Production and Logistics Management

(MBA 2032)

Course text books/reference books

1. Operations Management William Stevensen
2. Operations Management Collier/Evans/Ganguli
3. Logistics Management D. K. Agrawal
Concept of Production and Operations

What is Production?
• Conversion
• Value addition
• Utilization of Resources – Man, Machine,
Material, Money, technology

What is Operations?
• Operations management is the execution of
backend business functions
• It involves overseeing manufacturing, inventory,
quality control and distribution
• It is the management of systems or processes
that create goods and /or provide services
Historical Evolution of Operations Management
• Industrial revolution (1770’s)
• Scientific management (1911)
• Mass production
• Interchangeable parts
• Division of labor
• Human relations movement (1920-60)
• Decision models (1915, 1960-70’s)
• Influence of Japanese manufacturers
Can be best understood by referring to different Era’s

Industrial Revolution
Scientific Management
Human Relation Focus
Operation Research
Quality Movement
Internet & Telecom
Digital Era
Each Era brief details

Industrial Revolution (late 1700’s)

Steam Engine invention
Division of labour
Interchangeable parts

Scientific Management (Early 1900’s)

Principle of Scientific management coined
Time & Motion Studies
Activity Charts
Assembly lines
Human Relations Focus (Mid 1900’s)
Hawthorne experiments
Motivational theories

Operation Research (1950’s to 1970’s)

Linear Programming
Other OR techniques like Simulation, PERT CPM etc.

MRP, EDI,EFT,CIM (1960’s and 70’s)

Quality Movement (1970’s to 1990’s)

TQM, Kaizen, 5S, SPC, TPM etc.
Internet and Telecommunication (Present day)
Six Sigma, Kanban, JIT, CAD/CAM, Lean
Manufacturing

Digital Era (Present day and Future)

Industry 4.0, IoT, AI, ML, Robotics etc.
History on Focus Area

• Production Focus (late 1700’s to late 1800’s)

• Cost Focus (1800’s to late 1900’s)

• Quality Focus ( 1970’s to 1990’s)

• Customization Focus (1990’s to Present day)

Factors Affecting POM

• Global competition
• Cost challenges
• Quality challenges
• Customer services
• Rapid expansion of advanced technologies
• Scarcity of operations resources
• Continued growth of Service sector
• Social and environmental issues
Example
Example
Production of Goods vs. Delivery of Services
• Production of goods – tangible output
• Delivery of services – an act
• Service job categories
• Government
• Wholesale/retail
• Financial services
• Healthcare
• Personal services
• Business services
• Education
Key Differences
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory
 Goods vs Service

Characteristic Goods Service

Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
High
 Scope of Operations Management
• Operations Management includes:
• Forecasting
• Capacity planning
• Scheduling
• Managing inventories
• Assuring quality
• Motivating employees
• Deciding where to locate facilities
• And more . . .
 Types of Operations
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
 Responsibilities of Operations Management
Planning Organizing
– Capacity – Degree of centralization
– Location – Process selection
– Products & services Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects Directing
– Scheduling – Incentive plans
Controlling/Improving – Issuance of work orders
– Inventory – Job assignments
– Quality
– Costs
– Productivity
 Operations Interfaces
Industrial
Engineering
Maintenance
Distribution

Purchasing Public
Operations Relations

Legal
Personnel

Accounting MIS
Types of productivity

Labor, Machine, Capital, Material, Energy etc.

Efficiency of machine (of individual machines)

Speed, Setting time, breakdowns, stoppages

Efficiency of labor (of individual worker)

Hours, output

Efficiency of plant (Overall efficiency)

target vs actual, capacity

Higher efficiency leads to higher productivity

Concepts of Productivity
• Productivity is Output/Input
• Measured is percentage i.e. Output/Input X 100%
• Productivity can be improved in three ways:
• Keep Output constant and decrease Input
• Increase Output by keeping Input constant
• Increase Output and decrease Input

• Productivity Growth = Current productivity – Previous productivity

--------------------------------------------------------- X 100
Previous productivity
• Multifactor productivity = Output (in units)
-----------------------------------
Materials + Labor + Overheads (in Rs.)

