This document provides an introduction to production management from a mechanical engineering course. It defines production management and lists reasons for studying it. The objectives of production management are given as achieving the right quality, quantity, time and cost of manufacturing. Key functions of production management are then outlined, including selection of product/design, production process, capacity, planning, control, quality/cost control, inventory control and machine maintenance. Factors affecting plant location and layout are also summarized.

1. Subject: Engineering Economics And Management
(2140003)
Topic: Introduction To Production Management
Department Mechanical Engineering
Name of Subject Teacher
Mr. Amit Galphade

2. Team MembersTeam Members
 NameName
 Vinay Patel
 Dhananjay Patel
 Dhyey Shukla
 Safiuddin Siddique
 Enrollment NumberEnrollment Number
 170990119014
 170990119015
 170990119016
 170990119017

3. Production Management DProduction Management Definitionefinition
Production management is defined
as the design, production, and
improvement of the systems that
create and deliver the firm’s primary
products and services.
2

4. Why Study Production Management?Why Study Production Management?
Production
Management
Business Education/
Career Opportunities
Systematic Approach
to Org. Processes
Increase Competitive
Advantage/Survival
Cross-Functional
Applications
3

5. Objectives Of ProductionObjectives Of Production
ManagementManagement
 RIGHT QUALITY
 RIGHT QUANTITY
 RIGHT TIME
 RIGHT MANUFACTURING COST

6. 1. RIGHT QUALITY1. RIGHT QUALITY
 The quality of product is established based upon the customer’s
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.

7. 2. RIGHT QUANTITY2. 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.

8. 3. RIGHT TIME3. 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.

9. 4. RIGHT MANUFACTURING4. RIGHT MANUFACTURING
COSTCOST
 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.

10. Function Of ProductionFunction Of Production
ManagementManagement
 Selection of Product and Design,
 Selection of Production Process,
 Selecting Right Production Capacity,
 Production Planning,
 Production Control,
 Quality and Cost Control,
 Inventory Control, and
 Maintenance and Replacement of Machines

12. 1. Selection of Product and1. Selection of Product and
DesignDesign
 Production management first selects the right product for
production. Then it selects the right design for the product. Care
must be taken while selecting the product and design because the
survival and success of the company depend on it. The product
must be selected only after detailed evaluation of all the other
alternative products. After selecting the right product, the right
design must be selected. The design must be according to the
customers' requirements. It must give the customers maximum
value at the lowest cost. So, production management must use
techniques such as value engineering and value analysis.

13. 2. Selection of Production2. Selection of Production
ProcessProcess
 Production management must select the right production process.
They must decide about the type of technology, machines,
material handling system, etc.

14. 3. Selecting Right Production3. Selecting Right Production
CapacityCapacity
 Production management must select the right production capacity
to match the demand for the product. This is because more or less
capacity will create problems. The production manager must plan
the capacity for both short and long term's production. He must
use break-even analysis for capacity planning.

15. 4. Production Planning4. Production Planning
 Production management includes production planning. Here, the
production manager decides about the routing and scheduling.
 Routing means deciding the path of work and the sequence of
operations. The main objective of routing is to find out the best
and most economical sequence of operations to be followed in the
manufacturing process. Routing ensures a smooth flow of work.
 Scheduling means to decide when to start and when to complete
a particular production activity.

16. 5. Production Control5. Production Control
 Production management also includes production control. The
manager has to monitor and control the production. He has to find
out whether the actual production is done as per plans or not. He
has to compare actual production with the plans and finds out the
deviations. He then takes necessary steps to correct these
deviations.

17. 6. Quality and Cost Control6. Quality and Cost Control
 Production management also includes quality and cost control.
Quality and Cost Control are given a lot of importance in today's
competitive world. Customers all over the world want good-
quality products at cheapest prices. To satisfy this demand of
consumers, the production manager must continuously improve
the quality of his products. Along with this, he must also take
essential steps to reduce the cost of his products.

18. 7. Inventory Control7. Inventory Control
 Production management also includes inventory control. The
production manager must monitor the level of inventories. There
must be neither over stocking nor under stocking of inventories.
 If there is an overstocking, then the working capital will be
blocked, and the materials may be spoiled, wasted or misused.
 If there is an understocking, then production will not take place
as per schedule, and deliveries will be affected.

