Unit 1-Introduction to Production and Operation Management

Production and Operation Management – Meaning and Definitions

Production function of business is concerned with creation of products or
services required to satisfy the customer’s needs, wants, and desires.
Production means creation of utilities and to cover all the activities of
procurement, allocation, and utilization of recourses such as labor, energy,
material, equipment, machinery etc.
Production management ensures the accomplishment of two organizational
goals.
1. Customer Satisfaction
2. Productivity through the function of production planning, production
control, and inventory control.

Production management involves input, process and outputs.

Input Process Output

• Various resources • Manufacturing or • Final Product which

can be used as production process is ready to sell in the
inputs.for ex. Raw known as operation
material, Land , management. market .
Labour, Capital,
Human Resouce etc.

Production Management - Production Management refers to the application of

management principles to the production function in a factory. In other words,
Production management means planning, organizing, directing and controlling
of production activities. Production management deals with converting raw
materials into finished goods or products.
Production management deals with decision-making regarding the quality,
quantity, cost, etc.
The main objective of production management is to produce goods and services
of the right quality, right quantity, at the right time and at minimum cost.

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Definitions

1. E.S. Buffa- “Production is a process by which goods and services are

created.”

2. H.A. Hoarding- “Production Management is concern with those processes

which convert the inputs into outputs. The inputs are various resources
like raw material, men machines, methods, etc. and the outputs are goods
and services.”

Nature of Production Management

1. Transformation Process- Production Management acts as Transformation
Process by converting raw material into finished products using various
methods.
2. Operation function- it helps in day to day production of goods and services
by monitoring production Process.
3. Production Management Results in Value Addition -Production
Management Results in Value Addition because raw materials are
purchased from right source, at right place, in right form, in right quantity,
and right time. All these help in better quality products, which satisfy
needs and wants of the consumers in best possible way.
4. Production Management as Decision Making System- It helps in decision
making such as production and administration related activities, purchase
and warehousing related activities, transportation etc.
5. As an interdisciplinary approach- Production Management has been
developed with the contribution from various disciplines, like economics,
sociology, engineering, mathematics.
6. Part of General Management- Production Management involves
Planning, organizing, coordination and controlling all managerial and
production activities.
7. Production Management is both Art and Science- it is both Art and
Science. It is an art due to work assignment and coordination of activities
and is science due to management of machines and other cause and
reason-based activities.

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Scope of Production Management
The Production Management involves various rational decisions which must
satisfy the customers as well as business, these decisions, are broadly divided
into long term decision and short-term decisions.

A) Long Term Decisions

1.Plant Location
The selection of location is a key decision as large investment is made in building,
land, and machinery. Plant location is also known as sight or place for the
business. The plant location decision is very important for any organization due
to following reasons.

1. Plant Location decision affects the cost structure and profitability of the
business.

2. Once the Plant location (Plant) selected it is very difficult to change the
location.

2.Plant Layout & material handling

Plant layout refers to the physical arrangement of facilities. Material handling
refers to the moving of material from the storeroom to the machine & from
machine to the next during process of manufacturing. The main objectives of
good Plant layout are:

1. Optimum use of available space.

2. Minimum waste of time in production

3. Higher employee safety

4. Reduce cost

5. Provision for future expansion.

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3.Product Selection and Design
Product design deals with the conversion of the ideas about the product into the
reality. It is said that customer is the king of market, the customer needs, wants,
styles, fashion, and changes from time to time so it is the duty of company to
design and develop and product which suits the customer requirement.

B) Short- term decisions

1. Inventory Control- Inventory involves Raw Material, WIP, and

finished goods. Neither the shortage of inventory is good for the business
nor is excess inventory better for the business. The absence of inventory
leads to stoppage in production, on the other hand excess stock is result
into capital blockage or deterioration. It is very necessary to have a very
balanced quantity of inventory.

2. Production Planning & Controlling (P.P.C) -P. P .C can be

defined as the process of planning the production in advance, setting the
exact route of each item, fixing the starting & finishing dates for each item
to give production order to shops & to follow up the progress of products
according to the orders.

3. Method Study – Method study determine which method is more

suitable for production. For ex. 1. Batch Production. 2. Job -Lot /Jobbing-
The objective of method study is to determine the best method of
performing each operation and to eliminate the wastage, so that
ultimately production will increase. Utmost care must be taken while
choosing the method.

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Objectives: Production and Operation Management.