= 7040
---------------- = 2 unit per Rs. input
520+1000+2000
Examples of Partial Productivity Measures
Labor Units of output per labor hour
Units of output per shift
Productivity Value-added per labor hour

Machine Units of output per machine hour

machine hour
Productivity
Capital Units of output per dollar input
Dollar value of output per dollar input
Productivity
Energy Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Productivity
Productivity Measurement
Productivity Measurement
Operations Strategy

• Set of decisions that an organization makes for

production and delivery of goods

• Its in line with the overall company’s business

strategy

• Its for achieving long term goals to be

successful and competitive in the market place
Strategy Types

• Core competency strategies: Core competency

operations strategies revolve around the main
strengths of a company
• Corporate strategies: Adheres to a company’s
mission statement and aligns itself to a larger
corporate strategy.
• Competitive strategies: Develop their
operations processes in order to distinguish
their product or service from competitors.
• Product or service strategies: Revolves around
the quality control of existing products or
services as well as the development of new
products and services.
• Customer-driven strategies: Make operations
decisions based on the customer experience to
Elements of Operations Strategy

• Product Assembly Strategy

• Inventory Strategy
• Supply Chain Optimization
• Quality Strategy
• Facilities Management
• Forecasting for Planning
• Scheduling of Resources
• Use of Technology
Operations Strategy Formulation

• Low Cost – Walmart

• Short Processing time – MacDonald’s
• On time delivery – Domino’s
• High Quality – Sony TV
• Consistent Quality – Coca-Cola, Haldirams
• Innovation- Apple, Google
• Volume – Toyota
• Superior Customer Service – Amazon
• Convenience – Malls and Supermarkets
Caselet - Nalco-ceramics has been suffering losses in
recent months. They are concerned about losing huge
orders that are forthcoming. In order to receive the order ,
Nalco-ceramics wants to introduce certain changes in their
product and service design. What major factors should they
consider in designing their strategy.

Major factors in design strategy

· Cost
· Quality
· Time-to-market
· Customer satisfaction
· Competitive advantage
List the major activities before Nalco-ceramics to enhance
their Product and Service Performance.

· Translate customer wants and needs into product and

service requirements
· Refine existing products and services
· Develop new products and services
· Formulate quality goals
· Formulate cost targets
· Construct and test prototypes
· Document specifications
Facilities Planning for Manufacturing

Facility planning is concerned with the design, layout,

and accommodation of people, machines and activities
of a system or enterprise within a physical spatial
environment.

Facilities include:
Building/Shed
Machinery and Equipment
Utilities
Material Handling Equipment's
Other resources required for Production
Approach
1. Determine Facility Needs: To determine specific requirements needed to
accommodate the production like the building's size, layout, and equipment
2. Develop a Facility Design: Once the facility needs have been determined, a
detailed facility design should be created. This design should include a layout
of the building, the types of equipment needed, and the necessary
utilities/services.
3. Estimate Facility Costs: Includes the cost of the building, equipment,
utilities, and any other associated costs.
4. Secure Financing: Once the estimated costs have been determined, the
necessary financing should be secured. This could include bank loans, venture
capital, or other forms of financing.
5. Implement the Design: The final step is to implement the facility design.
This includes securing the necessary permits and approvals, purchasing or
leasing the building, installing the necessary equipment and utilities, and hiring
staff, if needed.
Product Design

• Product design involves the development of a product from concept to

production.
• It encompasses all aspects of the product’s creation, from concept to
implementation. It requires thorough understanding of the product
• This includes research, development, marketing, prototyping, production,
and customer service.
• Product design is a multidisciplinary field that combines elements of
engineering, industrial design, user experience, and marketing.
• Product design requires creativity, problem-solving, communication skills.
• It is important to consider factors such as user needs, product features,
cost, and manufacturing methods when designing a product.
• Additionally, product designers must keep up with trends in technology,
materials, and consumer preferences in order to create products that are
both attractive and functional.
Process Design

• Process required for converting raw materials in to finished goods.

