Operations Management

II BBA
Semester IV
Unit I
UNIT-I
Production Management - Functions – Scope; Plant Location – Factors; Site location –
Urban, Rural and Suburban locations manufacturing systems-Continuous and
Intermittent manufacturing systems. ; Plant layout – Principles – Process, Product and
Fixed position layout - Production Planning and Control – Functions - Information flow -
Routing-Scheduling – Dispatching – Control.

UNIT – II Material Handling – Importance – Principles - Criteria for selection of

Material handling equipments. Maintenance – Types – Breakdown –Preventive –
Routine - Relative advantages.
Work Study - Method study – Motion study - Time study – Definitions – Principles and
Procedure.
UNIT – III
Organization of Materials Management - Fundamental Principles – Integrated Materials
Management ; Purchasing – Procedure - Principles – Vendor Rating ; Purchase
department – Responsibility of Buyer & Seller Relationship
UNIT – IV
Inventory – Importance – Functions; Tools of Inventory Control – ABC, VED & FSN
Analysis - EOQ – Reorder Point - Safety Stock. Store Keeping – Objectives –
Functions Storekeeper – Duties & Responsibilities; Location of store – Centralized
store room – Security Measures; Stores Ledger – Bin Card.
UNIT – V
Quality Control – Types of Inspection – Centralized and Decentralized ; Benchmarking
- Process – Reasons; ISO -Features – Procedure for obtaining ISO ; JIT – Bottlenecks
 BOOKS
Text Books
[Link]. Title Author Publishers Publication
Year & Edison

1 Production and Operations Panneerselvam.R PHI Learning Pvt. 2006

Management Ltd
2 Production and Operations Aswathappa.K, Himalaya 2000
Management SridharaBhat.K, Publishing

Reference Books
[Link]. Title Author Publishers Year of
Publications
1 Production and Operations [Link], Himalaya 2000
Management Patel.D.K Publishing

2 Production and Materials Saravanavel.P, Margham 2008

Management Sumathi.S Publication

3 Total Quality Management Besterfield, Dele.H Pearson Education 2007

 Production
• Any process which involves conversion of raw material

into finished product for satisfaction of human wants is

called as production.
• Production function refers to creation of goods and

services in order to satisfy human needs by converting

resources into outputs. Otherwise it is the process of
conversion of raw materials into finished product.
 Production Management
• Production/Operation management is the process which
combines and transforms various resources used in the
production/operation subsystem of the organization into value
added products/services in a controlled manner as per the
policies of the organization.
• The set of interrelated management activities which are involved

in manufacturing certain products is called production

management and for service management, then corresponding
set of management activities is called as operation
management.
 Production Management

Resource
s used in Value
productio added
n/operatio Transfo product
n rm (in s/
subsyste controll services
m ed
Definition of Production Management

• E.S. Buffa defines production management as,

“Production management deals with decision making

related to production processes so that the resulting

goods or services are produced according to

specifications, in the amount and by the schedule

demanded and out of minimum cost.”

 Operations Management
• The business function responsible for planning , coordinating ,

and controlling the resources needed to produce products and

services for a company.

• A management function

• An organization’s core function

• In every organization whether Service or Manufacturing, profit

or Not for profit

 Scope of Production Management
1. Production Planning and Development: It is related to the activity of evolution of new

product and design it according to the specification of department in order to satisfy large

number of consumers in the market.

2. Production Administration: It deals with basic three activities that is (A) Production

planning, (B) production engineering,(C) production control. All the above functions under

production management have its own value and importance. Production management system

directly depends on this scope.

3. Implementation Function: It refers to the activity of execution of plan, policies and decisions.

It is a continuous activity in production management system which requires motivation of

employees who are in charge of production so that the things can be produced in time.

4. Other Allied Activity: These are some of the other activity related to standardisation,

simplification, specialisation, quality control, inventory control, research and development.

