Production &

Operations Management

Chapter 1 –
Introduction to Operations
Management

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 Learning Objectives

 Define and explain OM

 Explain the role of OM in business
 Describe the differences between service and manufacturing
operations
 Identify major historical developments in OM

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 Operations Management is:
The business function responsible for planning, coordinating,
and controlling the resources needed to produce products and
services for a company

Operations management focuses on how organisations produce

goods and services efficiently and effectively. It concerns the
improvement of business operations and the transformation
process through which goods and services are created
(Schermerhorn, 2011).

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 Operations Management is:
 A management function

 An organization’s core function

 In every organization whether Service or Manufacturing,

profit or Not for profit

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 What is Role of OM?
 OM Transforms inputs to outputs

 Inputs are resources such as

 People, Material, and Money

 Outputs are goods and services

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 OM’s Transformation Process

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 OM’s Transformation Role
 To add value

 Increase product value at each stage

 Value added is the net increase between output product value and input

material value

 Provide an efficient transformation

 Efficiency – means performing activities well for least possible cost

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 Manufacturers vs Service
Organizations
 Manufacturers:
 Services:  Tangible product

 Intangible product  Product is inventoried

 Product cannot be  Low customer contact

inventoried  Longer response time
 High customer contact  Capital intensive
 Short response time
 Labor intensive

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 Similarities for Service/Manufacturers
 Both use technology
 Both have quality, productivity, & response issues
 Both must forecast demand
 Both can have capacity, layout, and location issues
 Both have customers, suppliers, scheduling and staffing
issues

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 Service vs Manufacturing
 Manufacturing often provides services
 Services often provides tangible goods
 Some organizations are a blend of
service/manufacturing/quasi-manufacturing Quasi-
Manufacturing (QM) organizations
 QM characteristics include
 Low customer contact & Capital Intensive

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 Historical Development of OM
 Industrial revolution Late 1700s
 Scientific management Early 1900s
 Human relations movement 1930s-60s
 Management science 1940s-60s
 Computer age 1960s
 Environmental Issues 1970s
 JIT & TQM* 1980s

*JIT= Just in Time, TQM= Total Quality Management

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 Historical Development con’t
 Reengineering 1990s
 Global competition 1980s
 Flexibility 1990s
 Time-Based Competition 1990s
 Supply chain Management 1990s
 Electronic Commerce 2000s
 Outsourcing & flattening of world 2000s

For long-run success, companies must place much importance on their operations

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 Today’s OM Environment
 Customers demand better quality, greater speed, and
lower costs
 Companies implementing lean system concepts – a total
systems approach to efficient operations
 Recognized need to better manage information using
ERP and CRM systems
 Increased cross-functional decision making

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 OM in Practice
 OM has the most diverse organizational function
 Manages the transformation process
 OM has many faces and names such as;
 V. P. operations, Director of supply chains, Manufacturing
manager
 Plant manger, Quality specialists, etc.
 All business functions need information from OM in
order to perform their tasks

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 Business Information Flow

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 OM Across the Organization
 Most businesses are supported by the functions of operations,
marketing, and finance
 The major functional areas must interact to achieve the
organization goals

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 OM Across the
Organization – con’t
 Marketing is not fully able to meet customer needs if they do not
understand what operations can produce
 Finance cannot judge the need for capital investments if they do
not understand operations concepts and needs
 Information systems enables the information flow throughout the
organization
 Human resources must understand job requirements and worker
skills
 Accounting needs to consider inventory management, capacity
information, and labor standards

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 Product Design
 Product design is conceptualization of an idea about a
product and transformation of the idea into a reality.
 To transform the idea into reality a specification about the
product is prepared.
 This specification is prepared by considering different
constraints such as production process, customer
expectation, etc.
 In product design stage every aspects of the product are
analyzed.
 Also final decision regarding the product is taken on the basis
of the analysis.

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 What is Product Design?
 Product design is one of the most important and sensitive
factor for an organization.
 Success or failure of the product decides company’s business,
market share and reputation.
 So during design stage various factors related to the product
needs to be addressed.

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 Product Design
Manufactur
ability
Standardiza Reverse
tion Engineering

Product
Research &
Life
Cycle Concepts Development

in Product
Design

Concurrent
Robust
Engineerin Design
g

Computer Modular
Aided Design Design

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 Research & Development
 Design of New Product is done by R & D Department.
 Basic research is a search for new knowledge.
 It does not have any immediate application, but based on the
basic research new product can be developed in future.
 Applied research has objective of developing commercial
applications.
 Development is the process of converting the results of
Applied research into useful commercial application.
 For Ex. Newton's Law of Gravity

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 Reverse engineering:
 Reverse engineering is the process of carefully dismantling a
product step by step , in order to understand its design and
developing a product which is better than the existing one.

 Example: Sony Corp. is on the forefront of designing new

innovative items such as Handy cam, Digital Cameras

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 Concurrent engineering (CE):
 In CE, different co-related teams are formed, which perform
different activities for developing a product.
 For example, development of market concept, design of
product, development of manufacturing process, selection
and arrangement of material for new design is performed by
different teams at the same time.
 It reduces considerable amount of time to develop a new
product.
 In practice different concepts are combined and applied
together to design a new product

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 Manufacturability:
 Designing a product in such a way that its manufacturing &
assembling can be done easily.
 While designing a new product, the manufacturing
capabilities such as existing machines, equipments, skills of
workers of organisation have to be kept in mind.
 If required capabilities does not exists, then managements
can consider enhancing production capabilities by making
more investments.

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 Standardization:
 It means less variety in design of Products.
 Lack of standardisation creates problems for standard
products such as computers, keyboards etc.

 Benefits :
 Lower Design Cost
 Availability of components for replacements.

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 Modular Design:
 Another type of standardization
 Designing a product in parts or modules.
 Modules means subassemblies of different components &
parts.
 For Example:
 Hard disk
 Motherboards
 CD Drive

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 Robust Design
 Robust Design means designing a product that is operational
in varying environmental conditions

 Example : Jeep is more robust than car

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 Computer Aided Design:
 Is a software which helps designer to make the three
dimensional design of product on the computer
 & Visualize the design from different angles

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 Product Life Cycle:
 Incubation
 Growth
 Maturity
 Saturation
 Decline

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 Process Design:
Types of
Processes

Continuous Semi continuous Intermittent

Project
Process Process Process

Batch Process Job Shop

The Transformation Process is used to convert inputs

into desired outputs

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 Continuous Process
 Dedicated Plants & equipments with zero flexibility
 Material Handling is fully automated
 Predetermined Sequence of Operations
 Highly Standardized Product, no variety
 Measured on continuous basis ( tones per day)

 Example: chemicals, steel, plastic industries.

 Sugar Mills
 Oil & Gas Industries

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 Semi- Continuous Process:
 Repetitive in nature
 Standardization of product & Process sequence
 Produce high volume of output
 Products have little variety
 Dedicated special purpose machines

 Example- Electronic items, TV, Radios, automobiles etc.

 Limitation: Breakdown of one machine may stop entire
production.

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 Intermittent Process:
 Stop at regular Interval of time
 Product requires processing on variety of machines.
 Volume of Product is low
 No standard Routing

 These are of Two Types:

 Batch Process
 Job Shop Process

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 Batch Process
 Batches or Lots of items are to be produced
 Same set of machines in the same sequence
 Products are of Different varieties.
 Example: Bakery
 Batch of biscuits,
 Batch of chocolates
 Batch of Breads

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 Job Shop Process
 This Process can handle larger variety of products than batch
process
 Products may be different from each other
 Different machines
 Different processes

 Example Restaurant

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