps in the accomplishment of the business organization's objectives.
2. It increases the reputation, goodwill, and image of business organizations.
3. It helps in introducing new products.
4. It supports other business organization's functional areas.
5. It helps the business to face competition in the market.
6. It facilitates optimum resource utilization.
7. It helps to minimize production costs.
8. It helps in the expansion of a business.

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 Production management is important also to customers and society, and from the same
source, its importance was given, and these are
1. Higher standard of living
2. Employment generation
3. Quality improvement and cost reduction
4. Spread effect
5. Creates utility
6. Boosts economy

According to Ranjan, P. (2017, May 02). Production management, meaning, nature,

function, PPC, production pla... Retrieved from
https://www.slideshare.net/PrashantRanjan35/production-management-meaning-nature-
function-ppc-production-planning-control , production management has the following
functions:

Figure 1 Functions of Production Management

Ranjan, P. (2017, May 02). Production management, meaning, nature, function, PPC, production pla... Retrieved from
https://www.slideshare.net/PrashantRanjan35/production-management-meaning-nature-function-ppc-production-planning-control

1. Selection of product and design

Selecting the right product to produce, followed by selecting the right design
for the product. While doing such, care should be taken because the business's
success and survival depend on it. Detailed evaluation of all the other alternative
products should be done first before the selection of the product. Product design
should be according to the customers' requirements. Maximum value at the lowest
cost must be given to customers.
2. Selection of production process
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Introduction to Production and Operations Management

The right production process must be selected. Production management

must decide about the type of machines, material handling system, type of
technology,etc.
3. Selecting the right production capacity
To match the demand for the product, the right production capacity must be
selected by production management—the reason why is that more or less capacity
will create problems. The production manager must plan the capacity for both short
and long term production. A production manager must use break-even analysis for
capacity planning.

4. Production planning
It is included in production management. It deals with deciding the routing
and scheduling.
• Routing – deciding the work path and the operation sequence. Finding
out the best and the most economical operation sequence to be
followed in the process of manufacturing is the main objective of
routing. It ensures a smooth flow of work.

• Scheduling – it refers to deciding when to start and when to complete a

particular production activity.

5. Production control
Monitoring and controlling the production should be done by the production
manager. Finding out whether the actual production is done as planned should be done
by the manager. If there are deviations, necessary steps are then taken by the manager
so as to correct such deviation.

6. Quality and cost control

In today's competitive world, a lot of importance is given to quality and cost
control. To satisfy customers' demands, which is to have good quality products at the
lowest prices, production managers should continuously improve products' quality.
Together with this is for him to ensure that essential steps are taken to reduce his
products' costs.

7. Inventory control
The production manager's inventory level must be monitored because if there
will be overstocking, the working capital will be blocked, and spoilage, wastage, and

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 misuse of materials may happen. Likewise, if there will be understocking, production
will not take place as per schedule, which may lead to delivery problems.

8. Maintenance and replacement of machines

Efficient system for continuous inspection, cleaning, oiling, machine and
equipment, and spare parts maintenance and replacement should be considered and
implemented by the production manager. This prevents machine breakdown and avoids
production halts.

Integrated Production Management

According to Integrated Production Management (n.d.) Retrieved from
https://www.researchgate.net/publication/301675453_INTEGRATED_PRODUCTION_MAN
AGEMENT , integrated production management refers to the use of advanced manufacturing
technology ( CIM, additive manufacturing, robotics, mechatronics and automation, micro
and nano factories, sustainable and green manufacturing), JIT, TQM, human capital
perspective, and human resource management. Businessmen should realize the importance
of an integrated production management system because it can decrease costs and increase
output, which in turn can make a profit increase. In the said study, the development of
methods for integrating production management applications under production and other
management system was the focus.

Productivity
According to Productivity and Operation Management (n.d.) Retrieved from
https://www.slideshare.net/shreyasmetri/productivity-and-operation-management,
productivity refers to production process output per unit of input. To produce more with
less is productivity. There are different types of productivity, and these are:
1. Partial productivity – when the resources of productivity are measured
separately. It plays an important role in productivity improvement. Productivity
resources include labor productivity, capital productivity, and material
productivity.