 Functions of Production / Operation management
• Being the component of the organization, POM is concerned with the
organizational goal.
• Production/operation manager seeks to optimum utilization of the resources
(inputs).
• The most functions of the POM is decision making concerned with the
production function.
• Production/operation management is concerned with the creation of utility in raw
materials through conversion process.
• As a part of management, it has following functions:
 Planning
Organizing
Controlling
Behaviour
Models
• Functions of production operation management can be enclosed in a frame of
general management function.
• PO managers are concerned with planning, organizing, and controlling the
activities affect human behaviour through models.
 Functions of POM
• POM is a part of general management and it performs Planning,

Organizing, Controlling the production process by the affecting

human Behaviour through different mathematical and quantitative
Models in decision making
• PLANNING:
• Activities that establishes a course of action and guide future
decision- making is called planning.
• POM defines the objectives for the POM subsystem of the
organization
• It defines the policies, and procedures for achieving the objectives.
• This stage includes clarifying the role and focus of POM in the
organization’s overall strategy.
• It involves product planning, facility designing and using the
 Functions of POM
• ORGANIZING:

• Activities that establishes a structure of tasks and authority is called

organizing.
• POM establish a structure of roles and the flow of information within the

POM subsystem.
• POM determine the activities required to achieve the goals and assign

authority and responsibility for carrying them out.

• It includes:

 Job design
 Work Measurement
 Project Management
 Functions of POM
• CONTROLLING:

• Activities that assure the actual performance in accordance with

planned performance is called Controlling.

• To ensure that the plans for the POM subsystems are accomplished,

the PO manager must exercise control by measuring actual outputs

and comparing them to planned operations management.
• Controlling costs, quality, and schedules are the important functions for

POM.

 Material Control

 Material requirement planning (MRP)

 Functions of POM
• BEHAVIOUR

• Human aspect on the job is called behaviour.

• PO managers are concerned with how their efforts to plan,

organize, and control affect human behaviour.

• They also want to know how the behaviour of subordinates can

affect management’s planning, organizing, and controlling actions.

• The behaviour is affected by the leadership, motivation,
communication, inter-intra personnel relationship and their
attitudes.
 Functions of POM
• MODELS:

• The techniques which are used for problem solving is called Models.

• As a process of plan, organize, and control the conversion process, PO manager

encounter many problems and must make many decisions.

• She / he can simplify their difficulties using models.

• The models are:

 Aggregate planning models for examining how best to use existing capacity in
short-term.

 Break even analysis to identify break even volumes.

 Linear programming and computer simulation for capacity utilization.

 Decision tree analysis for long-term capacity problem of facility expansion.

 Plant location
• Plant location or the facilities location is an important strategic level

decision making for an organisation.

• One of the key features of a conversion process (manufacturing system) is the

efficiency with which the products (services) are transferred to the customers.
• This fact will include the determination of where to place the plant or facility.

• The selection of location is a key-decision as large investment is made in

building plant and machinery.

• Before a location for a plant is selected, long range forecasts should be made

anticipating future needs of the company.

• The plant location should be based on the company’s expansion plan and

policy, diversification plan for the products, changing market conditions, the
changing sources of raw materials and many other factors that influence the
Factors Influencing Plant Location
• On the basis of the nature of the organisation, we can divide

the Factors influence the plant location or facility location

into two types.
• 1. General locational factors

It includes controllable and uncontrollable factors for all type

of organisations.
• 2. Specific locational factors

Specifically required for manufacturing and service

organisations.
 General Locational Factors
• Controllable Factors

1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. External economies
7. Capital
 General Locational Factors
Uncontrollable Factors
1. Government policy

2. Climate conditions

3. Supporting industries and services

4. Community and labour attitudes

5. Community Infrastructure
Factors Influencing Plant Location
 Specific Locational Factors

• Specific Locational Factors for Manufacturing

Organisation
• Dominant factors are those derived from competitive
priorities (cost, quality, time, and flexibility) and have a
particularly strong impact on sales or costs.
• Secondary factors also are important, but management
may downplay or even ignore some of them if other
factors are more important.

