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Production Management Introduction


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  • 2. CHAPTER 1 OVERVIEW PRODUCTION MANAGEMENT1. Introduction.2. Historical Evaluation of Production and Operations management.3. Concept of Production classification of Production System.4. Objectives of Production Management.5. Operation Management concept.6. Automation: Benefits and Limitations. GURURAJ PHATAK
  • 3. Introduction PRODUCTION MANAGEMENT Production/Operations Management is: The management of that part of an organization that is responsible for producing goods and/or services. The management of systems or processes that create goods and/or provide services.i.e. Every book you read, every e-mail you send or every medical treatment you receive involves the operation function of one or more organizations. The aim of production and operations is to satisfy people’s wants or needs. Operations Management affects:  The collective success or failure of companies’ POM  Companies’ ability to compete  Nation’s ability to compete internationally
  • 4. Business Organization PRODUCTION MANAGEMENT The Three Basic Functions Organization Finance Operations MarketingAll business organizations have these three basic functions so it doesn’t matter thebusiness a hospital, a manifacturing firm, a car wash etc.....
  • 5. Basic Concepts PRODUCTION MANAGEMENT Finance- is responsible for securing financial resources at favourable prices as well as analysing investment proposal and providing funds for marketing and operations. Marketing is responsible for assessing consumer needs or wants and selling and promoting the organization’s goods and services. Operations is responsible for producing the goods or providing the services offered by the organization.
  • 6. Value-Added Process PRODUCTION MANAGEMENTThe operations function involves the conversion of inputs into outputs Value added Inputs Transformation/ Outputs Land Conversion Goods Labor process Services Capital Feedback Control Feedback Feedback Figure 1.2 6
  • 7. Basic Concepts PRODUCTION MANAGEMENT Input- Materials, labour, Data or unprocessed information, technology, equipment, legal constraints, government regulations etc.... What type of skill do the employees need? What type of materials does the firm need? Value-Added Activities- Performed with tools machines, techniques, human skills etc....i.e. Processing.  How will the firm use its resources to produce its products/ how can the firm improve its operations?  Output- Good and services.  what are their needs/what sort of products will be produced?
  • 8. Value-added PRODUCTION MANAGEMENT• Value-added is the difference between the cost of inputs and the value or price of outputs.• In non-profit organization, value-added of output is their value to society. The greater the value-added, the greater the effectiveness of these operations (i.e. High way construction, state school construction etc...).• In profit organization, value-added of output is measured by prices that customers are willing to pay for those goods and services. Firms use the money generated by value-added for research and development, worker salaries and profit. The greater the value-added, The greater the amount of funds available for these purposes.
  • 9. Example of the transformation for Hospital Process Inputs Processing OutputsDoctors, nurses Examination HealthyHospital Surgery patientsMedical Supplies MonitoringEquipment MedicationLaboratories Therapy
  • 10. Manufacturing or Service? PRODUCTION MANAGEMENT Tangible Act Manufacturing and Service are often different in terms of what isdone but quite similar in terms of how it is done. For example, manufacturers decide what size factory needed and serviceorganizations must decide what size building is needed. Manufacturing and Service differ cause manufacturing is goods-orientedand service is act-oriented.
  • 11. Production of Goods vs. Delivery of Services PRODUCTION MANAGEMENT Production of goods – tangible output Delivery of services – an act Service job categories  Government (state, local, etc..)  Wholesale/retail (clothing, food, stationery,etc..)  Financial services (banking, insurance, etc..)  Healthcare (doctors, dentists, hospitals, etc..)  Personal services (laundry, dry cleaning, etc..)  Business services ( data processing, e-business, etc..)  Education (schools, colleges, etc..)
