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Production Operations Management and TQM

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Introduction to Production and Operations Management

Module 001 Introduction to Production and


Operations Management

At the end of this module you are expected to:


1. Be oriented with the different strategic management process
2. Determine the importance of production management to business
organization
3. Examine the functions and importance of production management
4. Analyze the different types of productivity
5. Examine the activities related to operations management

Introduction to Production Management


Production is an act of creating something useful and according to Deepu2000 Follow.
(2016, December 01). Production management. Retrieved from
https://www.slideshare.net/deepu2000/production-management-69710952, production
management refers to the planning, acquisition, utilization and control of physical resources
employed in the provision of goods and services. To produce useful goods and services that will
satisfy the needs and wants of customers and to earn profit for the company, planning, organizing,
directing and controlling the manufacturing activities is involved in the process.

According to Production Management System (n.d.) Retrieved from


https://www.sjf.tuke.sk/transferinovacii/pages/archiv/transfer/28-2013/pdf/036-038.pdf, the
importance of production management to business organization are as follows:
1. It helps in the accomplishment of business organization’s objectives.
2. It increases the reputation, , goodwill and image of business organization.
3. It helps in introducing new products.
4. It supports other business organization’s functional areas.
5. It helps the business to face competition in the market.
6. It facilitates the optimum resource utilization
7. It helps to minimize the production costs.
8. It helps in the expansion of business.

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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

According to 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 , production management has the following
functions:

Figure 1 Functions of Production Management

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

1. Selection of product and design


Selecting the right product to produce followed by selecting the right design
for the product. While doing such, care should be taken because the success and
survival of the business depend on it. Detailed evaluation of all the other alternative
products should be done first before the selection of the product. Product design
should be according to the customers’ requirements. Maximum value at the lowest
cost must be given to customers.
2. Selection of production process
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Introduction to Production and Operations Management

The right production process must be selected. Production management


must decide about the type of machines, material handling system, type of technology
,etc.
3. Selecting right production capacity
To match the demand for the product, right production capacity must be
selected by production management. The reason why is that more or less capacity
will create problems. The capacity for both short and long term’s production must
be planned by the production manager. Break-even analysis for capacity planning
must be used by a production manager.

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.

 Scheduling – it refers to deciding when to start and when to complete


a particular production activity.

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.

6. Quality and cost control


In today’s competitive world, a lot of importance is given to quality and cost
control. To satisfy the demands of customers which is to have a good quality products
at cheapest prices, production manager should continuously improve quality of
products. Together with this is for him to ensure that essential steps are taken to reduce
the costs of his products.

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.

8. Maintenance and replacement of machines


Efficient system for continuous inspection, cleaning, oiling, machine and
equipment and spare parts maintenance and replacement should be considered and
implemented by the production manager. This prevents machine breakdown and
avoids production halts.

Integrated Production Management


According to Integrated Production Management (n.d.) Retrieved from
https://www.researchgate.net/publication/301675453_INTEGRATED_PRODUCTION_MAN
AGEMENT , integrated production management refers to the use advanced manufacturing
technology ( CIM, additive manufacturing, robotics, mechatronics and automation, micro
and nano factories, sustainable and green manufacturing), JIT, TQM, human capital
perspective and human resource management. Businessmen should realize the importance
of integrated production management system because it has a potential of decreasing costs
and increase output which in turn can make profit increase. In the said study, development
of methods for integrating production management applications under production and other
management system was the focus.

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.

3. Total productivity – productivity is calculated considering all the resources. It is


a qualitative and systematic to approach to complete the products considering
the timer, price and quality. It provides a systematic structure and framework
to business organization and profitability increase.

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
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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.

2. Technological progress and organizational change – Expanding output with a little


required input may be achieved as the organization adopts new organizational
structures, develops and applies new technologies and approaches.

3. Increasing returns to scale – Organization’s unit cost of production can fall as it


expands because it becomes financially advantageous to adopt existing
technologies.

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.

3. Economies of scale – It refers to cost advantages obtained which industries take


advantage due to size.

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.

