Production Management Introduction

PRESENTATION
ON

PRODUCTION
MANAGEMENT
BY

GURURAJ
PHATAK
B.Sc, MBA, (PhD)

CHAPTER 1 OVERVIEW
PRODUCTION MANAGEMENT

1. Introduction.

2. Historical Evaluation of Production and Operations management.

3. Concept of Production classification of Production System.

4. Objectives of Production Management.

5. Operation Management concept.

6. Automation: Benefits and Limitations.

GURURAJ PHATAK

Introduction PRODUCTION MANAGEMENT

 Production/Operations Management is:
 The management of that part of an organization that is
responsible for producing goods and/or services.
 The management of systems or processes that create
goods and/or provide services.
i.e. Every book you read, every e-mail you send or every medical treatment you receive
involves the operation function of one or more organizations.
 The aim of production and operations is to satisfy people’s
wants or needs.
 Operations Management affects:
 The collective success or failure of companies’ POM
 Companies’ ability to compete
 Nation’s ability to compete internationally

Business Organization PRODUCTION MANAGEMENT

The Three Basic Functions
Organization

Finance Operations Marketing

All business organizations have these three basic functions so it doesn’t matter the
business a hospital, a manifacturing firm, a car wash etc.....

Basic Concepts

 Finance- is responsible for securing financial resources
at favourable prices as well as analysing investment
proposal and providing funds for marketing and
operations.
 Marketing is responsible for assessing consumer needs
or wants and selling and promoting the organization’s
goods and services.
 Operations is responsible for producing the goods or
providing the services offered by the organization.

Value-Added Process PRODUCTION MANAGEMENT

The operations function involves the conversion of
inputs into outputs

Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback

Figure 1.2 6

Basic Concepts

Input- Materials, labour, Data or unprocessed
information, technology, equipment, legal constraints,
government regulations etc....
What type of skill do the employees need?
What type of materials does the firm need?
Value-Added Activities- Performed with tools
machines, techniques, human skills etc....i.e.
Processing.
 How will the firm use its resources to produce its products/
how can the firm improve its operations?
 Output- Good and services.
 what are their needs/what sort of products will be produced?

Value-added PRODUCTION MANAGEMENT

• Value-added is the difference between the cost of inputs and the
value or price of outputs.
• In non-profit organization, value-added of output is their value to
society.
 The greater the value-added, the greater the effectiveness of
these operations (i.e. High way construction, state school
construction etc...).
• In profit organization, value-added of output is measured by
prices that customers are willing to pay for those goods and
services.
 Firms use the money generated by value-added for research and
development, worker salaries and profit.
 The greater the value-added, The greater the amount of funds
available for these purposes.

Example of the transformation for Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy
Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

Manufacturing or Service? PRODUCTION MANAGEMENT

Tangible Act

 Manufacturing and Service are often different in terms of what is
done but quite similar in terms of how it is done.
For example, manufacturers decide what size factory needed and service
organizations must decide what size building is needed.
Manufacturing and Service differ cause manufacturing is goods-oriented
and service is act-oriented.

Production of Goods vs. Delivery of Services PRODUCTION MANAGEMENT

 Production of goods – tangible output
 Delivery of services – an act
 Service job categories
 Government (state, local, etc..)
 Wholesale/retail (clothing, food, stationery,etc..)
 Financial services (banking, insurance, etc..)
 Healthcare (doctors, dentists, hospitals, etc..)
 Personal services (laundry, dry cleaning, etc..)
 Business services ( data processing, e-business, etc..)
 Education (schools, colleges, etc..)

Key Differences PRODUCTION MANAGEMENT

1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory
9. Evaluation of work
10. Ability to patent design

Goods vs. Service PRODUCTION MANAGEMENT

Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual

Types of Operations PRODUCTION MANAGEMENT

Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites

Historical Evolution PRODUCTION MANAGEMENT

 Industrial revolution (1770’s)
 Scientific management (1911)
 Mass production
 Interchangeable parts
 Division of labor
 Human relations movement (1920-60)
 A psychologist focusing on human factor in work-tiredness and motivation.
 Decision models (Harris 1915-inventory model, 1960-70’s)
 The factory movement was accompanied by the development of several
quantitative techniques. After ww II-the importance of military and
manifucturing sectors, the models of forecasting, inventory man., project man
were developed.
 Influence of Japanese manufacturers
 JIT production, quality revolution, continual improvement etc.