• Process design decides optimal set of operations & equipment's
• Decides sequence of operations
• Analyses the requirements of manpower with their skill sets
• Analyses the requirements of material and their quantity
• Identifies the other resources required for production
• It also analyses the cost of production, the quality of the product, and
the production timeline
• Safety issues & environmental impact also forms the part of process
design
• Additionally, process design also includes the assessment of process
capability and the development of process control plans.
• The ultimate goal of process design in manufacturing is to create a
production system that meets all customer requirements & maximizes
profits.
Service Design
• Designing a service to meet the needs of customers
• Describes how the service will be delivered, what resources are
required, and how it will be used.
• Service design also takes into account the customer journey,
analyzing what customers expect from the service, how it can be
provided, and how it can be improved
• It is used to improve the customer experience, optimize the service
process, and create services that are more valuable to customers.
• Service design focuses on understanding customer needs and
wants, and designing services that meet those needs in an efficient
and effective way.
• Service design is used in a variety of industries, such as banking,
healthcare, hospitality, retail, and transportation
Types of Production Systems

• Mass production

• Batch production

• Job based production

• Assembly Line production

Facility Location For Manufacturing Unit

• Proximity to Raw materials

• Cement Plants, Mining industries, Power Plants, Refineries
• Proximity to Workforce
• Textile industries
• Proximity to Markets
• FMCG
• Proximity to Suppliers
• Automobile industries
• Government incentives
• SEZ’s
• Socio-Political Environment
• Infrastructure
• Transportation, Roads, Ports etc.
Facility Location For Services

• Proximity to customers – Easy accessibility to customers

(market place)
• Resources - Access to resources such as skilled labor, materials,
and technology
• Local regulations - Local regulations can affect the way a
business operates and what kind of services can be offered
• Cost - Consider the cost of renting or purchasing a space and the
associated costs such as taxes, utilities, and insurance.
• Brand visibility - Depending on the type of service you are
offering, the visibility of your brand in the area can have an
impact on the success of your business
Types of Layouts (Manufacturing)

• Product Layout

• Process layout

• Cellular Layout

• Fixed Position Layout

Product Layout
Product Layout

• Arrangement based on sequence of operations that is

performed during manufacturing
• Smooth and Logical flow of goods/services
• Examples: Paper industry , automobile industry(manufacturing),
Insurance policy processing (services)
• Product layout is suitable for Mass Production

• Pros: High volume production, low work in progress

inventory, high labour and equipment utilization, less material
handling.
• Cons: Breakdown in one equipment leads to entire process
shutdown, New product requires major changes
Process Layout
Process Layout

• A process layout consists of functional grouping

of equipment's or activities that do similar work

• Job shops are best examples of Process Layouts

• Examples: Shoe manufacturing, Hospitals

• Provides flexibility, lower investments

• But there is low equipment utilization, high

material handling and high skilled labors.
Cellular Layout
Cellular Layouts

• In a cellular layout, the design is not according to the

functional characteristics of equipment, but rather by self-
contained groups of equipment (called cells) needed for
producing a particular set of goods or services.

• Example: Mobile phone manufacturing

• Medical facilities like maternity, surgery etc.

• Facilitates the processing of families of parts

• Workflow is standardized and centrally located

Fixed Position Layouts
Fixed Position Layout

• A fixed position layout consolidates the resources

necessary to manufacture a good or deliver a
service, such as people, materials and
equipment's in physical location

• Example: Airplanes, ships, building etc.

• Requires high level of planning and control

Comparison
Service Layouts
Service Layouts

• Service layouts use product, process, cellular and fixed

position layouts to organize different types of work.

• Standard service – Product layout

• Variety of Services – Process Layout

Exercise: Design a Service layout for a Hospital and Bank