• Industrial revolution in 18th century, brought in
• Means mass production using machines and
• Rapid technical inventions in all spheres of
activities led to advent of modern industry with
aid of advanced production method and
• Pre industrial revolution was mostly manual
production old gen. techniques to latest most
advanced flexible manufacturing systems, says
the transition of production process.
What is production
• Process by which raw materials and other inputs are
converted into finished products.
• It is most basic function, heart of any organisation.
• Two ingradients of production , people and natural
resources, exploitation of resources by people , deliver
goods, to gain benefits and raise standard of living
members of society.
• All departments Purchase, finance, marketing, R & D,
Software development etc., revolves around
• Aim of every production system is to produce
economically to entire satisfaction of the customer, (
for whom the product is meant for )employer,
Production and manufacturing DO
THEY CARRY SAME MEANING ???
• Process through which
goods and services are
• Services can refer other
non manufacturing sectors
of economy like transport,
warehousing, postal system
• Refer to process of
producing only tangible
goods in factory like
• Configuration resources combined for provision of goods or
• Retail organisation, hospital, bus and taxi services, tailors, motels,
dentists examples of operating system.
• Converts inputs using physical resources, to create outputs to
satisfy the customer need.
• Inputs like labour, captial, information produce output using
transformation processes like storing, transport, manufacture,
supply, service etc.,
• Organisation takes measurement at various points / feedback at
various points and compare with previous established standard and
do corrective action.
• Goods and services can occur jointly like car oil change, painting.
Legal or political
captial , capital
like retailing or whole
Storage services like
real estates, health,
Govt. services like
local , state , federal.
Direct outputs like
products , services.
Indirect outputs like
taxes , wages and
Operation system in hotel industry
• Inputs like furniture, linen, employee, water,
fruits, meat , vegetables for kitchen, and
• Processes include cleaning rooms, making
reservations, checking guests in and out of the
hotel, room service delivery, organising functions.
• Outputs include provision of guest rooms, food
served in restaurants, facilities provided for
function and conferences.
• Operation generally used to imply activities of service
organization, now implies production as well.
• It covers both manufacturing and service industries.
• Theory of operation management is common to both
goods and service production.
• Some common functions are forecasting, scheduling, QC,
other managerial activities.
• So it is the management of productive system, regardless
whether it is product oriented or service oriented.
• Deals with decision making related to production
processes so that the resulting goods or services are
produced according to specifications, in the amounts,
and by the schedule demanded and at minimum cost.
Different time stages leading to
• Handicraft era
• Industrial revolution era,
invention of steam engine, assignment and division of
labour by skill, basis of time study.
• Scientific management era - seperation of planning from
doing. Time study, work study,, differential wages.
• Operation research and Computers Era- computers used
for large scale computation. Study of organisation
behaviour, Integrating operations into overall statergy and
policy. Computer application of manufacturing, scheduling.,
Quality and productivity applications from Japan, Robotics,
CAD, CAM, TQM, JIT, KANBAN.
total integrated system, integration of several engineering
disciplines, production of global marketing, and total
customer satisfaction, E commerce, email, Internet, etc.,
Role of operation management
Marketing group generates demand.
Financial group generates capital.
Production group to supply the output.
To supply the output, production department
engagaes in 2 major sets of activities.
convert finance into physical resources
required for production.
convert physical resource into saleable
goods and services.
Convert raw materails to finished proudcts
through following functions.
• Forecast demand / sales department which
decides the requirement of production.
• Arrange and bring together all the inputs, men,
material, machines, methods
• Arrange for services like maintenance, store
keeping, material handling, inspection, QC.
• Produce goods at minimum time, cost.
• Right time , sufficient in quantity, quality.
• Utilize all factors of production, service facilities
available to produce the product.
• Take statergic decisions concerning the design of
product, and production system which includes.
New product indentification, design.
Production planning and control.
Process design and planning.
Facilities location and lay out planning
Design of material handling system.
Maintenance and replacement.
Cost reduction, cost control, work system design.
• To be flexible in order to respond to changes in products
or all together to new products.
