Unit-1: Introduction to Production and Operations Management

Syllabus
Introduction to Production and Operations Management
Meaning of Production and Operations
Differences between Production and Operations Management
Scope of Production Management
Production System
Types of Production
Benefits of Production Management
Responsibility of a Production Manager
Decisions of Production Management
Operations management
Concept of Operations management
Functions of Operations management

Introduction to Production and Operations Management

Production and Operations Management is the process which transforms the inputs/resources of
an organization into final goods (or services) through a set of defined, controlled and repeatable
policies. It plays a critical role in helping businesses effectively and efficiently transform inputs
(such as raw materials, labour, and capital) into valuable outputs (products or services) while
minimizing costs and maximizing quality.

Meaning of Production
Production refers to the use of any process which is designed to transform a set of input elements
into a set of output elements.
Examples: 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.
Objectives of Production
Production involves the things which are essential for the manufacture of products. The objective
of the production management is ‘to produce goods services of right quality and quantity at the
right time and right manufacturing cost’.
1. To produce 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.
2. To produce 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.
3. To maintain right time: Timeliness of delivery is one of the important parameters to judge the
effectiveness of production department. So, the production department has to make the optimal
utilization of input resources to achieve its objective.
4. To ensure right manufacturing cost: Manufacturing costs are established before the product
is actually manufactured. Hence, all attempts should be made to produce the products at pre-
established cost, so as to reduce the variation between actual and the standard (pre-established)
cost.

Types of Production
Various types of production are as follows:
1. Job Shop Production
2. Batch Production
3. Mass Production
4. Continuous Production

1. Job Shop Production

Job Shop Production is a type of manufacturing process where products are produced based on
specific customer orders, and each product is typically unique or customized to some extent.
Examples: Print Shops, Tailoring, Jewelry Designers, Carpentry Workshops etc.
Characteristics of Job Shop Production
(i) Customization: In job shop production, products are made to order according to the customer's
specific requirements. Each job or order may be unique, and the production process is tailored to
the individual characteristics of the product.

(ii) Variability: The products manufactured in a job shop may have varying designs, sizes, and
specifications. This variability distinguishes job shops from other production systems, where
products are often standardized.

(iii) Flexibility: Job shops require a high degree of flexibility in terms of both equipment and
labour. Production processes are adaptable and can be reconfigured to accommodate different
product designs and specifications.

(iv) Skilled Labor: Workers in a job shop environment typically possess a wide range of skills and
expertise, as they must handle a variety of tasks and adapt to the specific requirements of each
order.

(v) Small to Medium Batch Sizes: Job shops often produce products in small to medium-sized
batches. While each product may be unique, the production is still conducted in batches to achieve
some level of efficiency.
(vi) Diverse Equipment: Job shops utilize a variety of machines and tools, as opposed to mass
production systems where specialized equipment is common. The equipment is versatile and can
handle a wide range of tasks.

2. Batch Production
Batch Production is a manufacturing process in which products are produced in groups or batches,
with each batch consisting of a specific quantity of items.
Examples: Bakery and Confectionery, Pharmaceuticals, Chemical Manufacturing, Cosmetics,
Electronic devices, Textile Industry, Food Processing, Semi-Conductor Manufacturing etc.

Characteristics of Batch Production

(i) Predefined Batch Sizes: In batch production, products are manufactured in predefined batches,
with each batch containing a specific quantity of items.

(ii) Variability within Batches: Each batch may have unique specifications or features based on
customer requirements or production changes.

(iii) Quality Control: Quality control is essential in batch production to ensure that all items within
a batch meet the specified quality standards.

(iv) Efficiency: Batch production strikes a balance between mass production efficiency and job
shop customization. Producing multiple items simultaneously within a batch can result in
economies of scale and reduced production costs compared to one-at-a-time manufacturing.
(v) Applicability to Multiple Industries: Batch production is used in various industries, including
food processing, pharmaceuticals, electronics manufacturing, and chemical processing.

(vi) Control over Production Process: Manufacturers have control over the production process,
allowing for adjustments and improvements between batches to optimize efficiency and quality.

