PRODUCTION AND

OPERATION
MANAGEMENT
MBA 2nd Semester
 PRODUCTION
MANAGEMENT
It refers to the activities related to the production of
goods and services or the conversion of raw
materials into finished goods.
It mainly focuses on offering the right quality of
products at the right time and at the right price.
The scope of production management is limited to
the production of goods and services.
 PRODUCTION
MANAGEMENT
It is an area of management that deals with planning,
organizing, coordinating and controlling the process
of production. It is concerned with managing an
entire production system that involves the process of
converting inputs(raw materials. Labour, machinery
and capital) into outputs (goods/services)
 PRODUCTION
MANAGEMENT
Raw material Capital Goods

Input Process Output

Labour Machinery Services

 Definition of
Production mgnt.
• It is concerned with those processes which
convert the inputs into its outputs. The inputs are
various resources like that of raw materials, men,
machines, methods, etc and outputs are the
goods and services. –H.A. Harding
• Production management is the process of
effectively planning and regulating that part of an
enterprise, which is responsible for the actual
transformation of material into the finished
products. -Breach
 OPERATION
MANAGEMENT
It refers to management of activities and processes of an
organization that are taking place before, during and after
the production of goods and services.
It focuses on using the organizational resources efficiently
and effectively to meet the requirement of the targeted
customers.
Scope of operation management comprises of business
activities, such as product quality, design quality, location,
process, workforce requirement, storage, inventory
management and logistics etc.
 OPERATION
MANAGEMENT
Labour Capital Goods

Planning Input Process Output Delivery

Raw Machinery Services

material
 Efficiency and
Effectiveness
EFFECTIVE: Effectiveness is measured in terms of the
value generated by the product for the customers.
Effectiveness of its operation is very important for
the long term performance of the organization.

EFFICIENT: It is the measure of costs incurred to obtain the

output as compared to the value or the cost of the outputs. it
is very essential to examine the efficiency for short term
operations and survival of the organization.
OM is continuously required to keep the organization effective
and efficient.
 Scope of POM
Supply chain
Inventory Management Capacity
Management Planning

Production &
Facility Operation Work Study
Location
Management

Product Production
Design & Planning &
Development control
Facility Layout
 Scope of POM
1. Facility Location
Facility or Plant Location means determining where the plant
should be located for getting maximum economic benefits and
effectiveness. In simple words, the area or location where the firm
set up its plant is called a plant location.
It is an important decision in the case of new entrepreneurs.
Economic benefits like cheap & quality raw material, transport
availability, near to market, good manpower, etc.
Some of the factors that need to be taken care of while deciding
plant location are Technical, Economical, Commercial, Social,
political and Government Policies.
 Scope of POM
2. Facility layout

Facility layout is a process in which all the resources (Men,

Material, Machines etc.) are arranged in such a manner that it will
maximize the productivity. Plant layout decision depends on the
nature of the product, the volume of production, type or size of
machinery, method or process of manufacturing.
Some of the factors that influences layout of plants are
Operational aspect, size of operations, safety, technology, location
aspect, system design, system arrangement, and government
regulations.
 Scope of POM
3. Product Design and Development

Production management first selects the right product by

evaluating the other alternative for production. After product
selection, the next step is to select the right design as per the
customer’s requirement. Product development involves all
the stages starting from an idea or concept and end with the
launch of a product and services in the market.
 Scope of POM
4. Production Planning and Control

It is the planning and then controlling the production process.