• Specific Locational Factors for Service Organisation

 Specific Locational Factors for Manufacturing Organisation
• DOMINANT FACTORS:

1. Favourable labour climate

2. Proximity to markets

3. Quality of life

4. Proximity to suppliers and resources

5. Utilities, taxes, and real estate costs

• SECONDARY FACTORS

There are some other factors needed to be considered

• room for expansion,

• Construction costs,

• accessibility to multiple modes of transportation

• the cost of shuffling people and materials between plants

• competition from other firms for the workforce,

Specific Locational Factors for Service Organisation

• DOMINANT FACTORS:

• Proximity to customers

• Transportation costs and proximity to markets

• Location of competitors

• SECONDARY FACTORS

• The level of retail activity

• residential density

• traffic flow

• Site visibility
 Site Location

• Urban or city Area

• Rural area

• Suburban Area
 Urban area
• Advantages of Urban area:
• Good transport facilities are available for the movement of raw-materials and finished
products by rail and road and at times, by water and air.
• Good and prompt postal and communication services are available.
• Banking and credit facilities available
• Services of insurance companies are available in city areas
• Sufficient storing facilities including cold-storage, are available.
• Ample availability of skilled and unskilled workers
• Advantages of vicitinty of the market for the product.
• Due to large population the local demand for the product is fairly high.
• Facility of the ancillary and services units, which develop around the industrial strip of
the city area.
• Sufficient passenger transport facilities by road and railways are available to
employees.
• Development of the training institutes for workers and management institutes for
executives put the city area units into privileged position.
• Educational, medical and recreational institutes increase the amenities of lives in the
city area .
• Certain specific municipal services facilities are available only in the city areas, like
 Urban Area
• Disadvantages of Urban or City Area:
• The cost of land is very high as compared to rural areas
• Even at high cost, sufficient land is not available, which puts constraints on the
arrangement of plants and machines. Sometimes multi-story buildings are used
which are not suitable for the installation of heavy plant and machines
• Due to high standard of living in city area, the cost of labour is relatively high Due
to possibilities of changing jobs from one unit to another, and tendency of
competitors to snatch away the good employees, the rate of labour turnover is very
high in city area
• The trade union movement is very strong in city area. Militant trade unionists
disturb the amicable industrial relations, which gives rise to strikes and lockouts
• Various types of taxes is levied in city areas.
• The rates of taxes are relative high. Eg. Octroi is a typical tax of the city area which
is not levied in rural areas.
• Certain municipal restrictions put constraints and involve extra cost due to height
of the building, disposal of waters, treatment of affluent water, elimination of air
pollution caused by smoke etc.
• The industrialization in the city areas gives birth to slums and dirty residence which
 Rural area
• Advantages of Rural area:
• As compared to the city area, the land is available at cheaper rates.
• Large plots of the land area available which can be developed for a factory
sites, office buildings and residential quarters. Horizontal arrangement of plant
machines in the vast areas of land is possible.
• Due to lower standard of living, the rates of labour are relatively lower.
• As compared to the city area, the labour force is more or less stable which
reduces the rate of labour turnover.
• The industrial relations between labour and management are relatively
amicable.
• The local taxes which are found in the city areas are practically nonexistent in
rural areas.
• The municipal restrictions which are found in city areas do not exist in rural
areas. E.g. height of buildings.
• Slums and dirty residence are not found in rural areas.
• The rural areas is conducive to good health of workers.
• Due to lack of congestion, there is danger of fire caused by surrounding units.
 Rural area
• Disadvantages of Rural Area:
• Transportation facilities are not available in good condition and sufficient
quantities.
• Banking and credit facilities are also not available. The indigenous money-lenders
are charging exorbitantly for these services.
• Absence of insurance facilities.
• Storing and warehouse facilities are not available in rural areas.
• Passenger transport facilities are not available, as are available in city area.
• Like in city areas, the advantage of ancillary and service units is not available.
Such units are very far from the market place and this increases the cost of
distribution of finished goods.
• Sometimes the means of transport are not available
• It is not possible to tap the advantage of industrial training institutes or
management development pragrammes which is possible in city areas.
• It is generally not easy to get skilled workers in rural areas.
• Municipal facilities like water supply, drainage, fire-fighting etc. are not available in
rural areas
• There is absence of recreation facilities, good educational institutes, good and
 Suburban Area
• Advantages of Suburban Area:
• Land is available at a cheaper rate as compared to urban areas.
• Adequate land is available for future expansion unit. The machines can be
installed horizontally and still the provision for future expansion can be made.
• Infrastructure facilities like road, water supply, drainage, banking,
warehousing insurance etc. are developed Government, municipal
authorities or industrial associations.
• As city area is nearest, the skilled and unskilled, both type of labour are
available.
• It is possible to tap the advantage of industrial training institutes,
management development programmes, research institutes etc. which are
available in nearby city area.
• The nearby city area provides a substantial market for the products of the
unit. This reduces the cost of marketing the finished products and other
ancillary advantages of marketing are available.
• Educational institutes, medical facilities and other recreational facilities are
available in the suburban area itself as well as in the nearby city area.
 Manufacturing System
• The production system is part of a larger organization.
• The production system can be viewed as a structure or skeleton of
value-creating activities.
• In short, the difference between the value of the inputs and the value
of the outputs represents the value generated by the production
activities. There are inputs at one end of the production system and
outputs at the other end. Combining inputs and outputs is a series of
operations or processes, storage, and inspections.
• The concept of the production system applies to both the production
of components and the production of services.
• The production of any component or service can be viewed on the
basis of a production system.
• For example, furniture making includes inputs such as wood, glue,
nails, screws, paints, sandpaper, wooden pallets, and workers. After
receiving these inputs, they must be stored until ready for use.
 Characteristics of manufacturing system
• It has a specific purpose of producing the required goods or

