Introduction Production & Operations Management

Production is the process by which, raw materials & other inputs are converted into finished products. (& services)
Manufacturing , the process of producing only tangible goods.

Overview

Introduction Historical Milestones in OM Factors Affecting OM Today Different Ways of Studying OM Wrap-Up: What World-Class Producers Do

Introduction

Operations management is the management of an organizations productive resources or its production system. A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production system. The primary concern of an operations manager is the activities of the conversion process.

Organizational Model
Finance
Sales HRM

OM
Marketing MIS QA

Engineering

Accounting

A production system model

Inputs Conversion sub-system
Physical (Mfr; Mining) Environment P; L; E; S; T Market Competition Product Inf. Primary Resources Locational Services (Transport) Exchange Services (Ret. WS) Storage Services (warehousing) Insurance; Finance; Real Estate Health; Utilities Governmental Services / Control National; State Control Sub System

Outputs

Goods Or Services

Production as Organisation Function Decision Making in Production

Conversion sub system is the core of production, wherein workers, materials, and Machines are used to convert inputs into products and services. Operation Mangers are required to make a series of decisions in the production function.
They plan, organise, staff, direct and control all the activities in the process of converting all the inputs into finished goods. e.g. Strategic; Operating & Control decisions
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POM Decision & Their Applications

Type of Decisions
1. Strategic Decisions

Area of Involvement
Production Processes

Nature of Activities
Long Range production/Process Plan

Planning Product Prod. Tech. Processes & Facilities Planning

Selecting & Managing Plan arrangement

Optimal dist. Of scarce resources

Facilities

Allocate Resources

Capacity Planning & How Much & Where Facility Location Prod Capacity
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POM Decision & Their Applications

Type of Decisions Area of Involvement Nature of Activities

2. Operating Decisions

Production Planning Aggregate Plan Systems Master Prod. Schedule

Planning Production
To meet demand

Independent Demand Inventory

Resources Req. planning

Plan & Control finished goods Inv.

Plan Materials & Capacity Requirement

Shop Floor Plan Materials Mgmt.

What & when to produce Manage Materials Move.

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POM Decision & Their Applications

Type of Decisions Area of Involvement
Productivity and Employees

Nature of Activities
Efficient & Effective Use of HR

3. Control Decisions

Planning and
Controlling Operations

Total Quality Control

Project Plan & Control Techniques

Plan & Control the Quality of Prod. /Services

Plan Materials & Capacity Requirement

Maintenance Mgmt. Plan for Maintenance Of and Reliability Machines & Facilities
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Importance of Production Function High Productivity is key to high standard of living

Production makes significant contribution to societys well being As for Industry; anyone who has created something with his own hands knows that production is neither capitalist nor socialist but one thing only , it is what creates national wealth, the common national basis without which no country can exist. The best brain & hands in the country should concentrate on creating & producing innovative products.

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In order to improve productivity

Improve Volume of Production Reduce the rejection rate Minimise Re-work rate Maintain delivery schedule Control Idle Machine & Manpower hours Control Overtime hours Improving Industrial Engineering norms & Standards Updating Processes and Procedures Maintain accuracy and timeline of MIS Decrease Machine set-up time Good house keeping Check Absenteeism; theft/pilferage and misconduct Eliminate accidents Effective Grievance Handling Efficient training and Team Building Minimise Inventory & Achieve better yields Enhance customer satisfaction TQM Business Process Re- Engineering Automation 11

Production Management

It is the application of management principles in a factory. It has emerged from the concept of manufacturing of large quantity of products. The development of large corporations with many owners created the need for managers. Many of the pioneers of scientific management demonstrated the value of some management techniques, from a performance and profit point of view.
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Operations Management
It is the process whereby resources or inputs are converted into more useful products.

Popularly, Production Management is used more for a system where tangible goods are produced.
Whereas, Operations Management is more frequently used where inputs are transformed into intangible services. Such as Bank, Airlines, Insurance, Pollution control, Police, Army & Educational institutes etc.

Secondly, operations management became more fashionable after the stupendous growth of services sector.

