Production and Operations Management PDF

Production and Operations Management By Revised by Dr. Hamed Zazou El-Senoussi Dr. Ahmed Abdul Wahab Assistant professor of management Professor of management Bu...

Production and Operations Management By Revised by Dr. Hamed Zazou El-Senoussi Dr. Ahmed Abdul Wahab Assistant professor of management Professor of management Business administration department Business administration department Faculty of commerce The Dean of Beni-Suef University Faculty of commerce Beni-Suef University 1st Edition 2022 xii  Preface The production activities represent the axis around which all the functions of the organization revolve, whether they are manufacturing or service operations. Production and Operations Management enjoys a pres- tige no less, if not higher, than that of other functions. The development in modern production and manufacturing systems based on computers and digital systems, flexible production systems, and the magnification of the service industry and the critical role it plays in the national and global econ- omy, all led to the need for the development of administrative concepts and methods, especially with regard to the management of these production systems. This book on ‘Production and Operations Management’ covers the complete syllabus of Bachelor of Business Management in Faculty of com- merce Beni-Suef university, and it seeks to enrich the knowledge of the learner, the reader, and the manager, with the concepts, functions, and strat- egies of production and operations management. This book contents have been presented systematically in eleven chapters, which can enable the reader to master the topics covered without any additional guidance. Author Dr. Hamed Zazou Elsenoussi 2022 xii xiii  Contents Chapter 1: Basic concepts in production and operations man- 1-38 agement 1/1 Introduction 3 1/2 The production function 4 1/3 The production system 4 1/4 Classification of Manufacturing Systems and Production 13 Methods 1/4/1 Classification based on the product nature 13 1/4/2 Classification based on the production volume and 14 the degree of outputs diversity (a)- Job Production 14 (b)- Batch Production 15 (c) - Mass Production 17 1/4/3 Classification based on the manufacturing nature: 19 (a)- Continuous Production 19 (b)- Intermittent production 20 1/5 Concept of production management 22 1/6 The historical development of production and operations 23 management 1/7 Functions and tasks of production and operations man- 28 agement (a) The main administrative functions of production 28 and operations management (b) Production and Operations Management Sub- 32 tasks 1/8 The relationship of production management with other 35-38 functions of the organization Chapter 2: Productivity and Competitive advantages 39-73 2/1 Introduction 41 2/2 Productivity 42 2/2/1 The concept of productivity 42 2/2/2 Measurement of Partial Productivity 47 xiv 2/3 Competitive advantages 50 2/3/1 The concept of competitive advantage 51 2/3/2 Dimensions of competitive advantage 52 2/3/2/1 The internal dimension of competitive advantage 2/3/2/2 The external dimension of competitive advantage 54 2/3/3 Production management role in achieving competi- 54 tive advantage (a) Cost 54 (b) Quality 56 (c) Delivery Speed 57 (d) Reliability 59 (e) Flexibility 61 2/4 Operations Strategy 62 2/4/1 Comprehensive Analysis of External Environment 64 Variables (PEST): (a) Social Variables 64 (B) Technological Variables 65 (c) Economic Variables 66 (D) Political Variables 66 2/4/2 Public and private external environment 67 General external environment 68 Task Environment 68 Industry environment 68-73 Chapter 3: Location Strategy 75-116 3/1 Introduction 77 3/2 Importance of Choosing a Location decision 78 3/2/1 Competition 78 3/2/2 Cost 79 3/2/3 Hidden Effects 79 3/3 Existing companies and Choosing a Location 79 3/7 Factors influencing Choosing a Location 82 3/4/1 Factors related to markets 82 xv  3/4/2 Tangible Cost Factors 83 3/4/2/1 The cost of transporting raw materials and sup- 84 plies 3/4/2/2 Abundance and cost of manpower 85 3/4/2/3 Abundance and cost of energy and water 86 3/4/2/4 Location and construction costs 86 3/4/3 Intangible Factors 87 3/5 Methods of Evaluating Alternative locations 88 3/5/1 factor Classification Method 88 3/5/2 Break-Even Analysis 90 First: the solution by tabular method 92 Second: Break-Even point using Equations 94 Third, The graphic method 95 3/5/3 Transportation method to compare between alterna- 97-116 tive location Chapter 4: Plant Layout 117-139 4/1 Plant layout Concept 118 4/2 The importance of plant layout 119 4/3 The need for plant layout 120 4/4 Objectives of plant layout: 122 4/5 Factors affecting plant layout 123 4/6 Principles of plant layout 126 4/7 Types of plant layout 127 4/7/1 Process Layout 128 4/7/2 product layout 132 4/7/3 - Fixed -position layout 133 4/7/4 group technology layout 135-139 Chapter 5: Assembly lines and production line balancing 141-174 5/1 Assembly systems 142 5/2 Assembly line balancing problem 143 5/3 Basic concepts of assembly line balancing 146 xvi  (A) Minimum Essential Work Component 146 (B) Total time 148 (c) Operating time of the station 148 (d) Cycle time (Tc) 148 (E) Priority Constraints 149 (F) Sequence diagram 150 Steps to draw a sequence diagram (priorities) 150-155 (G) Balancing Delay 155 5/4 Methods of assembly line balancing 157 5/4/1 Largest-candidate rule 158-166 5/4/2 Killbridge & Wester Method 166-173 5/5 Non-quantitative ways to improve assembly line balanc- 173-174 ing Chapter 6: Production Capacity Planning 175-195 6/1 The concept of production capacity 177 6/2 Importance of Capacity Planning 178 6/3 measures of production capacity 179 6/4 Production Capacity Planning 185 6/4/1 The concept and decisions of capacity planning 185 6/4/2 Estimated capacity needs 185 6/5 Capacity Planning Methods 186 6/6 The main factors adopted in developing a production ca- 188-195 pacity plan Chapter 7: Forecast and Estimate demand 197-220 7/1 7/1- Introduction 197 7/2 7/2 Concept and Importance of Forecasting 197 7/3 7/3 Types of Forecasting in Business Organizations 201 7/4 7/4 Factors Affecting Demand 203 7/5 7/5 Demand Forecasting Methods 206 7/5/1 non-quantitative forecasting methods 206 7/5/2 Quantitative methods for forecasting demand 209 xvii  (a)- Time Series Methods 210 (1) Simple average 211 (2) Moving average method 212 (3) Weighted moving average 214 (b)- Trend Techniques 215 (c)- Causality and Regression Models 218-220 Chapter 8: Production Planning 221-249 Introduction 223 8/1 Aggregate planning and its relationship to production 224 planning activities 8/2 Aggregate production Planning Concept 228 8/3 Aggregate production Planning Objectives 230 8/4 Components of Aggregate Production Planning 230 8/5 Aggregate Production Planning Strategies 232 8/6 Material Requirements Planning 236 8/6/1 The nature of demand and the concept of planning 236 material requirements 8/6/2 Concept of Material Requirements Planning 238 8/6/3 Objectives of Material Requirements Planning 240 8/6/4 Elements of Material Requirements Planning Sys- tem 241-249 Chapter 9: Scheduling and loading 251-273 9/1 Concept and Objectives of Scheduling 254 9/2 Components of the Scheduling System 254 9/3 Objectives of scheduling and loading 255 9/4 Using the Assignment method in Loading 256-266 9/5 Sequencing 267-273 Chapter 10: Production systems and queues 275-290 10/1 Introduction 276 10/2 Queue or Waiting Line Theory 276 10/2/1 Arrivals (Inputs) 278 xviii  10/2/2 Queue characteristics and assumptions 284 10/2/3 Characteristics of Service Performance Facilities 284 10/2/4 Service Rate 286 10/2/5 Service Authority 286 10/3 Applications of Queuing Theory 287-290 Chapter 11: Project planning and scheduling 291 11/1 Business Networking Tasks 293 11/2 Components of a Business Network 294 Types of events and activities in the business network 296 11/3 Business Network Drawing Rules 302 Calculation of project time 308 Business Network Analysis by Calculating Early and 309-308 Late Times xix  chapter 1 Basic concepts in production and operations management 1 2  chapter 1 Basic concepts in production and opera- tions management 1/1 Introduction: Production is the foundation of any economic system. Transferring resources from materials, money, equipment, information, labor, and oth- ers to outputs of value-added goods and services represents a successful production system, but the success of this system depends on the efficiency and effectiveness of its management. Most writers agree that production means creating goods and ser- vices through using people, materials, and equipment. Production means changing the characteristics and specifications of material things to be- come with new characteristics and specifications of greater benefit to the person. Before the industrial revolution, this transformation process was done in workshops and small places, and after the industrial revolution, specialized industrial companies rely on technology mainly to make the process of changing the properties and specifications of things. Production and Operations Management is that process that brings together and transforms the various resources used in the production and operations subsystem of an organization into value-added products and ser- vices in a controlled manner in accordance with the policies of the organi- zation. Therefore, production and operations management is that part of the organization, which is concerned with transforming a set of inputs into the desired products (goods and services) at the required quality level. The group of interrelated managerial activities, which are involved in the manufacture of a tangible physical product is called production man- agement, and if the same concept is extended to include the process of 3 providing services, then the corresponding group of these managerial ac- tivities is called operations management 1/2 The production function The production function is that part of the organization, which is basically concerned with converting a set of inputs into the desired outputs (products), at the desired level of quality. Some organizations are found to provide a tangible physical product (cars, refrigerators, clothes, food...etc.), while others provide an intangible product, a service (such as: health care service, insurance, financial and banking services, education...etc.). Production is defined as “the gradual (step-by-step) conversion of one form of a substance into another form through a chemical or mechan- ical process to create or enhance the utility of the product to the user.” Thus, production is a process of adding value. At each stage of processing, there will be value addition. All organizations exist to provide a good or service, all these organ- izations achieve this by having a system of transformational process through which they can add value to resources to provide what they are found for. This is achieved through the production system. 