3. Mass Production
Mass Production is a manufacturing process in which large quantities of standardized products are
produced with a high level of efficiency. Mass production is designed to produce large quantities
of products, often in anticipation of high market demand.
Examples: Consumer Electronics, Apparel Manufacturing, Beverage Industry, Pharmaceuticals,
Food Processing, Construction Materials, Personal Care Products etc.

Characteristics of Mass Production

(i) Standardization: Mass production involves the production of standardized products, where each
item is nearly identical in terms of design, and specifications.

(ii) High Volume: Mass production is designed to produce a large quantity of products rapidly. The
goal is to take advantage of economies of scale, where the per-unit production cost decreases as
production volume increases.

(iii) Specialized Machinery and Automation: Mass production relies on specialized machinery and
automation to perform repetitive tasks efficiently. Automation is essential for achieving high
productivity and reducing labour costs.

(iv) Assembly Line Production: A common approach in mass production is the use of assembly
lines. Products move along a conveyor system, with each station performing a specific task.

(v) Cost-Effectiveness: Mass production is known for its cost-effectiveness. It allows

manufacturers to spread fixed costs over a large number of units, leading to lower per-unit
manufacturing costs.

(vi) Just-in-Time (JIT) Inventory: In some cases, mass production is complemented by JIT
inventory systems, which aim to minimize excess inventory and associated holding costs while
ensuring products are available when needed.

4. Continuous Production
Continuous Production is a manufacturing process that involves the continuous and uninterrupted
production of goods or materials. It is used for products that have a consistent and uniform nature,
such as chemicals, petrochemicals, and utilities.
Examples: Oil Refineries, Power Plants, Paper Mills, Food and Beverage Industry, Water
Treatment Plants, Cement Production, Pharmaceuticals, production of Dairy products etc.
Characteristics of Continuous Production
(i) Uninterrupted Flow: Continuous production involves the constant and uninterrupted flow of
raw materials and products throughout the manufacturing process.

(ii) High Volume: Continuous production is designed to produce large quantities of products or
materials consistently and efficiently. The goal is to maximize production output to meet high
market demand.

(iii) Automation: Automation is a fundamental component of continuous production. Automated

systems control various stages of production, reducing the need for human intervention in routine
tasks and ensuring precision and efficiency.

(iv) Energy Efficiency: Continuous production can be highly energy-efficient, as it reduces the
energy costs associated with starting and stopping production processes frequently.

(v) Process Control: Continuous production relies on advanced process control systems that
monitor variables and adjust parameters to maintain product quality and process efficiency.

(vi) High Initial Investment: Setting up continuous production systems can be capital-intensive
due to the need for specialized machinery, automation, and infrastructure.

Production System
Production system is the organized set of activities, processes, resources, and technologies used to
produce goods or deliver services. It encompasses the entire sequence of actions and workflows
that transform inputs (such as raw materials, labor, and capital) into outputs (finished products or
services).
Examples: include systems for assembling automobile engines and automobiles themselves, as
well as other consumer products such as televisions, washing machines, and personal computers
Characteristics of Production System
The production system has the following characteristics:
(i) Inputs: A production system begins with inputs, which include raw materials, labor, equipment,
energy, and information. These inputs are essential for the production process.

(ii) Processes: Production systems involve a series of interconnected processes, operations, and
activities that transform inputs into outputs. These processes may include manufacturing,
assembly, packaging, and service delivery.

(iii) Outputs: The outputs of a production system are the final products, goods, or services that are
delivered to customers or end-users. The quality, quantity, and consistency of these outputs are key
aspects of the system's performance.

(iv) Resources: Production systems require various resources, such as human resources (workers,
managers), physical resources (machinery, equipment), and financial resources (capital) to operate
effectively.

(v) Quality Control: Maintaining and ensuring product or service quality is crucial. Quality control
measures are implemented at various stages of production to detect and rectify defects and non-
conformities.

(vi) Capacity: Production systems have a capacity or the maximum rate at which they can produce
goods or services. Capacity planning is vital to ensure that the system can meet demand without
overburdening or underutilizing resources.

