PAPER CODE: BMHGE 2134

A brief Handout on PRODUCTION AND OPERATIONS MANAGEMENT from

Dr. Supriyo Patra (UNITS I, II) FOR CIA 2023.
Please refer to any standard text book for further elaboration as discussed in the
class.

UNIT I- PRODUCTION PLANNING & CONTROL

PRODUCTION-
Production implies the creation of goods and services to satisfy human
needs.
Process of converting raw materials and other inputs in to finished
products.
Conversion of Inputs (Resources) in to Outputs (Products).
Any process which involves the conversion of raw materials and bought out
components in to finished products for sale is known as production.
The utility or added value is the difference between the value of outputs and
the value of inputs.
The value addition to inputs is brought about by-
Alteration, Transportation, Storage or Preservation, Quality Assurance.

MANUFACTURING VS PRODUCTION
Manufacturing refers to the process of producing only tangible goods.
Production or Operation is used to refer to the process of creating both
goods-
Tangibles as well as Services (which are Intangibles)

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PRODUCTION AS A SYSTEM
A System is defined as the collection of inter-related entities.
Production is viewed as a system which converts a set of inputs into a set of
desired outputs.
A production system has the following elements-
Inputs, Conversion /Transformation process (Welding/Cutting/packing), Outputs,
Transportation Subsystem, Communication subsystem, Control Decision making
subsystem.
A production system receives inputs in the form of materials, personnel,
capital and information which are then changed in a conversion
subsystem in to desired product/services, (called outputs).
A control subsystem monitors the quantity, cost and quality of outputs.
The control subsystem ensures system performance by providing feedback
to enable managers to take appropriate corrective action if and when
necessary.
Three general categories of Inputs are-
1) External Inputs- It is usually informational in character.
It tends to provide production managers knowledge about conditions of the
external environment of the system (Political, Technological, Social trends
etc.).
2) Market Inputs- It also tends to be informational.
It provides information about-
Competition,
Product Design,
Customer needs and desire etc.
Information is essential for the production manager to operate the system
so as to respond to the market needs.

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3) Primary Resources- These are inputs which directly support the
production and delivery of outputs.
Materials,
Personnel,
Capital and
Utilities such as Water, Gas, Electricity, Coal etc.
OUTPUTS- Outputs are categorized as
1) Direct outputs & 2) Indirect outputs
1) Direct outputs are usually either tangible or intangible.
Tangible goods are outputs of production systems, whereas the intangible
services are the outputs of the service system.
2) Indirect outputs- There are some indirect outputs in both production and
service system
Examples of indirect outputs are- Technological advancements.
CONVERSION SUBSYSTEM-
It is the core of production system.
It consists of workers, materials and machines used to convert the inputs in
to outputs.
CONTROL SUBSYSTEM- This consists of the decision making group
known as the Production Management.
The production manager manages all the activities of the production system.
He/She takes decision to carryout appropriate corrective actions as and
when necessary.
In an Automobile Factory-
Primary Inputs-
Raw materials, tools, personnel, paints etc.
Conversion Subsystem-

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 Transform raw materials in to automobiles through fabrication and
assembly operations.
Outputs- Automobiles.

PRODUCTION MANAGEMENT-
The term “production management” was earlier used to refer to the
management of an organisation’s productive resources or its production
system which convert inputs in to tangible outputs (physical products)
needed by the customers of the organisation.

PRODUCTION & OPERATIONS MANAGEMENT

Many organisations create both goods and services through the
transformation of inputs in to outputs.
The importance of services (either along with tangible goods or pure
services) is gaining ground.
The term “Production Management” has been changed to “Production and
Operations Management”.
REASONS FOR STUDYING-
One of the four major functions in any organisation.
To know how goods/services are produced.
To know what production manager do.
Scope for cost reduction.
Improve organisation profitability and enhance its service to the society.
PRODUCTION FUNCTION
Production function is defined as the creation of useful products for sale
with the help of inputs such as materials, machines, land, labour and
management.

