Unit 1

Structure

Introduction to Production Management

1.1 Introduction Objectives 1.2 History of Production and Operations Management

Industrial Revolution Era Era of Scientific Management Era of Human Relations Era of Quantitative Techniques Era of Quality Era of Technology

1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13

Definitions of Production Management Production Process Production: The Heart of an Organization Objectives of Production Management Scope of Production Management Importance of Technology in Production
The HumanMachine Interface

Summary Glossary Terminal Questions Answers Case Study

Caselet
Productions and Management Amalgamated Production implies application of processes (technology) to raw materials to add value to the desired product using the best method, without compromising on the preferred quality. There are three ways of Production: (i) Production by disintegration: By separating the contents of crude oil or a mixture, the desired products are produced. For instance the crude oil is disintegrated into various fuel oils. Similarly, salt production is also an example for product produced by disintegration. (ii) Production by integration: In this type of production, different components of the products are conglomerated to get the desired product. In this process, physical and chemical properties of the materials used may be modified. Examples include: assembly of two-wheelers, fourwheelers and so on.

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(iii) Production by service: In this case, the chemical and mechanical properties of materials are enhanced without any physical change. For example, heat treatment of metals. In reality, a combination of the aforementioned methods is used. In general, production is the use of any process or procedure designed to transform a set of input elements into a set of output elements, which have use value and economic value. Management refers to getting things done by the people, by means of planning, coordination, organizing, directing and controlling the activities to fulfil specified goals, within the framework of consensual policies. At present, production managers require scientific base along with personal tactics to manage the people working under his supervision to attain the desired objectives. Source: Compiled by author

1.1 Introduction
The word production immediately conjures up images of large rooms filled with machines of every shape and size, materials of all hues and colours, and people working to fulfil their targets. The coordination between all these Ms (i.e. man, machine, materials, money and method) is done by the sixth M, i.e., management. This is what production and operations management is all about. It is concerned with the production of goods and services and is responsible for ensuring that these operations are efficient and effective. In other words, production and operations management is to manage the efforts and activities of people, equipment and other resources of the organization in order to change raw material into finished goods and services. Production and operations involve the conversion of input into output through a transformation process. In the early days production involved the processes followed for mass production of tangible goods. As the complexities of business grew, management of the systems responsible for production became essential. Later, even services began to be produced or rendered. These were intangible. So some principles were needed which could encompass the entire system that produced a commodity or delivered a service. It was found that the same principles could be effectively applied in the management of processes that produced goods as well as those that produced services. This is production and operations management. POM (as it is called) uses the decision-making tools of operations research and the principles of industrial engineering, quantitative techniques, shop floor

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control, organizational behaviour, safety management and maintenance management, etc. So production and operations management deals with the concepts and principles that are employed by organizations to make them efficient and effective. This unit introduces the concept of production management that uses the decision-making tools of operations research and the principles of industrial engineering, quantitative techniques, organizational behaviour and others.

Objectives
After studying this unit, you should be able to: discuss the history of production management define production management describe the production process analyse production as the heart of an organization list the objectives of production explain the scope of production interpret the importance of technology in production

1.2 History of Production and Operations Management

Before learning further, it is important to take a look at the history of production and operations management. This will help you to understand that technology is the backbone of all production functions.

1.2.1 Industrial Revolution Era

The Industrial Revolution of Great Britain during the late eighteenth century brought about extensive mechanization of production systems. It resulted in a shift from home based production to large scale production outside the home. Equipment were created that could produce in large quantities. Workers reported to a supervisor, who planned the work and issued orders to workers. Many inventions such as James Watts steam engine, Jenny Cartwrights power looms and Maudslays cutting lathes, etc., contributed to the Industrial Revolution. During this period, Adam Smith, the father of modern economics published An Enquiry into the Nature and Causes of Wealth of Nations or popularly called The Wealth of Nations. The three main concepts propounded by him were division of labour, pursuit of self-interest and freedom of trade. He felt that other

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costs besides wages, such as rent and profit, also affected the price of a commodity. Smith believed that division of labour could greatly increase production.

