After studying this unit you will be able to
- Describe the concept of operations and production management
- Understand various levels of production management
- Appreciate the role of production manager.
- Levels of Production Decisions
- Historical Background
- Difference between manufacturing and service operations
- Role of Production Manager
- Review Questions
Operations Management is understood as the process whereby resources (or) inputs are converted into more useful products or services. Operations management is more frequently used where various inputs are transformed into intangible services. Production management refers to transforming raw material in to finished goods, which are tangible in nature. However, we can see that production and operations departments go hand in hand. These two terms also used as synonyms in manufacturing units. But, we state that the ‘Operations management’ will cover such service organizations as banks, airlines, utilities, pollution control etc.
Both production management and operations management play an important role in an organization in increasing the efficiency and productivity. While operations management is focused upon administration, planning and execution of operations involved in production of goods and services and trying to minimize the resources at the same time increasing output, production management is more concerned with input/output and churning out products in the shape of desired finished product.
Manufacturing is the transformation of raw materials into finished goods for sale, by means of tools and a processing medium, and including all intermediate processes involving the production or finishing of component parts. It is a large branch of industry and of secondary production. Some industries, like semiconductor and steel manufacturers use the term “fabrication”.
OPERATIONS MANAGEMENT vs. PRODUCTION MANAGEMENT:
The study of set of activities comprising supervision, planning and designing of business operations in the field of manufacturing of goods and services is termed as operations management. The purpose of operations management is to make certain that the operations of a business are efficient and effective and result in minimum of wastage. Operations management tries to cut down resources involved in operations while at the same time making operations more effective and productive. In fact operations management is more concerned on processes than people or products. Operations management in a nutshell is using physical resources in an optimum manner, converting input into output, so as to supply to the market the desired and finished product.
Production means application of processes to the raw material to add the use and economic values to arrive at desired product by the best method, with out sacrificing the desired quality. We have three ways of Production, they are:
(i) Production by Disintegration: We can use Mechanical or Chemical or both technologies to get the desired product to get disintegrated products, so that it will have desired use value. By separating the contents of Crude oil or a mixture the desired products are produced. For example the crude oil is disintegrated into various fuel oils. Similarly salt production is also an example for product produced by disintegrated.
(ii) Production by Integration: In this type of production various components of the products are assembled together to get the desired product. In this process, physical and chemical properties of the materials used may change. The examples are: Assembly of Two wheelers, Four wheelers and so on.
(iii) Production by Service: Some products can be improved with a little effort of service. For instance, the chemical and mechanical properties of materials are improved without any physical change. The example for this is ‘Heat Treatment of metals’. In real world, a combination of above methods is used.
Production management on the other hand focuses specifically on the production of goods and services and is concentrated upon churning output from input. It is a broad sum of activities that go into turning raw material into final, finished product. One may feel that production management is a subset of operations management, but production management in itself is a broad subject that comprises production planning and control, inventory management, and operations control. Production management includes all management activities like planning selection, designing, operating, controlling and updating production system.
There are four dimensions for the definition of ‘Product’ i.e. customer point of view and production manager’s view, financial manager view and personnel manager’s view.
(i) For a Consumer: The product is a combination of or optimal mix of potential utilities. This is because every consumer expects some use or uses from the product. Hence he/she always identifies the product in terms of the uses. Say for example-Soap can be identified by complexion, cleanliness of body, freshness, fragrance or health. etc. Because of this, many producers advertise that they
are selling health, or they are selling Cine star Complexion or they are selling freshness and so on.
(ii) For a Production Manager: Product is the combination of various surfaces and processes (or operations). This is because the production Manager is solely responsible for producing the product. He has to think of the various surfaces by which the product is made of, so that he can plan for processes by which a particular surface can be made and plan for required capacity of the facility by which the surface is produced. While planning he has to see that the required surface is produced by the best and cheapest method (optimally), so as to make the product to face competition in the market.
(iii) For a Financial Manager: For him the product is a mix of various cost elements as he is responsible for the profitability of the product.
