PRODUCTION & OPERATION

MANAGEMENT

Product
A product is anything that can be offered to a market to satisfy a want or
need, including physical goods, services, experiences, events, persons,
places, properties, organizations, information, and ideas.

Concept of Production
Production is defined as the step-by-step conversion of one form of
material into another form through chemical or mechanical process to
create or enhance the utility of the product to the user. Thus production
is a value addition process. At each stage of processing, there will be
value addition.
Edwood Buffa defines production as a process by which goods and
services are created.
Some examples of production are: manufacturing custom-made
products like, boilers with a specific capacity, constructing flats, some
structural fabrication works for selected customers, etc., and
manufacturing standardized products like, car, bus, motor cycle, radio,
television, etc.

Introduction
Production/operations management is the process, which combines and
transforms various resources used in the production/operations subsystem
of the organization into value added product/services in a controlled
manner as per the policies of the organization. Therefore, it is that part of
an organization, which is concerned with the transformation of a range of
inputs into the required (products/services) having the requisite quality
level.
The set of interrelated management activities, which are involved in
manufacturing certain products, is called as production management. If
the same concept is extended to services management, then the
corresponding set of management activities is called as operations
management.

Inputs:

Men
Materials
Machines
Information
Capital

Transformation Process:

Product Design
Product Planning
Production Control
Maintenance

Continuous:

Environment

Inventory
Quality
Cost

Feedback Information
Fig. 1.1 Schematic Production System

Outputs:

Product
Services

Product Service Continuum

Car
Mobile
Pen

Car Rental
Meal at
Restaurant
Tailored Clothing
Auto Repair

Financial
Consulting
Dental Checkup
Haircut
Accounting

Tangible
Services are more intangible than goods
Pure goods are tangible
socks

Pure service are intangible

medical procedure

A mix has tangible and intangible components

rental cars

Search, Experience, Credence

Search Qualities
May be evaluated prior to purchase
socks
Experience Qualities
Require trial or consumption before evaluation
restaurants
Credence Qualities
Difficult to judge even post-consumption
medical procedures

Perishability & Seprabilty

Services are simultaneously produced and consumed
Perishability: Services are more perishable than goods
Marketers must try to even out demand
Inseparability: Services are more impacted by the interaction between the service provider
and the customer than goods

Variability
Services are more variable than goods
Due to changing needs, abilities, etc. of the service provider and customer
Self-service and equipment can decrease variability
Try to reduce bad variability
Errors in the system
Try to improve good variability
Customization for customers unique needs

Scope of Production and Operations

Management
Production and operations management 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. It distinguishes itself from other
functions such as personnel, marketing, finance, etc., by its primary concern
for conversion by using physical resources. Following are the activities
which are listed under production and operations management functions:
1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.

Production System
The production system of an organization is that part, which produces
products of an organization. It is that activity whereby resources, flowing
within a defined system, are combined and transformed in a controlled manner
to add value in accordance with the policies communicated by management. A
simplified production system is shown above.
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 and improve system performance.

Production / Operations Volume

Production systems can be classified as Job Shop, Batch, Mass and Continuous
Production systems.

Continuous
Production

www.newagepublisher.com

Mass Production

Batch
Production
Job-Shop
Production

Output / Product Variety

Fig. 1.2 Classification of Production Systems

Types of Production System

Intermittent Production System

Intermittent means something that starts (initiates) and stops
(halts) at irregular (unfixed) intervals (time gaps).
In the intermittent production system, goods are produced
based on customer's orders. These goods are produced on a
small scale. The flow of production is intermittent
(irregular). In other words, the flow of production is not
continuous. In this system, large varieties of products are
produced. These products are of different sizes. The design
of these products goes on changing. It keeps changing
according to the design and size of the product. Therefore,
this system is very flexible.

Following chart highlights the concept of an

intermittent production system.

 The work of a goldsmith is purely based on the frequency

of his customer's orders. The goldsmith makes goods
(ornaments) on a small-scale basis as per his customer's
requirements. Here, ornaments are not done on a
continuous basis.

Similarly, the work of a tailor is also based on the number

of orders he gets from his customers. The clothes are
stitched for every customer independently by the tailor as
per one's measurement and size. Goods (stitched clothes)
are made on a limited scale and is proportional to the
number of orders received from customers. Here, stitching
is not done on a continuous basis.

The features of an intermittent production system

are depicted below.

The types of intermittent production system

include:

Project production flows

In project production flows, company accepts a single,
complex order or contract. The order must be completed
within a given period of time and at an estimated cost.

The characteristics or features of project

production flows are as follows

 The requirement of resources is not same (it varies).

