AGBS - INDORE

Fundamentals of Production and Operations Management(POM)

Module 1- Overview of POM with a caselet

• Definition

• Brief History of Production and operations management

• The Service Revolution

• Role of POM

• Functions of POM

• Factors affecting Operations Management

• Scope of POM

• Criteria of Performance for POM

• Effect of Growth of Service sector on Operations Management

• Shilpa Katira
 AGBS - INDORE

Date
Any organization has 3 core functions marketing , finance and operations(heart)
Contribution
Kellogs nokia(check why they failed on youtube)- discussed in class
Contributor
1776
Operations
Specialization
• The business function responsible for planning , coordinating and controlling the resources needed to produce product or
Adam Smith
services or both for a company.
1799
• Activities involved in the day to day functions of the business conducted for the purpose of generating profits.
Interchangeable parts, cost accounting
Eli Whitney and others
In modern era Operations is a function that converts inputs into outputs by transformation of processes
1832
It is broken up into two-
Division of of jobs by skill; basics of time study
1. Manufacturing Operations(products)
Charles Babbage
2. Service Operations
1900
Scientific management time study and work study developed; dividing planning and doing of work
Manufacturing Operations –raw materials->using transformation process- final product(tangible)
Frederick W. Taylor
Service operations - aviation, hospital, banking , education.
1900
Motion of study of jobs
Frank B. Gilbreth
1901
Scheduling techniques for employees, machines jobs in manufacturing
Henry L. Gantt
1915
 AGBS - INDORE
BRIEF HISTORY OF POM

HISTORIACAL EVOLUTION OF PRODUCTION AND OPERATIONS MANAGEMENT

For over two centuries production and operations management has been recognized as an important factor in a country’s
economic growth. The important contributions done are as follows-

YEAR CONTIRBUTION CONTRIBUTOR

1776 SPECIALISATION OF LABOUR ADAM SMITH

1799 INTERCHANGEABLE PARTS ELI WHITNEY
1900 SCIENTIFIC MANAGEMENT FREDRICK TAYLOR
1927 HUMAN BEHAVIOUR HAWTHORNE STUDIES ELTON MAYO
1932 Statistical inference -to product quality W. A. Shewart
1980 Quality and productivity applications W. E. Deming and
from Japan: robotics, CAD-CAM J. Juran
 AGBS - INDORE

Production deals with manufacturing a product(INPUT – PROCESS –OUTPUT)

(Thus production is a value addition process. At each stage of processing, there will be value addition.)

Production management –Acceptable from 1930-1950, focused on Economic efficiency in manufacturing. Workers were
studied in detail to eliminate wasteful efforts and achieve greater efficiency by adopting the approach of Division of labour ,
scientific management and human behaviour).

THE SERVICE REVOLUTION

• The service organisations accelerated sharply after World War II

• Today more than two thirds of US workforce is employed in services
• Two thirds of GDP in USA come from services
• There is huge trade surplus in services
• Investment per office worker now exceeds the investment per factory worker
• Hence there is a growing need for service operations management.
 AGBS - INDORE

Definition-

Production/operations management is the process, which combines and transforms various resources into
value added product/services in a controlled manner as per the policies of the organization.

INPUTS ==➔ TRANSFORMATION ===➔ OUTPUT

Inputs can be Men, machines , materials ,information, capital
Outputs will products/services

Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the
required (products/services) having the requisite quality level.

The set of interrelated management activities, which are involved in manufacturing certain products, is called as
production management. (Products manufactured can be custom made or standard)

If the same concept is extended to services management, then the corresponding set of management activities is called as
operations management.
 AGBS - INDORE

Operations Management
OM is the business function that is responsible for managing and coordinating the resources needed to produce a company’s
products and services.

Definition- Systematic direction, control and evaluation of entire range of processes that transform inputs into finished goods
or services.
Role of OM-
• to transform organizational inputs into company’s products or services outputs
• to assure the production of a good quality and/or service.
• To apply ideas and technologies to increase productivity and reduce costs
• To improve flexibility to meet rapidly changing customer needs
• To assure a safe workplace for all employees
• To assist in assuring high-quality customer service.

OM is responsible for a wide range of decisions, ranging from strategic to tactical. OM deals with design and management of
products, services, processes and supply chains.

Om objectives(Competitive priorities)
1. Offer good quality product to customers
2. Provide with Right Quantity(as per demand)[FLEXIBILITY]
3.Give Timely delivery[SERVICES]
4. At competitive Cost
 AGBS - INDORE
Functions of OM-(to meet objectives) or functions of operations manager-

1. Forecast(predict) the demand , plan the production

2. Arrange for procurement of raw materials

3. Arrange for maintenance , material planning , inspection, quality control.

4. Manage the operations effectively and efficiently to meet the target.

Role of Operations manager

•Production planning. During production planning, managers determine how goods will be produced, where production
will take place, and how manufacturing facilities will be laid out.

