Intro - Operations Mgt

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%angladesh Open &niversity

Lesson One: Introduction to Production & Operations

Lesson Objectivesfter completing this lesson you will be able to+

&nderstand the concept of goods and servicesefine operations management

-"plain the production systemustify the relationships between production system and environmentistorical development of operations management

The Concept of Product: Goods & ervices)roduct is the core of operations. #n this introductory chapter we begin our

journey by e"plaining what a 0product1 is because a thorough idea of productis vital to the understanding of productions and operations management.When we say an operation is converting inputs into outputs, these outputs are

products or things that satisfy consumer needs. product can be either a good2i.e., a physical object3 or it may be a service 2i.e., an intangible product3 thatoffer benefits to customers in forms of financial, medical, legal or educational, etc.. #n operational terms, producing a good is calledmanufacturing and generating service is services . The difference of the twocan be drawn in term of the following characteristics 2Table (.(.(3.

Table (.(.(+ 4haracteristic differences between goods 5 services

Characteristics Goods ervicesOutput Tangible #ntangible

4ustomer contact 6ow igh

&niformity of input igh 6ow

6abor content 6ow igh

7easurement of productivity -asy ifficult

Opportunity to correct quality problems before delivery to customer

igh 6ow

#nput variability 6ower 8reater

While reading the above table we need to 9eep in mind that it represents two e"tremeend of the same spectrum. #! one end pure goods are tangible in nature, whereas, onthe other end of the spectrum services are purely intangible. %ut in reality most goodsand services are somewhere in between the e"treme ends, as such, have features thatare common to each other. :or e"ample, irlines is a service sector endeavor, it ishighly capital intensive, has very little labor content, and has low customer contact.$imilarly, many goods that we use now a days come with lots of intangible features,li9e after sales service, etc. Operations Management !efinedWhat does production and operations management mean; :irst the term

production conjures up images of factories, machines, and assembly lines. Tomany production simply means to ma9e products. Therefore, production

)roduction Operations 7anagement )age' <

8oods are physicalobjects and services areintangible products thatoffer benefits to the


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management seems the management of ma9ing products. What then, does theterm operations management specifically mean; Operations management, aterm that more closely reflects the diverse nature of activities and situationsoutside manufacturing, such as, health care, food service, education,recreation, ban9ing, etc. Therefore, Operations management is defined as the

process of designing, operating, and controlling a productive system capable

of transforming physical resources and human talent into needed goods and services.

#n simpler terms, Operations Management is the process of converting inputsinto desired outputs. 7ore specifically, it is the management of the conversionof land, labor, capital, technology and management inputs into desired outputsof goods or services.

The Operation "stem !ow let us ta9e a loo9 at this operation process in more details. s we havesaid production is the process of converting the resources available to anorganization into products. #n some organization production or manufacturing

of goods and the creation of a service go hand in hand. 4onsider for e"amplea fast food restaurant where various food items are converted into consumable

products but where the speed and quality of service are also crucial factors for a successful operation. The collection of all interrelated activities andoperations involved in producing goods and services is called a productionsystem 2:igure(.(.(3. This figure illustrates that any production systemconsists of five principal components+ input, conversion, output, gettingfeedbac9 and generating managerial control.

:igure (.(.(+ The production system in operations management

• Inputs and outputs#nputs of a production system consist of the resources that are transformedinto the desired outputs 2goods and services3, as well as the resources neededto support the overall production process. #n manufacturing, for e"ample, theinputs consist of the raw materials and or the purchased parts that aretransformed into finished goods as outputs. These inputs might be crude oil toconvert into petrol, auto parts to assemble into a car, or fabrics to ma9edresses. #n addition to such material inputs, machines and material handling

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#nputs consist of theresources that aretransformed intodesired out ut.

Operations 7anagementis the process of converting inputs intodesired outputs.