2. Total factor productivity – many of the resource inputs are available within the
business organization, while few others are purchase are present in the
production process.

3. Total productivity – productivity is calculated, considering all the resources. It is

a qualitative and systematic approach to complete the products considering the
timer, price, and quality. It provides a systematic structure and framework for
business organization and profitability increase.

System Productivity
System productivity is all about measuring the whole system in a certain firm if each
part is working well – if the output is greater than the input in processing the said output.
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Introduction to Production and Operations Management

Let’s define first the term “Productivity”. According to Productivity and Operation
Management (n.d.) Retrieved from https://www.slideshare.net/shreyasmetri/productivity-
and-operation-management, productivity refers to the measure of the ability of a business
firm to produce goods and services from the given number of resources: capital, human
resource, land, knowledge, and time. The said resources may be combined in producing
goods and services.

Capital Productivity
Capital productivity refers to the company's efficiency of converting capital inputs
into output. When output grows faster than capital inputs, productivity grows. According
to What is productivity and how is it measured? (n.d.). Retrieved from
https://www.pc.gov.au/news-media/pc-news/previous-editions/pc-news-may-
2015/productivity-and-how-measured, productive efficiency of an organization or firm
can be improved in three ways:
1. Improvement in technical efficiency – with the given level of input and efficient
use of existing technology, output increase can be achieved.

2. Technological progress and organizational change – Expanding output with a little

required input may be achieved as the organization adopts new organizational
structures, develops and applies new technologies and approaches.

3. Increasing returns to scale – Organization's unit cost of production can fall as it

expands because it becomes financially advantageous to adopt existing
technologies.

Labor Productivity
Understanding labor productivity may be done easily by comparing two workers.
For instance, Worker A, who can make 10 pieces of rag for an hour compared to Worker B,
who can make 5 pieces in the same hour. It is so evident that Worker A is more productive
than Worker B. According to OpenStax. (n.d.). Principles of Economics. Retrieved from
https://opentextbc.ca/principlesofeconomics/chapter/20-2-labor-productivity-and-
economic-growth/, labor productivity refers to the value that each worker or employee
creates per unit of his input.

According to the same source, there are factors which determine labor productivity
and these are the following:
1. Human capital refers to the accumulated knowledge that an individual acquired
from education and experience, skills, and expertise that an average employee
possesses. Usually, the more educated an employee means higher human capital,
and labor productivity becomes higher.
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 2. Technological change – It is a combination of invention and innovation. Invention
refers to the advancement in knowledge, while innovation means using the said
advancement to new products and services.

3. Economies of scale – It refers to cost advantages obtained in which industries

take advantage due to size.

Personnel Productivity
Measuring and managing personnel or employee productivity are important things
that should be considered by the employer. However, the problem may arise in doing so,
especially in the unit of analysis, which is used to measure productivity and the possibility
of failure to recognize the relationship between individual worker productivity and the
organization's total performance.

According to Read "Organizational Linkages: Understanding the Productivity

Paradox" at NAP.edu. (n.d.). Retrieved from https://www.nap.edu/read/2135/chapter/6,
productivity measurement, and alignment has the following five major functions:
1. Define productivity and direct behavior
The measurement system provides a clear definition of productivity for
the operation while the productivity measurement provides specific direction
and guidance to the worker toward productive activities.
2. Monitor performance and provide feedback.
Means to check progress toward an objective is being provided by the
measurement system. Likewise, it can also form a major part of employees'
performance evaluation, leading to rewards or disciplinary action.

3. Diagnose problems
Examining trends that are a form of productivity analysis helps
determine problems before they become a crisis and enable early adjustment
and corrective action. However, only the problems are identified and not the
source of the said problem.

4. Facilitate planning and control

To allow decision making with respect to pricing, production
scheduling, purchasing, contracting, scheduling in delivery and other
industrial cycle's activities, productivity measurement provides information
on time, costs, output rate, and resource usage. Products or processes which
should be expanded and should be phased out may be determined through
productivity analysis and competitive strategy elements.

