NOTES OF KMBN 205 UNIT -1

Definition, Objectives, Scope and Functions of

Production & Operation Management
Production (or Operations) management is an umbrella term which encompasses a gamut of ideas
within the jingoistic managerial circles, mostly exemplified by the varied literal definitions of these
terms based on the source. But we’ll confine ourselves to straightforward (and understandable)
definition to answer the basic question – ‘What is operations management?

Production / Operations Management is defined as the process which transforms the

inputs/resources of an organization into final goods (or services) through a set of defined,
controlled and repeatable policies.

By policies, we refer to the rules that add value to the final output. The value added can be in
different dimensions, but the industrial set-up is mostly concerned with the duo
of quality and throughput.
Difference between Production and Operations Management

Production and operations management are more similar than different: if manufacturing products
is a prime concern then it is called production management, whereas management of services is
somewhat broader in scope and called operations management (because manufacturing services
sounds absurd, right?).

The line between products-based and services-based organizations is blurring rapidly as well—
car manufactures need to service their cars and the retailers manufacture their own brand labels.

We will be referring to them jointly as POM from here on in this article, for the benefit and
convenience of all the parties involved.

The fuss about production and systems

 Productionis a term which has caught the fancy of every industrialist ever since Adam
Smith propounded the idea of “specialization of labor”.

It is best envisioned as a piece-wise process (think about a typical production line with every
worker doing one and only one task at a frenetic speed), and this piece-wise production enabled
better quality, higher throughput, lower individual dependency and lesser labor costs.

The production systems are frequently classified in the following buckets:

 Mass Production: Utilizes standardized discrete assemblies in a continuous process,

suitable for very large volumes of production—all outputs following the same path.
Generally associated with mind-numbing repetition, very specific machinery and a labor
force low on skill/creativity.
 Continuous Production: Non-flexible mode of production in which the whole sequence
of operations is pre-arranged in a definite set-up.
 Batch production: American Production and Inventory Control defines batch production
as “a form of manufacturing in which the job passes through the functional departments in
lots or batches and each lot may have a different routing.” Enough said.

Job Shop Production: Characterized by custom specifications by customers for a limited

quantity of products, use of general purpose machines and comparatively more

Difference between Production and

Operations Management
Production Management

E.S.Buffa defines production management as follows: ‘Production management deals with

decision-making related to production processes so that the resulting goods or services are
produced according to specifications, in the amount and by the schedule demanded and out of
minimum cost’.

FIG: Areas of Production Management

Operations Management

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.
Key Differences Between Production and Operation Management

1. Production Management can be defined as the administration of the set of activities

concerning the creation of goods or transformation of raw material into finished goods.
Conversely, Operations Management is used to mean that branch of management which
deals with the administration both production of goods and provision of services to the
customers.
2. In production management, the manager has to make decisions regarding the design,
quality, quantity and cost of the product manufactured by the department. On the contrary,
the scope of operations management is larger in comparison to the production management
wherein the operations manager looks after the product design, quality, quantity, process
design, location, manpower required, storing, maintenance, logistics, inventory
management, waste management, etc.
3. Production Management can only be found in the firms where production of goods is
undertaken. Unlike, one can find operations management in every organization, i.e.
manufacturing concerns, service-oriented firms, banks, hospitals, agencies, etc.
 4. The basic objective of production management is to provide the right quality goods in the
right quantity at right time and best price. In contrast, operations management aims at
making the best possible use of organization’s resources, in order to fulfill the customer’s
wants.

 creative/skilled labor.

Productivity, Work Study, Productivity

Measurement, Factors affecting Productivity
PRODUCTIVITY

Productivity is an overall measure of the ability to produce a good or service. More specifically,
productivity is the measure of how specified resources are managed to accomplish timely
objectives as stated in terms of quantity and quality. Productivity may also be defined as an index
that measures output (goods and services) relative to the input (labor, materials, energy, etc., used
to produce the output). As such, it can be expressed as:

Hence, there are two major ways to increase productivity: increase the numerator (output) or
decrease the denominator (input). Of course, a similar effect would be seen if both input and output
increased, but output increased faster than input; or if input and output decreased, but input
decreased faster than output.

Organizations have many options for use of this formula, labor productivity, machine productivity,
capital productivity, energy productivity, and so on. A productivity ratio may be computed for a
single operation, a department, a facility, an organization, or even an entire country.

Productivity is an objective concept. As an objective concept it can be measured, ideally against a

universal standard. As such, organizations can monitor productivity for strategic reasons such as
corporate planning, organization improvement, or comparison to competitors. It can also be used
for tactical reasons such as project control or controlling performance to budget.

Productivity is also a scientific concept, and hence can be logically defined and empirically
observed. It can also be measured in quantitative terms, which qualifies it as a variable. Therefore,
it can be defined and measured in absolute or relative terms. However, an absolute definition of
productivity is not very useful; it is much more useful as a concept dealing with relative
productivity or as a productivity factor.