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equipment must be purchased, wor9ers must be hired and trained andinformation regarding the technology, mar9et and competitors must have to beobtained. ll these also fall in the category of inputs. #n a serviceorganization, similar inputs are needed. :or e"ample, an educational instituterequires tables, chairs, chal9s/mar9ers, chal9 boards/white boards, boo9s,lighting, and s9illed teachers to teach students> a restaurant requires food,

chefs, waiters and waitresses. The major output of a service organization isthe customer satisfaction.• The conversion process4onversion processes in production typically change the shape of rawmaterials or change the composition or form of the material. :or e"ample,grains are converted into food products and different parts are combined toma9e an automobile. 6arger manufacturing systems usually employ severaldifferent conversion processes. #n service organizations, conversion does notta9e place> rather the service is created. This creation process may consist of ma9ing the service available at specific times and locations?for e"ample, a

branch ban9 with a *='hour automatic teller that is built in a shopping mall. #nother service organizations, such as hospital, it is the s9ill and e"pertise of the

staff that create satisfaction.

The e"tent to which customers participate in the conversion process is veryimportant to understand. #n service operations, managers sometimes find ituseful to distinguish between output and throughput types of customer

participation. Output is a generated service> throughput is an item goingthrough the process. :ollowing two e"amples illustrate the difference betweenthroughput items going through the conversion process contrasted withoutputs coming out of the conversion process. #n a dental clinic the output isthe medical service to the patient who, by going through the conversion

process, is also the throughput 2:igure (.(.*3.

:igure (.(.*+ #nput'Output in a ental 4linic

t a restaurant, in contrast, the customer does not go through the conversion process. The outputs are prepared food items served 2both goods andservices3, and while the throughputs are the food items as they are preparedand converted 2:igure (.(.


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• Managers7anagers represent the most important component in a production system. #norder for a production system to function effectively, s9illed managers areneeded to plan and ma9e decisions. 7anagers must acquire the inputs, controlthe conversion or creation process and ensure that outputs are available at the

proper time and place to satisfy demand. The selection of customer orders to

process, the assignment of wor9ers to jobs, employee motivation, cost controland quality issues are a few of the important problems that managers of

production systems must face. $uch problems involve both technical and behavioral s9ills.

• 'eedbac :eedbac9 is the process of monitoring the outputs of a production system andusing this information to control the production process. -ffective feedbac9 requires useful performance measures and enables an organization to improvethe goods and services that it offers and better meet the demands of themar9etplace. :or e"ample, manufacturers need to determine if finished

products contain any defects. #f so, then it must be determined whether the problem is a result of bad materials, poor wor9manship or something else.

:eedbac9 is also an important issue for service operations. :or instance, atravel agent often calls a client after his or her vacation to see if the travelarrangements were satisfactory. #n case of a bad report from the client, theagent can easily understand that if this goes on, he might loose valuablecustomers in the future. #n larger organizations, feedbac9 provides means for top managers to determine how well their goals are being met at lower levels.While plans and decisions are fed downward, feedbac9 on performance flowsupwards, thus providing a lin9 between hierarchical levels.

The Production "stem and its (nvironment production system is only one of the major components of an organization.

)roduction is affected by, and has an impact on decisions in other functionalareas of the firm. These are referred to as the internal influences of the

production environment. #n addition, various e"ternal influences affect theoverall objectives and policies of a company and have important implicationsfor production. These relationships for a typical firm are illustrated in the:igure (.(.=.

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-nvironment isinternal and e"ternalfactors that affect theoverall performance of the organization.

)ctivit": ssume that you are an operation manager. !ow, how the process of feedbac9 will help you redesign your product or ensure

:eedbac9 is the process of monitoringthe outputs of a

production system andusing this informationto control the


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:igure(.(.=+ The production system and different environment

t the outermost level, e"ternal to the firm itself, are several environmentalfactors that influence the overall policies and objectives of the company. Themost important environmental factors are economic conditions, governmentregulation, competition, and technology. -conomic factors include interestrates, availability of capital, general economic conditions, ta" regulations, andeconomies of scale. :or e"ample, the sudden rise in oil prices, coupled withan increasing energy conscious merican people, has had a dramatic effect onthe product lines of automobile manufacturers. !ew product lines in mericarequires significant retooling and redesign of production processes in the autoindustry. 4ompliance with governmental regulations on pollution control andenvironmental impact, for e"ample, has also had an impact on production.

