Download - Unit 1_Introduction to Production Management

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Course:

Production Management

Unit-1:

Introduction to Production

Management

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Table of Contents

1.1. Introduction ............................................................................................................................... 4

1.2. Learning Objectives .................................................................................................................. 5

1.3. History of Production Management ......................................................................................... 6

1.4. Definition of Production Management ..................................................................................... 7

1.5. Dimensions of Production Management ................................................................................... 8

1.5.1. Product Design .................................................................................................................... 9

1.5.2. Insourcing and Outsourcing ................................................................................................. 9

1.5.3. Capacity Planning and Control ............................................................................................. 9

1.5.4. Purchasing Process............................................................................................................. 10

1.5.5. Evaluation, Selection and Measurement of Suppliers ......................................................... 10

1.5.6. Basic Inventory Systems .................................................................................................... 10

1.5.7. Aggregate Production Planning and Just-in-Time Systems ................................................. 11

1.5.8. Master Production Schedule ............................................................................................... 11

1.6. Production Strategies .............................................................................................................. 12

1.6.1. Strategy Targeting to Minimise Cost .................................................................................. 12

1.6.2. Strategy Aiming at Highest Quality .................................................................................... 12

1.6.3. Strategy of Innovation ........................................................................................................ 13

1.6.4. Strategy of Balancing the Competitive Priorities ................................................................ 13

1.7. Computer Integrated Manufacturing ..................................................................................... 14

1.7.1. Computer Technology ........................................................................................................ 14

1.7.2. Computer-Aided Design (CAD) ......................................................................................... 15

1.7.3. Computer-Aided Manufacturing (CAM) ............................................................................ 15

1.7.4. Robotics ............................................................................................................................. 15

1.7.5. Electronic Data Interchange (EDI) ..................................................................................... 15

1.7.6. Manufacturing Resource Planning...................................................................................... 15

1.7.7. Automated Guided Vehicle Systems .................................................................................. 16

1.7.8. Group Technology ............................................................................................................. 16

1.7.9. Vendor Scheduling............................................................................................................. 16

1.8. Automation and Enterprise Resource Planning ..................................................................... 16

1.8.1. Supply Chain Management (SCM) Systems ....................................................................... 18

1.8.2. Customer Relationship Management (CRM) Systems ........................................................ 19

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1.8.3. Supplier Relationship Management (SRM) Systems .......................................................... 19

1.8.4. Product Lifecycle Management (PLM) Systems ................................................................. 19

1.8.5. Employee Lifecycle Management (ELM) Systems ............................................................. 19

1.8.6. Corporate Performance Management (CPM) Systems ........................................................ 19

1.8.7. Business to Consumer (B2C) Systems................................................................................ 19

1.8.8. Business to Business (B2B) Systems .................................................................................. 20

1.9. Summary.................................................................................................................................. 20

1.10. References .............................................................................................................................. 21

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1.1. Introduction

The purpose of recalling is to inspect the front drive shaft. "The front shaft in these vehicles may

include a component that contains cracks that developed during the manufacturing process," said a

statement by Toyota Motor Sales, USA. "As those vehicles are used, the cracks may eventually lead

to the separation of the drive shaft at the joint portion," it added.

The Tacoma trouble is the latest embarrassment for the world's biggest automaker. Toyota has

recalled millions of vehicles in past months due to problems linked to accelerator and brake

functions. Those recalls cover the models with "sticky accelerators" that cause cars to race out of

control a defect cited in several deadly crashes. It has widened to brake system problems in the

Prius and other hybrid models.

The Tacoma pickup shafts were built by supplier Dana Corp from December until early this month,

a US government official said, speaking on condition of anonymity. Dana told the National

Highway Transportation Safety Administration, a government agency, that it was going to handle

the shaft recall on vehicles built for automakers Ford, Toyota and Nissan, the official said.

This was "because they had discovered a defect in their manufacturing process," the official said.

"So it looks like, out of caution, Toyota decided to submit its own recall notification to us because

technically, the vehicle manufacturer is responsible for recalls."

