Managing Information for

UNIT 10 MANAGING INFORMATION Production System

FOR PRODUCTION SYSTEM

Objectives
After going through this unit you should be able to:
• know the development of computer & communication technology and its
application in operations management;
• learn the concept and need of system in operations management:
• appreciate that operations system does not exist in isolation;
• have a sprit idea of objective(s) and methods of appraisal system in operations
management; and
• understand the impact of quality in information system.
Structure
10.1 Introduction
10.2 The Information-Oriented Costly and Corporate Activities
10.3 Need of the Systems
10.4 Cross Functions Systems and Operational Planning
10.5 Needs of Production Management and Work Organisation
10.6 Information Needs the Business Appraisal
10.6.1 Objectives of the Appraisal
10.7 Potential Benefits in Improving Management Information System
10.8 Information
10:9 Common Information Systems/Databases
10.10 Quality
10.11 Development of Production - Material Information System
10.12 Summary
10.13 Self-Assessment Exercises
10.14 Further Readings

10.1 INTRODUCTION
Knowledge is the key resource with which Management operates. Information and
intelligence are two essential ingredients of such knowledge. Utilization of
information from data source to decision-making is the index of management
efficiency. Management is responsible for important components of information, such
as, recognition of need, planning, implementing and operating the system. Attempt has
been made to make an understanding of corporate activities and the need of the
information flow among different departments. It has been explained how the
interdependence of functions shows the need for resource balance. Other issues like
information needs of business appraisal, objective of appraisal, methods of appraisal
are discussed. Information need of production content operational planning, product
information and the common database required for the production system etc, arc
highlighted at the end.

10.2 THE INFORMATION-ORIENTED SOCIETY AND

CORPORATE ACTIVITIES
Today the development of computer and communication technology (the combination
of which is referred to as IT. information Technology) has dramatically reduced the
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Production Systems Design
cost, and increased the speed, reliability and global reach of information production
and distribution. This development has ushered in a new age which is basically
characterized by the production, distribution and utilization of large volumes of
information unfettered by the constraints of physical distances, and an ccompanying
increase in-IT employment. For the purpose of this paper, we will focus only of
electronic information that is transmitted between individuals or organizations
regarding events and ides via computer and communication equipment.
The concept of production management emerges with the development of the factory
system. As the factory system becomes more complicated, dedicated and integrated,
the tasks and functions involved in production management have been expanding. The
basic problem associated with traditional manufacturing systems is improper
information flow among various departments which results in problems such as
excessive inventories, large work in process, long manufacturing lead times, confusion
and congestion on the shop floor and poor utilisation of resources. Industries with
significant investments on capital equipment understand the importance of proactive
planning systems to manage and maintain. Industries that maintain their investments at
an optimum level of functionality and availability are able to realise the improvement
in profits along with effective4 capacity utilisations and revenues increase.
Liberalisation, privatisation and' globalisation have forced Indian industry to strive for
productivity and quality to face competition from multinational companies (MNCs).
Integrated approach to factory management has clearly demonstrated its impact in
many developed nations. In this, the role of computer aided integrated information
system is not only of vital importance but essential.
Activity A
Give three functions of a manufacturing firm (e.g. marketing, production, finance) and
show how are MIS could help integrate these functions. Do the same for a bank bank.A
retail store.
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10.3 NEED OF THE SYSTEMS

