Production and Operations Management ("POM")

Production and Operations Management ("POM") - is about the transformation of production and
operational inputs into "outputs" that, when distributed, meet the needs of customers.

The Historical Evolution of Productions and Operations Management

Craft Production system in which highly skilled workers use simple, flexible tools to produced
goods according to customer specification (customized goods).

INDUSTRIAL REVOLUTION

The Industrial Revolution was the transition to new manufacturing processes that began in the
period from about 1770s in England and spread to the rest of Europe and to the United States
during the 19th century.

* Substituting machine power for human power *

Steam Engine invented by James Watt in 1764. Provide a source of power to operate
machines in factories.

Spinning Jenny by James Hargreaves and the Power Loom by Edmund

Cartwright revolutionized the textile industry

A major change occurred that gave the Industrial Revolution a boost: the development of
standard gauging system.

SCIENTIFIC MANAGEMENT

The movement was spearheaded by the efficiency engineer and inventor Frederick Winslow.

Frederick Winslow Father of Scientific Management. He believed in a science of

management based on observation, measurement, analysis and improvement of work methods,
and economic incentives.

His book The Principles of Scientific Management.

Other pioneers who contributed heavily to this movement:

 Frank Gilbreth Father of motion study.

Henry Gantt Developed a widely used system for scheduling called Gantt charts.

Gantt Charts Provides a graphic illustration of a schedule that helps to plan, coordinate,
and track specific tasks in a project.
Harrington Emerson - install his management methods at many industrial firms and to
promote the ideas of scientific management and efficiency to a mass audience.
His book The Twelve (12) Principles of Efficiency
Henry Ford employed scientific management techniques in his factories.
- He also introduced the moving assembly line and mass production.

Assembly Line are common methods of assembling complex items such as automobiles and
other transportation equipment, household appliances and electronic goods.

Mass Production a system of production in which large volumes of standardized goods are
produce by low-skilled or semi-skilled workers use specialized machinery.

1. Key concept: Interchangeable parts sometimes attributed to Eli

Whitney.

2. Second Concept: Division of Labor which Adam Smith wrote about in

the Wealth of the Nations (1776).

THE HUMAN RELATIONS MOVEMENT

Human relations movement emphasized the importance of the human element in job design.

Lillian Gilbreth a psychologist and wife of Frank Gilbreth. Her studies dealt with
worker fatigue and motivation.

Elton Mayo a psychologist. According to his studies, worker motivation is critical for
improving productivity.

Abraham Maslow psychologist who was best known for creating Maslow's hierarchy
of needs, a theory of psychological health predicated on fulfilling innate human needs in
priority, culminating in self-actualization.

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 .

Figure 1. Maslow's Hierarchy of Needs

Maslow's hierarchy of needs is a theory in psychology proposed by Abraham Maslow in his

1943 paper "A Theory of Human Motivation"

During 1940s, Abraham Maslow developed motivational theories, which

Frederick Hertzberg refined in the 1950s.

Douglas McGregor added Theory X and Theory Y. These theories represented

the two ends of the spectrum of how employees view work.

William Ouchi added Theory Z. which combined the Japanese approach with
and the traditional Western approach.

DECISION MODELS AND MANAGEMENT SCIENCE

Ford Whitman Harris developed a mathematical model for inventory management

(1915).
Harold Dodge, Harry Romig, and Walter Shewhart developed statistical
procedures for sampling and quality control.

Leonard Henry Caleb Tippett conducted studies that provided the groundwork for
statistical-sampling theory.

World War II

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 Decision models for:

1. Forecasting 4. And other areas of operations

2. Inventory management management
3. Project management

THE INFLUENCE OF JAPANESE MANUFACTURERS

Their approaches emphasized quality and continual improvement, worker teams and
empowerment, and achieving customer satisfaction.

W. Edwards Deming Often called the man who taught quality to the Japanese.
Quality Revolution -

Quality revolution credited to Japanese. It occurred in industrialized countries.