• To sum up it Op.management is to produce goods or
services of the right quality and quantity at right time
and the right cost.
Goods are tangible
Quality is fairly constant.
Goods can be produced,
stored, and transported to
Location of mfg. tend to
nearer to source of raw
Iocation need not attract
end customers and can be
in rural area.
More of unskilled labours
than skilled labours , rates
can be flexible.
Inventory can be built
• Goods are intangible.
• Services are usually
• Location services tend to
near to place of demand.
• Service location to attract
customers and urban and
accessible to customer.
• More of skilled labours,
rates may not be flexible.
• Inventory can not be built.
Classification of production systems.
• Continuous production or flow production
1. Mass production or flow production
2. Process production.
• Intermittent production system.
1. Job production
2. Batch production.
Mass or flow production
• Raw materials gets processed through a standard set of
processes and sequences to produce continuous stream of
• Standardization is the key feature.
• Facilities are standardised as inputs goes through a series of
successive connected operations.
• Variety of products manufactured but in big volume. Plant
lay out is arranged according to the sequence of operation
needed for manufacturing particular product.
• For another product lay out has to be changed ( flow
• Continuous manufacturing anticipating demand.
• Demand may not be uniform through out the year.
• Examples like steel, fertilizer, soft drink.
Mass production advantage.
• Material handling because of possible
application of conveyers, belts etc.,
• Automation is possible.
• Highly skilled machine operators are not
• Raw material inventories are low, as they are
used at steady rates and in large quantities.
Mass production Disadvantage.
• Because of big labour force reqd. labour
problems may creep up.
• High investments on machines and
• Cost of changing the sequence of operation is
• Only limited range of products are produced.
• Like automobiles, sugar refining, electrical
• Continuous production takes place her also, but
the raw materials go through a few major
processes maintained as separate departments.
• Finished product of one process is raw material to
• Large industries like petroleum refinery, heavy
chemical industries employ this system
• One raw material is transformed into several
products ( by- products) at different stages of
Process production advantage and
• Cost of production per unit is lowest in process
• Skilled managers are sufficient. No need for skilled
• Higher job security because of stable and continuous
demand of product.
• DISADVANTAGES like High investment .
• Changes in product variety cannot be easily
• Application : Chemical, petroleum, milk processing
Intermittent production system.
• Wide variety of prducts and sizes are manufactured .
• System should be flexible to handle the production of
different product designs with different input
• Standardized materials, machines or processes can not
• Manufacturing is done in lots, more often based on
• Components are first made and later combined
differently. Like watch, textile, shoe making.
• Finished product heterogenous but with standardized
options assembled by producers.
Intermittent production system types
1. JOB PRODUCTION./ Jobbing.
• Goods are produced according to the orders from the
• Demand not assured.
• Each job and process set up is unique and some time may
not get repeat order.
• Eg., Heavy, Special purpose machines (SPMs), aeroplanes ,
• Advantages like relatively low capital investment and
flexibility in production is high.
• Disadvantages like Skilled workers essential, cost of
production per unit is highest. Low job security.
• Applications like bridges, flyovers, packing machines,
Automatic material handling systems for different
Intermittent production system type 2
2. Batch production.
• Manufacturing done batches or in lots either on
basis of customer orders or with a hope of
continuous demand of product.
• Medium scale production takes place and
appears some where between mass and job
• Machines are available for next batches as soon
as production of one batch is completed.
• Eg., pharma , textile, machine tool. Etc.,
• Extension of job production , here multiple units
Comparision of different production system.
• Standardised raw materials,
• Product variety is low
• High volume production
• Production on anticipation of
• Cost of production per unit is
• Equipment is special purpose.
• Capital intense operation.
• Normally not standardised.
As per customer demand.
• General purpose.
• Labour intense operation.
Comparision of different production
• Emphasis on product.
• Line or product lay out
• Automation is possible.
• Less floor space.
• Not easy to change
• On process.
• Process or function lay
out is preferred.
• Large floor space.
• Accommodates change
in product line.