19. 8. Maintenance and8. Maintenance and
Replacement of MachinesReplacement of Machines
 Production management ensures proper maintenance and
replacement of machines and equipments. The production
manager must have an efficient system for continuous inspection
(routine checks), cleaning, oiling, maintenance and replacement
of machines, equipments, spare parts, etc. This prevents
breakdown of machines and avoids production halts.

20. Factors Affecting the PlantFactors Affecting the Plant
LocationLocation
 Law and order situation,
 Availability of infrastructure facilities,
 Good industrial relations,
 Availability of skilled workforce,
 Social infrastructure,
 Investor friendly attitude,
 Nearness to market,
 Nearness to raw-materials' source,
 Nearness to supportive industries and services, and
 Must meet safety requirements.

22. 1. Law and order situation1. Law and order situation

Plant location must be at that place where law and order situation
is in control. Entrepreneurs give a lot of importance to this factor
while locating a business unit in any state or region. If a state has
bad law and order situation, then the business must not be located
within that state, unless it has other important factors such as
availability of heavy or bulky raw materials.

23. 2. Availability of2. Availability of
infrastructure facilitiesinfrastructure facilities

Plant location which is selected must have proper infrastructure
facilities. Without good infrastructure facilities, it will be difficult
to do business efficiently. The infrastructure facilities are the
backbone of all industries. Without it, business cannot be done.
 Crucial infrastructure facilities that help industries to grow:
 Transport and communications,
 Banking and insurance services,
 Regular fuel supply,
 Continuous supply of electricity and water, etc.

24. 3. Good industrial relations3. Good industrial relations

Plant location must be at those places where good industrial-
relations are maintained. Industrial relations become bad, because
of militant and selfish trade unions. Entrepreneurs do not want to
locate their business at places where anti-social elements are
rampant, although there are other favorable factors such as good
infrastructure facilities, cheap labor, etc.

25. 4. Availability of skilled4. Availability of skilled
workforceworkforce

Plant location must be convenient and easily accessible to skilled
workforce. Most businesses require skilled-labor force such as
engineers, management experts, computer programmers, etc. The
entrepreneurs must consider the availability of competent and
skillful-workforce at a particular place to locate their business.

26. 5. Social infrastructure5. Social infrastructure

Plant location must have good a social infrastructure. There is a
need for social-infrastructure not only for employees but also for
the development of their families. The availability of social-
infrastructure will increase the employees' welfare.
 There must be suitable social infrastructure facilities like;
 Education institutions,
 Hospitals and health centers,
 Community centers like worship place, garden, meditation center,
etc.
 Recreation facilities like theaters, clubs, communication facilities,
etc.

27. 6. Investor friendly attitude6. Investor friendly attitude

Plant location must be in those states whose governments have an
investor-friendly attitude. Government must give attractive
incentives and concessions to those who start business units in
their states. There must not be any bureaucratic control for
starting a business.
 An investor-friendly attitude will not only attract investment, but
will also result in the overall development.

28. 7. Nearness to market7. Nearness to market

Plant location must be near a market. Every business unit
depends on a market for selling its goods and services. The
goods and services must reach the market on time, and it
must be available to the consumers at a low price.
Therefore, this factor is given importance while selecting
location of a plant.
 Locating a plant near the market is preferred, when the
product is fragile (easily breakable), perishable, heavy or
bulky and when quick service is required.

29. 8. Nearness to raw-materials'8. Nearness to raw-materials'
sourcesource

Plant location must be usually near to the source of raw-material.
Raw-materials' costs are about 50% of the total cost. So, it is
important in the business to get the raw materials in time and at a
reasonable price. Therefore, a business must be located close to
the source of raw material, especially in the case of “Gross
Materials.”
 Gross Materials are those which lose weight in the production
process. Examples of Gross Materials are sugarcane, iron ore,
limestone, so on.
 However, if the raw material is a “Pure Material,” then the
business may be located away from the source of raw materials.
 Pure Materials are those which add their weight to the finished
product. Examples of Pure materials are cotton textiles, bakeries,
silk fabrics, etc.

30. 9. Nearness to supporting9. Nearness to supporting
industriesindustries

Plant location must be near its supporting industries and services.
If it purchases spare parts from an outside agency, then these
agencies must be located very close to the business. If not, the
business will have to spend a lot of extra money on transport. It
will also be difficult, to control the quality of the spare parts
because of the distant location.

31. 10. Must meet safety10. Must meet safety
requirementsrequirements

Plant location must meet all essential safety requirements. Due to
air, water and sound pollution, some factories have a bad effect
on the health of the people. Therefore, these factories must be
located away from residential areas. Safety of environment must
also be given priority in this regards.

