33 Production and Operation

Dr.Shafali Nagpal

epgp books

 

35.1  Learning Objective

 

35.2  Introduction

 

35.3  Meaning of Production Management

 

35.4  Concept of Production and Operation Management

 

35.5  Operations Management

 

35.6  Production Management Vs. Operation Management

 

35.7  Strategic Management Process for Production and Operations

 

35.8 Challenges

 

35. 9 Summary

 

 

Learning Objectives

 

After completing this module, you will be able to:

  1. To study about production and operation management in detail
  2. To understand the implications of production and operation management
  3. To apply the fundamentals of production and operation management for effectiveness of the business organization

 

INTRODUCTION

 

Production and operations management concerns itself with the conversion of inputs into outputs, using natural sources, which will offer the preferred application/utilities-of form, vicinity, ownership or kingdom or a combination thereof to the purchaser even as assembly the other organizational goals of effectiveness, efficiency and adaptableness. It distinguishes itself from the other such functions which include employees, advertising, and many others. By its primary difficulty for ‘conversion with the aid of using physical resources’. Of route, there can be and would be some of the conditions in either advertising and marketing or personnel or different capabilities which may be classified or subclassified beneath manufacturing and operations management.

 

For example, (i) the physical distribution of items to the customers, (ii) the arrangement of collection of marketing information, (iii) the actual selection and recruitment process, (iv) the paper flow and conversion of the accounting information usable by the judge in a court of law, etc. can all be put under the banner of production and operations management. The ‘conversion’ here is subtle, unlike manufacturing which is obvious. While in case (i) and (ii) it is the conversion of ‘place’ and ‘possession’ characteristics of the product, in (iv) and (v) it is the conversion of the ‘state’ characteristics. And this ‘conversion’ is effected by using physical resources. This is not to deny the use of other resources such as ‘information’ in production and operations management. The input and output could also be non-physical such as ‘information’, but the conversion process uses physical resources for the conversion process is what distinguishes production and operations management from other functional disciplines.

 

Often production and operations management systems are described as providing physical goods or services. Perhaps, a sharper distinction such as the four customer utilities and physical/non-physical nature of inputs and outputs would be more appropriate. A clear demarcation is not always possible between operations systems that provide ‘physical goods’ and those that provide ‘service’, as an activity deemed to be providing ‘physical goods’ may also be providing ‘service’, and vice versa. We may also say that the actual production and operations management systems are quite complex involving multiple utilities to be provided to the customer, with a mix of physical and non-physical inputs and outputs and perhaps with a multiplicity of customers. Today, our ‘customers’ need not only by outsiders but also our own ‘inside staff’. In spite of these variations in (i) input type (ii) output type, (iii) customers serviced, and (iv) type of utility provided to the customers, production and operations management distinguishes itself in terms of ‘conversion effected by the use of physical resources such as men, materials, and machinery.’

 

 

Meaning of Production Management:

 

Production Management refers to the application of management principles to the production function in a factory. In other words, production management involves the application of planning, organizing, directing and controlling the production process. It is observed that one cannot demarcate the beginning and end points of Production Management in an establishment. The reason is that it is interrelated with many other functional areas of business, viz., marketing, finance, industrial relation policies etc.

 

In the words of Mr, E.L. Brech:

 

(i)“manufacturing management is the method of effective planning and regulating the operations of that segment of an organization which is responsible for the actual transformation of materials into completed merchandise.” This definition limits the scope of manufacturing control to the one’s type of an organisation which can be related to the transformation system of inputs into outputs. & the definition does no longer encompass the human elements involved in a production process. It lays pressure on materialistic features only.

 

(ii) Production Management deals with decision-making related to the production process. So that the resulting goods and services are produced by the quantitative specifications and demand schedule with minimum cost.

 

According to this definition design and control of the production system are two main functions of production management.

 

(iii) Production Management is a set of general principles for production economies, facility design, job design, schedule design, quality control, inventory control, work study and cost and budgetary control. This definition explains the main areas of an enterprise where the principles of production management can be applied. This definition points out that production management is not a set of techniques.

 

It is evident from above definitions that production planning and its control are the main characteristics of production management. In the case of poor planning and control of production activities the organization may not be able to attain its objectives and may result in loss of customer’s confidence and retardation in the progress of the establishment.