Separately, Toyota said in a letter to US lawmakers that it would investigate complaints on the

Tacoma relating to "engine idle speed changes when the vehicle is stopped and high idle speed

when the engine is cold." Also to be probed were complaints on "cruise control downshifting

behavior, engine speed changes when shifting (manual transmission) and lurching when a vehicle

is coming to a stop."

Amid the series of recalls, Toyota said it was studying the possibility of a new override system to

deactivate engines as an extra safety layer in emergency situations. "Toyota is considering adding

a multiple tap function to the start/stop button for vehicles produced in the future," said Toyota

spokesman Brian Lyons. The fix could make it easier to turn off engines in cases of accelerator

malfunctions in cars with keyless ignition systems.

A US woman filed a federal lawsuit in Los Angeles against Toyota, blaming the company for the

Exhibit – 1.1

Automotive Manufacturing

Toyota faced new woes with another recall - this time involving its Tacoma

pickup trucks. This was happened after US President Barack Obama warned

carmakers not to drag their feet on beefing up vehicle safety. Toyota said it was

voluntarily recalling 8,000 of the 2010 model Tacoma four-wheel drive pickups

in the United States

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death of her husband when the Prius she was driving suddenly accelerated. Jacquelyn Donoghue, a

67-year-old nurse, alleges in the suit that her car suddenly sped up and ploughed into another car

when she was driving home with her husband in December, and that a brake-to-idle override could

have prevented the crash.

Source: “Toyota recalls 8,000 Tacoma trucks” The Times of India, International Business, February 13, 2010.

http://timesofindia.indiatimes.com

„Exhibit 1.1‟ provides a good backdrop for understanding the importance of Production Management.

A legendary company, such as Toyota, which has been hitherto known for its leading-edge

innovations in the field, is facing unprecedented criticism for its recent oversight.

Under the given situation discussed in „Exhibit 1.1‟, some of the questions faced by Toyota are:

How did Toyota overlook the flaws when the vehicles/faulty components were being

designed?

Were there anomalies in the process that was used for assembling the failed components?

Was there slip ups during the vendor selection for the failed components?

Did Toyota perform proper controls to check if the components supplied by the vendors

were up to the specifications?

Was Toyota quick enough to respond to the complaints it received from the disgruntled

customers?

Were the managers of Toyota in the US adept enough to handle such a mammoth-sized

crisis?

The list of questions seems endless and it is clear that Toyota would find it hard to answer the same.

The dent in its world-class reputation seems irreparable. The lesson is obvious. Even the best of

organisations today cannot turn a blind eye to the customers. Organisations have to always strive hard

to create and sustain best practices in Production Management.

1.2. Learning Objectives

By the end of this unit, you will be able to:

Recall the basics of Production Management

Identify various dimensions of Production Management

Apply different tools used in computer integrated manufacturing

Recognise the need of basic knowledge of automated manufacturing and Enterprise

Resource Planning (ERP)

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1.3. History of Production Management

Figure 1.1 displays some of the world famous management gurus, about whom we will discuss in

detail. The history of Production Management can be traced back to the times of James Watt (1736 -

1819).

Figure 1.1. World Famous Management Gurus

James Watt, was a Scottish inventor, who invented the steam engine. Watt obtained a patent for the

steam engine and started a steam engine manufacturing factory in partnership with Mathew Bolton in

1794. A foundry of the company called Soho Foundry Works, was managed by the sons of Watt and

Boulton.

James Watt Jr. (son of James Watt) and Robinson Boulton (son of Mathew Bolton) used systematic

techniques to manage their foundry. The techniques were demand forecasting, facility layout and

work flow, production planning, planned site selection, production standards and standardisation of

James Watt

Mathew Bolton

Frederick W. Taylor

Henry Ford

W. E. Deming Joseph Juran

Taichii Ohno

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product standards. They also created systems to determine costs and profits for each machine

manufactured (Pollard, 1974).