5. Support innovation
Together with the cost data, productivity analysis helps evaluate
proposed changes to existing processes or products and introduce new ones.

Introduction to Operations Management

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Introduction to Production and Operations Management

According to Operations Management (n.d.) Retrieved from

https://managementhelp.org/operationsmanagement/index.htm , operations management's focus
is the careful process management so as to produce and distribute goods and services. Product
creation, development, production, and distribution are its major and overall activities. Activities
related to it are the following:
1. Purchasing – it refers to guidelines for buying materials from suppliers and vendors.
Materials include raw materials, computers, services from lawyers, insurance, etc.

2. Inventory control – It refers to the activity of checking products available for sale. It is
also called stock control.

3. Quality control – Ensuring the quality of the goods produced is of high quality. It is very
crucial, particularly continuous improvement. Some advancement in quality is the
benchmarking, total quality management (TQM). It resulted in operation management
advancement.

4. Storage – It refers to available facilities for storing goods produced in a firm that ensures
maintenance of the said goods' quality until they are transported to the customers' place.

5. Logistics – The focus of logistics is the flow of goods and materials from the suppliers,
through the business organization and to the customers, with efficiency and cost
effectiveness as its priority.

6. Process evaluation – It refers to evaluating how the manufacturing of goods was done
and if there is a need to take corrective actions ( if in case there will be deviations )

Likewise according to Introduction to Operations Management (n.d.) Retrieved from

https://www.mheducation.co.uk/he/chapters/9780077133016.pdf , a part of a business
organization that is responsible for producing goods and services is what we call "Operations”.
Moreover, operations as part of the organization with the said responsibility need the input and
support from other organizations' areas.

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 Figure 2 - 3 Basic Areas/Functions of Business Organizations

Introduction to Operations Management (n.d.) Retrieved from http://slideplayer.com/slide/9246190/

There are three basic functional areas in an organization: finance, marketing, and operations.

1. Finance – the area which is responsible for securing resources related to finances at
favorable price as well as the its allocation. Budgeting, investment proposal analysis,
and providing funds for operations are also its function.

2. Marketing Area – responsible for consumer needs and wants assessment. Likewise, this
area takes charge of selling and promotion of the company's goods and services.

3. Operations Area – responsible for the production of goods and services to customers.

To understand better, let's put it into a simple perspective. For instance, a business
firm or organization will be symbolized by a car while its operation is its engine. Everybody
knows that a car or any vehicle cannot run without an engine, and that is how important
operation is in a business organization. It is the core of what the business does, and of course,
the responsibility for managing the said core is the operations management. With that, we
can have the other definition of operations management as managing processes or systems
that create or produce goods and/or provide services to customers.

Operations Management and Strategy

No business organization could exist without operations management and supply
chain. Supply chain is the organization's sequence, which includes the facilities, functions,
and activities involved in producing and delivering products and services to customers.
Strategic operations management, according to Introduction to Operations
Management (n.d.) Retrieved from http://slideplayer.com/slide/9246190/ highlights the
importance of devoting lots of attention to environmental analysis and strategy formulation,
which relates directly to environmental changes. From the same source, steps in the
strategic management process were given, and these are the following:
1. Environmental scanning – In this step, external and internal environments are
scanned and end with monitoring of the organization's activities.

2. Strategy formulation – Formulation of strategies at the following levels is done

here.

a. Corporate Level – To oversee the interest and organizations operations which

is made up of more than one line business. In formulation such strategies in
this level, the management should decide where it wants to be in 10-15 years
regarding the following areas - standing in the market, innovation,
productivity, financial and physical resources, managerial performance and
development and worker attitude performance.
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Introduction to Production and Operations Management

The following are the typical strategies for the corporate level:
1. Growth strategies
• Growth internally
• Vertical integration
• Horizontal integration
• Mergers
• Strategic alliance
2. Stability strategies

3. Retrenchment strategies

• Turnaround
• Divestment
• Liquidation

b. Business unit level – Appropriate strategies for the business unit may address
the need to answer how the business organization will compete in the chosen
industry.

c. Functional level – in this level, the business organization should identify the
courses of action that the different departments (manufacturing, quality
control, Human resource, Finance, etc) would like to pursue to help the
business unit attain its objectives. In formulating such strategies, operations
managers should bear in mind that the different functions are interrelated.