The major problems faced by manufacturing industries today can be identified as:
a) Plant capacity problems
b) Sub optimal production scheduling
c) Large work in progress inventory
d) Long manufacturing lead times
e) Poor utilisation of resources
f) Confusion and congestion in the shop floor
g) Errors in engineering and manufacturing records.
The above mentioned problems can be attributed to poor management of information
flow. There is a need for substantial change in outlook regards management of
factories affairs. In the past, computerisation, if done, was also limited to a few
planning and management functions and that too in isolation. These problems thus call
for better systems to plan and control production operations. The need is for an
integrated information systems, streamlining the information handling in the factory.
It is confusing that the word `system' has acquired two meanings. Its most common use
covers paperwork system-production planning, machine scheduling, inventory control
and management accounting. In a broader context it can be defined as being
organisational - `the complex grouping of human beings and machines, joined together to
achieve a goal or goals: (The term socio-technical system is also used for the same thing.)
To establish control over the `organisational system% production managers need to have
knowledge of how this system works. They, must control (if they can) the variables of the
54 system and need information for this purpose. They need to know when
the system is going out of control. For all these purposes paperwork system are needed. Managing Information for
Inevitably production management will have some information on which base Production System
decisions- late order reports labour efficiency statements, machine breakdown data:
total cost of production etc. It may be produced in a timely way and citable corrective
action to be introduced if things are going wrong. Yet in many cases this tends not to
happen. The information available will not usually have resulted form a coherent and
well though though out plan, which relates the information to the objectives of the
managers of work groups in production. Usually information will have grown up more
by chance than design.
Activity B
What impact would (a) the technological revolution (b) Research and development (c)
product ranges (d) information explosion have on the need for information by
management in an automobile manufacturing company? A hospital? A university?
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10.4 CROSS FUNCTIONAL SYSTEMS AND
OPERATIONAL PLANNING
The 'broad production system' is only part of the overall company system. While the
production function may have the majority of the resources in the organisation, it
cannot exist as an independent activity. For example, if production control 'is mainly
concerned with the use of production resources and how these relate to inventories and
market demand, then it is essential that the related paperwork systems have to be cross
functional covering production, marketing stock control and distribution - if they are to
be truly effective in their purpose.
The interdependence of functions shows the need for resource balance. For example
the relationship between production capacity usage and inventory levels is often vital.
This suggests the need for short-term or operational planning where the various
resources are planned in order to achieve tactical goals.
Resource Systems
If the overall production system is concerned with the complex groupings of men and
machines, paperwork systems should be mainly, if not completely, concerned with
‘resources’ -inputs to the system and how these resources affect the outcome of the
system, helping to measure, plan and control resource use.
In most manufacturing companies the resources which are fixed and nearly permanent
are by far the most valuable. Plant the recruitment' can gradually reduce the work force,
but the ability to reduce either could be a problem. Direct labour for example, was once
considered by management accountants to be a variable cost, but now it is as fixed and
as variable as the administrative staff. Management accounting systems based on
absorbing the fixed cost and presenting, standard costs to production managers
comprising both fixed and variable elements, do not help in maximising the use of
production resources. They tend to hide the desirability of maximising the difference
between the variable costs that arc incurred in production and i he sales revenue
received for the products which are made.
Production Management
The concept of production management emerges with the development of the factory
system. As the factory system becomes more complicated, dedicated, and integrated,
the tasks and functions involved in production management have been expanding. This
makes comparison of the achievement in production management between firms very
difficult, if not impossible. The three basic functions Of production management have
been classified as production planning, resource planning and materials supply. The
three basic functions are elaborated into eighteen subjects as shown below:
• Design of manufacturing processes

• Management of product design 55

Production Systems Design
• Facility planning
• Work measurement
• Materials handling
• Production planning
• Purchasing management
• Control and Management of production progress
• Statistical quality control
• Storage and warehousing management
• Management, of occupational safety
• Management of equipment and tools
• maintenance management and reliability
• Data (released to production management) collection and analysis
• Implementation of production information system
• Suggestion systems
• Coherence of manufacturing and marketing
• Total quality management
Activity C

Make a list of management reports that the MIS might provide to ensure control
throughout for
i) a manufacturing firm
ii) a bank
iii) a hospital
iv) a chain of department stores.
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10.5 NEEDS OF PRODUCTION MANAGEMENT AND

WORK ORGANISATIONS
These are identified to be:
a) Closer links between production and other parts of the business systems, to ensure
better balance between capacities, stock levels and customer demand.
b) The introduction of interactive systems to answer 'what if?' types of question
c) Improved information flow to shop stewards and shop floor personnel, so
expressed that it is understandable
d) Better 'money' information to ensure that management and supervisors arc aware
of financial implications of decisions they make
e) An ability to relate information to objectives