Frederick Winslow Taylor (1856 - 1915) is another major contributor to the field, with his seminal

work “The Principles of Scientific Management”. Taylor is renowned for his Stop Watch Time

Studies, in which he measured the time taken by workers to perform various tasks in a factory. In the

process, he arrived at the Standard Time that should be ideally taken by the workers. This helps in

comparing the performance of the workers. Taylor is often hailed as the father of Production

Management.

Henry Ford (1863 - 1947), the legendary inventor and businessman (Founder of Ford Motors),

invented the modern assembly line and used it effectively for the large-scale production of the

immensely successful Model T. It was his vision that made the car within the reach of the common

man during those times.

In more recent times, W. Edwards Deming (1900 - 1993) and Joseph M. Juran (1904 - 2008) are

hailed as Quality Gurus for their immense contributions to the field of Production Management. Both

these gentlemen were instrumental in bringing Japan to the global world map for its quality products

which were beyond competition during the 1980s compared to their Western counterparts.

Deming and Juran (both of them Americans) lectured throughout Japan during the 1950s and 1960s,

preaching the concepts of quality. Their preaching is hailed as the harbinger of Total Quality

Management (TQM) philosophy.

It is during this time that Taiichi Ohno (1912 - 1990), the then Vice-President of Toyota, invented the

famed Just-in-Time (JIT) production method (known as the Toyota Production System during that

time). JIT reduced the inventory in the factories drastically, thus reducing the overall cost of

production while improving the quality.

It is ironical that Toyota is facing acute quality crisis today and perhaps, needs to revisit the concepts

preached by Deming and Juran.

1.4. Definition of Production Management

Figure 1.2 shows the transformation process to which various types of inputs are subjected to, for

conversion into desired products. These inputs can be the land, building, machinery, equipment, tools,

raw materials, labour, managers, and so on. It is imperative that the quality of inputs is monitored to

check if they meet the required specifications.

Similarly, after the inputs are transformed into finished products, quality should again be monitored to

ensure that no defective item reaches the hands of the customer. Any variations in the expected output

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and the actual output need to be compared. Any gaps found should serve as a feedback mechanism to

take corrective action at the input stage or the transformation process stage.

At times, random disturbances, such as strike by labour, high turnover of workers (workers leaving

the job frequently), and so on, disrupt the transformation process.

Figure 1.2. The Transformation Process (Bedi, 2007)

We define Production Management on the basis of transformation process as below.

Production Management is defined as the design, operation and maintenance of

the transformation process, which converts various inputs into outputs of desired

products.

1.5. Dimensions of Production Management

Production Management has a vast scope of application and encompasses various dimensions. Let us

briefly understand some of these dimensions of Production Management.

Some of the important dimensions are quality management, supply chain management and so on

(These dimensions are covered as separate subjects and hence, are not mentioned in this unit).

Transformation Process

Feedback Mechanisms

INPUTS OUTPUTS

Random disturbances

Quality of inputs

monitored

Quality of outputs

monitored

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1.5.1. Product Design

Product design is an extensive process that involves inputs from some of the following sources.

Existing/Potential Customers

Design Engineers

Industrial Clients

Contemporary organisations try to capture “the voice of the customer” to have a clear understanding

of the exact expectations of the customers from the product to be designed.

Some companies perform “reverse engineering” of the products of competitors, whereby the products

are dismantled layer-by-layer to understand the underlying concepts that may be helpful in designing

the new products.

1.5.2. Insourcing and Outsourcing

First, the product design stage is completed and the desired features of the product are finalised. Next,

the company must decide on the following issues.

Which components/parts of the product the company would like to manufacture itself

(insource)?

Which ones it would like to buy from some vendors/suppliers (outsource)?

The decision on Insourcing and outsourcing requires diligent analysis of the company‟s core

competencies and cost-benefit analysis (CBA) of various insourcing/outsourcing options (We will

study about insourcing and outsourcing in detail in Unit-2: Insourcing and Outsourcing).

1.5.3. Capacity Planning and Control

Capacity planning is a capital expenditure decision, which is closely linked with facility location and

layout planning. Here, the production manager needs to decide how many maximum numbers of units

of the product can be manufactured in the facility in a given period of time (say, a year).