The nature of competition, mar9et shares, and how the firms react tocompetitive strategies have a significant influence on product lines and other strategic decisions. This has been especially evident in the fast' food industry.Bou have undoubtedly observed that when a fast food franchise offers a newitem, a variety of other similar operations almost immediately imitate suchitems and offer them in different preparations. This requires newconsideration in food production processes and the management of food itemsand supplies.

!ew technology in manufacturing processes, equipment, or materials candrastically affect product designs and production methods. n e"cellentillustration of this is the development of microprocessors in the electronicindustry. 7anufacturers of all mechanical office equipment, cash registers,and other product were forced to incorporate the new technology in order tostay in business. Thus we see that production must react quic9ly to strategicchanges in firm1s business plan.

)roduction Operations 7anagement )age' C

#n the organizationother functional areassuch as finance,accounting, mar9etingetc also influences the

production system.

(*terna# 'actors

-conomic4onditions

8overnmentDegulations

4ompetition Technology

The Firm

:inance7ar9eting Traffic -ngineering

)urchasing

)ersonnel

Desearch 5evelopment

ccounting

Production"stem


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Within an organization, other functional area influences the productionsystem. :inance is responsible for obtaining funds, controlling their use,analyzing investment opportunities, and insuring that the firm operates on acost'effective basis and in most cases at a profit. :inancial decisions affect thechoice of manufacturing equipment, use of over time, cost'control policiesand price volume decision and in fact nearly all facets of the organization.

ccounting 9eeps records on costs and prices that relate to such factors asfinancial decisions, purchasing, and payroll. 7any of these data must beobtained from production managers. 7ar9eting is responsible for generatingand maintaining demand for the firm1s products, insuring customer satisfaction and developing new mar9ets and product potentials. 4oordinationof production and mar9eting is important in order to use demand forecasteffectively, to project wor9loads and to ensure sufficient capacity to handlethe demand and deliver finished products on time. -ngineering determinesguidelines for product quality, production methods and other technicalspecification. )ersonnel and labor relations recruit and train employees andare responsible for employee morale, wage administration, union negotiationsand so on. Desearch and development investigates new ideas and their

potential uses as consumer products. :inally, purchasing and traffic areresponsible for the acquisition of materials and supplies necessary for production and the distribution of the finished goods to customer,respectively.

s we have already mentioned, the random fluctuations can be due to internal problems 2e.g., human error, faulty process, imperfect input, etc.3 or becauseof e"ternal sources 2e.g., natural disasters, political impacts, governmentinterventions, etc.3. 4onsider the cases of a department store 2:igure (.(.@3and a farm 2:igure (.(.A3 for better understanding.

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Dandom fluctuations+6ate deliveries, recessions, labor turnover

4onversion process

:eedbac9+ inventory levels, laborefficiency, sales volume

Outputs+$erviced

customer withdesired

merchandise

#nputs+6and, 6abor,

building,equipment,

merchandise,store managers

)ctivit": o you thin9 the %angladeshi 8arment #ndustry sector isheavily influenced by the global environment; Why or why not;

iscuss.


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:igure (.(.@+ Operations systems for a epartment store

#n a department store we use land, labor, building, equipment, merchandise,store managers as inputs to get the serviced customers with desiredmerchandise as the outputs. #n this conversion process the random

fluctuations are late deliveries, recession, labor turnover, etc.

On the other hand in case of a farm we give inputs of land, farm labor,tractors, plough, buildings, s9ills of farmers, etc., to get the grains, beef, mil9,etc. ere the random fluctuations are weather, inflation, government control,and equipment brea9down.

There is continuous feedback on the process to monitor and controloperations. This helps to achieve desired outputs with minimum variations.The feedbac9 loop provides 9ey information to the managers regarding

adjustments needed.

+istorica# !eve#opment of Operations ManagementOperations 7anagement has been playing a vital role for over two centuriesfor the economic development of a country 2Table (.(.*3. The term Operations7anagement progressed through a series of names+ manufacturingmanagement, production management, production and operationsmanagement, and operations management. ll these different names describethe same general discipline.

