EMGT101 – Lecture 9

OPERATIONS AND
PRODUCTION MANAGEMENT
In this lecture, we will …

 Distinguish
the role of operations from
other areas of management
 Explainthe role of engineering in the
process of transformation of resources
into products and services
 Integratethe concepts and
relationship of productivity versus
quality.
 Set of activities that creates goods
and services by transforming inputs
into outputs.
 Managing the daily production of
goods and services.
Operations Management is concern with
the conversion of inputs into outputs,
using physical resources, so as to
provide the desired utilities to the
customer while meeting the other
organizational objectives of
effectiveness, efficiency and
adoptability.
The customer service objective.
To provide agreed/adequate levels of
customer service by providing goods or
services with the right specification, at
the right cost and at the right time.

The resource utilization objective.

To achieve adequate levels of
productivity or and resource
utilization
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 OM Transforms inputs to outputs
 Inputs are resources such as
 People, Material, and Money

 Outputs are goods and services

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Goods Services
 Tangible product  Intangible product
 Product can be  Product cannot be
inventoried inventoried
 Low customer contact  High customer contact
 Longer response time  Short response time
 Capital intensive  Labor intensive

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On the other hand…
 Both use technology
 Both have quality, productivity, & response issues
 Both must forecast demand
 Both will have capacity, layout, and location issues
 Both have customers, suppliers, scheduling and
staffing issues
 Manufacturing often provides services
 Services often provides tangible goods

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 Service sector growing
to 50-80% of non-farm
jobs
 Global
competitiveness
 Demands for higher
quality
 Huge technology
changes
 Time based
competition
 Work force diversity
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1. Productivity Improvement - Managing and
improving productivity is about improving the
underlying processes
 - Meeting the expectations of customers,
shareholders and employees
 - Development of technology
 - Motivation of the entire workforce to
achieve higher productivity levels in key
result areas.
 - Being more and more efficient.
2. Quality Improvement
PRODUCTIVITY
It is an index that measures output (product
and services) relative to the input (labor,
materials, other resources) used to produce
them. Or simply he increase in output per
work-hour or time expended.

Productivity = Outputs
Inputs
 Productivitycan be measured by the
amount it takes to complete one unit
of a product.

 Thiscan be expressed in terms of

Units/Cost or Cost/Unit,
Volume/Time, etc
Example:
1. If 1000 units are produced in 250 labor-hrs

Productivity = Units produced

Labor-hours used
= 1000 = 4 units/labor hrs
250
2. Labor hrs. = 10,000
Cost of Energy = $15,000
Ave. labor rate = $1.5/hr.
 Higher Lower Lower
Productivity Costs Prices

Higher
Higher
Standard Higher
Market
of Profits
Share
Living
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Different Ways to Increase the Output:
 Improve the efficiency of workers
 Improve overall efficiency of machines
 Maximize the usage of materials
 Improve process and cycle time
 Improve the quality of the product
 Improve the working environment
Different Ways to Decrease the Input
 Reduce manpower/man hours
 Reduce downtime of machines
 Reduce waste or scrap
 Reduce delays and non value added
activities that consumes time
 Reduce inventory or cost of money
 Reduce power consumption
STRATEGIES IN INCREASING
PRODUCTIVITY
1. Increase production using the same or smaller
amount of resources
2. Reduce the amount of resources used while
keeping the same production or increasing it
3. Allow the amount of resources used to
increase as long as production increases more
4. Allow production used to decrease as long as
the amount of resources used decreases more
 Managing the resources required for
production to produce specified product
by specified methods, by optimal
utilization of resources
• 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.”
 Objective of Production Management

“Produce goods or services of the right quality

and quantity at the right time and right
manufacturing cost”

QUALITY QUANTITY TIME COST

 Location of
facilities
Quality Control Plant layout &
Mat’l Handling

Maintenance
OPERATION AND
Mgmt PRODUCTION Product Design
MANAGEMENT

Materials Mgmt Process design

Prod’n &
Planning Control
DEFINED as…
The process of planning the production in
advance, setting the exact route of each item,
fixing the starting and finishing dates for each
item, to give production orders to shops and to
follow up the progress of products according to
orders.
 “First Plan Your Work and then Work on Your
Plan”
 “If You Fail to Plan, You Plan to Fail”
Functions:
1. Planning - Deciding in advance what to do, how to do it, when to
do it and who is to do it.
2. Routing - The selection of path where each part of the product
will follow from raw material to finished products
3. Scheduling - The fixation of time and date for each operation;
determines the sequence of operations to be followed.
4. Dispatching - Release of orders and instruction for the starting of
production
5. Follow-up - To report daily the progress of work in each shop
That aspect of management
function which is primarily
concerned with the acquisition,
control and use of materials needed
and flow of goods and services
connected with the production
process having some predetermined
objectives in view.
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 Types of Measuring
Inventory Inventory Levels

Costs of Systems for

Maintaining Managing
Inventory Inventory
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1. Average Aggregate Inventory
 The average overall inventory for a certain time
period

2. Weeks of Supply
 The number of weeks to run out of inventory

3. Inventory Turnover
 The number of times a year that a company sells
its average inventory

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 All costs associated with ordering
Ordering
inventory, correcting mistakes,
Cost determining when/how much to order

Costs of downtime and lost efficiency

Setup
when a machine is changed to produce
Cost different kinds of inventory

Holding Cost of keeping inventory until it is

Cost used or sold

Stockout Costs when a company runs out of

Costs a product
 Economic
EOQ
Order Quantity

Just-in-Time
JIT
Inventory

Materials
MRP
Requirement Planning
Quality control
Forecasting techniques
Capacity planning
Productivity measurement and improvement
Linear programming
Scheduling systems
Inventory systems
Work measurement techniques
Project management
Cost-benefit analysis
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Maintenance is a set of organised activities
that are carried out in order to keep an
item in its best operational condition with
minimum cost acquired.
• The relation between maintenance objectives
and production goals is reflected in the action
of keeping production machines and facilities
in the best possible condition.
 PLANT
Maximising Reduce
Production M Breakdowns
A
Minimising Reduce
Energy Usage I Downtime
N
Optimising Useful Implementing
Life of Equipment T Cost Reduction
E
Providing Improving
Budgetary N Equipment
Control A Efficiency

Optimising
N Improving
Resources C Inventory Control
Utilisation
E
Figure 2.3 Maintenance
Objectives
 Run to Failure Maintenance (RTF)

 Preventive Maintenance (PM)

 Corrective Maintenance (CM)

 Improvement Maintenance (IM)

 Predictive Maintenance (PDM)