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Historical Milestones in OM

The Industrial Revolution Post-Civil War Period Scientific Management Human Relations and Behaviorism Operations Research The Service Revolution

The Industrial Revolution

The industrial revolution developed in England in the 1700s. The steam engine, invented by James Watt in 1764, largely replaced human and water power for factories. Adam Smiths The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor. Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers.

The Industrial Revolution

The industrial revolution spread from England to other European countries and to the United Sates. In 1790 an American, Eli Whitney, developed the concept of interchangeable parts. The first great industry in the US was the textile industry. In the 1800s the development of the gasoline engine and electricity further advanced the revolution. By the mid-1800s, the old cottage system of production had been replaced by the factory system. . . . more

Post-Civil War Period

During the post-Civil War period great expansion of production capacity occurred. By post-Civil War the following developments set the stage for the great production explosion of the 20th century: increased capital and production capacity the expanded urban workforce new Western US markets an effective national transportation system

Scientific Management

Frederick Taylor is known as the father of scientific management. His shop system employed these steps: Each workers skill, strength, and learning ability were determined. Stopwatch studies were conducted to precisely set standard output per worker on each task. Material specifications, work methods, and routing sequences were used to organize the shop. Supervisors were carefully selected and trained. Incentive pay systems were initiated.

Scientific Management

In the 1920s, Ford Motor Companys operation embodied the key elements of scientific management: standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts

Human Relations and Behavioralism

In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production. Researchers and managers alike were recognizing that psychological and sociological factors affected production. From the work of behavioralists came a gradual change in the way managers thought about and treated workers.

Operations Research

During World War II, enormous quantities of resources (personnel, supplies, equipment, ) had to be deployed. Military operations research (OR) teams were formed to deal with the complexity of the deployment. After the war, operations researchers found their way back to universities, industry, government, and consulting firms. OR helps operations managers make decisions when problems are complex and wrong decisions are costly.

The Service Revolution

The creation of services organizations accelerated sharply after World War II. Today, more than two-thirds of the US workforce is employed in services. About two-thirds of the US GDP is from services. There is a huge trade surplus in services. Investment per office worker now exceeds the investment per factory worker. Thus there is a growing need for service operations management.

The Computer Revolution

Explosive growth of computer and communication technologies Easy access to information and the availability of more information Advances in software applications such as Enterprise Resource Planning (ERP) software Widespread use of email More and more firms becoming involved in EBusiness using the Internet Result: faster, better decisions over greater distances

Today's Factors Affecting OM

Global Competition Quality, Customer Service, and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues

Entry-Level Jobs in OM

Purchasing planner/buyer Production (or operations) supervisor Production (or operations) scheduler/controller Production (or operations) analyst Inventory analyst Quality specialist

Studying Operations Management

Operations as a System Decision Making in OM

Operations as a System
Production System Conversion Subsystem
Control Subsystem

Inputs

Outputs

Inputs of an Operations System

External Legal, Economic, Social, Technological Market Competition, Customer Desires, Product Info. Primary Resources Materials, Personnel, Capital, Utilities

Conversion Subsystem

Physical (Manufacturing) Locational Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services (Federal)

Outputs of an Operations System

Direct Products Services Indirect Waste Pollution Technological Advances

Production as an Organization Function

US companies cannot compete with marketing, finance, accounting, and engineering alone. We focus on OM as we think of global competitiveness, because that is where the vast majority of a firms workers, capital assets, and expenses reside. To succeed, a firm must have a strong operations function teaming with the other organization functions.

Decision Making in OM

Strategic Decisions Operating Decisions Control Decisions

Strategic Decisions

These decisions are of strategic importance and have long-term significance for the organization. Examples include deciding: the design for a new products production process where to locate a new factory whether to launch a new-product development plan

Operating Decisions

These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits. Examples include deciding: how much finished-goods inventory to carry the amount of overtime to use next week the details for purchasing raw material next month

Control Decisions

These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. Examples include deciding: labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria

What Controls the Operations System?

Information about the outputs, the conversions, and the inputs is fed back to management. This information is matched with managements expectations When there is a difference, management must take corrective action to maintain control of the system

Wrap-Up: World Class Practice

OM important in any organization Global competition forces rapid evolution of OM Decision based framework focus of course Strategic, Operating, and Control