Chapter No.

1
Introduction to Product &
Operation Management
BBA 7th Morning
Production/ Operations Management
• Operation Management: Operation Management is the set of activities that
creates values in the form of goods and services by transforming inputs into
output.
• Production: Production is the creation of good or services.
• The set of interrelated management activities which are involved in manufacturing
certain products is called production management
• For service management, then corresponding set of management activities is
called as Operation Management.
Organizing to Produce , Goods and Service
• Essential functions:
• Marketing- Generate demand.
• Production/Operations- Creates the products
• Finance/accounting- Tracks how well the organization is doing, pay the bills,
collect the money.
 Production System
1. A “Production System” is a system whose function is to transform an input into a
desired output by means of a process (the production process) and of resources.
The definition of a production system is thus based on four main elements: the
input, the resources, the production process and the output.

Resources
Input-Production Process-Output
 
2. Most of the organizations (including non-profit organization) can be described as
production systems. These organizations transform (or convert) a set of inputs
(such as materials, labor, equipment, energy etc.) in to one or useful outputs. The
outputs of a production system are normally called products.
Production System
• The production system has the Following characteristics:
1. Production has an organized activity, so every production system has an objective.
2. The systems transform various input (men, material, machines, information,
energy) to useful outputs (goods and/or services).
3. It doesn’t operate in isolation from the other organization system such as marketing,
finance etc.
4. There exist a feedback about the activities, which is essential to control and improve
performance.
Production Management
• Production management is the process of planning, controlling, leading,
organizing, and directing the activities of the production function. It combines and
transforms various resources used in the production subsystem of the organization
into value added product in a controlled manner as per the policies of the
organization.
• E.S. Buffa defines production management as, “Production management 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.”
Objectives of Production Management: The objective of the production management is ‘to produce
goods services of right quality and quantity at the right time and right manufacturing cost’.
• Right Quality
The quality of product is established based upon the customers 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.

• 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.

• 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.

• Right Manufacturing Cost

Manufacturing costs are established before the product is manufactured. Hence, all attempts should be made to
produce the products at pre-established cost, to reduce the variation between actual and the standard (pre-
established) cost.
History and Development of Production
Management
• For over two centuries, operations and production management has been recognized
as an important factor in a country’s economic growth.
• The traditional view of manufacturing management began in eighteenth century
when Adam Smith recognized the economic benefits of specialization of labor. He
recommended breaking of jobs down into subtasks and recognizes workers to
specialized tasks in which they would become highly skilled and efficient.
• In the early twentieth century, F.W. Taylor implemented Smith’s theories and
developed scientific management. From then till 1930, many techniques were
developed prevailing the traditional view.
Functions and scope of Production Department
Production and operation Management concern with the conversion of inputs into output, 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
• LOCATION OF FACILITIES
Location of facilities for operations is a long-term capacity decision which involves a long-term
commitment about the geographically static factors that affect a business. It deals with the
questions such as ‘where our main operations should be based?
• PLANT LAYOUT AND MATERIAL HANDLING
Plant layout refers to the physical arrangement of facilities. It is the configuration of departments,
work centers and equipment in the conversion process. The overall objective of the plant layout is
to design a physical arrangement that meets the required output quality and quantity most
economically.
• PRODUCT DESIGN
Product design deals with conversion of ideas into reality. Every business organization must
design, develop and introduce new products as a survival and growth strategy.
• PROCESS DESIGN
Process design is a macroscopic decision-making of an overall process route for converting the
raw material into finished goods. These decisions encompass the selection of a process, choice of
technology, process flow analysis and layout of the facilities.
• PRODUCTION PLANNING AND CONTROL
Production planning and control can be 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.
• Main functions of production planning and control includes planning, routing,
scheduling, dispatching and follow-up.
• Planning
• Routing
• Scheduling
• Dispatching
• Follow -up
•QUALITY CONTROL:
Quality Control(QC) may be define as a system that is used to maintain a desired level of quality in
product or service. It is a systematic control of various factors that affects the quality of the product.
Quality control aims at prevention of defects at the sources, relies on effective feedback system and
corrective action procedures.
•MATERIAL MANAGEMENT:
Material Management is primarily concerned with the acquisition , control and use of material needed
and flow of goods and services connected with the production process having some predetermined
objectives .
•MAINTENANCE MANAGEMENT:
In modern industry, equipment and machinery are a very important part of the total productive effort.
Therefore, their idleness or downtime becomes are very expensive. Hence, It is very important that the
plant machinery should be properly maintained. The main objectives of maintenance management are:
1.To achieve minimum breakdown and to keep the plant in good working condition at the lowest
possible cost.
2.To keep the machines and other facilities in such a condition that permits them to be used at their
optimal capacity without interruption.
3.To ensure the availability of the machines, buildings and services required by other sections of the
factory for the performance of their functions at optimal return on investment.