Module -1

Production and Operations Management Functions

Introduction to Operations
Operations are purposeful activities done methodically as part of a work plan
designed to achieve the pre-decided objectives.
Operations Management refers to the administration of business practices to
create the highest level of efficiency possible, within an organization. Operations
Management is concerned with converting materials and labor into goods and
services as efficiently as possible to maximize the profit of an organization.
Functions of Operations Management
1. Location of facilities
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?’
The selection of location is a key-decision as large investment is made in building
plant and Machinery. An improper location of plant may lead to waste of all the
investments made in plant and machinery equipment’s. Hence, location of plant
should be based on the company’s expansion.
2. Plant layout and material handling
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.
3. Product design
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.
The entire process of need identification to physical manufactures of product
involves three Functions: marketing, product development, manufacturing.
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Product development translates the Needs of customers given by marketing into

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technical specifications and designing the various Features into the product to

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these specifications. Manufacturing has the responsibility of selecting the
processes by which the product can be manufactured. Product design and
development provides link between marketing, customer needs and expectations
and the activities required to manufacture the product.
4. Process design
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. Hence, the important decisions in process design are to analyze the
workflow for converting raw material into finished product and to select the
workstation for each included in the workflow.
5. Production planning and control
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. The principle of production
planning and control lies in the statement ‘First Plan Your Work and then Work
on Your Plan’. Main functions of production planning and control includes
Planning, routing, scheduling, dispatching and follow-up.
6.Quality control
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 Feedback system and
corrective action procedure.
7.Materials Management
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.
8.Maintenance Management
In modern industry, equipment and machinery are a very important part of the
total productive Effort. Therefore, their idleness or downtime becomes are very
expensive. Hence, it is very Important that the plant machinery should be
properly maintained.
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Classification of Production system
Production System refers to that set-up of the organization, which is engaged in
producing products. It is an activity in which resources are put together and
converted into a product. This process enables adding value to that product.
Further, the process takes place as per the policies of the management.

Intermittent production
As the name signifies, the production process takes place at irregular intervals
to produce a number of different products with the help of one production line.
Manufacturers use this system to produce low-volume, high-variety products.
The types of intermittent production systems are discussed below:
Job Shop Production
It involves the manufacturing of one or a few products within a predetermined
time and cost. This is because the production takes place as per the
specifications of the customer. Therefore, the products in job shop production
are high in variety and low in volume. Also, they aim to meet the requirement of
the specific order.
The machines are general purpose. These are set up in different departments.
Further, each job has a unique technological requirement. Also, it requires
processing on machines in a definite order.
Examples: Boutique, Automobile service center, typing shops, etc.
Batch Production
It is that type of production system in which the job passes through functional
departments, in lots. These lots are nothing but batches and each lot has a
different routing. It involves manufacturing a confined number of products. They
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are similar and produced in large volumes These products are produced at
periodic intervals and stocked awaiting sales of the batches.
Examples: Production of tyres and tubes, ready-made garments,
pharmaceuticals, and cosmetics.
Continuous Production
Here utilization of machines and resources for producing identical products
takes place. It involves the production of large quantities of products, whose
demand is high. The types of continuous production are explained below:
Mass Production
When manufacturing of discrete parts and assemblies takes place by way of a
continuous process, it is mass production. As the name signifies, the production
involves a large volume so as to meet demand.
In this, the arrangement of the machine is in a line. There is the standardization
of products and processes. Further, the outputs go through the same path. Also,
the materials are purchased in bulk. It requires well-researched production
planning.
Examples: Production of auto parts and industrial products
Flow Production
The need for the product forms the basis of plant design. There is no flexibility
regarding the use of resources to produce similar products. Due to this
characteristic, when there is a decrease in demand, the resources cannot be used
to produce other products. Therefore, it is discarded. So we can say that the
plant design is specific to that product only.
Examples: Cement factory, sugar factory, chemical processing, computer
keyboards, and oil refinery
Productivity
Productivity is a measure of economic performance that compares the amount
of goods and services produced (output) with the amount of inputs used to
produce those goods and services.
Types of Productivity
1.Labor Productivity
Labor productivity is the measure of how much financial yield a company has
been able to generate for every work hour. It is also the efficiency with which
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labor has transformed the input into a product that has a much higher perceived
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value. For instance, in software companies, it would be a measure of how
efficiently a firm is using its resources to write the necessary code and implement
it.
When companies endeavor to improve labor productivity, they can do so with
innovation in how things are done, investment in physical capital and improving
human capital. When a company measures its labor productivity, it is also trying
to figure if the measures implemented for these three areas have been effective.
2. Capital Productivity
Capital productivity is used to determine the efficiency of fixed assets. It is a
measure of the amount of output to the amount of physical capital used as input.
Capital productivity is measured using parity valuation of the fixed assets used,
either by the output generated through the year or the final output at the end of
the year. Profitability is inversely related to the ratio of capital and output.
3. Material Productivity
Material productivity is a measure of the output generated to the amount of input
materials used. All companies need to know if their utilization levels are on par
with industry levels, at the very least. If they can improve their utilization level
well above the base minimum of the industry levels, then they have truly stepped
up to the competition.
4. Total factor Productivity
There are many factors that impact a country’s productivity. Such things include
investment in plant and equipment, innovation, improvements in supply chain
logistics, education, enterprise, and competition. It is interpreted as the
contribution to economic growth made by managerial, technological, strategic,
and financial innovations.
Factors affecting productivity