 

In short, the main activities of production management can be listed as:

 

(i) Specification and procurement of input resources namely management, material, and land, labour, equipment and capital.

 

(ii) Product design and development to determine the production process for transforming the input factors into the output of goods and services.

 

(iii) Supervision and control of transformation process for efficient production of goods and services.

 

Concept of Production

 

 

Example of typical transformation process of Production and Operations

 

Source: Google

 

“Exhibit summarizes the transformation process. The arrow labelled “Transformation System” is the critical element in the model that will determine how well the organization produces goods and services that meet customer needs. It does not matter whether the organization is a for-profit company, a non-profit organization (religious organizations, hospitals, etc.), or a government agency; all organizations must strive to maximize the quality of their transformation processes to meet customer needs.

 

 

The production function is that part of an organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level. Production is defined as “the step-by-step conversion of one form of material into another form through the chemical or mechanical process to create or enhance the utility of the product to the user.” This production is a value addition process. At each stage of processing, there will be a valuable addition.

 

Edward Buffa defines production as ‘a process by which goods and services are created ’. Some examples of production are manufacturing custom-made products like boilers with a specific capacity, constructing flats, some structural fabrication works for selected customers, etc., and manufacturing standardised products like car, bus, motorcycle, radio, television, etc. Production and Operations Management (“POM”) is about the transformation of production and operational inputs into “outputs” that, when distributed, meet the needs of customers.

 

The process in the above diagram is often referred to as the “Conversion Process”. There are several different methods of handling the conversion or production process – Job, Batch, Flow and Group. POM incorporates many tasks that are interdependent, but which can be grouped under five main headings:

 

PRODUCT

 

Marketers in business must ensure that a business sells products that meet customer needs and wants. The role of Production and Operations is to ensure that the business makes the required products by the plan. The role of PRODUCT in POM, therefore, concerns areas such as:

 

 

  • Performance
  • Aesthetics
  • Quality
  • Reliability
  • Quantity
  • Production costs
  • Delivery dates

 

PLANT

 

To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of the fixed assets of the business. In determining which PLANT to use, management must consider areas such as:

  • Future demand (volume, timing)
  • Design and layout of factory, equipment, offices
  • Productivity and reliability of equipment
  • Need for (and costs of) maintenance
  • Heath and safety (particularly the operation of equipment)
  • Environmental issues (e.g. creation of waste products)

 

PROCESSES

 

There are many different ways of producing a product. Management must choose the best process or series of processes. They will consider:

 

  • Available capacity
  • Available skills
  • Type of production
  • Layout of plant and equipment
  • Safety
  • Production costs
  • Maintenance requirements

 

PROGRAMS

 

The production program concerns the dates and times of the products that are to be produced and supplied to customers. The decisions made about the program will be influenced by factors such as:

  • Purchasing patterns (e.g. lead time)
  • Cash flow
  • Need for / availability of storage
  • Transportation

 

PEOPLE

 

Production depends on PEOPLE, whose skills, experience and motivation vary. Key people-related decisions will consider the following areas:

  • Wages and salaries
  • Safety and training
  • Work conditions
  • Leadership and motivation
  • Unionisation
  • Communication

 

Operations Management

 

As to deliver value to customers in products and services, it is essential for the company to do the following:

 

  1. Identify the customer needs and convert that into a specific product or service (numbers of products required for specific period)
  2. Based on product requirement do back-ward working to identify raw material requirements
  3. Engage internal and external vendors to create a supply chain for raw material and finished goods between vendor → production facility → customers.

 

Operations management captures above-identified 3 points.

Production and operations project

 

Source: http://www.conceptdraw.com/samples/resource/images/solutions//BUSINESS-PROCESS-DIAGRAMS-Flow-Charts-Project-Management-Process-Flow-Chart.png

 

Production Management v/s Operations Management

 

A high-level comparison which distinct production and operations management can be done on following characteristics:

  • Output: Production management deals with manufacturing of products like (computer, car, etc.) while operations management cover both products and services.
  • Usage of Output: Products like computer/car are utilized over a period whereas services need to be consumed immediately
  • Classification of work: To produce products like computer/car more of capital equipment and less labour are required while services require more labour and minor capital equipment.
  • Customer Contact: There is no participation of customer during production whereas for services a constant contact with the customer is required.