(iv) For a Personnel Manager: For him the product is a mix of various skills, as he is the person who selects and trains the personnel to meet the demand of the skill to produce the product. In general we can define the product as a bundle of tangible and intangible attributes, which along with the service is meant to satisfy the customer wants.
Mr.E.L.Brech: ‘Operations Management is the process of effective planning and regulating the operations of that section of an enterprise which is responsible for the actual transformation of materials into finished goods.’
E.S. Buffa defines ‘Operations Management’ is the subject which deals with decision making related to production process so that the resulting goods or service is produced according to specification, in the amounts and by the schedule demanded and at minimum cost.’
H.A. Harding, ‘Operations Management is concerned with those processes which convert the inputs into the outputs. The inputs are various resources like raw materials, men, machines, methods, etc and the outputs are goods and services’.
LEVELS OF PRODUCTION DECISIONS:
- Corporate level: Corporate level decision-making is concerned with broad issues, such as which types of business the company should be in. It explains overall direction in terms of its general attitude toward growth and the management of its various businesses and product lines. For example, the decision to enter or exit from a business- requires sound strategic analysis. These may fit within main categories of stability, growth and retrenchment. Thus, diversification, expansion of product line is also depends upon the strategy adopted by the company.
- Competitive level: Business decisions deals with how production units able to produce competition in different markets. This usually occurs at the business unit level or product level. Policies are formulated which influence the allocation of resources to these units. Business strategies may fit within the overall categories of competitive or cooperative strategies.
- Operational level: Operational level decisions are taken at low level who contributes to day-to- day operations of the plant. The decisions are routine.
HISTORICAL BACKGROUND OF OPERATIONS MANAGEMENT:
The subject ‘production and operations management’ has its grass roots way back in the 16th century. One of the most memorable event is the industrial revolution started in the 1770s in England and spread to the rest of Europe as well to the United States. However, the industrial revolution changed the face of production forever with two principal elements: the widespread substitution of machine power for human and water power and the establishment of the factory system.
Before this time, product systems were often referred to as the cottage system, because the production of products took place in homes or cottages where craftsmen directed apprentices in performing handwork on products. Under the cottage system, it was usual for one person to be responsible for making a product, such as a horse drawn wagon or a piece of furniture, for the beginning to the end. Products were made of parts that were custom fitted to other parts. Because of this, the parts were not interchangeable. Generally, production was slow and labour- intensive. The following table depicts crucial evolutionary milestone in the subject ‘operations and production mangement’.
Tabe.1. EVOLUTIONARY MILESTONES
|Fredrick Winslow taylor||1856 -1915||Scientific management principles,|
|Frank B. Gilbreth||1868-1934||Motion study, methods, therbligs,|
|Lillian M. Gilbreth||1878- 1973||Fatigue studies, human factor in work,|
|Henry L. Gantt||1961 -1919||Gantt charts, incentive pay system,|
|Carl G. Barth||1860-1939||Mathematical analysis, slide rule, feeds|
|Harrington Emerson||1885-1931||Principles of efficiency|
|Morris L. Cooke||1872-1960||Scientific management application|
- Division of Labour, 1776: The foundation theory to the subject may be treated as ‘division of labour’ which was first propounded by Adam Smith in his book “The Wealth of Nations” in 1776. It was observed that specialized efforts on machines and tools were more useful and productive.
- Assembly Line, 1790: Eli Whitney, an American inventor, developed the concept of ‘interchangeable parts’ in 1790. Whitney designed rifles to be manufactured for the U.S government on an assembly line such that parts were produced to tolerances allowing every part to fit right the very first time. This method of production ensured that the parts did not have to be custom made, they were standardised.
- Scientific Management, 1878: Frederic Winslow Taylor, who is often referred to as the father of scientific management. In 1878, he took a job in Philadelphia at the Midvale Steel Company, and his contributions are scientific management principles, exception principle, time study, methods analysis, standards and control.
- Motion study, 1900: Frank B. Gilberth was introduced the concept of motion study of Job, Methods, THERLBIGS, etc in the year 1900.
- Gantt Chart, 1901: Henry L Gantt was introduced the concepts of Gantt charts, incentive pay systems training in the year 1901.