  • 12. Key Differences PRODUCTION MANAGEMENT1. Customer contact2. Uniformity of input3. Labor content of jobs4. Uniformity of output5. Measurement of productivity6. Production and delivery7. Quality assurance8. Amount of inventory9. Evaluation of work10. Ability to patent design
  • 13. Goods vs. Service PRODUCTION MANAGEMENTCharacteristic Goods ServiceCustomer contact Low HighUniformity of input High LowLabor content Low HighUniformity of output High LowOutput Tangible IntangibleMeasurement of productivity Easy DifficultOpportunity to correct problems High LowInventory Much LittleEvaluation Easier DifficultPatentable Usually Not usual
  • 14. Types of Operations PRODUCTION MANAGEMENT Operations Examples Goods Producing Farming, mining, construction, manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites
  • 15. Historical Evolution PRODUCTION MANAGEMENT Industrial revolution (1770’s) Scientific management (1911)  Mass production  Interchangeable parts  Division of labor Human relations movement (1920-60) A psychologist focusing on human factor in work-tiredness and motivation. Decision models (Harris 1915-inventory model, 1960-70’s) The factory movement was accompanied by the development of several quantitative techniques. After ww II-the importance of military and manifucturing sectors, the models of forecasting, inventory man., project man were developed. Influence of Japanese manufacturers JIT production, quality revolution, continual improvement etc.
  • 16. Historical Evolution PRODUCTION MANAGEMENT  Production of goods remained at a handicraft level untill the Industrial revolution took place. In 1764, the Industrial revolution began and James Watt invented the steam engine and advanced the use of mecanical power to increase productivity.  Eli Whitney (1798) found out and introduced the concepts of standardised parts and interchangeable parts. He then developed musket system because the type of muskets were handcrafted-he produced 10000 muskets by using the concept of interchangeable parts.  By using the same concept, he allowed the manifacture of fire- alarms, clocks, watchs, sewing machines etc..  Soon after, by conducting the concept of steam engine, Richard Trevithick (1802) invented the first train and Richard Fulton (1807) invented the first steam boat.
  • 17. Historical Evolution PRODUCTION MANAGEMENT  The first steam boat and the first train indicate a long stream of application in which human anad animal powers were replaced by engine power.  The Industrial revolution was the transformation of a society from peasant and local occupation into a society with world wide connections in terms of great use of machinery and large- scale commercial operations. This is the first step of factory system.  This system replaced the traditional production system by the concept of mass-production by bringing together large numbers of semi-skilled workers.  Adam Smith’s ‘The wealth of nations’ (1776) pointed out the importances and advantages of the division of labor where the production process was broken down into series of small tasks and each performed by a different worker.
  • 18. Historical Evolution PRODUCTION MANAGEMENT  With aid of the concept of the division of labor:  Workers who continually perfomed the same task, they would gain skill and experience.  Saving time or avoiding lost time due to changing jobs.  Workers’ concentration on the same job increased would lead to the development of special tools and techniques for faster and easier task.  Specialization jobs and division of labor began to take place. A prominent mathematician and engineer Charles babbage (1832) promoted an economic analysis of work and pay on the basis of skill requirement.  In the earliest days of manufacturing, goods were produced using craft production-highly skilled workers conducting simple, flexible tools to produce small quantities customized goods .
  • 19. Historical Evolution PRODUCTION MANAGEMENT  Frederick Taylor (1911) published ‘the priciples of scientific management’. This helped to achieve wide tasks in industry.  Frank Gilber (principles of motion economy), Henry Gantt (schudeling and charts design for system) and Herrington Emerson (organizational efficiency) used Taylor’s ideas to improve the system of operation and production management.  Influence of Japanese manufacturers  JIT production, quality revolution, continual improvement etc.  Using the concept of JIT production, Japanese manufacturers changed the rules of production from Mass Production to Lean Production.  Lean production prizes flexibility rather then efficiency, as well as quality rather than quantity. This indicates the first step of ‘Era of Industrial globalization’.
