PRODUCTION AND OPERATIONS MANAGEMENT

UNIT-1
INTRODUCTION TO PRODUCTION AND OPERATIONS

Dr. Devyani
Assistant Professor
NICE School of Business Studies
Shobhit Institute of Engineering & Technology
(Deemed-to-be-University), Meerut, India
E-mail: [email protected]
Production
• The action of making or manufacturing from components or raw
materials, or the process of being so manufactured.
• Production planning involves planning, organizing, directing and
controlling the activities relating to production function.
Production Management
• "Production management is a branch of management which is related
to the production function. Production management deals with
decision making related to production process so that the resulting
goods & services are produced according to the specifications in
amounts & by the scheduled demanded, & at a minimum cost."
Schematic Production System
Inputs: Transformation Process: Outputs:

• Men • Product
• • Product Design • Services
Materials
• • Product Planning
Machines
• • Production Control
Information
• • Maintenance
Capital

Continuous:
• Inventory
• Quality
• Cost
Environment Feedback Information
Operations Management
The association for operations management also defines Operation
Management as "the field of study that focuses on the effectively
planning, scheduling, use & control of a manufacturing or service
organization through the study of the concepts from design engineering,
industrial engineering, management information systems, quality
management, production management, inventory management,
accounting & other functions as they affect the organization."
Operation Management Continue.
Operations management is an area of management concerned with
designing and controlling the process of production and redesigning
business operations in the production of goods or services.
Operations management is defined as the design, operation, and
improvement of the systems that create and deli ver the firm’s primary
products and services.
 Author Definition of POM
• Elwood S. Buffa (author): “Production operation management deals with decision-
making related to production processes, so that resulting goods or service is produced
according to the specifications in the amounts and by schedule demanded and at minimum
cost. In accomplishing the objectives, production management is associated with two
broad areas of activities the design and control of production system.”
• Mr. E.L. Brech: “Production and Operation Management is the process of effective
planning and regulating the operations of that section of an enterprise which is responsible
for the actual transformation of materials into finished products”.
• A.W. Field: Production Management is the process of planning and regulating the
operations part of an enterprise which is responsible for actual transformation of material
into finished products.
• Joseph G. Monks defines Operations Management as the process whereby resources,
flowing with in a defined system, are combined and transformed by a controlled manner to
add value in accordance with policies communicated by management.
Nature & Scope of Production/Operation
Management
E.S. Buffa defines production management as follows: “Production management
deals with decision-making related to production processes so that the resulting
goods and services are produced according to specifications, in the amount and by
the schedule demanded and out of minimum cost”.