In simple terms, a decision has to be taken as to how large or small the factory should be. This is a

long-term decision and cannot be reversed easily. Hence, this long-term decision requires careful

analysis and planning.

During the operation of the plant, capacity needs to be controlled in the medium and short term to

optimise the production as per the demand projections (We will study about these aspects in detail in

Unit-3: Capacity Planning and Control).

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1.5.4. Purchasing Process

Various inputs, such as raw materials, components, parts, sub-assemblies, tools, equipment and so on,

have to be purchased by an organisation. The purchase cycle commences with the placement of order

with the vendor and ends with the payment made to the vendor.

Vendors in today‟s times are more of strategic partners. Organisations are striving hard to manage

vendor relationships to their advantage (We will study about „Purchasing Process‟ in detail in Unit-4:

Purchasing Process).

1.5.5. Evaluation, Selection and Measurement of Suppliers

An organisation needs to identify the various supply sources for its requirements. The capabilities of

the vendors identified needs to be meticulously evaluated in terms of:

Quality

Delivery

Performance

Price

Communication

Repair service

Attitude

Packaging ability

Training aids

Vendors who offer maximum value to the company are finally selected to place orders. Their actual

performance needs to be measured continually to decide whether to continue taking their services or

not in future. Quality standards, such as ISO 9000, provide useful guidelines in this regard (We will

study „Evaluation, Selection and Measurement of Suppliers‟ in detail in Unit- 5: Suppliers -

Evaluation, Selection and Measurement).

1.5.6. Basic Inventory Systems

Inventory is a stock of idle resources, which are stored for future use. Excessive inventory is

undesirable, as it unnecessarily ties up the money while adding to the costs related to its storage.

Low levels of inventory, on the contrary, may result in lost sales if the demand during that period

turns out to be high. Thus, an “optimal” level of inventory is required to be maintained.

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There are inventory models that help us in determining the following tasks.

When an order should be placed to the suppliers

How much should be the size of each order

(We will study about inventory systems in detail in Unit-6: Basic Inventory Systems).

1.5.7. Aggregate Production Planning and Just-in-Time Systems

Just-in-time (JIT) systems target to achieve minimum possible inventory so as to minimise the

associated costs. The idea in using the Just-in-time approach is:

To source materials just-in-time when required

To manufacture components or parts just-in-time

To assemble parts just-in-time to create the finished products ready for customers

The intention in JIT approach is to avoid inventory build-up at any stage of the production process.

JIT systems are based upon “pull-production” concept. On the other hand, aggregate production

planning systems are based upon “push production” concept.

In “pull-production” concept, a customer order “pulls” the material into the production process. In

„push production” concept, products are produced to stock on the basis of demand forecasting.

Aggregate production planning involves deciding how many units of a product should be produced on

a weekly or monthly basis for the next six to eighteen months duration (Aggregate production

planning would be studied extensively in Unit-7: Aggregate Production Planning and Just-in-Time

Systems).

1.5.8. Master Production Schedule

The aggregate production plan is utilised to further break up into details. The details are about the

exact models of the product and the quantities thereof to be produced in the coming periods of time.

All these tasks relate to the master production schedule.

The master production schedule takes into account the left-over units from the past periods of time,

due to any abrupt changes in the demand forecast. It, therefore, provides useful insights to the

marketing department about how much quantities can be promised to the prospective clients to be

delivered in a given period (These details would be discussed in Unit-8: The Master Production

Schedule).

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1.6. Production Strategies

The manufacturing environment is getting more and more competitive world-wide. Companies today

are trying to compete with each other in many ways. In this process, companies are not leaving any

stone unturned.

Over the past decade we have witnessed major corporations in the West shifting their factories to

China and India. The purpose of shifting may be to derive cost advantages, while maintaining the

quality and performance standards.

Strategies are long-term plans that are derived keeping in view the strengths and weaknesses of an

organisation. These strategies are derived while banking on the opportunities offered by the business

environment and overcoming its threats. The production strategy should be in line with the overall

business strategy of the firm.