  • 20. Historical Evolution PRODUCTION MANAGEMENT
  • 21. Historical Evolution: School of Management PRODUCTION MANAGEMENT• The process school of management – was developed by Henry Fayol in 1900 – management can be viewed as a continuous process – the function of planning, organizing and controlling• The behavioural school of management – was developed by Elton Mayo in 1920 – human relation movement on production output – Productivity depends not only on the physical environment but also on social norms and personal feelings (i.e. Western Electric’s Hawthorne plant)
  • 22. Historical Evolution: School of Management PRODUCTION MANAGEMENT• The quantitative school of management – is concerned with decision making, mathematical modeling as well as system theory – represents a productive system – In 1915, Harris developed an Economic Order Quantity model for inventory management – In 1931, Shewhart developed a Quantity decision model for use in Statistical quality control work – In 1947, George Dantzing developed PERT/CPM – In the late 1950s and early 1960s Edward Bowman, Robert Fetter and Elwood Buffa developed the concept called Modern poduction Management – As computers became available in the 1950s, the power of opeartions research was multiplied
  • 23. Historical Evolution: School of Management PRODUCTION MANAGEMENT• The School of Modern Management – In the late 1960s, MRP and CPR were introduced by Joseph Orlicky and Oliver White – In the late 1970s, MRP II, JIT, TMQ and KANBAN systems were developed – the School of Modern Management includes the system and the contingency approaches. – these are also called new contemporary management approaches – the system approach points out that an organization has interdependent factors as such individuals, status, motives, goals etc and must work together – the contingency approach reveals that organizations are different so different and changing cases need to conduct different approaches and techniques in reaching a solution
  • 24. Trends in Industrial Globalization PRODUCTION MANAGEMENT • Major trends – The Internet, e-commerce, e-business – Management technology – Globalization – Management of supply chains – Outsourcing – Ethical behavior
  • 25. Production system PRODUCTION MANAGEMENT  Production is the process by which raw materials and other inputs are converted into finished products. Production system model comprises: i. Production system, ii. Conversion sub-system and iii. Control sub-system.
  • 26. Production System Model PRODUCTION MANAGEMENT Inputs Conversion Outputs Subsystem Control SubsystemProduction System: A System whose function is to convert a set of inputs in to a set ofdesired outputs.Conversion Subsystem: a subsystem of the larger production system where inputs areconverted in to outputsControl Subsystem: a subsystem of the larger production system where a portion ofthe output is monitored for feedback signals to provide a corrective action if required.
  • 27. Production System Model PRODUCTION MANAGEMENT
  • 28. Production System PRODUCTION MANAGEMENTThe production system of an organization is that part, which produces products of anorganization.It is that activity whereby resources, flowing within a defined system, arecombined and transformed in a controlled manner to add value in accordancewith the policies communicated by management.A simplified production system is shown below:The production system has the following characteristics:1. Production is an organized activity, so every production system has an objective.2. The system transforms the various inputs to 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 andimprove system performance.
  • 29. Classification of Production System PRODUCTION MANAGEMENTProduction systems can be classified as: Job Shop, Batch, Mass and ContinuousProduction systems.JOB SHOP PRODUCTIONJob shop production are characterized by manufacturing of one or few quantity ofproducts designed and produced as per the specification of customers within prefixedtime and cost. The distinguishing feature of this is low volume and high variety ofproducts.A job shop comprises of general purpose machines arranged into different departments.Each job demands unique technological requirements, demands processing onmachines in a certain sequence.CharacteristicsThe Job-shop production system is followed when there is:1. High variety of products and low volume.2. Use of general purpose machines and facilities.3. Highly skilled operators who can take up each job as a challenge because ofuniqueness.4. Large inventory of materials, tools, parts.5. Detailed planning is essential for sequencing the requirements of each product,capacitiesfor each work centre and order priorities.
  • 30. JOB SHOP PRODUCTION PRODUCTION MANAGEMENTAdvantagesFollowing are the advantages of job shop production:1. Because of general purpose machines and facilities variety of products can beproduced.2. Operators will become more skilled and competent, as each job gives them learningopportunities.3. Full potential of operators can be utilized.4. Opportunity exists for creative methods and innovative ideas.LimitationsFollowing are the limitations of job shop production:1. Higher cost due to frequent set up changes.2. Higher level of inventory at all levels and hence higher inventory cost.3. Production planning is complicated.4. Larger space requirements.