Objectives are the foundation of production management without which the

production cannot get completed. Production management deals with decision-

making related to production processes so that the resulting goods or service is

produced according to specification, in the amount and by the schedule

demanded and at minimum cost. Production management deals with decision-

making related to production processes so that the resulting goods or service is

produced according to specification, in the amount and by the schedule

demanded and at minimum cost.

Production management is a process of:

✓ Planning,
✓ Organizing,
✓ Directing
✓ Controlling and
✓ Coordinating
the activities in the production plant.
Production management deals with decision-making related to production
processes so that the resulting goods or services are produced according to
specifications.

The objectives of Production and operation Management divided into two

categories.

A. Primary Objectives

B. Secondary Objectives

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A. Primary Objectives-
The Primary objective of the production management is to produce goods
and services of:
❑ Right quality
❑ Right quantity
❑ At the right time and
❑ Right manufacturing cost.

1.Right Quality- The quality of product is based upon the customer’s needs.
The right quality is not necessarily best quality, it is determined by the cost
of the product and the technical characteristics as suited to the specific
requirements.
The maintaining of quality should not result in:
Increase in manufacturing cost or
Delay in production.

2.Right Quantity- The manufacturing organization should produce the

products in right number.
Excess Quantity- If goods/ Products are produced in excess of demand the
capital will block up in the form of inventory. There may be chances of
damage of product, units may be stolen out, pilferage, deterioration etc.
and
Shortage of Quantity- if the quantity is produced in short of demand, it leads
to shortage of products.

3.Right Time- Timeliness of delivery is one of the important parameters to

judge the effectiveness of production department. So, the production
department has to make the optimal utilization of input resources to achieve
its objective.

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 4.Right Manufacturing Cost- Manufacturing costs are established before the
product is actually manufactured. Hence, all attempts should be made to
produce the products at pre-established cost, so as to reduce the variation
between actual and the standard (pre-established) cost.
The unit cost of the product should be estimated carefully and efforts should
be made to reduce the manufacturing cost.

B. Secondary Objectives-
The Secondary objective of the production management are as follows:
❑ Machinery and Equipment.
❑ Material
❑ Manpower

1.Machinery and Equipment.

The Machinery and equipment selected should possess certain desirable
characteristics or meet certain criteria to be best suited to the desired task.
Some of these criteria are:
✓ Be as simple as possible;
✓ Require minimum space;
✓ Require minimum of loading, unloading and re-handling;
✓ Call for as little maintenance, repair, power and fuel as possible;
✓ Have a long useful life;
✓ Perform the operation efficiently and economically.

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 2.Material
Materials department is responsible for ensuring quality of materials from
outside suppliers. Therefore, quality becomes the single most objective in
procurement of materials.
It is concerned with all the activities related to the flow of material.
It covers – planning, sourcing, procurement, scheduling, storing, providing,
and controlling appropriate materials.

3.Manpower
Manpower is an important input in manufacturing activities. The objective of
production with regards to manpower must be closely related to the
objective of:
Selection, training, rewarding, and utilization of manpower.
This is all about utilization of manpower to its fullest means ensuring that all
skills available in all people involved are tapped to their fullest potential.
Production manager is responsible and should avoid for employee
absenteeism, employee turnover and labour idle time.

Automation
Automation is the process of creation and application of technologies to
produce and deliver goods and services with minimum human intervention.
The implementation of automation technologies, techniques and processes
improve the:
✓ Efficiency,
✓ Reliability, and
✓ Speed of many tasks that were previously performed by humans

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 Automation is being used in a number of areas such as: manufacturing,
transport, defence, operations and information technology.
The term automation was coined in the automobile industry about 1946 to
describe the increased use of automatic devices in production lines.
The term automation was coined by D.S. Harder, an engineering manager at
the Ford Motor Company at that time.

Types of Automation
1.FIXED AUTOMATION
It is also called hard automation and it has a fixed task. These types of
automation are used in large volume production and most of the production
done with the individual machines.
Despite its initial high investment costs,
a fixed automation system is well-suited for high-volume production
processes where products tend not to be changed over the time.
This type of system would typically be used for discrete mass production and
continuous flow systems.
An example of a fixed automation equipment would be an automated
conveyer belt system designed to increase efficiency by moving objects from
point A to B without minimal efforts.
Fixed automation systems other examples include:
✓ Automated assembly machines
✓ Chemical manufacturing processes
✓ Material handling conveyor systems
✓ Machining transfer lines
✓ Paint & coating automation processes