•Production control. Once the production process is under way, managers must continually schedule and monitor the
activities that make up that process. They must solicit and respond to feedback and make adjustments where needed. At
this stage, they also oversee the purchasing of raw materials and the handling of inventories.

•Quality control. Finally, the operations manager is directly involved in efforts to ensure that goods are produced accordin
to specifications and that quality standards are maintained.
 AGBS - INDORE

FACTORS AFFECTING OPEERATIONS MANAGEMENT(why OM)

1. Global Competition

2. Material (proper utilization)and Capital Security

3. Quality, Customer care and expenditure(may increase cost of production)

4. Social Responsibility(Do something for the society)

5. Expansion of Technology Advancement

6. Legal considerations

7. Business Ethics
AGBS - INDORE
 AGBS - INDORE

Continuous Production

• The volume of output is generally large (mass production) and goods are produced in anticipation of demand.
• The product design and the sequence of the operations are standardized i.e. identical products are produced.
• Special purpose automatic machines are used to perform standardized operations.
• Materials are fed at one end of the process and the finished product is received at the other end.
• The sequence of operations is predetermined.
• Work-in-progress inventory is minimum and material handling is reduced.
• Workers need not be highly skilled as they do repetitive jobs
The continuous system, however, is very rigid and if there is a fault in one operation the entire process is disturbed and al so
investments in machines are fairly high.
Mass production-This production refers to the manufacturing of standardized parts or components on a large
scale(different products on large scale-canned goods, toothpaste, soaps,pens)
Process production – This is employed in the bulk processing of certain materials(just one product in large quantities). The
typical processing Industries are fertilizers plants, petrochemical plants, and milk dairies, steel, cement, paper,sugar.
 AGBS - INDORE
Assembly Lines-
• Assembly line a type of flow production which is developed in the automobile industry in the USA.

• A manufacturing unit prefers to develop and employ an assembly line because it helps to improve the efficiency of production. In an
assembly line, each machine must directly receive material from the previous machine and pass it directly to the next machine.

• Machine and equipment should be arranged in such a manner that every operator has free and safe access to each machine. Space
should be provided for free movement of forklifts, trucks, etc. which deliver materials and collect finished products.

Intermittent situations are those where the facilities must be flexible enough to handle a variety of products and sizes.

•The sequence of operations is not predetermined and periodical adjustments are made to suit different jobs or batches.

•The flow of production is intermittent, not continuous.

•The volume of production is generally small.

•A wide variety of products are produced.

•General purpose, machines, and equipment are used.

•The intermittent system is much more complex because every product has to be treated differently under the constraint of limited
resources.
 AGBS - INDORE

Job shop production are characterised by manufacturing of one or few of products designed and produced as per the
specification of customers within prefixed time and cost.
Characteristics-
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who take each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product.

Batch production is defined “as a form of manufacturing in which the job passes through the functional departments in
lots or batches. Ex cars of different colors, cakes and ice-creams of different flavors
Characteristics-
1. Used for shorter production runs.
2. Used when plant and machinery are flexible.
3. Ideal when plant and machinery set up is used for the production of item in a batch and change of set up is required
for processing the next batch
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.
 AGBS - INDORE

Production systems can be classified as Job Shop, Batch, Mass and Continuous
Production systems.

Continuous
Production / Operations Volume

Production
Mass Production

Batch
Production
Job-Shop
Production

www.newagepublisher.com Output / Product Variety

Fig. 1.2 Classification of Production Systems
 AGBS - INDORE

DIFFERENCE BETWEEN MANUFACTURING AND SERVICE OPERATIONS

MANUFACTURING SERVICES
1. Output-Tangible 1.Output-Intangible
2. Output produced can be stored for future use. 2. Output cannot be stored(perishable)
3. Expenses for production are high (CAPITAL Intensive) 3. Expenses are less
4.Human contact is less 4.More human contact required for
services(labour intensive)
5. Manufacturing operations are standardized, 5. Services are customised and heterogenous
homogenous
6.Huge space is required for production 6.Huge space is not necessarily required
7. Product can be patented 7. Service cannot be patented.
 AGBS - INDORE

Strategies of an Organization are broadly into three types-

The corporate strategy is the highest and most broad level strategy. It is the business plan which sets the guidelines of what is
to be achieved and how the business is expected to achieve it. It sets the mission, vision, and corporate objectives.
Example- Diversification into new product or geographic markets

The business strategy is a unit specific strategy which differs for different units of the business. A unit can be different
products or channels which have totally different operations. These units form strategies to differentiate themselves(by usin g
their core competencies) from the competitors using competitive strategies and to align their objectives with the overall
business objective defined in the corporate strategy. It attempts to secure competitive advantage in existing product or
geographic markets.

