PRODUCTION MANAGEMENT - I

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Production Management
Definition Operations Management deals with the design and management of products, processes, services and supply chains. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their clients want
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Operations function consists of all activities directly related to producing goods or providing services.
Organization

Finance

Production/ Operations

Marketing

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SIGNIFICANCE OF PM
Plays a major role in production & distribution of goods & services Products & Services should be provided as planned Determine the operating system, such as equipment, labour, facilities, materials, energy, and information, to produce the output. To improve productivity while providing a broader array of highquality products and services.

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SIGNIFICANCE OF PM

Planning

Organizing
Degree of centralization Subcontracting

Capacity Location Make or buy Layout Projects Scheduling Inventory Quality

Products and services

Staffing
Hiring/laying off Use of Overtime

Directing
Incentive plans Issuance of work orders Job assignments
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Controlling

Manufacturing vs Service
Characteristic
Output Customer contact Uniformity of input Labor content Uniformity of output

Manufacturing
Tangible Low High Low High

Service
Intangible High Low High Low Difficult Low

Measurement of productivity Easy Opportunity to correct High quality problems

High

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HISTORY OF PM
In the 18th century, most manufacturing was performed by rural families in their own homes under the domestic or cottage industry system. Merchants supplied families in small towns with raw materials and later found markets for the finished products. The development of steam power and the introduction of labor-saving equipment (or automation) early in the 18th century led to the development of the factory system.

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HISTORY OF PM
The principle of the factory systems was simple: Assign workers a small set of tasks that they repeat over and over. This reduces the time spent by workers in switching tasks and they become specialized. The result is improved labor productivity and lower production costs. Technological developments in 1850s transformed factory system into mass-production.

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HISTORY OF PM
Factories became larger. They produced huge volumes of identical products. Manufacturing costs were reduced because no time was needed for setting machines and people to produce other types of products. As the sizes of the factories increased, management of these operations became a major problem. Frederick Taylor introduced systematic approaches to operations management at the turn of 19th century.
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HISTORY OF PM
His intent was to eliminate waste, especially the wasted effort, in order to minimize costs. Henry Ford combined the teachings of Taylor with the concepts of labor specialization and interchangeable parts to design the first moving assembly line in 1913. In 1920s and 1930s, a series of studies were conducted at the Hawthorne Works of Western Electric by Elton Mayo. The results showed that psychological factors were as important as scientific job design.

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HISTORY OF PM
The 1950s was the beginning of the information technology era. The discovery of transistor by Shockley led to the ability process data and information at continuously decreasing costs. Today, you can imagine the difficulty of monitoring inventories of hundreds of units OR managing a large project without a computerized system.

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HISTORY OF PM
In the late 1950s and early 1960s scholars began to write books dealing specifically with the problems faced by operations managers. These books also contained information regarding the application of quantitative models to operations management.

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PRODUCIVITY
Productivity is an index that measures output (goods and services) relative to the input (labor, materials, energy, and other resources) used to produce them Productivity = Output Input

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PRODUCIVITY
Productivity is a relative measure. A productivity ratio can be computed for a single operation, a department, an organization, or an entire country. Productivity measure Restaurant Customers per labor hour Retail store Sales per square foot

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SIGNIFICANCE
Productivity is a common measure of how well a country, industry, or business unit is using its resources. In business organizations, productivity ratios are used for planning workforce requirements, scheduling equipment, financial analysis, and other important tasks. For non profit organizations, higher productivity means lower cost.

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SIGNIFICANCE
For profit organizations, productivity is an important in determining how competitive a company is. For a nation, the rate of productivity growth is of great importance. Productivity growth is a key factor in a countrys rate of inflation and the standard of living of its people. Productivity increases add value to the economy while keeping inflation in check.

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COMPUTING PRODUCTIVITY
Single measures Multifactor measures Total measure (Total factor productivity) Productivity growth

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i.

i.

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SINGLE MEASURES
Productivity measures based on a single input
Labor productivity Units of output per labor hour Units of output per shift Value of output in Rs. per labor hour

Machine Productivity Units of output per machine hour Value of output in Rs. per machine hour

Capital productivity

Units of output per input in Rs.

Value of output in Rs per input in Rs.

Energy Productivity

Units of output per kilowatt-hour

Value of output in Rs. Per Kilowatt-hour

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MULTIFACTOR MEASURES
Productivity based on more than one input

Output Output Labor + Machine Labor + Capital + Energy

Material Productivity = Production Output (Value in Rs)

Raw materials + packing materials + Supplies (all in Rs)

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TOTAL MEASURES
Productivity based on all inputs.

Total measure =

Goods or services produced

All inputs used to produce them

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PRODUCTIVITY GROWTH
Productivity growth = Current productivity Previous Productivity Previous Productivity * 100

For example, if productivity increased from 80 to 84, the growth rate would be 84 80 80
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* 100

= 5%

COMPETITIVE PRIOROTIES
Competitive priorities are things that customers want from products/services which can be used as tools to capture market share
All competitive priorities cant be used for a product Business strategy decides the mix of priorities Operations strategy determines the production system required to execute it.

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Competitive priority
Low production cost

Definition
Unit cost of each product / service, including labor, material & overhead costs

Ways to Implement
Redesign product New technology Increase pdtion rates Reduce waste Larger inventory Faster pdtion rates Quick shipping Realistic promises Control of pdtion orders Better information system

Fast delivery Delivery performance On time delivery

High quality product / services

Improve: Appearance Customers perception of Defect Rates degree of excellence exhibited Endurance by product / services After sales service Ability to change according to Advanced technologies customer responsiveness Increase capacity Lean manufacturing

Customer service & flexibility

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SCIENTIFIC MANAGEMENT

is a theory of management that analyzed and synthesized workflows with an objective of improving economic efficiency, especially labor productivity

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CONVERSION SYSTEM

which receives the inputs in form of materials personnel, capital, utilities & information and converts the input into desired products & services called as outputs

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OPERATIONS STRATEGY
long range game plan for the production of a companys products / services and provides a road map for what the production or operation must function must do if business strategies are to be achieved

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ELEMENTS OF OPS. STR.

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

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6.

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POSITIONING OF THE PDTN. SYSTEM

selecting the type of product design, type of production processing system, and type of finished-goods inventory policy for each product group in the business strategy Standard Product Design Custom

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POSITIONING OF THE PDTN. SYSTEM

Production Process Product focused production

Few products High volume

Process - focused production

Unique Products Low volume

Finished goods inventory policy Product - to - stock Product - to - order

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PRODUCT / SERVICE PLANS

Designed as per characteristics Characteristics affects the production system Product Life cycle

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OUTSOURCING PLANS
Hiring out or subcontracting some of the work that a company has to do Outsourcing Employees

Banks latest entry in outsourcing Aimed at reducing cost

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PROCESS & TECHNOLOGY PLANS

Planning every detail in production process Implementing high technology in conventional ideas Automated technology has made the revolution

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STRATEGIC ALLOCATION OF RESOURCES

Availability of resources is limited Shortage in resources may affect the production severely.

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FACILITY PLANS
Capacity Location Layout

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KIRUBA DANIEL. J
Lecturer, MBA dept., Sri Venkateswara Institute of Information Technology & Management, Ettimadai, Coimbatore jkirubadaniel@gmail.com

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Thank You !

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