In planning, management will establish the sequence to be
followed during the manufacturing process. In control,
management checks and monitor the actual performance
meets the set standard or not, If not, then take proper
precautions to fill up the gap.
 Scope of POM
5. Work Study

Work Study is used to increase the productivity of a particular

job or number of jobs. It can be classified further into two
types
(a) Method study- It includes identification of the best
method of doing the job by cutting unnecessary activities.
(b) Work measurement- It includes setting up a fixed time for
doing a job and compare with actual performance.
 Scope of POM
6. Capacity Planning

Management must select the right production capacity to

match the demand for the product. It is because more or less
capacity of production will create problems to produce the
product as per the demand. The production manager must
plan the capacity for both short and long term production. He
must use break even analysis for capacity planning.
 Scope of POM
7. Inventory management

Inventory in raw materials, Work in progress products and

finished goods. These are that product or services which are
ready or will be ready for sale. Organisations invest hugely in
inventory. So, proper management is essential to reduce costs
and smooth the flow of production at every stage of
production.
 Scope of POM
8. Supply chain Management

It is the management or handling of the flew of goods and

services starting from raw material and ends with delivering it
to the end customer. It includes the coordination of activities
of the supplier, manufacture, distributors and dealers to
ensure that the products are placed at the right price and at
the right time.
 OBJECTIVE OF PRODUCTION
AND OPERATION MANAGEMENT

1. Production Planning
Production manager fix production targets as per the
demand of products and services. Based on these
target requirement of resources like men, material,
machine and money is identified. Now the sequence
of performing various production activities is
planned. After then the actual performance of
various activities takes place.
 OBJECTIVE OF PRODUCTION
AND OPERATION MANAGEMENT

2. Optimum utilization of resources

Optimum utilization of resources means when management
utilizes all the limited resources like men, material, machines
in the best way. It uses experts, professional services of
management to use their skills or knowledge and avoid
wastage. If employees and machines are producing their
maximum there is no wastage of any resources.
 OBJECTIVE OF PRODUCTION
AND OPERATION MANAGEMENT

3. To control production cost

If management wants to satisfy their customer and want to
face competition in the market, then management has to
provide its product at a reasonable price. It will be possible
only when management keeps it production cost under
control. There is a direct link between the cost and price of
the product, if cost increase, then price increase if cost
decrease then price will also decrease.
 OBJECTIVE OF PRODUCTION
AND OPERATION MANAGEMENT

4. To maintain the standard quality

The products offered to the customer should be a quality
product. Good quality products are liked by customers even if
they have to pay a little higher amount for that product.
Management should also set some targets regarding the
quality of the product. Proper inspection must be there in
order to check the standard quality of the product.
 OBJECTIVE OF PRODUCTION
AND OPERATION MANAGEMENT

5. Helps in achieving organization objective

Organization objectives are different from time to time.
Sometimes it can be mass production, increase sales,
increase profit, product development, production of quality
product, sales of product at a reasonable and competitive
price etc. Production and operation management help the
organization or company to achieve these targets.
 OBJECTIVE OF PRODUCTION
AND OPERATION MANAGEMENT

6. Timely delivery of products

Management divides its task into smaller units and time is
fixed for the completion of these tasks.
e.g. a group of productive men, machine hours required to
produce one unit, ideal time of labor or machine, length of
the production cycle, availability of material on time etc. all
these at last help the company to deliver its product to the
market in time.
 IMPORTANCE OF PRODUCTION
& OPERATION MANAGEMENT

1. Importance to Organization
i. It helps to build a good image of the organization
ii. It helps in the development of new products
iii.It helps the organization in facing competition
iv. It helps an organization in effective utilization of
resources
v. It helps in controlling cost
vi. It facilitates growth and expansion
 IMPORTANCE OF PRODUCTION
& OPERATION MANAGEMENT

2. Importance to consumer
i. Increased use-value in the product
ii. Receive quality products
iii. Gets product at reasonable price
iv. Receive products at the right time.
 IMPORTANCE OF PRODUCTION
& OPERATION MANAGEMENT

3. Importance to Investors
i. Increase trust
ii. Increase security for the investment
iii. Adequate market returns
iv. Increase credibility among prospective investors
v. Improve good image in the society
 IMPORTANCE OF PRODUCTION
& OPERATION MANAGEMENT

4. Importance to Employee
i. Gets adequate wage or salary
ii. Job security
iii. Improved working condition
iv. Provide job satisfaction
v. Future growth
 IMPORTANCE OF PRODUCTION
& OPERATION MANAGEMENT