Generally, the resource requirement at the beginning is
low. Then in mid of production, the requirement
increases. Finally, it slows down when the project is
near its completion phase.
Many agencies are involved in the project. Each agency
performs specialized jobs. Here, coordination between
agencies is important because all jobs are interrelated.
Delays take place in completion of projects due to its
complexity and massiveness.
As routing and scheduling changes with fresh orders,
proper inspection is required at each stage of
production.

Jobbing production flows

In jobbing production flows, company accepts a contract to
produce either one or few units of a product strictly as per
specifications given by the customer. The product is produced
within a given period and at a fixed cost. This cost is fixed at
the time of signing the contract.
This is the oldest method of production on a very small scale.
It is also popularly known as job-shop or Unit production.
With this method individual requirements of consumers can be
met. Each job order stands alone and may not be repeated.
Examples of such jobbing production flows include, services
given by repair shops, tailoring shops, manufacturer of special
machine tools, etc.

The characteristics or features of jobbing

production flows are as follows:
The production of items takes place in small lots. Sometimes
only one product is produced at one time.
The items are manufactured strictly as per customer's
specifications.
Highly skilled labour is required to perform specialized jobs.
There is disproportionate manufacturing cycle time. For e.g.
the time needed to design the product may be more than the
manufacturing time.
This system has a lot of flexibility of operation, and hence
general purpose machines are required.

Continued
Generally no automation is used in this system, but
computer-aided-design (CAD) is used.
It deals with low volume and large variety production. It
can cater to specific customer Order, or job of one kind at
a time.
It is known for rapid value addition.
Large inventory of materials, tools, parts.
Detailed planning is essential for sequencing the
requirements of each product, capacities for each work
centre and order priorities.

Advantages
Following are the advantages of job shop production:
Because of general purpose machines and facilities variety of
products can be produced.
Operators will become more skilled and competent, as each
job gives them learning opportunities.
Full potential of operators can be utilised.
Opportunity exists for creative methods and innovative ideas.
Low risk of loss to the factory adopting this type of
production. Due to flexibility, there is no chance of failure of
factory due to reduction in demand. It can always get one or
the other job orders to keep it going.
Requires less money and is easy to start.
Less or no management problem because of very small work
force.

Disadvantages
Following are the limitations of job shop production:
Higher cost due to frequent set up changes.
Higher level of inventory at all levels and hence higher
inventory cost.
Production planning is complicated.
Larger space requirements.
For handling different types of jobs, only workers with
multiple skills are needed. This increases the labour cost.
Low equipment utilization.
As the raw materials are purchased in less quantity, the
cost of material procurement is more.

Batch production flows

Batch production is defined by American Production and
Inventory Control Society (APICS) as a form of
manufacturing in which the job passes through the
functional departments in lots or batches and each lot may
have a different routing. It is characterised by the
manufacture of limited number of products produced at
regular intervals and stocked awaiting sales.
In batch production flows, the production schedule is
decided according to specific orders or are based on the
demand forecasts. A product is divided into different jobs.
All jobs of one batch of production must be completed
before starting the next batch of production.

Continued..
The batch production system is generally adopted in medium
size enterprises. Batch production is a stage in between mass
production and job-shop production. As in this system, two or
more than two types of products are manufactured in lots or
batches at regular interval, which justifies its name the batch
production system.
Examples of batch production flows include, manufacturing of
drugs and pharmaceuticals, medium and heavy machineries,
etc.

The characteristics or features of batch

production flows are as follows:
The products are made and kept in stock until their
demand arises in the market.
General purpose machines and handling equipments,
which can do many different jobs quickly are installed.
This is because large varieties of items are to be
produced.
There is a possibility of large work-in-progress due to
many reasons.
There is a need for detailed production planning and
control.

Continued..
A batch production turns into flow production when the rest
period vanishes. In flow production, the processing of
materials is continuous and progressive.
Batch production is bigger in scale than job production, but
smaller than that of mass production.
Material handling may be automated by robots.
A medium size lots (5 to 50) of same items is produced in this
system. Lot may be produced once in a while or on regular
interval generally to meet the continuous customer demands.
Plant capacity generally is higher than demand.
It is used when there is shorter production runs.

Continued..
This System is used when plant and machinery are flexible.
It is used when plant and machinery set up is used for the
production of item in a batch and change of set up is required
for processing the next batch.
This system is used when manufacturing lead time and cost
are lower as compared to job order production.

Advantages
Following are the advantages of batch production:
Better utilisation of plant and machinery.
Promotes functional specialisation.
Cost per unit is lower as compared to job order production.
Lower investment in plant and machinery.
Flexibility to accommodate and process number of products.
Job satisfaction exists for operators.
It is flexible in the sense that it can go from one job to another
with almost zero cost. It needs general purpose machine having
high production rate.
If demand for one product decreases then production rate for
another product may be increased, thus the risk of loss is very
less.
Most suitable for computer-aided-manufacturing (CAM).

