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Unit 1:introduction to production and operation management


The very essence of any business is to cater needs of customer by providing services and goods, and in process create value for customers and solve their problems. Production and operations management talks about applying business organization and management concepts in creation of goods and services.


Production is an intentional act of producing something in an organized manner.It is the fabrication of a physical object through he use of men, material and some function which has some utility e.g. repair of an automobile, legal advice to a client, banks, hotels, transport companies etc. Thus irrespective of the nature of organization, production is some act of transformation, i.e. inputs are processed and transformed into some output. The main inputs are information, management, material, land, labour and capital.

Meaning of Production Management

Production management is a branch of management which is related to the production function. Production may be referred to as the process concerned with the conversion inputs (raw materials, machinery, information, manpower, and other factors of production) into output (semi finished and finished goods and services) with the help of certain processes (planning, scheduling and controlling etc.) while management is the process of exploitation of these factors of production in order to achieve the desired results. Thus production management is the management which by scientific planning and regulation sets into motion the part of an enterprise to which it has been entrusted the task of actual transformation of inputs into output. A few definitions of production management are being reproduced hereunder to understand the meaning of the term clearly :

(i) “Production management then becomes the process of effectively planning and regulating the operations of that part of an enterprise which is responsible for actual transformation of materials into finished products”. The definition seems to be quite incomplete as it ignores the human factors involved in a production process and lays stress only on the materialistic features. Elwood S. Buffa has defined the term in a broader sense as :

(ii) “Production management deals with decision making related to production process so that the resulting goods or services are produced according to specifications in amounts and by the schedules demanded, and at a minimum cost”. Thus production management is concerned with the decision making regarding the production of goods and services at a minimum cost according to the demands of the customers through the management process of planning, organizing and controlling. In order to attain these objectives, effective planning and control of production activities is very essential. Otherwise, the customers shall remain unsatisfied and ultimately certain-activities may have to be closed. Production management, thus, is assigned with the following tasks (i) Specifying and accumulating the input resources, i.e., management, men, information, materials, machine and capital. (ii) Designing and installing the assembly or conversion process to transform the inputs into output, and (iii) Coordinating and operating the production process so that the desired goods and services may be produced efficiently and at a minimum cost.

Defination production:

According to Elwood Butta “production is a process by which goods or services are created”. Production involves the step by step convertion of one form of material into another through chemical or mechanical process with a view to enhance the utility of the product or services.

Defination of production management:

“production management deals with the decision making related to production process of that the resulting goods and service is produced according to specifications in the amounts and at the scheduled demanded and at minimum cost”-Elwood Butta.

Meaning of operation management:

Operation Management is a way or means through which the listed objectives of an operating system is achieved. There is always a confusion between the word OM & PM (Production Management). It is accepted norm that OM includes techniques which are enabling the achievement of operational objectives in an operation system.

The operation system includes both manufacturing sector as well as service sector, but when you use the word PM, you should be careful to note that it refers to the manufacturing sector but not the service sector. Suppose, you are designing a layout for the hospital you should say that you are applying Operations Management Techniquenot the Production Management Technique.

When you design a layout for a manufacturing sector you can say that you are applying Production Technique or Operation Technique or vice versa.

From, the above discussion we can come to a conclusion that production management is a subset of Operations Management.

Definition of Operations Management:

“Operations Management” is the process in which resources/inputs are converted into more useful products. Operations management is the management of an organisation‟s productive resources or its production system. It is the design, execution, and control of a firm's operations that convert its resources into desired goods and services, and implement its business strategy. Operations management is the conversion of inputs into outputs, using physical resources, so as to provide the desired utility/utilities of form, place, possession or state or a combination there-of to the customer while meeting the other organisational objectives of effectiveness, efficiency and adaptability.


The objective of Production Management is to produce the desired product or specified product by specified methods so that the optimal utilization of available resources is met with. Hence, the production management is responsible to produce the desired product, which has marketability at the cheapest price by proper planning, the manpower, material and processes. Production Management must see that it will deliver right goods of right quantity at right place and at right price. When the above objective is achieved, we say that we have effective production management system.