3. Strategic implementation – In this stage, the strategies formulated are

implemented in the business. Of course, strategic implementation is different and
more difficult than strategic formulation in a sense that:
• Strategy formulation is positioning before action while strategy
implementation is the managing forces during the action;
• Effectiveness is the focus in strategy formulation while efficiency in
strategy implementation.
• Primarily, strategy formulation is an intellectual process, while strategy
implementation is an operational process.
• Good intuitions and operating skills are required in strategy formulation,
while motivation and leadership skills are required in the implementation
.
• Coordination among a few individuals is required in strategy formulation
while in the implementation, coordination among many persons are
required.

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 • For small, large, or non-profit organizations, strategy formulation does not
vary , while strategy implementation varies among the different sizes and
types of industries.

4. Evaluation and control – the following steps are done during this stage:
4.1. Performance targets, standards, and tolerance limits for the objectives
are established.
4.2. Measuring the performance and managers will be informed if the
outcomes are outside the limits.
4.3. From the accepted limits, analyze deviation.
4.4. Modifications will be executed, if necessary.

Tools for Implementation of Operations

According to Operations Management (2016, July) Retrieved from
https://vtechworks.lib.vt.edu/bitstream/handle/10919/70961/Chapter%209%20Operati
ons%20Management.pdf, in managing operations in a manufacturing firm, setting up of
schedules for the operation is very important and in doing so, the following tools are
useful:
1. Gantt Charts – To help the operations manager in determining the status of a project,
an easy to use graphical tool is used, and that is the Gantt chart. It is named after the
designer, Henry Gantt.
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Introduction to Production and Operations Management

Figure 3 Sample Gantt Chart

The Use of GANTT Charts in Production Monitoring (n.d.) Retrieved from http://www.quality-
wars.com/2012/01/10/the-use-of-gantt-charts-in-production-monitoring/

In the above example of production schedules, production tasks were divided into
three phases – the pre-production, production, and post-production. For each phase or
process, tasks are given, and the appropriate time day of accomplishing such tasks was
highlighted. Operations manager should bear in mind that Gantt charts are useful and
appropriate to use when the production process is simple and the activities are not
interrelated.
2. PERT charts – PERT stands for Program Evaluation and Review Technique.
Operations managers usually use PERT charts for more complex schedules. In
diagraming activities required to produce goods, specifying the time required to
perform each activity in the process, and organizing activities in the most efficient
sequence, PERT charts are used by operations managers.

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 Figure 4 - Sample PERT Chart

Advantages of PERT Charts vs. Gantt Chart (n.d.) Retrieved from https://www.lucidchart.com/blog/advantages-of-pert-charts-
vs-gantt-charts

In the above sample of a PERT chart, the activities were divided into
manageable activities After formalizing the specifications, the different dependent
activities are indicated, and interrelation among them is indicated in the chart. In the
above example, both the hardware, software, and the content of the program were
worked out through different activities, and the arrows indicate the directions and
sequence of doing the said tasks.

3. Computer-aided design software package - CAD Software | 2D And 3D Computer-

Aided Design | Autodesk. (n.d.). Retrieved from
https://www.autodesk.in/solutions/cad-software , in CAD software or computer-
aided design and drafting, computer technology is used in designing and in designing
documentation. It is usually used for building design and construction.

4. Computer-aided manufacturing software system (CAM) refers to the automation

process that accurately converts the product design and drawing of a thing into a
code format, making it more readable by the machine to manufacture the product.
Controlling machinery in a highly automated environment to manufacture different
items an pieces becomes possible through the said system. Likewise, CAM is also
used in manufacturing plant, specifically in all computer-aided operations - planning,
management, transportation and storage. Through CAM, measuring of plant's
output and production as a whole as well as in optimizing the assembly process.

