Definition, Objectives, Scope and Functions of Production & Operation Management
Production (or Operations) management is an umbrella term which encompasses a gamut of ideas within the jingoistic managerial circles, mostly exemplified by the varied literal definitions of these terms based on the source. But we’ll confine ourselves to straightforward (and understandable) definition to answer the basic question – ‘What is operations management?
Production / Operations Management is defined as the process which transforms the inputs/resources of an organization into final goods (or services) through a set of defined, controlled and repeatable policies.
By policies, we refer to the rules that add value to the final output. The value added can be in different dimensions, but the industrial set-up is mostly concerned with the duo of quality and throughput.
Difference between Production and Operations Management
Production and operations management are more similar than different: if manufacturing products is a prime concern then it is called production management, whereas management of services is somewhat broader in scope and called operations management (because manufacturing services sounds absurd, right?).
The line between products-based and services-based organizations is blurring rapidly as well— car manufactures need to service their cars and the retailers manufacture their own brand labels.
We will be referring to them jointly as POM from here on in this article, for the benefit and convenience of all the parties involved.
The fuss about production and systems
- Productionis a term which has caught the fancy of every industrialist ever since Adam Smith propounded the idea of “specialization of labor”.
It is best envisioned as a piece-wise process (think about a typical production line with every worker doing one and only one task at a frenetic speed), and this piece-wise production enabled better quality, higher throughput, lower individual dependency and lesser labor costs.
The production systems are frequently classified in the following buckets:
- Mass Production: Utilizes standardized discrete assemblies in a continuous process, suitable for very large volumes of production—all outputs following the same path. Generally associated with mind-numbing repetition, very specific machinery and a labor force low on skill/creativity.
- Continuous Production: Non-flexible mode of production in which the whole sequence of operations is pre-arranged in a definite set-up.
- Batch production: American Production and Inventory Control defines batch production as “a form of manufacturing in which the job passes through the functional departments in lots or batches and each lot may have a different routing.” Enough said.
- Job Shop Production: Characterized by custom specifications by customers for a limited quantity of products, use of general purpose machines and comparatively more creative/skilled labor.
- There are a few decision areas which are of utmost importance in POM, such as design, quality, location selection, human resource allocation, supply chain management and maintenance.
- The decisions arising from a POM perspective often decide the core priorities of an organization: What makes us better than the competitors? Will we compete on cost, quality, delivery time, design/form factor, ease of use, or something else? Et cetera et cetera.
- There are some pre-defined objectives of production management, which can be broken down into:
- Right quality,
- Right quantity,
- Right time and
- Right cost
- Production management can essentially be seen as an optimization problem: the goal is to make the process as predictable as possible (as all of us do not share the same enthusiasm for surprises).
- The objectives of operations management are a tad more extensive and take a couple of things more into the fold: customer serviceand resource utilization.
- Almost all the things in operation management converge towards a single focal point: the customer. Customer satisfaction is a barometer of things moving in the right direction.
- Resource utilization is equally imperative: the process of obtaining the output from input through the path of least resistance, i.e. through least wastage and maximum utilization of resources.
- Scoring high on one usually leads to deterioration in performance of the other (utilization v/s customer service), and their balance is usually the nightmare of an operations manager — but is definitely a worthy goal to look forward to.
Objectives of Production/Operations Management:
(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.
Production Management v/s Operations Management
A high level comparison which distinct production and operations management can be done on following characteristics:
- Output: Production management deals with manufacturing of products like (computer, car, etc) while operations management cover both products and services.
- Usage of Output: Products like computer/car are utilized over a period of time whereas services need to be consumed immediately
- Classification of work: To produce products like computer/car more of capital equipment and less labour are required while services require more labour and lesser capital equipment.
- Customer Contact: There is no participation of customer during production whereas for services a constant contact with customer is required.
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:
- Location of facilities
- Plant layouts and material handling
- Product design
- Process design
- Production and planning control
- Quality control
- Materials management
- 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.