Joseph G. Monks defines “Operations management as the process where by

resources, flowing with in a defined system, are combined and transformed by a
controlled manner to add value in accordance with policies communicated by
management”.
Production/Operations Management
Objectives of POM
1. Maximum customer satisfaction7. Maximum possible production (i.e.,
through quality, reliability, cost, and outputs).
deliver time. 8. Higher operating efficiency.
2. Minimum scrap/rework resulting in9. Minimum production cycle time.
better product quality.
10. Maximum possible profits or return
3. Minimum possible inventory levels on investment.
(i.e., optimum inventory levels).
11. Concern for protection of
4. Maximum utilization of all kinds of environment.
resources needed.
12. Maximum possible productivity.
5. Minimum cash outflow.
6. Maximum employee satisfaction.
Nature of POM
1. Production/operations as a system,
2. Production/operations as an organizational function,
3. Production/operations as a conversion or transformation process, and
4. Production/operations as a means of creating utility.
 Important Views of POM
Production/Operations as a system, A system is defined as the collection of interrelated
entities. The systems approach views any organization or entity as an arrangement of
interrelated parts that interact in ways that can be specified and to some extent predicted.
Production is viewed as a system which converts a set of inputs into a set of desired outputs.
A production system has the following elements or parts: Inputs, Conversion process or
transformation process, Outputs, Transportation subsystem, Communicated subsystem and
Control or Decision making subsystem.
Production/Operations as a conversion/transformation process, The conversion for
transformation subsystem is the core of a production system because it consists of processes
or activities wherein workers, material, machines, and equipment are used to convert input
into output. The conversion process may include manufacturing processes such as cutting,
drilling, machining, welding, painting, etc., and other processes such as packing, selling,
etc. Any conversion process consists of several small activities referred to as "operations"
which are some steps in the overall process of producing a product for service that leads to
the final output.
Important Views of POM Continue..
Production/Operations as a Means of Creating Utility, Production is defined as
the process of adding to the value of outputs or the process of creating utility in
outputs. “Utility” is the power of satisfying human needs. During the process of
converting the raw materials into finished goods, various types of utilities are
created while adding value to the outputs. These types of utilities are:
Form Utility: This is created by changing the size, shape, form, weight, colour,
smell of inputs in order to make the outputs more useful to the customers. For
example, iron ore is changed to steel, wood is changed to furniture, etc.
Place Utility: This is created by changing the places of inputs or transporting the
inputs from the source of their availability to the place of their use to be converted
into outputs. For example the iron ore and coal are transported from the mines to the
steel plant to be used in the conversion process.
Continue…
Time Utility: This is created by storage or preservation of raw materials or finished goods
which are in abundance sometime, so that the same can be used at a later time when they
become scarce due to higher demand exceeding the quantity available.
Possession Utility: This is created by transferring the possession or ownership of an item
from one person to another person. For example, when a firm purchases materials from a
supplier, the possession utility of the materials will increase when they are delivered to the
buying firm.
Service Utility: Which is the utility created by rendering some service to the customer. For
example, a doctor or a lawyer or an engineer creates service utility to a client/customer by
rendering service directly to the client/customer.
Knowledge Utility: This is created by imparting knowledge to a person. For example, a
sales presentation or an advertisement about some product communicates some
information about the product to the customer, there by imparting knowledge.
Scope of Production & Operation Management
• Location of facilities
• Plants layouts and material handling
• Product design
• Process design
• Production and planning control
• Quality control
• Materials management
• Maintenance management
Process Design
Production system is the framework within which the conversion of inputs into
output occurs. There are three basic kinds of production system: process production,
job production and intermittent production. The choice of production system will be
dependent upon the type of product and scale of production to be produced.
Production Planning & Control
Once Production system is designed and started/activated, the production manager
is concerned with the planning of production. The establishment of sequence of
operations of each individual item part or assembly or lays down the schedule of its
completion. The production manager has to apply control in these important areas:
control of inventories, control of flow of raw- materials into the plant and control of
work-in process.
Selection of Location
Plant location should be decided with respect to minimization of production and
distribution cost. The location decision must include- cost of land, rental value,
transportation cost, labor cost, cost of water and power. The factors can be process
units, process outputs, process requirements, government policies, availability of
site, personal preference etc.
Plant Layout
The plant layout represents an arrangement of machines and facilities. An efficient
layout is the one that allows materials to move through the necessary operations
rapidly and in the most direct way possible. It tries to shorten the longest routes