SCOPE OF PRODUCTION MANAGEMENT In fact, we apply Principles of Management; and functions of Management in our day-to-day life. We all know, from morning till night, we plan our activities; we coordinate available resources and control our activities to achieve certain goals. So any organization must follow the Principles of Management for its survival and growth. The same is applicable to Production Management also. Reading and learning

Production Management will enable one to be capable of solving the problems of the organization, may be an education institution, production shop, hospital, departmental shop or even a barber shop. The problems a manager face in various organizations are more or less similar to that of Production department but smaller in magnitude. Hence the Knowledge of Production Management will help any professional Manager to tackle the problems of his business easily. For example: The Production Management consists of planning, and selection of materials, planning of processes, routing, scheduling and controlling the activities etc., Take the example of an Educational Institution/University. Here, also selection of raw students, Planning of the course work, educating the students and conducting the examinations. Therefore this knowledge of Production and Operations Management will enable one to apply the principles of Production Management to any field of life without restriction. Here, we have to remember that the above is applicable to the management of a service organization and the management of a Project. Here, it is better to distinguish between product, service and project, so as to help the reader to know on which particular aspect of Production Management is much emphasis to put in managing a service organization or a project.

( i ) Product: Manufacturing system often produces standardized products in large volumes. The plant and machinery have a finite capacity. The facilities constitute fixed costs, which are allocated to the products made and variable costs, such as, labour cost and materialscosts. While manufacturing, the product use value and economic values are added to the product. Hence, the product is a store of values added during manufacture. Because the input costs and output costs are measurable, the productivity can be measured with certain degree of accuracy. Product can be transported to the markets and stored physically until it is sold.

( ii ) Service: Service system present more uncertainty with respect to capacity and costs. Service are produced and consumed in the presence of the customer. We cannot store the service physically. Because of this the service organizations, such as Hotels, Hospitals, Transport organizations and many other service organizations, the capacity must be sufficiently or consciously managed to accommodate a highly variable demand. Sometimes services like legal practice and medical practice involves, professional or intellectual judgments, which cannot be easily standardized. Because of this, the calculation of cost and productivity is difficult.

( iii) Project: Project system does not produce standardized products. The plant, machinery, men and materials are often brought to project site and the project is completed. The project is of big size and remains in the site itself after completion. More the costs can be calculated and allocated to the project with considerable accuracy, productivity can be measured. Once the project is completed, all the resources are removed from the site.

Objectives of Production Management The objective of the production management is „to produce goods services of right quality and quantity at the right time and right manufacturing cost‟.


The quality of product is established based upon the customers 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 manufacturing organization should produce the products in right number. If they are produced

in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of products.


Timeliness of delivery is one of the important parameter to judge the effectiveness of production

department. So, the production department has to make the optimal utilization of input resources

to achieve its objective.


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.

Scope of Operations Management The scope of operations management is very vast, commencing with the selection of location, operations management covers such activities as:

Forecasting Capacity planning Scheduling Managing employees Deciding where to locate facilities Design of work system Operations planning and control Resource requirement planning Capacity requirement planning Project management Quality management Maintenance management Just in time system Supplay chain management Operations function includes all activities directly related to producing goods or providing services All the above terms are explained in further chapters, as the operations management includes these activities or processes collectively.

INTRODUCTION Automation is a technology concerned with the application of mechanical, electronic, and computerbased systems to operate and control production. This technology includes automatic machine tools to process parts, automatic assembly machines, industrial robots, automatic material handling and storage systems, automatic inspection systems for quality control, feedback control and computer process control, computer systems for planning, data collection and decision-making to support manufacturing activities.

Definition of Automation: The use of computers to control a particular process in order to increase reliability and efficiency, often through the replacement of employees. For a manufacturer, this could entail using robotic assembly lines to manufacture a product.

TYPES OF AUTOMATION Automated production systems can be classified into three basic types:

1. Fixed automation,

2. Programmable automation, and

3. Flexible automation.


It is a system in which the sequence of processing (or assembly) operations is fixed by the equipment configuration. The operations in the sequence are usually simple. It is the integration and coordination of

many such operations into one piece of equipment that makes the system complex. The typical features of fixed automation are:

( a ) High initial investment for customEngineered equipment;

( b ) High production rates; and ( c ) Relatively inflexible in accommodating product changes. The economic justification for fixed automation is found in products with very high demand rates and volumes. The high initial cost of the equipment can be spread over a very large number of units, thus making the unit cost attractive compared to alternative methods of production. Examples of fixed automation include mechanized assembly and machining transfer lines.