The traditional view of manufacturing management began in the eighteenthcentury when dam $mith recognized the economic benefits of specialization

of labor. :or higher s9ill and efficiency, he recommended brea9ing down of jobs into subtas9s and reassigning wor9ers to specialized tas9s. #n lateeighteenth century, -li Whitney and others highlighted interchangeable partsand cost accounting. #n nineteenth century, 4harles %abbage came up withdivision of labor by s9ill, assigning of jobs s9ills and basics of time study. #nthe early twentieth century, :rederic9 W. Taylor implemented $mith1s theoriesand voiced for scientific management throughout the vast manufacturing

)roduction Operations 7anagement )age' F

:eedbac9+ observation of soil andcrop conditions, prices received

#nputs+6and, farm labor,

building, equipment,tractors, plough, etc.

Outputs+8rain, beef,mil9, etc.

Dandom fluctuations+Weather, inflation, govt. controls,equipment brea9down

4onversion process

:igure (.(.A+ Operations systems for a farm

Traditional view of manufacturing

management began inthe eighteenth centurywhen dam $mithrecognized theeconomic benefits of specialization of labor.


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comple" of his day. :rom then until about (F


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inspection sampling plans(F=G Operations research applications in World War ## ).7.$. %lac9et 5 others(F=A igital computer ohn 7auchly 5 .). -c9ert(F=C 6inear programming 8eorge %. antzig, William

Orchard' ays, 5 others(F@G 7athematical programming, nonlinear and stochastic

processes. 4harnes, W.W. 4ooper, .Daiffa 5 others

(F@( 4ommercial digital computer> large'scalecomputations available

$perry &nivac

(FAG Organizational behavior> continued study of peopleat wor9

6. 4ummings, 6. )orter 5others

(FCG #ntegrating operations into overall strategy and policy

W. $9inner

(FCG 4omputer applications to manufacturing, scheduling,and control, material requirements planning 27D)3

. Orlic9y 5 O. Wright

(FEG Iuality and productivity applications from apan>robotics, computer'aided design and manufacturing24 /4 73

W.-. eming 5 . uran

(FFG Time based competition and information highway !umerous

The evolution of in the core concepts regarding operations management can be illustrated in the following :igure (.(.C.

Wor9 4ontrol

$cheduling control

#nventory control

4ost control

)rofit control2Operations management involving mar9eting3

4orporate strategy management2change in operational management methodology based on

corporate strategy3

7anagement changes2!ew ideas to cope with systematization, computerization,automation, respect for man, ecological control, safety and

welfare3

:igure (.(.C+ -volution of Operation 7anagement

-ecent Issues of the Operations Management#n today1s world production and operations management considers certainfactors as vital to the success of any organization. These recent trends are+

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• Global market place: The world economy is, JKnot trade among (AGcountries> it is the world moving from trade among countries to a singleeconomy. One economy, one mar9etplace.L

• Operation strategy: J..#nvolves fitting the operations mission into thecorporate strategy, a strategy that should blend the environment andcorporate resources into a corporate position statement.L

• TQM—total uality management: continuous attention tomanufacturing details rather than attainment of a fi"ed quantitativequality standard.

• !le"ibility: 4apability of a manufacturing system to adapt successfullyenvironmental conditions and process requirements.

• Time reduction: #ncreasing efficiency by reducing time ta9en.• Technology: The level of sophistication in plant, equipment, and s9ills in

the conversion process.• #orker investment: 4onsidering wor9er benefit and improving human

relationship with the top management.• $eengineering: &pdating the complete conversion process by

reprocessing the entire set of information and recreating the entire 7D)2materials requirement planning3.

• %nvironmental issues: )rofit ma"imization through operational activitieswith the social and environmental welfare in mind.

Operation Management Toda".) "stem /ie0point)roduction management, which originally meant the management of

production lines, has today evolved into a comprehensive idea directly relatedto corporate strategy. The process of evolution appears to be closely related tothe birth of industrial giants having comple" production systems.

Today organizations are viewed as systems. system is a collection of

objectives of regular interaction and interdependence. systems model of theorganization identifies the subsystems or sub'components that ma9e up theorganizations. business firm might well have finance, mar9eting,accounting, personnel, engineering, purchasing, and physical distributionsystems in addition to the operations system. These systems are notindependent, but are interrelated to one another in many vital ways.

