Production & Operations Management: Concepts, Objectives, Functions and Scope

Introduction to production or operations management

Production or operations management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level.

The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to services management, then the corresponding set of management activities is called as operations management.

Concept Production

Production function is that part of an organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level.

1. Production is defined as “the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user.”
2. Edwood Buffa defines production as ‘a process by which goods and services are created’.

Some examples of production are: manufacturing custom-made products like, boilers with a specific capacity, constructing flats, some structural fabrication works for selected customers, etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.

Production management

Production management is a process of planning, organizing, directing and controlling the activities of the production function. It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization.

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.”

Objectives of Production Management 

The objective of the production management is ‘to produce goods 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 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 are 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 parameters 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.

Concept of Operations 

An operation is defined in terms of the mission it serves for the organization, technology it employs and the human and managerial processes it involves. Operations in an organization can be categorized into manufacturing operations and service operations. Manufacturing operations is a conversion process that includes manufacturing yields a tangible output: a product, whereas, a conversion process that includes service yields an intangible output: a deed, a performance, an effort.

Distinction between Manufacturing Operations and Service Operations 

Following characteristics can be considered for distinguishing manufacturing operations with service operations:

1. Tangible/Intangible nature of output
2. Consumption of output
3. Nature of work (job)
4. Degree of customer contact
5. Customer participation in conversion
6. Measurement of performance.

Manufacturing is characterized by tangible outputs (products), outputs that customers consume overtime, jobs that use less labour and more equipment, little customer contact, no customer participation in the conversion process (in production), and sophisticated methods for measuring production activities and resource consumption as product are made.

Service is characterized by intangible outputs, outputs that customers consume immediately, jobs that use more labour 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 rail-road services, telephone services and some are people based namely tax consultant services, hair styling.

Operations Management

Managing operations can be enclosed in a frame of general management function as shown in Figure below Operation managers are concerned with planning, organizing, and controlling the activities which affect human behaviour through models.

1. PLANNING (Activities that establishes a course of action and guide future decision-making is planning.) The operations manager defines the objectives for the operations subsystem of the organization, and the policies, and procedures for achieving the objectives. This stage includes clarifying the role and focus of operations in the organization’s overall strategy. It also involves product planning, facility designing and using the conversion process.
2. 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.
3. 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.
4. BEHAVIOUR - Operation managers are concerned with how their efforts to plan, organize, and control affect human behaviour. They also want to know how the behaviour of subordinates can affect management’s planning, organizing, and controlling actions. Their interest lies in decision-making behaviour.
5. MODELS - 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, break-even analysis to identify break even volumes, linear programming and computer simulation for capacity utilization, decision tree analysis for long-term capacity problem of Facility expansion, simple median model for determining best locations of facilities etc.

Definition: 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 process in the above diagram is often referred to as the "Conversion Process". There are several different methods of handling the conversion or production process - Job, Batch, Flow and Group POM incorporates many tasks that are interdependent, but which can be grouped under five main headings:

1. PRODUCT - Marketers in a business must ensure that a business sells products that meet customer needs and wants. The role of Production and Operations is to ensure that the business actually makes the required products in accordance with the plan. The role of PRODUCT in POM therefore concerns areas such as:
• Performance
• Aesthetics
• Quality
• Reliability
• Quantity
• Production costs
• Delivery dates
2. PLANT - To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of the fixed assets of the business. In determining which PLANT to use, management must consider areas such as:
• Future demand (volume, timing)
• Design and layout of factory, equipment, offices
• Productivity and reliability of equipment
• Need for (and costs of) maintenance
• Health and safety (particularly the operation of equipment)
• Environmental issues (e.g. creation of waste products)
3. PROCESSES - There are many different ways of producing a product. Management must choose the best process, or series of processes. They will consider:
• Available capacity
• Available skills
• Type of production
• Layout of plant and equipment
• Safety
• Production costs
• Maintenance requirements
4. PROGRAMMES - The production PROGRAMME concerns the dates and times of the products that are to be produced and supplied to customers. The decisions made about programme will be influenced by factors such as:
• Purchasing patterns (e.g. lead time)
• Cash flow
• Need for / availability of storage
• Transportation
5. PEOPLE - Production depends on PEOPLE, whose skills, experience and motivation vary. Key people-related decisions will consider the following areas:
• Wages and salaries
• Safety and training
• Work conditions
• Leadership and motivation
• Unionization

Benefits derived from efficient production management

1. Consumer benefits from improved industrial Productivity, increased use value in the product. Products are available to him at right place, at right price, at right time, in desired quantity and of desired quality.
2. Investors: They get increased security for their investments, adequate market returns, and creditability and good image in the society.
3. Employee gets adequate Wages, Job security, improved working conditions and increased Personal and Job satisfaction.
4. Suppliers: Will get confidence in management and their bills can be realized without any delay.
5. Community: community enjoys Benefits from economic and social stability.
6. The Nation will achieve prospects and security because of increased Productivity and healthy industrial atmosphere.