Time-Based Management It is a general approach that recognizes the importance of time

and seeks to reduce the level of wasted time in the production processes of a business

Function within Business Organization

Businesses use organization to help employees understand how their jobs relate to the company's
business strategy. How employees relate to one another and to their supervisor dictates the
organizational structure of a business. Organization can be achieved through intentional design, or
a company might evolve as it establishes its business position in the market.

3 Basic Functions of Business Organizations:

Businesses regardless of their type (private, government, not-for-profit), size or financial position
they all consist of three basic functions that run the business. Those three functions are
Operations, Finance and Marketing. Whether the business type is manufacturing, retail, hospital
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or others, whether the business size is small, medium or enterprise, whether the business financial
position is different they all have these three basic functions.

Operations

The operational function consists of all activities directly related to producing goods or providing
services. The operations function is the core of most business organizations. It is responsible for
the creation of an organizations goods or services.

The operations function is the key function of the business, it concerns about producing goods and
services. Goods are something tangible (physical) which created form raw materials and parts such
as motherboard that is part of the computers, as well as phone and, cars and TV. Services are
something intangible (not physical) that provide some sort of psychological value or mixture of
time or location value such as education and healthcare.

There are so many examples of goods and services that surround our day to day life that remind
us about operations function, every time we use the phone to call someone, read a book, or watch
a video it reminds us about operations function of one or more of firms.

The aim of the business is to equalize between the supply of the materials and achieving the
customer demand. Having a lot of the supply consider a waste for the firm resources and having a
little of the supply might lead into customer dissatisfaction. The business through the operations
function needs to manage and control the supply chains, work with sales and marketing to make
sure they meet the customer demand. Although the operations function is accountable for
producing goods and services, the operations function needs the help and support from other parts
or function areas of the organization such as finance and marketing.

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 Figure 2. Operations

Finance

The finance function of a business concern about securing the financial resources and allocating
those resources to different part of the organization. Also, finance function concern about
budgeting and providing the required funds to the other functions of the organization such as
operations and marketing. The finance function is responsible of providing all the required
materials by operations and marketing to make them able to complete the activities related to their
function.

Finance needs to perform so many critical tasks to make sure the success of organization such as
managing the cash flows, budgeting, assets management and financial statements. Finance has a
major role in success of the business, for instance in Amazon.com the company stated first making
their money not from selling books only but from sales revenue short-term investment. The
company utilized the time between purchasing the book to the time the actual payment happen to
the seller, and use that time which was between a month or two to make a return from short-term
investment.

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Finance and operations management personnel cooperate by exchanging information and expertise
in such activities as:

1. Budgeting- Budgets must be periodically prepared to plan financial requirements. Budgets must
sometimes be adjusted, and performance relative to a budget must be evaluated.

2. Economic analysis of investment proposals- Evaluation of alternative investments in plant

and equipment requires inputs from both operations and finance people.

3. Provision of funds-The necessary funding operations and the amount and timing of funding
can be important and even critical when funds are tight.

Marketing

The marketing function of a business concern about promoting goods and services and ensuring
the availability of the customers for the business. The marketing function have so many roles,
one of this role is understanding the needs and requirement of the customer and making sure that
the organizations goods and services meets the customer needs. Making the organizations
goods and services well-known in the target market as well as meeting the required standard of
the target market is another role of marketing function. Also, the marketing function has to come
up with a strategy to increases the awareness of the organizations product to the community
such as promoting the products during community events, advertising the products using
advertising media, printing T-shits, sponsoring charity or sponsoring sport team.

Other Functions:

*Accounting-Has responsibility for preparing the financial statements, including the

income statement and balance sheet.
*Purchasing-Has responsibility for procurement of materials, supplies, and equipment.
*Personnel Department- is concerned with recruitment and training of personnel, labor
relations, contract, negotiations, wage and salary administration, assisting in manpower
projections, and ensuring the health and safety of employees.
*Public Relations-Has responsibility for building and maintaining a positive public image
of the organization.

*Industrial Engineering- Is often concerned with scheduling, performance standards,

work methods, quality control, and material handling.