Martin-Pena and Diaz-Garrido (2008) identified four forms of production strategies. Let us

understand these four forms.

1.6.1. Strategy Targeting to Minimise Cost

The organisations pursuing this strategy strive hard to improve efficiencies, eliminate wastes in their

production processes, and try to always meet the delivery timelines given by the customers.

A good example of this strategy can be SpiceJet, which promotes itself with the tagline “Lowest

fares with the highest value”. In 2009, it achieved the highest on-time performance for its flights.

1.6.2. Strategy Aiming at Highest Quality

Organisations aiming at the highest quality have the motto of leading the show with best quality

products in the marketplace. They tend to become synonymous with quality.

Such organisations always try to keep an eye on the pulse of the customer. They are always ready to

modify their products promptly as per the changing requirements of the customers. Not only they aim

at producing and delivering products quickly, but also provide exemplary after-sales service to

complement their product quality.

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A good example for strategy aiming at highest quality is Maruti Udyog Limited.

Maruti Udyog Limited is a market leader in India in terms of car sales for the past several decades. It

has introduced several models continually keeping in view the competition and changing preferences

of the Indian customers. Quality of cars has been its hallmark and the after-sales-service network

created by it throughout India is phenomenal.

1.6.3. Strategy of Innovation

Organisations focusing upon the strategy of innovation always lead the pack with continual

innovations in their products and processes. They introduce state-of-the-art technologies one after the

other, which often render the existing products out of competition or obsolete.

New designs and models of products are introduced at regular intervals, thus providing ample options

to the customers to choose from.

Sony Corporation offers an excellent example here. Sony has always remained the leader in

introducing leading-edge products. Sony‟s products are so advanced that it takes the competition

some time to catch up with such innovations. Be it the Walkman or the Handycam, Sony has been

on the forefront of innovation.

1.6.4. Strategy of Balancing the Competitive Priorities

Organisations who adopt the strategy of balancing the competitive priorities try to nullify the

traditional view. Organisations with the traditional view believe that there must be a trade-off between

various competitive priorities, such as:

Cost

Quality

Innovation

Flexibility,

Delivery,

After-sales-Service

Environmental Protection

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Organisations who adopt the strategy of balancing the competitive priorities try to exemplify that

many of these competitive priorities can be taken care of simultaneously.

Bharti Airtel is a suitable example in this category, for it has proved time and again that its

competitors in the Indian telecom market cannot easily match with it in terms of many of these

competitive priorities taken together. No wonders that it has been the market leader in the wake of

competition from India‟s biggest corporate houses, namely, the Ambanis, Birlas and Tatas.

1.7. Computer Integrated Manufacturing

The term „Computer Integrated Manufacturing (CIM)‟ comprises of the following three terms.

“Computer” signifies the use of computer hardware and software

“Integrated” means the different isolated islands of automation are interlinked through a

distributed processing system

“Manufacturing” represents the functional area of production (including design, analysis,

planning, purchasing, cost accounting, inventory control, material handling and all process

operations) and other supporting functions

Thurawachter (1985) defines CIM as:

CIM is the logical organisation of engineering, production, marketing and supporting functions into a

computer integrated system. Functional areas of the enterprise, such as design, analysis, planning,

purchasing, cost accounting, inventory control and distribution, are integrated with the factory floor

functions (such as materials handling, and management with direct control and monitoring of all the

process operations) through computers.

CIM comprises of a suite of tools with varied applications as identified by Polakoff (1990). Let us

study in detail about the CIM tools.

1.7.1. Computer Technology

Computer technology allows for seamless integration of hardware and software such that artificial

intelligence and expert systems are easily supported. The use of computer technology enhances the

decision-making capabilities of the managers by manifold.

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1.7.2. Computer-Aided Design (CAD)

Using Computer-Aided Design (CAD), the designers can easily create three-dimensional diagrams of

the products as per the specifications of the customers/clients. Any modifications in these designs can

be easily performed. Geographically dispersed experts can contribute to the refinement of the designs,

as these can be easily transmitted to distant locations.