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 The production function represents basically a physical relationship
between input and outputs.
The physical relationship can be represented as-
Q= f ( a, b, c, d…….)
“Q’ is the quantity of output and a, b, c, d etc. represent quantities of
various inputs such as materials, machine hours, labour hours etc.

PRODUCTIVITY
Productivity is an index that measures output (goods/service) relative to
inputs (materials, energy and other resources).
PRODUCTIVITY= Output/Input.
It indicates how well a productive process is carried out to convert a set of
inputs to a set of outputs of value to the customer which also provides
reasonable profit to the seller.

PRODUCTION FUNCTION-Importance
Core function of any business organisation.
In absence of production there would be no need for any other function.
More than 50% of employees in a business organisation have jobs in area of
production.
Consumption of goods and services is an integral part of any society.
Production function facilitates creation of goods and services for the benefit
of people in the society.

COMPETITIVE ADVANTAGE
Areas in which production management can offer competitive advantage-
Shorter New product lead time (speed to Market)

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 Higher Product Quality (reduced defects)
Higher Inventory turnover (low inventory)
Reduced wastages
Better Customer Service
Higher Productivity

OBJECTIVES OF PRODUCTION MANAGEMENT

Maximum Customer Satisfaction through quality, reliability, cost and
delivery time.
Minimum scrap/rework resulting in better product quality.
Maximum utilization of all kind of resources needed.
Maximum Possible Production (outputs).
Higher operating efficiency.
Maximum possible productivity.
Concern for protection of environment.

PRODUCTION MANAGER
The production/operation managers manage all activities of
production/operations system which convert inputs in to desired outputs
(goods/services).
Their job profile varies from organisation – to- organisation.
They must coordinate the use of resources through the managerial process
of planning, organizing, staffing, directing and controlling.

ROLE OF PRODUCTION/OPERATIONS MANAGER

PLANNING-In respect to Capacity, location, layout, make or buy, projects
and scheduling.

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 ORGANISING-
Degree of centralization, issues related to subcontracting.
STAFFING- Hiring/laying off of employees.
DIRECTING-. Incentive plans, issue of work orders, job assignment.
CONTROLLING- Quality control, inventory control and cost control.

RESPONSIBILITIES OF PRODUCTION/OPERATIONS MANAGER-

Production/operations managers are responsible for the amalgamation of
5Ps.
PRODUCT, PLANT, PROCESSES, PROGRAMMES, PEOPLE

PRODUCT-
It is the most obvious interface between Production and Marketing.
It includes characteristics such as-
Quality Reliability Selling price Delivery dates and/or lead time

PLANT-
The plant includes buildings, equipments and machinery required to
produce the product.
It should have the capacities to meet the present needs as well as that of the
future.
Important considerations are-
1) Design & Layout of buildings
2)Performance & Reliability of Machines
3) Maintenance
4) Safety of installation and operation of machinery & equipments.
5) Environmental protection.

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 PROCESSES-
It includes the transformation or conversion process which converts the
inputs in to outputs.
Factors to be examined in deciding upon a process are-
1) Available capacity.2) Available labour skill3) Layout of plant and
equipments. 4) Safety requirements in operations.

PROGRAMMES-
It consists of schedules or timetables which set the times for delivery of
products/services to customers.
These delivery schedules in turn decide the time schedule for various
activities such as-
Design, Purchase, Manufacture, Assembly, Packing & Despatch etc.

PEOPLE-
The human aspect of production/operations management includes the skills,
knowledge, and intelligence of the labour and managerial personnel.
Understanding people is crucial for the efficient and effective utilization of
resources for the production of outputs.
Production Planning & Control (PPC)
Production Planning and Control is a management tool.
It is employed for the direction of manufacturing operations and their
coordination with other activities of the firm.
It coordinates with various departments such as marketing, product design,
purchase, quality control, maintenance, manufacturing, packing and
dispatching department in the production system.