 Production of goods remained at a handicraft level untill the
Industrial revolution took place. In 1764, the Industrial
revolution began and James Watt invented the steam engine and
advanced the use of mecanical power to increase productivity.
 Eli Whitney (1798) found out and introduced the concepts of
standardised parts and interchangeable parts. He then
developed musket system because the type of muskets were
handcrafted-he produced 10000 muskets by using the concept
of interchangeable parts.
 By using the same concept, he allowed the manifacture of fire-
alarms, clocks, watchs, sewing machines etc..
 Soon after, by conducting the concept of steam engine, Richard
Trevithick (1802) invented the first train and Richard Fulton
(1807) invented the first steam boat.


 The first steam boat and the first train indicate a long stream of
application in which human anad animal powers were replaced
by engine power.
 The Industrial revolution was the transformation of a society
from peasant and local occupation into a society with world
wide connections in terms of great use of machinery and large-
scale commercial operations. This is the first step of factory
system.
 This system replaced the traditional production system by the
concept of mass-production by bringing together large numbers
of semi-skilled workers.
 Adam Smith’s ‘The wealth of nations’ (1776) pointed out the
importances and advantages of the division of labor where the
production process was broken down into series of small tasks
and each performed by a different worker.


 With aid of the concept of the division of labor:
 Workers who continually perfomed the same task, they would
gain skill and experience.
 Saving time or avoiding lost time due to changing jobs.
 Workers’ concentration on the same job increased would lead to
the development of special tools and techniques for faster and
easier task.
 Specialization jobs and division of labor began to take place. A
prominent mathematician and engineer Charles babbage (1832)
promoted an economic analysis of work and pay on the basis of
skill requirement.
 In the earliest days of manufacturing, goods were produced using
craft production-highly skilled workers conducting simple,
flexible tools to produce small quantities customized goods .


 Frederick Taylor (1911) published ‘the priciples of scientific
management’. This helped to achieve wide tasks in industry.
 Frank Gilber (principles of motion economy), Henry Gantt
(schudeling and charts design for system) and Herrington
Emerson (organizational efficiency) used Taylor’s ideas to
improve the system of operation and production management.
 Influence of Japanese manufacturers
 JIT production, quality revolution, continual improvement etc.
 Using the concept of JIT production, Japanese manufacturers
changed the rules of production from Mass Production to Lean
Production.
 Lean production prizes flexibility rather then efficiency, as well
as quality rather than quantity. This indicates the first step of
‘Era of Industrial globalization’.

Historical Evolution: School of
Management PRODUCTION MANAGEMENT

• The process school of management
– was developed by Henry Fayol in 1900
– management can be viewed as a continuous process
– the function of planning, organizing and controlling
• The behavioural school of management
– was developed by Elton Mayo in 1920
– human relation movement on production output
– Productivity depends not only on the physical
environment but also on social norms and personal
feelings (i.e. Western Electric’s Hawthorne plant)


• The quantitative school of management
– is concerned with decision making, mathematical
modeling as well as system theory
– represents a productive system
– In 1915, Harris developed an Economic Order Quantity
model for inventory management
– In 1931, Shewhart developed a Quantity decision model
for use in Statistical quality control work
– In 1947, George Dantzing developed PERT/CPM
– In the late 1950s and early 1960s Edward Bowman,
Robert Fetter and Elwood Buffa developed the concept
called Modern poduction Management
– As computers became available in the 1950s, the power
of opeartions research was multiplied


• The School of Modern Management

– In the late 1960s, MRP and CPR were introduced by Joseph Orlicky and
Oliver White
– In the late 1970s, MRP II, JIT, TMQ and KANBAN systems were developed

– the School of Modern Management includes the system and the
contingency approaches.
– these are also called new contemporary management approaches

– the system approach points out that an organization has interdependent
factors as such individuals, status, motives, goals etc and must work together
– the contingency approach reveals that organizations are different so
different and changing cases need to conduct different approaches and
techniques in reaching a solution

Trends in Industrial Globalization PRODUCTION MANAGEMENT

• Major trends
– The Internet, e-commerce, e-business
– Management technology
– Globalization
– Management of supply chains
– Outsourcing
– Ethical behavior

Production system

 Production is the process by which raw
materials and other inputs are converted into
finished products.

 Production system model comprises:
i. Production system,
ii. Conversion sub-system and
iii. Control sub-system.

Production System Model

Inputs Conversion
Outputs
Subsystem

Control
Subsystem

Production System: A System whose function is to convert a set of inputs in to a set of
desired outputs.
Conversion Subsystem: a subsystem of the larger production system where inputs are
converted in to outputs
Control Subsystem: a subsystem of the larger production system where a portion of
the output is monitored for feedback signals to provide a corrective action if required.