  • 31. BATCH PRODUCTION PRODUCTION MANAGEMENTBatch production is defined by American Production and Inventory Control Society(APICS) “asa form of manufacturing in which the job passes through the functional departments inlots or batches and each lot may have a different routing.” It is characterized by themanufacture of limited number of products produced at regular intervals and stockedawaiting sales.CharacteristicsBatch production system is used under the following circumstances:1. When there is shorter production runs.2. When plant and machinery are flexible.3. When plant and machinery set up is used for the production of item in a batch andchange of set up is required for processing the next batch.4. When manufacturing lead time and cost are lower as compared to job orderproduction.
  • 32. BATCH PRODUCTION PRODUCTION MANAGEMENTAdvantagesFollowing are the advantages of batch production:1. Better utilization of plant and machinery.2. Promotes functional specialization.3. Cost per unit is lower as compared to job order production.4. Lower investment in plant and machinery.5. Flexibility to accommodate and process number of products.6. Job satisfaction exists for operators.LimitationsFollowing are the limitations of batch production:1. Material handling is complex because of irregular and longer flows.2. Production planning and control is complex.3. Work in process inventory is higher compared to continuous production.4. Higher set up costs due to frequent changes in set up.
  • 33. MASS PRODUCTION PRODUCTION MANAGEMENTManufacture of discrete parts or assemblies using a continuous process are called massproduction.This production system is justified by very large volume of production. The machines arearranged in a line or product layout. Product and process standardization exists and alloutputs follow the same path.CharacteristicsMass production is used under the following circumstances:1. Standardization of product and process sequence.2. Dedicated special purpose machines having higher production capacities and outputrates.3. Large volume of products.4. Shorter cycle time of production.5. Lower in process inventory.6. Perfectly balanced production lines.7. Flow of materials, components and parts is continuous and without any back tracking.8. Production planning and control is easy.9. Material handling can be completely automatic.
  • 34. MASS PRODUCTION PRODUCTION MANAGEMENTAdvantagesFollowing are the advantages of mass production:1. Higher rate of production with reduced cycle time.2. Higher capacity utilization due to line balancing.3. Less skilled operators are required.4. Low process inventory.5. Manufacturing cost per unit is low.LimitationsFollowing are the limitations of mass production:1. Breakdown of one machine will stop an entire production line.2. Line layout needs major change with the changes in the product design.3. High investment in production facilities.4. The cycle time is determined by the slowest operation.
  • 35. CONTINUOUS PRODUCTION PRODUCTION MANAGEMENTProduction facilities are arranged as per the sequence of production operations from thefirst operations to the finished product. The items are made to flow through the sequenceof operations through material handling devices such as conveyors, transfer devices,etc.CharacteristicsContinuous production is used under the following circumstances:1. Dedicated plant and equipment with zero flexibility.2. Material handling is fully automated.3. Process follows a predetermined sequence of operations.4. Component materials cannot be readily identified with final product.5. Planning and scheduling is a routine action.
  • 36. CONTINUOUS PRODUCTION PRODUCTION MANAGEMENTAdvantagesFollowing are the advantages of continuous production:1. Standardization of product and process sequence.2. Higher rate of production with reduced cycle time.3. Higher capacity utilization due to line balancing.4. Manpower is not required for material handling as it is completely automatic.5. Person with limited skills can be used on the production line.6. Unit cost is lower due to high volume of production.LimitationsFollowing are the limitations of continuous production:1. Flexibility to accommodate and process number of products does not exist.2. Very high investment for setting flow lines.3. Product differentiation is limited.
  • 37. Objectives of Production Management. PRODUCTION MANAGEMENTThe objective of the production management is ‘to produce goods services ofright quality and quantity at the right time and right manufacturing cost’.1. RIGHT QUALITYThe quality of product is established based upon the customers needs.The right quality is notnecessarily best quality. It is determined by the cost of the product and the technical characteristicsas suited to the specific requirements.2. RIGHT QUANTITYThe manufacturing organization should produce the products in right number. If they are producedin excess of demand the capital will block up in the form of inventory and if the quantity is producedin short of demand, leads to shortage of products.3. RIGHT TIMETimeliness of delivery is one of the important parameter to judge the effectiveness of productiondepartment. So, the production department has to make the optimal utilization of input resources toachieve its objective.4. RIGHT MANUFACTURING COSTManufacturing costs are established before the product is actually manufactured. Hence, allattempts should be made to produce the products at pre-established cost, so as to reduce thevariation between actual and the standard (pre-established) cost.