10.6 INFORMATION NEEDS-THE BUSINESS APPRAISAL

Anyone who has the opportunity to redesign or introduce new production systems
should initially carry out a business appraisal of the production function and its
relationship with other parts of the business. There should be an environmental
analysis of the production function. The following should be covered:
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1) What important changes will occur, in the next few years? These could include Managing Information for
the setting up or closing down of production lines, the use of new equipment, the Production System
establishment of new work organisations, general emphasis on some aspect of
resource utilisation. Each factor will need a new or developed paperwork system
to ensure that full benefit is being of will be obtained from it.
2) What are the overall objectives of the business (both now and in the future)? What
impact do these have on the production function and on production management?
Can objectives be established in a hierarchical way? Do objectives relate to
resources which have been allocated to production manager at all levels?
3) What are the greatest problems facing the production function? What might be
done to pull things right or to improve the situation?
4) Is it likely that improved systems will be of benefit in any of the situations
described in 1 to 3 above? If so could the benefits be quantified so that the cost
benefit of development can be calculated?
5) If systems are to be changed or new ones introduced, what priorities should be
established?
The completed approval should specify where systems development is required,
so among the more important elements in the report will be:
6) Where serious discrepancies have come to light between objectives, resource
allocation and information available to measure, plan and control such resources.
7) What key business, business elements and business decisions have been
identified?
8) What opportunities and benefits will exist from improving management
information?
9) What obvious advances in production efficiency could be obtained through the
use of computers, and particularly modeling, which will help to answer ‘what’ if
we did this?
The following is an example of a completed business appraisal for the type
recommended.
10.6.1 Objectives of the Appraisal
These are:
1) To determine the minimum paperwork systems and information requirements
which will aid the production function in measuring, planning and controlling its
resources, so that the function will help to achieve either who or in part the
corporate objectives.
2) To highlight the benefits which better systems and improved information will
help to achieve. These should include:
Identifying the changes which are occurring and are likely to occur in the production
environment - especially the external environment - and ensuring that appropriate
adaptation within the production function is carries out.
Achieving corporate objectives, particularly the wages/ added value ratio.
Planning the strategic as well as the tactical use of production resources.
The business appraisal team
This comprises the following personnel:
Works manager
Production managers of fabrics and pressing
Production trainees (2),
Systems analysis (one senior, one junior)
Shop steward where apropriate.
Method of appraisal used.
The following arc to be identified:
The production business 57
Production Systems Design
a) Products (product differences), machines. capacities
b) Relationship between product markets and current capacities.
c) Future product markets v future current capacities
d) Relationships between stock values and capacities
e) Contribution per product type
f) Cost, profit/volume relationships
g) Relationship between work organisation needs and overall business requirements
Information needs
These are seen to be concerned with:
a) Measurement - production line statements
b) Planning - operational planning
c) Control - by responsibility and resource
d) Motivation - general motivational systems
Current systems
The following are recorded in detail:
a) Planning and machine scheduling systems
b) Labor efficiency systems
c) Material control systems
d) Wages payment systems
Systems improvement is considered essential for the following activities:
a) Operational planning - all aspects
b) Material productivity
c) Role identification and design of appropriate systems, especially for:
Production management hierarchies
Resource allocation
Work organisation
d) Adaptation to external environment
General problems (faced during appraisal)
a) Lateness in production reports if any kind, particularly management accounting
control systems, is prevalent.
b) Administrative cost of supporting production system.
c) Lack of computer support in systems prevents production managers from
adequate decision making in many instances.
d) There is a need to develop closer links with other parts of the business, through
strategic and tactical planning.
e) Resource allocation based on inadequate plans and control systems needs to be
strengthened.
f) There is a need to develop new performance measurements to ensure that
operational planning is effective e.g.;
added value
contribution
Material yield
g) Inadequacy of available data.
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Activity D Managing Information for
Production System
Think of your organisation what are the types problems your organisation face during
an appraisal?

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10.8 POTENTIAL BENEFITS IN IMPROVING

MANAGEMENT INFORMATION SYSTEMS
The principal benefits are:
a) Closer links between the production function, its organisation and its external
environment, will ensure that sufficient adaptation is made to improve industrial
relations, create a good motivational ethos, and ultimately ensure survival of the
business.
b) Improved case of production resources, by preplanning production (through a
cost model) which could gain cost savings in resource utilisation.
c) Improved materials productivity
d) Much improved management effectiveness; the precise monetary benefits are
doubtful, but substantial all the same.
Priorities
a) Undoubtedly, enhancing operational planning is a first priority. Production
management tends to think in a tactical rather than strategic way. This makes
decision making rather short - sighted. Enhanced operational planning will
provide the means to plan production resources in a superior way to that now
possible.
b) To achieve better operational planning, a considerable improvement in
information will be necessary. This means, not just collecting data (an essential
prerequisite to any production system's development) but so recording it that it
can be used as the basis for decision making.
c) It is essential that production control in its widest definition must be improved
with emphasis on the ability of production management to co-operate better with
marketing and distribution managers..
Activity E
Production management tends to think in a tactical rather than strategic way Explain.
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Data for production systems and data bases
Many production systems suffer from a lack rather than a surfeit of information. Often
the limited information available is apparently accurate but a test-particularly when
computers are used to process the data-proves it inadequate in some way
It is surprising that much common information concerning production and machine or
operation capacities is needed throughout a business system. For example, production
capacities are needed for strategic as well as in promising deliveries to for plant
scheduling as well as in promising deliveries to customers, for stock control as well
management accounting use.