The systems viewpoint identifies each of these functional areas of theorganization as subsystems. Thus operations stand out as a very importantsubsystem of the 0organization1 system. The significance of this approach isthat operations is not viewed as an independent subsystem of anyorganization> it is rather considered as an interrelated subsystem that

incorporates large emphasis from other subsystems. s a result the decisionma9ers of any organization always bears in mind the operations function intimes of developing the overall corporate strategies. $imilarly, the operationsfunction always adheres to the goals of the corporate bodies.

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$ystem is a collection

of objectives of regular interaction andinterdependence.


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!iscussion 1uestions(. 6ist five different organizations that offer both manufacturing and

service operations.*. What are the major components of a production system; 8ive

e"amples of each.


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Lesson 2: Operations Objectives% Life C"c#e )pproach

Lesson Objectivesfter completing this lesson you will be able to+

#dentify operations objectivesiscuss the concept of new product

-"plain the life cycle and operations issues#dentify the role of operations managers-"plain operation management thought of the different schools

The Operations ObjectivesThe major objective of the operations subsystem is to provide conversioncapabilities for meeting the organization1s goal and strategy. The specificobjectives 2sub goals3 of the operations subsystem are+

To define product and service characteristicsTo define process characteristicsTo define product/service qualityTo ensure efficiency in terms of

2a3 -ffective employee relations and cost control of labor 2b3 4ost control of material2c3 4ost control in facility utilization

To provide customer service through2a3 )roducing quantities to meet e"pected demand2b3 7eeting the required delivery date for goods 5 services

To ensure adaptability for future survival

These operations sub'goals or the objectives can be attained through thedecisions that are made in the various operations areas. -ach decisioninvolves important trade'off between choices about product and process vs.choices about quality, efficiency, schedule and adaptability. gain the

priorities among these sub goals and their related emphasis should be directreflection of the organization1s mission. Once again the general thrust of the

process is guided by competitive and mar9ets conditions in the industry,which provide the basis for the organizations strategy.

The Product Life C"c#e )pproach and Operations Issues7anagerial strategies for operations should be formulated from situations athand and not from set rules and principles. nd to identify the stages and rightsituations, an operational manager must remain aware at what stage his

product is at any moment and thus ma9e the right decision.

-ntrepreneurs frequently come up with new businesses with unique productideas or new services. :irms ordinarily prepare to bring out new products or services as competitors infringe on the mar9et, replicating products andservices or as the useful product life diminishes. These new product ideas

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Operational manager mustremain aware at' whatstage his product is.


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come from various sources such as, top management, customers, staff,research and development 2D5 3, etc. Once launched even good productshave limited life and to remain viable, the organization see9s a flow of new

product possibilities.

The PLC3 Product Life C"c#e

The demand for a product M its mar9et acceptance M generally tends to followa predictable pattern called the product life cycle 2:igure (.*.(3. product lifecycle is nothing but a graphic representation of the sequential rise and fall of a

product. ny products go through a series of stages, beginning with low'demand during mar9et development, proceeding through growth, maturity,high volume saturation, and finally decline.

:igure (.*.(+ The )roduct 6ife 4ycle

The time span of the four stages varies from industry to industry. :or novelty

products this time may be only few wee9s or months. :or other products thelife cycle may span many years or decades. This life cycle is significant for operations managers. %ecause the operation issues that will arise are+

• Occurrence of various stages and their accommodation• Optimization of facilities, materials, labor, management system• :ate of e"isting facilities and conversion processes through

various stages

The following Table (.*.( summarizes the important features of differentstages in the product life cycle that can provide a guideline to operationsmanagers.

)roduction Operations 7anagement )age' (@

product life cycle isnothing but a graphicrepresentation of thesequential rise and fallof a product.

D5 #ntroduction 8rowth 7aturity ecline

)ctivit": Thin9 of goods or services 2any of your choice3. nd designthe )64 of it with your understanding regarding the current situation of that product in the )64. lso justify your arguments.