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 It is responsible for coordinating various activities concerned with
production management right from design to dispatch of the products to the
customers.

PRODUCTION PLANNING FUNCTIONS

The main functions of production planning are –
1) ESTIMATING-
It involves deciding the quantity of products to be produced and cost
involved in it on the basis of sales forecast.
Estimating manpower, machine capacity and materials required to meet the
planned production targets are the key activities.
Budgeting for resources (production budget is the basis for materials
budget, manpower budget etc.).
2) ROUTING-
This is the process of determining the sequence of operations to be
performed in the production process.
Routing determines what work must be done where and how.
Routing information is useful to prepare machine loading chart and
schedules.
Route Sheet is a document providing information and instructions for
converting the raw materials in to finished products.
It defines each step of the production process and lays down the precise
path or route through which the product will flow during the conversion
process.
Route Sheet contains detailed drawings of parts, machine or equipment to
be used, standard time etc.

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 3) SCHEDULING-
It involves fixing priorities for each job.
Determining the starting time and finishing time for each operation, starting
date and finishing date for each part, and final assembly.
Scheduling lays down a time table for production.
Objective of scheduling are-
Prevent unbalanced use of time among work centres and departments.
To utilize labour to produce the output within the lead time and at minimum
total cost.
4)LOADING
Facility loading means loading of facility or work centre and deciding
which jobs to be assigned to which work centre.
It is the process of converting the operation schedule in to practice.
Machine loading is the process of assigning specific jobs to machines, men
based on relative priorities and capacity utilization.
It is essential to avoid overloading or under loading the facilities, machines
to ensure maximum utilization of resources.
PRODUCTION CONTROL FUNCTIONS
The main functions of production Control are –
1)DISPATCHING
It is defined as setting production activities in motion.
It releases work order and instructions in accordance with the previously
planned time schedule and routings.
It also helps in comparing actual progress with planned production
progress.
It also includes issuing job orders authorizing operations in accordance
with date and time as indicated in schedule.

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Issue of drawings, route cards etc.
2)EXPEDITING/FOLLOW-UP/PROGRESSING-
Progressing includes activities such as status reporting.
Attending to bottlenecks or hold-ups in production and removing the same.
Controlling variations or deviations from planned performance levels.

3)INSPECTION-
This function relates to checking the quality in production and evaluating
the efficiency of the processes, methods and workers so that improvements
can be made to achieve the desired level of quality.

4)EVALUATING OR CONTROLLING-
The objective of evaluation or controlling is to improve performance.
Methods and facilities are evaluated to improve their performance.
PPC is a management tool employed for the direction of manufacturing
operations and their co-ordination with other activities of the organisation.

EFFICIENCY OF PRODUCTION PLANNING AND CONTROL

PPC function is the nerve centre or heart of the production/operation
management function.
An efficient PPC function results in higher quality, better utilization of
resources, faster delivery, lower cost of production and better customer
service.
It helps in minimization of breakdown of machines, minimizes idle time of
labour and ensures even flow of work through the plant facilities.
An efficient PPC system enables the firm to improve its sales turnover,
market share and profitability and provides a competitive edge.

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OPERATIONS MANAGEMENT
Operations management focuses on carefully managing the processes to
produce and distribute products and services.
Major, overall activities often include product development, production
and distribution. (These activities are also associated with Product and
Service Management).
KEY DECISIONS (Related activities include) –
Managing purchases
Inventory control
Quality control
Storage
Logistics and evaluations of processes.
KEY DECISION OF OPERATIONS MANAGEMENT-
Design of Goods and Services. ...
Quality Management. ...
Process and Capacity Design. ...
Location Strategy.....
Layout Design and Strategy. ...
Human Resources and Job Design. ...
Supply Chain Management. ...
Inventory Management.
Ultimately, the nature of how operations management is carried out in an
organization depends very much on the nature of the products or services
in the organization, for example
Manufacturing, Wholesale, Retail.

