PRODUCTION AND

OPERATIONS MANAGEMENT
 PRODUCT

A PRODUCT is anything that can be offered to a

market for attention, acquisition, use or consumption
that might satisfy a want or need in the form of goods
& services, whereas goods will refer to the tangible
output and services will refer to intangible output.
 Operations
•The Production & Operation function consists of all
activities directly related to producing goods or
providing services ; it is the core of business
organizations & is responsible for the creation of an
organization’s goods or services ;
• Hence, it exists both in manufacturing & assembly
operations, which are goods oriented; and in areas
such as health care, transportation, food handling &
retailing, which are primarily service-oriented.
 Products – Goods vs. Service
Goods (Manufactured Products) Service
• Tangible outputs, • Intangible outputs,
• Products can be inventoried, • Outputs cannot be
inventoried,
• Little or no customer contact, • Excessive customer contact,
• Long lead times, • Short lead times,
• Capital intensive, • Labour intensive,
• Opportunity to correct quality • Opportunity to correct quality
problems before delivery to is low,
customer is high,
• Evaluation easier. • Evaluation more difficult.
 Production & Operational Perspectives
(Operations as a System)

 Production & Operations system receives inputs, which

are changed in a conversion / transformation process into
the desired goods or services , which are called outputs ;
 The essence of the operations function is to add value
during the transformation process.
 In a non-profit organization, the value of outputs is their
value to society,
 In a for-profit organization, the value of outputs is
measured by the prices that customers are willing to pay for
those goods or services.
 Transformation process model
• Inputs
- Transformed resources: materials, information,
customers,etc.
- Transforming resources:facilities e.g. building,eqpt.,plant,etc.
• The transformation / conversion Process
- Materials processing
- Information processing
- customer processing
• Outputs to Customers
- Goods
- Services
 Examples of types of POM

Types of Operations Examples

Physical Farming, Mining, Construction,
Manufacturing, Power generation,
etc.
Locational Warehousing, Transporting, Mail
service, Taxis, Buses, Airlines, etc.
Exchange Retailing, Wholesaling, Banking,
Renting or leasing, etc.
Entertainment Films, Radio & Television, Plays,
Concerts, Recording, etc.
Informational Education, Newspapers, Radio &
/Communication Newscasts, Telephone, Satellites,
Internet, etc.
PRODUCTION &
OPERATIONS
MANAGEMENT
 Evolution of POM

• Historical Perspective,
• Industrial Revolution,
• Need for new management skills,
• Management movement,
• Management science era,
• Information Age,
• Growth of Technology
 Evolution of POM (contd.)

• Japanese influence on Operations management,

• Rise of Service sector,
• New challenges,
• Managers’ role in Operations,
• Importance of Operations Management.
 Production &Operations Management

• PRODUCTION & OPERATIONS

MANAGEMENT is the management of the conversion
process that transforms inputs, such as raw materials,
labour, etc., into outputs in the form of finished goods &
services to satisfy the customers.
• The operations manager must co-ordinate the use of
resources through the management process of planning,
organizing, staffing, leading & controlling.
Responsibilities of Production/operations
Manager
• Planning
- Products / Services,
- Process / Technology,
- Location / Layout,
- Capacity,
- Make or Buy,
- Projects,
- Scheduling, etc.
• Organizing
- Organization structure,
- Degree of centralization,
- Sub-contracting, etc.
 Responsibilities
• Staffing
- Hiring / Laying off,
- Use of Over-time, etc.
• Leading
- Leadership,
- Motivation / Communication,
- Incentive plan,
- Job assignment / Job redesigning, etc.
• Controlling
- Inventory control,
- Quality control,
- Cost control, etc.
 The Role of the Production &Operations
Manager
 Managing a cost centre ;
 Managing the short- and long-term ;
 Manager of Technology ;
 Coordinating the whole ;
 Managing the work and money flow ;
 Using the common denominator of time ;
 Tangible / Intangible outputs ;
 Linking the thinking and doing ends of a business ;
 Managing complexity.
 Current issues in POM

• Coordinating the relationships between mutually

supportive but separate organizations ;
• Optimizing global supplier, production, and
distribution network ;
• Increased co-production of goods & services ;
• Managing the customer touch points ;
• Raising senior management awareness of operations
as a significant competitive weapon.
 The Ever-changing World of POM

• POM is continuously changing to meet new &

exciting challenges of today’s business world.
The ever-changing world is characterized by ;
 Increased global competition, & advances
in technology
 Linking POM to Customers & Suppliers
– referring to ‘Value chain’,
 The Ever-changing World of POM

