Production

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Production Operations Management

• Unit - I

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Production (Vs) Operation

• The transformation process of inputs into the
  form of output, thereby adding value to some
  entity.
• Output may be a product or service. If it is a
  product centric that is known as production, If
  it is a service centric then that is known as
  operation.

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Production/operations management

• It is concerned with the production of goods and
  services, and involves the responsibility of
  ensuring that business operations are efficient
  and effective.
• It is also the management of resources, the
  distribution of goods and services to customers.

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Definition

• The field of study that focuses on the effective
  planning, scheduling, use, and control of a
  manufacturing or service organization through the
  study of concepts from design engineering,
  industrial engineering, management information
  systems, quality management, inventory
  management, accounting, and other functions as
  they affect the organization" -- APICS The
  Association for Operations Management

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OPERATIONS MANAGEMENT

• UNIT I INTRODUCTION TO PRODUCTION AND
  OPERATIONS MANAGEMENT
• Production Systems Nature, Importance and
  organizational function. Characteristics of
  Modern Production and Operations function.
  Organization of Production function. Recent
  Trends in Production and Operations Management.
  Role of Operations in Strategic Management.
  Production and Operations strategy Elements and
  Competitive Priorities. Nature of International
  Operations Management.

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• UNIT II FORECASTING, CAPACITY AND AGGREGATE
  PLANNING
• Demand Forecasting Need, Types, Objectives
  and Steps. Overview of Qualitative and
  Quantitative methods. Capacity Planning Long
  range, Types, Rough cut plan, Capacity
  Requirements Planning (CRP), Developing capacity
  alternatives. Aggregate Planning Approaches,
  costs, relationship to Master Production
  schedule. Overview of MRP, MRP II and ERP

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• UNIT III DESIGN OF PRODUCT, SERVICE AND
  WORK SYSTEMS
• Product Design Influencing factors,
  Approaches, Legal, Ethical and Environmental
  issues. Process Planning, Selection, Strategy,
  Major Decisions. Service Operations Types,
  Strategies, Scheduling (Multiple resources and
  cyclical scheduling). Work Study Objectives,
  Procedure. Method Study and Motion Study. Work
  Measurement and Productivity Measuring
  Productivity and Methods to improve productivity

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• UNIT IV MATERIALS MANAGEMENT
• Materials Management Objectives, Planning,
  Budgeting and Control. Overview of Materials
  Management Information Systems (MMIS). Purchasing
  Objectives, Functions, Policies, Vendor rating
  and Value Analysis. Stores Management Nature,
  Layout, Classification and Coding. Inventory
  Objectives, Costs and control techniques.
  Overview of JIT.

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• UNIT V PROJECT AND FACILITY PLANNING
• Project Management Scheduling Techniques,
  PERT, CPM, Crashing CPM networks Simple
  Problems. Facility Location Theories, Steps in
  Selection, Location Models Simple Problems.
  Facility Layout Principles, Types, Planning
  tools and techniques.

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Business environment (Vs) Operations management

• Operations management closely interrelated with
  all other functional areas of the business
  environment.
• The following figure shows the various functions
  of operations management in other functional
  areas.

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Evolution of Operations Management (or) History
of OM

• The Industrial Revolution
• Division of Labor
• Scientific Management
• Mass Production
• Lean Production

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The Industrial Revolution

• Operations management did not begin until the
  Industrial Revolution in the 1700s
• Prior to that time only craft production
• Mechanically powered machines replaced the
  laborer as the primary factor of production and
  brought workers to a central location called
  Factory.
• The revolution first took hold in textile mills,
  grain mills, metalworking, and machine-making
  facilities

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Division of Labor

• Adam Smiths Wealth of Nations (1776) proposed
  the division of labour.
• Production process was broken down into a series
  of small tasks, each performed by a different
  worker.
• Allowed him or her to become very proficient at
  those tasks

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Scientific Management

• In the early 1900s F.W. Taylor approached the
  management of work as a science.
• Based on observation, measurement, and analysis,
  he identified the best method for performing each
  job
• The methods were standardized for all workers,
  and economic incentives were established to
  encourage workers to follow the standards

