MANAGING PRODUCTION AND SERVICE OPERATIONS

Organizations are designed mainly to produce products or services. If these organizations must survive and grow, the operations function must be taken in the most economical manner as possible. As most companies are expected to make profits, any activity, including those for operations must be managed to contribute to the accomplishment of such objectives.

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

Inputs: y Men y Materials y Machines y Information y Capital

Transformation Process: y Product Design y Process Planning y Production Control y Maintenance

Outputs: y Products y Services

Environment

Continuous: y Inventory y Quality y Cost

Feedback Information Fig. 1.1 Schematic production system PRODUCTION SYSTEM The production system of an organization is that part, which produces products of an organization. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. Characteristics of Production System 1. Production is an organized activity, so every production system has an objective.

2. The system transforms the various inputs into useful outputs. 3. It does not operate in isolation from the other organization system. 4. There exists a feedback about the activities, which is essential to control and improve system performance.

PRODUCTION MANAGEMENT E.S. Buffa defines production management as, Production management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded and out of minimum cost. Products (or services) management includes a wide range of management activities, ranging from the time that there s a new idea for a new product to eventually providing ongoing support to customer who have purchased the new product. Every organization conducts management, whether it s done intentionally or unintentionally.

OBJECTIVES OF PRODUCTION MANAGEMENT The objective of the production management is to produce goods and services of right quality and quantity at the right time and right manufacturing cost. 1. Right Quality The quality of product is established based upon the customers needs. The right quality is not necessarily the best quality. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. 2. Right Quantity The manufacturing organization should produce the products in right number. If they 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. 3. Right time 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. 4. Right manufacturing cost 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.

SERVICE OPERATIONS
WHAT IS OPERATION? Operations refer to any process that accepts inputs and uses resources to change those inputs into useful ways . The transformation process converts the inputs into final goods or services. Examples of final goods and service are as follows: 1. Industrial chemicals like methylene chloride, borax powder, phosphoric acid, etc., which are produce by chemical manufacturing films; 2. Services like those for the construction of ports, high-rise buildings, roads, bridges, etc., which are produced by construction firms; 3. Electrical products like transformers, circuit breakers, switch gears, power capacitors, etc., which are produced by electrical manufacturing firms; 4. Mechanical devices like forklifts, trucks, loaders, etc., which are produced by manufacturing firms; 5. Engineering consultancy services like those for construction management and supervision, project management services etc., which are produces by engineering consultancy firms. Operations in an organization can be categorized into manufacturing operations (a conversion process that includes manufacturing yields a tangible output: a product) and service operations. SERVICE OPERATIONS A service operation is an open transformation process that includes service yields an intangible output (a deed, a performance, an effort) through the appropriate application of resources (material, labor, information, and the consumer as well). Service is characterized by intangible outputs, outputs that customers consumes immediately, jobs that use more labor and less equipment, direct consumer contact, frequent customer participation in the conversion process, and elementary methods for measuring conversion activities and resource consumption. Some services are equipment based namely railroad services, telephone services and some are people based namely tax consultant services, hair styling. WHAT IS OPERATIONS MANAGEMENT? An operation is an activity that needs to be managed by competent persons. Aldag and Stearns accurately defined operations management as the process of planning, organizing, and controlling operations to reach objectives efficiently and effectively . As the terms planning ,

organizing , and controlling have already been discussed in the previous chapters, elaborations on the terms efficiency and effectiveness will be made. Efficiency is related to the cost of doing something, or the resource utilization involved. When a person performs a job at lesser cost than when another person performs the same job, he is more efficient than the other person. Effectiveness refers to goal accomplishment. When one is able to reach his objective, say produced 10,000 units in one month, he is said to be effective. Operations management must be performed in coordination with the other functions like those for marketing and finance although the specific activities of the operations divisions of firms slightly differ from one produced products or services.

OPERATION MANAGEMENT FRAMEWORK Managing operations can be enclosed in a frame of general management functions. Operation managers are concerned with planning, organizing, and controlling the activities which affect human behavior through models. y PLANNING. Activities that establishes a course of action and guide future decisionmaking

This stage includes clarifying the role and focus of operations in the organization s overall strategy. It also involves planning, facility designing and using the conversion process. y ORGANIZING. Activities that establishes a structure of tasks and authority.

