Production &Operations Management

Unit - I

Production (Vs) Operation

“The transformation process of inputs into the form of output, thereby adding value to some entity”.

Output may be a product or service. If it is a product centric that is known as production, If it is a service centric then that is known as operation.

Production/operations management

It is concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient and effective.

It is also the management of resources, the distribution of goods and services to customers.

Definition

“The field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, inventory management, accounting, and other functions as they affect the organization" -- APICS The Association for Operations Management

OPERATIONS MANAGEMENT

UNIT – I INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT

Production Systems – Nature, Importance and organizational function. Characteristics of Modern Production and Operations function. Organization of Production function. Recent Trends in Production and Operations Management. Role of Operations in Strategic Management. Production and Operations strategy – Elements and Competitive Priorities. Nature of International Operations Management.

UNIT – II FORECASTING, CAPACITY AND AGGREGATE PLANNING

Demand Forecasting – Need, Types, Objectives and Steps. Overview of Qualitative and Quantitative methods. Capacity Planning – Long range, Types, Rough cut plan, Capacity Requirements Planning (CRP), Developing capacity alternatives. Aggregate Planning – Approaches, costs, relationship to Master Production schedule. Overview of MRP, MRP II and ERP

UNIT – III DESIGN OF PRODUCT, SERVICE AND WORK SYSTEMS

Product Design – Influencing factors, Approaches, Legal, Ethical and Environmental issues. Process – Planning, Selection, Strategy, Major Decisions. Service Operations – Types, Strategies, Scheduling (Multiple resources and cyclical scheduling). Work Study – Objectives, Procedure. Method Study and Motion Study. Work Measurement and Productivity – Measuring Productivity and Methods to improve productivity

UNIT – IV MATERIALS MANAGEMENT

Materials Management – Objectives, Planning, Budgeting and Control. Overview of Materials Management Information Systems (MMIS). Purchasing – Objectives, Functions, Policies, Vendor rating and Value Analysis. Stores Management – Nature, Layout, Classification and Coding. Inventory – Objectives, Costs and control techniques. Overview of JIT.

UNIT – V PROJECT AND FACILITY PLANNING

Project Management – Scheduling Techniques, PERT, CPM, Crashing CPM networks – Simple Problems. Facility Location – Theories, Steps in Selection, Location Models – Simple Problems. Facility Layout – Principles, Types, Planning tools and techniques.

Business environment (Vs) Operations management Operations management closely interrelated

with all other functional areas of the business environment.

The following figure shows the various functions of operations management in other functional areas.

Evolution of Operations Management (or) History of OM The Industrial Revolution Division of Labor Scientific Management Mass Production Lean Production

The Industrial Revolution

Operations management – did not begin until the Industrial Revolution in the 1700s

Prior to that time only craft production Mechanically powered machines replaced the

laborer as the primary factor of production and brought workers to a central location called Factory.

The revolution first took hold in textile mills, grain mills, metalworking, and machine-making facilities

Division of Labor

Adam Smith’s Wealth of Nations (1776) proposed the division of labour.

Production process was broken down into a series of small tasks, each performed by a different worker.

Allowed him or her to become very proficient at those tasks

Scientific Management

In the early 1900s F.W. Taylor approached the management of work as a science.

Based on observation, measurement, and analysis, he identified the best method for performing each job

The methods were standardized for all workers, and economic incentives were established to encourage workers to follow the standards

Mass Production

American manufacturers became adept at mass production over the next 50 years and easily dominated manufacturing worldwide.

Elton Mayo and Hawthorne studies, introduced the idea of workers motivation and Productivity

Theories of motivation were developed by Hertzberg, Maslow, McGregor, and others

Computers and automation led still another upsurge in technological advancements

Lean Production/ JIT production:

Japanese manufacturers changed the rules of production from mass production to lean production

Lean production prizes flexibility (rather than efficiency) and quality (rather than quantity)

Jidoka / Autonomation

Jidoka, means, not allowing defective parts to go from one work station to the next.

It specifically refers to machines or the production line itself being able to stop automatically in abnormal conditions

This Autonomation allows machines to run autonomously, as they will stop when a problem occurs.

Ultimately, it is about transferring human (or better) intelligence to machines.

Production system

‘A production system is the collection of people, equipment, and procedures organized to accomplish the manufacturing operations of a company (or other organization).’

Types of production systems

There are three common types of basic production systems:

1) Batch production system or Job shop production,

2) Continuous production system or flow shop production ,

3) Project system or one shot system.

Batch production system

General-purpose equipment and methods are used to produce small quantities of output with specifications that vary greatly from one batch to the next.

A given quantity of a product is moved as a batch through one or more steps, and the total volume emerges simultaneously at the end of the production cycle.

(e.g) heavy-duty construction equipment, specialty chemicals, and processed food products,etc

Continuous production system

Items to be processed flow through a series of steps, or operations, that are common to most other products being processed.

Since large volumes of throughput are expected, specially designed equipment and methods are often used so that lower production costs can be achieved.

(e.g.) assembling automobiles, consumer products such as televisions, washing machines, and personal computers etc

Project system

The project, or “one-shot” system - For a single, one-of-a-kind product

Resources are brought together only once. Because of the singular nature of project systems, special methods of management have been developed to contain the costs of production within reasonable levels.

(e.g.) Construction of building, bridge etc

Decision Making in OM

Strategic Decisions Operating Decisions Control Decisions

Strategic Decisions

These decisions are of strategic importance and have long-term significance for the organization.