(vii) Scheduling and Planning: Efficient scheduling and planning are crucial to allocate resources
effectively, manage lead times, and meet production targets.
(viii) Continuous Improvement: A commitment to ongoing improvement is often a characteristic
of successful production systems. Methods like Six Sigma, Total Quality Management (TQM),
and continuous improvement practices help enhance system performance.

Meaning of Production Management

Production Management, often referred to as operations management, is the process of planning,
organizing, directing, and controlling the activities involved in the production of goods or services
within an organization.

Definition of Production Management

According to Elwood Spencer Buffa, "Production management deals with decision-making
related to production processes so that the resulting goods or service is produced according to
specification, in the amount and by the schedule demanded and at minimum cost."
According to A.W. Field, “Production management is the process of planning and regulating the
operations of that part of an enterprise which is responsible for actual transformation of materials
into finished products”.

Objectives of Production Management

i) The main objective of production management is to produce goods of the right quality, right
quantity, at the right time and at minimum cost.
ii) To ensure optimum utilisation of available production capacity.
iii) To ensure optimum use of resources at optimal cost.
iv) To produce in required quantities of required quality as per schedule.
v) To consider the minimum lead time.
vi) To ensure the maximum capacity utilization.
vii) To consider flexible working conditions.
viii) To ensure minimum raw material cost, labour cost and maintenance costs.
ix) To consider minimum storage, material handling and inspection.
x) To improve productivity of all inputs.
Scope of Production Management
Scope of Production Management can be summarized as follows:
1. Product Design and Development: Production management is often involved in the early stages
of product design and development to ensure that products are designed with manufacturing
efficiency and cost-effectiveness in mind.
2. Process Planning: Planning the production processes, including determining the sequence of
operations, selecting machinery and equipment, and defining the workflow.
3. Capacity Planning: Estimating and managing production capacity to meet demand while
avoiding underutilization or overburdening of resources.
4. Facility Layout and Design: Determining the physical arrangement of production facilities,
workstations, and machinery to optimize workflow and minimize material movement.
5. Resource Allocation: Allocating and managing resources, such as labor, materials, equipment,
and capital, to maximize production efficiency.
6. Production Scheduling: Developing production schedules that coordinate production activities
to meet customer demand, minimize idle time, and maintain resource utilization.
7. Inventory Management: Managing inventory levels to balance the cost of holding inventory
with the need to meet customer demand promptly.
8. Quality Control and Assurance: Implementing quality control measures to monitor and maintain
product quality, including inspections, testing, and quality assurance practices.

Benefits of Production Management

Benefits of Production Management can be summarized as follows:
1. Advantages to consumers: A well planned production function will lead to good quality
products, higher rate of production and lower cost per unit. The consumers will be benefitted from
prices of goods and will get good quality products.
2. Advantages to Investors: An enhancement in productivity will increase profitability of the
business. The investors will get higher returns on investment if profitability is better. This will also
result in appreciation of assets values and ultimately the prices of shares will go up which will also
benefit investors.
3. Advantages to employees: Higher productivity will benefit employees in the form of better
remuneration, stability in employment, good working conditions, etc. Better productivity to a
worker will give him job satisfaction and improve his morale.
4. Advantages to suppliers: Every enterprise depends upon supplies of raw materials, finished
goods, spare parts etc. The suppliers will always like to deal with a concern having sound financial
position. The company and its suppliers will have an enduring relationship only if both are satisfied
with each other’s dealings.
5. Advantages to the community: The economic and social stability of a- community is linked
with growth and development of its industrial structure. An overall improvement in productivity
will improve economic welfare of the society.
6. Advantages to the nation: The advantages of various segments of society improve welfare of
a nation. Better production management will result in proper and economical use of natural
resources and elimination of wastages. An improved industrial climate will bring all round
development and prosperity.

Who is a Production Manager?

Production Manager is a key person in the field of production management and manufacturing.
This individual is responsible for overseeing and managing various aspects of the production
process within an organization. The role of a Production Manager is multifaceted and encompasses
a wide range of responsibilities to ensure the efficient and effective production of goods or the
delivery of services.