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Mass Production

• American manufacturers became adept at mass
  production over the next 50 years and easily
  dominated manufacturing worldwide.
• Elton Mayo and Hawthorne studies, introduced the
  idea of workers motivation and Productivity
• Theories of motivation were developed by
  Hertzberg, Maslow, McGregor, and others
• Computers and automation led still another
  upsurge in technological advancements

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Lean Production/ JIT production

• Japanese manufacturers changed the rules of
  production from mass production to lean
  production
• Lean production prizes flexibility (rather than
  efficiency) and quality (rather than quantity)

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Jidoka / Autonomation

• Jidoka, means, not allowing defective parts to go
  from one work station to the next.
• It specifically refers to machines or the
  production line itself being able to stop
  automatically in abnormal conditions
• This Autonomation allows machines to run
  autonomously, as they will stop when a problem
  occurs.
• Ultimately, it is about transferring human (or
  better) intelligence to machines.

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Production system

• A production system is the collection of people,
  equipment, and procedures organized to accomplish
  the manufacturing operations of a company (or
  other organization).

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Types of production systems

• There are three common types of basic
  production systems
• Batch production system or Job shop production,
• Continuous production system or flow shop
  production ,
• Project system or one shot system.

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Batch production system

• General-purpose equipment and methods are used to
  produce small quantities of output with
  specifications that vary greatly from one batch
  to the next.
• A given quantity of a product is moved as a batch
  through one or more steps, and the total volume
  emerges simultaneously at the end of the
  production cycle.
• (e.g) heavy-duty construction equipment,
  specialty chemicals, and processed food
  products,etc

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Continuous production system

• Items to be processed flow through a series of
  steps, or operations, that are common to most
  other products being processed.
• Since large volumes of throughput are expected,
  specially designed equipment and methods are
  often used so that lower production costs can be
  achieved.
• (e.g.) assembling automobiles, consumer products
  such as televisions, washing machines, and
  personal computers etc

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Project system

• The project, or one-shot system - For a single,
  one-of-a-kind product
• Resources are brought together only once. Because
  of the singular nature of project systems,
  special methods of management have been developed
  to contain the costs of production within
  reasonable levels.
• (e.g.) Construction of building, bridge etc

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Decision Making in OM

• Strategic Decisions
• Operating Decisions
• Control Decisions

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Strategic Decisions

• These decisions are of strategic importance and
  have long-term significance for the organization.
• Examples include deciding
• the design for a new products production process
• where to locate a new factory
• whether to launch a new-product development plan

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Operating Decisions

• These decisions are necessary if the ongoing
  production of goods and services is to satisfy
  market demands and provide profits.
• Examples include deciding
• how much finished-goods inventory to carry
• the amount of overtime to use next week
• the details for purchasing raw material next month

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Control Decisions

• These decisions concern the day-to-day activities
  of workers, quality of products and services,
  production and overhead costs, and machine
  maintenance.
• Examples include deciding
• labor cost standards for a new product
• frequency of preventive maintenance
• new quality control acceptance criteria

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CIM

• Computer Integrated Manufacturing, known as CIM.
• In the 1980s, Computer Integrated Manufacturing
  was developed and promoted by machine tool
  manufacturers and the CASA/SME (Computer and
  Automated Systems Association /Society for
  Manufacturing Engineers).
• CIM used to describe the complete automation of a
  manufacturing plant, with all processes
  functioning under computer control and digital
  information tying them together.

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Today's Factors Affecting OM

• Global Competition
• Quality, Customer Service, and Cost Challenges
• Rapid Expansion of Advanced Technologies
• Continued Growth of the Service Sector
• Scarcity of Operations Resources
• Social-Responsibility Issues

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Reality of Global Competition

• Changing nature of world business
• International companies
• Strategic alliances and production sharing
• Fluctuation of international financial conditions

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Changing Nature of World Business

• The US gross domestic product (GDP) is, at 10
  trillion, the largest in the world.
• Companies all over the globe are aggressively
  exporting their products/services to the US
• Many US companies are targeting foreign markets
  to shore up profits.
• The global economy that interconnects the
  economies of all nations has been termed the
  global village.
• One of the most important new markets is China.

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International Companies

• International companies are those whose scope of
  operations spans the globe as they buy, produce,
  and sell.
• International firms search out opportunities for
  profits relatively unencumbered by national
  boundaries.
• Operations managers must coordinate
  geographically dispersed operations.