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 Maintenance- Is responsible for general upkeep and repair of equipment, buildings and
grounds, heating and air-conditioning; removing toxic wastes; parking; and perhaps
security.
*Distribution- Involves the shipping of goods to warehouses, retail outlets, or final
customers.

OPERATIONS MANAGER AND DECISION MAKING

Operations Manager is a senior role which involves overseeing the production of goods
and/or provision of services. They are there to ensure that all the parts of the production process
come together to deliver the correct quality of final product.

The chief role of an operations manager is that of a planner and decision maker. In this
capacity, the operations manager exerts considerable influence over the degree to which the
goals and objectives of the organization are realized.

General approaches to decision making:

The Use of Models once a model has been developed, a great deal can be learned about
it by manipulating its variable and observing the results.
- They are all decision-making aids and abstractions (simplifications) of more complex
real-life phenomena.
- Strips away the unimportant details so that attention can be concentrated on the most
important aspects of a situation, thus increasing the opportunity to understand a problem
and its solution.
Analysis of Trade-Offs Managers sometimes deal with these decisions by listing the
advantages and disadvantages of a course of action to better understand the
consequences.
Systems Approach The systems approach emphasizes interrelationships among
subsystems, but its main theme is that the whole is greater than the sum of its individual
parts.

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 - The output of the organization as a whole take precedence over those of any one
subsystem should be optimized even if this requires less-than-optimum result in one or
more subsystem
Establishing Priorities - there are more important parts that need more attention than the
others.
- Recognition of priorities in problem solving means solving more important problems first
and little or nothing will be gained by focusing efforts to other, less important factors

OPERATING PRODUCTION SYSTEM

Production system utilizes materials, funds, infrastructure and labor to produce the required
output in forms of goods.

Production system consists of three main components:

Inputs include raw-materials, machines, man-hours, components or parts, drawing,

instructions and other paper works.

Conversion process where inputs are converted into output

Output includes finished products, finished goods (parts), and services.

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 Conversion
Input Output
Process

System Design - involves decisions that relate to system capacity, geographic location of
facilities, product and service planning. (Long term commitments)
System Operation involves management of personnel, inventory planning and control,
scheduling, project management, and quality assurance

Differentiating Features of Production Systems

DEGREE OF STANDARDIZATION

Production Systems produce output that ranges from highly standardized to highly
customized.

Systems with Standardized Output can generally take advantage of: (a) Standardized
Methods, (B) Materials, (C) Mechanization, all of which can contribute to higher volumes and
lower unit cost.

TYPES OF OPERATION

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 The Degree of Standardization and the volume of output of a product or service influence
the way production is organized.

Project- is a set of activities directed toward a unique goal.

Job Shop- An organization that renders unit or lot production or service with varying
specifications, according to customer needs.
Batch Processing- A system used to produce moderate volume of similar items.
Repetitive Processing- A production system that renders one or a few highly-
standardized products or services
Continuous Processing- A system that produces highly uniform products or continuous
services, often performed by machines.

MANUFACTURING OPERATIONS VS. SERVICE OPERATIONS

Servicing is act-oriented, while manufacturing is product-oriented

Key issues differentiating production and servicing systems:

Characteristic Manufacturing Service

Customer contact Low High

Uniformity of input High Low
Labor content of jobs (higher labor content vs. more Low High
capital-intensive production)
Uniformity of output High Low
Measurement of productivity Easy Difficult
Quality assurance High Low

Figure 4. Manufacturing VS. Service

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IMPLICATIONS FOR DESIGN AND OPERATION OF PRODUCTION SYSTEMS.

Degree of output standardization, type of operation, product/service combination will have a

bearing on capital requirements, choice of equipment, capacity planning, location planning,
layout, inventory management, work force requirements, scheduling, and quality assurance.

E.g. high-volume operation requires a steady rate of output (which is costly to vary, though);
hence, a good forecast is necessary to adequately design the system. Job shop is flexible, so
forecasting is less critical at the design stage. Inventory management of the two also sharply
differs. Standardization of purchases also varies.

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