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SCOPE OF PRODUCTION &OPERATIONS MANAGEMENT

A great deal of focus is on efficiency and effectiveness of processes.

Therefore, operations management often includes substantial
measurement and analysis of internal processes.
Operations become a positive factor when facilities, equipment, and
employee training are viewed as a means to achieve organizational
objectives, rather than as narrowly focused departmental objectives.
OPERATION STRATEGIES
To understand operations and how it contribute to the success of an
organization, it is important to understand the strategic nature of
operations, the value-added nature of operations, the impact technology
can have on performance, and the globally competitive marketplace.
By linking operations and operating strategies with the overall strategy of the
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organization (including engineering, financial, marketing, and information
system strategy) synergy can result.

ORDER QUALIFIERS AND ORDER WINNERS

Terry Hill argues that the criteria required in the marketplace (and identified by
marketing) can be divided into two groups: order qualifiers and order winners.
An order qualifier is a characteristic of a product or service that is required in
order for the product/service to even be considered by a customer. An order
winner is a characteristic that will win the bid or customer's purchase. Therefore,
firms must provide the qualifiers in order to get into or stay in a market. To
provide qualifiers, they need only to be as good as their competitors. Failure to do
so may result in lost sales. However, to provide order winners, firms must be
better than their competitors. It is important to note that order qualifiers are not

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less important than order winners; they are just different.
Firms must also exercise some caution when making decisions based on order
winners and qualifiers. Take, for example, a firm producing a high quality product
(where high quality is the order-winning criteria). If the cost of producing at such
a high level of quality forces the cost of the product to exceed a certain price level
(which is an order-qualifying criteria), the end result may be lost sales, thereby
making "quality" an order-losing attribute.
Order winners and qualifiers are both market-specific and time-specific. They
work in different combinations in different ways on different markets and with
different customers. While, some general trends exist across markets, these may
not be stable over time. For example, in the late 1990s delivery speed and product
customization were frequent order winners, while product quality and price, which
previously were frequent order winners, tended to be order qualifiers. Hence,
firms need to develop different strategies to support different marketing needs, and
these strategies will change over time. Also, since customers' stated needs do not
always reflect their buying habits, Hill recommends that firms study how
customers behave, not what they say.
When a firm's perception of order winners and qualifiers matches the customer's
perception of the same, there exist a "fit" between the two perspectives. When a fit
exists one would expect a positive sales performance. Unfortunately, research
published in the International Journal of Operations and Production Management,
found that for many firms a substantial gap existed between managers' and
customers' opinions on why they did business together. The researchers found that
favorable sales performance resulted when there was a good fit between a firm's
perception of the strengths of a product and customer perception of the product.
Conversely, when firms with high opinions about their competitive strengths had
customers who did not share this opinion, sales performance was negative.

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UNIT II PLANT LOCATION & LAYOUT
PLANT LOCATION-
One of the most important strategic decisions made by companies engaged
either in manufacturing goods or in providing services is where to locate
their operations.
All firms need to address the location decision because location greatly
affects both fixed and variable costs.
A well-known consultancy firm Mckinsey believes “location ultimately has
the power to make or break a company’s business strategy”.
Facility location or Plant location is the process of determining a
geographical site for a firm’s operations achieving maximum operating
economy and effectiveness.
Need for Location Decisions-
Location decisions represent an integral part of the strategic planning
process of every organization.
The reasons for making location decisions arise –
(i) When a business is started.
(ii) When a business firm wants to expand its market by adding new locations
to the existing systems.