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 2.FLEXIBLE AUTOMATION
As the name suggests, flexible automation is a manufacturing method
designed to easily adapt and respond to changes in production needs, such
as the type and quantity of the product.
Machines are controlled by computerized systems and operated by humans
utilizing computer coding or HMIs (Human Machine Interfaces).
The system can be configured i.e. Programmed, to produce multiple product
types simultaneously.
Flexible Automation Examples
✓ Robotics
✓ Assembly systems
✓ Material handling systems

3.PROGRAMMABLE AUTOMATION
As the names suggests, programmable automation runs through commands
delivered by a computer program. This means that the instructions given to
the computer through a series of code.
When there are customization & frequent changes throughout
the manufacturing process then programmable automation is the best
choice to use
New programs can be prepared and entered into the equipment to produce
new products. The whole process is controlled by a program of instruction
that is read & interpreted by the system. You can also enter a new program
into the hardware to produce new products at any time.

Programmable Automation Examples

✓ Numerically controlled (NC) machine tools
✓ Programmable logic controllers
✓ Industrial robots

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 Same Product Different Products Customise Products

Advantages of Automation
1.Reduction in production time
Use of an automated machine definitely speeds up the production time since
no thinking is needed by the machine, there is better repeatability, and less
human error.

2.Increase in accuracy and repeatability

When an automated machine is programmed to perform a task over and over
again, the accuracy and repeatability compared to an employee is far greater.

3.Less employee costs

By adding automated machines to an operation, means less employees are
needed to get the job done. It also indicates less safety issues, which leads to
financial savings. With having less employees, there are numerous costs that
are diminished or reduced such as payroll, benefits, sick days, etc.

4.Increased safety
Having automated machines means having less employees who perform
tasks that can be dangerous and prone to injury, which can make the work
environment safer.

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 5.High volume of production
Investing in automated equipment creates a valuable resource for large
production volumes, which in turn, will increase profitability.

6.Less human error

No one is perfect, and we are all prone to making mistakes. Which is why a
machine that performs repeated tasks is less likely to make mistakes than an
employee.

Disadvantages of Automation.
1.Huge initial investment
You will require a huge initial investment for the machines to set up in your
factories or institutions, and not just that, you will also require an expert to
handle those machines with a proper budget for maintenance.

2.Unemployment
Automation minimized human work. Just like for transportation, horses were
taken over by the Cars and as laborers by the tractor.
For instance, robots can perform many tasks as compared to human beings
hence Increasing degree of automation will increase unemployment.
Big IT companies like Cognizant, Infosys and Tech Mahindra etc. clearly
showing the impact of an automation in the country.

3.Maintenance
The maintenance of the huge industrial machinery can be a big issue.
you’ll require a quite big percentage of your business budget to buy and
maintain the machines.

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 4.Minimal customization and creativity
Since the machines are made to do a single job, you’ll need different sets for
different tasks. And unless they are programable, most of the items produced
will be similar with zero creativity.

5.Industrial pollution
We are already on the verge of a global warming crisis, and with more
machines taking over the planet, this thing isn’t going to get better. Different
types of machines operate using motor which may require gases or chemicals
in order to operate.

6.Unpredictable costs
So, let’s say you have bought a new machine for your garment’s factory.
Everything has been running smoothly for a year or so, and suddenly out of
nowhere, the machine stops working. You have no clue what went wrong.
You’ll need a professional analysis and repairman for that, That’s not
something cheap either.

7.The risk of hacking

Automated systems are vulnerable to attacks since they may have limited
intelligence as well as security that is not that robust. Automation is also most
likely to be an area for errors.

Waste Management
Waste management refers to the various schemes to manage and dispose of
wastes.
A waste management system is the strategy an organization uses to dispose,
reduce, reuse, and prevent waste. Possible waste disposal methods are
recycling, composting, incineration, landfills, bioremediation, waste to energy,
and waste minimization.
The prime objective of waste management is to reduce the amount of unusable
materials and to avert potential health and environmental hazards.

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 Types of Waste
1. Surplus Stock
These are materials which have no immediate use or at least in the
foreseeable future.
They have accumulated due to faulty planning, forecasting and
purchasing.
Under so many circumstances surplus stock arises like when:
✓ purchases are made in larger quantities than the actual consumption
or
✓ when operations are suddenly reduced or produce buffer stock or
✓ when there is a change in specification or size or
✓ sometimes when wrong items have been purchased when a project is
completed.
This is when there is a need to dispose of them because they are not used
by the companies.