providing the required service.

• It contains a certain amount of inputs.

• It is an organized function with good coordination among

many functions.
• It does not operate independently from other systems such as

marketing or financial systems.

• There is a perception of functions and processes that help to

control and improve system performance.

Types of Manufacturing System
 1. Intermittent production system
• Intermittent means something that starts and stops at irregular
intervals (time intervals).
• In the intermittent production system, goods are produced
according to customer orders. These products are produced
on a small scale. The production flow is intermittent (irregular).
In other words, the production flows are not continuous.
• In this types of production system, large varieties of products
are produced.
• These products are of different sizes. The design of these
products keeps changing. It keeps changing based on product
design and size.
• Therefore, this system is very flexible.
 Characteristics of an intermittent production
system
• The production flow is not continuous. It is intermittent.

• Wide varieties of products are produced.

• The production volume is small.

• General-purpose machines are used. Different types of

products can be produced by the use of these machines.
• The sequence of operations continues to change according to

the product design.

• The quantity, size, shape, design, etc. Product depends on

customer orders.
Types of intermittent production system

• Project production flows

• Jobbing production flows

• Batch production flows

 Project production flows
• Here, in the project’s production flows, the company accepts a single

complex order or contract. The order must be completed within a

certain period of time and at an estimated cost.

• Labor, facilities and other resources focus on these products.

Therefore, each product can be treated as a project, which requires

the sequencing of certain activities, either in series or simultaneously.

• PERT/CPM or network analysis is a useful technique to plan and

control such projects.

• Examples of project production flows mainly include the construction

of airports, roads, buildings, shipbuilding, dams, etc.

 Jobbing production flows
• In the job production flows, the company accepts a contract

to produce one or a few units of a product strictly according

to the specifications given by the customer.
• The product is produced within a certain period and at a

fixed cost. This cost is fixed at the time of signing the

contract.
• Examples of such job production flows include services

provided by clothing workshops, repair shops,

manufacturers of special machine tools, etc.
 Batch production flows
• In batch production flows, the production schedule is decided

according to specific orders or is based on demand forecasts.

• Here, the production of items takes place in lots or lots. A

product is divided into different jobs. All jobs in a production

batch must be completed before starting the next production
batch.
• Examples of batch production flows include, manufacture of

drugs and pharmaceuticals, medium and heavy machinery, etc.

 2. Continuous production system
• Continuous means something that operates constantly without

irregularities or frequent stops.