 

Strategic Management Process for Production and Operation

 

For the success of organizational strategic objective, strategic planning has to trickle down to various functional areas of the business. To build strategy management process a sequential process as below is followed

 

Competition Analysis: In this step company evaluates and studies current competition in the market and practices that are followed in the industry for operations and production vis-vis company policies

 

Goal Setting: Next step involves narrowing down the objective towards which the organization wants to move towards.

 

Strategy Formulation: The next step is breaking down of organizational goals into operations and production strategies.

 

Implementation: The final step is to convert operations and production strategies into the day to day activities like production schedule, product design, quality management etc.

 

As organizations are always customer-centric, production and operation strategy for organization are built around them

 

Productivity

 

Measurement of formulated operations and production strategy is important to maintain alignment with the organization objectives. In simple terms, productivity is defined as the sum of total output per employee or per day. The productivity of company is dependent on industry and environmental conditions in which it is operating.

 

Two essential part of productivity is labour and capital. In the scenario of limited resources, optimum and efficient utilization of labour and capital will generate favourable productivity. Productivity measurement also enables the company to identify areas which require improvement or special focus. Also, productivity provides ready report card to measure status against company’s production objective. Productivity measurement can be classified into three categories based on the inputs used for calculation. Partial productivity ration of output is compared to one of resource used, for example, labour productivity where the output is compared to the labour wages. Total productivity measure takes into consideration sum of all input factors which are used for the output.

 

In the modern age, technology plays an important part in productivity.

 

Wastivity

 

Another important factor is the case of production is activity. Not 100% of input would be converted to an output; there is going to waste during production. Wastivity is reciprocal of productivity. Classic examples of wastivity are defective products and services which either have to be recycled or disposed of completely. Another example is the idle capacity of the material, manpower equipment etc.

 

Technology and Operations Management

 

The scope of Technology and operation management has evolved over a period and has moved from the development of products into design, management and improvement of operating system and processes. Usage of technology in operation management has ensured that organizations can reduce the cost, improve the delivery process, standardize and improve quality and focus on customization, thereby creating value for customers.

 

Integration of Technology with Production System

 

Technology drives efficiency in organization and increases’ productivity of the organization. However, bringing technology in the production system is a highly complex process, and it needs to follow steps:

 

Technology Acquisition: technology acquired should align with overall objectives of the organization and should be approved after elaborate cost-benefit analysis.

 

Technology Integration: technology affects all aspects of production, i.e. capital, labour and customer. Therefore, a solid technology integration plan is required.

 

Technology Verification: once technology integrated, it is important to check whether technology is delivering operational effectiveness and is used to its fullest.

 

Technology in Manufacturing and Design

 

Technology is getting extensively used in customization of design products and services. The usage of computers and supporting electronic systems is an integral part of modern industrial and services industry. Current techniques can be broadly classified into following categories:

 

Computer-Aided Design (CAD): CAD facilitates linking of two more complex components of design at the very high level of accuracy thus delivering higher productivity.

 

Computer-Aided Manufacturing System (CAM): Precision is essential in operating any machines and therefore, Computerized Numerically Controlled machines are used, thus ensuring the highest level of accuracy.

 

The standard for the Exchange of Product Data: As the name suggests product design is transmitted among CAM and CAM in three dimensions. The standard for The Exchange of Product Data process sharing of product across all phases of the product lifecycle and serves as neutral file exchange.

 

Software Systems in Manufacturing

 

There are various software systems available to integrated operations and manufacturing functions with other business functions of the organization. Some of the common software systems are Enterprise Resource Planning (ERP), Supply-Chain Management (SCM), New-Product Development (NPD) and Customer Relationship Management (CRM). Enterprises Resources Planning (ERP) links all business functions like manufacturing, marketing, human resource and finance through a common software platform. The main benefits of the ERP solution are that it not only reduces database errors but also delivers value to the customer through faster delivery and order fulfilment.

 

Automation in Production and Operations

 

Automation reduces manual intervention in the manufacturing process. It increases productivity and reduces the margin of error thereby facilitating economies of scale. There is this-advantages of automation also, such as unemployment, high breakdown cost and initial capital investment. Therefore, automation may not be suitable in all situations, and the end alignment with an overall organization objective is important.