The functional/operations strategies are set by different departments of the units. The departments include marketing, sales,
operations, finance etc. These functional level strategies are limited to day to day actions and decisions needed to deliver unit
level and corporate level strategies, maintaining relationships between different departments, and fulfilling functional goal s.
Supports Corporate and business strategy. It includes all sub systems like Information systems , HR practices and production
processes that facilitate achievement of Corporate and business strategy
 AGBS - INDORE

Operation Strategy-

According to Slack and Lewis, operations strategy is defined as “the total pattern of decisions which shape the long-
term capabilities of any type of operations and their contribution to the overall strategy.”

Operations strategy is the tool that helps to define the methods of producing goods or a service offered to the
customer. It is typically driven by the overall business strategy of the organization, and is designed to maximize the
effectiveness of production and support elements while minimizing costs.

The operations strategy binds the various operations decisions together ,linking firm policies and actions to the
competitive priorities chosen and communicated by the corporate or business strategy.
 AGBS - INDORE

OM DECISIONS- 10 strategic operations management decisions that can make a difference for an organisation-
1. Good and Services
2. Quality management
3. Process and capacity design
4. Location
5. Layout design and strategy
6. HR and job design
7. Supply chain management
8. Inventory
9. Scheduling
10. Maintenance

These 10 areas can be applied to any size business and they can help in analysing the operations, measuring the
current productivity. New strategies can be implemented by making changes in any of these 10 areas and help in
increasing the productivity
 AGBS - INDORE

Criteria of performance of the production and operations management system -

1.Customer satisfaction
2. Effectiveness
3. Efficiency

1.Customer satisfaction refers to the extent to which customers are happy with the products and services provided by a
business. Customer satisfaction levels can be measured using survey techniques and questionnaires.

2. Effectiveness is any kind of practice which allows a business or other organization to maximize the use of their inputs by
developing products at a faster pace than competitors or reducing defects.

3. Efficiency is Performing in the best possible manner with the least waste of time and effort. Companies usually seek to
increase and improve the efficiency of their operations and sales processes. When working with limited resources, they
would prefer to maximize the use of each of these resources.
 AGBS - INDORE

Scope(focus) of OM depends on strategic(long term) and tactical(business) decisions.

Strategic decisions-They are unstructured and thus, a manager has to apply his business judgement, evaluation and intuition
into the definition of the problem. These decisions are based on partial knowledge of the environmental factors which are
uncertain and dynamic. Such decisions are taken at the higher level of management.

• New product identification and design

• Process design and planning
• Facility location and planning layout
• Design of material handling system
• Capacity planning

Tactical decisions-These decisions relate to the implementation of strategic decisions. They are directed towards developing
divisional plans, structuring workflows, establishing distribution channels, acquisition of resources such as men, materials
and money. These decisions are taken at the middle level of management.

• Production planning
• Production control
• Inventory control maintenance design cost reduction
 AGBS - INDORE

Operational decisions:
These decisions relate to day-to-day operations of the enterprise.
They have a short-term horizon as they are taken repetitively.
These decisions are based on facts regarding the events and do not require much of business judgement.
Operational decisions are taken at lower levels of management
they implement plans and policies made by top management
The decisions involves time schedules, amount of remuneration, set up of machines and tools

Operations management for manufacturing-

It has the responsibility of producing the goods and services of an organization.
The decisions made by the operation managers in manufacturing organizations are-
1. Production(Product design, process)
2. Quality
3. Capacity,
4. Location
5. layout,
6. scheduling
7. MRP and Inventory
8. CAD/CAM, IT
 AGBS - INDORE

Operation management for services-

It has the responsibility of producing the services of an organization and providing them directly to customers.
The six types of decisions made by the operation managers in service organizations are
1. Process and capacity design(fast service, minimise waiting time)
2. Quality
3. Scheduling
4. Inventory
5. Supply chain
6. Information technology

Effect of growth of service sector on Operations management

➢ Service operations are mainly associated with efficiency, effectiveness, quality and cost out of which providing excellent
and quality customer service is the most crucial factor of a service industry.(ex. Banking, hospitality)

➢ Due to growth in the service sector since last 10 years, Operations management of service sector is widely affected. In
Service industries satisfaction of customers is the most important factor which helps the company to increase its market
share and generate profits.

➢ The operations managers have to look for new ways to satisfy their customers which needs planning new strategies and
making the right decisions at the right time so as to remain competitive in the todays scenario.
 AGBS - INDORE

Case study Solution(https://youtube/X_LEVZGH31I)

Read it 2-3 times

Steps
1. Understand the case study and understand the situation- Write a summary (1/3 of the case study)
(On an average 10 words in a line so 50 lines = 500 words so summary has to be 150-160 words)

2. Formulation of the problem in one sentence- Identify the problem ,focus and write in one sentence
3.Facts and figures – Example turnover ,core competencies, key persons
4. Assumptions- These assumptions are to be made based on theory of the subject which will help to solve the case study
5. SWOT analysis- Strengths weakness are known but opportunities threats can be assumed
6.Conclusion
7.Suggestions
8. Answer the questions if close ended case study else give alternatives and select the best according to your
understanding of the case.

QFD
https://www.slideshare.net/mmarleanne/quality-function-deployment-45707746