Nature, Scope of Production and Operations Management PDF

**1.1 Nature and Scope of Production and Operation Management** Production management deals with decision-making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded, and out of minimum cost. **...

**1.1 Nature and Scope of Production and Operation Management** Production management deals with decision-making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded, and out of minimum cost. **Meaning of Production and Operations:** **Production** is the process of combining various inputs, both material (such as metal, wood, glass, or plastics) and immaterial (such as plans, or knowledge) to create output. **Operations** refer to the activities and tasks that organizations use to produce goods and services. Operations include planning, organizing, directing, coordinating, and controlling the various aspects of production, such as procurement, manufacturing, distribution, and marketing. **Production Management:** Production management means applying the principles of management to build an effective outline for production. It involves various tasks like planning, supervising, scheduling, and enforcing adequate regulations to maximize output. **Operations Management:** Operations management applies the principles of management to manage the everyday activities of a company. Therefore, it guarantees the smooth and effective running of an organization. It involves planning, designing, and supervising production as well as other non-production activities. **Production Vs Operations Management** Here is the major distinction between Production Vs Operations Management -------------------------- ---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------- **Basic for Comparison** **Production Management** **Operations Management** Definition It revolves around managing all production activities. It involves managing complete overall business operations, including production and post-production stages. Scope of Operation The scope is limited because it focuses on the design, pricing, quality, and quantity of goods produced. Broader scope because operations management revolves around routine business activities like workforce management, inventory management, etc. Objective Ensures that the right quality of products is produced at the right time Focused on leveraging organizational resources in the most effective way to meet customer requirements Area of Decision-making Relevant specifically for different aspects of production Relevant for daily business operations in any organization Capital Requirement Revolves around high capital requirements initially Fewer capital requirements. Skills Required Technical skills, IT skills, project management skills, communication skills, and confidence Leadership skills, data entry and processing skills, decision-making skills, conflict management skills, and organizational skills Challenges Meeting deadlines without compromising quality is a major challenge for production managers. The development of technology and innovative business models pose new challenges to operations managers. Advantages Delivering high-quality products on time at low costs Utilization of resources to improve regular business operations and improve business reputation. Prevalence Applicable only in organizations where products are manufactured Applicable in all types of organizations like banks, hospitals, and more -------------------------- ---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------- **Nature of Production/Operations:** The nature of production or operations can be better understood by viewing the manufacturing function as: **Production/Operations for Creating Utility:** Production is defined as the process of adding to the value of outputs or the process of creating utility in outputs. "Utility" is the power of satisfying human needs. During the process of converting the raw materials into finished goods, various types of utilities are created while adding value to the outputs. These: **Types of Utilities are:** **(a) Form Utility:** This is created by changing the size, shape, shape, form, weight, color, the smell of inputs to make the outputs more useful to the customers. For example, iron ore is changed to steel, wood is changed to furniture, etc. **(b) Place Utility:** This is created by changing the places of input or transporting the inputs from the source of their availability to the place of their use to be converted into outputs. For example, the iron ore and coal are transported from the mines to the steel plant to be used in the conversion process. **(c) Time Utility:** This is created by the storage or preservation of raw materials or finished goods that are in abundance sometimes so that the same can be used at a later time when they become scarce due to higher demand exceeding the quantity available. **(d) Possession Utility:** This is created by transferring the possession or ownership of an item from one person to another person. For example, when a firm purchases materials from a supplier, the possession utility of the materials will increase when they are delivered to the buying firm. **(e) Service Utility:** Which is the utility created by rendering some service to the customer? For example, a doctor, a lawyer, or an engineer creates service utility for a client/customer by rendering service directly to the client/customer. **(f) Knowledge Utility:** This is created by imparting knowledge to a person. For example, a sales presentation or an advertisement for some product communicates some information about the product to the customer, thereby imparting knowledge. **Objectives of Production/Operations Management:** a. Maximum customer satisfaction through quality, reliability, cost, and delivery time. b. Minimum scrap/rework resulting in better product quality. c. Minimum possible inventory levels (i.e., optimum inventory