PRINCIPLES AND PRACTICES OF MANAGEMENT

Unit-IV
Production and Operation Management

PRODUCTION MANAGEMENT becomes the acceptable term from 1930s to 1950s. As F.W.
Taylors works become more widely known, managers developed techniques that focused on
economic efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful
efforts and achieve greater efficiency. At the same time, psychologists, socialists and other social
scientists began to study people and human behaviour in the working environment.
In addition, economists, mathematicians, and computer socialists contributed newer, more
sophisticated analytical approaches. With the 1970s emerge two distinct changes in our views.
The most obvious of these, reflected in the new name operations management was a shift in the
service and manufacturing sectors of the economy. As service sector became more prominent,
the change from production to operations emphasized the broadening of our field to service
organizations. The second, more suitable change was the beginning of an emphasis on synthesis,
rather than just analysis, in management practices.
Concept of production
Production function is that part of an organization, which is concerned with the transformation of
a range of inputs into the required outputs (products) having the requisite quality level.
Production is defined as the step-by-step conversion of one form of material into another form
through chemical or mechanical process to create or enhance the utility of the product to the
user. Thus production is a value addition process. At each stage of processing, there will be
value addition.
Edwood Buffa defines production as a process by which goods and services are created. Some
examples of production are: manufacturing custom-made products like, boilers with a specific
capacity, constructing flats, some structural fabrication works for selected customers, etc., and
manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.
Production system
The production system of an organization is that part, which produces products of an
organization. It is that activity whereby resources, flowing within a defined system, are
combined and transformed in a controlled manner to add value in accordance with the policies
communicated by management.

The production system has the following characteristics:

1. Production is an organized activity, so every production system has an objective.

2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve system
performance.
Objectives of production Management
Producing right kind of goods
Maximizing output of goods
Quality objective
Capacity utililisation
Cost objective
SCOPE:

Scope
of PM
Maintenance
and replacement

Work study and

job design

Cost reduction and

cost control

Quality assurance
and control

Process selection
and planning

Inventory
control

Product selection
and design

Capacity
planning

Plant layout and

material handling

Production
planning and
control

Plant
location

Importance
To ensure smooth and efficient operation
Minimization of production cost
To Improve productivity of business firm
Maximize profit
Reduction of waste

TYPES OF PRODUCTION

Some of the most important types of production are: (i) Job Production (ii) Batch production and
(iii) Mass or flow production.
A production manager will have to choose most appropriate method for his enterprise.
The final decision regarding any particular method of production is very much affected by the
nature of the products and the quantity to be produced. Production methods may be broadly
classified as Job Production, Batch production and Mass or Flow Production.

(i) Job Production:

Under this method peculiar, special or non-standardized products are produced in accordance
with the orders received from the customers. As each product is non- standardized varying in size
and nature, it requires separate job for production. The machines and equipments are adjusted in
such a manner so as to suit the requirements of a particular job.
Job production involves intermittent process as the work is carried as and when the order is
received. It consists of bringing together of material, parts and components in order to assemble
and commission a single piece of equipment or product.
Ship building, dam construction, bridge building, book printing are some of the examples of job
production. Third method of plant layout viz., Stationery Material Layout is suitable for job
production.
Characteristics:
The job production possesses the following characteristics.
1. A large number of general purpose machines are required.
2. A large number of workers conversant with different jobs will have to be employed.
3. There can be some variations in production.
4. Some flexibility in financing is required because of variations in work load.
5. A large inventory of materials, parts and tools will be required.
6. The machines and equipment setting will have to be adjusted and readjusted to the
manufacturing requirements.
7. The movement of materials through the process is intermittent.
Limitations:
Job production has the following limitations:
1. The economies of large scale production may not be attained because production is done in
short-runs.
2. The demand is irregular for some products.
3. The use of labour and equipment may be an inefficient.

