PRODUCTION AND

OPERATIONS
MANAGEMENT
Introduction
 Manufacturing- Largest sector next to Agriculture
 Appreciate the roles played by people in producing
goods and services
 Factory study helps in selecting a career
 High productivity – key to high standard of living
 Knowledge of POM is strategically useful
PRODUCT
 Consumer: Optimal mix of potential utilities.
 Production Manager: Combination of materials and
processes
 Financial Manager: Mix of various cost elements
 Personnel Manager: Mix of various skills
 Bundle of Tangible and Intangible attributes, along
with service, meant to satisfy the customer wants
PRODUCTION
 Use of any process and procedure designed to
transform a set of input elements in to set of
output elements, which has economic value to the
customer
 3 ways of production
1) Disintegration - eg: Crude Oil
2) Integration – eg: Vehicles assembly
3) Service – eg: Heat treatment of metals
Meaning
 Production mgmt is the set of interrelated
management activities which are involved in
manufacturing certain products like automobiles,
consumer durables etc.
 Operations management is the set of management
activities related to services like developing a
computer software, Medical facilities etc
Production and Operations Mgmt
 Conversion of inputs into outputs, using physical
resources, so as to provide Utility- of form, place,
possession or state or combination thereof
 Utility to the customer while meeting the other
organizational objectives of
1) Effectiveness
2) Efficiency
3) Adaptability
Example1
Chemical Production
 Input=Ores

 Physical resources=Chemical plant, use of

labor, equipment
 Output= Chemical desired

 Type of utility = Form

Example 2
Educational Institution
 Input = Raw minds

 Physical Resource = Teachers, books, teaching aids

 Output = Enlightened minds

 Utility = State
Objectives
1. Customer Satisfaction
2. Efficiency
3. Effectiveness
Efficiency and Effectiveness
 Objective: To produce  Objecitve: To enhance
quantity and quality the value to the customer
and to the society
 Goal: To improve  Goal: To determine the
process or the product right direction for the
organization
 “How to perform the
 ‘Why to perform and
task” what to perform”
Manufacturing and Services -Difference

 Tangibility: Products can be touched, tasted or felt

but services cannot be
 Heterogeneity: High experiential component in
services makes it heterogeneous than products
 Difference in the time of production and
consumption
 Perishability: Services cannot be inventoried but
products can be
Manufacturing and Services -Similarities

 Is concerned about Quality, Productivity and

Timely response to customers
 Must make choices about capacity, Location and
Layout
 Has suppliers to deal with
 Must plan operations, Schedules and Resources
 Has to make estimate of demand
System Concept
 A System consists of elements or components
 components are interlinked together to achieve the
objective for which it exists
 Eg: human body, educational institutions, business
organizations
Components of a system
Control
1) Proactive Control: prevents any major quality
setback after the production
2) Reactive Control: finding out the reason for the
deviations after production
Business System
Production / Operation System
TYPES OF PRODUCTION & OPERATION
SYSTEM
Basis Classifications Examples
Type of Output Products Consumer goods like Furniture, TV
Producer goods like milling machine
Services Transportation, Healthcare,
Education
Type of Flow Flow Shop High volume TV factory
Job Shop Hospital, Auto repair

Projects Construction of bridge, dam, ship

Type of Customized Medical Care, Legal Service

Specification
Standardized Insurance, Whole sale stores
Flow Shop
 Successive units of output undergo the same
sequence of operations
 Equipments are arranged according to the sequence

of operation required by the product design. Eg:

Auto assembly, TV assembly etc
 Eg: Ready to wear cloth

Cutting -> Joining by sewing -> Adding buttons,

zippers etc -> Quality checking -> Packaging
Classification of Flow shop
 Continuous Production
 Mass Production and
 Batch production.
Continuous Production
 Constant flow of materials like Oil Refining,
Chemical processing etc.
 No way to identify successive units of output
 This type of production lacks in flexibility.
Mass Production
 Auto Manufacturing
 TV Manufacturing
 Cigarettes
 produces the same type of output, it has little
flexibility compared to Continuous Production.
Batch Production
 Shoe manufacturing, Bottling plant and Cloth
manufacturing
 Basic design of the product is the same but the
specification of the product differs
 Production gets interrupted when the system
switches over to other type of the product
specification.
 The products are similar in nature but not identical.
Job Shop

 Diff types of products follow different sequences in

different shops
 Products are mostly customized products
 Productive resources are kept according to the
function
 Industries involved
1. Auto repairing
2. Hospital
3. Machine shop
Project Production
 Production of one type of complex products like,
ship construction, dam construction, bridge
construction, research and development etc.
 Activities are interlinked, time phased and resources
committed.
 Scheduling the activities is important for meeting
time and budget constraint
 Resources are brought to the workplace
 No movement of the product
Functions of Production Management

 Material Selection
 Method Selection
 Machinery and Equipment Selection
 Estimating
 Loading and Scheduling – Draw time table for
various production activities, specifying when to
start and when to finish the process
Functions of Production Management
 Routing – fixing the flow lines for materials from
stores to packaging, so that all concerned knows
what is happening
 Despatching – Releasing the documents like job
cards, route sheets, move cards, inspection cards
for each and every product to give green signal
for starting production is called Despatching
Functions of Production Management
 Expediting or Follow-up – Comparing the actual
with the plans and feedback the progress of the
work to the management
 Inspection – Activities during production done by
quality control department
 Evaluation – Contribution of production activities
in achieving departmental and organisational
objectives for setting future standards and
objectives
PRODUCTIVITY
 Relationship between the output and the input
(Output / Input)
 This ratio must be 1 for survival of the organisation
and >1 for comfortable position
 Objective of the org is to improve productivity
Basic types of productivity
 Partial Productivity
 Total Factor Productivity
 Total Productivity
 Partial Productivity
 Ratio of output to one class of input among various
factors of production
 Eg: Labor productivity, Material productivity,
Capital Productivity
Total Factor Productivity
 Ratio of net output to sum of associated labour and
capital (factor) inputs
 Net output = Output – Intermediate goods
and services purchased
 Total Productivity
 Ratio of Total Output to sum of all input factors

Problem
The Data regarding outputs and inputs of M/s XYZ
co. is given below. Find partial productivity and
Total productivity
Output = Rs.1000; Human Input = Rs. 300;
Material Input = Rs.200; Capital Input = Rs.300;
Energy input = Rs.100; other input expenses =
Rs.50
Productivity Benefit Model
 Selling Price = Cost Price + Profit
 Profit increases only when cost of production is
reduced by applying productivity Strategies:
1) Reducing S.P without reducing profit margin
2) Increasing profit margin without reducing S.P
 Effect of Strategy 1
 Consumer will benefit from savings
 Organization will benefit from increase in market
share and higher revenues
 Employees get higher real wages due to increased
revenues of the org and get job security
Effect of Strategy 2
 Shareholders and promoters get higher dividends.