5. Computer-integrated manufacturing system – According to Operations Management

(n.d.) Retrieved from
https://managementhelp.org/operationsmanagement/index.htm , CIM systems
have taken the integration of computer-aided design and manufacturing to a higher
level by automating and integrating ompany's operation's aspects. Likewise,
through CIM, the capabilities of CAD/CAM are expanded. CIM also handles order
entry, inventory control, warehousing, and shipping in addition to design and
production applications.

References and Supplementary Materials

Books and Journals
1. Deepu2000 Follow. (2016, December 01). Production management. Retrieved
May 29, 2018 from https://www.slideshare.net/deepu2000/production-
management-69710952
2. OpenStax. (n.d.). Principles of Economics. Retrieved May 29, 2018 from
https://opentextbc.ca/principlesofeconomics/chapter/20-2-labor-productivity-
and-economic-growth/
3. Read "Organizational Linkages: Understanding the Productivity Paradox" at
NAP.edu. (n.d.). Retrieved May 29, 2018 from
https://www.nap.edu/read/2135/chapter/6
 Production Operations Management and TQM
13
Introduction to Production and Operations Management

4. Defining and measuring productivity(n.d.) Retrieved May 29, 2018 from

http://www.oecd.org/sdd/productivity-stats/40526851.pdf
5. Production Management Standards: Industrial Need (n.d.) Retrieved May 30,
2018 from
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.37.4777&rep=rep1&
type=pdf
6. Productivity and Operation Management (n.d.) Retrieved May 30, 2018 from
https://www.slideshare.net/shreyasmetri/productivity-and-operation-
management
7. Operations Management (n.d.) Retrieved May 30, 2018 from
https://managementhelp.org/operationsmanagement/index.htm
8. Production Management System (n.d.) Retrieved May 31, 2018 from
https://www.sjf.tuke.sk/transferinovacii/pages/archiv/transfer/28-
2013/pdf/036-038.pdf
9. Operations Management (2016, July) Retrieved May 31, 2018 from
https://vtechworks.lib.vt.edu/bitstream/handle/10919/70961/Chapter%209%
20Operations%20Management.pdf
10. CAD Software | 2D And 3D Computer-Aided Design | Autodesk. (n.d.). Retrieved
May 31, 2018 from https://www.autodesk.in/solutions/cad-software
11. Applications of Computer Aided Manufacturing (2018) Retrieved May 31, 2018
from https://www.digitalschool.ca/applications-of-computer-aided-
manufacturing/
12. Ranjan, P. (2017, May 02). Production management, meaning, nature, function,
PPC, production pla... Retrieved May 31, 2018 from
https://www.slideshare.net/PrashantRanjan35/production-management-
meaning-nature-function-ppc-production-planning-control
13. Integrated Production Management (n.d.) Retrieved May 31, 2018 from
https://www.researchgate.net/publication/301675453_INTEGRATED_PRODUCT
ION_MANAGEMENT

Online Supplementary Reading Materials

1. Production Management (n.d.). Retrieved May 29, 2018 from
https://www.slideshare.net/patel9078/productio-new-management
2. What is productivity and how is it measured? (n.d.). Retrieved May 30, 2018 from
https://www.pc.gov.au/news-media/pc-news/previous-editions/pc-news-may-
2015/productivity-and-how-measured
3. Understanding operations management. (n.d.). Retrieved May 31, 2018 from
http://www.open.edu/openlearn/money-business/leadership-
management/understanding-operations-management/content-section-3.1

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Online Instructional Videos
1. INTODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT new. (2014,
April 11). Retrieved May 31, 2018 from
https://www.youtube.com/watch?v=idkIrZsHJ74&t=3s
2. Production and Operations Management Overview Chapter 1. (2013, June 25).
Retrieved May 31, 2018 from
https://www.youtube.com/watch?v=qJu0EomMKxg
3. Introduction to Business Chapter 9: Production and Operations Management.
(2014, July 31). Retrieved May 31, 2018 from
https://www.youtube.com/watch?v=9pztIoZdpFI
4. Garvin, D. A. (n.d.). The Processes of Organization and Management. Retrieved
May 31, 2018, from https://sloanreview.mit.edu/article/the-processes-of-
organization-and-management/