1/3 The production system: System - in general - is defined as a set of things, components and sub-parts that unite in a form and interact with each other in a systematic manner to achieve a specific goal or objectives. Any system consists of inputs, operations, and outputs. The organization consists of a group of sub-systems that interact to- gether in an organized manner to achieve its objectives, so that the objec- tives of each sub-system do not conflict with the objectives of the other 4 sub-systems, and the objectives of any sub-system do not conflict with the general objectives of the organization that it seeks to achieve. Thus, the production system can be viewed as a sub-system of the organization as a whole that integrates with the marketing system, the fi- nancing system, the inventory system, the human resource system, and with other sub-systems of the organization. and it is also affected by other sys- tems in the external environment surrounding the organization. The basic elements common to all organizations is the presence of an operating system or processes, all organizations have a transformational process, some resources are entered into the process, and the outputs are produced from the process of transforming those inputs, and feedback is provided as feedback on activities in an operating system (processes). Once goods and services are produced, they are converted into money (by sell- ing) to obtain resources to keep the transfer process and its continuity as depicted in figure (1/1). This differs transformation process from one industry to another, but it is an economic phenomenon that exists in every industry. Economists have called the process of transforming inputs into outputs, whether they are goods or services, the concept of production function. And for all op- erating systems, the primary objective is to create added value so that it is more valuable to the consumer than its value as individual inputs. 5  Random deviations Inputs Changes Output - Raw Materials needed control Outputs - parts and Transfor- components. mational - goods - facilities and - Services Process equipment. - energy - capital. Comparison: - labor. Compare actual to - Information desired Feedback Figure (1/1) Production system Thus, all goods and services are provided through an integrated sys- tem consisting of inputs (raw materials, workers, energy, and capital), transformational processes, and outputs, whether they are goods or ser- vices. The process of transforming inputs into outputs occurs in the organ- ization through the production process, and the processes can be expressed in all the activities of that transformation process. If we go back to Figure 1/1, we find that in addition to the inputs, the transformation process and the outputs, there are random deviations, which consist of unplanned and uncontrollable effects that lead to a differ- ence in the final product from the desired output. Random deviations result from external sources (fire, floods, natural phenomena...etc.) or from inter- nal sources as problems associated with the conversion process, such as 6 materials not conforming to specifications, or employee errors, all of which affect the quality of the desired final product as output. There is also feedback, which provides information to the manage- ment and individuals about the progress of the transformation process. Without it, individuals and management cannot monitor the transformation process because they then do not know the results of their decisions. Production system elements: Manufacturing systems transform inputs into tangible outputs, which are goods. While operations in service organizations work to trans- form inputs into intangible outputs in the form of performance or efforts. The production and process systems of industrial organizations that pro- duce goods are similar to those of service organizations that provide ser- vices in terms of system components. Any production system must consist of inputs, transformational processes, outputs, control, and feedback. But there are differences between the characteristics of the good and the characteristics of the service, which distinguishes the production and marketing of the service from the production and marketing of the service. 1- Inputs: They are the resources that are included in the operating system or the production system, which converted through a transformational process by specific methods in order to achieve certain goals. Inputs often consist of a combination of: Materials: Some materials are inputs to the production system for change its physical properties (shape or composition, for example), and most manufacturing processes are like that. Some materials un- dergo other processes to reposition (package delivery companies, for 7  example), and some operating systems such as retail stores change ownership of materials, and some processes store materials. Information: Operations that process information can do so to trans- form its informational properties, the purpose of theses process is change form or format of the information, an example of this is what accountants do. Operations may shift inputs from information by transferring possession of the information, such as market research firms selling information. Some processes store information, such as archives and libraries. Some operations move or change the location of information, such as telecommunications companies. Customers: Customers are one of the inputs to operations, espe- cially in service organizations. Operations may change the physical characteristics of the client such as materials, for example: hair- dresser and plastic surgery. And some operations carry out storage operations for the customer, as is the case in the operations of hotels and tourist resorts, and the customer represents inputs that change the place, such as airlines and express transport companies. But the customer is not along the line an "object" as an input to the opera- tions. Rather, the client may play a more active role in many pro- cesses, as the student as one of the inputs to the educational process may provide a stimulating environment for teaching and learning through discussions and dialogue. While hospitals change the phys- iological state of the client, and some operations change the psycho- logical state of clients, such as: most entertainment services, thea- ters, television, parks…etc. Facilities: These include buildings, equipment, factories, and produc- tion technology Individuals (labor): They are the individuals who plan, operate, man- age and maintain operations. 8  We must realize that the exact nature of each of the facilities and employees differs from one production system to another. For a five-star hotel, production facilities consist mainly of low-tech buildings, furniture, and fixtures. But the production system of the nuclear aircraft carrier, the facilities are concentrated in the "high technology" of nuclear generators, and advanced electrical equipment. Likewise, the nature of human re- sources inputs will differ from one operational system to another. Most employees working in a home refrigerator assembly plant may not require a very high level of technical skills. By contrast, most employ- ees who work for an accounting firm are highly skilled in their own "tech- nical" (accounting) skills. Despite the differences in skills, all employees make their contribution to the productive process. An assembly worker who constantly errs in assembling refrigerators will negatively affect cus- tomer satisfaction and increase costs, just as the accountant is an account- ant who cannot add value to information. The balance between facilities and staff also varies. Also, the balance or mix of both facilities and human resources dif- fers from one production system to another. A computer chip maker, like Intel, invests most of its investment in physical facilities as production fa- cilities. A single computer chip factory costs more than $4 billion in facil- ities, so operations managers spend a lot of their time managing those fa- cilities. Conversely, a management consulting firm depends to a large ex- tent on the quality of its employees. Here, Operations Management is largely concerned with developing and disseminating the skills and knowledge of consultants. 