Overview of Production and Operation Management

Overview of Production and Operation Management

1. Module I
Overview of Production and
Operation Management

2. Definition of Production and Operation
Management (POM)
Production/OperationsManagementisdefinedastheprocess
whichtransformstheinputs/resourcesofanorganizationintofinal
goods(orservices)throughasetofdefined,controlledand
repeatablepolicies.
Itincludescoordinatingthejobsandcontrollingtheactivities
requiredtomakeaproduct;involvingeffectivecontrol,
scheduling,cost,performance,quality,andwasterequirement.
Itcanalsobedefinedasanareaofmanagementconcernedwith
overseeing,designing,andcontrollingtheprocessofproduction
andredesigningbusinessoperationintheproductionofgoodsor
services.

3. Organizational Model
Marketing
MIS
Engineering
HRM
QA
Accounting
Sales
Finance
OM

4. Brief History of Production and
Operation Management
Theearliestaccountofoperationsandproductionmanagementis
givenbyAdamSmithinhisbook,"AnInquiryintotheNatureand
CausesoftheWealthofNations,"publishedin1776.
Inthiswork,Smithexplainshowthedivisionoflaborallowsfor
moreefficientproduction.
AccordingtoSmith,peoplearemoreefficientproducersifeach
personworksonasinglecomponent,ratherthanbuildingthe
productfromstarttofinish.

5. Historical Milestones in OM
•The Industrial Revolution
•Post-Civil War Period
•Scientific Management
•Human Relations and Behaviorism
•Operations Research
•The Service Revolution

8. Development continues

9. The Service Revolution
•Thecreationofservicesorganizationsaccelerated
sharplyafterWorldWarII.
•Today,morethantwo-thirdsoftheUSworkforce
isemployedinservices.
•Abouttwo-thirdsoftheUSGDPisfromservices.
•Thereisahugetradesurplusinservices.
•Investmentperofficeworkernowexceedsthe
investmentperfactoryworker.
•Thusthereisagrowingneedforservice
operationsmanagement.

10. Objectives of Production/Operations
Management
(i)Maximumcustomersatisfactionthroughquality,reliability,cost
anddeliverytime.
(ii)Minimumscrap/reworkresultinginbetterproductquality.
(iii)Minimum(optimum)possibleinventorylevels.
(iv)Maximumutilizationofallkindsofresourcesneeded.
(v)Minimumcashoutflow.
(vi)Maximumemployeesatisfaction.
(vii)Maximumpossibleproduction(i.e.,outputs).
(viii)Higheroperatingefficiency.
(ix)Minimumproductioncycletime.
(x)Maximumpossibleprofitorreturnoninvestment.
(xi)Concernforprotectionofenvironment.
(xii)Maximumpossibleproductivity.

11. Factors Affecting Operations
Management

12. Internal influences on operational objectives
Corporate objectives
As with all the functional areas, corporate objectives are the most
important internal influence. An operations objective (e.g. higher
production capacity) should not conflict with a corporate objective (e.g.
lowest unit costs)
Finance
Operations decisions often involve significant investment and cost. The
financial position of the business (profitability, cash flow, liquidity)
directly affects the choices available
Human resources
For a services business in particular, the quality and capacity of the
workforce is a key factor in affecting operational objectives. Targets for
productivity, for example, will be affected by the investment in training
and the effectiveness of workforce planning
Marketing issues
The nature of the product determines the operational set-up. Regular
changes to the marketing mix – particularly product – may place strains
on operations, particularly if production is relatively inflexible

13. External influences on operational objectives
Economic environment
Crucial for operations. Sudden or short-term changes in demand impact
on capacity utilisation, productivity etc. Changes in interest rates impact
on the cost of financing capital investment in operations
Competitor efficiency flexibility
Quicker, more efficient or better quality competitors will place pressure
on operations to deliver at least comparable performance
Technological change
Also very significant – especially in markets where product life cycles are
short, innovation is rife and production processes are costly.
Legal & environmental change
Greater regulation and legislation of the environment places new
challenges for operations objectives.