Production System Model

Production System
The production system of an organization is that part, which produces products of an
organization.
It is that activity whereby resources, flowing within a defined system, are
combined and transformed in a controlled manner to add value in accordance
with the policies communicated by management.
A simplified production system is shown below:

The production system has the following characteristics:
1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and
improve system performance.

Classification of Production System
Production systems can be classified as: Job Shop, Batch, Mass and Continuous
Production systems.

JOB SHOP PRODUCTION
Job shop production are characterized 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.

JOB SHOP PRODUCTION PRODUCTION MANAGEMENT

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 utilized.
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 characterized 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.

BATCH PRODUCTION
Advantages
Following are the advantages of batch production:
1. Better utilization of plant and machinery.
2. Promotes functional specialization.
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 standardization exists and all
outputs follow the same path.

Characteristics
Mass production is used under the following circumstances:
1. Standardization 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.

MASS PRODUCTION

Advantages
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilization 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.

CONTINUOUS PRODUCTION

Advantages
Following are the advantages of continuous production:
1. Standardization of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilization 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.

Objectives of Production 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.

Concept of Operations Management
An operation is defined in terms of the mission it serves for the organization, technology
it employs and the human and managerial processes it involves. Operations in an
organization can be categorized into manufacturing operations and service operations.
Manufacturing operations is a conversion process that includes manufacturing yields a
tangible output: a product, whereas, a conversion process that includes service yields an
intangible output: a deed, a performance, an effort.

Following characteristics can be considered for distinguishing manufacturing operations
with service operations:

1. Tangible/Intangible nature of output
2. Consumption of output
3. Nature of work (job)
4. Degree of customer contact
5. Customer participation in conversion

A Framework for Managing Operations
PLANNING
Activities that establishes a course of action and guide future decision-making is planning.
The operations manager defines the objectives for the operations subsystem of the organization, and the
policies, and procedures for achieving the objectives. This stage includes clarifying the role and focus of
operations in the organization’s overall strategy. It also involves product planning, facility designing and using the
conversion process.
ORGANIZING
Activities that establishes a structure of tasks and authority. Operation managers establish a
structure of roles and the flow of information within the operations subsystem. They determine the activities
required to achieve the goals and assign authority and responsibility for carrying them out.
CONTROLLING
Activities that assure the actual performance in accordance with planned performance.
To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise
control by measuring actual outputs and comparing them to planned operations management. Controlling costs,
quality, and schedules are the important functions here.

BEHAVIOUR
Operation managers are concerned with how their efforts to plan, organize, and control affect human behaviour.
They also want to know how the behaviour of subordinates can affect management’s planning, organizing, and
controlling actions. Their interest lies in decision-making behaviour.
MODELS
As operation managers plan, organize, and control the conversion process, they encounter many problems and
must make many decisions. They can simplify their difficulties using models like aggregate planning models for
examining how best to use existing capacity in short-term, break even analysis to identify break even volumes,
linear programming and computer simulation for capacity utilization, decision tree analysis for long-term capacity
problem of facility expansion, simple median model for determining best locations of facilities etc.

A Framework for Managing Operations

Objectives of Operations Management.

The customer service objective.

To provide agreed/adequate levels of customer service (and hence customer

satisfaction) by providing goods or services with the right specification, at the right cost

and at the right time.

The resource utilization objective.

To achieve adequate levels of resource utilization (or productivity) e.g., to achieve

agreed levels of utilization of materials, machines and labor.

Automation

Automation is a technology concerned with the application of mechanical, electronic,

and computer based systems to operate and control production. This technology

includes automatic machine tools to process parts, automatic assembly machines,

industrial robots, automatic material handling and storage systems, automatic inspection

systems for quality control, feedback control and computer process control, computer

systems for planning, data collection and decision-making to support manufacturing

activities.

TYPES OF AUTOMATION

1. FIXED AUTOMATION
It is a system in which the sequence of processing (or assembly) operations is fixed by
them equipment configuration. The operations in the sequence are usually simple. It is
the integration and coordination of many such operations into one piece of equipment
that makes the system complex. The typical features of fixed automation are:
(a) High initial investment for custom–Engineered equipment;
(b) High production rates; and
(c) Relatively inflexible in accommodating product changes.
The economic justification for fixed automation is found in products with very high
demand rates and volumes. The high initial cost of the equipment can be spread over a
very large number of units, thus making the unit cost attractive compared to alternative
methods of production. Examples of fixed automation include mechanized assembly
and machining transfer lines.