2. Scrap
This is another term which is used to describe material not useful to the
organisation (sometimes, used also for obsolete and surplus items when
these are not useful to the organisation).
▪ Scrap can be defined as the residue from a construction or manufacturing
process which cannot be used economically within the organisation.
▪ Typical scrap material in the construction industry are empty tins, drums,
and packing material etc.

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Disposal of Surplus and Scrap
There are various ways for disposal of Surplus and Scrap material which are as
follows;

1.Circulation within the Enterprise:

Among all the disposal programmes, if the surplus can be put to some
alternative productive use in the same enterprise is best.
The administrative cost is also saved to a great extent by making use of surplus
within the unit.

2.Return to Supplier:
The next best method is to return the surplus to suppliers if these are not found
useful in the enterprise.
In majority of cases, suppliers, allow return of surplus materials as a courtesy.

3.Direct Sale to Other Enterprises:

Another alternative with the firm is that it may resort to open market and
identify some units/concerns using the same material which is lying as surplus
with the concern.

4.Sale to Brokers:
The dealers and brokers act as an intermediate agency in order to relieve the
enterprise of its surplus accumulation and to acquire the needs for the users.
When the enterprise is not in a position to lay its access to the potential users
of the surplus materials directly, the sale of such materials/item to brokers is the
best channel for this purpose.
▪ Such brokers constitute an excellent outlet for surplus items/material.

5.Help of Consultants for Sale of Scrap:

In the management of surplus and scrap the salient aspect is that the buyer is
more well versed and informed regarding various items/goods than the seller.
In such situations scrap consultants can provide help.

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 The services of preliminary survey for various scrap/surplus items and
their handling procedures are rendered by them.
In this way negotiations with suitable parties provide a ready disposal of
the enterprise’s surplus. In return, the consultant may be paid fee or
commission on sales of surplus.

6.Sale to Employees of the Enterprise:

Some scrap/surplus items are sometimes sold to employees of the
enterprise. If the surplus is the result of technical obsolescence or
overstocking due to various reasons but the materials are in new or good
condition, these can be disposed to employees in a satisfactory manner.

7.Donation to Educational Institutions:

With the growth of technical education in our country, presently
Technical Institutions/Universities are actually in need of machine tools
and other industrial materials for instructional purposes.
Though this method does not provide anything for the surplus or scrap
items, only a favourable public image in the community can be earned.

Salvage and Recovery

Any waste or combination of wastes that poses a substantial danger, now or in

the future, to human, plant, or animal life and that therefore must be handled
and disposed of with special precautions.
Salvage is the act to save goods from damage or destruction, especially when
the ship that has been sunk or been damaged or Building that has been damaged
by fire or flood.
Salvage operations means any business, industry or trade engaged wholly or in
part in salvaging or reclaiming any product or material.
A salvage is a process which involves the removal dying, or deteriorating
material from a mishaps or industrial accidents before the value of that products
become worthless.

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 Recovery
For every item that can't be refused, reduced, or reused, try
repurposing/recovering it.
Recovery is the process of transforming waste or unwanted items into new
materials or products, that have a perceived greater quality – such as artistic
or environmental value.
Sometimes recovery may involve a bit of imagination and creativity. It often
requires thinking outside the box.
For example, an employee may have IT equipment they no longer need; they
can leave it in the space so it can have a second life rather than going to a
landfill.
You could even designate an area in your office as an 'upcycling station'
where colleagues can collect and store items that can be recovered in the
future. This space could also be an area where colleagues and visitors can
share equipment.

The 5R’s of waste management

Refuse, Reduce, Reuse, Repurpose and Recycle

The 5Rs of waste management meaning is broken down into Refuse, Reduce,
Reuse, repurpose (Recovery) and Recycle.

Step One-Refuse- The first step is to say no to items that will lead to
waste production for your business.

Step two-Reduce-It means to let go of items that are no longer of use.

Step Three-Reuse Reusing involves repairing instead of throwing, the

“reuse” step refers to the diligent reuse of any materials.

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Step four- Repurpose or recovery- Recovery is the process of

transforming waste or unwanted items into new materials or products, that

have a perceived greater quality – such as artistic or environmental value.

Step five- Recycling - Last but not least, recycling! After you’ve made

quality efforts to go through all the previous steps from the five Rs, recycling is

a great final option. recycling is the most environmentally friendly waste

disposal method. Recycling is the process of collecting and processing materials

that would otherwise be thrown away as trash Ex. A group of plastic

containers. Plastic Bottles & Containers ; A pile of cans used to store food and

beverages. Food & Beverage Cans; A stack of folded newspapers.

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