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Table (.*.(+ #mportant features of different stages in the product life cycle

tages -&! Introduction Gro0th Maturit" !ec#ine

%asicstrategies

#nnovate #nfiltrate dvance efend Withdraw

)roductvariety

8reat variety 8reat variety #ncreasingstandardization

-mergence of a0dominant

design1

ighstandardization, 0commodity

characteristics1

)roductvolume

' 6ow volume #ncreasing volume igh volume igh volume

:orm of competition

' )roductcharacteristics

)roduct qualityand availability

)rice anddependability

)rice

$trategicconcerns

(. D5 new

*. :orecastsales and 9ey

trends

(. )lanfinancing for negative cashflow period.

*. scale up production and

mar9etingoperations

(. D5competitive

innovations for present products

*. see9 economiesof scale in

production

(. 4ut costs in production and

mar9eting to fightdeclining profit.

*. 4onsider e"tending product

life cycle viareintroduction or product update.

(. scale down production and

mar9eting

*. triminventories

The Operations Issues

:rom an operations management viewpoint, the life cycle can bereconstructed into five stages+ Desearch 5 evelopment, #ntroduction,8rowth, 7aturation, and ecline of commodity. The operations strategy andconversion process have to be adaptive throughout the life cycle because of change in basic strategies, product variety, forms of competition, strategicconcerns, etc in different stages of )64. :or e"ample, in the D5 andintroductory stages, design change is frequent due to differences in thedemands on product design and production> whereas, in the maturity andduring decline phases the product design is rather stable, as is the conversion

process.

Whereas the early life cycle stages emphasize the product1s uniquecharacteristics and quality, later stages emphasize price competition anddelivery capabilities. $urvival in the mar9et depends on producing a stable

product with high volume in contrast to the earlier emphasis on a high qualityvariety, low'volume conversion process. The conversion process has changedsubstantially, including new types of human s9ills and orientations, equipment

and facility revisions, and planning and control systems. To prepare for andinfluence these adaptations use of D 5 is underta9en.

)rocess technologies have life cycles related to product life cycle. Over timeunit manufacturing costs diminish for mature products. :rom product start'upto decline, manufacturing processes change in organization, throughputvolume, rates of process innovation, and automation. The process technology

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6ife cycle can bereconstructed into fivestages+ evelopment,#ntroduction, 8rowth,7aturation 5 ecline.


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2:igure (.*.*3 is typically &ob'shop( at start'up and moves towards acontinuous flo( technology * if the products survive to become a commodity.Throughput volumes and automation are low at start'up and high duringmaturation and decline. These changes require appropriately matching up themanufacturer1s product and process structures 2e.g., batch, technology ) andassembly line *3.

Time:igure (.*.* )rocess 4osting

s products, mar9et requirements, and competitions change, so mustequipment procedures and human resources. #f process changes are not madeto accommodate the product life cycles, product and process are incompatible+the result is competitive disadvantage.

-o#e of Operations ManagerOperations managers li9e other managers must guide the efforts of other people in selecting the organization1s goals and accomplishing its objectives.They may perform some of the tas9s they direct, but when they are

performing what are strictly management tas9s, their wor9 is to plan anddirect the wor9 of others.

)roduction and operations managers require two main types of decisions ' onefor the design of the systems and the other related to the operation and controlof the system inclusive of long'run and short'run decisions. They will have togive emphasis on the factors of cost, service and reliability of both functionaland time performance that depend on the basic purposes of the whole concernand the general nature of production of goods or services to be rendered. #nthis way, generally, economic concerns will most emphasize cost based uponquality and delivery of goods.

( ob shop technology is a process technology suitable for a variety of custom'designed products in smallvolume.* 4ontinuous flow technology is a process technology suitable for producing a continuous flow of products.< %atch technology is a process technology suitable for a variety of products in varying volumes.= ssembly line is a process technology suitable for a narrow range of standardized products in highvolumes.