Responsibility of a Production Manager

The Responsibilities of a Production Manager can be summarized as follows:
(i) Planning and Scheduling: Develop production plans and schedules to meet customer demand
while optimizing resource utilization and ensuring on-time delivery of products or services.
(ii) Resource Allocation: Allocate and manage resources, such as labour, materials, equipment,
and capital, to support production activities efficiently and cost-effectively.
(iii) Cost Management: Manage and control production costs, including direct labor, materials,
overhead, and operational expenses, to maintain cost-effective operations and achieve financial
targets.
(iv) Inventory Management: Manage inventory levels to balance the cost of holding inventory
with the need to meet customer demand promptly, reducing carrying costs.
(v) Process Improvement: Identify opportunities for process improvement, implement lean
manufacturing and continuous improvement methodologies, and eliminate waste in production
processes to enhance efficiency and productivity.
(vi) Supervision and Leadership: Manage and lead production staff, providing leadership and
direction, ensuring proper training, motivation, and engagement to achieve production goals.
(vii) Supply Chain Management: Collaborate with suppliers and distributors to ensure a smooth
flow of materials and finished products throughout the supply chain, optimizing supply chain
efficiency.
(viii) Risk Management: Identify and manage risks related to production, such as supply chain
disruptions, quality issues, and regulatory changes, to minimize negative impacts.

Decisions of Production Management

Production management involves making a wide range of decisions to ensure efficient and
effective production processes. The important decisions of production management are given
bellow:
(i) Production Planning: Deciding on production schedules, the sequence of operations, and the
allocation of resources to meet customer demand efficiently.
(ii) Resource Allocation: Allocating and managing resources, including labor, materials,
equipment, and capital, to support production activities effectively.
(iii) Quality Control: Deciding on quality control measures and inspection processes to maintain
product or service quality and meet specified standards.
(iv) Inventory Management: Making inventory decisions to balance holding costs with the need
to meet customer demand and avoid stockouts or overstock situations.
(v) Benefits of Production Management: Deciding on the layout of production facilities,
workstations, and machinery to optimize workflow and minimize material movement.
(vi) Technology Adoption: Choosing and adopting advanced technologies, such as automation,
robotics, and digital manufacturing tools, to improve production efficiency and product quality.
(vii) Outsourcing Decisions: Evaluating whether to outsource specific production activities or
components to external suppliers or handle them in-house.
(viii) Safety and Compliance: Ensuring compliance with safety regulations, environmental
standards, and industry-specific regulations to protect employees, consumers, and the
environment.

Meaning of Operations Management

Operations Management refers to the process of planning, designing and controlling of operations
and processes within an organization to achieve efficient and effective production of goods or the
delivery of services. It involves a range of activities aimed at optimizing resources, processes, and
workflows to meet quality standards, cost targets, and customer demands.
Example:The first is a manager who oversees a company's production, workflow, inventory,
equipment and people. Another one in is a manager overseeing a service, such as IT.

Importance of Operations Management

The importance of operations management can be summarised as follows:
i) Towards Customers: These are the most obvious people who will be affected by any business.
What the chapter goes on to call the five operations performance objectives apply primarily to this
group of people.
Example: high customer satisfaction, repeat business, positive referrals, and a strong reputation.

ii) Towards Suppliers: Operations can have a major impact on suppliers, both on how they
prosper themselves, and on how effective they are at supplying the operation.
Example: finding vendors that supply the appropriate goods at reasonable prices and have the
ability to deliver the product when needed.
iii) Towards Shareholders: Clearly, the better and operation is at producing goods and services,
the more likely the whole business is to prosper and shareholders will be one of the major
beneficiaries of this.

iv) Towards Employees: Similarly, employees will be generally better off if the company is
prosperous; if only because they are more likely to be employed in the future. The operations
responsibilities to employees go far beyond this. It includes the general working conditions which
are determined by the way the operation has been designed.
Example: provides clear roles, responsibilities, and goals, fostering a supportive work
environment and teamwork.

v) Towards Society: Although often having no direct economic connection with the company,
individuals and groups in society at large can be impacted by the way its operations managers
behave. The most obvious example is in the environmental responsibility exhibited by operations
managers.
Example: improved customer satisfaction, increased revenue and improved employee
productivity