32. 11. Miscellaneous factors11. Miscellaneous factors
Following miscellaneous factors also affect a plant location:
Availability and cost of land,
Suitability of land - soil and topography,
Climatic conditions,
Location of a similar unit, etc.

33. Objectives of Good PlantObjectives of Good Plant
LayoutLayout
 Minimizing handling of materials.Minimizing handling of materials.
 Maintaining flexibility of operations.Maintaining flexibility of operations.
 Ensuring optimum utilization of men, materials, equipment andEnsuring optimum utilization of men, materials, equipment and
available space.available space.
 Achieving good work flow and avoiding accumulation of work.Achieving good work flow and avoiding accumulation of work.
 Minimizing delays and bottlenecks in the production system.Minimizing delays and bottlenecks in the production system.
 Ensuring safety of workmen by minimizing and eliminating theEnsuring safety of workmen by minimizing and eliminating the
chances of accidents.chances of accidents.
 Providing for effective supervision and production control.Providing for effective supervision and production control.
 Minimizing work-in-process inventory.Minimizing work-in-process inventory.
 Providing sufficient and conveniently located service centres.Providing sufficient and conveniently located service centres.
 Flexibility in design to adapt to the changing future requirements.Flexibility in design to adapt to the changing future requirements.

34. Factors Affecting PlantFactors Affecting Plant
LayoutLayout
 Policies of management
 Plant location
 Nature of the product
 Volume of production
 Availability of floor space
 Nature of manufacturing process and
 Repairs and maintenance of equipment and machines.

35. (1) Policies of management:(1) Policies of management:
 It is important to keep in mind various managerial policies and
plans before deciding plant layout.
 Various managerial policies relate to future volume of production
and expansion, size of the plant, integration of production
processes; facilities to employees, sales and marketing policies
and purchasing policies etc. These policies and plans have
positive impact in deciding plant layout.

36. (2) Plant location:(2) Plant location:
 Location of a plant greatly influences the layout of the plant.
Topography, shape, climate conditions, and size of the site
selected will influence the general arrangement of the layout and
the flow of work in and out of the building.

37. (3) Nature of the product:(3) Nature of the product:
 Nature of the commodity or article to be produced greatly affects
the type of layout to be adopted. In case of process industries,
where the production is carried in a sequence, product layout is
suitable. For example, soap manufacturing, sugar producing units
and breweries apply product type of layout. On the other hand in
case of intermittent or assembly industries, process type of layout
best suited. For example, in case of industries manufacturing
cycles, typewriters, sewing machines and refrigerators etc.,
process layout method is best suited.
 Production of heavy and bulky items need different layout as
compared to small and light items. Similarly products with
complex and dangerous operations would require isolation
instead of integration of processes.

38. (4) Volume of production(4) Volume of production
 Plant layout is generally determined by taking into consideration
the quantum of production to be produced. There are three
systems of production viz.,
 (a) Job production
 (b) Mass production
 (c) Batch production

39. (a) Job production(a) Job production
 Under this method peculiar, special or non- standardized products
are produced in accordance with the orders received from the
customers. As each product is non- standardized varying in size
and nature, it requires separate job for production. The machines
and equipment’s are adjusted in such a manner so as to suit the
requirements of a particular job.
 Job production involves intermittent process as the work is
carried as and when the order is received. Ship building is an
appropriate example of this kind. This method of plant layout
viz., Stationery Material Layout is suitable for job production.

40. (b) Mass production(b) Mass production
 This method involves a continuous production of standardized
products on large scale. Under this method, production remains
continuous in anticipation of future demand. Standardization is
the basis of mass production. Standardized products are produced
under this method by using standardized materials and
equipment. There is a continuous or uninterrupted flow of
production obtained by arranging the machines in a proper
sequence of operations. Product layout is best suited for mass
production units.

41. (c) Batch production(c) Batch production
 It is that form of production where identical products are
produced in batches on the basis of demand of customers or of
expected demand for products. This method is generally similar
to job production except the quality of production.
 Instead of making one single product as in case of job production
a batch or group of products is produced at one time, It should be
remembered here that one batch of products has no resemblance
with the next batch. This method is generally adopted in case of
biscuit and confectionary manufacturing, medicines, tinned food
and hardware’s like nuts and bolts etc.

42. (5) Availability of floor space(5) Availability of floor space
 Availability of floor space can be other decisive factor in
adopting a particular mode of layout. If there is a scarcity of
space, product layout may be undertaken. On the other hand more
space may lead to the adoption of process layout.