• In the continuous production system, goods are constantly produced

according to the demand forecast. The goods are produced on a

large scale for storage and sale.
• They are not produced at the customer’s request. Here, the inputs

and outputs are standardized together with the production process

and the sequence.
• Examples:

• The production system of the food industry

 Characteristics of a continuous production system

• The production flow is continuous. It is not intermittent

• The products are standardized.

• Products are produced with predetermined quality standards.

• Products are produced in anticipation of demand.

• Standardized roadmaps and schedules are prepared.

Types of continuous production systems

1. Mass production flows

2. Process production flows.

 Mass production flows
• Here, the company produces different types of large-scale products

and stores them in warehouses until they are demanded in the market.
• Products are produced with the help of a single operation or use a

series of operations.
• E.g. Mass production is the production of toothpaste, soaps, pens, etc.

• Characteristics of mass production flows:

• 1. Continuous production flow, depends on market demand.

• 2. Here, there is limited work in progress.

• 3. Supervision is easy: few instructions are necessary.

 Process production flows
• Here, a single product is produced and stored in warehouses until it is

demanded in the market.

• The flexibility of these plants is almost nil because only one product can be

produced.

• Examples of production process flows include steel, cement, paper, sugar,

etc.

• Characteristics of process production flows:

• Low skilled labor and skilled technicians are required.

• Very little work in progress, since the flow of material is continuous.

• Production planning and programming can be decided in advance.

 Plant Layout
• Plant layout refers to the physical arrangement of facilities. It is

the configuration of departments, work centres and equipment

in the conversion process. The overall objective of the plant
layout is to design a physical arrangement that meets the
required output quality and quantity most economically.
• According to James Moore, “Plant layout is a plan of an

optimum arrangement of facilities including personnel, operating

equipment, storage space, material handling equipments and all
other supporting services along with the design of best structure
 Principles of Plant Layout
• Principle of integration

• Principle of minimum distance

• Principle of cubic space utilisation

• Principle of flow

• Principle of maximum flexibility

• Principle of safety, security and satisfaction

• Principle of minimum handling

 CLASSIFICATION OF LAYOUT

• Process layout

• Product layout

• Fixed position layout

 Process Layout
• Process layout is recommended for batch production.

• All machines performing similar type of operations are grouped at one location

in the process layout e.g., all lathes, milling machines, etc. are grouped in the
shop will be clustered in like groups.

• Thus, in process layout the arrangement of facilities are grouped together

according to their functions.

• Usually the paths are long and there will be possibility of backtracking.

• Process layout is normally used when the production volume is not sufficient to

justify a product layout.

• Typically, job shops employ process layouts due to the variety of products

manufactured and their low production volumes.

Process Laout
 Product Layout
• In this type of layout, machines and auxiliary services are
located according to the processing sequence of the
product. If the volume of production of one or more products
is large, the facilities can be arranged to achieve efficient
flow of materials and lower cost per unit.
• Special purpose machines are used which perform the
required function quickly and reliably.
• The product layout is selected when the volume of
production of a product is high such that a separate
production line to manufacture it can be justified.
• In a strict product layout, machines are not shared by
different products. Therefore, the production volume must be
sufficient to achieve satisfactory utilisation of the equipment.
Product Layout
 Fixed Position Layout
• This is also called the project type of layout. In this type

of layout, the material, or major components remain in a

fixed location and tools, machinery, men and other
materials are brought to this location.
• This type of layout is suitable when one or a few pieces of

identical heavy products are to be manufactured and

when the assembly consists of large number of heavy
parts, the cost of transportation of these parts is very high.
Fixed Position Layout
 Production planning and control
• Production planning and control is a tool available to the management to achieve the stated

objectives.

• Thus, a production system is encompassed by the four factors. i.e., quantity, quality, cost and

time.

• Production planning starts with the analysis of the given data, i.e., demand for products,

delivery schedule etc., and on the basis of the information available, a scheme of utilisation of

firms resources like machines, materials and men are worked out to obtain the target in the

most economical way.

• Once the plan is prepared, then execution of plan is performed in line with the details given in

the plan.

• Production control comes into action if there is any deviation between the actual and planned.