  • 38. Concept of Operations Management PRODUCTION MANAGEMENTAn operation is defined in terms of the mission it serves for the organization, technologyit employs and the human and managerial processes it involves. Operations in anorganization can be categorized into manufacturing operations and service operations.Manufacturing operations is a conversion process that includes manufacturing yields atangible output: a product, whereas, a conversion process that includes service yields anintangible output: a deed, a performance, an effort.Following characteristics can be considered for distinguishing manufacturing operationswith service operations:1. Tangible/Intangible nature of output2. Consumption of output3. Nature of work (job)4. Degree of customer contact5. Customer participation in conversion
  • 39. A Framework for Managing Operations PRODUCTION MANAGEMENTPLANNINGActivities 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 thepolicies, and procedures for achieving the objectives. This stage includes clarifying the role and focus ofoperations in the organization’s overall strategy. It also involves product planning, facility designing and using theconversion process.ORGANIZINGActivities that establishes a structure of tasks and authority. Operation managers establish astructure of roles and the flow of information within the operations subsystem. They determine the activitiesrequired to achieve the goals and assign authority and responsibility for carrying them out.CONTROLLINGActivities 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 exercisecontrol by measuring actual outputs and comparing them to planned operations management. Controlling costs,quality, and schedules are the important functions here.BEHAVIOUROperation 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, andcontrolling actions. Their interest lies in decision-making behaviour.MODELSAs operation managers plan, organize, and control the conversion process, they encounter many problems andmust make many decisions. They can simplify their difficulties using models like aggregate planning models forexamining 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 capacityproblem of facility expansion, simple median model for determining best locations of facilities etc.
  • 40. A Framework for Managing Operations PRODUCTION MANAGEMENT
  • 41. Objectives of Operations Management. PRODUCTION MANAGEMENTThe customer service objective.To provide agreed/adequate levels of customer service (and hence customersatisfaction) by providing goods or services with the right specification, at the right costand at the right time.The resource utilization objective.To achieve adequate levels of resource utilization (or productivity) e.g., to achieveagreed levels of utilization of materials, machines and labor.
  • 42. Automation PRODUCTION MANAGEMENTAutomation is a technology concerned with the application of mechanical, electronic,and computer based systems to operate and control production. This technologyincludes automatic machine tools to process parts, automatic assembly machines,industrial robots, automatic material handling and storage systems, automatic inspectionsystems for quality control, feedback control and computer process control, computersystems for planning, data collection and decision-making to support manufacturingactivities.
  • 43. TYPES OF AUTOMATION PRODUCTION MANAGEMENT1. FIXED AUTOMATIONIt is a system in which the sequence of processing (or assembly) operations is fixed bythem equipment configuration. The operations in the sequence are usually simple. It isthe integration and coordination of many such operations into one piece of equipmentthat makes the system complex. The typical features of fixed automation are:(a) High initial investment for custom–Engineered equipment;(b) High production rates; and(c) Relatively inflexible in accommodating product changes.The economic justification for fixed automation is found in products with very highdemand rates and volumes. The high initial cost of the equipment can be spread over avery large number of units, thus making the unit cost attractive compared to alternativemethods of production. Examples of fixed automation include mechanized assemblyand machining transfer lines.
  • 44. TYPES OF AUTOMATION PRODUCTION MANAGEMENTPROGRAMMABLE AUTOMATIONIn this the production equipment is designed with the capability to change the sequence ofoperations to accommodate different product configurations. The operation sequence is controlledby a program, which is a set of instructions coded so that the system can read and interpret them.New programs can be prepared and entered into the equipment to produce new products. Some ofthe features that characterize programmable automation are:(a) High investment in general-purpose equipment;(b) Low production rates relative to fixed automation;(c) Flexibility to deal with changes in product configuration; and(d) Most suitable for batch production.Automated production systems that are programmable are used in low and medium volumeproduction. The parts or products are typically made in batches. To produce each new batch of adifferent product, the system must be reprogrammed with the set of machine instructions thatcorrespond to the new product. The physical setup of the machine must also be changed over:Tools must be loaded, fixtures must be attached to the machine table also be changed machinesettings must be entered. This changeover procedure takes time. Consequently, the typical cyclefor given product includes a period during which the setup and reprogramming takes place,followed by a period in which the batch is produced. Examples of programmed automation includenumerically controlled machine tools and industrial robots.