In this the production equipment is designed with the capability to change the sequence of operations to accommodate different product configurations. The operation sequence is controlled by a program, which is a set of instructions coded so that the system can read and interpret them. New programs can be prepared and entered into the equipment to produce new products. Some of the features that characterise programmable automation are:

( a ) High investment in general-purpose equipment; ( b ) Low production rates relative to fixed automation; ( c ) Flexibility to deal with changes in product configuration; and ( d ) Most suitable for batch production. Automated production systems that are programmable are used in low and medium volume production. The parts or products are typically made in batches. To produce each new batch of a different product, the system must be reprogrammed with the set of machine instructions that correspond to the new product. The physical setup of the machine must also be changed over:

Tools must be loaded, fixtures must be attached to the machine table also be changed machine settings must be entered. This changeover procedure takes time. Consequently, the typical cycle for given product includes a period during which the setup and reprogramming takes place, followed by a period in which the batch is produced. Examples of programmed automation include numerically controlled machine tools and industrial robots.




is an extension of programmable automation. A flexible automated system is one that is capable

of producing a variety of products (or parts) with virtually no time lost for changeovers from one product to the next. There is no production time lost while reprogramming the system and altering

the physical setup (tooling, fixtures, and machine setting). Consequently, the system can produce various combinations and schedules of products instead of requiring that they be made in separate batches. The features of flexible automation can be summarized as follows:

( a ) High investment for a custom-engineered system. ( b ) Continuous production of variable mixtures of products. ( c ) Medium production rates. ( d ) Flexibility to deal with product design variations.

The essential features that distinguish flexible automation from programmable automation are: (1) the capacity to change part programs with no lost production time; and (2) the capability to changeover the physical setup, again with no lost production time. These features allow the automated production system to continue production without the downtime between batches that is characteristic of programmable automation. Changing the part programs is generally accomplished by preparing the programs off-line on

a computer system and electronically transmitting the programs to the automated production system.

Therefore, the time required to do the programming for the next job does not interrupt production on the current job. Advances in computer systems technology are largely responsible for this programming capability in flexible automation. Changing the physical setup between parts is accomplished by making the changeover off-line and then moving it into place simultaneously as the next part comes into position for processing. The use of pallet fixtures that hold the parts and transfer into position at the workplace is one way of implementing this approach. For these approaches to be successful; the variety of parts that can be made on a flexible automated production system is usually more limited than a system controlled by programmable automation.

ADVANTAGES OF AUTOMATION Following are some of the advantages of automation:

1. Automation is the key to the shorter workweek. Automation will allow the average number of working

hours per week to continue to decline, thereby allowing greater leisure hours and a higher quality life.

2. Automation brings safer working conditions for the worker. Since there is less direct physical

participation by the worker in the production process, there is less chance of personal injury to the


3. Automated production results in lower prices and better products. It has been estimated that the cost to

machine one unit of product by conventional general-purpose machine tools requiring human operators

may be 100 times the cost of manufacturing the same unit using automated mass-production techniques. The electronics industry offers many examples of improvements in manufacturing technology that have significantly reduced costs while increasing product value ( e.g ., colour TV sets, stereo equipment, calculators, and computers).

4. The growth of the automation industry will itself provide employment opportunities. This has been

especially true in the computer industry, as the companies in this industry have grown (IBM, Digital Equipment Corp., Honeywell, etc.), new jobs have been created. These new jobs include not only workers directly employed by these companies, but also computer programmers, systems engineers, and other needed to use and operate the computers.

5. Automation is the only means of increasing standard of living. Only through productivity increases

brought about by new automated methods of production, it is possible to advance standard of living. Granting wage increases without a commensurate increase in productivity will results in inflation. To

afford a better society, it is a must to increase productivity.


Following are some of the disadvantages of automation:

1. Automation will result in the subjugation of the human being by a machine. Automation tends to

transfer the skill required to perform work from human operators to machines. In so doing, it reduces the need for skilled labour. The manual work left by automation requires lower skill levels and tends to involve rather menial tasks ( e.g ., loading and unloading workpart, changing tools, removing chips, etc.). In this sense, automation tends to downgrade factory work.

2. There will be a reduction in the labour force, with resulting unemployment. It is logical to argue that

the immediate effect of automation will be to reduce the need for human labour, thus displacing workers.

3. Automation will reduce purchasing power. As machines replace workers and these workers join the

unemployment ranks, they will not receive the wages necessary to buy the products brought by automation. Markets will become saturated with products that people cannot afford to purchase. Inventories will grow. Production will stop. Unemployment will reach epidemic proportions and the result will be a massive economic depression.