Examples include deciding: the design for a new product’s production

process where to locate a new factory whether to launch a new-product development

plan

Operating Decisions

These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits.

Examples include deciding: how much finished-goods inventory to carry the amount of overtime to use next week the details for purchasing raw material next

month

Control Decisions

These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance.

Examples include deciding: labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria

CIM

Computer Integrated Manufacturing, known as CIM. In the 1980s, Computer Integrated Manufacturing

was developed and promoted by machine tool manufacturers and the CASA/SME (Computer and Automated Systems Association /Society for Manufacturing Engineers).

CIM used to describe the complete automation of a manufacturing plant, with all processes functioning under computer control and digital information tying them together.

Today's Factors Affecting OM

Global Competition Quality, Customer Service, and Cost

Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues

Reality of Global Competition

Changing nature of world business International companies Strategic alliances and production sharing Fluctuation of international financial

conditions

Changing Nature of World Business The US gross domestic product (GDP) is, at $10

trillion, the largest in the world. Companies all over the globe are aggressively

exporting their products/services to the US Many US companies are targeting foreign markets to

shore up profits. The global economy that interconnects the

economies of all nations has been termed the global village.

One of the most important new markets is China.

International Companies

International companies are those whose scope of operations spans the globe as they buy, produce, and sell.

International firms search out opportunities for profits relatively unencumbered by national boundaries.

Operations managers must coordinate geographically dispersed operations.

Strategic Alliances

Strategic alliances are joint ventures among international companies to exploit global business opportunities.

Alliances are often motivated by Product or production technology Market access Production capability Pooling of capital

Strategic Alliances

Japanese companies have long practiced keiretsu, the linking of companies into industrial groups. A financial keiretsu links companies together

with cross-holding of shares, sales and purchases within the group, and consultation.

A production keiretsu is a web of interlocking relationships between a big manufacturer (Toyota) and its suppliers.

Production Sharing

Production sharing means that a product might be designed and financed in one country, its materials produced in other countries, assembled in another country, and sold in yet other countries.

The country that is the highest-quality, lowest-cost producer for a particular activity would perform that portion of the production of the product.

Pros and Cons of Globalization

Pros (Pluses) Productivity grows more quickly (living

standards can go up faster) Global competition and cheap imports keep a

lid on prices (inflation less likely to derail economic growth)

Open economy spurs innovation (with fresh ideas from abroad)

Export jobs often pay more than other jobs US has more access to foreign investment

(keeps interest rates low)

Pros and Cons of Globalization

Cons (Minuses) Millions of Americans have lost jobs due to imports

or production shifts abroad Most displaced workers find new jobs that pay less Workers face pay-cuts demands from employers Service and white-collar jobs are increasingly

vulnerable US employees lose their comparative advantage

when companies build advanced factories abroad

Elements of Operations Strategy

Positioning the production system Product/service plans Outsourcing plans Process and technology plans Strategic allocation of resources Facility plans: capacity, location, and layout

Positioning the Production System

Select the type of product design Standard Custom

Select the type of production processing system Product focused Process focused

Select the type of finished-goods inventory policy Produce-to-stock Produce-to-order

Product/Service Plans

As a product is designed, all the detailedAs a product is designed, all the detailedcharacteristics of the product are established.characteristics of the product are established.

Each product characteristic directlyEach product characteristic directly affects how the product can be made.affects how the product can be made.

How the product is made determinesHow the product is made determines

the design of the production system.the design of the production system.

Stages in a Product’s Life Cycle

Introduction- Sales begin, production and marketing are developing, profits are negative.

Growth - sales grow dramatically, marketing efforts intensify, capacity is expanded, profits begin.

Maturity - production focuses on high-volume, efficiency, low costs; marketing focuses on competitive sales promotion; profits are at peak.

Decline - declining sales and profit; product might be dropped or replaced.

Stages of a Product’s Life Cycle

Introduction Growth Maturity DeclineIntroduction Growth Maturity Decline

B&W TVB&W TV

AutomobileAutomobile

Video RecorderVideo Recorder

CD PlayerCD PlayerColor CopierColor Copier

Cell PhoneCell Phone

Internet RadioInternet Radio

Fax MachineFax MachineDot-MatrixDot-Matrix PrinterPrinter

Outsourcing Plans

Outsourcing refers to hiring out or subcontracting some of the work that a company needs to do.

This strategy is being used more and more as companies strive to operate more efficiently.

Outsourcing has many advantages and disadvantages.

Companies try to determine the best level of out-sourcing to achieve their operations & business goals.

More outsourcing requires a company to have less equipment, fewer employees, and a smaller facility.

Outsourcing Plans

A company might outsource any of the following manufacturing related functions: Designing the product Purchasing the basic raw materials Processing the subcomponents,

subassemblies, major assemblies, and finished product

Distributing the product

Outsourcing Plans

Many companies even outsource some service functions such as: Payroll Billing Order processing Developing/maintaining a website Employee recruitment Facility maintenance

Process and Technology Plans

An essential part of operations strategy is the determination of how products/services will be produced.

The range of technologies available to produce products/services is great and is continually changing.

Strategic Allocation of Resources

For most companies, the vast majority of the firm’s resources are used in production/operations.

Some or all of these resources are limited. The resources must be allocated to products,

services, projects, or profit opportunities in ways that maximize the achievement of the operations objectives.

Facility Plans

How to provide the long-range capacity to produce the firm’s products/services is a critical strategic decision.

The location of a new facility may need to be decided.

The internal arrangement (layout) of workers, equipment, and functional areas within a facility affects the ability to provide the desired volume, quality, and cost of products/services.