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Production management is also called operations management. Productions management
is the activity of managing the resources which are devoted to theproduction and delivery of
products and services. Examples of goods and services are found all around us from the book we
read, videos we watch, e-mails we send to every medical treatment we receive involves the
operations function of one or more organizations. So does everything we wear, eat, travel in, sit
on, and access the Internet with. It is one of the core functions of any business, although it may
not be called operations management in some industries. Techniques of production management
are employed in service as well as in manufacturing industries. It is a responsibility similar in
level and scope to other specialties such as marketing or human resource and financial
management. In manufacturing operations, production management includes responsibility for
product and process design, planning and control issues involving capacity and quality, and
organization and supervision of the workforce. The span of responsibility varies between
companies, but will usually overlap with the other functions. Operations management is
concerned with the managing processes. And all processes have internal customers and suppliers.
Since all management functions manage processes. Therefore, operations management has
relevance for all managers.
All productions follow an inputtransformationoutput process
Inputs to the process: These are the resources that are treated, transformed or converted in the
process. They are usually a mixture of the following; materials, information, customers, facilities
and staffs.
Transformation: is the execution phase where all input materials are put together to produce a
unique commodity (goods or service).
Outputs from the process: All processes exist to produce products and services, and although
products and services are different, this distinction can be subtle. Perhaps the most obvious
difference is in their respective tangibility. (Products are usually tangible. You can physically
touch a television set or a newspaper while Services are usually intangible. You cannot touch
consultancy advice or a medical service, although you can often see or feel the results of these
services). Also, services may have a shorter stored life. Products can usually be stored for a time,
some food products for only a few days, and some buildings for thousands of years. The life of a
service is often much shorter.
Operations managers are required to make a series of decisions in the production function. They
plan, organize, staff, direct and control all the activities in the process of converting all the inputs
into finished products. At each level, operating managers are expected to make decisions and
implement them too. The decisions made by operations managers about the activities of
production systems tend to fall into three general categories viz.
Strategic (Long Range): Decisions relating to products, processes and manufacturing facilities.

These decisions are major ones, having strategic importance and long-term significance for the
organization. It Includes; which products to produce, on which of the dimensions of cost, quality,
delivery and flexibility to compete; where to locate facilities; what production equipment to use;
and long-range choices concerning raw materials, energy and labour skills.
Operating (Medium Range): Decisions relating to planning production to meet demand. These
decisions are necessary in order to ensure that the ongoing production of goods and services
meets the market demand and provides reasonable profits for the organization. It takes the basic
physical production capacity constraints and projected demand pattern, established by a longrange plan, and ration available resources to meet demand as effectively and as profitable as
possible. Even though basic production capacity is essentially fixed by long-range
considerations, production capacity can be increased or decreased within limits in the medium
term. A decision can be made to vary one or more of the following: the size of the work force,
the amount of overtime worked, the number of shifts worked, the rate of production, the amount
of inventory, the shipping modes and possible the amount of subcontracting utilized by the
company. These plans, in turn, constrain but provide stability to what can be done at the
operational level.
Control: Decisions relating to planning and controlling operations. These decisions concern the
day to day activities of workers, quality of products and services, production and overhead costs
and maintenance of machines. Short-range operating schedules take the orders directly from
customers, or as generated by the inventory system and plan in detail how the products should be
processed through a plant. In most cases detailed schedules are drawn up for one week, then one
day and finally one shift in advance. The schedules involve the assignment of products to
machines, the sequencing and routing of orders through the plant, the determination of
replenishment quantities for each stock keeping unit and so on.
Production managements responsibilities are summarized by the five Ms: men,
machines, methods, materials, and money.
refers to the human element in operating systems. Since the vast majority of manufacturing
personnel work in the physical production of goods, people management is one of the
production managers most important responsibilities.
production manager must also choose the machines and methods of the company, first selecting
the equipment and technology to be used in the manufacture of the product or service and then
planning and controlling the methods and procedures for their use. The flexibility of the
production process and the ability of workers to adapt to equipment and schedules are important
issues in this phase of production management.
The production managers responsibility for materials includes the management of flow
processes both physical (raw materials) and information (paperwork). The smoothness of
resource movement and data flow is determined largely by the fundamental choices made in the
decision phase of the product and in the process to be used.
The managers concern for money is explained by the importance of financing and asset
utilization to most manufacturing organizations. A manager who allows excessive inventories to

build up or who achieves level production and steady operation by sacrificing good customer
service and timely delivery runs the risk that overinvestment or high current costs will wipe out
any temporary competitive advantage that might have been obtained.
Although the five Ms capture the essence of the major tasks of production management,
control summarizes its single most important issue. The production manager must plan and
control the process of production so that it moves smoothly at the required level of output while
meeting cost and quality objectives.
Process control has two purposes: first, to ensure that operations are performed according to plan
and second, to continuously monitor and evaluate the production plan to see if modifications can
be devised to better meet cost, quality, delivery, flexibility, or other objectives. For example,
when demand for a product is high enough to justify continuous production, the production level
might need to be adjusted from time to time to address fluctuating demand or changes in a
companys market share. This is called the production-smoothing problem. When more than
one product is involved, complex industrial engineering or operations research procedures are
required to analyze the many factors that impinge on the problem.
Inventory control is another important phase of production management. Inventories include raw
materials, component parts, work-in-process, finished goods, packing and packaging materials,
and general supplies . Although the effective use of financial resources is generally regarded as
beyond the responsibility of production management, many manufacturing firms with large
inventories (some accounting for more than 50 percent of total assets) usually hold production
managers responsible for inventories. Successful inventory management, which involves the
solution of the problem of which items to carry in inventory in various locations, is critical to a
companys competitive success. Not carrying an item can result in delays in getting needed parts
or supplies, but carrying every item at every location can tie up huge amounts of capital and
result in an accumulation of obsolete, unusable stock. Managers generally rely on mathematical
models and computer systems developed by industrial engineers and operations researchers to
handle the problems of inventory control
Operations and supply chains are intrinsically linked and no business organization could
exist without both. A supply chain is the sequence of organizationstheir facilities, functions,
and activitiesthat are involved in producing and delivering a product or service. The sequence
begins with basic suppliers of raw materials and extends all the way to the final customer,
Facilities might include warehouses, factories, processing centers, offices, distribution centers,
and retail outlets. Functions and activities include forecasting, purchasing, inventory
management, information management, quality assurance, scheduling, production, distribution,
delivery, and customer service.Note carefully that the value of the product increases as it moves
through the supply chain.
Supply chains are both external and internal to the organization. The external parts of a supply
chain provide raw materials, parts, equipment, supplies, and/or other inputs to the organization,
and they deliver outputs that are goods to the organizations customers while the internal parts of