• Achieve greater output from same set of
inputs we say efficiency is increased.
• Efficiency is used referring to machines.
• Productivity is used while addressing
• Both are analogous.
• Efficiency (Output/input <1),
• Productivity ( Output/input >1) for profitable
• Ratio of output to input.
• Measure of input required to produce given
• Efforts to produce more and more with less and
less consumption of resources.
• Or balance between all factors of production that
will give the maximum output with smallest
• It is a mental attitude, and constant urge to find
better, cheaper, easier and safer means of doing a
job, manufacturing product or providing a
When is productivity increased.
• Increase in production with out increase in inputs.
• Same production is achieved with decrease in inputs.
• Rate of increase in output is more when compared to rate
of increase in inputs.
• Simple ratio may not sufficient , as in ratio both has to be in
• Outputs are different quantities like profit earned,
customer satisfaction, social improvement, ecolgical
• Inputs like money, manpower, materials, machinary land,
• Productivity = value of output/ cost of inputs.
• Improve the productivity to increase the profitability, and
be more competitive in the market.
Factors affecting productivity.
1. Controllable or interal
• Plant and equipment
• Work methods and
• Energy resources and
• Human factors
• Management style.
2. Uncontrollable or external
• Changes in economic
• Social changes and
• Natural resources.
• Government policy.
Techniques to improve productivity.
1. Technology based like
• Use of CAD, CAM,
• Use of robotics
• Modern maintenance techniques, optimum use of energy
• Flexible manfacturing systems.
2. Employee based.
• Giving financial and non financial incentives to individuals
or group level.
• Extending promotion to employees whenever due.
• Encourage workers participation in management.
• Incorporating concepts like TQM , QC, QIT.
• Stressing on personality development programs.
• Human engineering practice.
Techniques to improve productivity contd..
3. Material based.
• Materials requirement planning(MRP)
• Purchase of materials,logistics.
• Materials storage and retrieval.
• Selection of proper sources and procurement of quality material.
• Waste elimination
• Material recycling and reuse.
4. Process based.
• Method studies and work simplification.
• Job design, job evaluation, job safety.
5. Product based.
• Value analysis and value engineering.
• Product diversification
• Standardisation and simplification.
• Reliability engineering.
• Product mix and promotion.
Techniques to improve productivity contd..
6, Management based.
• Management style.
• Communication practices in organisation.
• Work culture.
• Motivation and employee welfare.
• Promoting group activity.
International dimensions of productivity
• Corporate objectives – priority level from customer, employee, and
• Time horizon – long term sustainability.
• Production system – emphasis on automated systems using
mechatronics, robotics. Quality is paramount and things happen as
• Employment schedule- workers join services for a life long career in
same company. Unions constructive towards nation building,
politeness and harmony are practised everywhere.
• Materials – Resources are limited. Space is used efficiently while
inventories are kept to minimum.
• Financing – more use is made of debt capital and less of equity
• Training – Employees are given training , job rotation, job
enlargement , are practiced.
• Worker participation. Via suggestions, feeback, quality circles etc.,
The environment of operations.
• Operation deparment transforms inputs to
• In the process operations are affected by its
environment both internal and external.
• Internal means the different departments in the
organization with which operation has to interact.
• External means forces outside the operation.
• Both internal and external environment affects
inputs, transformation process, which in turn
• Feedback help in controlling factors which affect
input and transformation process.
• Companies which excel in operational
management and statergies are found to be more
successful and long lasting.
• Various measures are there to check operational
1. Quality measures.
• Percentage of products which do not need
• Costs incurred to improve quality
• No. of defective pieces ( parts per million ppm)
• Average no. of suggestions from employee. Per
Measures of operational excellence
2. Delivery schedule measures.
• Lead time required to procure raw material
• Manufacturing lead time and cycle time requried.
• No. of times delivery schedules not met.
3. Cost measures.
• Average time spent by inventory before usage.
• Cost of manufacturing as percentage of selling
• Cost of ordering and procuring raw materials.
• Cost reduction due to import substitution.