5. Importance to suppliers
i. Improve relationship
ii. Helps in getting future contracts
iii. Helps in increasing sales and profit
iv. Receive timely payment
 IMPORTANCE OF PRODUCTION
& OPERATION MANAGEMENT

6. Importance to Nation
i. Proper utilization of natural resources
ii. Increase in standard of living of the people
iii. Increase in demand and supply in the market
iv. Generation of employment opportunity
v. Helps in economic development
 Functions of POM
1. Planning
2. Design and engineering
3. Production
4. Maintenance
5. Procurement of Materials
6. Logistic Management
7. Human Resource Management
8. Finance
9. Accounting
10. Marketing
 Historical
Background of POM
Production and operation management is not a new concept.
This concept dates back to the 18th century before the industrial
revolution and still continuing into the 21st Century. There has
been big development in this area allowing a greater production
efficiency.
18TH CENTURY: The earliest account of operations and
production management is given by Adam Smith in his book, "An
Inquiry into the Nature and Causes of the Wealth of Nations,"
published in 1776. In this work, Smith explains how the division
of labor allows for more efficient production. According to Smith,
people are more efficient producers if each person works on a
single component, rather than building the product from start to
finish.
 Historical
Background of POM
19TH CENTURY: Technological advancements gave rise to the use of
interchangeable parts. These are components to a product that are
standardized according to precise specifications. Previously, each
component had to be custom fit to the specific product. Industrialists
such as Eli Whitney and Marc Isambard Brunel used interchangeable
parts to develop highly efficient production systems in which workers
could simply build components that would be assembled at the end of
the process.
EARLY 20TH CENTURY: In the early 20th century, Henry Ford took the
division of labor and the use of interchangeable parts one step further,
creating the assembly line method of manufacturing. This method
revolutionized operation and production management, allowing Ford to
produce a high volume of cars at affordable prices. This method of
production has been adopted by many other producers, allowing for the
mass production of cheap consumer goods.
 Historical
Background of POM
LATE 20TH CENTURY: LATE 20th century, several operation and
production management systems have been developed. The focus of
most of these systems is on creating even greater efficiency in the
production process. Some of the more popular systems have included
Six Sigma, which was developed by Motorola; lean manufacturing,
which was developed by Toyota; and ISO 9000, which was developed
by the International Organization for Standardization.
 OM in profitability
and Management
1. Increase in Product Quality
The quality of a product refers to its capability of
meeting and fulfilling the need and Expectation of
the customer. Operations management ensures that
products meet the quality standards and offers
opportunities to identify areas where quality can be
improved. One of the main functions of operations
management ensures that products are designed to
be reliable and durable.
 OM in profitability
and Management
2. Customer Satisfaction
Customer satisfaction is essential for any organisation
as it ensures future business from your current
customers and word of mouth publicity can also be
done through the satisfied customer. While
operations management takes care of creating
products and services of high quality, it also ensures
that customer needs are met. When your operations
are running smoothly, it will allow you to deliver your
products at the right time to your customer.
 OM in profitability
and Management
3. Increase in Gross Revenue
Increased product quality and consumer satisfaction
will give an organisation to have a good reputation in
the market. This reputation will further help in
attracting more number of customers and expand its
business which will help in increasing the revenue of
the organisation
 OM in profitability
and Management
4. Reduction of Waste
Waste reduction is one of the most important
components of operations management. Various
techniques and tools can be used to identify and
eliminate waste within manufacturing operations, such
as lean manufacturing strategies and JIT scheduling to
manage and reduce inventory costs. Eliminating waste
within production and operation will help in increasing
profits by eliminating unnecessary costs and ultimately
improving the overall production process within
the organisation.
 OM in profitability
and Management
5. Collaboration
Adequately implementing operations management
strategies require collaboration between many
individuals and departments at different levels of the
organization. Many business strategies involved in
operations management include supply chain
configuration, sales, capacity to hold money, and
optimal utilization of human resources etc.
 OM in profitability
and Management
6. Competitive Advantage
In order to have a competitive advantage an
organisation requires to create a system that has a
unique advantages over its competitors. OM helps in
providing value and experience to the customer in an
efficient and sustainable manner through
differentiation and at a low cost.
 Production System &
Technological Choice
1. Project: Projects are executed to complete a single job at a site
other than the organisations own locations. It involves large
number of activities and involves large number of employees
with various skills and expertise. Duration of the project varies
based on the nature of project, size of the project and
availability of resources etc. Projects are very different when
compared with other production system.
Normally uses general purpose machines which can be procured on
rent or lease for the required duration. They demand for reliable
machines to ensure no failure during the project execution.
e.g Building an airport, Building a Dam
 Production System &
Technological Choice
2. Jobbing: Jobbing is a manufacturing process in which relatively
few units of a product are produced as and when required.
Jobbing is mostly performed in a small shop or a garage for
producing one or two jobs. All the tasks involved in completing a
job are performed on single order. When many small jobs are
performed at the same time, the process is called as job shop.