1.7.3. Computer-Aided Manufacturing (CAM)

Computer-Aided Manufacturing (CAM) makes use of computer numerically-controlled (CNC)

machines, which are programmed and controlled by computers. Thus, CAM not only helps in process

control, but also in quality control.

1.7.4. Robotics

Robotics is used for intricate operations requiring precision that cannot be easily achieved by the

human work force or are unsafe for humans.

The following are some of the application areas where robots are used extensively.

Precise Welding

Excessive Lifting

Picking/Packing in Manufacturing Industries

Transporting Hazardous Materials

During Military Wars

Performing Medical Surgeries

1.7.5. Electronic Data Interchange (EDI)

Electronic data interchange (EDI) is an application used for order management. EDI is utilised to

capture customer orders on a real-time basis. It allows visibility to the customer to available capacity

of the supplier so that the customer may place orders accordingly.

1.7.6. Manufacturing Resource Planning

The simulation of the master production schedule with dynamic updates of demand forecasts on a

real-time basis, allows for realistic production plans. Manufacturing resource planning keeps track of

the following activities, while having in view the capacity constraints.

Available Inventory

Actual Orders Received

Real-time Updated Demand Forecast

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1.7.7. Automated Guided Vehicle Systems

Automated storage and retrieval systems are the driverless forklifts, automated packaging systems and

automated cranes and so on. These automated guided vehicle systems have aided the manufacturing

companies immensely especially in the Just-in-time (JIT) production systems.

1.7.8. Group Technology

Group Technology (GT) aids in coding and classification of similar parts and components. The use of

GT is helpful in inventory management and JIT manufacturing.

1.7.9. Vendor Scheduling

Orders are placed to the vendors on a real-time basis using Electronic Data Interchange (EDI). The

delivery schedules, quantities to be supplied, specifications of parts and so on are automatically

communicated to the vendors on the basis of customer orders received. The incoming and outgoing

transportation is scheduled so as not to congest the factory premises.

1.8. Automation and Enterprise Resource Planning

Enterprise Resource Planning (ERP) software integrates the diverse functional areas of an

organisation. The functional areas, such as financials, sales and distribution, logistics, manufacturing,

and human resources are integrated on a single platform. This integration results in seamless flow of

data, avoids reentry of data and reduces possibilities of errors drastically, while making substantial

savings on various types of costs. ERP is the most contemporary form of automation of an enterprise.

Figure 1.3 shows the evolution of automation in manufacturing (adapted from Moller, 2005). The

1950s were dominated by Inventory Control Systems (ICS). During 1950s, the production systems

were “push-based” and inventories were an integral part of manufacturing. Products were

manufactured on the basis of demand forecasts and stocked as inventory to be consumed in the due

course of time.

Figure 1.3. Evolution of Automation in Manufacturing (adapted from Moller, 2005)

Time 1950s 1960s 1970s 1980s 1990s 2000s

Inventory Control

Systems

(ICS)

Material Requirement

Planning

(MRP)

Manufacturing Resource Planning

(MRP-II)

Computer Integrated

Manufacturing

(CIM)

Enterprise Resource Planning

(ERP) ERP-II

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During the 1960s, inventory management of components and parts became more sophisticated with

the advent of Material Requirement Planning (MRP). MRP reports helped in determining exactly

when the purchase order should be released keeping in view the lead time of the vendors of various

components.

As the computing technology evolved during the 1970s, Manufacturing Resource Planning (MRP-II)

software came into existence, which started helping in generating production plans in a closed-loop

manner by taking into consideration the MRP and capacity constraints. (The 1980s brought the era of

CIM, which we have discussed in detail in the previous section). The 1990s were dominated by the

advent of an ERP software created and marketed by companies.

Well known ERP software vendors in the market are SAP, BAAN, Oracle, PeopleSoft and so on. The

current era of 2000s has brought to the fore the next-generation ERP, known as an ERP-II.

Before understanding the features of an ERP-II, let us discuss in layman terms exactly how an ERP

helps businesses by integrating the diverse functional areas. Let us take an example of a simple

illustration that gives an idea about the power and utility of an ERP.

