INTRODUCTION TO PRODUCT

AND
OPERATION MANAGEMENT
UNIT : 1
Introduction
■ Operation management is the management of systems or processes
that create value in the form of goods or provides services
■ Production management deals with the transformation of inputs to
desired product (output) whereas operation management is about
managing to resources of the whole system; including product and
services
■ Transformation process is about transforming the inputs (raw
materials, land, human resources, machinery (technology), capital,
information, time, skill) to outputs (car, mobiles, haircut (service))
■ Operation process has close inter-relation with department like;
marketing, finance and human resource, R&D
Operation Management Definition
■ Joseph G .Monks defines Operations Management as the process
whereby resources, flowing within a defined system, are combined and
transformed by a controlled manner to add value in accordance with
policies communicated by 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
Scope of Operation Management
Design of products and services
Manage the quality
Strategy process
Strategic location
Layout strategy
Human resources
Supply chain management
Inventory management
Scheduling
Maintenance
Function/Role of a Operation Manager
#. Production Planning: Operation manager must plan about the product and
production related to make sure of production is efficient and product is a success in
market. It consist of;
a. Product Design: size, weight, model. Quality, utility, packaging, raw materials
b. Process Design: machinery, technology, production stage
c. Schedule Design: production timing or season, over time, shifts,
d. Work Division: allocation of jobs as per knowledge/skills, performance, payroll
#. Production Organizing: establishing structural relationship between various
units and sub units of operation system by gathering various activities, It contains;

a. Plant layout activities

b. By-product activities
c. Work measurement activities
Function of a Operation Manager
#. Production Implementation: After planning and organizing, transforming raw
material to final product is done through implementation. It needs proper control
like;
a. Inventory Control
b. Quality Control
c. Material Handling
d. Cost control
#. Co-ordination and Integraion: It deals with maintaining harmonic relationship
among various department and activities
#. Use of Models: In order to forecast demand and to produce desired product,
operation manager can use various statistical and mathematical models like; Linear
Programming, Transportation, Assignment, Simulations, Networking and so
on
Operation Mgt. and other departmental relations
Historical Development of Operation Management
▪ 1920-1929 : Scientific Management ▪ 1950-1960 : Operational Research
(forwarded by F.W. Taylor regarding (practical use of mathematical models
maximum prosperity and optimized
productivity) : and scientific information to solve
problems
• proper compensation and training and
work as per skills ▪ 1980 (Lean Management and
• Moving Assemble line by Henry Ford Automation)
(continuous production decreasing ▪ 1990 (Business process improvement [six
production time)
sigma])
• Economic lot size and Economic Order
Quantity ▪ 2000+
▪ 1930-1939 : Quality Control (preventing ▪ Advancement in Technologies and BPO
defects at production stage) W. Edward
Deming's major contribution ▪ Human Resource strategic planning ,
Talent Management,
▪ 1940: Multifunctional Team Approach
for Problem solving ▪ Consumer Relationship Management,
CSR, Business Ethics, Green Initiatives
Production Management as Transformational Process

■ Operations management transforms input (labor, capital, equipment, land,

buildings, materials, and information) into output (goods and services) that
provide added value to customers. All organizations must strive to
maximize the quality of their transformation processes to meet customer
needs
■ A transformation process is any activity or group of activities that takes
one or more inputs, transforms and adds value to them, and provides outputs
for customers or clients
■ Often all three types of input – materials, information and customers – are
transformed by the same organization. For example, withdrawing money
from a bank account involves information about the customer's account,
materials such as cheque and currency, and the customer.
Production Management as Transformational Process

# One useful way of categorizing different types of transformation is into:

■ manufacture – the physical creation of products (for example cars)
■ transport – the movement of materials or customers (for example a taxi
service)
■ supply – change in ownership of goods (for example in retailing)
■ service – the treatment of customers (for example hospital wards)