2- Transformational Process: A production system usually involves the process of converting ma- terials or physical components from one state to another state or states. This 9 includes modification or change in shape, chemical composition, hardness, and composition the ingredients. The transformational process is that which adds value to the elements of the inputs, so that the value of the out- puts from this process is higher than the cost or value of these inputs and at the same time the highest value or cost of operating them. The transformational process is the technical basis for production. Where this technical basis consists of a set of operations, and the process means the point at which resources are collected and employed in order to convert the inputs to another form. The sum of the interrelated operations together represents what is called the Job. The process of converting inputs into outputs varies according to the technology being employed. Technology refers to the types of conversion activities used, which include the level of scientific progress in the plant, equipment, human skills, and the good or service in the conversion process. There are four types of operating systems: a - Manufacturing: According to this function, the form of the material is changed to another form, meaning that the output includes goods that differ in their appearance from the input and in a way that achieves better benefit from the input. b - Transportation: Under this function, the organization transports the consumer or his things (airlines and transportation) from one place to another. The operat- ing system uses the available resources to achieve this purpose. But re- sources are not changed or diverted as dramatically as in the manufacturing function. 10 c- Supply: Where the ownership or possession of the commodity is changed, and in this case, there is no change in the inputs, the outputs are the same as the inputs, and there is no transfer or change of resources, and the benefit that is achieved according to this function is a change of possession or ownership, as done by wholesale and retail stores. d - Service: Under the service function, the inputs undergo a specific change or treatment, and therefore the outputs differ from the inputs, but the outputs are intangible, such as health care services, communication services, insur- ance services...etc. 3- Outputs: Outputs are the outputs that are formed as a result of transforming inputs, with preconditions, certain specifications, and according to estab- lished plans, in order to reach specific goals. The outputs of any operation in a production system include final products of goods and/or services. Outputs as goods differ from outputs as services. Goods are usually tangible, while services are activities or operations. A car, newspaper, or restaurant meal is a commodity, while a service is the activity of the cus- tomer to use or consume the product. Some services do not include goods. Getting a health service or a haircut is a process (although some goods can be used to obtain the service, such as a medical report, rumor, or hair cream). Also, while most products can be stored, at least for a short period, service only occurs when they are consumed or used. Thus, a stay in a hotel room, for example, will be wasted or perished if it is not sold that night; Also, an airplane seat remains empty unless it is occupied by a path on the flight. 11 4-System environment: A system does not operate in a vacuum, but rather operates within an environment consisting of a set of systems with which the operating system interacts. A production system affects and is affected by other sys- tems in its environment. The production system is a sub-system of the or- ganization’s systems that constitute the internal environment of the organ- ization, and at the same time the organization as a whole works as a system that interacts with the surrounding external environment and the systems it contains, is affected by and affects them. Often the elements and variables of the internal environment are un- der the control of the administration, and they can be influenced in favor of the production system, but there are variables in the external environ- ment that are outside the control of the administration, and they cannot be affected, and restrictions are imposed on the production system, Examples of these variables are: the elements of the technological environment, which impose technical restrictions that prevent production as quickly as possible and at the lowest possible cost at the same time.. The elements of the political and legislative environment also im- pose restrictions that affect the inputs of the system, such as importing raw materials from certain countries, or at the lowest price. Economic environ- ment variables may also impose restrictions on the volume of production or the volume of demand, and there are social environment variables, which may make it imperative to produce a particular product in line with consumer tastes. But the external environment does not impose restrictions and limitations only on the production system but may bring with it oppor- tunities to improve and increase the efficiency and effectiveness of the pro- duction system. 12 1/4 Classification of Manufacturing Systems and Production Methods: Several bases are used to classify manufacturing systems and pro- duction methods, such as: classification based on the product basis, classi- fication based on the nature of processing, classification based on raw ma- terial, classification based on production volume, and classification based on the internal plant layout. We will address some of these bases for clas- sifying production systems as follows: 1/4/1 Classification based on the product nature: According to this basis, manufacturing systems are classified based on the nature of the product being manufactured in two production systems: 1- Production systems that produce a single product as single or sepa- rate units, and then the product can be identified as a single unit de- finitively, Thus, the production quantity in this case can be estimated by the number of pieces that are produced from the system, such as: the production of a car, a refrigerator, a pen.... etc. 2- Production systems in which the product is continuous flow, and its units cannot be distinguished, such as: oil production that flows in oil pipelines, and here the amount of production is estimated by vol- ume or weight. 1/4/2 Classification based on the production volume and the degree of outputs diversity Production methods are classified according to production volume and the degree of outputs diversity into three modes, as shown in Figure (2-1), namely: Job Production, batch production, and mass production. 13  Production/output volume Mass production. Batch production Job Production Degree of product/output variety Figure (1-2) classification of production systems (a)- Job Production This type of manufacturing system is characterized by the produc- tion small quantities of a large variety of products that are designed and produced specifically for specific customers according to prior agreements about production cost and production timing. The most important charac- teristic of this type of production is the low volume of production or the number of units, but with diverse outputs. This production system style aims at meeting customers' demands, which are very diverse, and requires general-purpose machines. Because of the small size of each job, the order received by the manufacturer may produce only one unit of the required type. Job production characteristics: 1- Producing a variety of products produced in small quantities. 2- Depends on general-purpose machines, equipment, and facilities. 14  3- Dependence on individuals with high specialized skills who consider each job as a challenge, because of its uniqueness. 4- It requires a very large stock level of materials, tools, and parts. 5- It needs detailed planning that defines the sequence and requirements for each job, determines the energies required for it, and determines the priority of its implementation. Job production advantages 1- Due to the reliance on general purpose machines, equipment and fa- cilities, a variety of products can be produced. 2- The operators' skills and abilities increase because every job is an opportunity to learn. 3- Exploiting the full potential of employees. 4- There are opportunities for creativity and innovation. Job production Disadvantages: 1- Setup and preparing machines and workshops for each job requires high costs and a great deal of time. 2- High stock level and high storage cost. 3- Production planning and routing is a complex process 4- It needs large areas for storage. (b)- Batch Production Batch production is defined as the moving of the job over the func- tional workshops or departments in the form of batches, and each batch has a different path from the other. It is characterized by the production of a limited number of products at regular intervals, and production may be carried out for the purpose of storage. The product is produced or manufactured under batch production by dividing the production process into parts or processes. Each process is 15 carried out (along with other processes for other products) under a full pro- duction batch before the next process is perform. Under this style of production, machines are grouped together ac- cording to the function they perform. This type is characterized by the ir- regularity of the volume of work, which leads to increase work under op- eration in the various departments, and batches may increase the waiting time for operation, and the gaps between batches may increases the length of the production period, and the difficulty of the flow of production for each part in the production batch. Batch production characteristics: 1- Flexibility of machines and production facilities. 2- A short operating cycle compared with the job production style. 3- The facilities are setup and prepared for the batch, and when an- other batch is produced, another preparation and setup is made that fits the second batch. 4- The production time cycle and the cost are less compared with job production style. Batch production advantages 1- Better utilization of production equipment and facilities. 