Job shops employ general purpose machines, tools and fixtures

that can perform multiple tasks and it uses flexible materials
handling system.
 Production System &
Technological Choice
Two categories of products are produced under the job shop, one
is make to stock and other is make to order.
Make to order job shop produce more jobs, which have to be
stocked for present and future use.
Make to order job shop produce product which are not required
on a regular basis. The need for such product are unpredictable.
So, they are not stocked in inventory.
 Production System &
Technological Choice
3. Batch Production: It normally produces in moderate volume.
Goods are usually produced in large quantities than in the job-
shops. The volume of production depends on the capacity of the
process equipment's. Batch production offer many advantages
over job production due to economies of scale. Batch production
is adopted to meet the requirements of repetitive orers for the
standard products.
Specialized machines, tools and fixtures are used if the production
is limited to certain products only and the mostly used flexible
equipment’s.

e.g Medicines, Cars, and Batteries etc.

 Production System &
Technological Choice
4. Line production: Special purpose machines and equipment's
are arranged in a rigid sequence to perform repetitive tasks of
large volume. Large volumes of standard products are
manufactured more cheaply in a line production system than in
other processes. It’s strength is to produce standard product
especially in competitive market and it has very high speed of
production.
Special purpose machines, tools and fixtures are used and
material handling activities are generally automated.

e.g Standard product like fridge, scooters, air conditioner, cars etc.
 Production System &
Technological Choice
5. Continuous flow process: A specific configuration of options to
produce the standardized products in used in a continuous flow
process. It usually produce streams of exactly similar materials.
Continuous process is a production line of connected work
stations as one unit and is highly efficient.

