Module-1: Introduction to Production and Operations Management

Syllabus:
Introduction - Meaning, Nature and Scope of Production and Operation Management, Types
of production processes

Meaning:
• Production and Operations Management is the process in which resources/inputs are
converted into more useful products.
• Production and Operations management is the conversion of inputs into outputs, using
physical resources, so as to provide the desired utility/utilities of form, place, possession or
state or a combination there-of to the customer while meeting the other organisational
objectives of effectiveness, efficiency and adaptability.

Nature of Production:
The nature of production or operations can be better understood by viewing the manufacturing
function as:
(i) Production/operations as a system,
(ii) Production/operations as an organisational function,
(iii) Production/operations as a conversion or transformation process and
(iv)Production/operations as a means of creating utility.
These four distinct views are discussed below.

The above figure explains the above three aspects. The main task here is to plan, organise, and
control the input and to produce desired output, which is represented in following diagram.

The production system has the following characteristics:

• Production is an organized activity, so every production system has an objective.
• The system transforms the various inputs (men, material, machines information, and energy)
into useful outputs (goods or services).
• Productions system does not operate in isolation from the other organizational systems such
as external environment forces, marketing, finance, etc.
 • There exists feedback about the activities which is essential to control and improve system
performance.

Importance of Production function:

The production function is the core function in any business organization. Production function creates
goods and services and organization exist primarily to create goods and services. With out production
function, there would be no need for any other function such as marketing, finance or human resource
function. Production function is responsible for a major portion of assets in most organization.
Consumption of goods and services is an integral part of any society and production function facilitates
creations of goods and services for the benefit of the society. Some of the areas in which production
management can offer competitive advantage to a firm are listed below:

• Shorter new product lead time

• Higher inventory turnover
• Shorter manufacturing cycle time
• High product quality
• Greater flexibility
• Better customer service
• Reduced wastages
• Higher productivity.

Difference between Production and Operations Management

Production management and operations management are differentiated on the basis of tangibility of
finished goods or services. Production management and operations management are used
interchangeably.

There are only two points for describing the difference between production and operations
management.

• The term 'production management' is more frequently used for a system where tangible
goods are produced, whereas operations management is used for various inputs are
transformed into intangible services.
• The second distinction relates to the evolution of the subject. Operations management is the
term used nowadays whereas the production management precedes operations
management in the historical growth of the subject.

Scope of P & OM
The scope of operations management is very vast, commencing with the selection of location,
operations management covers such activities as:

• Forecasting
• Capacity planning
• Scheduling
• Managing inventories
• Assuring quality
• Motivating employees
• Deciding where to locate facilities
• Design of work system
 • Operations planning and control
• Resource requirement planning
• Capacity requirement planning
• Project management
• Quality management
• Maintenance management
• Just-In-Time system
• Supply chain management
• Operations function includes all activities directly related to producing goods or providing
services

Objectives of Production and Operations Management

The objective of the production management is ‘to produce goods & services of right quality
and quantity at the right time and right manufacturing cost’.
1. RIGHT QUALITY The quality of product is established based upon the customers needs. The
right quality is not necessarily best quality. It is determined by the cost of the product and the
technical characteristics as suited to the specific requirements.
2. RIGHT QUANTITY The manufacturing organization should produce the products in right
number. If they are produced in excess of demand the capital will block up in the form of
inventory and if the quantity is produced in short of demand, leads to shortage of products.
3. RIGHT TIME Timeliness of delivery is one of the important parameter to judge the
effectiveness of production department. So, the production department has to make the
optimal utilization of input resources to achieve its objective.
4. RIGHT MANUFACTURING COST Manufacturing costs are established before the product is
actually manufactured. Hence, all attempts should be made to produce the products at pre-
established cost, so as to reduce the variation between actual and the standard (pre-
established) cost.