1.2.2 Era of Scientific Management

The era of scientific management began in the United States of America in the early 20th century. Fredrick Winslow Taylor is called the father of scientific management. He propounded the following four principles: 1. Replace the rule of thumb work method with methods based on a scientific study of tasks. 2. Scientifically select, train, and develop each employee rather than leaving them to train themselves. 3. Provide detailed instruction and supervision to each worker. 4. Divide work nearly equally between managers and workers; the duty of establishing standards and enforcing them rests with the management alone. Taylor also propounded the time and motion study. This involved breaking up the job into its component parts and measuring each component in terms of the time required to do it. This study was carried forward by his associates, the husband and wife duo of Lilian and Frank B.Gilbreth, who coined the term motion study. The Gilbreths used a camera to record and examine detailed micromovements, and invented cyclographs and chronocyclegraphs to observe rhythm and movements. Another known pioneer of the scientific management era was Henry Gantt. The Gantt chart that he created is a visual display chart used for scheduling work based on time; he showed the humane face of management and listed out the conditions that have a favourable psychological effect on workers. By the end of the nineteenth century, the internal combustion engine had been invented and the first assembly line manufacture of cars was started by Henry Ford in Detroit, USA.

1.2.3 Era of Human Relations

The impact of behaviour of workmen on their performance was increasingly recognized and some experiments were carried out at Hawthorne Works in Chicago, USA. These tests called the Hawthorne studies or the Hawthorne

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experiments form the basis of several behavioural and motivation theories. Other important contributors of this era are A. Maslow, F. Hertzberg, Douglas McGregor, etc.

1.2.4 Era of Quantitative Techniques

Quantitative techniques originated during World War II. Operations research teams were formed to deal with strategic and technical problems faced by the military. These techniques were later used for non-military applications as well. In 1947, George Dantzig discovered a simpler method of solving linear programming problems. Since then many developments such as the computer have taken place enabling people to solve a large variety of industrial problems. Explosion in technology continues; today digital manufacturing has enabled companies to rapidly build to order, maintain nonstop production and integrate their supply chains.

1.2.5 Era of Quality

Toyota first caught the worlds attention in the 1980s when it began manufacturing automobiles that bore an unbelievable consistency both in process and product. Since then Toyota has established its reputation and success on its astounding quality. It became necessary to manufacture products with inbuilt quality. This was followed by TQM or total quality management and the focus shifted from quality control to quality assurance. To this end, the ISO 9000 series for quality management systems, and the ISO 14000 environment management standards have been established and are followed across the world. Companies are using statistical techniques in process control for building consistency in the quality of product or service.

1.2.6 Era of Technology

Transmission of information is very essential in the production process. Over the years, this has been made effective with the introduction of a vast number of technological inputs required for collection of information as well as its transmission through various channels. Computerization of information, Internet facilities, digital processes, etc. have enhanced effective communication across the levels of hierarchy in the production process.

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Self Assessment Questions

1. Adam Smith introduced the concept of specialization of labour in the manufacturing process. (True/False) 2. By the end of the eighteenth century, the internal combustion engine had been invented. (True/False) 3. Digital manufacturing has disabled companies to rapidly build to order, maintain nonstop production and integrate their supply chains. (True/False)

1.3 Definitions of Production Management

The domain of Production and Operations Management (POM) is not only limited to the production of goods and services, but it also comprises all the activities that are related to the process of production. The term production is applicable to entities like manufacturing units, machinery, equipment, assembly lines, etc. Fundamentally, it is linked to manufacturing. In the past, focus was on manufacturing management, which was later modified to production management. Production theories and practices were being used in a broad range of operations and conditions, which have very little or no link with industries or manufacturing. The outcome of these activities is not just production of goods, but also supply of services like banking, hotel management, health services, education, transportation, recreation and government operations. As a result of the broadening of the scope, the term production management began to be referred to as operations management, where the theory, equipment and methods are used for a varied nature of processes, both, in the manufacturing and in the service sectors. Here, we take a look at the definition of production. This process is a combination of one or more procedures that are put into execution for the purpose of conversion or transformation of an array of inputs into a predetermined array of outputs, in synchronization with the objectives designated to the production system. Usually, a system comprises a process wherein an input is transformed or converted into the desired output with a feedback procedure, so that any variation or discrepancies can be spotted and fixed. This process is known as transformation.

