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OM/U1 Topic 1 Nature And Scope of Production And Operation Management

E.S.Buffa defines production management as follows: ‘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’.

Joseph G .Monks defines Operations Management as the process whereby resources, flowing with in a defined system, are combined and transformed by a controlled manner to add value in accordance with policies communicated by management.

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Objectives of Production/Operations Management:

Some of the important objectives of production/operations management are:

(i) Maximum customer satisfaction through quality, reliability, cost and delivery time.

(ii) Minimum scrap/rework resulting in better product quality.

(iii) Minimum possible inventory levels (i.e.,optimum inventory levels).

(iv) Maximum utilisation of all kinds of resources needed.

(v) Minimum cash outflow.

(vi) Maximum employee satisfaction.

(vii) Maximum possible production (i.e., outputs).

(viii) Higher operating efficiency.

(ix) Minimum production cycle time.

(x) Maximum possible profit or return on investment.

(xi) Concern for protection of environment.

(xii) Maximum possible productivity.

NATURE OF PRODUCTION/OPERATIONS:

The nature of production or operations can be better understood by viewing the manufacturing function as :

(i) Production/operations as a system,

(ii) Production/operations as an organisational function,

(iii) Production/operations as a conversion or transformation process and

(iv) Production/operations as a means of creating utility.

These four distinct views are discussed in the following section.

  • Production/Operations as a System

This view is also known as “systems concept of production”. A system is defined as the collection of interrelated entities. The systems approach views any organisation or entity as an arrangement of interrelated parts that interact in ways that can be specified and to some extent predicted. Production is viewed as a system which converts a set of inputs into a set of desired outputs. A production system has the following elements or parts : (i) Inputs,

(ii) Conversion process or transformation process,

(iii) Outputs

(iv) Transportation subsystem,

(v) Communication subsystem and

(vi) Control or decision making subsystem.

  • Production/Operations as a Conversion/Transformation Process

The conversion or transformation sub-system is the core of a production system because it consists of processes or activities wherein workers, materials, machines and equipment are used to convert inputs into outputs. The conversion process may include manufacturing processes such as cutting, drilling, machining, welding, painting, etc., and other processes such as packing, selling, etc. Any conversion process consists of several small activities referred to as “operations” which are some steps in the overall process of producing a product or service that leads to the final output.

  • Production/Operations as a Means of Creating Utility:

Production is defined as the process of adding to the value of outputs or the process of creating utility in outputs. “Utility” is the power of satisfying human needs. During the process of converting the raw materials into finished goods, various types of utilities are created while adding value to the outputs. These

Types of utilities are:

  • Form utility:

This is created by changing the size, shape, form, weight, colour, smell of inputs in order to make the outputs more useful to the customers. For example, iron ore is changed to steel, wood is changed to furniture, etc.

  • Place utility:

This is created by changing the places of inputs or transporting the inputs from the source of their availability to the place of their use to be converted into outputs. For example the iron ore and coal are transported from the mines to the steel plant to be used in the conversion process.

  • Time utility:

This is created by storage or preservation of raw materials or finished goods which are in abundance sometime, so that the same can be used at a later time when they become scarce due to higher demand exceeding the quantity available.

  • Possession utility:

This is created by transferring the possession or ownership of an item from one person to another person. For example, when a firm purchases materials from a supplier, the possession utility of the materials will increase when they are delivered to the buying firm.

  • Service utility:

Which is the utility created by rendering some service to the customer. For example, a doctor or a lawyer or an engineer creates service utility to a client/customer by rendering service directly to the client/customer.

  • Knowledge utility:

This is created by imparting knowledge to a person. For example, a sales presentation or an advertisement about some product communicates some information about the product to the customer, thereby imparting knowledge.

SCOPE OF PRODUCTION AND OPERATION MANAGEMENT

Production and operations management concern with the conversion of inputs into outputs, using physical resources, so as to provide the desired utilities to the customer while meeting the other organizational objectives of effectiveness, efficiency and adaptability. It distinguishes itself from other functions such as personnel, marketing, finance, etc., by its primary concern for ‘conversion by using physical resources.’ Following are the activities 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.

Location of facilities for operations is a long-term capacity decision which involves a long term commitment about the geographically static factors that affect a business organization. It is an important strategic level decision-making for an organization. It deals with the questions such as ‘where our main operations should be based?’

Plant layout refers to the physical arrangement of facilities. It is the configuration of departments, work centers and equipment in the conversion process. The overall objective of the plant layout is to design a physical arrangement that meets the required output quality and quantity most economically.

According to James Moore, “Plant layout is a plan of an optimum arrangement of facilities including personnel, operating equipment, storage space, material handling equipment’s and all other supporting services along with the design of best structure to contain all these 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’. It is also defined as the ‘art and science of moving, packing and storing of products in any form’. It is a specialized activity for a modern manufacturing concern, with 50 to 75% of the cost of production.

Product design deals with conversion of ideas into reality. Every business organization have to design, develop and introduce new products as a survival and growth strategy. Developing the new products and launching them in the market is the biggest challenge faced by the organizations.

Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis and layout of the facilities.

Production planning and control can be defined as the process of planning the production 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. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are, to where we want to go. Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products. Scheduling determines the programmer for the operations. Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it determines the sequence of operations to be followed.

Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a particular work, which has already been planned under ‘Routing’ and ‘Scheduling’.

Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of quality in a product or service’. It is a systematic control of various factors that affect the quality of the product. Quality control aims at prevention of defects at the source, relies on effective feed back system and corrective action procedure. Quality control can also be defined as ‘that industrial management technique by means of which product of uniform acceptable quality is manufactured’. It is the entire collection of activities which ensures that the operation will produce the optimum quality products at minimum cost.

The main objectives of quality control are: To improve the companies income by making the production more acceptable to the customers i.e., by providing long life, greater usefulness, maintainability, etc. To reduce companies cost through reduction of losses due to defects. To achieve interchange ability of manufacture in large scale production. To produce optimal quality at reduced price. To ensure satisfaction of customers with productions or services or high quality level, to build customer goodwill, confidence and reputation of manufacturer. To make inspection prompt to ensure quality control. To check the variation during manufacturing.

Materials management is that aspect of management function which is primarily concerned with the acquisition, control and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view.

The main objectives of materials management are:

  • To minimize material cost.
  • To purchase, receive, transport and store materials efficiently and to reduce the related cost.
  • To cut down costs through simplification, standardization, value analysis, import substitution, etc.
  • To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply at reasonable rates.
  • To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios.

THE SCOPE OF OPERATIONS MANAGEMENT

Operations management has been gaining increased recognition in recent years because of the following reasons:

(i) The application of operations management concepts in service operations.

(ii) The growing importance of quality.

(iii) The introduction of operation management concepts to other areas such as marketing and human resources and

(iv) The realization that the operations management function can add value to the end product.

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