Disadvantages
Following are the limitations of batch production:
Material handling is complex because of irregular and longer
flows.
Production planning and control is complex.
Work in process inventory is higher compared to continuous
production.
Higher set up costs due to frequent changes in set up.
As the raw materials to be purchased are in smaller quantity
than in case of mass production, the benefits of discount due
to large lot purchasing is not possible.
It needs specially designed jigs and fixtures.

Continuous Production System

Continuous means something that operates constantly without any
irregularities or frequent halts.
In the continuous production system, goods are produced
constantly as per demand forecast. Goods are produced on a large
scale for stocking and selling. They are not produced on
customer's orders. Here, the inputs and outputs are standardized
along with the production process and sequence.
In this, the production activity continues for 24 hours or on three
shifts a day basis. A steel plant, for example, belongs to this type.
It is impossible to stop the production process on a short notice
without causing a great damage to its blast furnace and related
equipment. Other examples include bottling plant, soft drink
industry, fertilizer plant, power plant, etc).

Following chart highlights the concept of a

continuous production system.

Following are examples on the continuous

production system.
The production system of a food industry is purely based on
the demand forecast. Here, a large-scale production of food
takes place. It is also a continuous production.
Similarly, the production and processing system of a fuel
industry is also purely based on, demand forecast. Crude oil
and other raw sources are processed continuously on a large
scale to yield usable form of fuel and compensate global
energy demand.

The features of a continuous production system

are depicted below

The types of continuous production system

include

Process production flows.

Mass production flows

Process Production Flows

Production facilities are arranged as per the sequence of
production operations from the first operations to the
finished product. The items are made to flow through the
sequence of operations through material handling devices
such as conveyors, transfer devices, etc.
In this type, the plant, its equipment, and layout have been
chiefly designed to produce a particular type of product.
Flexibility is limited to minor modifications in layout or
design of models. Some famous examples are
automobiles, engines, house-hold machinery, chemical
plants, etc. If the management decides to switch over to a
different type of product, it will result in extensive change
in tooling, layout, and equipment.

Features
Process production, in general, has the following features:
It is very highly automated (process automation), and highly capital
intensive. Items move from one stage to another automatically in a
continuous manner.
It has a fixed or hard automation which means there is very less or no
flexibility at all. Layout of the plant is such that it can be used for only
one type of product. Each machine in the system is assigned a definite
nature of work.
To avoid problem of material handling, use of cranes, conveyors etc. are
made.
Work-in-process (WIP) inventory in this system is zero.
Dedicated plant and equipment with zero flexibility.
Material handling is fully automated.
Process follows a predetermined sequence of operations.
Component materials cannot be readily identified with final product.
Planning and scheduling is a routine action.

Advantages
Following are the advantages of process production:
Standardisation of product and process sequence.
Higher rate of production with reduced cycle time.
Higher capacity utilisation due to line balancing.
Manpower is not required for material handling as it is completely
automatic.
Unit cost is lower due to high volume of production.
It gives better quality, large volume but less variety of products.
Wastage is minimum.
As the raw materials are purchased on a large scale, higher
margin of profit can be made on
purchase.
Only a few skilled, and many semi-skilled workers are required.
This reduces the labor cost substantially.

Disadvantages
Following are the limitations of process production:
Flexibility to accommodate and process number of products
does not exist.
Very high investment for setting flow lines.
Product differentiation is limited.
During the period of less demand, heavy losses on invested
capital may take place.
Because all the machines are dedicated and special purpose
type, the system is not changeable to other type of production.
Most of the workers handle only a particular operation
repetitively, which can make them feel monotonous.
As this type of production is on the large scale, it cannot fulfill
individual taste.

Mass Production System

In this type, a large number of identical items is produced,
however, the equipment need not be designed to produce only this
type of items. Both plant and equipment are flexible enough to
deal with other products needing the same production processes.
For example, a highly mechanized press shop that can be utilized
to produce different types of components or products of steel
metal without the need of major changes.
Manufacture of discrete parts or assemblies using a continuous
process are called mass production. This production system is
justified by very large volume of production. The machines are
arranged in a line or product layout. Product and process
standardisation exists and all outputs follow the same path.

Characteristics
Mass production is used under the following circumstances:
1. Standardisation of product and process sequence.
2. Dedicated special purpose machines having higher production
capacities and output rates.
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.

Advantages
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilisation due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.

Limitations
Following 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.