These common usage suggest that failing and using information for one purpose only,
say plant scheduling, will not make the best use of the data files which are needed.
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Production Systems Design
10.9 INFORMATION
Information requirement for different activities are discussed below: Production
control
For production control purposes, two sets of basic information will be required. These
are:
a) Operational data: Information about capacities, machine constraints, potential
bottlenecks, etc.
b) Products - product specifications -sizes, technical details, tolerances of various
kinds.
Operational planning
Largely, operational planning should be concerned with maximising the use of current
resources measured by either 'contribution' of `added value' or perhaps some other way.
It will be necessary to have three measurements:
a) The technical maximum resource usage: For machine usage this will normally
be the speeds at which be an engineering originally designed to operate. This will
be an engineering or technical decision. With some operations, it will be
occasionally found that basically similar machine-possibly purchases or modified
at different dates - may have dissimilar technical rates of production.
b) Standard capacity: Starting with the technical maximum, the various standard
allowances are recorded and deducted. For example, there may be regular meal
break interruptions, setting and starring up times etc. which can be calculated. The
standard sales mix will indicate the number of change-over needed.
c) Current capacity: This is the capacity currently being obtained. For various
reasons it may differ considerably from the standard capacity - e.g. lack of orders,
sales mix deterioration, excessive machine breakdowns, etc.
It is likely that operational information will be changing most of the time. It may be
possible to issue to all production managers and supervisors a line status report which
shows in bold terms the current capacity situation. The current potential or 'limiting
factors' need to be established so that appropriate resource planning and usage can be
decided. Fig. 10.1 gives a framework for Information System requirements.
Activity F
Give a framework for information system requirement (w.r.t. Fig. 10.1) of your
organisation.
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Product Information
The information needed for products will probably be established under a product
category or code or both. Weight and material yield will be important. so that product
size and raw or semi-finished material origins can be quoted.
The production process through which the product has to pass should be recorded and
processing times per 100 products are calculated. The information should be set out so
that batching is possible in production and maximum resource utilisation settled.
Production Cost Information
The costs produced should support decisions on resource utilisation. For example the
contribution which each product makes should be know. This can be determined by
adding together all marginal costs (usually the direct expense) and deducting the result
form the net sales revenue obtainable for the product.
For bottleneck operations it may be necessary to calculate a contribution hour rate so
providing the basis for priority scheduling
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 Managing Information for
10.10 COMMON INFORMATION SYSTEMS/DATA Production System
BASEDS
Many people have fallen into the rather painful trap of designing systems as if
functions within an organisation have independent existence. Where this information
is on a computer file, cross functional access to it is very difficult.
Data is a valuable commodity in any organisation. Using it for one process only can
largely be avoided if a `business system' viewpoint is taken in designing information
systems.
The traditional approach to computer systems design has been to computerise existing
systems. While this has often proves satisfactory, it has. not generated cross functional
data usage. While production managers may feel this is mainly a problem that should
be solved by systems personnel, the nature of the problem should be fully understood
by production people, especially where they have need seconded to lead systems
development teams. It also happens that the line managers are often much more aware
of the type of data needed to run the business than are systems analysis. Given that a
data base is necessary, line managers should designate what it will comprise. Systems
personnel should translate required data to a technical data base form. An example of
development of MIS plan is given below:
MIS Plan

Contents of MIS plan Answers the question

Corporate guidelines Environment Where arc we?
Current operations
Mission/direction statement
Objectives/goals Assumptions/risks Where do we want to go?
Strategies, Policies How do we get there
Programs/projects
Management control Transition
Priorities and schedules
Organisation and delegation When will it be done and who will do it?
Resources, Budget How much will it cost?

