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Introduction to Production and Operations Management
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Production management is important also to customers and society, and from the same
source, its importance were given and these are
1. Higher standard of living
2. Employment generation
3. Quality improvement and cost reduction
4. Spread effect
5. Creates utility
6. Boosts economy
Ranjan, P. (2017, May 02). Production management, meaning, nature, function, PPC, production pla... Retrieved from
https://www.slideshare.net/PrashantRanjan35/production-management-meaning-nature-function-ppc-production-planning-control
4. Production planning
It is included in production management. It deals with deciding about the
routing and scheduling.
Routing – deciding the work path and the operation sequence. Finding
out the best and the most economical operation sequence to be
followed in the process of manufacturing is the main objective of
routing. It ensures smooth flow of work.
5. Production control
Monitoring and controlling the production should be done by the production
manager. Finding out whether the actual production is done as planned should be done
by the manager. If there are deviations, necessary steps are then taken by the manager
so as to correct such deviation.
7. Inventory control
Level of inventories must be monitored by the production manager because
if there will be overstocking, the working capital will be blocked and spoilage,
wastage and misuse of materials may happen. Likewise, if there will be
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understocking, production will not take place as per schedule which may lead to
delivery problems.
Productivity
According to Productivity and Operation Management (n.d.) Retrieved from
https://www.slideshare.net/shreyasmetri/productivity-and-operation-management,
productivity refers to production process output per unit of input. To produce more with
less is productivity. There are different types of productivity and these are:
1. Partial productivity – when the resources of productivity are measured
separately. It plays an important role in productivity improvement. Productivity
resources include labor productivity, capital productivity and material
productivity.
2. Total factor productivity – many of the resource inputs are available within the
business organization , while few others are purchase are present in the
production process.
System Productivity
System productivity is all about the measuring the whole system in a certain firm if
each part is working good – if the output is greater than the input in processing the said
Production Operations Management and TQM
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Introduction to Production and Operations Management
output. Let’s define first the term “Productivity”. According to Productivity and Operation
Management (n.d.) Retrieved from https://www.slideshare.net/shreyasmetri/productivity-
and-operation-management, productivity refers to measure of ability of a business firm to
produce goods and services from the given number of resources: capital, human resource,
land, knowledge and time. The said resources may be combined to in producing goods and
services.
Capital Productivity
Capital productivity refers to the company’s efficiency of converting the capital
inputs into output. When output grows faster than capital inputs, productivity grows.
According to What is productivity and how is it measured? (n.d.). Retrieved from
https://www.pc.gov.au/news-media/pc-news/previous-editions/pc-news-may-
2015/productivity-and-how-measured, productive efficiency of a an organization or firm
can be improved in three ways:
1. Improvement in technical efficiency – with the given level of input and efficient
use of existing technology, output increase can be achieved.
Labor Productivity
Understanding labor productivity may be done easily by comparing two workers.
For instance, Worker A who can make 10 pieces of rag for an hour compared to Worker B
who can make 5 pieces in the same hour. It is so evident that Worker A is more productive
than Worker B. According to OpenStax. (n.d.). Principles of Economics. Retrieved from
https://opentextbc.ca/principlesofeconomics/chapter/20-2-labor-productivity-and-
economic-growth/, labor productivity refers to the value that each worker or employee
creates per unit of his input.
According to the same source, there are factors which determine labor productivity
and these are the following:
1. Human capital – It refers to the accumulated knowledge that an individual
acquired from education and experience, skills and expertise which an average
employee possesses. Usually, the more educated an employee means higher
human capital and of course labor productivity becomes higher too.
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2. Technological change – It is a combination of invention and innovation. Invention
refers to the advancement in knowledge while innovation means using the said
advancement to new products and services.
Personnel Productivity
Measuring and managing personnel or employee productivity are important things
that should be considered by employer. However, problem may arise in doing so especially
in the unit of analysis industry which is used in measuring productivity and the possibility
of failure to recognize the relationship between the individual worker productivity and the
organization’s total performance.
3. Diagnose problems
Examination of trends which is a form of productivity analysis helps
determine problems before they become crisis and enable to have early
adjustment and corrective action. However, only the problems are identified
and not the source of the said problem.
5. Support innovation
Together with the cost data, productivity analysis helps in the
evaluation of proposed changes to existing processes or products and
introduction of new ones.
2. Inventory control – It refers to activity of checking products available for sale. It is also
called stock control.
3. Quality control – Ensuring the quality of the goods produced are in high quality. It is
very crucial particularly continuous improvement. Some advancement in quality are
the benchmarking, total quality management (TQM). It resulted in operation
management advancement.