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Self Assessment Questions

4. The term ___________ is applicable to entities like manufacturing units, machinery, equipment, assembly lines, etc. 5. Production theories and practices were being used in a broad range of _________ and conditions, which have very little or no link with industries or manufacturing. 6. A ________ comprises a process wherein an input is transformed or converted into the desired output with a feedback procedure.

1.4 Production Process

The production and operations of goods and services involve the conversion of input into output through a transformation process as shown in Figure 1.1.

Input

Transformation Process
Figure 1.1 Conversion of Input into Output

Output

As the complexities of organizations grew, it was found that merely converting input to output was not enough. Feedback from the output stage was necessary to adjust the changes required in input or the transformation process. So, production control was done to take care of fluctuation in inputs, if any. The quality of the produced output was now constantly compared to the quality of the desired output and feedback mechanisms were put in place to monitor performance of the transformation process.
This includes the six Ms, i.e., man, machine, materials, money, method and management. Input It is a value-addition process that modifies or adds value to the input and converts it into a form that is more useful and sold to a customer, which can be done in many ways as represented subsequently.

Transformation process

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Alteration includes all the activities such as change in the physical state of input, changing dimensions, adding, chemicals, heating, rolling, galvanizing, etc. Output Output can be in the form of either goods or services, or a combination of both.

Transformation Process

Transportation physical movement of goods from one place to another. Traders specialize in buying goods from one place and transporting them to a location where they can be sold.

Storage preserving the goods in a protected environment so that these can be made available at a later date

Figure 1.2 The Transformation Process Table 1.1 Major Differences between Goods and Services
Goods Goods are tangible; they have physical parameters. Goods can be produced, stored and transported according to demand since the value is stored in the product. They are produced in a factory environment, usually away from the customer. Goods are mainly standardized. Quality is inherent in the product. Services Services are intangible. They are just ideas, concepts or information. Services cannot be produced beforehand, stored or transported. Value is conveyed as used. Services are produced in a market environment in collaboration with the customer. Services are often customized. Quality is inherent in the process since it is a function of people.

The cycle of production and operations management can be represented as shown in Figure 1.3.

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Random Disturbances

Input

Transformation Process

Output

Figure 1.3 The Cycle of Production and Operations Management

Self Assessment Questions

7. The six Ms associated with the production process are __________ , __________, __________, __________, ________, and _____________ 8. The transformation process includes ________, ________, __________, and _____________ 9. Goods are tangible but ___________ are intangible.

1.5 Production: The Heart of an Organization

Production is the primary business of an organization. All other wings or activities of an organization exist subject to the existence of production. Without production or anything to sell, there is no organization at all. An organization usually has several departments and each department has a specialized function. Marketing establishes the demand for goods and sells what is produced. Finance provides the capital for equipment and resources. Human Resource Management provides and manages manpower. Purchasing is concerned with procurement of materials needed to run the organization. Materials Management takes care of inventories. Law Department safeguards the organization on legal issues. Public Relations department builds the image of the organization. R&D is responsible for Research and Development. But it is the production department which produces goods and services. It plays a vital role in achieving a firms strategic goal.
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Figure 1.4 Aspects of Production

Production involves the greatest bulk of a companys employees and is responsible for a large portion of its assets. It also has a major impact on the quality and cost of goods and therefore is the visible face of the company. Hence we say that production is the heart of an organization.

Self Assessment Questions

10. Marketing establishes the demand for goods and sells what is produced. (True/False) 11. Finance provides the capital for equipment and resources. (True/False) 12. Human Resource Management provides and manages manpower. (True/ False)

1.6 Objectives of Production Management

Every organization starts with a goal and mission and then chalks out the activities to achieve these goals. All the activities, primarily those for converting inputs into required outputs, are planned accordingly. The common objectives of any kind of organization are:

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Customer satisfaction: Customer satisfaction is vital to the survival of an organization. The organization researches the expectations of the customer or service to be rendered and decides on the product. An organization can survive only if its products satisfy the customers on the basis of the following criteria: (i) Quality of the product as per acceptable standards (ii) Easy maintenance and reliability of the product (iii) Functionality of the product as offered by the seller Profitability: The pricing of the product should be competitive to achieve sales. For this, the market price of products should be competitive and commensurate with the features offered in the product. A good organization produces the right quality that meets all product specifications, at optimal cost. The organization should focus on minimizing costs and maximizing revenue for increasing profitability. Timeliness: The product produced or service rendered may be qualitative and cost-competitive but if it does not reach the consumers when they require it, the organization loses. The consumer does not wait for a good or service; he acquires it from a competitor. Therefore, production and operations management plays a vital role in providing the product or service on time by effectively maintaining production schedules. To summarize, we can say that an effective POM needs to produce goods or render services of the right quality in right quantities at the right time and at minimal costs. It should also ensure that there is no wastage in the system because this results in cost escalations and severe delays. If the above-mentioned factors are not kept in mind, then it could lead to failure of the management in achieving its objectives and targets.

Self Assessment Questions

13. An organization can survive only if its products satisfy the _________. 14. The __________ of the product should be competitive to achieve sales. 15. Production and _________ management plays a vital role in providing the product or service on time by effectively maintaining production schedules.

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1.7 Scope of Production Management

The scope of production and operations management encompasses all the activities involved in producing a good or a service. Imagine how an entrepreneur would go about it. He would first decide what product or service he wants to sell. He then decides what process he will use, where he will make it, etc. Following the same line of thought, the scope of production and operations management is listed below: 1. Product selection and development: This deals with the study of how a product is selected and developed for commercial production. 2. Process selection: This deals with how the process required for producing a product for commercial purposes is selected. 3. Facilities location: This concerns the parameters that need to be considered for locating factory premises. 4. Layout planning: This deals with the study of how the factory or plant should be laid out for optimum production. 5. Material handling: This deals with the study of the significance of material flow in an organization, the different methods of material handling, etc. 6. Manufacturing system: It is the study of different types of manufacturing systems and their applicability. 7. Production planning and production control: This concerns the methods followed in different kinds of manufacturing systems. It includes methods followed for job loading, scheduling, dispatching, PERT /CPM and linear programming etc. 8. Work studies: This involves method study and work measurement 9. Materials Management: This deals with methods to control inventory, inventory analysis, etc. 10. Quality: This deals with quality standards and techniques, TQM, six sigma etc. 11. Safety Management: This involves safety management principles, methods, etc. Activity 1 Imagine that you are an entrepreneur, and describe the scope of production and operations with regard to your goods and services. Mention the product you would deal in and associate each aspect of scope with the same.
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Self Assessment Questions

16. Layout planning deals with the study of how the factory or plant should be laid out for optimum production. (True/False) 17. Material management deals with the study of the significance of material flow in an organization, the different methods of material handling, etc. (True/False) 18. Materials handling deals with methods to control inventory, inventory analysis, etc. (True/False)

1.8 Importance of Technology in Production

Technology makes way for fast and efficient operations in manufacturing companies, as well as facilitates cost-saving measures. Technology brought significant changes to traditional production systems that have been so beneficial to all industrial players, including suppliers and customers. A pharmaceutical company, for example, employs advanced machineries in concocting, capsulizing, and wrapping medicine. Traditionally, the making of medicine was manually done. However, to prevent contamination and mitigate errors from human intervention, pharmaceutical companies have employed robots and computerized machines, resulting in the mass production of medicine at faster speeds and lower costs. It is now quite difficult to imagine a world without modern inventions. Countries in Europe, North America, and some parts of Asia are particularly experienced at applying modern technology in producing products and services. The Finnish pharmaceutical sector for instance is characterized by a high-level know-how, attracting foreign capital to the country.

Figure 1.5 Wrapping Machine Sikkim Manipal University Page No. 13

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1.8.1 The HumanMachine Interface