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 When some firms need to relocate due to rising costs of inputs or due to
depletion of basic inputs such as raw materials, fuel.
Due to other Social and Economic reasons such as shortage of labour
supply, shortage of electric power and changes in lifestyle of the customers
etc.
The importance of location decisions are –
(i) Involve a long term commitment.
(ii) Location often has an impact on investment required, operating costs
etc.
(iii) A wrong choice of location might result in-
Excessive Transportation Cost,
Shortage of Qualified Labour,
Inadequate supply of Raw materials etc.
For services, a poor location could result in lack of customers and/or high
operating cost.
The broad factors that affect the location decision are-
1) Deciding on Domestic or International location.
2) Regional Location decisions
3) Selection of community
4) Selection of exact site.
1) Deciding on Domestic or International location.
First management must decide whether the facility will be located
internationally or domestically.
The choice of a particular country for location depends on-
Political stability,
Availability of natural resources,
Cultural and
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Economic considerations etc. (Make in India)
2) Regional Location Decision
There are various factors that affects the selection of a particular region –
(i) Availability of Raw materials and nearness to the source of raw
materials- This will reduce the cost of transportation of raw materials from
its source to the plant.
(ii) Proximity to the market- Bottling plants of soft-drink companies are
generally located within the city.
(iii) Proximity to Suppliers- Firms are located near their suppliers due to
bulkiness of the materials, transportation cost etc.
(iv) Availability of power- Power is essential for any manufacturing firm.
(v) Transport Facilities- Petroleum refineries and fertilizer plants are
generally located near the ports.
Reliance refinery (Jamnagar, Gujarat) near Sikka port.
(vi) Suitability of Climate- Certain industries require particular climatic
conditions because the nature of their production. Humid climate is
essential for Cotton textile and jute industries.
vii) Competition between states-
Many states compete among themselves to attract new industries by
offering investment subsidies, cheap power, land etc. (Bengal Global
Business Summit)

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(viii) Government policy-The central government may influence plant
location in backward states by providing subsidies.
3) Selection of Community-
The selection of a locality or community in a region is influenced by the
following factors-
(i) Availability of Labour- The skilled labour influences the location of a
plant
(ii) Civic amenities for employees-Employees need facilities such as
housing, medical, educational and recreational facilities. (Exide Industry
at Haldia)
(iii)Existence of Complementary and ancillary Industries- They can accept
job orders which are sub contracted by major industries. (e.g. Automobile-
Tata Motors)
iv) Finance and Research facility-Availability of Financial institutions,
research and development labs is also a factor that attract new industries
to a location.
(v) Local taxes and restrictions- The local administration has its own tax
structure and waste disposal policies that affect the location of a plant.
) Selection of Exact Site-
(i) Area of land available, cost of land-
(ii) Disposal of waste- Some industries such as leather industries and
chemical plants have the problem of disposal of waste. (Leather factories
in Topsia).
(iii)Community attitude- The people living in the nearby areas
surrounding the proposed site for the industry should not oppose the
location of the plant.

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 Finally the choice of the exact site can be in rural, urban or Semi urban
area.
LOCATION EVALUATION METHOD-
Analysis should follow 3 step process:
Step 1: Identify dominant location factors
Step 2: Develop location alternatives
Step 3: Evaluate locations alternatives
FACTOR RATING METHOD-
Six steps:
Develop a list of relevant factors.
Assign a weight to each factor reflecting its relative importance to the firm.
Develop a rating scale for the factors.
Score each location on each factor based on the scale.
Multiply the scores by the weights for each factor and total the weighted
scores for each location.
Make a recommendation based on the maximum point score considering
other factors.
CAPACITY PLANNING-
The production system design planning, considers input requirements, conversion
process and output. After considering the forecast and long-term planning
organization should undertake capacity planning. Capacity is defined as the ability
to achieve, store or produce.
For an organization, capacity would be the ability of a given system to produce
output within the specific time period.
In operations, management capacity is referred as an amount of the input
resources available to produce relative output over a period of time.