2- Low unit cost of production compared to the job production. 3- It encourages professional specialization. 4- Decreased capital invested in inventory. 5- Flexibility in producing a variety of products. 6- Diversification of production leads to a high level of job satisfac- tion for workers. 16 Batch production Disadvantages 1- The complexity of material handling systems due to the long and irregular flow. 2- The complexity and difficulty of production planning and con- trol. 3- Existence of a large stock of products, materials, and parts in op- eration. 4- high cost of setup and configuration for each batch. (c) - Mass Production Mass production style is based on mass production of one typical product or a finite number of products. It is synonymous with continuous production in classification by nature of manufacture. It specializes in the production of standardized products and is characterized by: large volume of production and the use of machines specifically designed to produce a specific product, and is characterized by the huge volume of demand for its products. Therefore, it uses specialized machines and not a general pur- pose. Mass production often depends on flow lines, through the flow lines, the product is manufactured or assembled by passing the product through a series of workstations, and the production line is fed with materials and requirements of the production process at the beginning of the production line or at specific points along the production line, and at the end of the line The finished product is received. Mass production is classified into: 1- Mass production in terms of production quantity: It means produc- tion in large quantities using specialized facilities. In this case, there 17  is no flow through these facilities, and here it is not required that continuous production be dependent on flow lines. 2- Mass production that depends on the flow lines: meaning that the nature of the product requires continuous production through the flow lines. Mass production characteristics: 1- Standardized products and sequence of operations 2- A very large production of one or a few products. 3- Relying on highly specialized machines and equipment with high production capacity. 4- Short production cycle. 5- Low operational inventory level. 6- The balance of production or assembly lines. 7- The materials and parts flow continuously according to the pro- duction line path, and there is no chance of them going back. 8- Ease of production planning and control process. 9- The handling can be done completely automatically. Mass production Advantages: 1- A very high rate of production volume with a short production cycle. 2- High energy utilization due to the balancing of the production line. 3- Use of general, non-specialized skills. 4- Low level of inventory. 5- Low unit cost of output. 18 Mass production Disadvantages: 1- One machine stop causes the entire production line to stop. 2- The need to change the characteristics of the product requires changing the production line. 3- High investments in production facilities. 4- The production cycle time is determined by the machines with the lowest production capacity in the production line. 1/4/3 Classification based on the manufacturing nature: Production styles are classified according to the manufacturing method into: continuous production and intermittent production. (a)- Continuous Production: Continuous Production system relies on running the production pro- cess for 24 hours a day, seven days a week, all year round, without inter- ruption, to produce a typical product in large quantities, whether for one product or for a small number of products. Continuous production is a standardized production in its outputs, and it may be standardized in its inputs. It relies on specialized machines in production lines. Standardized outputs means that the outputs have the same dimensions and properties, or have the same standard specifications, the same quality, the same shape, and the same specialization. It may be Standardized input, means that the inputs having the same specifications. Continuous production is often directed to consumption directly, and is subject to the determinants of demand, such as: unit price, prices of com- peting goods, consumer tastes and behaviors...etc. Such as food industries, ceramics industry.... etc. 19 Characteristics and advantages of continuous production: 1- A large quantity of one product or a few products. 2- It requires a small number of specialized supervisors because the work is very typical. 3- Achieving a better use of the spaces. 4- Reducing the need to allocate spaces for storing products under operation due to the convergence of production departments. 5- Achieving the greatest benefit from the machines in the produc- tion line due to the sequence of the production process. 6- Ease of handling and smooth flow of materials and parts. Disadvantages of continuous production 1- If one machine stops, the entire production line stops 2- The difficulty of making a change individually on one of the ma- chines, as it is an inflexible production method. 3- It is difficult to change products, because the product is typical, which may not meet the change in customer tastes. 4- The difficulty of the planning process in this system. (b)- Intermittent production The intermittent production system is either the production of one product with small groups or several products, each of which has a single shape and special specifications (which is customized production), mean- ing, the production of products that are repeated according to the orders or orders received from customers. Or the production of intermittent and re- petitive quantities for the purpose of storing them for a certain period. Intermittent production is characterized as non-standardized pro- duction in its outputs, and production done only after specifying specifica- tions by the customer or direct consumer, and it may be typical in its inputs. 20 Intermittent production is divided into two types: (1) Producing frequent batches of an order: It is an Intermittent production, typical in its inputs, and not atyp- ical in its outputs. Subject to the specifications provided by the customer. The advantage of this type is: Production of batches according to the re- quired characteristics or specifications requested by the customer. Its main characteristics: 1- Changing the specifications from one customer to another. 2- It depends on non-specialized machines but rather general pur- pose. 3- It requires specialized human skills 4- It requires a large stock of parts and raw materials 5- It needs large areas for storage. 6- A large stock of products under processing. (2) - Producing frequent batches for storage The reason for the interruption of production may not be due to a change in specifications, but rather the interruption of production may be due to other things, such as: the seasonality of demand or the seasonality of the availability of production inputs. Thus, the productiom system de- pends on the production of frequent batches of storage. For example, in the case of seasonal demand, as is the case in the clothing industry according to the seasons, time, machines, or stores are allocated to produce repeated batches for storage, i.e., reliance on continu- ous production during the season, and intermittent production during the year, to avoid storage problems and loss of time. 21  Examples of the seasonality of inputs are the use of agricultural crops and fruits as inputs to produce juices and preserved food. The pro- duction takes place in season and the production is stored until demand. 1/5 Concept of production management Production management is defined as: "Managing the transformational process of converting inputs into outputs" "The process of planning, organizing and controlling the activ- ities of the production function, which integrates and transforms the various resources in the production sub-system from the or- ganization's systems into outputs of higher value, in a special way to control, and in accordance with the organization's poli- cies." "Production management is concerned with making decisions about production processes that lead to the production of goods or services produced in accordance with specified specifications, in the required quantities, and in accordance with scheduled de- mand, and at the lowest cost." - Production management is the process of planning, organizing, directing, and controlling the activities of the production func- tion. It is responsible for assembling and converting the various resources used in the production sub-system of the organization into value-added products, and in the manner, it controls in ac- cordance with the policies of the organization. "Production management deals with making decisions related to production operations so that the resulting goods or services 22  are produced according to specifications, in the required quanti- ties, on the required schedule, and at the lowest cost." The management of the transformational process means that the practices of the production and operations manager to manage the transfor- mational process have evolved with the development of managerial thought, as each of these schools defines the assumptions upon which the management of the transformational process is based and defines the re- sponsibilities and tasks of the production manager. 