4. The scientific assessment of costs is difficult.

(ii) Batch production:

Batch production pertains to repetitive production. It refers to the production of goods, the
quantity of which is known in advance. It is that form of production where identical products are
produced in batches on the basis of demand of customers or of expected demand for products.
This method is generally similar to job production except the quantity of production. Instead of
making one single product as in case of job production, a batch or group of products are
produced at one time. It should be remembered here that one batch of products may not resemble
with the next batch.
Under batch system of production the work is divided into operations and one operation is done
at a time. After completing the work on one operation it is passed on to the second operation and
so on till the product is completed. Batch production can be explained with the help of an
illustration. An enterprise wants to manufacture 20 electric motors.
The work will be divided into different operations. The first operation on all the motors will be
completed in the first batch and then it will pass on to the next operation. The second group of
operators will complete the second operation before the next and so on. Under job production the
same operators will manufacture full machine and not one operation only.
Batch production can fetch the benefits of repetitive production to a large extent, if the batch is
of a sufficient quantity. Thus batch production may be defined as the manufacture of a product in
small or large batches or lots by series of operations, each operation being carried on the whole
batch before any subsequent operation is operated. This method is generally adopted in case of
biscuit and confectionery and motor manufacturing, medicines, tinned food and hardwares like
nuts and bolts etc.
The batch production method possesses the following characteristics:
1. The work is of repetitive nature.
2. There is a functional layout of various manufacturing processes.
3. One operation is carried out on whole batch and then is passed on to the next operation and so
on.
4. Same type of machines is arranged at one place.
5. It is generally chosen where trade is seasonal or there is a need to produce great variety of
goods.

(iii) Mass or flow production:

This method involves a continuous production of standardized products on a large scale. Under
this method, production remains continuous in anticipation of future demand. Standardization is
the basis of mass production. Standardized products are produced under this method by using
standardized materials and equipment. There is a continuous or uninterrupted flow of production

obtained by arranging the machines in a proper sequence of operations. Process layout is best
suited method for mass production units.
Flow production is the manufacture of a product by a series of operations, each article going on
to a succeeding operation as soon as possible. The manufacturing process is broken into separate
operations.
The product completed at one operation is automatically passed on to the next till its completion.
There is no time gap between the work done at one process and the starting at the next. The flow
of production is continuous and progressive.
Characteristics:
The mass or flow production possesses the following characteristics.
1. The units flow from one operation point to another throughout the whole process.
2. There will be one type of machine for each process.
3. The products, tools, materials and methods are standardised.
4. Production is done in anticipation of demand.
5. Production volume is usually high.
6. Machine set ups remain unchanged for a considerable long period.
7. Any fault in flow of production is immediately corrected otherwise it will stop the whole
production process.
Suitability of flow/mass production:
1. There must be continuity in demand for the product.
2. The products, materials and equipments must be standardised because the flow of line is
inflexible.
3. The operations should be well defined.
4. It should be possible to maintain certain quality standards.
5. It should be possible to find time taken at each operation so that flow of work is standardised.
6. The process of stages of production should be continuous.
Advantages of mass production:
A properly planned flow production method, results in the following advantages:
1. The product is standardised and any deviation in quality etc. is detected at the spot.
2. There will be accuracy in product design and quality.
3. It will help in reducing direct labour cost.
4. There will be no need of work-in-progress because products will automatically pass on from
operation to operation.
5. Since flow of work is simplified there will be lesser need for control.
6. A weakness in any operation comes to the notice immediately.
7. There may not be any need of keeping work-in-progress, hence storage cost is reduced.