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 ■ Goal of Capacity Planning
■ The ultimate goal of capacity planning is to meet the current and future level
of the requirement with minimum wastage.
■ Effective capacity planning is dependent upon factors like-
■ Production facility (layout, design, and location),
■ Product line
■ Production Technology,
■ Human capital (job design, compensation), operational structure
(scheduling, quality assurance) and external structure (policy, safety
regulations).
■ There is no one best way to measure capacity
■ Output measures are easier to understand
■ With multiple products, inputs measures work better.
■ The three-step procedure for making capacity planning decisions is as
follows:
■ Step 1: Identify Capacity Requirements
■ Step 2: Develop Capacity Alternatives
■ Step 3: Evaluate Capacity Alternatives

PLANT LAYOUT
Plant layout also known as “Facilities Layout” refers to the configuration
of departments, work centres, equipment and machinery with focus on the
flow of materials or work through the production system.
Plant layout or Facility layout means planning for location of all
machines, equipments, utilities, materials storage areas, restrooms,
customer service area and also planning for patterns of flow of materials
and people around, into and within the buildings.

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Layout planning involves decisions about the physical arrangement of
economic activity centres within a facility.
An economic activity center can be anything that consumes space, a
person or group of people, a machine, a storeroom and so on.
The goal of layout planning is to allow workers and equipments to operate
more effectively.
There are some important questions that are to be addresses in layout
planning-
1) What centres should the layout include?
2) How much space and capacity does each centre need?
3) Where should each centre be located?
The location of a centre has two dimensions-
(i) Relative location- Placement of a centre relative to other centres.
(ii)Absolute location- It refers to the particular space that the centre
occupies within the facility.
OBJECTIVES OF A GOOD PLANT LAYOUT
The objectives of a good plant layout are stated below-
1) Higher utilization of space, equipment and people.
2) Improved flow of materials, information and people.
3) Improved employee morale and safe working conditions.
4) To provide ease of supervision.
5) To facilitate better coordination and face to face communication where
needed.
To allow ease of maintenance.
To improve productivity.

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PROCESS LAYOUT OR FUNCTIONAL LAYOUT
Process layout is also called batch production layout.
The process layout involves a grouping together of similar machines in
one department.
The process arrangement is signified by the grouping together of like
machines based upon their operational characteristics.
Work has to be allotted to each department in such a way that no
machines remain idle in any department.
The work which needs to be done is allocated to the machines according to
the loading schedules.
Each machine should be fully loaded.
The process layout carries out the functional idea of Taylor and from the
historical point of view it precedes product layout.
Important principles to be kept in mind while grouping machines
according to Process type-
1) The distance between the departments needs to be as short as possible
with a view of avoiding long distance movement of materials.
2) Convenience for inspection.
3) Though similar machines are grouped in one department, the
departments themselves should be located in accordance with the principle
of sequence of operation.
Can be used in heavy engineering industries, furniture industries etc.
It is also common in service environment like Universities, Hospitals etc.

PRODUCT LAYOUT
Product layout is also called straight line layout or layout for serialized
manufacturer.

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 It involves arrangement of machines in one line depending upon the
sequence of operations.
Materials are fed in the first machine and finished products come out from
the last machine.
In between partly finished goods move from one machine to another.
The output of one machine becomes the inputs for the next.
The emphasis here therefore is on special purpose machine.
All machines and equipments must be placed at the point demanded by the
sequence of operations.
All operations, including assembly, testing and packing should be included
in the line.
The product layout followed in plants manufacturing standardized products
on a mass scale are sugar, paper, cement industries etc.
FIXED POSITION LAYOUT-
✓ In this particular type of layout, the product does not move,
✓ It is the different resources that are moved to perform the operations on the
product.
✓ This type of layout is commonly found in industries that manufacture large
size products, such as ships or aircrafts.
✓ GROUP TECHNOLOGY LAYOUT-
✓ Processes are grouped into cells using a technique known as Group
Technology (GT).
✓ Group technology involves identifying parts with similar design
characteristics (size, shape, and function) and similar process
characteristics (type of processing required, available machinery that
performs this type of process, and processing sequence).

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