Measures of operational excellence
4. Flexibility measures.
• range of products offered w.r.t colour, size, capacity etc.,
• Time taken from design stage to customer delivery stage.
• Process and manufacturing flexibility.
5. Other measures.
• Direct labour to indirect labour ratio.
• Average training time per employee.
• Process rate to sale rate ratio.
ALL MEASURES MAY NOT DIRECTLY YIELD FINANCIAL
NUMBERS BUT WILL IMPROVE COMPETITIVE ADVANTAGE
IN OPERATIONAL EXCELLENCE , A LONG TERM VIEW.
World class manufacturing practices.
1 . Just In time manufacturing (JIT)
• System operated with low level of inventory of all kinds
like raw materials, work in process and finished goods.
• Products are assembled just before sale.
• Sub assemblies made just before they are assembled.
• Components fabricated before subassembly.
• Raw materials procured before components fab.
• Ultimate aim is to bring inventory cost to zero.
• Help cost efficient production, through delivery of
necessary items, in right quantity in right time, right
place using minimum facilities.
Total quality management
Aims at organising the entire work force into small improvement
• Creating mindset for continious improvement
3. TPM Total productive maintenance.
• Aims at removal of maintenance department
• Production takes care of maintenance also.
• Gives sense of ownership, awareness of problems with wrong
usage of equipment.
4. Employee involvement
• Don’t follow rigid rules, believe in involving employees in mulitple
• Production repsonsible for maintenance, scheduling, planning of
production tasks, quality checks etc.,
WCM contd.. 3
5. Simplicity – hall mark of any organisation how ever big it
may be. Some of the managerial techniques by japanese
• A. Kanban systems - kind of production systems, which
operates based on the information written on the cards
with drawl kanban type(WK): contains how much raw
material / semi finished components should any machine
with draw from a previous machine for processing.
Production order kanban (POK): contains information on
how much raw materials / semi finished components that
any machine should produce to be consumed by
o Ensures non surplus production
o Brings immediately any problem present in the system to
the notice of the concerned person for corrective action.
WCM Contd.. 4
2. POKA YOKE.
Japanense term meaning mistake proofing.
Aims at fool proof operations, no rejections or rework.
It is a bunch of small devices like jigs, fixtures, gadgets, warning
signals etc., used to detect or prevent defects from occuring in the
Hence expenditure on rework or inspection less.
Minimize wastage of energy, time and resources and bring more
Philosophical concept Means to change to good.
Calls for continuous improvement in all facets of business so as to
eliminate all kinds of wastes.
Forms basis and lies behind many japanese management concepts
such as total quality control, quality circles, labour relation etc.,
which made Japanese companies ahead in international
Decision making situtations
• Whether to order raw materials in bulk or
• To produce for demand or for future also.
• Whether to go for new machine or repair the
• Full time skilled labour or employ on need.
• Volume production with low price or low
volume , high price item products to be made.
Classifying decision making
1. Strategic decisions
• Decisions about products, processes, facilities. Are of
strategic importance and have long term significance.
• People from various departments put together study
business opportunities, arrive at the decision on long term
• Examples like deciding on
whether to launch a new product development project.
on the design for a production process for a new product.
how to allocate scarce materials, utilities, capacity and
personnel among new and existing business oppurtunities
On what new facilities are needed and the where to
• Issues concerned with planning production to meet
customers demands for products and services.
• Operation has to ensure that orders generated by
marketing are delivered to the satisfaction of customers at
• Decision on
How much finished goods inventory to carry out for each
What products and how much to include in next months
How many temprovary employees to hire next week.
Decide on how much to purchase from vendor next month.
• Concerned with variety of problems in organisation like
workers performance, product quality, break down etc.,
• Operation managers to take control decision engage in
planning, analysing and controlling activities for
improvement on the areas.
• Decides on
What to do about departments failure to meet the planned
labor cost target.
Developing labor cost standards for a revised product
design that is about to be produced.
New quality acceptance criteria should be for a product
that has had a change in design.
Deciding on Preventive maintenance schedules.