• The corrective action is taken so as to achieve the targets set as per plan by using control

techniques.
 Definition of Production planning and control

• production planning and control can be defined as the

“direction and coordination of firms’ resources towards

attaining the prefixed goals.”

• Ray wild defines “Production planning is the

determination, acquisition and arrangement of all facilities

necessary for future production of products.”

 Functions Of Production Planning And Control

• Functions of production planning and controlling is classified

into:

1. Pre-planning function

2. Planning function

3. Control function
 Pre-planning Function
• Pre-planning is a macro level planning and deals with analysis of

data and is an outline of the planning policy based upon the

forecasted demand, market analysis and product design and
development.
• This stage is concerned with process design (new processes

and developments, equipment policy and replacement and work

flow (Plant layout). The pre-planning function of PPC is
concerned with decision-making with respect to methods,
machines and work flow with respect to availability, scope and
capacity.
 PLANNING FUNCTION
• The planning function starts once the task to be accomplished is

specified, with the analysis of four M’s,

• Machines

• Methods

• Materials

• Manpower.

• This is followed by process planning (routing). Both short-term (near

future) and long-term planning are considered.

• Standardisation, simplification of products and processes are given

due consideration.
 Control Function
• Control phase is effected by dispatching, inspection and

expediting materials control, analysis of work-in-process.

Finally, evaluation makes the PPC cycle complete and
corrective actions are taken through a from analysis.
• A good communication, and feedback system is essential

to enhance and ensure effectiveness of PPC.

 Routing
• Routing may be defined as the selection of path which each part
of the product will follow while being transformed from raw
materials to finished products. Path of the product will also give
sequence of operation to be adopted while being manufactured.
• In other way, routing means determination of most advantageous
path to be followed from department to department and machine
to machine till raw material gets its final shape.
• Routing involves the following steps:
• (a) Type of work to be done on product or its parts.
• (b) Operation required to do the work.
• (c) Sequence of operation required.
• (d) Where the work will be done.
• (e) A proper classification about the personnel required and the
machine for doing the work.
 SCHEDULING
• Scheduling can be defined as “prescribing of when and

where each operation necessary to manufacture the product

is to be performed.”
• It is also defined as “establishing of times at which to begin

and complete each event or operation comprising a

procedure”.
• The principle aim of scheduling is to plan the sequence of

work so that production can be systematically arranged

towards the end of completion of all products by due date.
 Principles of Scheduling
• 1. The principle of optimum task size: Scheduling tends

to achieve maximum efficiency when the task sizes are

small, and all tasks of same order of magnitude.
• 2. Principle of optimum production plan: The planning

should be such that it imposes an equal load on all plants.

• 3. Principle of optimum sequence: Scheduling tends to

achieve the maximum efficiency when the work is planned

so that work hours are normally used in the same
sequence.
 Dispatching
• Dispatching is concerned with the starting the processes. It gives
necessary authority so as to start a particular work, which has already
been planned under ‘Routing’ and ‘Scheduling’. Therefore, dispatching is
‘release of orders and instruction for the starting of production for any item
in acceptance with the route sheet and schedule charts’.
• Dispatching is the transition from planning phase to action phase. In this
phase, the worker is ordered to start manufacturing the product.
• The tasks which are included in dispatching are job order, store issue
order, tool order, time ticket, etc.
• The job order number is the key item which is to be mentioned in all other
reports/orders.
• Stores issue order gives instruction to stores to issue materials for
manufacturing the product as per product specifications.
• As per tooling requirements for manufacturing the product, the tool order
instruct the tool room to issue necessary tools.
• Time ticket is nothing but a card which is designed to note down the
actual time taken at various processes.
 CONTROL
• The process through which the standards are established and met
with standards is called control.
• This process consists of observing our activity performance,
comparing the performance with some standard and then taking
action if the observed performance is significantly too different from
the standards.
• The control process involves a universal sequence of steps as
follows:
• 1. Choose the control object
• 2. Choose a unit of measure
• 3. Set the standard value
• 4. Choose a sensing device which can measure
• 5. Measure actual performance
• 6. Interpret the difference between actual and standard
Thank You