levels). d. Maximum utilization of all kinds of resources needed. e. Minimum cash outflow. f. Maximum employee satisfaction. g. Maximum possible production (i.e., output). h. Higher operating efficiency. i. Minimum production cycle time. j. Maximum possible profit or return on investment. k. Concern for the protection of the environment. l. Maximum possible productivity. **Production System:** A production system transforms input into output, and it is the systems that manufacture a product consisting of whatever components are needed to make it a reality. There are usually five types of ways of transforming input into output: - - - - - **Conversion/Transformation Process** The conversion or transformation sub-system is the core of a production system because it consists of processes or activities wherein workers, materials, machines, and equipment are used to convert inputs into outputs. The conversion process may include manufacturing processes such as cutting, drilling, machining, welding, painting, etc., and other processes such as packing, selling, etc. Any conversion process consists of several small activities referred to as "operations" which are some steps in the overall process of producing a product or service that leads to the final output. **Types of Production Systems:** There are three common types of basic production systems: the batch system, the continuous system, and the project system. **1. Batch System:** In the batch system, general-purpose equipment and methods are used to produce small quantities of output (goods or services) 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. Examples include systems for producing specialized machine tools or heavy-duty construction equipment, specialty chemicals, and processed food products, or, in the service sector, the system for processing claims in a large insurance company. Batch production systems are often referred to as job shops. **2. Production system:** In the continuous system, items to be processed flow through a series of steps or operations, 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. Frequently the tasks handled by workers are divided into relatively small segments that can be quickly mastered and efficiently performed. Examples include systems for assembling automobile engines and automobiles themselves, as well as other consumer products such as televisions, washing machines, and personal computers. **3. Project System:** The third type of production system is the project, or "one-shot" system. For a single, one-of-a-kind product, for example, a building, a ship, or the prototype of a product such as an airplane or a large computer, 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. **Types of Methods of Production:** The methods of production can be classified into many types depending on the company's product and the organization's needs. The five types of production are: - - - - - **Mass production** means there is continuous production and all employees work continuously to produce the same items at the same time. In this kind of production, the forms and size of the products remain the same and every employee focuses on the same product. All resources are utilized to produce the same range. To make production more efficient and effective, multiple tasks may be carried out at once to get quick results. If one company is producing only white bread on a huge level, all employees will focus on the white bread packets only. In this process, most employees will be working towards white bread making preparing the dough, baking, etc. Others will be working on packing the produced loaves of white bread at the same time, to generate the loaves of white bread quickly and efficiently at once. **Batch production** is similar to mass production. However, the products may be produced in batches. This means that the production may be divided based on product size, color, form, etc. We can understand this with the example of T-shirt production. The T-shirt manufacturing company may opt for batch manufacturing, as they would want to manufacture in different sizes from small, medium, and large, and also in different colors, say red, blue, green, and yellow. Hence, the team may be divided for every batch based on production of the respective size and color. **Job production** means the products are produced in a limited quantity and may be specific to customer preferences. Job production is small-scale, and the task of producing an item or product is completed before taking up other jobs. **Service Production:** This method of production involves rendering services via an automated process, such as technical support for customers. One example of current business in terms of service production is delivery services. Consumers now have the benefit of ordering goods and services from the comfort of their own homes and receiving them directly at their doorstep due to the sheer amount and scope of delivery services available. **Customized production** is a process in which goods and services are produced based on the customer\'s needs. This can be divided into 2 categories: **Benefits of Production Management:** The success of production management is linked with proper forecasting, production planning, and control. Scientific planning of production functions will result in enhanced productivity. An increase in productivity will benefit all parties connected with the business. a. b. c. d. e. f. **Responsibility of a Production Manager:** Some of the major responsibilities of a production manager are: (1) Production planning (2) Production control (3) Quality control (4) Method analysis (5) Inventory control (6) Plant layout (7) Work measurement and (8) Other functions: a. b. c. d. e. f. g. h. **Decisions of Production Management:** Major Decision Areas of Production Management Several decision areas in an organization are touched by production