followed as well as maintain the inflow of in-process items. The type of layout
depends mainly upon the type of production system adopted by the production
department.
Selection of Plant & Equipment
The choice of plant and equipment depends upon: (a) what is and can be made
available? (b) What is cost wise possible, meaning economically possible?
The quality output, life of machine and adaptability of the facilities are also
important
considerations.
Research & Development
Research means critical investigation in order to acquire critical information which
can be applied to solve practical problems, thus, know as applied research.
Development is done using this applied research. It involves design and
manufacture of new products and then testing of these products utility as per
customer’s needs and demands.
Scope of Operation Management
• The application of operation management concepts in service operations.
• The growing importance of quality.
• The introduction of operation management concepts to other areas such as
marketing and finance.
• The realization that the operations management function can add value to the end
product.
Difference Between Production & Operation
Management
• Operation management is often used along with production management in literature of the subject. it is
therefore, useful to understand the nature of operations management. Operations management is
understood as the process whereby resources or inputs are converted into more useful products. A second
reading of the sentences reveals that, there is hardly any difference between the terms production
management & operation management. but, there are at least two points of distinction between production
management & operation management.
• FIRST, the term production management is more used for a system where tangible goods are produced.
Whereas, operation management is more frequently used where various inputs are transformed into
intangible services. Viewed from this point of view operation management will cover such service
organizations as banks, airlines, utilities, pollution control agencies, super bazaars, educational
institutions, libraries, consultancy firms & police departments, in addition of course, to manufacturing
enterprises .
• The Second distinction relates to the evolution of the subject. Operation management is the term used
now-a- days. Production management precedes operations management in historical growth of the
subject.
• The terms production management & operations management are used interchangeably.
(10) Functions of an Operation Manager
• Production Planning: Operation manager is responsible for producing the required quantity of
product in time to meet the stipulated delivery date.
• Production planning & control: An operation manager is concerned with production planning &
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.
• Quality control: An operation manager is concerned with 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.
• Purchasing: It plays a significant role in arriving at make or buy decisions. Specifications & quality
requirements of materials & equipment, etc. are laid down either by the staff department or
production department.
• Method of analysis: Method analysis improves the productivity of the concern & minimizes the cost
of production.
 Continue…
• Plant layout & Material Handling: The physical arrangement of manufacturing components &
the equipment for handling the material during production process has considerable effect on the
cost of production to which the operation manager is essentially concerned with.
• Inventory Control: Inventory implies the stockpile of all the materials, parts, tools. & in-process
or finished products which all are kept in a store for some time. Operation manager is concerned
with the arrangement & control of such products in a manner so that there is neither shortage nor
excess of such things.
• Work study: Method study & work measurement techniques are applied to find the relationship
between output of goods & service & input of human & material resources.
• Motivate workers: An Operation Manager should be able to generate the interest of the workers to
increase their efforts by providing them wages, incentives, etc.
• Cost Control: The Operation manager is responsible to follow a systematic approach to control
capital &expenditure designed in a way that desired profit is ensured.
 Benefits of Operation Management
The efficient Production manager will give benefits to the various sections of the society. They are:
Consumer: consumer will be benefited from improved industrial productivity, increased use value in the
product. products are available to him at right place, at right price, at right time, in desired quantity, & of
desired quality.
Investors: They get increased security for their investments, adequate market returns. & creditability &
good image in the society.
Employee: They get adequate wages, job security, improved working conditions & increased personal &
job satisfaction.
Suppliers: Suppliers will get confidence in management & their bills can be easily realized without any
delay.
Community: Community enjoys benefits from economic & social stability.
Nation: Nation will achieve prospects & security because of increased productivity & healthy industrial
atmosphere.
 Goods & Services
Service Goods
1)Physical:
Entity Intangible tangible
Storage Not possible Possible
Quality Varies with time & person More standardized
Producer Inseparable from service Can be separable from goods
Labor intensity High Lower
Life short Long
2)Production:
Production Spontaneous Time spread
Customer Involvement High Can be low
Physical presence of customer Essential May not be necessary
Standardization Only for some routine services Possible all over
Facility location Closer to customer Near supply
Scheduling As per the customer interest Completion dates
Quality objective Zero defection Zero defection
Communication Criss-Cross Vertical,Mainly
 Goods & Services
3)Marketing:
Delivery Along with production Separate from production