According to Read "Organizational Linkages: Understanding the Productivity


Paradox" at NAP.edu. (n.d.). Retrieved from https://www.nap.edu/read/2135/chapter/6,
productivity measurement and alignment has the following five major functions:
1. Define productivity and direct behavior
A clear definition of productivity for the operation is provided by the
measurement system while specific direction and guidance to the worker
toward productive activities are provided by the productivity measurement.
2. Monitor performance and provide feedback
Means to check progress toward an objective is being provided by the
measurement system. Likewise, it can also form a major part of employees
performance evaluation which can lead to rewards or disciplinary action.

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.

4. Facilitate planning and control


To allow decision making with respect to pricing, production
scheduling, purchasing, contracting, scheduling in delivery and other
industrial cycle’s activities, productivity measurement provides information
on time, costs, output rate and resource usage. Products or processes which
should be expanded and should be phased out may be determined through
productivity analysis and competitive strategy elements.

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.

Introduction to Operations Management


Production Operations Management and TQM
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Introduction to Production and Operations Management

According to Operations Management (n.d.) Retrieved from


https://managementhelp.org/operationsmanagement/index.htm , operations management’s focus
is the careful process management so as to produce and distribute goods and services. Product
creation, development, production and distribution are its major and overall activities. Activities
related to it are the following:
1. Purchasing – it refers to guidelines for buying materials from suppliers and vendors.
Materials include raw materials, computers, services from lawyers, insurance, etc.

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 )

Likewise according to Introduction to Operations Management (n.d.) Retrieved from


https://www.mheducation.co.uk/he/chapters/9780077133016.pdf , a part of business
organization which is responsible for producing goods and services is what we call “Operations”.
Moreover, operations as part of the organization with the said responsibility needs the input and
support from other organization’s areas.

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Figure 2 - 3 Basic Areas/Functions of Business Organizations

Introduction to Operations Management (n.d.) Retrieved from http://slideplayer.com/slide/9246190/

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.

Operations Management and Strategy


No business organization could exist without operations management and supply
chain. Supply chain is the organization’s sequence which includes the facilities, functions
and activities which are involved in producing and delivering products and services to
customers.
Strategic operations management, according to Introduction to Operations
Management (n.d.) Retrieved from http://slideplayer.com/slide/9246190/ highlights the
importance of devoting lots of attention to environment analysis and strategy formulation
which relate direct to environmental changes. From the same source, steps in the strategic
management process were given and these are the following:
1. Environmental scanning – In this step, external and internal environments are
scanned and ends with monitoring of organization’s activities.

2. Strategy formulation – Formulation of strategies at the following levels is done


here.

a. Corporate Level – To oversee the interest and organizations operations which


is made up of more than one line business. In formulation such strategies in
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Introduction to Production and Operations Management

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.

c. Functional level – in this level, the business organization should be able to


identify the courses of action that the different departments (manufacturing,
quality control, Human resource, Finance, etc) would like to pursue in order
to help the business unit to attain its objectives. In formulating such strategies,
operations managers should bear in mind that the different functions are
interrelated.

3. Strategic implementation – In this stage, the strategies formulated are


implemented in the business. Of course, strategic implementation is different and
more difficult than strategic formulation in a sense that
 Strategy formulation is positioning before action while strategy
implementation is the managing forces during the action;
 Effectiveness is the focus in strategy formulation while efficiency in
strategy implementation
 Primarily, strategy formulation is an intellectual process while strategy
implementation is an operational process.
 Good intuitions and operating skills are required in strategy formulation
while motivation and leadership skills are required in the implementation

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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.

Tools for Implementation of Operations


According to Operations Management (2016, July) Retrieved rom
https://vtechworks.lib.vt.edu/bitstream/handle/10919/70961/Chapter%209%20Operati
ons%20Management.pdf, in managing operations in a manufacturing firm, setting up of
schedules for the operation is very important and in doing so the following tools are
useful:
1. Gantt Charts – To help operations manager in determining the status of a project, an
easy to use graphical tool is used and that is the Gantt chart. It is named after the
designer, Henry Gantt.
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Introduction to Production and Operations Management

Figure 3 Sample Gantt Chart

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.

3. Computer aided design software package - CAD Software | 2D And 3D Computer-Aided


Design | Autodesk. (n.d.). Retrieved from https://www.autodesk.in/solutions/cad-
software , in CAD software or computer –aided design and drafting , computer
technology is used in designing and in designing documentation. It is usually used for
building designing and construction.