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1. Technical factors: Productivity largely depends on technology. Technical
factors are the most important ones. These include proper location, layout and
size of the plant and machinery, correct design of machines and equipment,
research and development, automation and computerization, etc. If the
organization uses the latest technology, then its productiveness will be high.
2. Production factors: Productivity is related to the production-factors. The
production of all departments should be properly planned, coordinated and
controlled. The right quality of raw-materials should be used for production. The
production process should be simplified and standardized. If everything is well
it will increase the productiveness.
3.Organizational factor: Productivity is directly proportional to the organizational
factors. A simple type of organization should be used. Authority and
Responsibility of every individual and department should be defined properly.
The line and staff relationships should also be clearly defined. So, conflicts
between line and staff should be avoided. There should be a division of labor and
specialization as far as possible. This will increase organization's productiveness.
4. Personnel factors: Productivity of organization is directly related to personnel
factors. The right individual should be selected for suitable posts. After selection,
they should be given proper training and development. They should be given
better working conditions and work-environment. They should be properly
motivated; financially, non-financially and with positive incentives. Incentive
wage policies should be introduced. Job security should also be given. Opinion
or suggestions of workers should be given importance. There should be proper
transfer, promotion and other personnel policies. All this will increase the
productiveness of the organization.
5. Finance factors: Productivity relies on the finance factors. Finance is the life-
blood of modem business. There should be a better control over both fixed capital
and working capital. There should be proper Financial Planning. Capital
expenditure should be properly controlled. Both over and underutilization of
capital should be avoided. The management should see that they get proper
returns on the capital which is invested in the business. If the finance is
managed properly the productiveness of the organization will increase.
6. Management factors: Productivity of organization rests on the management
factors. The management of organization should be scientific, professional,
future-oriented, sincere and competent. Managers should possess imagination,
judgement skills and willingness to take risks. They should make optimum use
of the available resources to get maximum output at the lowest cost. They should
use the recent techniques of production. They should develop better relations
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with employees and trade unions. They should encourage the employees to give
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suggestions. They should provide a good working environment, and should

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motivate employees to increase their output. Efficient management is the most
significant factor for increasing productiveness and decreasing cost.
7.Government factors: Productivity depends on government factors. The
management should have a proper knowledge about the government rules and
regulations. They should also maintain good relations with the government.
8.Location factors: Productivity also depends on location factors such as Law
and order situation, infrastructure facilities, nearness to market, nearness to
sources of raw-materials, skilled workforce, etc.
Characteristics of Operational Decisions
Accuracy
Good operational decisions behave like informed employees with the appropriate
reports and analysis, using data quickly and effectively to take the right action.
Instead of just being aware of the past, they use this data to get insight into the
future and use that understanding to behave more appropriately. Through
micro-segmentation and intense customization, they target their customers
using information about them.
Flexibility
Operational choices must be made quickly to reflect new possibilities,
organisations, and threats; otherwise, their value will quickly deteriorate. No
modern business system can endure protracted periods of static. Given the
current competitive, economic, and regulatory context, it is impossible. When
businesses automate their transactions and procedures, they frequently discover
that how rapidly they can alter their information systems greatly affects how
quickly they react to change. Operational decisions must be simple to alter
quickly and effectively to reduce missed opportunity costs and increase overall
business agility.
Consistency
The operational decisions must be consistent throughout time and space across
many channels you use to conduct business, including the web, mobile devices,
interactive voice response systems, and kiosks. These systems support the
people who directly work for you and the third parties and agents who represent
you. They ensure you stay out of trouble by upholding your company’s laws,
rules, and social preferences everywhere it conducts business. They continually
provide your employees with a top-notch experience.
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Timely
One needs to act as quickly as possible. The competition is only three clicks
away, as they say online. The coworkers are developing short attention spans
and a lack of patience. The systems that manage the supply and demand chains
must act swiftly and shrewdly as they become more real-time. The company
must reduce wait times for these associates as fewer staff handle more clients,
partners, and suppliers.
Cost-effective
Operational choices must, above all, be economical. Cost cutting is still crucial
despite significant efficiency improvements and reductions in previous years.
Effective operational choices reduce costly reports and needless tasks. They
lessen fraud and avoid penalties. They enable the employees to work more
effectively and allocate their time wisely.
Decision making environment
1. Decision making under certainty
In this type of decision making environment, there is only one type of event that
can take place. It is very difficult to find complete certainty in most of the
business decisions. However, in many routine type of decisions, almost complete
certainty can be noticed. These decisions, generally, are of very little significance
to the success of business.
2. Decision making under Uncertainty
In the environment of uncertainty, more than one type of event can take place
and the decision maker is completely in dark regarding the event that is likely to
take place. The decision maker is not in a position, even to assign the
probabilities of hap-pening of the events.
Such situations generally arise in cases where happening of the event is
determined by external factors. For example, demand for the product, moves of
competitors, etc. are the factors that involve uncertainty.
3. Decision making under Risk
Under the condition of risk, there are more than one possible events that can
take place. However, the decision maker has adequate information to assign
probability to the happening or non- happening of each possible event. Such
information is generally based on the past experience.
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Virtually, every decision in a modern business enterprise is based on interplay
of a number of factors. New tools of analysis of such decision making situations
are being developed. These tools include risk analysis, decision trees and
preference theory.
Decision Process