Seasonality May be there May be there

Pricing Labor-based Material-based
Consumer reaction
Basis of competition Personalization Technology

Need satisfied More emotional More physical

Replacement Rare Common
4)Strategy:
Orientation Internal External
Focus Customer expectations Customer Needs
5)Organization:
Role of higher level management Supportive Demanding
New Product Development

Product development is a specialized activity which may result in creation of new

products or modifications in the production process to produce the same product. It
involves design, redesign, & fabrication of new or modified product.
Product development is essential in order to:

1)Meet changing needs of the customers.

2)Adjust with the variation in quantity required.

3)Manufacture improved & low cost products.

4) Maintain sales position & net profit.

Stages of New Product Development

The development of a new product passes through seven distinct stages. The stages are:

1) Needs Identification: Needs Identification must be preceded by idea generation.

new product development starts with an idea. idea emanates from customers, top
management, staff of the marketing department, production department or from the
engineering section.

2) Advance product planning: It is also called Feasibility Study. It includes

preliminary market analysis, creating alternative concepts for the product, clarifying
operational requirements, establishing design criteria & their priorities. & estimating
requirements for producing, distributing & maintaining the product in the market.
Cont.

3) Advance Design: It involves detailed investigation by basic & applied researchers into
technical feasibility & also identifying trade-offs (Innovation) in product design.

4) Detailed Engineering Design: It involves:

a)design for function.

b)design for reliability.

c)design for maintainability.

d)design for safety.

e)design for productivity.

Cont..

5) Production process design & development: Armed with the detailed product design,
engineers & manufacturing specialists prepare plans for material acquisition ,production,
warehousing ,transportation & distribution.

6) Product evaluation & improvement: After the product has been launched, its needs
constant evaluation & improvement.

7) Product use & support: it is considered with support for consumers who use the
product. it may involve: a) educate users on specific application of the product.

b)provide warranty & repair services. c) distribute replacement parts.

d)upgrade product with design improvements.

Benefits of New Product Development

Following are the benefits of new product development:

1) Market Position: New product enhance market position by creating barriers to

entry for competitors & establishing a leadership image.

2) Resource Utilization: They improve resource utilization by leveraging the capacity

of such resources as research & development, factories, the sales force, & field service
personnel.

3) Organizational renewal & Enhancement: The excitement associated with new

product development efforts often renews a company by fostering creativity &
demonstrating a commitment to innovation.
Product Design

Product Design: "A product is a bundle of utilities consisting of various features &
accompanying services. design is the conversion of knowledge & requirement into a
form, convenient & suitable for us for manufacture. thus product design can be
defined as the idea generation, concept development, testing & manufacturing or
implementation of a product."
Elements Involved in Product Design

1) Research & Development: Research & Development the design of products is done
by research & development department of organizations with the help of many other
departments.

2)Reverse Engineering: It is the process of designing new products , which are better
than of competitors.

3) Manufacturability: Manufacturability implies designing a product in such a way that

it's manufacturing /assembling can be done easily.

4)Standardization: It refers to the less variety in the design of products, i.e. new
products are designed such that there is no major variation from the existing productions.
Elements Involved in Product Design (Cont.)

5) Modular design: It means designing a product in parts & modules.

6)Robust Design: Robust design means designing a product that is operational in

varying operational conditions. e.g. Jeep is having more robust design than car.

7)Concurrent Engineering: It is the product design approach in which the design

team includes personnel from marketing department, accounting , production,
materials department etc.
8)Computer aided design(CAD): CAD is a software which helps the designer to
make the three dimensional design of a product on the computer & visualize it from
various angles like front, top, bottom, back ,side etc.
Elements Involved in Product Design (Cont.)

9) Life Cycle of a product: The product life cycle has five stages spread throughout the
life of a product.

These stages are incubation, growth, maturity, saturation, & decline. The duration of the
life of a product depends upon the type of the product.

The Incubation stage witnesses a low demand of the product owing to customer not being
aware of the new product. As the awareness increase & new features are added to the
product over a period of time, the demand starts growing & this phase is called the growth
phase. Next follows the maturity stage, when the demand tends to become stable & even
new features do not appeal much to the masses, leading to the saturation phase &
eventually the decline phase.
Product Life Cycle

A product life cycle is the length of time from a product first being introduced to
consumers until it is removed from the market. A product’s life cycle is usually
broken down into four stages; introduction, growth, maturity, and decline.

Product life cycles are used by management and marketing professionals to help
determine advertising schedules, price points, expansion to new product markets,
packaging redesigns, and more. These strategic methods of supporting a product are
known as product life cycle management. They can also help determine when newer
products are ready to push older ones from the market.
Product Life Cycle
Product Life Cycle (Cont.)