4. Storage – It refers to available facilities for storing goods produced in a firm which
ensures maintenance of quality of the said goods until they are transported to the
customers’ place.
5. Logistics – The focus of logistics is the flow of goods and materials from the suppliers,
through the business organization and to the customers, with efficiency and cost
effectiveness as its priority.
6. Process evaluation – It refers to evaluating how the manufacturing of goods was done
and if there is a need to take corrective actions ( if in case there will be deviations )
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Figure 2 - 3 Basic Areas/Functions of Business Organizations
Actually there are three basic functional areas in an organization and these are finance,
marketing and operations.
1. Finance – the area which is responsible for securing resources related to finances at
favorable price as well as the its allocation. Budgeting, investment proposal analysis and
providing funds for operations are also its function.
2. Marketing Area – responsible for the consumer needs and wants assessment. Likewise,
this area take charge of selling and promotion of company’s goods and services .
3. Operations Area – responsible for the production of goods and services to customers.
To understand better, let’s put it into a simple perspective. For instance, a business
firm or organization will be symbolized by a car while its operation is its engine. Everybody
knows that a car or any vehicle cannot run without an engine and that is how important
operation is in a business organization. It is the core of what the business does and of course
the responsible for managing the said core is the operations management. With that, we can
have the other definition of operations management as the management of processes or
systems that creates or produces goods and/or provide services to customers.
this level, the management should decide where it want to be in 10-15 years
with regards to the following areas - standing in the market, innovation,
productivity, financial and physical resources, managerial performance and
development and worker attitude and performance.
The following are the typical strategies for the corporate level:
1. Growth strategies
Growth internally
Vertical integration
Horizontal integration
Mergers
Strategic alliance
2. Stability strategies
3. Retrenchment strategies
Turnaround
Divestment
Liquidation
b. Business unit level – Appropriate strategies for the business unit maybe
addressing the need for answering how the business organization will
compete in the chosen industry.
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Co ordination among few individuals are required in strategy formulation
while in the implementation, co ordination among many persons are
required
For small, large or non profit organization, strategy formulation does not
vary while strategy implementation varies among the different sizes and
types of industries.
4. Evaluation and control – the following steps are done during this stage:
4.1. Performance targets, standards, and tolerance limits for the objectives
are established.
4.2. Measuring the performance and managers will be informed if the
outcomes are outside the limits.
4.3. From the accepted limits, analyze deviation
4.4. Modifications will be executed, if necessary.
The Use of GANTT Charts in Production Monitoring (n.d.) Retrieved from http://www.quality-
wars.com/2012/01/10/the-use-of-gantt-charts-in-production-monitoring/
In the above example of production schedules, tasks for production were divided into
three phases – the pre –production, production and the post-production. For each phase or
process, tasks are given and appropriate time day of accomplishment of such tasks were
highlighted. Operations manager should bear in mind that Gantt charts are useful and
appropriate to use when the production process is simple and the activities are not
interrelated.
2. PERT charts – PERT stands for Program Evaluation and Review Technique. PERT
charts are usually used by operations managers for more complex schedules. In
diagraming activities required to produce goods, specifying the time required to
perform each activity in the process and organizing activities in the most efficient
sequence, PERT charts are used by operations managers.
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Figure 4 - Sample PERT Chart
Advantages of PERT Charts vs. Gantt Chart (n.d.) Retrieved from https://www.lucidchart.com/blog/advantages-of-pert-charts-
vs-gantt-charts
In the above sample of a PERT chart, the activities were divided into
manageable activities After formalizing the specifications, the different dependent
activities are indicated and interrelation among them are indicated in the chart. In
the above example, both the hardware, software and the content of the program
were worked out through different activities and the arrows indicate the directions
and sequence of doing the said tasks.
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1. Production Management (n.d.). Retrieved May 29, 2018 from
https://www.slideshare.net/patel9078/productio-new-management
2. What is productivity and how is it measured? (n.d.). Retrieved May 30, 2018 from
https://www.pc.gov.au/news-media/pc-news/previous-editions/pc-news-may-
2015/productivity-and-how-measured
3. Productivity Improvement Techniques and its Relationship with Work Study (n.d.)
Retrieved May 31, 2018 from
http://shodhganga.inflibnet.ac.in/bitstream/10603/13108/8/08_chapter%203.p
df
4. Understanding operations management. (n.d.). Retrieved May 31, 2018 from
http://www.open.edu/openlearn/money-business/leadership-
management/understanding-operations-management/content-section-3.1