1. Defining and Analysing the real problem

The manager should first find out what is the real problem. The problem may be
due to bad relations between management and employees, decrease in sales,
increase in cost, etc. After finding out the true problem manager must analyse it
carefully. He should find out the cause and effect of the problem.
2. Developing Alternative Solutions
After defining and analysing the real problem, the manager should develop
(make) alternative (different) solutions for solving the problem. Only realistic
solutions should be considered. Group participation and computers should be
used for developing alternative solutions.
3. Evaluating the Alternative Solutions
The manager should carefully evaluate the merits and demerits of each
alternative solution. He should compare the cost of each solution. He should
compare the risks involved. He should also compare the feasibility of each
solution. He should find out which solution will be accepted by the employees.
4. Selecting the best Solution
After evaluating all the solutions, the manager should select the best solution.
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He should select a solution which is less costly and less risky. He should select
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a solution which is most feasible and which is accepted by the employees. In

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short, the manager should select a solution which has the most merits and least
demerits. The best solution is called the "Decision".
5. Implementing the Decision
After making the decision, the manager should implement it. That is, he should
put the decision into action. He should communicate the decision to the
employees. He should persuade the employees to accept the decision. This can
be done by involving them in the decision making process. Then the manager
should provide the employees with all the resources, which are required for
implementing the decision. He should also motivate them to implement the
decision.
6. Follow Up
After implementing the decision, the manager must do follow up. That is, he
must get the feedback about the decision. He should find out whether the
decision was effective or not. This is done by comparing the decision with the
action, finding out the deviations (differences) and taking essential steps to
remove these deviations. So, follow-up is just like the control function. It helps
to improve the quality of future decisions.
Work study
Work study is the investigation, by means of a consistent system of the work
done in an organization in order to attain the best utilization of resources i.e.
Materials, Machines, Men and Money. All the technologies and management
systems are related with productivity.

Time study
Time Study is the original technique of work measurement, time study is the
technique principally used for the measurement of repetitive work, i.e. work
which follows a defined pattern and method.
Methods:
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1. Stop Watch Method

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2. Time Recording Machine
3. Motion Picture Camera.
Method study
Method study is analyzing the method of doing a job including human
movements involved in it.
It deals with doing the work in a better way, with less time and effort.
Methods:
Charts and graphs
Motion study
Motion study is the study of movements like lifting, putting objects, sitting and
changing positions, etc., which are undertaken while doing a typical job.
Unnecessary movements are sought to be eliminated so that it takes less time to
complete the job efficiently.
Methods:
1.Therblig analysis: a therblig is a small part of a job. Gilbreath gave 17 basic
motions of a worker each motion is known as therblig.
2.Micro motion study: it is the study of elements of an operation with the help of
high-speed movie camera in order to eliminate the unnecessary motions involved
in the operation and balancing the necessary motions.
3.Principles of micro economy: this motion study finds out the correct
application of theories behind motion elements to achieve synchronization of
human body movements, best layout of work places and optimum design of
equipments.

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