1. Market Introduction and Development

This product life cycle stage involves developing a market strategy, usually through
an investment in advertising and marketing to make consumers aware of the product
and its benefits.
At this stage, sales tend to be slow as demand is created. This stage can take time to
move through, depending on the complexity of the product, how new and
innovative it is, how it suits customer needs and whether there is any competition in
the marketplace. A new product development that is suited to customer needs is
more likely to succeed, but there is plenty of evidence that products can fail at this
point, meaning that stage two is never reached. For this reason, many companies
prefer to follow in the footsteps of an innovative pioneer, improving an existing
product and releasing their own version.
Product Life Cycle (Cont.)

2. Market Growth
If a product successfully navigates through the market introduction it is ready to
enter the growth stage of the life cycle. This should see growing demand promote an
increase in production and the product becoming more widely available.
The steady growth of the market introduction and development stage now turns into
a sharp upturn as the product takes off. At this point competitors may enter the
market with their own versions of your product – either direct copies or with some
improvements. Branding becomes important to maintain your position in the
marketplace as the consumer is given a choice to go elsewhere. Product pricing and
availability in the marketplace become important factors to continue driving sales in
the face of increasing competition. At this point the life cycle moves to stage three;
market maturity.
Product Life Cycle (Cont.)

3. Market Maturity
At this point a product is established in the marketplace and so the cost of producing
and marketing the existing product will decline. As the product life cycle reaches
this mature stage there are the beginnings of market saturation. Many consumers
will now have bought the product and competitors will be established, meaning that
branding, price and product differentiation becomes even more important to
maintain a market share. Retailers will not seek to promote your product as they
may have done in stage one, but will instead become stockists and order takers.
Product Life Cycle (Cont.)

4. Market Decline
Eventually, as competition continues to rise, with other companies seeking to emulate
your success with additional product features or lower prices, so the life cycle will go
into decline. Decline can also be caused by new innovations that supersede your
existing product, such as horse-drawn carriages going out of fashion as the automobile
took over.
Many companies will begin to move onto different ventures as market saturation
means there is no longer any profit to be gained. Of course, some companies will
survive the decline and may continue to offer the product but production is likely to be
on a smaller scale and prices and profit margins may become depressed. Consumers
may also turn away from a product in favour of a new alternative, although this can be
reversed in some instances with styles and fashions coming back into play to revive
interest in an older product.
Objectives of Designing a Product

1) Creating attention in product for increasing sale potential.

2) To enlarge the importance of product from customer's point of view.

3) Making the product more effective & create more utility in the product for the
consumer.
4) Producing better quality product at the lowest possible price.
Factors Determining The Design of Product

1) Customer's requirements & psychological effects: The product should be acceptable to the
consumer & should satisfy his needs.

2)Facility to operators: The designer must see that an operator is provided with all possible
comforts & facilities in handling the operations involved in the product design.

3)Functionality: The product should be functionally sound.

4) Material Requirements: The designer should have up to date information about new
materials available to make the desired product.

5) Work methods & Equipment: The work methods & equipment required to perform the
operations specified in the design are of great significance on the utility & viability of the design.
Service Design

Service Design : A service product defines the type of customer segment the
organization has chosen for itself. A service product design is not only a choice of
the design of component ,parts that can be put together, It is verily the choice of the
kind of customers the organization has decided to cater to & the choice of the type
of customers not to cater to.
Classification of Service Design

1)Services directed at people's body: Health care, Passenger transportation, Beauty

salons, Exercise clinics, Restaurants, Hair cutting.

2)Service directed at people's mind: Education, Broadcasting, Information Services,

Theatres, museums.

3)Services directed at goods & other physical possessions: Freight transportation,

Industrial equipment repair & maintenance, Laundry & dry cleaning, landscaping/lawn
care, Veterinary care.

4)Services directed at intangible assets: Banking, accounting, securities, insurance,

legal advices.
Determinants of Service Quality

1)Reliability

2)Responsiveness

3)Competence

4)Courtesy

5) Communication

6)Credibility

7) security

8) Understanding of customers
THANK YOU