Functions of production management department

The functions of Production Management depend upon the size of the firm. In small firms the production Manager may have to look after production planning and control along with Personnel, Marketing, Finance and Purchase functions. In medium sized firms, there may be separate managers for Personnel, marketing and Finance functions. But the production planning and control and Purchase and stores may be under the control of Production management department. In large sized firms the activities of Production Management is confined to the management of production activities only. As such, there are no hard and fast rules or guidelines to specify the function of Production Management, but in the academic interest we can mention some of the functions, which are looked after by the Production Management department. They are:

1. Materials: The selection of materials for the product. Production manager must have sound Knowledge of materials and their properties, so that he can select appropriate materials for his product. Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes.
2. Methods: Finding the best method for the process, to search for the methods to suit the available resources, identifying the sequence of process are some of the activities of Production Management.
3. Machines and Equipment: Selection of suitable machinery for the process desired, designing the maintenance policy and design of layout of machines are taken care of by the Production Management department.
4. Estimating: To fix up the Production targets and delivery dates and to keep the production costs at minimum, production management department does a thorough estimation of Production times and production costs. In competitive situation this will help the management to decide what should be done in arresting the costs at desired level.
5. Loading and Scheduling: The Production Management department has to draw the time table for various production activities, specifying when to start and when to finish the process required. It also has to draw the timings of materials movement and plan the activities of manpower. The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available.
6. Routing: This is the most important function of Production Management department. The Routing consists of fixing the flow lines for various raw materials, components etc., from the stores to the packing of finished product, so that all concerned knows what exactly is happening on the shop floor.
7. Dispatching: The Production Management department has to prepare various documents such as Job Cards, Route sheets, Move Cards, Inspection Cards for each and every component of the product. These are prepared in a set of five copies. These documents are to be released from Production Management department to give green signal for starting the production. The activities of the shop floor will follow the instructions given in these documents. Activity of releasing the document is known as dispatching.
8. Expediting or follow up: Once the documents are dispatched, the management wants to know whether the activities are being carried out as per the plans or not. Expediting engineers go round the production floor along with the plans, compare the actual with the plan and feedback the progress of the work to the management. This will help the management to evaluate the plans.
9. Inspection: Here inspection is generally concerned with the inspection activities during production, but a separate quality control department does the quality inspection, which is not under the control of Production Management. This is true because, if the quality inspection is given to production Management, then there is a chance of qualifying the defective products also. For example, Teaching and examining of students is given to the same person, and then there is a possibility of passing all the students in the first grade. To avoid this situation an external person does correction of answer scripts, so that the quality of answers is correctly judged.
10. Evaluation: The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives. This is necessary for setting up the standards for future. Whatever may be the size of the firm; Production management department alone must do Routing, Scheduling, Loading, Dispatching and expediting. This is because this department knows very well regarding materials, Methods, and available resources etc. If the firms are small, all the above-mentioned functions (i to x) are to be carried out by Production Management Department. In medium sized firms in addition to Routing, Scheduling and Loading, Dispatching and expediting, some more functions like Methods, Machines may be under the control of Production Management Department. In large firms, there will be Separate departments for Methods, Machines, Materials and others but routing, loading and scheduling are the sole functions of Production Management.

Nature and Scope of Operations Management 

Operations management is often used along with production management in literature on the subject. It is therefore, useful to understand the nature of operations management. Operations management is understood as the process whereby resources or inputs are converted into more useful products. A second reading of the sentence reveals that; there is hardly any difference between the terms production management and operations management. But there are a least two points of distinction between production management and operations management. First, the term production management is more used for a system where tangible goods are produced. Whereas, operations management is more frequently used where various inputs are transformed into tangible services. Viewed from this perspective, operations management will cover such services organization as banks, airlines, utilities, pollution control agencies super bazaars, educational institutions, libraries, consultancy firm and police departments, in addition, of course, to manufacturing enterprises. The second distinction relates to the evolution of the subject. Operation management is the term that is used now a day. Production management precedes operations management in the historical growth of the subject the two distinctions notwithstanding, the terms production management and operations management are used interchangeably.

Scope of Production and Operation Management

The scope of production and operations management is indeed vast. Commencing with the selection of location production management covers such activities as acquisition of land, constructing building, procuring and installing machinery, purchasing and storing raw material and converting them into saleable products. Added to the above are others related topics such as quality management, maintenance management, production planning and control, methods improvement and work simplification and other related areas.

1. Facility Location - Selecting appropriate location for the production
2. Plant layouts and material handling - Deciding upon the machines, equipment and necessary devices which could lead to effectual and desired production in the most economical way. Preparation of plan layout for the establishment of machines in the required sequence. Storage of material and handling it in most effective way to avoid the wastage and delivery at the work centers as and when required.
3. Product design - Designing the product and conceive the idea about its production.
4. Process design - Determination of the production process which is most relevant and efficient in the given state of affairs.
5. Production and planning control - Planning the production and its various aspects how, when and were producing a particular product or its assembly will be done.
6. Quality control - Controlling the production and ensuring the quality by setting the check points and taking the periodic measurements of the current performance.
7. Materials management - Managing the inventories of raw material, semi-finished, and finished goods in a way that neither excessive money may block in this non production operation nor the required material.
8. Maintenance management - Analysis the deviations and formulating the corrective measures to stay in track with planned quality, time-schedule and predetermined cost schedules.

Related Posts

Sandeep Ghatuary

Finance & Accounting blogger simplifying complex topics.

View full author profile →

Previous

Next