1/6 The historical development of production and operations management: The human has exercised the function of production since God Al- mighty created him. This practice may sometimes be in an organized man- ner and at other times in an unorganized manner, as there were handicrafts and various craftsmen. The rise of the industrial revolution in the middle of the eighteenth- century AD and the entry of mechanization led to the development of the means of production, and the emergence of new patterns of production management, and then the emergence of new administrative horizons that led to the development of production and operations management to reach its contemporary concept. The traditional view of manufacturing management arose in the eighteenth century when the principles of Adam Smith's theory and the economic benefits of business specialization were recognized. Adam Smith recommended dividing jobs into sub-tasks, and that individuals specialize in the tasks in which they will become highly skilled and efficient. In the early twentieth century, Frederick Taylor implemented Smith's theories and established the principles of scientific management. 23  Since then, many developments and technologies have been intro- duced from that traditional vision of traditional manufacturing manage- ment right up to the modern concept of production and operations manage- ment. Table 1-1 provides brief information on historical contributions to manufacturing management. Contributions Contributor Date Specialization in work and manufacturing Adam Smith 1776 Interchangeable parts, cost accounting Eli Whitney and 1799 others division of labor according to skill; customization of Charles Bab- 1832 jobs by skill ;Fundamentals of time study bage Scientific management for the study of work and the Frederick W. 1900 study of advanced time; Planning for the implemen- Taylor tation of work, and movement study jobs Frank B. Gil- breth Methods for scheduling employee activities, and Henry L. Gantt 1901 scheduling manufacturing machinery jobs. Economical batch size and inventory control FW Harris 1915 Human Relations and Hawthorne Studies. Elton Mayo 1927 Using inferential statistics methods to control prod- WA Shewart 1931 uct quality, and quality control maps The use of statistical samples in quality control: In- HF Dodge & 1935 spection and quality control using samples HG Roming Operations research applications used in World War PM Blacker - 1940- II on manufacturing processes, and the use of digital John Mauchlly 1946 computers and J.P. Eckert. The use of linear programming in the management GB Dantzig , 1947 of production and manufacturing operations Williams & others Mathematical programming, linear operations (cer- A. Charnes , 1950 tain case), and random event programming (uncer- W.W. Cooper & tainty case) others 24  The use of digital computers in business, and the Sperry Univac 1951 possibility of performing large-scale calculations. Organizational Behavior: Continuing the study of L. Cummings, 1960 human behavior in the workplace. L. Porter Integration of operations into the overall policies and W. Skinner J. 1970 strategy of the organization, use of electronic appli- Orlicky and G. cations and computers in manufacturing operations, Wright scheduling, and production control, planning of ma- terial requirements. Applying the concept of total quality, Japanese prac- WE Deming and 1980- tices in production, the use of robots in manufactur- J. Juan. & until now ing processes, and the use of advanced electronic ap- others plications in design and manufacturing by comput- ers. The previous table shows the following: 1. The first study on industrial establishments appeared in 1776 AD. British economist Adam Smith in his book The Wealth of Nations, where he focused on topics such as: capital, wages, profits, and rent. His most important contributions were represented in: The principle of division of labor, which achieved several advantages, including developing the skills of workers by constantly performing the same work, reducing lost time when moving from one process to another, and contributing to increasing productivity. 2. In 1798 Eli Whitney introduced the concepts of inspection and qual- ity control, and the concept of parts interchangeability for the man- ufacture of goods consisting of a set of parts. 3. In the year 1801, Joseph Jacquard used punched cards to shape the loom in the spinning and weaving industry, which constituted the first launch of the mechanism in production and manufacturing. 4. In 1832, the English mathematician Charles Babbage contributed to the development of Adam Smith's ideas and warned of the existence of administrative problems that could be distinguished from 25  manufacturing problems, and suggested the necessity of applying scientific methods, quantitative and statistical methods in manage- ment. 5. During the period approximately 1919 - 1928, Frederick Taylor's ideas appeared, and his book Principles of Scientific Management was published. and productive business scheduling. 6. In 1911 Gilberth and Lillian Gilberth contributed to the study of movement and time in the performance of production processes and the study of the relationship between fatigue and stress and its impact on the performance of the production process. 7. In 1913, the ideas of Henry Ford and Charles Sorensos appeared, which focused on integrating parts with standardized measurements and the emergence of the so-called Assembly Line, and this was the beginning of the so-called mass production. 8. In 1914, Henry Gantt developed an important method in scheduling, which is known by his name "Gantt Charts" in addition to his work with Taylor and his interest in the psychological and moral aspect and the use of financial incentives to raise the morale of workers. 9. In 1917, Harris presented mathematical methods for calculating the economic size of the medicine and the production batch and using them in planning and controlling the inventory. 10.In 1924, Walter Shewhart suggested the use of statistical methods in quality control through statistical samples. 11.During the period 1940-1945, the field of using quantitative methods and operations research in production processes emerged. 12.During the sixties, new concepts were introduced such as: inventory analysis, business networks, and critical path assessment method. 26 13.During the seventies and eighties, international competition emerged to penetrate global markets, as technological development repre- sented the source of growth in the service sector. 14.During the past 20 years, the concepts and systems of Lean Produc- tion, Just-In-Time Production (JIT), Total Quality Management (TQM), Computer Aided Manufacturing (CAM) and Computer Aided Design Systems Computer Aided Design (CAD). 15.The historical development clarifies the distinction between the two concepts: production management and operations management. In the period from 1930 to 1950, the concept of production manage- ment prevailed, where Taylor’s ideas were widely known, and man- agers developed methods that focused on economic efficiency in manufacturing processes and conducted extensive studies on the workers themselves and methods of implementing production pro- cesses to exclude unnecessary efforts in production and reduce waste. And extravagance to achieve the greatest productive effi- ciency in economic terms, and at the same time contributed psy- chologists and sociologists to the study of human behavior in the workplace. The clients of economics, mathematics, statistics, and electronic computers also presented advanced methods for develop- ing production and manufacturing processes. While the 1970s wit- nessed a fundamental shift in this concept, it became called Opera- tions Management. Where the same industrial process management concepts were used for the operations of service-providing organi- zations. This was the beginning of the development and growth of the service industry at the global level. Accordingly, production management is concerned with the management processes of manu- facturing tangible products, while operations management applies 27  the same concepts in the manufacture and provision of services in service organizations. 1/7 Functions and tasks of production and operations manage- ment: The functions of production management are the management of the transformational process, and therefore the function of production manage- ment is the production manager’s exercise of the management functions of planning, organizing, and controlling…. etc. Figure (1/3) illustrates the production and operations management framework. (a) The main administrative functions of production and operations management (1) Planning: Planning is one of the main functions of managing the production process, whether it is manufacturing or service. Where the production man- ager chooses the goals of the production system and defines the policies, programs, and procedures required to achieve the goals. This stage aims to highlight the role of production and operations in the overall strategy of the organization, direct efforts towards product planning, and facilitate the de- sign and management of the transformational process. The planning function in the field of production and operations con- sists of: 1- Planning the transformational process: o Formulation of production and operations strategy: in which the production manager directs his attention to the activities of formu- lating the production and operations strategy, linking them to the organization’s strategy, and other functional strategies. 