Functions of Operations Management

Important Functions of Operations Management are as follows:
(i) Process Design and Improvement: Operations managers are responsible for designing and
optimizing production processes to enhance efficiency, reduce waste, and maximize productivity.
This function often involves adopting methodologies like Lean manufacturing and Six Sigma to
improve processes.
(ii) Quality Control and Assurance: Ensuring that products or services meet specified quality
standards is crucial. This function involves implementing quality control measures, conducting
inspections, and monitoring quality assurance practices.
(iii) Inventory Management: Managing inventory levels to balance the cost of holding inventory
with the need to meet customer demand and avoid stockouts or overstock situations. It includes
decisions related to ordering, storage, and inventory turnover.
(iv) Capacity Planning: Determining the level of production capacity required to meet anticipated
demand and making decisions regarding equipment investments or resource adjustments.
(v) Supply Chain Management: Coordinating activities with suppliers and distributors to ensure
a seamless flow of materials, products, or services throughout the supply chain. This function
includes decisions related to supplier selection and supply chain optimization.
(vi) Lean and Agile Principles: Adopting principles from Lean manufacturing and agile
methodologies to reduce waste, enhance flexibility, and respond quickly to changes in demand or
requirements.
(vii) Customization vs. Standardization: Deciding the degree of customization or
standardization in production or service delivery processes based on industry requirements and
customer preferences.
(viii) Staffing and Training: Managing the workforce, including decisions regarding staffing
levels, hiring, training, and skills development to support operational activities.

Differences between Production and Operations Management

Basis for
Production management Operations management
comparison
Meaning Production Management connotes the Operations Management refers to the
administration of the range of activities part of management concerned with
belonging to the creation of products. the production and delivery of goods
and services.
Decision Related to the aspects of production. Related to the regular business
Making activities.
Found in Enterprises where production is Banks, Hospitals, Companies
undertaken. including production companies,
Agencies etc.
Objectives To produce right quality goods in right To utilize resources, to the extent
quantity at right time and at least cost. possible so as to satisfy customer
wants.

Meaning of Production and Operations management

Production and Operations Management (POM) is a field of management that deals with the
planning, organizing, coordinating, and control of the processes and activities involved in
producing goods and services. It is a critical function for businesses as it directly impacts their
ability to efficiently and effectively create products or deliver services to meet customer demands
and achieve their strategic objectives.

Objectives of Production and Operations Management

Objectives of production and operation management are as follows:
i) To attain maximum output with given set of resources (input).
ii) To produce maximum with lowest cost.
iii) To control pollution and wastage.
iv) To ensure optimum capacity utilization.
v) To exercise inventory control.
vi) To control and reduce cost of operation.
vii) To ensure optimum utilization of resources.
viii) To ensure timely delivery of output.
ix) To ensure quality of products.
x) To suggest changes in machinery and equipment.

Scope of Production and Operations Management

The scope of production and operation management has increased due to the dynamic change in
the business environment, Following are the activities which are included under production and
operations management functions:
1. Location of Facilities: Selecting appropriate location for the production and operation
management activities is important. The appropriate location should ensure the availability of
power supply, water supply, better road conditions, nearness of raw materials, skilled labours etc.
2. Plant layouts and Job Design: Deciding upon the machines, equipment and necessary devices
which could lead to effectual and desired production in the most economic way. Prepare of plant
layout for the establishment of machines in the required sequence. Prepare a job design to organize
machines, tasks into a unit of work to achieve a certain objective.
3. Material handling: Material handling is the process of ensuring the movement of raw materials
and semi-finished goods inside the factory. Storage of material and handling it in most effective
way to avoid the wastage and delivery at the work centres as and when required.
4. Product design: Designing the product and conceive the idea about its production. Product
design considers the product size, weight, colour etc.
5. Process design: Process design means the complete description of specific steps in the
production process. This determines the production process which is most relevant and efficient in
the given state of affairs.
6. Production and planning control: Production planning and control may be defined as the
coordination of a series of functions according to a plan which will, economically utilize the plant
facilities and regulate the orderly movement of goods through their entire manufacturing cycle.
7. Quality control: Quality control is a staff function concerned with the prevention of defects in
manufacturing so that, items may be made right way and ensure the quality standard. Controlling
the production and ensuring the quality by setting the check points and taking the periodic
measurements of the current performance.
8. Inventory Management: Inventory refers to the stock on hand at a particular time of raw
materials, semi-finished goods and finished goods to meet the demand of manufacturing units and
market.
9. Maintenance management: Maintenance management refers to the process of formulating
the corrective measures to stay in track with planned quality, time-schedule and predetermined
cost schedules.
10. Automation: Automation refers to the technique of operating or controlling a productive
process by electronic devices and reducing human intervention to the minimum.