)roduction Operations 7anagement )age' (C

Operations managersrequire two maintypes of decisions'$ystems designdecision, 5 Operationand control decision

M a n u f a c

t u r i n g

C o s

t 4 u n

i t

ob $hop

%atchTechnology 4ontinuous

$tart up Dapid growth 7aturation 4ommodity

ssembly 6ine


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6ong run decisions base on the production design system. These will begiven below+

i3 +election of the product + :irst of all the product is to be selectedto the requirements of the people to fetch more appeal.

ii3 esign of the product + $election and design are greatly related

mutually. They have interaction of strong nature with capability of the product. The design will create the appreciability of the people.

iii3 +election of e uipment and processes + There are many equipmentand processes. The equipment and processes should be such thatconcern can cope up within its capital limit prescribed for theequipment> and processes should be such to cope up design.

iv3 -roduction design of items processed + )roduction cost interactsgreatly with the design of arts, products, and paper wor9 forms.

esign decision mostly set the limiting characteristics of cost and processing of the system.

v3 ob design + Total system design includes many things of which job design is an integral part. #t involves the basic organization of

wor9 and the integration of human engineering data to producedesigned jobs optimally.vi3 +ite of the industry and business + The decisions about location of

the system play an important part if the balance of cost factorsdetermined by nearness to mar9ets and material supply is critical.6ocation should be near to mar9et so that the transportation e"pensesare not more and supply of material does not pose any great problemdue to seasons.

vii3 !acility layout + ll decisions regarding design capacity, basicmodes of production, shift, use of overtime and subcontracting.%esides, operations and equipment must be situated in a pattern thatlessens overall material handling cost or meets the needs of some

more complicated criterion. The latter need is most difficult for thecomple" intermittent model where routes change. 7any detailed problems are connected with each other so as to specify sufficientlythe layout of a production system. These include heating, lightningand other utility needs, the allocation of storing space and the designof the building to accommodate the layout.

$hort'run decisions concerning the design of operation and control systemsare as follows+

i3 /nventory control + ecisions should be made regarding inventory atdemand.

ii3 -roduction control + ecision should be made relating to allocation of productive capacity consistent with demand and inventory policy.:easible schedules must be wor9ed out, and the load on men andmachines and the flow of production should be in control.

iii3 Maintenance and reliability of the system + ecisions should be madefor the efforts of maintenance, recognition of the random nature of equipment brea9down and recognition that machine down'time mayitself be connected with important costs or loss of sales.

iv3 Quality control + While controlling the quality, care should be ta9en sothat defective parts are not produced and shipped. #f that is not

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possible at all, it should be seen that errors are tolerable and the good parts are sent. #nspection should be done and covered in the costagainst probable losses due to passing defective material or services.

v3 0abor control + 7ost products need labor and it costs much for services. )roduction planning needs labor appraisal and so we findthat much effort is wasted to develop wor9 measurement and wage

payment systems.vi3 1ost control and improvement + #t is the duty of the production

supervisors to see that daily decisions regarding the balance of labor material and overhead costs are done to the satisfaction up tominimum.

The individual production systems change these factors1 importance in production management. !o doubt every system faces these problems to somee"tent. The equipment policy may cost more where capital investment per labor is more but in some industries it may not cost more. The art of operations management includes the sense of the relative importance of thevarious problems in a given circumstance or situation.

i##s re5uired of the operations managers#n trying to wor9 through others to accomplish the objectives of operationsand production, managers must posses a variety of s9ills of which two major categories are as follows.

i3 Technical competence + $ince managers ma9e decisions about thetas9s that other people are to perform, they need a basicunderstanding of the technology with which the production systemwor9s and they need adequate 9nowledge of the wor9 they are tomanage. Technical competence can be obtained through personaltraining and e"perience or through the use of staff specialists andconsultants.

ii3 2ehavioral competence + )eople find that they can achieve more, both in wor9 and in rewards, by wor9ing as a group, rather than bywor9ing alone. 7anagement must consider the social as well as the

physical aspects of the wor9 and wor9ers. $ince managers wor9 through others, their wor9 necessarily involves a great deal of interpersonal contact. good manager therefore should have good

behavioral competence?the ability to wor9 with other people.

)roduction Operations 7anagement )age' (F

Operations manager must posses a varietytechnical s9ills andhave the ability towor9 with others.

)ctivit": s a production manager do you thin9 that you would face any problem in ta9ing long term production decisions; What are they; Whythese problems might arise; ow you can overcome all these problems;

ustify.