Operation managers establish a structure of roles and the flow of information within the operations subsystem. They determine the activities required to achieve the goals and assign authority and responsibility for carrying them out. y CONTROLLING. Activities that assure the actual performance in accordance with planned performance.

To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual outputs and comparing them to planned operations management. Controlling costs, quality, and schedules are the important functions here. y BEHAVIOR

Operation managers are concerned with how their efforts to plan, organize, and control affect human behavior. They also want to know how the behavior of subordinates can affect

management s planning, organizing, and controlling actions. Their interest lies in decision-making behavior. y MODELS

refers to the creation of representations of management problems and organizations in order to determine outcomes of proposed courses of action. As operation managers plan, organize, and control the conversion process, they encounter many problems and must make many decisions. They can simplify their difficulties using models (like aggregate planning models for examining how best to use existing capacity in short-term) Types of Models in Production Operations and Management: 1. 2. 3. 4. Verbal Models - express in words the relationships among variables. Schematic Models - pictorial relationship among variables Iconic Models - scaled physical replicas of objects or processes. Mathematical Models - functional relationships among variables by using mathematical symbols

OPERATIONS AND THE ENGINEER The engineer manager is expected to produce some outputs at whatever management level he is. If he is assigned as the manufacturing engineer, his function is to determine and define the equipment, tools, and process required to convert the design product into reality in an efficient manner . The engineer in charge of operations in a construction firms is responsible for the actual construction of whatever bridge or road his company has agreed to put up. He is required to do it using the least-expensive and easiest methods. The engineer, as operations manager, must find ways to contribute to the production of quality goods or services and the reduction of costs in his department.

TRANSFORMATION PROCESS The engineer manager must have some knowledge of the various types of transformation process. They are as follows: 1. SERVICE PROCESSES Service processes are those that refer to the provision of services to persons by hand with machinery.

Service factory. A service factory offers a limited mix of services which results to some economies of scale operations. This is also affords the company to compete In terms of price and speed producing the service. Ex: Jollibee and McDonald Service Shop. A service shop provides mix of services. The layout are those for job shops or fixed position and adaptable to various requirements. Examples are Servitek and Megashell. Among the services provided by these shops are car engine tune-up, wheel balancing, wheel alignment, change oil, etc. Mass Service. A mass service company provides services to a large number of people simultaneously. A unique processing method is, therefore, necessary to satisfy requirement. To be able to serve many people, mass service companies offer limited mix of services. Professional Services. These are companies that provide specialized services to other firms or individuals. Examples of such firms are as follows: 1. 2. 3. 4. 5. Engineering or management consulting services Advertising agencies Accounting services Legal services Health services

2. MANUFACTURING PROCESSES Manufacturing process are those that refer to the making of products by hand or with machinery. Job Shop Production. Job shop production are characterized by manufacturing of one or few quantity of products designed and produced as per the specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of products. A job shop comprises of general purpose machines arranged into different departments. Each job demands unique technological requirements, demands processing on machines in a certain sequence. Batch Production. Batch production is defined by American Production and Inventory Control Society (APICS) as a form of manufacturing in which the job passes through the functional departments in lots or batches and each lot may have a different routing. It is characterized by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales. Mass Production. Manufacture of discrete parts or assemblies using a continuous process are called mass production. This production system is justified by very large volume of production. The machines are arranged in a line or product layout. Product and process standardization exists and all outputs follow the same path.

Continuous Production. Production facilities are arranged as per the sequence of production operations from the first operations to the finished product. The items are made to flow through the sequence of operations through material handling devices such as conveyors, transfer devices, etc.