43. (6) Nature of manufacturing(6) Nature of manufacturing
processprocess
 The type of manufacturing process undertaken by a business
enterprise will greatly affect the type of layout to be undertaken.
 (i) Synthetic process
 (ii) Analytical process
 (iii) Conditioning process
 (iv) Extractive process

44. (i) Synthetic process(i) Synthetic process
 Under this process two or more materials are mixed to get a
product. For example, in the manufacture of cement, lime stone
and clay are mixed.

45. (ii) Analytical process(ii) Analytical process
 This is just the reverse of synthetic process. Under this method
different products are extracted from one material. For example,
from crude oil, petroleum, gas, kerosene and coal tar etc. are
extracted.

46. (iii) Conditioning process(iii) Conditioning process
 Under this process the original raw material is given the shape of
different products and nothing is added to it. Jute is an important
example of this kind.

47. (iv) Extractive process(iv) Extractive process
 This method involves the extraction of a product from the
original material by the application of heat or pressure. This
involves the process of separation, for example, aluminium is
separated from bauxite

48. (7) Repairs and maintenance(7) Repairs and maintenance
of equipment and machines:of equipment and machines:
 The plant layout should be designed in such a manner as to take
proper care with regard to repairs and maintenance of different
types of machines and equipment being used in the industry. The
machines should not be installed so closely that it may create the
problems of their maintenance and repairs. It has been rightly
said that “Not only should access to parts for regular maintenance
such as oiling, be considered in layout but also access to machine
parts and components when replacement and repair are fairly
common”.

49. Different Types Of PlantDifferent Types Of Plant
LayoutLayout
 Product or Line Layout
 Process or Functional Layout.
 Fixed Position Layout.
 Combination type of Layout

50. 1. Product or Line Layout:1. Product or Line Layout:
 If all the processing equipment and machines are arranged
according to the sequence of operations of the product, the layout
is called product type of layout. In this type of layout, only one
product of one type of products is produced in an operating area.
This product must be standardized and produced in large
quantities in order to justify the product layout.
 The raw material is supplied at one end of the line and goes from
one operation to the next quite rapidly with a minimum work in
process, storage and material handling. Fig. 8.3 shows product
layout for two types of products A and B.

52. Advantages offered byAdvantages offered by
Product Layout:Product Layout:
 (i) Lowers total material handling cost.
 (ii) There is less work in processes.
 (iii) Better utilization of men and machines,
 (iv) Less floor area is occupied by material in transit and for
temporary storages.
 (v) Greater simplicity of production control.
 (vi) Total production time is also minimized.

53. Limitations of ProductLimitations of Product
Layout:Layout:
 (i) No flexibility which is generally required is obtained in this
layout.
 (ii) The manufacturing cost increases with a fall in volume of
production.
 (iii) If one or two lines are running light, there is a considerable
machine idleness.
 (iv) A single machine break down may shut down the whole
production line.
 (v) Specialized and strict supervision is essential.

54. 2. Process or Functional2. Process or Functional
Layout:Layout:
 The process layout is particularly useful where low volume of
production is needed. If the products are not standardized, the
process layout is more low desirable, because it has creator
process flexibility than other. In this type of layout, the machines
and not arranged according to the sequence of operations but are
arranged according to the nature or type of the operations. This
layout is commonly suitable for non repetitive jobs
 Same type of operation facilities are grouped together such as
lathes will be placed at one place, all the drill machines are at
another place and so on. Therefore, the process carried out in that
area is according to the machine available in that area.

56. Advantages of ProcessAdvantages of Process
Layout:Layout:
 (i) There will be less duplication of machines. Thus, total
investment in equipment purchase will be reduced.
 (ii) It offers better and more efficient supervision through
specialization at various levels.
 (iii) There is a greater flexibility in equipment and man power
thus load distribution is easily controlled.
 (iv) Better utilization of equipment available is possible.
 (v) Break down of equipment can be easily handled by
transferring work to another machine/work station.
 (vi) There will be better control of complicated or precision
processes, especially where much inspection is required.

57. Limitations of ProcessLimitations of Process
Layout:Layout:
 (i) There are long material flow lines and hence the expensive
handling is required.
 (ii) Total production cycle time is more owing to long distances
and waiting at various points.
 (iii) Since more work is in queue and waiting for further
operation hence bottle necks occur.
 (iv) Generally, more floor area is required.
 (v) Since work does not flow through definite lines, counting and
scheduling is more tedious.
 (vi) Specialization creates monotony and there will be difficult
for the laid workers to find job in other industries.