OPERATIONS MANAGEMENT
Operations management refers to the activities, decisions and responsibilities of managing the
resources which are dedicated to the production and delivery of products and services.
The part of an organisation that is responsible for this activity is called the operations function
and every organisation has one as delivery of a product and/or service is the reason for existence.
Operations managers are the people who are responsible for overseeing and managing the
resources that make up the operations function. The operations function is also responsible for
fulfilling customer requests through the production and delivery of products and services.
Depending on the type of industry or business, other titles can be used interchangeably, such as a
fleet manager' in a distribution company or a store manager' in retail businesses.[1]
Although the operations function is central to any organisation, it is only one of the three main
core functions, the others being marketing and finance. The marketing function is responsible for
communicating the organisation's products and services to its markets and researching customer
wants and needs.[2] The finance function is responsible for providing information to assist in
economic decision making and the overall management of financial resources.[3]
There are also other functions which are not core to an organisation; however, their contribution
is crucial to the smooth running of any organisation. Commonly known as support functions,
they include accounting, information systems, human resources and engineering.
Often, there is no clear division between the various functions and one of the biggest difficulties
faced by management is the ability to work effectively with other parts of the organisation. It is
critical to the success of your business that functional boundaries do not interfere with efficient
internal processes.
Being a small business owner, you may feel as though operations management does not apply to
your business. However, this is far from the truth and in reality, the concepts and principles
behind operations management is applicable to all businesses. The only difference is that you
may have to take on several roles as many smaller organisations simply don't have the resources
to dedicate individuals to specialised roles.

The Role of an Operations Manager

A operations manager needs strong communication skills. An operations manager fills a pivotal
role in a business, government or other organization. The precise tasks of an operations manager

depend in large part upon the nature and size of the enterprise, but she needs a wide range of
business and interpersonal skills to succeed. In general, an operations manager plans, oversees
and smooths communication.

Management of Resources
Operations managers play a leading role in managing both raw materials and personnel.
Oversight of inventory, purchasing and supplies is central to the job. Human resources tasks
include determining needs, hiring employees, overseeing assignment of employees and planning
staff development.

Financial Management
Operations managers play a key role in budgeting, controlling costs and keeping the organization
on track financially. Their management of the supply chain and other resources helps minimize
costs of production. They study business forecasts, sales reports and financial statements to find
ways to maximize results. They use methods such as cost-benefit analysis to improve efficiency.
Modern operations management even includes sustainability in the financial equation.

Goal-setting
Operations managers set goals and objectives and establish policies for various departments in
the organization. For example, operations manager duties include sales forecasting and planning
of sales promotions. In cooperation with other managers, they help establish procedures and put
them into effect.

Communications
Operations managers need good communication and interpersonal skills to help the different
parts of an organization work together. Their job includes creating a positive culture where the
work can get done. They facilitate communication between employees and departments. At
times, operation managers help resolve disputes or disagreements. Operations managers
cooperate in high-level decision making with other top executives of an organization, such as the
president, chief financial officer and chief executive.

Salary
Operations and general managers averaged an annual income of $113,100 in 2010, according to
the Bureau of Labor Statistics. Managers at the 10th percentile received $47,280 per year, while
those at the 75th percentile got $142,030 per year. The government does not report a specific
figure at the 90th percentile, stating only that it was at least $166,400 annually.

Education and Outlook

Most operations managers have a minimum of a bachelor's degree in business, finance or another
field relevant to the organization. Some have a master's in business administration or other
advanced degree. The number of positions for operations managers will remain unchanged from

2008 to 2018, according to the Bureau of Labor Statistics. As existing operations managers move
to similar positions in different organizations, new applicants will face strong competition. Those
with good leadership skills, a proven ability to get results and foreign language skills have the
best chances of securing jobs.

MANUFACTURING VS SERVICE OPERATIONS

There are five main differences between service and manufacturing organizations: the tangibility
of their output; production on demand or for inventory; customer-specific production; laborintensive or automated operations; and the need for a physical production location. However, in
practice, service and manufacturing organizations share many characteristics. Many
manufacturers offer their own service operations and both require skilled people to create a
profitable business.

Goods
The key difference between service firms and manufacturers is the tangibility of their output. The
output of a service firm, such as consultancy, training or maintenance, for example, is intangible.
Manufacturers produce physical goods that customers can see and touch.