TYPES OF AUTOMATION
PROGRAMMABLE AUTOMATION

In this the production equipment is designed with the capability to change the sequence of
operations to accommodate different product configurations. The operation sequence is controlled
by a program, which is a set of instructions coded so that the system can read and interpret them.

New programs can be prepared and entered into the equipment to produce new products. Some of
the features that characterize programmable automation are:

(a) High investment in general-purpose equipment;
(b) Low production rates relative to fixed automation;
(c) Flexibility to deal with changes in product configuration; and
(d) Most suitable for batch production.

Automated production systems that are programmable are used in low and medium volume
production. The parts or products are typically made in batches. To produce each new batch of a
different product, the system must be reprogrammed with the set of machine instructions that
correspond to the new product. The physical setup of the machine must also be changed over:
Tools must be loaded, fixtures must be attached to the machine table also be changed machine
settings must be entered. This changeover procedure takes time. Consequently, the typical cycle
for given product includes a period during which the setup and reprogramming takes place,
followed by a period in which the batch is produced. Examples of programmed automation include
numerically controlled machine tools and industrial robots.

TYPES OF AUTOMATION

FLEXIBLE AUTOMATION

It is an extension of programmable automation. A flexible automated system is one that
is capable of producing a variety of products (or parts) with virtually no time lost for
changeovers from one product to the next. There is no production time lost while
reprogramming the system and altering the physical setup (tooling, fixtures, and machine
setting). Consequently, the system can produce various combinations and schedules of
products instead of requiring that they be made in separate batches.

The features of flexible automation can be summarized as follows:
(a) High investment for a custom-engineered system.
(b) Continuous production of variable mixtures of products.
(c) Medium production rates.
(d) Flexibility to deal with product design variations.

ADVANTAGES OF AUTOMATION

Following are some of the advantages of automation:
1. Automation is the key to the shorter workweek. Automation will allow the average number of
working hours per week to continue to decline, thereby allowing greater leisure hours and a higher
quality life.
2. Automation brings safer working conditions for the worker. Since there is less direct
physical participation by the worker in the production process, there is less chance of personal
injury to the worker.
3. Automated production results in lower prices and better products. It has been estimated that the
cost to machine one unit of product by conventional general-purpose machine tools requiring
human operators may be 100 times the cost of manufacturing the same unit using automated
mass-production techniques. The electronics industry offers many examples of improvements in
manufacturing technology that have significantly reduced costs while increasing product value (e.g.,
color TV sets, stereo equipment, calculators, and computers).
4. The growth of the automation industry will itself provide employment opportunities. This
has been especially true in the computer industry, as the companies in this industry have grown
(IBM, Digital Equipment Corp., Honeywell, etc.), new jobs have been created. These new jobs
include not only workers directly employed by these companies, but also computer programmers,
systems engineers, and other needed to use and operate the
computers.
5. Automation is the only means of increasing standard of living. Only through productivity
increases brought about by new automated methods of production, it is possible to advance
standard of living. Granting wage increases without a commensurate increase in productivity will
results in inflation. To afford a better society, it is a must to increase productivity.

DISADVANTAGES OF AUTOMATION

Following are some of the disadvantages of automation:
1. Automation will result in the subjugation of the human being by a machine. Automation
tends to transfer the skill required to perform work from human operators to machines. In so doing,
it reduces the need for skilled labor. The manual work left by automation requires lower skill levels
and tends to involve rather menial tasks (e.g., loading and unloading work part, changing tools,
removing chips, etc.). In this sense, automation tends to downgrade factory work.
2. There will be a reduction in the labor force, with resulting unemployment. It is logical to
argue that the immediate effect of automation will be to reduce the need for human labor, thus
displacing workers.
3. Automation will reduce purchasing power. As machines replace workers and these workers
join the unemployment ranks, they will not receive the wages necessary to buy the products brought
by automation. Markets will become saturated with products that people cannot afford to purchase.
Inventories will grow. Production will stop. Unemployment will reach epidemic proportions and the
result will be a massive economic depression.


END OF
UNIT-I

TEST
Sub: Production Management Max Marks-25 Time: 12-45 TO1-30
Answer the Following Questions: 5*2=10

1. Define Production Management.
2. What is Conversion System?
3. What are the types of Production System?
4. Write the Objectives of Production Management.
5. What is Automation?
Answer the Following Questions: 5*3=15

1. Explain the Historical Background of Production Management.
2. Explain the Different types of Production Systems with their Advantages and
Disadvantages.
3. Write the Advantages and Disadvantages of Automation.
*ALL THE BEST*

Production Management Introduction

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