4. Computer-aided manufacturing software system (CAM) – It refers to the automation


process that accurately converts the product design and drawing of a thing into a
code format which makes it more readable by the machine to manufacture the
product . Controlling machinery in a highly automated environment to manufacture
different items and pieces becomes possible through the said system. Likewise, CAM
is also used in manufacturing plant specifically in all computer-aided operations -
planning, management, transportation and storage. Through CAM, measuring of
plant’s output and production as a whole as well as in optimizing the assembly
process.

5. Computer-integrated manufacturing system – According to Operations Management


(n.d.) Retrieved from
https://managementhelp.org/operationsmanagement/index.htm , CIM systems
have taken the integration of computer-aided design and manufacturing to a higher
level by automating and integrating company’s operation’s aspects. Likewise,
through CIM, capabilities of CAD/CAM are expanded . CIM also handle order entry,
inventory control, warehousing and shipping in addition to design and production
applications.

References and Supplementary Materials


Books and Journals
1. Deepu2000 Follow. (2016, December 01). Production management. Retrieved
May 29, 2018 from https://www.slideshare.net/deepu2000/production-
management-69710952
Production Operations Management and TQM
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Introduction to Production and Operations Management

2. OpenStax. (n.d.). Principles of Economics. Retrieved May 29, 2018 from


https://opentextbc.ca/principlesofeconomics/chapter/20-2-labor-productivity-
and-economic-growth/
3. Read "Organizational Linkages: Understanding the Productivity Paradox" at
NAP.edu. (n.d.). Retrieved May 29, 2018 from
https://www.nap.edu/read/2135/chapter/6
4. Defining and measuring productivity(n.d.) Retrieved May 29, 2018 from
http://www.oecd.org/sdd/productivity-stats/40526851.pdf
5. Production Management Standards: Industrial Need (n.d.) Retrieved May 30,
2018 from
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.37.4777&rep=rep1&
type=pdf
6. Productivity and Operation Management (n.d.) Retrieved May 30, 2018 from
https://www.slideshare.net/shreyasmetri/productivity-and-operation-
management
7. Operations Management (n.d.) Retrieved May 30, 2018 from
https://managementhelp.org/operationsmanagement/index.htm
8. Introduction to Operations Management (n.d.) Retrieved May 30, 2018 from
https://www.mheducation.co.uk/he/chapters/9780077133016.pdf
9. Production Management System (n.d.) Retrieved May 31, 2018 from
https://www.sjf.tuke.sk/transferinovacii/pages/archiv/transfer/28-
2013/pdf/036-038.pdf
10. Operations Management (2016, July) Retrieved May 31, 2018 from
https://vtechworks.lib.vt.edu/bitstream/handle/10919/70961/Chapter%209%
20Operations%20Management.pdf
11. CAD Software | 2D And 3D Computer-Aided Design | Autodesk. (n.d.). Retrieved
May 31, 2018 from https://www.autodesk.in/solutions/cad-software
12. Applications of Computer Aided Manufacturing (2018) Retrieved May 31, 2018
from https://www.digitalschool.ca/applications-of-computer-aided-
manufacturing/
13. Ranjan, P. (2017, May 02). Production management, meaning, nature, function,
PPC, production pla... Retrieved May 31, 2018 from
https://www.slideshare.net/PrashantRanjan35/production-management-
meaning-nature-function-ppc-production-planning-control
14. Integrated Production Management (n.d.) Retrieved May 31, 2018 from
https://www.researchgate.net/publication/301675453_INTEGRATED_PRODUCT
ION_MANAGEMENT

Online Supplementary Reading Materials

Course Module
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

Online Instructional Videos


1. INTODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT new. (2014,
April 11). Retrieved May 31, 2018 from
https://www.youtube.com/watch?v=idkIrZsHJ74&t=3s
2. Production and Operations Management Overview Chapter 1. (2013, June 25).
Retrieved May 31, 2018 from
https://www.youtube.com/watch?v=qJu0EomMKxg
3. Introduction to Business Chapter 9: Production and Operations Management.
(2014, July 31). Retrieved May 31, 2018 from
https://www.youtube.com/watch?v=9pztIoZdpFI
4. Garvin, D. A. (n.d.). The Processes of Organization and Management. Retrieved
May 31, 2018, from https://sloanreview.mit.edu/article/the-processes-of-
organization-and-management/

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