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!ifferent choo#s of Thought of Operationa# ManagementOperations Management is the process of converting inputs into desiredoutputs. 7ore specifically, it is the management of the conversion of land,labor, capital, technology and management inputs into desired outputs of goods or services. #n doing so managers use various approaches from theclassical , behavioral , and modeling views of management. The following

chart shows the various views under these three schools of thought.choo# ome important

issuesPrimar" focus Genera# contribution

to the managementC#assica#

$cientificmanagement

)eople motivated byeconomies alone7anagerial rationalityOrganization a closedsystem 2certainty3

-conomic efficiency>)hysical aspects of wor9 environment>$cientific analysis of wor9 tas9s>

pplications of techniques towor9 tas9s

emonstration of benefitsfrom specialization oflabor, division of labor,

job analysis, separation of planning and doing wor9

)rocessorientation

7anagement activitiesseparable

7anagement processes #dentification ofmanagement functions and

principals$ehaviora#

umanrelations

)eople comple" possessmultiple needs

%ehavior of individual in wor9environment

wareness ofindividualism

%ehavioralscience

uman beings aresocial creatures

#nterpersonal and social aspects of wor9s

#dentification of behavioral variables thatrelate to organizational

behavior $ocial systems Organization an open

system#nteractive relationships oforganization with its environment

evelopment of theoriesrelating organizational

behavior to humancharacteristics andorganizational variables

Mode#ing

ecisionma9ing

ecision ma9ing processes are the primary managerial%ehavior

#nformation acquisition,utilization and choice processes

evelopment of guides for improving decisionma9ing

$ystems theory Organization'an opensystemOrganization'ancomple" of interrelatedsub'components

#dentification of organization boundaries, interrelationshipsamong subsystems, andrelationships betweenorganization and largerenvironment

evelopment ofapproaches for predictingand e"plaining system

behavior

7athematicalmodeling

7ain elements oforganizations can beabstracted interrelated,and e"pressedmathematically

Iuantification of decision problems and systems

evelopment of e"plicitrules for managementdecisions

evelopment of methodsfor analyzing organizationsystems or subsystems

Operations management elements from various schools of management thought

1lassical management theories emphasize efficiency at the production core,the separation of planning and doing wor9, and management principles andfunctions. 4lassical management has contributed the scientific management and process orientation theories. +cientific management emphasizes economicefficiency at the production core through management rationality, the

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economic motivation of wor9ers, and the separation of planning and doingwor9. Organizational efficiency refers to a ratio of outputs to land, capital, or labor inputs.

-fficiency 2N3 Output/#nput " (GGN

-rocess management emphasizes management as a continuous process of

planning, organizing, and controlling to influence the others1 action. This isalso referred to as the administrative or functional approach to management.

2ehavioral management emphasizes human relations and the behavioralsciences. The phenomenon recognized by behavioral scientists noted that

people are comple" and have multiple needs and that the subordinate'supervisor relationship directly affects productivity are 9nown as humanrelations. %ehavioral science e"plores how human behavior leadership,motivation, communication, interpersonal relationships, and attitude changeaffect. %esides this, social psychologist, sociologists and culturalanthropologists have developed social systems theories of groups of people atwor9.

Modeling management emphasizes decision'ma9ing, systems, andmathematical modeling. These models create and use mathematicalrepresentations of management problems and organizations to predictoutcomes of proposed courses of action. The decision'ma9ing orientationconsiders ma9ing decisions to be the central purpose of management. $ystemstheory stresses the importance of studying organizations from a 0totalsystems1 point of view. 7athematical modeling, with its foundations inoperations research and management science focuses on creatingmathematical representations of management problems and organizations.

Case 5uestions(. ow the classical thought of management and operations management

differ from the behavioral thought; o you thin9 these differences aresignificant; Why or why not; ustify.

*. What are the difference between process management and modelingmanagement style; -"plain.

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!iscussion 5uestions

(. ccomplishing an organization1s goals requires that operationsmanagement accounts for the organization1s industry strategy,operations policy and conversion process. ow do these elementsrelate to one another; ow they relate to accomplishing

organizational goals; ustify.*. -"plain how the 9nowledge of product1s life cycle helps an

operations manager formulate operational strategies.

Intro - Operations Mgt

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