The purchase department of an organisation has placed an order to a vendor to supply X quantity of a

component. The purchase order (PO) contains various details, such as:

Specifications of the component

Quantity, per unit price of the component

Delivery date

In a non-ERP system, the following activities occur sequentially.

1. Print-outs of the purchase order sent to the department that would

receive the supplies from the vendor

2. Quality Control (QC) department performs the incoming inspection

3. Finance department that would release the payment (provided the QC

department gives its approval)

In such isolated islands of automation, each of these departments would need

to enter the details of the PO in their respective computer systems.

Such re-entry of data at different isolated systems increases the chances of

manual data-entry errors. This is so because different employees would be

entering the same data in their respective computer systems.

Re-entering of same data increases the risk of human error. In addition, lot of

time and effort is consumed on part of personnel in these departments.

A

Non-ERP

System

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Let us now understand what kind of additional applications are supported by the second generation

ERPs known as ERP-II (Moller, 2005).

1.8.1. Supply Chain Management (SCM) Systems

A supply chain comprises of several enterprises that serve as vendors to each other. Figure 1.4

represents an illustration of a supply chain.

Figure 1.4. Illustration of a Supply Chain

A manufacturer takes supplies (say, sub-assemblies) from Tier-1 vendor, which in turn takes supplies

(say, components/parts) from Tier-II vendor. Tier-II vendor sources its supplies (say, raw materials)

from Tier-III vendor. This chain of supplies from one vendor to the other is the supply chain.

A seamless communication and coordination between these vendors in the supply chain would result

in optimal inventory all across the supply chain. Hence, maintaining the optimal inventory minimises

the overall cost of production. The SCM component of ERP-II provides this functionality in terms of

real time “visibility” across the supply chain.

In an ERP-based system, all the three departments would be interlinked

through the same platform and the details of the PO would automatically

be reflected “real-time” in their respective computer terminals.

Thus, the need for data re-entry would be completely eliminated. There is

no time-lag and no effort wasted on part of the employees in the three

departments.

In addition, the cost of taking paper print-outs and sending them to various

departments is done away with.

An

ERP System

Tier-III

Vendor

Tier-II

Vendor

Tier-I

Vendor

Manufacturer

Supplies

Raw Materials Supplies

Components or

Parts

Supplies

Sub-assemblies

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1.8.2. Customer Relationship Management (CRM) Systems

Identifying the various categories of customers, keeping their records (regarding details, such as

purchases made by them, their preferences, and so on), and providing customer service, are some of

the facets of CRM systems.

1.8.3. Supplier Relationship Management (SRM) Systems

Akin to the CRM, SRM systems help in managing relationships with suppliers in the long-term.

Suppliers are treated by organisations today as partners and therefore, healthy and congenial relations

with them are a key to success.

1.8.4. Product Lifecycle Management (PLM) Systems

Developing a new product generates enormous amount of useful data that needs to be managed.

During the life-cycle of a product, new features may be added from time-to-time as per the customer

requirements and expectations.

A careful record and subsequent analysis thereof may provide valuable insights for development of

new products in future. The PLM component of ERP-II is helpful in this regard.

1.8.5. Employee Lifecycle Management (ELM) Systems

ELM systems of ERP-II help in keeping a record of employees in the organisation from their

recruitment to retirement/resignation. The competencies developed in the employees through training

interventions are recorded and their effectiveness is gauged. This analysis aids in designing future

training interventions. Similarly, the career progression of employees within the company is

monitored, while assessing their level of job satisfaction.

1.8.6. Corporate Performance Management (CPM) Systems

In this sub-system, ERP-II provides tools to keep track of the overall performance of the company on

various financial and non-financial parameters. Thus, top management gets a holistic view of the

company‟s performance in a given period of time.

1.8.7. Business to Consumer (B2C) Systems

Many companies have started reaching out to the consumers through retail-selling internet portals.