- Mass Production, 1913: Henry Ford developed the concept of mass production and arranged work stations into an assembly line with moving belt in 1913.
- Economic Order Quantity, 1915: F.W.Harris was introduced the concept of economic lot sizes for inventory control in the year of 1915.
- Control charts, 1931: Walter A. Stewart was introduced the concept of statistical techniques applied to product quality and control charts in the year 1931.
- Sampling theory, 1934; L.H.C. Tippet was the contributor of the development of sampling theory in the year 1934.
- H.F. Dodge and Roming was introduced the concept of statistical sampling applied to quality control and inspecting sampling plan. His concept was given in the year 1935.
- P.M. Blackert was introduced the concept of operations research in the Second World War, 1940.
- William orchard hay was the contributor of the linear programming in 1947.
- In and around 1950 two major developments that influenced operations management were the emergence of techniques of ‘Operations Research beyond military context and developments in engineering offered by L.D. Miles. The OR is application of scientific methods to study and devise Solutions to managerial problems in decision-making. Using mathematical models and the Systems approach OR has helped solve resource allocation, scheduling, processing, inventory, location, layout and control problems. Techniques of value engineering helped in efficiently identifying the unnecessary costs so that products and Systems could perform their function at minimum costs.
- Sperry Univac in the year 1951 introduced the concept of commercial digital computer in a large- scale industry.
- L. Porter & L. Cummings was the contributors of organizational behaviour and study of people at work.
- J. Orlicky Wright was the contributor of computer applications to manufacturing concern and material requirement planning in the year 1970.
- Deming and Juran was introduced the concept in the year 1980.
- The contributions were quality control and productivity applications from Japan examples of CAD & CAM (computer Aided design and Computer Aided Manufacturing).
- In 1913, Harrington Emerson applied Taylor’s ideas to develop Organisation structure and suggested the use of experts in organisations to improve efficiency.
- Wilson developed the concept of Economic Order Quantity (EOQ) in 1928 which is still recognized as the classical work in the scientific analysis of inventory Systems and works of subsequent researchers were essentially further refinements of Wilson’s lot size formula.
Similar Operations Management Question and Answers
DIFFERENCES BETWEEN MANUFACTURING AND SERVICE OPERATIONS SERVICE CHARACTERISTICS:
A service is an act or performance offered by one party to another. They are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing desired change. According to Sir William B “Service refers to social efforts which includes the Govt. to fight five giant evils – wants, disease, ignorance, squalor and illness in the society”.
CHARACTERISTICS OF SERVICES:
Service is an act or performance offered by one party to another. They are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in or on behalf of the recipient of the service. The term service is not limited to personal services like medical services, beauty parlors, legal services, etc. According to the marketing experts and management thinkers the concept of services is a wider one. The term services are defined in a number of ways but not a single one is universally accepted. The distinct characteristics of services are mentioned below.
- Intangibility: Services are intangible we cannot touch them are not physical objects. According to Carman and Uhl, a consumer feels that he has the right and opportunity to see, touch, hear, smell or taste the goods before they buy them. This is not applicable to services. The buyer does not have any opportunity to touch smell, and taste the services. While selling or promoting a service one has to concentrate on the satisfaction and benefit a consumer can derive having spent on these services. For e.g. An airline sells a flight ticket from A destination to B destination. Here it is the matter of consumer’s perception of services than smelling it or tasting it.
- Perishability: Service has a high degree of perish ability. Here the element of time assumes a significant position. If we do not use it today, it perishes for ever. If labor stops working, it is a complete waste. It cannot be stored. Utilized or unutilized services are an economic waste. An unoccupied building, an unemployed person, credit unutilized, etc. are economic waste.