Humanmachine interface refers to the user interface in a manufacturing system or process control system tools used for incorporating the human factors in the interface design are developed. Rapid changes in technology in the last few decades have resulted in creating machines that are capable of performing tasks that have traditionally been done by people. Robots, for example, have relieved workers of menial and dangerous tasks such as welding or lifting heavy objects. In offices, word processors have broadened the scope of secretaries jobs. On the one hand, technological developments have enhanced the role of the worker in production systems. On the other hand, increased automation has resulted in a threat to job security; for instance, totally automated factories are a reality in countries such as Germany and Japan. This presents a dilemma for operations managers: What should be the proper balance between human work and machine work? Automation has significantly changed the nature of the workforce. It has decreased the need for low skilled, direct factory workers but has increased the demand for highly trained specialists. There are now a large number of technical, professional, and managerial workers who are performing complex, long-cycle activities. A workers time is mostly devoted to mental processes, with much less time being spent on physical work. The degree of human and machine work varies from industry to industry. Human involvement is generally more in the primary sector and less as we go into the secondary and tertiary sectors. The level of automation and use of human labour in an industry should be selected so as to provide the lowest unit manufacturing cost at highest productivity. The relative roles that human beings and machines have played in production have changed during the course of history. Prior to the Industrial Revolution, manufacturing tasks were performed primarily by people. Activities such as weaving cloth, forging and bending metal, etc. were labour intensive. As the Industrial Revolution progressed, machines provided more power for manufacturing, but workers retained much of the control of the process. For example, lathes and drill machines required a large amount of operator assistance. Today, numerically controlled machines and robots permit less human involvement in the production process. In service organizations, we also see evidence of this evolution in ATMs of banks, railway bookings, etc. The focus has now shifted from issues of human production to human machine interface. In order to make effective decisions regarding the introduction of new technology, managers need to understand the fundamental differences between machines and people.
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Advantages of humans over machines They can think creatively and adapt to new and unexpected situations much better than machines. They can take subjective decisions and have reasoning abilities. But humans tire after some time; their productivity is not uniform over time; due to boredom, frustration, fatigue, etc., they are not capable of performing heavy-duty jobs and their memory is short and limited. Advantage of machines over humans They are better suited for complex or repetitive tasks requiring precision and speed. They are accurate, fast and precise and can perform heavy duty tasks which are beyond the human capabilities. They can store and process large amounts of data. They are more reliable and consistent than humans. They do not cause Industrial relation problems like strikes, lockouts, etc. State-of-the-art automated plants increase the market value of the firm and improve client base in international markets. But their capability is limited to their programmed instructions. They are less flexible than humans and cause unemployment/ retrenchment of work force. The goal of the operations manager is therefore to provide the best synthesis of technology and people so that the objectives of the organization are met. Technological changes have occurred in every industry and can be categorized into two groups - hardware and software. Hardware technologies have resulted in greater automation of processes. They perform labour - intensive tasks that were originally performed by humans. Examples of these major types of hardware technologies are numerically controlled machine tools, machining centres, industrial robots, automated materials handling systems, and flexible manufacturing systems. These are all computer - controlled devices that can be used in the manufacturing of products. Activity 2 Prepare a chart displaying the various technological aspects associated with production management of a company. You may give examples of existing companies.
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Self Assessment Questions

19. _________ makes way for fast and efficient operations in manufacturing companies, as well as facilitates cost- saving measures. 20. Characteristics of a human being are not thought of as fixed quantities. (True/False).

1.9 Summary
Let us recapitulate the important concepts discussed in this unit: Frederick W. Taylor introduced the concept of scientific management. Production and operations involve the conversion of input into output through a transformation process. In the industrial revolution era, Adam Smith propounded three main concepts: division of labour, pursuit of self-interest and freedom of trade. By the end of the nineteenth century, the internal combustion engine had been invented and the first assembly line manufacture of cars was started by Henry Ford in Detroit, USA. The Hawthorne studies or the Hawthorne experiments form the basis of several behavioural and motivation theories. Quantitative techniques originated during World War II. Operations research teams were formed to deal with strategic and technical problems faced by the military. These techniques were later used for non-military applications as well. The ISO 9000 series for quality management systems, and the ISO 14000 environment management standards have been established and are followed across the world. Computerization of information, Internet facilities, digital processes, etc. have enhanced effective communication across the levels of hierarchy in the production process. Production is a process or a set of procedures to be executed in order to convert or transform a set of inputs into a predetermined set of outputs in accordance with the objectives assigned to the production system. Production is the primary business of an organization. All other wings or activities of an organization exist subject to the existence of production.

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Objectives of production and operations management: customer satisfaction, profitability and timeliness The scope of production and operations management encompasses all the activities involved in producing a good or a service. Technology makes way for fast and efficient operations in manufacturing companies, as well as facilitates cost-saving measures. In the technologists view, a human being has certain physiological, psychological and sociological characteristics that define both his/her capabilities and limitations in the work situation.