a supply chain are part of the operations function itself, supplying operations with parts and
materials, performing work on products and/or services, and passing the work on to the next step
in the process.
The creation of goods or services (Production management) has five major decision
areas: quality, process, capacity, inventory, and work force.
1. Quality. The operations function is typically responsible for the quality of goods and services
produced. Quality is an important operations responsibility which requires total organisational
support. Quality decisions must ensure that quality is built into the product in all stages of
operations: standards must be set, people trained, and the product or service inspected, preferably
by those who produce it, for quality to result.
2. Process. Decisions in this category determine the physical process or facility used to produce
the product or service. The decisions include the type of equipment and technology, process
flows, layout of the facility, and all other aspects of the physical plant or service facility. Many of
these process decisions are long-range in nature and cannot be easily reversed, particularly when
heavy capital investment is needed. It is, therefore, important that the physical process be
designed in relation to the long-term strategic posture of the business.
3. Capacity. Capacity decisions are aimed at providing the right amount of capacity at the right
place at the right time. Long-range capacity is determined by the size of the physical facilities
which are built. In the short run, capacity can sometimes be augmented by subcontracting, extra
shifts, or rental of space. Capacity planning, however, determines not only the size of facilities
but also the proper number of people in operations. Staffing levels are set to meet the needs of
market demand and the desire to maintain a stable work force. In the short run, available capacity
must be allocated to specific tasks and jobs in operations by scheduling people, equipment, and
4. Inventory. Inventory decisions in operations determine what to order, how much to order, and
when to order. Inventory control systems are used to manage materials from purchasing through
raw materials, work in process, and finished goods inventories. Inventory managers decide how
much to spend on inventory, where to locate the materials, and a host of related decisions. They
manage the flow of materials within the firm.
5. Work force. Managing people is the most important decision area in operations because
nothing is done without the people who make theproduct or service. Work-force decisions
include selection, hiring, firing, training, supervision, and compensation. These decisions are
made by the line managers in operations, often with the assistance of the personnel or human
resources office. Managing the work force in a productive and humane way is a key task for
operations today.


A scientific and analytical structure for decision implies the following systematic steps: Defining
the problem, Establish the decision criteria, Formulation of a model, Generating alternatives,
Evaluation of the alternatives, Implementation and monitoring.
DEFINING THE PROBLEM: Defining the problem enables to identify the relevant variables
and the cause of the problem. Careful definition of the problem is crucial. Finding the root cause
of a problem needs some questioning and detective work. If a problem defined is too narrow,
relevant variable may be omitted. If it is broader, many tangible aspects may be included which
leads to the complex relationships.
ESTABLISH THE DECISION CRITERIA: Establish the decision criterion is important
because the criterion reflects the goals and purpose of the work efforts. For many years profits
served as a convenient and accepted goal for many organizations based on economic theory.
Nowadays organization will have multiple goals such as employee welfare, high productivity,
stability, market share, growth, industrial leadership and other social objectives.
FORMULATION OF A MODEL: Formulation of a model lies at the heart of the scientific
decision-making process. Model describes the essence of a problem or relationship by
abstracting relevant variables from the real world situation. Models are used to simplify or
approximate reality, so the relationships can be expressed in tangible form and studied in
isolation. Modeling a decision situation usually requires both formulating a model and collecting
the relevant data to use in the model. Mathematical and statistical models are most useful models
for understanding the complex business of the problem. Mathematical models can incorporate
factor that cannot readily be visualized. With the aid of computers and simulation techniques,
these quantitative models become flexible.
GENERATING ALTERNATIVES: Alternatives are generated by varying the values of the
parameters. Mathematical and statistical models are particularly suitable for generating
alternatives because they can be easily modified. The model builder can experiment with a model
by substituting different values for controllable and uncontrollable variable
EVALUATION OF THE ALTERNATIVES: Evaluation of the alternatives is relatively
objective in an analytical decision process because the criteria for evaluating the alternatives
have been precisely defined. The best alternative is the one that most closely satisfies the criteria.
Some models like LPP model automatically seek out a maximizing or minimizing solution. In
problems various heuristic and statistical techniques can be used to suggest the best course of
IMPLEMENTATION AND MONITORING: Implementation and monitoring are essential for
completing the managerial action. The best course of action or the solution to a problem
determined through a model is implemented in the business world. Other managers have to be
convinced of the merit of the solution. Then the follow-up procedures are required to ensure
about appropriate action taken. This includes an analysis and evaluation of the solution along
with the recommendations for changes or adjustments.