Inventory
Service firms, unlike manufacturers, do not hold inventory; they create a service when a client
requires it. Manufacturers produce goods for stock, with inventory levels aligned to forecasts of
market demand. Some manufacturers maintain minimum stock levels, relying on the accuracy of
demand forecasts and their production capacity to meet demand on a just-in-time basis.
Inventory also represents a cost for a manufacturing organization.

Customers
Service firms do not produce a service unless a customer requires it, although they design and
develop the scope and content of services in advance of any orders. Service firms generally
produce a service tailored to customers' needs, such as 12 hours of consultancy, plus 14 hours of
design and 10 hours of installation. Manufacturers can produce goods without a customer order
or forecast of customer demand. However, producing goods that do not meet market needs is a
poor strategy.

Labor
A service firm recruits people with specific knowledge and skills in the service disciplines that it
offers. Service delivery is labor intensive and cannot be easily automated, although knowledge
management systems enable a degree of knowledge capture and sharing. Manufacturers can
automate many of their production processes to reduce their labor requirements, although some
manufacturing organizations are labor intensive, particularly in countries where labor costs are
low.

Location
Service firms do not require a physical production site. The people creating and delivering the
service can be located anywhere. For example, global firms such as consultants Deloitte use
communication networks to access the most appropriate service skills and knowledge from
offices around the world. Manufacturers must have a physical location for their production and
stock holding operations. Production does not necessarily take place on the manufacturer's own
site; it can take place at any point in the supply chain.
Services:
Intangible product
Product cannot be inventoried
High customer contact
Short response time
Labor intensive
Manufacturers:
Tangible product
Product is inventoried
Low customer contact
Longer response time
Capital intensive

PROJECT MANAGEMENT
Project Management Institute, Inc. (PMI) defines project management as "the application of
knowledge, skills, tools and techniques to a broad range of activities in order to meet the
requirements of a particular project." It is the discipline of carefully projecting or planning,
organizing, motivating and controlling resources to achieve specific goals and meet specific
success criteria. A project is a temporary endeavor designed to produce a unique product, service

or result with a defined beginning and end (usually time-constrained, and often constrained by
funding or deliverables) undertaken to meet unique goals and objectives, typically to bring about
beneficial change or added value. The temporary nature of projects stands in contrast with
business as usual (or operations), which are repetitive, permanent, or semi-permanent functional
activities to produce products or services. In practice, the management of these two systems is
often quite different, and as such requires the development of distinct technical skills and
management strategies.
The primary challenge of project management is to achieve all of the project goals and objectives
while honoring the preconceived constraints. The primary constraints are scope, time, quality and
budget. The secondary and more ambitious challenge is to optimize the allocation of
necessary inputs and integrate them to meet pre-defined objectives.

5 Basic Phases of Project Management

The process of directing and controlling a project from start to finish may be further divided into
5 basic phases:

1. Project conception and initiation

An idea for a project will be carefully examined to determine whether or not it benefits the
organization. During this phase, a decision making team will identify if the project can
realistically be completed.

2. Project definition and planning

A project plan, project charter and/or project scope may be put in writing, outlining the work to
be performed. During this phase, a team should prioritize the project, calculate a budget and
schedule, and determine what resources are needed.

3. Project launch or execution

Resources' tasks are distributed and teams are informed of responsibilities. This is a good time to
bring up important project related information.

4. Project performance and control

Project managers will compare project status and progress to the actual plan, as resources
perform the scheduled work. During this phase, project managers may need to adjust schedules
or do what is necessary to keep the project on track.

5. Project close
After project tasks are completed and the client has approved the outcome, an evaluation is
necessary to highlight project success and/or learn from project history.

Projects and project management processes vary from industry to industry; however, these
are more traditional elements of a project. The overarching goal is typically to offer a
product, change a process or to solve a problem in order to benefit the organization.