28  Figure 1/3 Production and Operations Management Framework Planning: 1- Transformational Process Planning Organization: Operations strategy. Site selection. - work design Operations layout. - Production and process Forecasting and product planning. standards Capacity planning - project management 2-Scheduling the conversion process Aggregate planning Scheduling and loading Transformational process inputs Outputs Behavior Models Control Inventory control Material requirements planning Quality control 29  o Choosing the location of the production facilities: This job is concerned with choosing the most appropriate location for produc- tion facilities, based on scientific bases, which enable the selection of the best location considering environmental restrictions and limitations, in a manner that achieves the highest level of effi- ciency and effectiveness of operations, and achieves the mission and objectives of the organization. o The internal plant layout: the planning function here relates to the design of the internal production system, in terms of arranging the production and service departments, and arranging machines and equipment to ensure the smooth flow of materials and parts from the moment they enter the production system until they exit as fin- ished products, and to ensure that the process does not stop, or the length of its path, Or the occurrence of waste and waste of materi- als. o Capacity planning and forecasting: The production system does not operate randomly, and to determine the requirements of the system from the inputs during a certain period, the demand for the outputs of the system during that period must be known. Here, one of the planning functions is to estimate the demand for the system's products, and based on the estimated demand, the future needs of raw materials, parts, people, funds, and required production capac- ities are estimated. 2- Production scheduling: in which the production manager sets the main production sched- ules, which determine the total quantities that will be produced during the month or week, for example, and develop a plan that specifies the produc- tion facilities that will be used in production, distributed over time. 30  This function also includes planning, scheduling, and loading ma- chines and production departments, meaning setting the date and time of the path and completion of each activity, and determining the start and end time of each production facility. (2) Organizing: Through the organization function, the production and operations department define the structure of roles, the flow of information within the production system, the production manager identifies the activities re- quired to achieve the goals of the production system, and defines the roles, responsibilities and authorities required to carry out tasks and activities. The work is designed, production standards are established, roles are as- signed, and lines of communication are established. (3) Control: To ensure the implementation of production plans as a sub-system of the organization's systems, the production manager must exercise the control function. The outputs of the transformational process must be measured to know their conformity with the plans developed, and the in- puts must be ensured that the required specifications match. This function, called production control, is the heart of the produc- tion management process, and it depends on cost control, quality control, inventory control, scheduling control…. etc. (4) Directing Behavior: To implement planning, organization and control, the production manager must be interested in knowing how actions affect the behavior of workers, and he needs to know how the behavior of workers affects the processes of planning, implementation, organization, and control. 31 (5) models When the production manager exercises the functions of planning, organizing, and controlling, he faces many problems, which he must take decisions about, and therefore the production manager must rely on math- ematical models and quantitative methods that help in making decisions. In addition to those quantitative models, the production manager must rely on modern methods that rely on computer applications and in- formation technology, which help in managing the production process in general, especially computer-aided design systems and computer-aided manufacturing systems. (b) Production and Operations Management Sub-tasks: 1- Forecasting and objective setting Tasks: The production planning process requires forecasting to identify potential or prospective events. Forecasting is a future estimate based on objective statis- tical bases. 2- planning budgets Tasks: The production planning process is based on several tasks, including budgets that direct all activities, which are a financial translation of the activities of the plan, so the plan is translated into quantities and values for the required materials and parts as well as individuals, and determining finan- cial values for the needs of equipment, machinery, and other as- sets. 3- Resource allocation tasks: The production planning process is also concerned with distributing and allocating material, financial and human resources to the products that are produced, research- ing the optimal allocation of resources to achieve the goals of the production system and the goals of the organization. 32 4- Operations scheduling tasks: One of the tasks of the production manager is the optimal scheduling of the production process on production lines, so that the volume of production can be identi- fied in a certain period, and thus the production capacity can be calculated in a year, for example. In this regard, it is considered to determine the operations, their times and their sequence on the machines used in the production process. The tasks of providing materials: The production department undertakes the tasks of op- timally determining the raw materials that are used in the produc- tion of the required products during a certain time cycle, and this means that the cost of raw materials stock must be matched against the cost of stopping production due to running out of stock, and thus the inability to meet demand and loss clients. And identify the stock of semi-finished products and finished prod- ucts. 5- Equipment identification tasks: The production department is concerned with the optimal selection of equipment and produc- tion lines that are used in the production of a certain volume of required goods, considering the technology used and the availa- ble capabilities. 6- Employment estimation tasks: The implementation of production plans requires defining what is needed for each plan of human skills in quantity and quality, and scheduling employment ac- cording to production plans and production volume so that the required activities can be carried out. It makes the worker more willing and willing to perform the required activities. 7- Work study tasks: It is concerned with analyzing the current and emerging processes, by recording the current operating methods, 33  and then developing them to reduce the effort of the worker, re- duce the operating time, and thus reduce the cost, and get rid of the double repetitive processes, to improve the ways of operating them. 8- Maintenance tasks: It is concerned with the analysis of periodic preventive maintenance, and repair when production stops. Among the necessary factors that necessitate an effective preven- tive maintenance program, consideration of safety, degree of equipment reliability, employment stability, and operating eco- nomics. 9- Productivity management tasks: The production department un- dertakes productivity management tasks, through a cycle that in- cludes productivity measurement, productivity analysis, and productivity improvement, whether at the level of total produc- tivity or at the level of partial productivity of input elements. 10- Cost control tasks: The control process is based on several tasks, including setting standard costs, which are calculated based on the rate of raw materials, labor and expenses, and comparing them with actual costs, in order to develop a policy to rationalize the elements of costs, and compress indirect expenses at the level of the production system as a whole. 11- Production control tasks: It is one of the most important tasks of production management, as the monitoring process is based on several tasks, including: setting policies that determine produc- tion rates, achieving the reliability of the production system to ensure the production of planned quantities, determining the size of employment, determining additional working hours, and in- centives to increase productivity. 34  12- Quality control tasks: The quality control process is based on several tasks, including determining the quality level for the spec- ifications of the product required by customers, and during all stages, such as: the stage of engineering design for the product to meet marketing objectives, during the stage of production of raw materials, operating processes, and during the stages of use for warranty Against manufacturing defects. 1/8 The relationship of production management with other functions of the organization: The production and operations function is the axis around which all the functions of the organization revolve. The organization's primary ob- jective is to produce the product, whether it is a good or a service, and this is done through the transformational process carried out by the production and operations function. Without this function, there will be no entity for the organization and there is no need for the rest of the organization's functions. If there is no good or service, then there is no need for the marketing function. What do we market? Nothing is being marketed. The financing function aims to manage the flow of funds and provide them for the purchase of machinery, equipment and production requirements, and the purchasing and warehous- ing function aims to provide the required needs for the production activity with the appropriate quality and from the appropriate source of supply, at the appropriate cost, and at the appropriate time for the production activity, and the research and development function innovates and develops new products The production function bears the burden of its production. Therefore, these sub-systems must work in harmony and coordina- tion as if they revolve around one axis, which is the production function. 