58. 3. Fixed Position Layout:3. Fixed Position Layout:
 This type of layout is the least important for today’s
manufacturing industries. In this type of layout the major
component remain in a fixed location, other materials, parts,
tools, machinery, man power and other supporting equipment’s
are brought to this location.
 The major component or body of the product remain in a fixed
position because it is too heavy or too big and as such it is
economical and convenient to bring the necessary tools and
equipment’s to work place along with the man power. This type
of layout is used in the manufacture of boilers, hydraulic and
steam turbines and ships etc

59. Advantages Offered by FixedAdvantages Offered by Fixed
Position Layout:Position Layout:
 (i) Material movement is reduced
 (ii) Capital investment is minimized
 (iii) The task is usually done by gang of operators, hence
continuity of operations is ensured
 (iv) Production centers are independent of each other. Hence,
effective planning and loading can be made. Thus total
production cost will be reduced.
 (v) It offers greater flexibility and allows change in product
design, product mix and production volume.

60. Limitations of Fixed PositionLimitations of Fixed Position
Layout:Layout:
 (i) Highly skilled man power is required.
 (ii) Movement of machines equipment’s to production centre may
be time consuming.
 (iii) Complicated fixtures may be required for positioning of jobs
and tools. This may increase the cost of production.

61. 4. Combination Type of4. Combination Type of
Layout:Layout:
 Now a days in pure state any one form of layouts discussed above
is rarely found. Therefore, generally the layouts used in industries
are the compromise of the above mentioned layouts. Every layout
has got certain advantages and limitations. Therefore, industries
would to like use any type of layout as such.
 Flexibility is a very important factory, so layout should be such
which can be molded according to the requirements of industry,
without much investment. If the good features of all types of
layouts are connected, a compromise solution can be obtained
which will be more economical and flexible.

62. Production Decision MakingProduction Decision Making
People Plants Parts Processes
Planning and Control
Materials &
Customers
Products &
Services
Input Output
production Management
Marketing StrategyFinance Strategy
Marketplace
Corporate Strategy
production Strategy
The Transformation Process (value adding) 4

63. Key OM ConceptsKey OM Concepts
 Efficiency - Doing something at the lowest
possible cost
 Effectiveness - Doing the right things to
create the most value for the organization
 Value - Quality divided by price
8

64. TransformationsTransformations
 Physical--manufacturing
 Locational--transportation
 Exchange--retailing
 Storage--warehousing
 Physiological--health care
 Informational--telecommunications
5

65. Examples of Production SystemsExamples of Production Systems
System Inputs Conversion Output
(desired)
Hospital Patients
MDs, Nurses
Medical Supplies
Equipment
Health Care Healthy
Individuals
Restaurant Hungry Customers
Food, Chef
Servers
Atmosphere
Prepare Food
Serve Food
Satisfied
Customers
Automobile
Plant
Sheet Steel
Engine Parts
Tools, Equipment
Workers
Fabrication
and Assembly
of Cars
High Quality
Automobiles
University High School Grads
Teachers, Books
Classroom
Transferring
of Knowledge
and Skills
Educated
Individuals
6

66. Service or Good?Service or Good?
 “If you drop it on your foot, it won’t hurt you.” (Good or service?)
 “Services never include goods and goods never include services.”
(True or false?)
7

67. What about McDonald’s?What about McDonald’s?
 Service or Manufacturing?
 The company certainly manufactures tangible
products
 Why then would we consider McDonald’s a
service business?
8

68. Front and Back OfficeFront and Back Office
Front Office
Customer
Service Provider
Back Office
9

69. Core “Factory Services”Core “Factory Services”
Core Services are basic things that customers want from products that
they purchase.
 Quality
 Flexibility
 Speed
 Price (or production cost)
10

70. Value-Added ServicesValue-Added Services
Value-added services differentiate the organization from competitors and build
relationships that bind customers to the firm in a positive way.
 Information
 Problem Solving and Field Support
 Sales Support
11

71. History of ProductionHistory of Production
 Cottage System TIME<1700
1700 - 1800
1850s
1890s
1910s
1930s
1940s
1970s
1980s
1990s
 Industrial Revolution
 Civil War
 Scientific Management
 Hawthorne Studies
 Mass Customization
 Service Revolution
 Global Competition
 production Research
 Moving Assembly Line
12

