Among all the functional areas of management,
production is considered to be crucial in any
Production is the process by which raw materials and
other inputs are converted into finished products
Manufacturing refer to the process of producing only
tangible goods whereas production includes creation
of both tangible and the intangible services
Production and operations management (POM) is the
management of an organization’s production system.
A production system takes inputs and converts them into
The conversion process is the predominant activity of a
The primary concern of an operations manager is the
activities of the conversion process.
Production Vs Operations
Production: creation of goods and services
Operations function consists of all activities directly
related to producing goods or providing services.
Operations management (OM) is defined as the design,
operation, and improvement of the systems that create (transform
inputs into outputs) and deliver the firm’s primary products and
Production and operations management are differentiated based
on tangibilities of finished goods/services.
Production as an organisational
The core production system is its
conversion sub-system, wherein workers,
materials and machines are used to
convert inputs into products and services.
The process of conversion is the heart of
Significance of production
Significant contribution to the society’s well being
The standard of living of people depends on production of
goods and services. – high productivity
It creates national wealth
Production can offer competitive advantage to a firm in the
Shorter new-product-lead time
More inventory turns
Shorter manufacturing lead time
Better customer service
Characteristics of modern
production and operations function
Manufacturing as competitive advantage
Disappearance of smokestacks
Small has become beautiful (page 8 K. Aswathappa)
Functions of Operations Management
Relationship between Operations and Other Functions:
Three Primary Functions in Business:
Broader Perspective of Operations Management:
An Integrated Production System Including:
Inventory Control / Aggregate Planning / Demand
Scheduling / Capacity Planning / Purchasing / Quality
Control / Facility Location & Layout / Production and
Process Design / Job Design / Maintenance / Project
Management / ……
Operations Manager’s Responsibility: (typically)
——— 75% of the Firm’s Investment
———80% of the Firm’s Personnel
———85% of Firm’s Expenditures for Materials
Functions of Operations Management
Operations as a System
Materials and supplies
Capital and capital
External services (
services ( insurance,
Real estate, health,
Wages and salaries
OM by Norman Gather, Greg
Concept of productivity
Production refers to the total output.
Productivity refers to the output relative to the inputs.
Amount of goods and services produced with the resources
Productivity = Quantity of goods and services produced
Amount of resources used
Aswathappa Page -195
Evolution of operations
Post-civil war period
Human relations and behavioralism
The service revolution
The computer revolution
Norman Gaither, Greg Frazier
The Industrial Revolution
The industrial revolution developed in England in the 1700s.
The steam engine, invented by James Watt in 1764, largely
replaced human and water power for factories.
Adam Smith’s The Wealth of Nations in 1776 touted the
economic benefits of the specialization of labor.
Thus the late-1700s factories had not only machine power
but also ways of planning and controlling the tasks of
The Industrial Revolution
The industrial revolution spread from England to other
European countries and to the United Sates.
In 1790 an American, Eli Whitney, developed the concept of
The first great industry in the U.S. was the textile industry.
In the 1800s the development of the gasoline engine and
electricity further advanced the revolution.
By the mid-1800s, the old cottage system of production had
been replaced by the factory system.
. . . more
Post-Civil War Period
During the post-Civil War period great expansion of
production capacity occurred.
By post-Civil War the following developments set the stage
for the great production explosion of the 20th century:
increased capital and production capacity
the expanded urban workforce
new Western U.S. markets
an effective national transportation system
Frederick Taylor is known as the father of scientific
management. His shop system employed these steps:
Each worker’s skill, strength, and learning ability were
Stopwatch studies were conducted to precisely set standard
output per worker on each task.
Material specifications, work methods, and routing sequences
were used to organize the shop.
Supervisors were carefully selected and trained.
Incentive pay systems were initiated.
. . . more
In the 1920s, Ford Motor Company’s operation embodied
the key elements of scientific management:
standardized product designs
low manufacturing costs
mechanized assembly lines
specialization of labor
In the 1927-1932 period, researchers in the Hawthorne
Studies realized that human factors were affecting
Researchers and managers alike were recognizing that
psychological and sociological factors affected production.