15. ROLE -SCOPE OF PRODUCTION AND
OPERATION MANAGEMENT
1.Location of facilities
2.Plant layouts and material handling
3.Product design
4.Process design
5.Production and planning control
6.Quality control
7.Materials management
8.Maintenance management

16. Other factors are:
1.Tominimizematerialcost.
2.Topurchase,receive,transportandstorematerials
efficientlyandtoreducetherelatedcost.
3.Tocutdowncoststhroughsimplification,standardization,
valueanalysis,importsubstitution,etc.
4.Totracenewsourcesofsupplyandtodevelopcordial
relationswiththeminordertoensurecontinuoussupplyat
reasonablerates.
5.Toreduceinvestmenttiedintheinventoriesforuseinother
productivepurposesandtodevelophighinventory
turnoverratios.

17. Operationsmanagementhasbeengainingincreasedrecognitionin
recentyearsbecauseofthefollowingreasons:
(i)Theapplicationofoperationsmanagementconceptsinservice
operations.
(ii)Thegrowingimportanceofquality.
(iii)Theintroductionofoperationmanagementconceptstootherareas
suchasmarketingandhumanresourcesand
(iv)Therealizationthattheoperationsmanagementfunctioncanadd
valuetotheendproduct.

18. Functions of Production and Operation Management
Productionandoperationsmanagementconcernwiththeconversionof
inputsintooutputs,usingphysicalresources,soastoprovidethe
desiredutilitiestothecustomerwhilemeetingtheotherorganizational
objectivesofeffectiveness,efficiencyandadaptability.
Followingaretheactivitieswhicharelistedunderproductionand
operationsmanagementfunctions:
1.Planning
2.Organizing
3.Controlling
4.Behavior
5.Models

19. Criteria of Performance for the Production
and Operation Management
Thecriteriaofperformanceoftheproductionandoperations
managementsystemare:
1.Customer satisfaction
2.Effectiveness
3.Efficiency
4.Accuracy
5.Timeliness
6.EaseofUse
7.SupportofDecisionMaking
8.Cost
9.ScopeofCoverage

20. Effect of Growth of Service Sector on
Operations Management
Operations Processes
Serviceorganizationssucceedbyprovidingservicesthatsatisfy
customers’needs.Companiesthatprovidetransportation,suchas
airlines,havetogetcustomerstotheirdestinationsasquicklyandsafely
aspossible.Companiesthatdeliverpackages,suchasFedEx,mustpick
up,sort,anddeliverpackagesinatimelymanner.
Serviceprovidersthatproducegoodscan,likemanufacturers,adopt
eitheramake-to-orderoramake-to-stockapproachtomanufacturing
them.BK,whichencouragespatronstocustomizeburgersandother
menuitems,usesamake-to-orderapproach.BKcancustomizeproducts
becauseitbuildssandwichesoneatatimeratherthanbatch-process
them.

21. Facilities
Whenstartingorexpandingaservicebusiness,ownersandmanagers
mustinvestalotoftimeinselectingalocation,determiningitssizeand
layout,andforecastingdemand.Apoorlocationorabadlydesigned
facilitycancostcustomers,andinaccurateestimatesofdemandfor
productscanresultinpoorservice,excessivecosts,orboth.
Site Selection
Peopleintherealestateindustryoftensaythatthethreemost
importantfactorstoconsiderwhenyou’rebuyingahomearelocation,
location,location.Tobesuccessfulinaserviceindustry,youneedtobe
accessibletoyourcustomers.Someservicebusinesses,suchascable-
TVproviders,package-deliveryservices,ande-retailers,gototheir
customers.Manyothers,likehotels,restaurants,stores,hospitals,and
airports—havetoattractcustomerstotheirfacilities.Thesebusinesses
mustlocatewherethere’sahighvolumeofavailablecustomers.

22. Size and Layout
Becausemanufacturersdobusinessoutofplantsrarelyvisitedby
customers,theybasethesizeandlayoutoftheirfacilitiessolelyon
productionneeds.Intheservicesector,however,mostbusinesses
mustdesigntheirfacilitieswiththecustomerinmind:theymust
accommodatetheneedsoftheircustomerswhilekeepingcostsaslow
aspossible.Performingthistwofoldtaskisn’teasy.
Capacity Planning
•HowmanycustomerswillIhave?
•Whenwilltheywantmyservices(whichdaysoftheweek,which
timesoftheday)?
•Howlongwillittaketoserveeachcustomer?
•Howwillexternalfactors,suchasweatherorholidays,affectthe
demandformyservices?

23. Managing Operations
Scheduling
Inventory Control
Other Factors are