72. Development of OM as a Field – The Names and
Emphasis Change, but the Elements Remain
Basically the Same!
Scientific
Management
Moving Assembly
Line
Hawthorne
Studies
production
Research
Historical
Underpinnings
Manufacturing
Strategy
TQM &
Six Sigma
JIT/Lean
Manufacturing
Business Process
Reengineering
Manufacturing
Resources Planning
Electronic
Enterprise
Service Quality
and Productivity
Global Supply
Chain Mgt.
OM’s Emergence
as a Field
13

73. Some Current IssuesSome Current Issues
 Implementing/sustaining Quality Management initiatives
 Consolidating production resulting from mergers
 Speeding up the time to get new products to market
 Developing flexible production systems to enable mass
customization of products and services
 Developing and integrating new technologies
 Managing global supplier, production and distribution
networks
 Outsourcing
14

74. Quality
Management
Statistical
Process Control
Just in Time
Materials Requirement Planning
Inventory Control
Aggregate
Planning
Production Management - Overview
Project
Management
Supply Chain
Management
Process Analysis
and Design
Process Control
and Improvement
Waiting Line Analysis
and Simulation
Services
Manufacturing
production
Strategy
Facility Layout
Consulting and
Reengineering
Process Analysis
Job Design
Capacity Management
Planning for Production
Supply Chain
Strategy

75. Production StrategyProduction Strategy
Customer Needs
Corporate Strategy
production Strategy
Decisions on Processes
and Infrastructure
ExampleStrategy Process
More Product
Increase Org.
Size
Increase Production Capacity
Build New Factory

76. Competitive DimensionsCompetitive Dimensions
 Cost
 Quality and Reliability
 Delivery
 Flexibility
 Speed
 Reliability
 Coping with Changes in Demand
 New Product Introduction
 Speed
 Flexibility

77. Dealing with Trade-offsDealing with Trade-offs
Cost
Quality
DeliveryFlexibility
Example II, if we improve
customer service problem
solving by cross-training
personnel to deal with a
wider-range of problems,
they may become less
efficient at dealing with
commonly occurring
problems.
Example II, if we improve
customer service problem
solving by cross-training
personnel to deal with a
wider-range of problems,
they may become less
efficient at dealing with
commonly occurring
problems.
For example, if we reduce costs by reducing product
quality inspections, we might reduce product quality.
For example, if we reduce costs by reducing product
quality inspections, we might reduce product quality.

78. Order Qualifiers and WinnersOrder Qualifiers and Winners
Order Qualifiers: Screening criterion that permits a firm’s products or
services to be considered as possible candidates for purchase
Order Winners: Criterion that differentiates the products or
services of one firm from another

79. StrategyStrategy Begins with PrioritiesBegins with Priorities
Consider the personal computer assembler
1. How would we segment the market according to
product group?
2. How would we identify product requirements,
demand patterns, and profit margins for each group?
3. How do we identify order winners and order
qualifiers for each group?
4. How do we convert order winners into specific
performance requirements?
Us
(Core competencies)
Competition
(Them) Differentiation

80. Manufacturing’s Role in CorporateManufacturing’s Role in Corporate
StrategyStrategy
 Stage I--Internally Neutral - minimize potential
manufacturing negative
 Stage II--Externally Neutral - achieve parity with
competitors
 Stage III--Internally Supportive - support business
strategy
 Stage IV--Externally Supportive - manufacturing
based competitive strategy

81. Four Stages of Service FirmFour Stages of Service Firm
CompetitivenessCompetitiveness
 Stage I. Available for Service
 Stage II. Journeyman
 Stage III. Distinctive Competence Achieved
 Stage IV. World Class Service Delivery

82. ProductivityProductivity
 Partial measures
 output/(single input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)
Inputs
Outputs
=tyProductivi

83. ExampleExample
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the
labor productivity?

84. Example--Labor ProductivityExample--Labor Productivity
10,000 units/500hrs = 20 units/hour ...
... or we can arrive at a unitless figure
(10,000 unit*$10/unit)/(500hrs*$9/hr) = 22.22

85. Example:Example:
Productivity MeasurementProductivity Measurement
 You have just determined that your service employees have used a total of 2400 hours
of labor this week to process 560 insurance forms. Last week the same crew used only
2000 hours of labor to process 480 forms.
 Is productivity increasing or decreasing?

86. Thank YouThank You
 Questions AndQuestions And
Suggestions AreSuggestions Are
AcceptedAccepted