1.10 Glossary
Chronocyclegraph: A device used in micromotion studies to record a complete work cycle by taking still pictures with long exposures, the motion paths being traced by small electric lamps fastened to the workers hands or fingers Cyclograph: It (also known as an arcograph) is an instrument for drawing arcs of large diameter circles whose centres are inconveniently or inaccessibly located. Input: Something entered into a system to get a desired result. Output: Product Transformation: Change in form

1.11 Terminal Questions

1. Describe the historical overview of production management. 2. Explain the objectives of production. 3. Discuss the scope of production. 4. How is production the heart of an organization? 5. Describe the production process. 6. What is the importance of technology in production?

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1.12 Answers Self Assessment Questions

1. True 2. False 3. False 4. Production 5. Operations 6. System 7. Man, machine, materials, money, method, management 8. Alteration, transportation, storage, output 9. Services 10. True 11. True 12. True 13. Customers 14. Pricing 15. Operations 16. True 17. False 18. False 19. Technology 20. True

Terminal Questions
1. Before learning further, it is important to take a look at the history of production and operations management. For more details, refer section 1.2. 2. Every organization starts with a goal and mission and then chalks out the activities to achieve these goals. For more details, refer section 1.6.

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3. The scope of production and operations management encompasses all the activities involved in producing a good or a service. For more details, refer section 1.7. 4. Production is the primary business of an organization. For more details, refer section 1.5. 5. The production and operations of goods and services involve the conversion of input into output through a transformation process. For more details, refer section 1.4. 6. Technology brought significant changes to traditional production systems that have been so beneficial to all industrial players, including suppliers and customers. For more details, refer section 1.8.

1.13 Case Study

On the Highway GM has had a long history in India. Its cars were first imported in India between 1918 and 1928, mostly by the rich. The first generation of GM vehicles imported into India were Chevrolets small four-cylinder Tourers. They were preferred at the time owing to their fuel efficiency and the ease of running them. GM first entered the Indian market with the launch of its Chevrolet brand in 1928. After the economic reforms initiated in the early 1990s, especially the automobile sector and the passenger vehicles segment witnessed massive growth. The gross turnover of the Indian automobile market grew from US$ 20,896 million in 2004-05 to US$ 38,238 million in 2008-09. GMI launched the Chevrolet Cruze in the Indian market in October 2009. It was well received in the Indian market and got positive reviews from industry analysts. By June 2011, the Chevrolet Cruze had clocked in sales of 860 units per month, making it one of the best performing premium sedans in the Indian market. Irrespective of the success of GMIs first small car, the Chevrolet Spark, the company could not make any crucial impact on the Indian automobile sector. GMI expected that the Beat would increase its Indian sales from 70,000 units in 2009 to 100,000 units in 2010. Before the Beat was launched in the Indian market, it was launched in Korea, Europe, and East Asia and was selling 5,000 units a month in the Korean market. GM hoped to release the Beat in 150 countries around the globe to make it a truly global car. Apart
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from domestic production, GM planned to make India an export hub of the Beat and export 20 per cent of the units to the Europe and Asia Pacific markets. By this, GM hoped to follow many other global car manufacturers that had made India their global automobile manufacturing hub. The increase in the sales of the Beat despite the problems faced by the Indian automobile market like increasing fuel prices and high interest rates on vehicle loans was seen as a sign of improvement in its performance in the Indian market. Analysts said that GMI had started to understand the preferences of the Indian customers. They said that high fuel efficiency and the low price tag were the primary reasons for the success of the Beat diesel in India. Discussion Questions 1. Give a brief history of GM in India. 2. Mention two successful endeavours of GM in the Indian market. Source: Compiled by author References Aquilano, Chase and Jacobs (2003). Operations Management for Competitive Advantage. New Delhi: Tata McGraw-Hill. Bedi, Kanishka (2007). Production and Operations Management. New Delhi: Oxford University Press. Bhattacharya, D.K. (2000). Production and Operations Management. New Delhi: Excel Books. Evans, J.R., D.R. Anderson, D.J. Sweeney and T.A. Williams (1984). Applied Production and Operations Management. US: West Publishing Co. St. Paul M.N. E-References www.pom.org/journals/departments (Retrieved on 30 March 2013)

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