FACTORS AFFECTING PRODUCTIVITY

Factors influencing productivity can be classified broadly into two categories:

1. Controllable (or internal) factors

2. Un-controllable (or external) factors.
 1. Controllable For Internal Factors

(I) Product factor: In terms of productivity means the extent to which the product meets output
requirements product is judged by its usefulness. The cost benefit factor of a product can be
enhanced by increasing the benefit at the same cost or by reducing cost for the same benefit.

(II) Plant and equipment: These play a prominent role in enhancing the productivity. The
increased availability of the plant through proper maintenance and reduction of idle time increases
the productivity. Productivity can be increased by paying proper attention to utilization, age,
modernization, cost, investments etc.

(III) Technology: Innovative and latest technology improves productivity to a greater extent.
Automation and information technology helps to achieve improvements in material handling,
storage, communication system and quality control. The various aspects of technology factors to
be considered are:

Work Study Method

Work study is the investigation, by means of a consistent system of the work done in an
organization in order to attain the best utilisation of resources i.e. Materials, Machines, Men and
Money. All the technologies and management systems are related with productivity.

Work study is one of the basic techniques of improving productivity. In order to resolve this aspect,
work study aims:

(i) To have optimum utilization of resources i.e., 4 Ms.

(ii) To analyse the work in order to achieve work simplification and thereby improving
productivity of the system.

(iii) To set time standards for various jobs.

(iv) To evaluate the work content through work measurement.

Role of Work Study:

 To eliminate unnecessary human movements.

 To standardise the method of doing a work.
 To determine the standard time for doing a task.
 To a systematic investigation of all factors.
 To minimise the unit cost of production.
 To minimise the material movement, and operator’s movement.
 To utilise facilities such as man, machine and materials most effectively.

Advantages of Work Study:

 Work study ensures higher productivity.

 Better service to customers.
 Better working conditions with less fatigue.
 Harmonious employer-employee relation.
 Higher wages to workers.
 Job satisfaction and job security to workers.
 Fast delivery schedule.
 Reduction in unit cost of production.
 Quality products to consumers.
 Uniform production flow.

Techniques of Work Study:

Basically, there are two techniques:

Method study and work measurement.

Thus, work study is the term used to embrace the techniques of Method Study and Work
Measurement which are used to ensure the best utilization of manpower and material resources in
carrying out specified activity.

The sequential order of the correct procedure to be adopted for having effective or purpose-
oriented results of method study include the following:

(i) Select the work/procedure to be analysed.

(ii) Record all the relevant information related with the existing work system with the help of
various recording devices or techniques.

Work Study

(iii) Make critical examination of collected data/facts.

(iv) Develop and improve the method which is economical and practical after giving due
consideration to the alternative method possible.

(v) Install the new selected method with proper instructions.

Work Measurement
Work measurement is concerned with the determination of the amount of time required to
perform a unit of work. Work measurement is very important for promoting productivity of an
organization. It enables management to compare alternate methods and also to do initial staffing.
Work measurement provides basis for proper planning.

Since it is concerned with the measurement of time it is also called ‘Time Study’. The exact
examination of time is very essential for correct pricing. To find the correct manufacturing time
for a product, time study is performed. To give competitive quotations, estimation of accurate
labour cost is very essential. It becomes a basis for wage and salary administration and devising
incentive schemes.

Work measurement has been defined by British Standard Institution as, “The application of
techniques designed to establish the time for a qualified worker to carry out a specified job
at a defined level of performance”. This time is called standard or allowed time. Time study may
also be defined as “the art of observing and recording the time required to do each detailed
element of an industrial operation”.

Objectives of Work Measurement:

1. To compare the times of performance by alternative methods.

2. To enable realistic schedule of work to be prepared.
3. To arrive at a realistic and fair incentive scheme.
4. To analyse the activities for doing a job with the view to reduce or eliminate unnecessary
jobs.
5. To minimise the human effort.
6. To assist in the organisation of labour by daily comparing the actual time with that of target
time.

Uses of Work Measurement:

1. Wok measurement is used in planning work and in drawing out schedules.

2. Wok measurement is used to determine standard costs.
3. Wok measurement is used as an aid in preparing budgets.
4. It is used in balancing production lines for new products.
5. Wok measurement is used in determining machine effectiveness.
6. To determine time standards to be used as a basis for labour cost control.
7. To establish supervisory objectives and to provide a basis for measuring supervisory
efficiency.
 8. To determine time standards to be used for providing a basis for wage incentive plans.

Techniques of Work Measurement:

Work measurement is investigating and eliminating ineffective time. It not only reveals the
existence of ineffective time. But it can be used to set standard times for carrying out the work so
that ineffective time does not evolve later. It will be immediately found out by the increased
standard time. For the purpose of work measurement, work may be regarded as repetitive work
and non-repetitive work.

