Week 1: Introduction to Production and Operations Management PDF

WEEK 1: INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT Production or Operations Management - Combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of...

WEEK 1: INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT Production or Operations Management - Combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. - Concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level. Production Management - Set of interrelated management activities, which are involved in manufacturing certain products Operations Management - If the same concept is extended to services management, this is the corresponding set of management activities Activities which are listed under production and operations management functions: 1. Location of facilities 2. Plant layouts and material handling 3. Product design 4. Process design 5. Production and planning control 6. Quality control 7. Materials management 8. Maintenance management Production and Operation Management (POM) - Management of an organization’s production system Production system - Takes inputs and converts them into outputs Conversion process - Predominant activity of production system Activities of conversion - Primary concern of an operations manager Operation Management Topics a. Scheduling b. Aggregate planning c. Inventory d. Forecasting  e. Strategy f. Quality g. Quality tools h. Flows and waiting line Operations Management I. Value proposition 1. Operation strategy 2. Operation priorities - Cost - Quality - Delivery - Flexibility - Innovation - Service II. System Design 1. Product or Service 2. Design 3. Process selection 4. TQM 5. Facility location 6. Facility layout 7. JIT III. Planning & Control 1. Aggregate planning 2. Inventory system 3. Project management 4. Scheduling 5. MRP 6. Statistical Process Control Differences between Production and Operation Production - Manufacturing of a tangible product - Used in a narrow sense - Applied in manufacturing organizations, such as industry - Have a closing stock at the end of an accounting year - Demand for product is regular Operation - Rendering of kind of services, such as electricity - Used in a broad sense - Applied to non-manufacturing organizations, such as bank, insurance, housing  - No closing stocks - Demands for services fluctuate time to time Evolution of Production and Operations Management A. Adam Smith - Recognized economic benefits of specialization of labor in the 18th century - Recommended breaking jobs into subtasks - Recognizes workers to specialized tasks in which they would become highly skilled and efficient B. F.W. Taylor - Implemented Smith’s theories and developed scientific management in the early 20th century Production concept - The step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user - A value addition process - A process by which goods and services are created (Edwood Buffa) Production system - 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 - Production is an organized activity, so every production system has an objective - The system transforms the various inputs to useful outputs. - It does not operate in isolation from the other organization system. - There exists feedback about the activities, which is essential to control and improve system performance 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 (E.S. Buffa) Objectives of production management - to produce goods services of right quality and quantity at the right time and right manufacturing cost 1. Right Quality - product established based upon the customers’ needs - determined by the cost of the product and technical characteristics as suited to the specific requirement. 2. Right Quantity  - If products are produced in excess of demand the capital will block up in the form of inventory and if quantity is produced in short of demand, leads to shortage of products. 3. Right Time - Timeliness of delivery is one the important parameter 4. Right Manufacturing Cost - Established before the product is actually manufactured Operating system - Converts inputs in order to provide outputs which are required by a customer - An operating system (function) of an organization is the part of an organization that produces the organization’s physical goods and services (Everett E. Adam & Ronald J. Ebert) - An operating system is a configuration of resources combined for the provision of goods or services (Ray Wild) Concept of Operation - Defined in terms of the mission it serves for the organization, technology it employs and the human and managerial processes it involves - 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 Distribution between Manufacturing Operations and 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 6. Measurement of performance Elements of Production and Operation Management Operation Managers are concerned with: 1. Planning - An activity that establishes a course of action and guide future decision-making 2. Organizing - Activities that establish a structure of tasks and authority 3. Controlling  - Activities that assure the actual performance in accordance with planned performance 4. Behavior - How their efforts to plan, organize, and control affect human behavior, they also want to know how the behavior of subordinates can affect management planning, organizing, and controlling actions 5. Model - Simplify their difficulties using aggregate planning models, break-even analysis, linear programming and computer simulation, decision tree analysis, and simple median model Objective of Operation Management a. Customer service - Provide something to a specification which can satisfy the customer in terms of cost and timing - Right thing at right price at the right time b. Resource utilization - To achieve adequate levels of resource utilization (or productivity) example to achieve agreed levels of utilization of materials, machines and labor Scope of Production and Operations Management - Primary concern for conversion by using physical resources 1. Location of facilities - A long-term capacity decision which involves a long-term commitment about the geographically static factors that affect a business organization - Where our main operations should be based? 2. Plant layouts and material handling - Plant layout is the physical arrangement of facilities - Material Handling refers to the moving of materials from the store room to the machine and from one machine to the next during the process of manufacture 3. Product design - Design, develop and introduce new products as a survival and growth strategy 4. Process design - Macroscopic decision-making of an overall process route for converting the raw material into finished goods 5. Production and planning control  - Planning the production in advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow up the progress of products according to orders. a. Planning - What, how, when and who b. Routing - Selection of path which each part of the product will follow c. Scheduling - Fixation of time and date for each operation d. Dispatching - Necessary authority so as to start a particular work 6. Quality control - System that is used to maintain a desired level of quality in a product or service 7. Materials management - Acquisition, control and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view 8. Maintenance management - Plant machinery should be properly maintained Nature and Scope of Operations Management - Operation management is often used along with production management in literature on the subject. - Operation management is understood as the process whereby resources or inputs are converted into useful products Operation or Production difference between the terms 1. Term production management is more used for a system where tangible goods are produced 2. Distinction relates to the evolution of the subject. Scope of Production and Operation Management - Quality management, maintenance management production planning and control, methods improvement and work simplification and other related areas Evolution of Production Function Historical Developments: 1. The industrial Revolution 2. Scientific management 3. Human Relation Movement 4. Operation Research 5. Computers and advanced production technology  6. Service Revolution Strategies of Operation Management a. Design of goods and services- associated w/ quality and human resources. b. Quality – product quality must be maintained during construction process products. c. Design Process and capacity – related to the quality, human resources, inventory, scheduling and maintenance. d. Site selection- choice of location associated w/ supply chain management e. Design layout – is done after the design process and capacity. f. Human resource (HR) and design work – HR factors include safety, health, job description, work environment and wages. g. Supply chain mgt – is influenced by site selection and product quality h. Inventory – Decisions are influenced by design processes and capacity, human resources, and design layout. i. Scheduling – decision is influenced by the design process and capacity, layout and HR j. Maintenance – associated w/ maintaining the quality or qualities Manufacturing System Layout 1. Manufacturing system - Transformation of raw materials into marketable goods 2. Layouts - Configuring the plant site with line, building, major facilities, work area, aisles, and other pertinent features such department boundaries Factors of Production 1. Land - Overall natural resources 2. Labor - Human capital and technology 3. Capital - Wages, fund, equipment, payment of interest, present value of investment owners return 4. Entrepreneurship - Ownership capital, profit, organizer, innovator, older as to create new, willing risk, producer and distributors, return to entrepreneurship