OBJECTIVES OF OPERATIONS MANAGEMENT Objectives of operations management can be categorized into customer service and resource utilization. Customer Service - Aspects of customer service: specification, cost and timing - the operating system must provide something to a specification which can satisfy the customer in terms of cost and timing. Thus, primary objective can be satisfied by providing the right thing at a right price at the right time . Resource Utilization - is to utilize resources for the satisfaction of customer wants effectively, i.e., customer service must be provided with the achievement of effective operations through efficient use of resources. Inefficient use of resources or inadequate customer service leads to commercial failure of an operating system. FUNCTIONS OF PRODUCTION AND OPERATIONS MANAGEMENT Production and operations management that are concerned with the conversion of inputs into outputs, using physical resources, so as to provide the desired utilities to the customer while meeting the other organizational objectives of effectiveness, efficiency and adoptability. It distinguishes itself from other functions such as personnel, marketing, finance, etc., by its primary concern for conversion by using physical resources. Following are the activities which are listed under production and operations management functions:

1. Location of facilities Location of facilities for operations is a long-term capacity decision which involves a long term commitment about the geographically static factors that affect a business organization. It is an important strategic level decision-making for an organization. It deals with the questions such as where our main operations should be based? 2. Plant layouts and materials management Plant layout refers to the physical arrangement of facilities. It is the configuration of departments, work centers and equipment in the conversion process. The overall objective of the plant layout is to design a physical arrangement that meets the required output quality and quantity most economically.

Materials management refers to approach that seeks efficiency of the operation through integration of all material acquisition, movement, and storage activities in the firm.

3. Product design Product design deals with conversion of ideas into reality. 4. Process design Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis and layout of the facilities. 5. Production and planning control Production planning and control can be defined as the process of planning the production in advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow up the progress of products according to orders. Main functions of production planning and control: o Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. o Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products o Scheduling is defined as the fixation of time and date for each operation as well as it determines the sequence of operations to be followed. o Dispatching is release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts. o Follow-up is to report daily the progress of work in each shop in a prescribed performance and to investigate the causes of deviations from the planned performance. 6. Quality control Quality Control (QC) may be defined as a system that is used to maintain a desired level of quality in a product or service. 7. Materials management Materials management is that aspect of management function which is primarily concerned with the acquisition, control and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view. 8. Maintenance management. The main objectives of maintenance management are:

1. 2. 3.

To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost. To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption. To ensure the availability of the machines, buildings and services required by other sections of the factory for the performance of their functions at optimal return on investment

DEVELOPING PRODUCTS Sources of Ideas Ideas can come from many sources, for example: 1. 2. 3. 4. Complaints from current customers (Customer and Customer Satisfaction) Requests for Proposals from large business, government agencies etc. Modifications to current products(Innovation) Suggestions from employees, customers, suppliers, etc. (Creative Thinking)

FACTORS IN PRODUCT/SERVICE PRODUCTION y Product/Service Distribution  Direct distribution methods include your providing your products and services directly to your customer. Direct methods are, for example, direct mail, retail, catalogs, or even over the Internet.  Indirect methods include having a middleman. Indirect methods include, for example, using wholesalers and distributors, or retailers (the middleman is a large chain of retail stores). Advertising and Promotion

Advertising and promotion of products and services are often some of the most underrated activities by new business owners. Many people strongly believe that if they build it, buyers will come. In this increasingly expanding and competitive marketplace, you must ensure your products and services are prominently in the minds of your customers and clients. This requires ongoing advertising and promotion. Sales Even if your products and services are prominently in the minds of your customers and clients, you need to facilitate the process of their buying your product and services. This often requires cultivating an ongoing relationship with customers and clients to understand their y

needs, explain how your products and services can meet those needs, and facilitate the closing of the sale, that is, where they sign on the dotted line . y Warranties

Customers are increasingly knowledgeable and intelligent in their buying habits. Depending on the nature of the product or service, a warranty (or promise of ongoing repair and/or support for some period of time) can greatly reassure customers when considering the purchase of your products.

Customer satisfaction

(note that nonprofits might use the term clients rather than customers ) Increasing competition (whether for profit or nonprofit) is forcing businesses to pay much more attention to satisfy customers. It may help the reader to notice the role of the customer satisfaction in the overall context of the product or service development and management.

Prepared by:
Juana Abetria Aura Karissa Alcantara Ranijames Bangay Chester Carlo Brizuela Ron de Guzman BSCE 4 1 CENG - Engineering Management

Engr. Cene M. Bago

Instructor