- Inseparability: Services are generally created or supplied simultaneously. They are inseparable. For an e.g., the entertainment industry, health experts and other professionals create and offer their service at the same given time. Services and their providers are associated closely and thus, not separable. Donald Cowell states ‘Goods are produced, sold and then consumed whereas the services are sold and then produced and consumed’. Therefore inseparability is an important characteristic of services which proves challenging to service management industry
CHARACTERISTICS OF MANUFACTURED PRODUCTS AND SERVICES:
|Tangible products||Intangible products|
|Products can be inventoried||Outputs cannot be inventoried|
|Little customer contact||Extensive customer contact|
|Long lead time||Short lead time|
|Capital intensive||Labour intensive|
|Product quality easily determined||Service quality determined with difficulty|
ROLE OF PRODUCTION MANAGER:
In the present era of cut throat competition laid in the market, the objective of production manager should be to produce goods at least cost and maximum satisfaction of the buyer. To meet this objective, the role of Production Manager in an enterprise is most important. The production manager has to administer a great variety of activities. Managers also has to respond to other forces from the external environment such as government regulations, labour organizations, as well as local, regional, national and international economic conditions. Thus, managers have to pay more attention not only to what their customers might buy but also increase in government regulations and behavior of the consumer and environmental protection groups. The duties of Production Manager in general can be classified as given below:
- Production Planning: In every enterprise, the Production Manager is responsible for producing the required quantity of product in time to meet the stipulated delivery date. The Production Department has to make arrangements for input factors and also produce in economic lot sizes. To achieve all these objectives, proper production planning is necessary. The Production Planning involves the generations and identifications of alternate course of action and to select the optimum alternative. This can be done by:
- Assembling the requirement of various factors of production on the basis of demand forecast.
- Formulating demand schedule for factors of Production to permit purchase of raw materials and the production of product in economic lot sizes.
- Production Control: It is the duty of the Production Manager to use the resource at his disposal in the best possible manner as well as to regulate the operations in such a way that desired delivery schedule is maintained. This is done by Routing, Scheduling and Inspection during the Production Process.
- Quality control: It is the responsibility of the Production Manager to manufacture the goods and services of desired specifications. The quality of the finished goods can be ensured by the Inspection of finished goods but it is better to employ measures, which maximize the likelihood of producing defective items.
- Method of Analysis: There can be a number of ways in which some operations can be executed. The Production Manager should select the most efficient and economical method to perform the operations.
- Plant Layout and Material Handling: The physical arrangement of the manufacturing components and the equipments for handling the materials during the Production Process has considerable effect on cost of production. The material handling system and plant layout should be more efficient for the given situation.
- Proper inventory control: Inventory managing employees make sure that all the materials like parts, supplies, and tools and in process or finished products are kept in stocks for some time. The procurement policy of these items requires careful considerations and analysis. The purchases should be planned in economic lot sizes and the item of purchase should be scheduled that the investment in the inventory is at lowest possible level. This implies the determination of economic lot sizes and reorder level.
- Work-Study: Method study and work measurement techniques find the relations between output of goods and services and input of human material resources. The Production Manager should try to find the most appropriate method of performing various operations involved in the production process so as to obtain the optimum use of the resources as well as increasing productivity.
- Incentives: Production Manager should be able to generate the interest of the workers to increase their efforts by providing them wage incentives. This will result an increase in the labour productivity.
- Systematic Control: The cost of production varies with different methods of production. The Production Manager is responsible to follow a systematic approach to control capital and expenditure designed in such a way that desired profits are ensured.
In this unit we have discussed about the concept of operations and production management. A production function can be defined as the specification of the minimum input requirements needed to produce designated quantities of output, given available technology. The relationship is non- monetary, that is, a production function relates physical inputs to physical outputs. In practice, top- level managers can use these different techniques. We can say that production management is an applied art than the theoretical science.
1.8. REVIEW QUESTIONS:
- Define ‘Production Management’? Explain the scope of production management?
- Examine the role of production manager along with various levels of production decisions.
- What are the essential qualities of a good production policy?
- Explain the importance of production policy in a corporate entity.
- Dr. B.S.Goel, Production and Operations Management, Pragati Prakashan, Meerut, 2002.
- George Robert Terry, ‘Basic Production Management: Concept, Cases”, W.C. Brown (1965)
- E..L.Brech, ‘The Principles and Practice of Management”, Longmans Green and Co; First Edition (1953)
- E.S.Bufa,” Modern Production Management, John Wiley and Sons (1965)
- H.A. Harding, “ Production Management”, Macdonald and Evans (1970)