35  Where it begins with the marketing function, which studies the mar- ket and determines the needs and desires of the consumer of goods and services, and in coordination with the production department, the produc- tion function must be able to produce what the marketing department de- sires, and the financial department must provide the production department with the funds necessary to purchase machinery, equipment, and produc- tion requirements. The Human Resources Department provides the com- petencies and human skills in number and quality for the possibility of pro- ducing products. The following is an explanation of the relationship of the production function to other functions (a) The relationship of the production function to the marketing function The relationship of the production function to the marketing function is characterized as a reciprocal relationship. This relationship is so im- portant that it determines the extent of the success or failure of the produc- tive institution depending on the strength or weakness of this relationship. The elements of the marketing mix, namely product, price, distribution and promotion, affect the production function, in terms of product design, pro- duction quantity, production cost, sales quantity, and the company's market share. Marketing activity precedes, accompanies, and follows production. It precedes production to provide data on the market, consumers, competi- tors, and other data on which production management relies in developing plans, designing, and producing products. Marketing accompanies the pro- duction function to provide the necessary information about the develop- ment or changes taking place in the market. While the production depart- ment provides the marketing department with all the information about the status and progress of production, its dates, and quantities. 36 (b) The relationship of the production function to the financing function It is known that most, if not all, of all the company's industrial de- cisions and production activities have financial resonance. The responsi- bility for managing and optimizing the use of funds rests with the financial management. In addition, the institution's production revenues and profits increase with the increase in the volume of production and the optimal uti- lization of productive energies and resources, and this optimal exploitation falls within the responsibility of the production department. For example, when the production department decides the need for a specific stock of a particular material according to the production plan, the quantities to be purchased and the timing of purchase are determined, and this means that the financial department must provide the funds re- quired to purchase those materials and provide them at the time specified by the production department. The production system cannot function without the availability of funds to cover the production management needs of machines, equipment, raw materials, parts and components, and spare parts, as well as providing wages, incentives, and rewards for those in charge of production. And The financial department also contributes to the preparation of the company's planning budgets, and assists its management in carrying out the tasks of financial control, so that resources can be allocated and exploited opti- mally. (c) Relationship of the Production Function to the Purchasing and in- ventory Function: The Production Department provides the Purchasing and inventory department with data about the production plan in the form of quantities and specifications of the required materials and various inputs, which forms 37 the basis of purchasing and Inventory planning, and at the same time the Purchasing and inventory department provides the Production Department with the necessary information about the materials available in markets and their various alternatives, and evaluate suppliers in terms of their ca- pabilities and quality, as well as purchase prices, purchase contract dates, and arrival dates of purchased quantities. (d) Relationship of Production Function to Human Resource Manage- ment: The relationship of the production function with the human re- sources function is characterized as a direct and reciprocal relationship, as the production department provides the human resources department with all information about the needs of the production plan from human resources, whether current or to be attracted, and the type of skills required in quantity and quality, as well as the human resources department pro- vides production department with the necessary data about size and type of labor available in the organization’s departments, as well as the type of labor available in the labor market. (e) Relationship of Production Function to Research and Development Department: The production department benefits from the research activities of the Research and Development Department, which is concerned with de- veloping production methods, improving techniques used in manufacturing and developing management methods. It also benefits from marketing re- search on consumers, alternative materials and competing products. 38  Chapter 2 Productivity and Competitive advantages 39 40  Chapter 2 Productivity and Competitive advantages 2/1 Introduction: Productivity is one of the important issues that affect not only the organization's competitive capabilities, but also the competitive capabili- ties of countries, and the well-being of individuals and society. Therefore, developed countries focus on issues of productivity and competitive advantages. Improving productivity achieves several ad- vantages, including: increasing employment rates, decreasing unemploy- ment rates at the national level, increasing the company’s competitive ca- pabilities, which is positively reflected on its effectiveness and profits, im- proving the income level of employees and their job stability, and achiev- ing sustainability benefits. It is the preservation of resources, because im- proving productivity means avoiding waste and wasteful use of resources to achieve the required outputs. Production and Operations Management is capable of either “make or die” any organization. Not only because the operations function is large and, in most companies, represents most of its assets and includes most employees, but because the operations function achieves competitiveness by providing the ability to respond to customers and developing capabili- ties that enables the organization to gain a competitive advantage that gives it priority over competitors. This chapter includes different concepts and methods related to productivity and competitive advantages. 41 2/2 Productivity 2/2/1 The concept of productivity Productivity is an accurate measure of the efficiency of production and operations management, and productivity is defined as a measure of the relationship between outputs (products of goods and services) and in- puts (raw materials - parts - components - labor - capital - management - services) during a certain period. Or it is: the ability to construct results using specific production elements. Thus, productivity reflects the man- agement's efficiency in exploiting the available resources to get the best possible production. The volume, quantity and value of production cannot be used alone to judge the efficiency of the organization, for example: If the production of factory (x) of cement was 200 thousand tons in the past year, while the volume of production increased to 250 thousand tons in the following year, does this mean Increased or improved plant efficiency (x)? Certainly, this cannot be judged based on the volume of production. Production may in- crease in the form of the number of units produced or in their value, but this is offset by waste of raw materials and inputs to the production process, or lost efforts, or an increase in labor and energy costs, or a high percentage of wastage or defective units in output. Therefore, judging the efficiency of the production system requires a measure that attributes the outputs of the system to its inputs, which is a measure of productivity. Productivity is measured as follows: 𝐎𝐮𝐭𝐩𝐮𝐭 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒗𝒊𝒕𝒚 = 𝐈𝐧𝐩𝐮𝐭 The higher the result of this ratio, the higher the efficiency of the production system or the efficiency of production and operations 42 management. The variables of the ratio may be expressed in terms of quan- tities or values. We must differentiate between productivity rate, production effi- ciency and production Effectiveness. The productivity rate measures the amount of inputs required to achieve a given volume of output. So, the productivity rate focuses on the nature of the relationship between the quantity or value of outputs and the quantity or value of inputs, regardless of whether the resources used are optimally exploited or not, as follows: 𝐎𝐮𝐭𝐩𝐮𝐭 𝐪𝐮𝐚𝐧𝐭𝐢𝐭𝐲 𝐎𝐮𝐭𝐩𝐮𝐭 𝐕𝐚𝐥𝐮𝐞 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 𝐫𝐚𝐭𝐞 = , or = 𝐈𝐧𝐩𝐮𝐭 𝐪𝐮𝐚𝐧𝐭𝐢𝐭𝐲 𝐈𝐧𝐩𝐮𝐭 𝐕𝐚𝐥𝐮𝐞 While, production efficiency, refers to the production system' ability to achieve a certain volume of output using the possible least amount of inputs. It focuses on the optimal use of inputs to obtain outputs, and thus efficiency focuses on the quality of performance of the activities of the pro- duction system, and it is measured as follows: 𝐀𝐜𝐭𝐮𝐚𝐥 𝐎𝐮𝐭𝐩𝐮𝐭 𝐄𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐜𝐲 = 𝐄𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐎𝐮𝐭𝐩𝐮𝐭 While effectiveness refers to the ability of the production system to achieve a certain level of output using the resources in the organization, and therefore effectiveness is related to the quality of the output. Productivity can be improved by one or a combination of the following strategies: 1- Increasing the value or quantity of outputs while keeping the value or quantity of inputs constant. 2- An increase in the value or quantity of outputs and an increase in the value or quantity of inputs, but the increase or rise in outputs is greater than the rate of increase in inputs. 