10.11 QUALITY
Quality in information systems has a number of characteristics. This importance of
each depends on the application and its contest. The following arc some of the
characteristics include in the concept of quality in information systems.
Information system quality characteristic Implementation of quality concepts
Complete data All data items are captured stored for use
Data items are properly identified with
time periods
Accurate data The correct data values are recorded

Precise data Measurement of variables meets user

needs for precision

Understandable output The output of the system is

understandable to the users.
Timely output The output of the application is available
in Time for actions and decisions. 61
Production Systems Design
Relevant output The outputs are relevant to the actions and
decisions to be taken
Meaningful output The format, labeling, data provided, and
context in which data is presented makes
the output meaningful for actions and
decision waiting.
User friendly operation The system provides user interfaces that
arc understandable and designed to
conform to human capabilities.
Error resistant operations Suitable error prevent ion and detect ion
procedures are in place. There are
procedures for reporting and correcting
errors. Various audit procedures

10.12 DEVELOPMENT OF PRODUCTION -MATERIAL

INFORMATION SYSTEM
A total picture of production Management information system may look like as given
in Fig. 10.1.
This starts from either forecasted demand or customer orders. Subsequent activities arc
interrelated and a comprehensive information system tries to help the manager keep a
tab on each activity.
This information system helps to follow up the orders placed with vendors, proper
receipt of materials from vendors inspection and inward material quality control and
finally its proper storage. Similarly on the production side, the production schedule is
prepared based on the despatch schedule. Production plan ensures that material is
issued timely from ware house and any rejection must be properly salvaged. The
produced material must go through quality control process and it goes to warehouse or
customer only after it has passed quality assurance test.
Fig. 10.2 gives us an idea as to how important production management information
system is? Any delay in material procurement, improper or poor quality material may
incur heavy losses to the organisation. Similarly if we are not able to prepare suitable
production plan or dispatch schedule the material purchase may be delayed. Improper
production process if not detected in time may lead to heavy rejections thus causing
heavy loss of goodwill as well as money. Above all the product costing has to be done
and this can be appropriately done only if we have information from all concerned i.e.
material section production section and distribution section. All this make production
management information system so important in today's competitive market

10.12 SUMMARY
Major problem Faced by manufacturing industries today can be attributed to the lack
of information We have looked into the facts that information technology his entered
into the operations management for solving the complex problems and reduce the
improper flow of information among various departments. The managers must control
the variables of the system and need information for that purpose It has been
emphasized that closer links between production and other pants of the business
systems to ensure better bola lice between capacities stock levels and customer
demand The business appraisal objectives of appraisal methods of appraisal and
general problems are discussed in details
Close links between production function, improved case of production resources
improved material productivity a the issues considered important of production
management coupled up with information system Finally highlighted that information
is required from production control operational planning and product information A
total picture of production management information system is depicted very clearly.
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Production System

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Production Systems Design

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10.13 SELF-ASSESSMENT EXERCISES Production System

1) List five applications that lead themselves to programmed decision rules_ List
Five that do not. For the five that do not, show how an MIS would help snake the
decision.

2) It is said that an information system will avail you nothing unless it is backed up
by a management system. Explain.

3) List at least eight steps involved in inventing a manual system to a

computer-based system.. Do nay of these logically proceed other?

4) What are the advantages of having a companywide data bank? What typical items
are contained in a databank and how are they structured? Show how different
functions e.g. cost accounting, sales, imentary.) can be integrated with a databank.

5) Do you think that your organisation should more towards computerisation ?

Evaluate your manufacturing management information system if presently
prevails in your organisation.

6) Production system cannot exist as an independent system in an organisation. It

has to be dependent on other functional areas. Explain.

7) List out two softwares that which are available in operations management. Give
some important features of commonly used software.

8) Evaluate the need of information system for planning, organising and controlling
operations management.

9) Draw a systematic diagram showing flow production subsystem interacts with all
major functions of a manufacturing company.

10) MIS is a technique for making programmed decisions. Draw a programmed

decisions in a manufacturing subsystems.

11) What is an integrated manufacturing information system? Draw a detail flow

diagram if an integrated manufacturing information system for your
manufacturing unit.

10.14 FURTHER READINGS

1) Davis gordon B & Olson Margrethe H., Management information System. 2nd Ed.
Me Graw Hill International Edition.

2) Walley B.H., Production Management Handbook, 2nd Ed, Metropolitan N. Delhi.

3) Mundick, Robert G., Ross, Joel E. and Claggett. James R., Information Systems
for Modern Management, 3rd ed., PHI, N. Delhi.

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