NOTE: Operation Management helps in managing the transformation process

of production management with the help of; Controlling, scheduling, resource
planning and more
System approach to Operation Management
Production System
■ The production system refers to system that is concerned with production of product
that organization has to offer to consumers
■ There are mainly 2 types of production system; Continuous and Intermittent
Production System
■ Under Intermittent we have : Job Shop Production and Batch Production
■ Under Continuous we have : Mass production and Process Production
■ Job shop Production: highly customized, design oriented and low volume (tailor,
construction)
■ Batch Production: flexible working flow, short run production and produced in
lots/batched, set up of machines and production flow changed for next batch (books,
shoes, watches)
■ Mass Production : Standardized products, similar in huge quantity (calculator, pen)
■ Process Production: low flexibility of machines so product are produced and stored till
there is demand in market (iron, sugar, paper)
Intermittent Production System
■ In the intermittent production system, goods are produced based on customer's
orders on a small scale and the system changes as per the design and size of
product to be produced. Characteristic features of intermittent system is as follow;
• The flow of production is not continuous rather customized and low in numbers
• Wide varieties of products are produced
• The volume of production is small
• General purpose machines are used. These machines can be used to produce different
types of products
• The sequence of operation goes on changing as per the design of the product
• The quantity, size, shape, design, etc. of the product depends on the customer's orders
• Example: Tailor, Websites, Constructions
Continuous Production System
■ In the continuous production system, goods are produced on a large scale for
stocking and selling, constantly as per demand forecast. They are not
produced on customer's orders. Here, the inputs and outputs are standardized
along with the production process and sequence. Characteristic features given
below;
• The flow of production is continuous
• The products are standardized
• The products are produced on predetermined quality standards
• The products are produced in anticipation of demand
• Standardized routing sheets and schedules are prepared
• Example: newspaper press, pen, sugar
Productivity
■ productivity is the measure of how specified resources are managed to accomplish
timely objectives as stated in terms of quantity and quality
■ According to Peter Drucker,” productivity means a balance between all factors of
production that Will give the maximum output with the smallest effort.”
■ Measured productivity is the ratio of a measure of total outputs to measure of total
inputs used in the production of goods and services
■ Factor affecting productivity go through this link:
https://www.youtube.com/watch?v=YSgaUOfICCo . Other factors which the video
doesn’t include but impact productivity are presented in next slide
Factors affecting Productivity
Improving productivity
■ Assignment: “ How to improve productivity?”
Measurement of Productivity
▪ Labor productivity
Labor productivity = output/ labor input
▪ Total factor productivity
TFP = net output/ (labor+ capital)inputs
▪ Total productivity
TP = total tangible output/ total tangible input
Total tangible output =value of finished goods+ value of partial finished
units + dividends from securities + interest + other incomes
Total tangible input = value of human, material, capital, energy and other
input used
Types of Productivity
■ Labor productivity : (ratio of output per person. Labor productivity measures
the efficiency of the labour in the transformation of something into a product of
higher value)
■ Material productivity : (is the ratio of output to the input of materials)
■ Capital productivity : (is the ratio of output (goods or services) to the input of
physical capital)
■ Total productivity : is the average of labour and capital productivity weighted
and adjusted to price fluctuations. It can be calculated either by a labour-time or
by a financial method
Ethics and Social Responsibility
■ Efficient use of resources: minimizing wastage
■ Going above and beyond legal requirements to ensure safety of the employees
■ Implementing technology to improve wellbeing
■ Training
■ Environmental sustainable inputs
■ Fair dealing with suppliers and purchase supplies locally
■ Quality
■ Packaging
■ Honest marketing
Green Productivity
▪ Green Productivity (GP) is a strategy for enhancing productivity and
environmental performance for overall socio-economic development.
▪ It is the application of GP methodology comprising the appropriate techniques,
technologies and management system to produce environmentally compatible
goods and services
▪ According to Polonsky;
“green productivity consist of all activates designed to generate and facilitate
any exchanges intended to satisfy human needs and wants, such that the
satisfaction of these needs occur, with minimal detrimental impact on the natural
environment”
▪ Example: low carbon footprint products, eco friendly packages, plastic less
packaging, degradable casing and bottles
Green Productivity
Requirement for Green Productivity
1. Commitment
2. Pollution control
3. New technology
4. Use of recyclable materials
5. Legal framework
6. Use of eco labels
7. Consumer consciousness