Integration 0f POM with other functional subsystems of organisation:

Production and Operations Management links with other functional areas in a business
through coordination of resources, processes, and strategies to achieve organisational goals.
Production and Operations Management is the heart of any organisation, responsible for the
creation and delivery of goods or services. It works closely with other functional areas such as
marketing, finance, human resources, and information technology to ensure smooth
operation and achievement of business objectives.
Marketing and Production and Operations Management often work hand in hand. The
marketing department identifies customer needs and wants, and Production and Operations
Management ensures these needs are met through the production of goods or services. For
instance, if the marketing department identifies a trend for eco-friendly products, Production
and Operations Management would need to adjust production processes to meet this
demand, perhaps by sourcing sustainable materials or implementing energy-efficient
manufacturing processes.
Finance is another key area linked with Production and Operations Management. The finance
department is responsible for budgeting, cost control, and financial forecasting. Production
and Operations Management needs to work within these financial constraints to ensure cost-
effective production. For instance, if the finance department sets a budget for raw materials,
Production and Operations Management must find ways to stay within this budget while still
meeting production targets.
Human resources (HR) and Production and Operations Management also have a close
relationship. HR is responsible for recruiting, training, and managing staff. Production and
Operations Management relies on HR to provide skilled and motivated employees who can
carry out the tasks required in the production process. For example, if Production and
Operations Management introduces a new production technique, HR would need to ensure
staff are trained to use this technique effectively.
Lastly, information technology (IT) plays a crucial role in modern Production and Operations
Management. IT systems can be used to monitor and control production processes, manage
inventory, and analyse performance data. Production and Operations Management works
closely with the IT department to ensure these systems are fit for purpose and used
effectively.
In conclusion, Production and Operations Management is closely linked with other functional
areas in a business. It relies on these areas for resources, information, and support, and in
turn, helps these areas to achieve their own objectives. This interdependence highlights the
importance of good communication and coordination within a business.

Classification of Production System

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

JOB SHOP PRODUCTION

Job shop production is characterised by manufacturing of one or few quantity of products designed
and produced as per the specification of customers within prefixed time and cost. The distinguishing
feature of this is low volume and high variety of products.
A job shop comprises of general-purpose machines arranged into different departments
Each job demands unique technological requirements, demands processing on machines in a
certain sequence.

Characteristics
The Job-shop production system is followed when there is:
1. High variety of products and low volume.
2. Use of general-purpose machines and facilities.
3. Highly skilled operators who can take up 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, capacities
for each work centre and order priorities.

Advantages
Following are the advantages of job shop production:
1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning opportunities.
3. Full potential of operators can be utilised.
4. Opportunity exists for creative methods and innovative ideas.

Limitations
Following are the limitations of job shop production:
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.

BATCH PRODUCTION

Batch production is defined by American Production and Inventory Control Society (APICS) “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.” It is characterised by the manufacture of limited number of
products produced at regular intervals and stocked awaiting sales.

Characteristics
Batch production system is used under the following circumstances:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. 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. When manufacturing lead time and cost are lower as compared to job order production.

Advantages
Following are the advantages of batch production:
1. Better utilisation of plant and machinery.
2. Promotes functional specialisation.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.

Limitations
Following are the limitations of batch production:
1. Material handling is complex because of irregular and longer flows.
2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.

MASS PRODUCTION
Manufacture of discrete parts or assemblies using a continuous process are called mass production.
This production system is justified by very large volume of production. The machines are arranged in
a line or product layout. Product and process standardisation exists and all outputs follow the
same path.

Characteristics
Mass production is used under the following circumstances:
1. Standardisation of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.

Advantages
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilisation due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.

Limitations
Following are the limitations of mass production:
1. Breakdown of one machine will stop an entire production line.
2. Line layout needs major change with the changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.

CONTINUOUS PRODUCTION
Production facilities are arranged as per the sequence of production operations from the first
operations to the finished product. The items are made to flow through the sequence of operations
through material handling devices such as conveyors, transfer devices, etc.
Characteristics

Continuous production is used under the following circumstances:

1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.

Advantages

Following are the advantages of continuous production:

1. Standardisation of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilisation due to line balancing.
4. Manpower is not required for material handling as it is completely automatic.
5. Person with limited skills can be used on the production line.
6. Unit cost is lower due to high volume of production.

Limitations
Following are the limitations of continuous production:
1. Flexibility to accommodate and process number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.

Examples:
Type Goods Services
Manufacturing, Furniture Surgery
manufacturing, Restaurant,
Job Shop (Custom Production)
Garment industry, tailoring
business
Restaurant Kitchen, Bakery, Education in university
Batch Shop Medicine Production,
Printing, T-shirt mfr
Automotive production, Car wash,
Assembly of television sets,
computer keyboard, Cold
Mass (Assemble line Production)
drinks factory, Ready made
clothing, tooth brush, White
bread
Petrol, Chemical
Continuous
manufacturing,
Project Ship building, Wedding cake, Event