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Strategic Alliances

• Strategic alliances are joint ventures among
  international companies to exploit global
  business opportunities.
• Alliances are often motivated by
• Product or production technology
• Market access
• Production capability
• Pooling of capital

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Strategic Alliances

• Japanese companies have long practiced keiretsu,
  the linking of companies into industrial groups.
• A financial keiretsu links companies together
  with cross-holding of shares, sales and purchases
  within the group, and consultation.
• A production keiretsu is a web of interlocking
  relationships between a big manufacturer (Toyota)
  and its suppliers.

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Production Sharing

• Production sharing means that a product might be
  designed and financed in one country, its
  materials produced in other countries, assembled
  in another country, and sold in yet other
  countries.
• The country that is the highest-quality,
  lowest-cost producer for a particular activity
  would perform that portion of the production of
  the product.

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Pros and Cons of Globalization

• Pros (Pluses)
• Productivity grows more quickly (living standards
  can go up faster)
• Global competition and cheap imports keep a lid
  on prices (inflation less likely to derail
  economic growth)
• Open economy spurs innovation (with fresh ideas
  from abroad)
• Export jobs often pay more than other jobs
• US has more access to foreign investment (keeps
  interest rates low)

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Pros and Cons of Globalization

• Cons (Minuses)
• Millions of Americans have lost jobs due to
  imports or production shifts abroad
• Most displaced workers find new jobs that pay
  less
• Workers face pay-cuts demands from employers
• Service and white-collar jobs are increasingly
  vulnerable
• US employees lose their comparative advantage
  when companies build advanced factories abroad

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Elements of Operations Strategy

• Positioning the production system
• Product/service plans
• Outsourcing plans
• Process and technology plans
• Strategic allocation of resources
• Facility plans capacity, location, and layout

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Positioning the Production System

• Select the type of product design
• Standard
• Custom
• Select the type of production processing system
• Product focused
• Process focused
• Select the type of finished-goods inventory
  policy
• Produce-to-stock
• Produce-to-order

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Product/Service Plans

• As a product is designed, all the detailed
• characteristics of the product are established.

Each product characteristic directly affects how
the product can be made.
How the product is made determines the design of
the production system.
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Stages in a Products Life Cycle

• Introduction- Sales begin, production and
  marketing are developing, profits are negative.
• Growth - sales grow dramatically, marketing
  efforts intensify, capacity is expanded, profits
  begin.
• Maturity - production focuses on high-volume,
  efficiency, low costs marketing focuses on
  competitive sales promotion profits are at peak.
• Decline - declining sales and profit product
  might be dropped or replaced.

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Stages of a Products Life Cycle
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Outsourcing Plans

• Outsourcing refers to hiring out or
  subcontracting some of the work that a company
  needs to do.
• This strategy is being used more and more as
  companies strive to operate more efficiently.
• Outsourcing has many advantages and
  disadvantages.
• Companies try to determine the best level of
  out-sourcing to achieve their operations
  business goals.
• More outsourcing requires a company to have less
  equipment, fewer employees, and a smaller
  facility.

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Outsourcing Plans

• A company might outsource any of the following
  manufacturing related functions
• Designing the product
• Purchasing the basic raw materials
• Processing the subcomponents, subassemblies,
  major assemblies, and finished product
• Distributing the product

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Outsourcing Plans

• Many companies even outsource some service
  functions such as
• Payroll
• Billing
• Order processing
• Developing/maintaining a website
• Employee recruitment
• Facility maintenance

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Process and Technology Plans

• An essential part of operations strategy is the
  determination of how products/services will be
  produced.
• The range of technologies available to produce
  products/services is great and is continually
  changing.

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Strategic Allocation of Resources

• For most companies, the vast majority of the
  firms resources are used in production/operations
  .
• Some or all of these resources are limited.
• The resources must be allocated to products,
  services, projects, or profit opportunities in
  ways that maximize the achievement of the
  operations objectives.

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Facility Plans

• How to provide the long-range capacity to produce
  the firms products/services is a critical
  strategic decision.
• The location of a new facility may need to be
  decided.
• The internal arrangement (layout) of workers,
  equipment, and functional areas within a facility
  affects the ability to provide the desired
  volume, quality, and cost of products/services.