 Expanding business to foreign markets need POM to

take global perspective,
Increased emphasis on logistics, location facilities &
moving material long distances,
 Leading to single world economy due to :
- advances in IT for data transfer,
- trend in lower trade barriers using NAFTA, etc.,
- emergence of high growth markets.
 Production & Operations Strategy
 Corporate Strategy defines the specific businesses in which
the firm will compete & the way in which resources are
acquired & allocated among these various businesses ;
 Business strategy defines the scope & boundaries of the
SBU, in terms of how it addresses the specific markets that it
serves & the product it provides ;
 Functional strategy is developed by a function, within an
organization, to support the business strategy ;
 Operations strategy is concerned with the development of a
long term plan for determining how to best utilize the major
resources of the firm so that there is a high degree of
compatibility between these resources & the firm’s long-term
corporate strategy.
 POM STRATEGY
MARKET PLACE

CORPORATE STRATEGY

Assessment of Global Distinctive Competencies

business condition BUSINESS STRATEGY or weaknesses

Product / Service plans

Competitive priorities

Operations Strategy
• Positioning the production system,
• Product / Service plans,
• Outsourcing plans,
• Process technology plans,
• Strategic allocation of resources,
• Facility plans – Capacity, location &
layout.
 Positioning the Production system
 Positioning the production system means selecting type of
product design, production processing system, and type of
finished goods inventory policy for each product group in the
business strategy.
 The two basic types of product design are :
- Custom products,
- Standard products.
 Two classic types of production processes are :
- Product-focused production,
- Process-focused production.
 Two basic types of finished goods inventory policies are :
- Produce to stock,
- Produce to order.
 Forming Production & Operation Strategies

 It is crucial that structure of operations determined by

the positioning strategy be linked to product / service
plans & competitive priorities defined in business
strategy ;
 Operations strategies must include plans for
modifying production system to a changing set of
competitive priorities.
 All elements of operations strategy must be carefully
linked with the market strategy.
 Developing POM Strategy from Competitive
priorities
• The key to developing effective operations strategy lies in
understanding how to create or add value for customers
through the competitive priority or priorities that are
selected to support given strategy.
• These priorities translate directly into characteristics that
are used to describe various processes by which a company
can add value to the products it provides.
• The priorities are – Quality, Cost, Speed , Dependability
(delivery), Flexibility.
 Quality
• Quality means ‘doing things right’, but the things the
operation need to do right will vary according to the kind of
operation.
• For example :
Hospital
• Patients receive the most appropriate treatment,
• Treatment is carried out in the correct manner,
• Patients are consulted & kept informed,
• Staff are courteous, friendly, & helpful.
Automobile Plant
• All parts are made to specification,
• All assembly to specification,
• The product is reliable,
• The product is attractive & blemish-free.
 COST
• Cost means ‘doing things cheaply’- operations seek to
influence the cost of the company’s goods & services.
• Examples are :
Technology & facilities cost
Hospital
Staff cost

Bought-in
materials &
services

Automobile
Plant Bought-in materials &
services

Technology &
facilities cost
Staff cost
 Speed
• Speed means ‘doing things fast’ – operations seek to influence
the speed with which goods & services are delivered.
• Externally, speed is an important aspect of customer service.
Internally, speed both reduces inventory & risks of delay of
resources.
• Examples are :
Automobile plant
• The time between dealers requesting a vehicle of a particular specification
& receiving it, kept to a minimum.
• The time to deliver spares to service centres kept to a minimum.
Hospital
• The time between requiring treatment & receiving treatment kept to a
minimum.
• The time for test results, X-rays, etc., to be returned kept to a minimum.
 Dependability (delivery)
• Dependability means ‘doing things on time’ – delivery of
goods & services on time, externally to customers & internally
within operations, increasing reliability.
• Examples are :
Automobile plant
• On-time delivery of vehicles to dealers.
• On-time delivery of spares to service centres.
Supermarket
• Predictability of opening hours.
• Proportion of goods out of stock kept to a minimum.
• Keeping o reasonable queuing times.
• Constant availability of parking.
 Flexibility
• Flexibility means ‘changing what they do’ - include
product flexibility / mix flexibility / volume flexibility /
delivery flexibility.
• Internally – speed up response time / change over time ,
etc.
• Examples :
Automobile plant
• Product flexibility – introduction of new models .
• Mix flexibility – wide range of options available.
• Volume flexibility – ability to adjust the number of vehicles produced.
• Delivery flexibility – ability to reschedule manufacturing facilities.
 Flexibility (contd.)

Supermarket

• Product flexibility – introduction of new goods or promotion .

• Mix flexibility – wide range of goods stocked.
• Volume flexibility – ability to adjust the number of customers served.
• Delivery flexibility – ability to obtain out of stock items
(occasionally) .