The principal techniques of work measurement are classified under the following heads:

1. Time Study
2. Work Sampling
3. Pre-determined Motion Time System
4. Analytical Estimating

Production Technology: Types of

Manufacturing Processes
Production Technology

In the simplest sense, production technology is the machinery that makes creating a tangible
physical product possible for a business. To the small business, this means a workshop at the very
least, with more elaborate operations making use of machines and assembly lines. Choosing a
production scale model within a company’s capital means is important; simpler workshops tend to
lead to lower production volume but cost less to assemble, while higher output operations require
more complex and costly machines, which are sometimes cost prohibitive.

Components of Production Technology

1. The Modern Artisan Workshop

The artisan workshop represents the basic minimum effective level of modern production
technology. An artisan workshop builds upon the traditional workshops of craftsmen from before
the industrial revolution and replaces most of the simple hand tools used with time-saving
electrically driven tools. These tools offer the skilled tradesperson the advantage he needs in order
to more quickly produce goods to the same level of quality he would otherwise make with hand
tools. The tablesaw, drill press and belt sander are all examples of modern variations on simple
hand tools used to save the modern craftsman time. Artisan workshops focus on low or medium
output of higher than average quality goods to maintain a competitive advantage over large-scale
factory-produced items of similar type.
 2. CNC Machining and Extending the Artisan Workshop

A computer number-controlled or CNC machine – also referred to as computer-aided

manufacturing – further extends the capability of an artisan workshop, allowing the skilled
craftsman to program the device to perform highly detailed repetitive tasks such as router and drill
operation. CNC machines are expensive investments; however, when used to address the more
time-consuming steps of producing an item in the standard artisan workshop, they can significantly
improve the overall profitability of that manufacturing business. Because of their high initial cost
when compared to manually operated shop tools, CNC machines are generally unavailable to all
but the most successful small business. Investing in a CNC machine is a pivotal decision for a
small business and should be done with careful consideration of how much the machine will
actually boost profits when compared to continuing with the manual method.

3. Automated Assembly Line-Style Mass Production

Automated assembly-line mass production represents the apex of modern industrial production,
and is the driving force behind industrial titans such as automobile manufacturers and the makers
of household appliances. The higher the degree of mechanization and use of robotics in the
assembly line process, the fewer human workers are required to produce a product; however, in
replacing human laborers with robots, the initial investment cost rises dramatically. The extremely
high initial cost of automated assembly line mass production places such production methods far
beyond the grasp of small business owners as far as practicality is concerned. Maintaining
advanced automated assembly lines also requires the professional services of highly skilled
robotics technicians, again making practical implementation difficult for the small business owner.

4. Practicality Considerations for Small Business

When it comes to investing in production technology, a small business’s focus should be on

generating the best dollar return on capital investment within the confines of the company’s
reasonable budget. The IRS states that small businesses are a success when they generate profit at
least three out of every five years. This general rule means that for the small business person, if it
takes more than two years to pay off the initial capital investment in production technology, the
businesses likely exceeded its ideal maximum production technology budget. This doesn’t mean
that smaller to medium businesses have to abandon advanced production methods entirely; instead,
they can adapt some practices from larger-scale industry that suit their own needs and capabilities.
For example, small and medium businesses looking to capitalize upon the mass production method
of industrial manufacturing can take a page out of Henry Ford’s book and use a simple conveyor
belt line along with labor division to simplify and speed up the production process while still using
artisan shop-style manually operated tools.

TYPES OF MANUFACTURING PROCESS

The four main types of manufacturing are casting and molding, machining, joining, and shearing
and forming.
Factors affecting Plant Location
Eight Factors Affecting Plant Location

1. Selection of Region
(i) Availability of Raw Materials
(ii) (ii) Proximity to Markets
(iii) Transport Facilities
(iv) Availability of Power, Fuel or Gas
(v) Water Supply
(vi) Disposal Facility for Waste Products
 (vii) Availability of Labour
2. Township Selection
(i) Availability of men power of requisite skill
(ii) (ii) Competitive wage rates of workers
(iii) Moderate taxes and the absence of restricting laws.
(iv) Favourable cooperative and friendly attitude towards the industry
3. Question of Urban and Rural Area

Current Trends in Pant Location

(I) Location in Proximity of Cities

(II) Planned Industrial Centers
(III) Competition for Development of Industries

8. The Design of Factory Plant Building

After a plant location has been decided upon, management’s next problem deals with the design
of building. A building is designed and built to protect the property and employees of an
organization. This basic fact is mostly overlooked in planning the requirement for building
structures.

For those plants where employees, materials and infrastructure facilities require protection, the
problems involved in designing and constructing effective and economical structures are many.