This requires extensive software and hardware infrastructure, comprising of online product

catalogues, online ordering facilities (so that the customers may place orders online), status checking

(so that the customers may check the status of the orders placed by them) and so on.. The ERP-II

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serves as the back-end processing support to the front-end internet tools in this context of “e-

commerce”.

1.8.8. Business to Business (B2B) Systems

For e-procurement of items, B2B systems of the ERP-II come into play. Here, the whole process of

procurement of items is executed online. The requisition of items are generated by an employee/

department by filling an online form after browsing through the list of approved vendors and their

online product catalogues.

The necessary approvals are taken by the B2B systems online from the relevant authorities of the

company and the purchase order is automatically released to the vendor. The vendor, in turn supplies

the goods directly to the employee/department. The payment is then released by the finance

department to the vendor electronically (through electronic data interchange, EDI).

1.9. Summary

Here is a quick recap of what you have learnt in this unit.

Production Management is defined as the design, operation and maintenance of the

transformation process, which converts various inputs into outputs of desired products.

The history of Production Management can be traced back to the times of James Watt

(1736-1819), the Scottish inventor, who invented the steam engine.

Contemporary organisations try to capture “the voice of the customer”. The purpose is to

have a clear understanding of the exact expectations of the customers from the product to be

designed.

Vendors in today‟s times are more of strategic partners. Organisations are striving hard to

manage vendor relationships to their advantage.

Inventory is a stock of idle resources, which are stored for future use.

The idea of Just-in-time (JIT) is to:

Source materials just-in-time when required

Manufacture components/parts just-in-time

Assemble the components just-in-time to create the finished products

Aggregate production planning involves deciding how many units of a product should be

produced on a weekly or monthly basis for the next six to eighteen months duration.

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Master production schedule takes into account the left-over units from the past periods of

time, any abrupt changes in the demand forecast and provides useful insights to the

marketing department about how much quantities can be promised to the prospective clients

to be delivered in a given period.

Strategies are long-term plans that are derived keeping in view the strengths and weaknesses

of an organisation.

Computer Integrated Manufacturing (CIM) is the logical organisation of engineering,

production and marketing and supporting functions into a computer integrated system.

Using Computer-Aided Design (CAD), the designers of products can easily create three-

dimensional diagrams as per the specifications of the customers/clients.

Computer-Aided Manufacturing (CAM) makes use of computer numerically-controlled

(CNC) machines, which are programmed and controlled by computers.

Enterprise Resource Planning (ERP) is a type of software that integrates the diverse

functional areas of an organisation on a single platform. The functional areas include

financials, sales and distribution, logistics, manufacturing, and human resources.

The current era of 2000s has brought to the fore the next-generation ERP, known as ERP-II.

1.10. References

Bedi K, Production & Operations Management, Second Edition, Oxford University

Press, New Delhi, 2007

Pollard H.R. (1974), Developments in Management Thought, William Heinemann,

London

Book References

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Martin-Pena M. L. and Diaz-Garrido E. (2008) “Typologies and taxonomies of operations

strategy: a literature review”, Management Research News, Vol. 31 No. 3, pp. 200-218

Moller C. (2005) “ERP II: a conceptual framework for next-generation enterprise

systems?”, Journal of Enterprise Information Management, 18, 4, pp. 483-497

Polakoff J. C. (1990) “Computer Integrated Manufacturing: A New Look at Cost

Justifications” Journal of Accountancy, 169, 3, pp. 24-29

Thurawachter W. A. (1985) “FMS vs FMC”, Computer Integrated Manufacturing Flexible

System Seminar Proceedings, New Orleans, LA, pp. 179-188

“Toyota recalls 8,000 Tacoma trucks” The Times of India, International Business,

February 13, 2010, http://timesofindia.indiatimes.com/biz/international-business/Toyota-

recalls-8000-Tacoma-trucks/articleshow/5569718.cms

Virgin Galactic Full Introduction film Nov 09 Version 2,

http://www.youtube.com/watch?v=1hc49hI8soQ

Articles/Information for Further Reading

Web References

Video References

Download - Unit 1_Introduction to Production Management

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