From the work of behavioralists came a gradual change in
the way managers thought about and treated workers.
During World War II, enormous quantities of resources
(personnel, supplies, equipment, …) had to be deployed.
Military operations research (OR) teams were formed to deal
with the complexity of the deployment.
After the war, operations researchers found their way back
to universities, industry, government, and consulting firms.
OR helps operations managers make decisions when
problems are complex and wrong decisions are costly.
The Service Revolution
The creation of services organizations accelerated sharply
after World War II.
Today, more than two-thirds of the U.S. workforce is
employed in services.
About two-thirds of U.S. GDP is from services.
There is a huge trade surplus in services.
Investment per office worker now exceeds the investment
per factory worker.
Thus there is a growing need for service operations
Today's Factors Affecting POM
U.S. Quality, Customer Service, and Cost Challenges
Computers and Advanced Production Technology
Growth of U.S. Service Sector
Scarcity of Production Resources
Issues of Social Responsibility
Different Ways to Study POM
Production as a System
Production as an Organization Function
Decision Making in POM
Operations strategies in global
Factors affecting today’s global business conditions
Reality of global competition
Quality, customer service, and cost challenges
Rapid expansion of advanced technologies
Continued growth of the service sector
Scarcity of operations resources
OM by Norman Gaither, Greg Frazi
It is a high-level integrated plan for business effectiveness
It is the road map for achieving the operations objectives
and form the long-range game plan for production of the
firm’s goods and services.
It includes decisions about each major product line on such
issues, as what new production facilities are needed and
when they are needed, what major production technologies
and processes must be developed and what production
schemes will be followed to produce the sales forecast.
ICFAI and Aswathappa
Developing operations strategy
Corporate priorities Cost, Time, Quality, and flexibility
Positioning the production system
Process and Technology Plans
Strategic allocation of resources
Facility plans: Capacity, Location, and
Layout Norman Page 44
Elements of production/operations
Designing /positioning the production system
Focus of factories and service facilities
Product/service design and development
Technology selection and process development
Allocation of resources to strategic alternatives
Facility planning and location layout
ICFAI book and Aswathappa
Definition Some ways of creating
Unit cost of each product/service, including
labor, material, and overhead costs
Redesign of products/services
Increase in production rates
Reduction of scrap or waste
Reduction of inventories
Fast Delivery Larger finished-goods inventories
Faster production rates
Quicker shipping methods
On-time delivery More realistic promises
Better control of production of orders
Better information systems
Customers’ perceptions of degree of
excellence exhibited by products/services
Malfunction or defect rates
Performance and function
Wear, endurance ability
Ability to quickly change production to
other products/ services, customer
Change in type of processes used
Use of advanced technologies
Reduction of amount of work in
process through lean manufacturing
Operations Strategy as a
Shorter product cycle
Low cost process
Convenience and location
Product variety and facility size
Strategic and tactical decisions of
Major decision areas in production management
Building a new plant
Mergers and Acquisitions
New product planning
Quality assurance planning
Forming new technology department
Dropping a product from the existing product mix
Social Responsibility planning etc.
Pricing a product
Product improvement through value analysis
Preventive maintenance policy
Short term forecasting
Make or buy analysis
Reward system design
Buying equipments etc.
Designing sampling plan to inspect the raw materials and store
while receiving materials from vendors
Deciding price discount at salesman level in the field.
Scheduling of maintenance manpower
Daily operator scheduling
Approving loans etc.
Forecast Location and Layout
Product design and analysis, work study
Aggregate planning Materials Requirement Scheduling and Control
Master Production Planning (MRP) Line Balancing
Scheduling Capacity Planning Line of Balance
single machine scheduling
flow shop scheduling
Job shop scheduling
R. Paneerselvam. P. 6
Inventory control Quality control
Duties and responsibilities of Production managers in
Recent trends in POM ( page 10 Aswathappa)
Some typical production/operations system ( page 19
Norman Gather, Greg Frazier)