  • 45. TYPES OF AUTOMATION PRODUCTION MANAGEMENTFLEXIBLE AUTOMATIONIt is an extension of programmable automation. A flexible automated system is one thatis capable of producing a variety of products (or parts) with virtually no time lost forchangeovers from one product to the next. There is no production time lost whilereprogramming the system and altering the physical setup (tooling, fixtures, and machinesetting). Consequently, the system can produce various combinations and schedules ofproducts instead of requiring that they be made in separate batches.The features of flexible automation can be summarized as follows:(a) High investment for a custom-engineered system.(b) Continuous production of variable mixtures of products.(c) Medium production rates.(d) Flexibility to deal with product design variations.
  • 46. ADVANTAGES OF AUTOMATION PRODUCTION MANAGEMENTFollowing are some of the advantages of automation:1. Automation is the key to the shorter workweek. Automation will allow the average number ofworking hours per week to continue to decline, thereby allowing greater leisure hours and a higherquality life.2. Automation brings safer working conditions for the worker. Since there is less directphysical participation by the worker in the production process, there is less chance of personalinjury to the worker.3. Automated production results in lower prices and better products. It has been estimated that thecost to machine one unit of product by conventional general-purpose machine tools requiringhuman operators may be 100 times the cost of manufacturing the same unit using automatedmass-production techniques. The electronics industry offers many examples of improvements inmanufacturing technology that have significantly reduced costs while increasing product value (e.g.,color TV sets, stereo equipment, calculators, and computers).4. The growth of the automation industry will itself provide employment opportunities. Thishas been especially true in the computer industry, as the companies in this industry have grown(IBM, Digital Equipment Corp., Honeywell, etc.), new jobs have been created. These new jobsinclude not only workers directly employed by these companies, but also computer programmers,systems engineers, and other needed to use and operate thecomputers.5. Automation is the only means of increasing standard of living. Only through productivityincreases brought about by new automated methods of production, it is possible to advancestandard of living. Granting wage increases without a commensurate increase in productivity willresults in inflation. To afford a better society, it is a must to increase productivity.
  • 47. DISADVANTAGES OF AUTOMATION PRODUCTION MANAGEMENTFollowing are some of the disadvantages of automation:1. Automation will result in the subjugation of the human being by a machine. Automationtends to transfer the skill required to perform work from human operators to machines. In so doing,it reduces the need for skilled labor. The manual work left by automation requires lower skill levelsand tends to involve rather menial tasks (e.g., loading and unloading work part, changing tools,removing chips, etc.). In this sense, automation tends to downgrade factory work.2. There will be a reduction in the labor force, with resulting unemployment. It is logical toargue that the immediate effect of automation will be to reduce the need for human labor, thusdisplacing workers.3. Automation will reduce purchasing power. As machines replace workers and these workersjoin the unemployment ranks, they will not receive the wages necessary to buy the products broughtby automation. Markets will become saturated with products that people cannot afford to purchase.Inventories will grow. Production will stop. Unemployment will reach epidemic proportions and theresult will be a massive economic depression.
  • 49. TESTSub: Production Management Max Marks-25 Time: 12-45 TO1-30Answer the Following Questions: 5*2=101. Define Production Management.2. What is Conversion System?3. What are the types of Production System?4. Write the Objectives of Production Management.5. What is Automation?Answer the Following Questions: 5*3=151. Explain the Historical Background of Production Management.2. Explain the Different types of Production Systems with their Advantages and Disadvantages.3. Write the Advantages and Disadvantages of Automation. *ALL THE BEST*