43  3- A decrease in the value or quantity of outputs with a decrease in the value or quantity of inputs, but the decrease in inputs is at a rate greater than the decrease in outputs. 4- Increasing the value or quantity of outputs with a decrease in the value or quantity of inputs, and this is the optimal strategy to raise the level of productivity, which achieves the competitive advantage. Productivity plays an influential role in achieving and maintaining competitive advantage for the following: 1- Productivity leads to optimal using of resources to minimize the cost of producing a good or service. 2- Cost reduction enables the organization to improve its competitive- ness in the local and global markets. 3- Improving competitiveness can reduce prices, increase sales, and achieve a high rate of return. 4- The profits generated by the high level of productivity are consid- ered sources of financing for the company that enable it to expand and increase its ability to raise wages. Example (1) The (wxz) company's Production in 2020 was 800,000 units, using 500,000 pounds as production inputs, and unit selling price equals one pound, while sales return due to defects in the product was 62,000 units, so if the company’s planned production for the same year is one million pounds. Required: Calculate the productivity, efficiency, and effectiveness of the com- pany for the same year. The solution: To calculate productivity, we must use either units or values for the outputs and inputs, here we have inputs as value (pounds), so, outputs must be expressed as value too. 44  Output value = number of output X selling price = 800000 X 1 = 800000 pound Input value = 500000 pound 𝐓𝐨𝐭𝐚𝐥 𝐎𝐮𝐭𝐩𝐮𝐭 𝐯𝐚𝐥𝐮𝐞 𝟖𝟎𝟎𝟎𝟎𝟎 1- Total productivity = = = 𝟏. 𝟔 𝐓𝐨𝐭𝐚𝐥 𝒊𝒏𝒑𝒖𝒕 𝒗𝒂𝒍𝒖𝒆 𝟓𝟎𝟎𝟎𝟎𝟎 2- To calculate the production efficiency, the actual output must be cal- culated, and the actual output is equal to the value of the valid output after excluding the defective. So, the following is done: Calculating the cost per unit 𝐈𝐧𝐩𝐮𝐭𝐬 𝟓𝟎𝟎𝟎𝟎𝟎 = = = 𝟎. 𝟔𝟐𝟓 pounds 𝐎𝐮𝐭𝐩𝐮𝐭𝐬 𝟖𝟎𝟎𝟎𝟎𝟎 Number of valid units = total output – defective = 800000 - 62000 = 738000 Valid production cost = number of valid units x unit cost = 738000 x 0.625 = 461250 𝐀𝐜𝐭𝐮𝐚𝐥 𝐎𝐮𝐭𝐩𝐮𝐭𝐬 3- Production efficiency = 𝑿 𝟏𝟎𝟎 𝐀𝐜𝐭𝐮𝐚𝐥 𝐈𝐧𝐩𝐮𝐭𝐬 𝟒𝟔𝟏𝟐𝟓𝟎 = 𝑿 𝟏𝟎𝟎 = 𝟗2.25% 𝟓𝟎𝟎𝟎𝟎𝟎 𝐀𝐜𝐭𝐮𝐚𝐥 𝐎𝐮𝐭𝐩𝐮𝐭𝐬 4- Effectiveness = 𝑿 𝟏𝟎𝟎 𝐩𝐥𝐚𝐧𝐧𝐞𝐝 𝐩𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝟖𝟎𝟎𝟎𝟎𝟎 = 𝑿 𝟏𝟎𝟎 = 𝟖𝟎% 𝟏𝟎𝟎𝟎𝟎𝟎𝟎 Example (2): The following table shows the production of a company of ready- made clothes in 2020, 2021 Statement 2020 2021 Production size (pounds) 300000 450000 45  Electricity (kw) 10000 15000 energy cost 100000 180000 Raw Materials (canvas meter) 5000 90000 Raw material cost 160000 180000 Cost of wages and incentives 90000 100000 Required: 1- Calculate the total productivity 2- Calculation of the productivity index. 3- Calculation of the change in productivity index. The solution: We have outputs expressed by value (pounds); therefore, we must use inputs expressed by values not units. The total inputs value = (energy cost + raw material cost + labor cost) for every year. Total productivity in 2020= 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 = 𝒆𝒏𝒆𝒓𝒈 𝒄𝒐𝒔𝒕+𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑙𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡 𝟑𝟎𝟎𝟎𝟎𝟎 𝟑𝟎𝟎𝟎𝟎𝟎 = = = 0.86 𝟏𝟎𝟎𝟎𝟎𝟎+𝟏𝟔𝟎𝟎𝟎𝟎+𝟗𝟎𝟎𝟎𝟎 𝟑𝟓𝟎𝟎𝟎𝟎 Total productivity in 2021= 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 = 𝒆𝒏𝒆𝒓𝒈 𝒄𝒐𝒔𝒕+𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑙𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡 𝟒𝟓𝟎𝟎𝟎𝟎 𝟒𝟓𝟎𝟎𝟎𝟎 = = = 0.97 𝟏𝟖𝟎𝟎𝟎𝟎+𝟏𝟖𝟎𝟎𝟎𝟎+𝟏𝟎𝟎𝟎𝟎𝟎 𝟒𝟔𝟎𝟎𝟎𝟎 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 𝐨𝐟 𝐚 𝐠𝐢𝐯𝐞𝐧 𝐩𝐞𝐫𝐢𝐨𝐝 (𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐲𝐞𝐚𝐫 ) Productivity Index = 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 𝐨𝐟 𝐭𝐡𝐞 𝐛𝐚𝐬𝐞 𝒑𝒆𝒓𝒊𝒐𝒅 (𝒃𝒂𝒔𝒆 𝒚𝒆𝒂𝒓) 𝟎.𝟗𝟕 = = 1.3 𝟎.𝟖𝟔 Productivity change index = 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐲𝐞𝐚𝐫 − 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 𝐭𝐡𝐞 𝐛𝐚𝐬𝐞 𝐲𝐞𝐚𝐫 𝑿 𝟏𝟎𝟎 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 𝐨𝐟 𝐭𝐡𝐞 𝐛𝐚𝐬𝐞 𝒚𝒆𝒂𝒓) 𝟎. 𝟗𝟕 − 𝟎. 𝟖𝟔 𝑿 𝟏𝟎𝟎 = 𝟏𝟐. 𝟕𝟗% 𝟎. 𝟖𝟔 46 2/2/2 Measurement of Partial Productivity: In the previous example, the total productivity of 2021 increased over the total productivity of 2020 by about 13%. What is the reason for the rise? In other words, is the rise due to the efficiency of the use of man- power? Or to efficient use of materials? Or to energy? Or a mixture of them. It is necessary to know which elements of production cause of the increase or decrease in productivity. So partial productivity measures are used to calculate the productivity of each input component. For example, we must calculate the productivity of each production element or factor as flowing: 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 Productivity of raw materials = 𝑣𝑎𝑙𝑢𝑒 𝒐𝒇 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 Wage productivity = 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑤𝑎𝑔𝑒𝑠 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 Productivity of kilowatts of electricity = 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡𝑜𝑡𝑎𝑙 𝑒𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 Productivity of working hours = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑘𝑖𝑛𝑔 ℎ𝑜𝑢𝑟𝑠 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 𝑣𝑎𝑙𝑢𝑒 Productivity of the maintenance pound = 𝑡𝑜𝑡𝑎𝑙 𝑚𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 𝑐𝑜𝑠𝑡 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 𝑣𝑎𝑙𝑢𝑒 Productivity of supplementary services = 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑠𝑢𝑝𝑝𝑙𝑒𝑚𝑒𝑛𝑡𝑎𝑟𝑦 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 𝑣𝑎𝑙𝑢𝑒 Productivity of raw material (A) = 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 (𝐴) 𝑡𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 𝑣𝑎𝑙𝑢𝑒 Productivity of raw material (b) = 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 (𝑏) Example (3) The following is the data related to a company for the years 2020, 2021: 47  Statement 2020 2021 total revenue 80000 120000 Equipment depreciation 22000 24000 labor wages 8000 10000 raw material value 10800 16000 Support services value 4400 4800 Required: 1- Calculate the total productivity 2- Calculating the productivity change index 3- Calculating the partial productivity of the production elements and use this to explain the change in the total productivity. The solution: First: indicators for 2020 year: 1- Total Productivity = 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) depreciation + wages + 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 + supplementary materials 𝟖𝟎𝟎𝟎𝟎 = = 𝟏. 77 22000+8000+𝟏𝟎𝟖𝟎𝟎+4400 2-Equipment productivity 𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡𝑠 (𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒) 𝟖𝟎𝟎𝟎𝟎 = = = 𝟑. 𝟔𝟒 𝐸𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡 𝑑𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 22000 3- Labor productivity 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) 𝟖𝟎𝟎𝟎𝟎 = 𝒍𝒂𝒃𝒐𝒓 𝒘𝒂𝒈𝒆𝒔 𝒗𝒂𝒍𝒖𝒆 = = 𝟏𝟎 8000 4- Raw materials Productivity 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) 𝟖𝟎𝟎𝟎𝟎 = 𝑅𝑎𝑤 𝑚𝑎𝑡𝑒𝑖𝑎𝑙𝑠 𝑣𝑎𝑙𝑢𝑒 = = 𝟕. 𝟒 1080 5- supplementary services value 48  𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) 𝟖𝟎𝟎𝟎𝟎 = 𝑺𝒖𝒑𝒑𝒐𝒓𝒕 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝒗𝒂𝒍𝒖𝒆 = = 𝟏𝟖. 𝟏𝟖 4400 Second: indicators for the year 2021: 1- Total Productivity = 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) depreciation + wages + 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 + supplementary materials 𝟏𝟐𝟎𝟎𝟎𝟎 = = 𝟐. 𝟏𝟗 24000+10000+𝟏𝟔𝟎𝟎𝟎+4800 2-Equipment productivity 𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡𝑠 (𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒) 𝟏𝟐𝟎𝟎𝟎𝟎 = = =𝟓 𝐸𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡 𝑑𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 24000 3- Labor productivity 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) 𝟏𝟐𝟎𝟎𝟎𝟎 = 𝒍𝒂𝒃𝒐𝒓 𝒘𝒂𝒈𝒆𝒔 𝒗𝒂𝒍𝒖𝒆 = = 𝟏𝟐 10000 4- Raw materials Productivity 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) 𝟏𝟐𝟎𝟎𝟎𝟎 = 𝑅𝑎𝑤 𝑚𝑎𝑡𝑒𝑖𝑎𝑙𝑠 𝑣𝑎𝑙𝑢𝑒 = = 𝟕. 𝟓 16000 5- supplementary materials value 𝑻𝒐𝒕𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕𝒔 (𝒕𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆) 𝟏𝟐𝟎𝟎𝟎𝟎 = 𝑺𝒖𝒑𝒑𝒐𝒓𝒕 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝒗𝒂𝒍𝒖𝒆 = = 𝟐𝟓 4800 𝟐.𝟏𝟗 Third: productivity index = = 1.24 𝟏.𝟕𝟕 Fourth: Productivity change index = 𝟐. 𝟏𝟗 − 𝟏. 𝟕𝟕 𝑿 𝟏𝟎𝟎 = 𝟐𝟑. 𝟕𝟑% 𝟏. 𝟕𝟕 Explanation: The change in productivity index shows that the productivity of 2021 increased by 23.73% over the productivity of 2020. The analysis of partial productivity metrics, we find the following: 49  This increase is primarily due to the increase in the productivity of support services, as its productivity increased from 18.18 in 2020 to 25 in 2021, i.e. a difference of 6.82. The labor force also contributed to this in- crease, as the productivity of the labor force increased from 10 in 2020 to 12 in 2021. , followed by the change in equipment productivity from 3.64 to 5, with a difference of 1.36, while the changes in the productivity of raw materials were small, the changes did not exceed 0.1 2/3 Competitive advantages Production management is currently facing an environment charac- terized by a high degree of change and complexity, due to the political, economic, technological, and social changes and modifications taking place in its environment. Thus, organizations must be constantly aware about these changes and deal with them effectively. Production systems, whether those that produce goods or services, have found themselves in a world characterized by the following: The transformation from local markets to global markets, estab- lished by international agreements, regional blocs, and the dev