 

Challenges

 

Technology can be facilitating factor in bringing about change in operations and production management. But it may not be feasible to use technology in all aspects of the challenge coming through a high initial cost of investment, a high cost of maintenance and mismanagement.

 

Process Planning

 

Process development for process design can be summarized through following steps:

 

  1. Process Requirement: The very 1st step is to collect and gather information to give a structure with the end objective. That is to make process requirement document highlighting various stages, risk and stakeholders for production. This will include assessment of available technology, raw material requirement, factory/plant layout and demand forecast.
  2. Team Building: Once the process requirements are finalized, for each objective, a team is finalized based on skill level and experience. The function of the team is to get familiarize with the whole process.
  3. Planning and Implementation: Process planning team will develop module; policies and procedure required for production, which are after required approval internal as well as external is implemented.
  4. Audit: A regular audit is carried out to ensure that process thus implemented is in line and delivering value to customers.
  5. End of Life: Over the course of time there may be an enhancement of the product or product may get discontinued in these circumstances, the process thus develop is discontinued.

 

Production Process

 

Based totally on the nature of product and provider production or conversion procedure may be divided into broad categories, continuous manufacturing (assembly line, oil refinery) and intermittent manufacturing (job work, service). The manufacturing procedure for both manufacturing industry and service industry can be categorized into broad categories based totally on standardization of products or services. It can vary from single mission assignment like a building or bridge (production) to indoors layout (provider) and mass production mission like a vehicle (manufacturing) to a fast-food joint (services).

 

Process Design

 

A success technique design has to bear in mind the appropriateness of the procedure to current organization objective. Procedure design calls for a large view of the whole enterprise and should not have a myopic outlook. And the manner needs to supply customer price with the consistent involvement of the control at various degrees. A good way to obtain an amazing manner layout, an effective method is required, which deals with unique line objects required to manufacture the end product. Powerful method strategy offers with uncooked fabric procurement, consumer participation, era funding, and many others.

 

Over a period manner layout has gone through trade, and new ideas like flexible production systems have been evolved, which delivers green and great production layout and analysis.

 

Aggregate planning as an Operational Tool

 

Aggregate planning helps achieve a balance between operation goal, financial goal and overall strategic objective of the organization. It serves as a platform to manage capacity and demand planning. In a scenario where demand is not matching the capacity, an organization can try to balance both by pricing, promotion, order management and new demand creation.

 

In a scenario where capacity is not matching demand, an organization can try to balance the both by various alternatives such as.

  • Laying off/hiring excess/inadequate excess/inadequate excess/inadequate workforce until demand decrease/increase.
  • Including overtime as part of scheduling thereby creating additional capacity.
  • Hiring a temporary workforce for a fixed period or outsourcing activity to a sub-contractor.

 

Operations Planning

 

Scheduling deals with both time allocations as well resource allocation for production of required quantity. Operations’ planning is done as part of short-term planning. The high-level objective of operation’s planning is to decide the best way of allocation of labour and equipment as to find a balance between time and use of limited resources within the organization.

 

In the modern age of competition and global market, importance is given to Just In Time and the lean production concepts. This has led to the importance of operation’s scheduling. There is three important task performed by operations scheduling:

  • Allocation of resources
  • Workforce scheduling
  • Production equipment scheduling

 

Operations’ planning ensures that proper workflow is established by ensuring allocation of a job on appropriate machines before the advent of production activities. Scheduling is production timetable highlighting sequence of job, timing and quantity for allocation of resources as to help an organization in cash flow planning. Therefore, there are three main objectives of production schedule:

 

  • Due importance to delivery date and avoiding delays in completion
  • Reducing time of job on machines
  • Proper utilization of work centres

 

Summary:

 

The scope of production management is indeed vast. Commencing with the selection of location, production management covers such activities as acquisition of land, constructing a building, procuring and installing machinery, purchasing and storing raw materials and converting them into saleable products. Added to the above are other related topics such as quality management, maintenance management, production planning and control, methods improvement and work simplification and other related areas.

 

you can view video on : Production and Operation

 

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