Function of Production and Operations management

Important Function of Production and Operations management are as follows:
(i) Product and Service Design: POM involves designing and developing products or services
that align with customer needs and market demands. This function encompasses decisions
regarding product features, materials, and production methods.
Example: a smartphone, an e-book, or a car.

(ii) Capacity Planning: Determining the organization's production capacity, i.e., how much it can
produce or deliver within a given time frame. This function ensures that the company can meet
customer demand and growth objectives without overburdening its resources.
Example: In a bakery, Understanding how many pies can be made and baked in a given day using
existing equipment and staff (capacity) allows the bakery to plan for how many pies they can sell
and what they need for resources (staff, apples, etc.)

(iii) Process Design and Analysis: Defining and optimizing production processes to improve
efficiency, reduce waste, and enhance product or service quality. This involves decisions about the
layout of equipment, technology, and workflow.
Example: creating budgets, forecasting sales and costs, and analysing financial data.

(iv) Quality Management: Ensuring that products or services meet or exceed customer
expectations. Quality management functions involve quality control, quality assurance, and
continuous improvement methodologies like Total Quality Management (TQM) and Six Sigma.

(v) Inventory Management: Managing inventory levels to strike a balance between carrying costs
and stockouts. Efficient inventory management minimizes holding costs while maintaining
product availability.
Example: If a newspaper vendor uses a vehicle to deliver newspapers to the customers, only the
newspaper will be considered inventory. The vehicle will be treated as an asset.

(vi) Supply Chain Management: Coordinating the flow of materials, information, and finances
across the entire supply chain, from suppliers to manufacturers to distributors to customers. This
function ensures timely and cost-effective movement of goods or services.
Example: sourcing, materials management, operations planning, distribution, logistics, retail,
demand forecasting, order fulfillment, and more.
(vii) Maintenance and Reliability: Ensuring that production equipment and machinery are
properly maintained to minimize downtime and maintain operational reliability.
Example: In a vahicle, Getting an oil change every 6 months or 5,000 miles is important for its
maintenance and reliability similarly, maintaining proper equipment and machinery is important.

(viii) Cost Control and Efficiency Improvement: Managing costs in production and operations
to optimize resource utilization, reduce waste, and improve overall efficiency. Techniques like
Lean management are often used for this purpose.
Example: a company may spend $100 to create a product worth $500.

(ix) Risk Management: Identifying and mitigating risks that could impact production and
operations. This includes contingency planning for unexpected disruptions.

(x) Continuous Improvement: Implementing a culture of continuous improvement to adapt to

changing market conditions and customer preferences, while finding ways to enhance operational
efficiency and effectiveness.
Example: Employee training, skills development, cross-training programs, educational benefits,
and courses

Review Questions

Conceptual Type Questions

1. What is Production?
2. Give the meaning of Production System.
3. What is Production Management?
4. Give the meaning of Operations Management.
5. What is Production and Operations Management?
6. Give the meaning of Job Shop Production.
7. What is Batch Production?
8. Give the meaning of Mass Production.
9. What is Continuous Production?
Descriptive Type Questions
1. Discuss various types of Production.
2. Explain scope of Production Management.
3. Discuss benefits of Production Management.
4. Explain the responsibility of a Production Manager.
5. Discuss the decisions of Production Management.
6. Explain the concept of Operations management.
7. Discuss the functions of Operations management.
8. Differences between Production and Operations Management.
9. Explain importance of Production System.
10. Discuss scope of Production and Operations Management.
11. Explain the functions of Production and Operations Management.