They generally employees highly specialized equipment's and high

degree of machine utilisation are also achieved.
e.g milk, oil refinery, chemical plants etc.
 Value Engineering
Value engineering is the systematic approach directed to analyze
the requirements of the systems, equipment, facilities,
procedure and supplies to achieve information about the
functions as planned to give the needed and at the lowest cost.
The items produced should be of desired quality, reliable, and
should have easy maintainability, Value engineering analysis is
done prior to manufacturing of an item.
 Value analysis
VA is a study concerning the items under purchase or already
purchased. Objective is to reduce the cost through various
option such as modifications in design, materials of
construction, changing the process of manufacturing by an
improved process of manufacturing, change in the source of
supply or addition or deletion of some features of the
product.
Organisation needs to looks into various aspects like cost
incurred, convenience, Prestige, Safety, Ease in maintenance.
Durability and maintainability, etc of an issue in order to help
in making a choice between the various options available.
 Value Buying
Value analysis is an integral and continuing element of
scientific purchasing. Application of value analysis ahs
improved the art of purchasing. Purchasing is a cost saving
activity and contributes to the profit of the organisation. It is
more than price analysis since it goes into the causes of price.
It suggest ways and means to minimize the causes and reduce
the cost.
 Operation
strategy
An operations strategy is defined as a set of principles or rules
that guide your company’s decision-making in all the business
choices you make.
It’s an outline and a breakdown of how your business obtains
the materials that go into your products and services, which
suppliers and distributors you work with, what it takes to design
and manufacture products, and what the product delivery
process looks like.
Operations strategy is a guiding principle used to plan, analyze,
and execute a company’s operations. Businesses use operations
strategies to identify and implement cost-effective processes for
creating and distributing products and services. An operations
strategy supports a company’s overall business strategy in order
to maximize profits.
 Key Elements of
Operation strategy
1. Resources: A comprehensive overall strategy for
operations takes into account the total operations
resources available to an organization, including
locational, mechanical, and human resources.
 Key Elements of
Operation strategy
2. Technology: Operations strategy increasingly
depends on new technological developments like
machine learning, production line automation,
real-time metrics, and market forecasting tools.
 Key Elements of
Operation strategy
3. Product or Services: One of the most important
elements of any operations strategy is the quality
management of a product or service. Businesses
analyze the lifecycle of their products and
services in order to predict market trends, adjust
their product or service, and allocate resources to
new service development and product
development.
 Key Elements of
Operation strategy
4. Facilities: A company’s operational capabilities
are influenced by the size and number of
production facilities. To function properly, specific
facilities require achievable production goals,
clear safety procedures, and inventory
management systems.
 Key Elements of
Operation strategy
5. Production system: An organization’s production
system determines the short-term and long-term
planning for how resources are turned into
marketable products and services. A
comprehensive production system includes clear
workflows, quality control benchmarks, and
supply chain management strategies.
 Advantages of
Operation system
1. Helps to break down department silos
If your company has many departments that rarely
intersect, an operational strategy will help create a
more seamless cohesion between departments when
the need arises.
These departments will have a roadmap to follow to
work together. When everyone works as a unit, they
can produce more comprehensively with the goal of
increasing output and thus revenue.
 Advantages of
Operation system
2. Makes better utilization of resources
Resources are precious things and should be treated as such.
To allocate resources wisely and ensure that nothing is wasted,
an operational strategy comes very much in handy.
Resources can be redirected, canceled, increased, or reduced
depending on the needs of the operations of your business.
The costs of certain resources can be more clearly understood
as well, which will help cut down on any needless waste.
 Advantages of
Operation system
3. Boosts efficiency and productivity
Employees are also bolstered by an operations strategy. Each
employee division will have clear-cut goals to abide by and team
managers who will guide these divisions to success.
The overarching goals will keep teams motivated to do their best
and work cooperatively with others as they have to.
Employees will use their skills and time better than they have in
the past, increasing output, working more efficiently, and feeling
like they’re doing more fulfilling work.
 5 types of
operation strategy
1. Core competency strategies: Core competency
operations strategies revolve around the main
strengths of a company’s business model. By
identifying the best core business processes within
an organization, core competency operations
strategies focus on leveraging existing strengths to
maximize profitability.
 5 types of
operation strategy
2. Corporate strategies: This type of operations
strategy adheres to a company’s mission statement
and aligns itself to a larger corporate strategy.
Businesses using this type of operations strategy
develop production initiatives, key performance
indicators (KPIs), and decision-making processes
based on an overall strategic plan determined by
company leaders and stakeholders.
 5 types of
operation strategy
3. Competitive strategies: Companies using this type
of strategy develop their operations processes in
order to distinguish their product or service from
competitors. By identifying competitive priorities
within a specific economy, businesses can change
their operations strategy to move toward a
competitive advantage, whether that’s a higher-
quality product or a faster lead time during
production.
 5 types of
operation strategy
4. Product or service strategies: This type of
operations strategy revolves around the quality
control of existing products or services as well as the
development of new products and services.
Businesses using this model often determine their
operations strategies based on the research and
ideas from product managers.
 5 types of
operation strategy
5. Customer-driven strategies: Organizations using
customer-driven strategies make operations
decisions based on the customer experience. This
type of operations strategy aligns with sales and
marketing strategies to manage and fulfill customer
expectations