management. These decision areas can be classified under three heads: a. b. c. a. **Strategic Decisions**: These are the decisions that are taken by the top level of management. Some such decisions are under (a) Distribution System Decisions (b) Plant Layout Decisions (c) Mergers and Acquisitions (d) Research and Development Decisions (e) Compensation Planning Decisions (f) Decisions Regarding Commissioning of New Plants (g)Warehousing Location Decisions (h) New Product planning (i) Quality Decisions (j) Dropping Product from Product Mix (k) Social Responsibility Planning Decisions, etc. **(b) Tactical Decisions:** These decisions are initiated by middle-level management. Some of these decisions are (a) Project Scheduling Decisions (b) Preventive Maintenance Decisions (c) Designing Reward Systems (d) Make or Buy Decisions (e) Equipment Decisions (f) Pricing of the Product (g) Budget Analysis (h) Product Improvement (i) Evaluating Credit of Buyers (j) Short-term Forecasting, etc. **(c) Operational Decisions:** These are the decisions taken by the bottom level of management and are much related to managing production. Some of these decisions are (a) Production Scheduling Decisions (b) Machine Loading Decisions (c) Designing sample plans at the time of receiving raw material (d) Daily Operator Scheduling (e) Maintenance Scheduling (f) Deciding Incentives of Salesman (g) Order Entry Decisions, etc. **Scope of Production and Operation Management** Production and operations management are concerned with the conversion of inputs into outputs, using physical resources, to provide the desired utilities to the customer while meeting the other organizational objectives of effectiveness, efficiency, and adaptability. It distinguishes itself from other functions such as personnel, marketing, finance, etc., by its primary concern for 'conversion by using physical resources.' **Following are the activities that are listed under production and operations management functions:** a. Location of facilities b. Plant layouts and material handling c. Product design d. Process design e. Production and planning control f. Quality control g. Materials management h. Maintenance management. The **location of facilities** for operations is a long-term capacity decision that involves a long-term commitment to the geographically static factors that affect a business organization. It is an important strategic level of decision-making for an organization. It deals with questions such as 'Where our main operations be based?' **Plant layout** refers to the physical arrangement of facilities. It is the configuration of departments, work centers, and equipment in the conversion process. The overall objective of the plant layout is to design a physical arrangement that meets the required output quality and quantity most economically. According to **James Moore**, "Plant layout is a plan of an optimum arrangement of facilities including personnel, operating equipment, storage space, material handling equipment and all other supporting services along with the design of the best structure to contain all these facilities". '**Material Handling'** refers to the 'moving of materials from the storeroom to the machine and from one machine to the next during the process of manufacturing'. It is also defined as the 'art and science of moving, packing and storing of products in any form'. It is a specialized activity for a modern manufacturing concern, with 50 to 75% of the cost of production. **Product design** deals with the conversion of ideas into reality. Every business organization has to design, develop, and introduce new products as a survival and growth strategy. Developing new products and launching them in the market is the biggest challenge faced by organizations. **Process design** is macroscopic decision-making of an overall process route for converting the raw material into finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis, and layout of the facilities. **Production planning and control** can be defined as the process of planning the production, setting the exact route of each item, fixing the starting and finishing dates for each item, giving production orders to shops, and following up on the progress of products according to orders. Planning is deciding in advance what to do, how to do it when to do it, and who is to do it. **Dispatching** is concerned with starting the processes. It gives the necessary authority to start a particular work, which has already been planned under 'Routing' and 'Scheduling'. **Quality Control (QC)** may be defined as a system that is used to maintain a desired level of quality in a product or service. It is systematic control of various factors that affect the quality of the product. Quality control aims at the prevention of defects at the source and relies on an effective feedback system and corrective action procedure. The main **objectives of quality control are**: **Materials Management** is that aspect of management function that is primarily concerned with the acquisition, control, and use of materials needed, and the flow of goods and services connected with the production process having some predetermined objectives in view. **The main objectives of materials management are:** a. To minimize material costs. b. To purchase, receive, transport, and store materials efficiently and to reduce the related costs. c. To cut down costs through simplification, standardization, value analysis, import substitution, etc. d. To trace new sources of supply and to develop cordial relations with them to ensure continuous supply at reasonable rates. e. To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios. **Scope of Operations Management:** Operations management has been gaining increased recognition in recent years because of the following reasons: a. The application of operations management concepts in service operations. \*\*\*