SYBBA SEM-4

Production & Operation management

Chapter -1 Introduction to Production management

According to Bates and Parkinson:

Production is the organized activity of transforming resources into
finished products in the form of goods and services; the objective of
production is to satisfy the demand for such transformed resources”.

Production is the method of turning raw materials or

inputs into finished goods or products in a manufacturing process.
In other words, it means the creation of something from basic
inputs.

Production is the process of combining various

material inputs and immaterial inputs in order to make something
for consumption. It is the act of creating an output, a good or
service which has value and contributes to the utility of
individuals.
Production Management:

Production Management refers to the application of management

principles to the production function in a factory. In other words, production

management involves application of planning, organizing, directing and controlling

the production process.

Production management, or operations management, focuses on achieving

a smooth production process with efficient planning and control of business

operations.
Operations management

Operations management is an area of management concerned with

designing and controlling the process of production and redesigning business

operations in the production of goods or services.

Operations management (OM) is the administration of business practices to create

the highest level of efficiency possible within an organization. It is concerned with

converting materials and labor into goods and services as efficiently as possible to

maximize the profit of an organization. Operations management teams attempt to

balance costs with revenue to achieve the highest net operating profit possible.
Service industry & their services

Industry Service generated

Insurance

Banking

Aviation

Hotel

TV channels

News channel & News Paper

Internet

Hospital

Consultant
Service industry & their services

Industry Service generated

Insurance Risk coverage

Banking Various saving option, loan, locker

Aviation Air travel

Hotel Comfort & stay

TV channels Entertainment

News channel & News Paper Information & Knowledge

Internet Information, Knowledge & Entertainment

Hospital Medical treatment

Consultant Advice
Production Management

Production management means applying the principles of management to build

an effective outline for production. It involves various tasks like planning, supervising,

scheduling, and enforcing adequate regulation to maximize output. In a nutshell, it is an

efficient use of an organization's resources to turn raw materials into products.

Operations Management

Operations management applies the principles of management to manage the

everyday activities of a company. Therefore, it guarantees the smooth and effective

running of an organisation. It involves planning, designing and supervising production as

well as other non-production activities.

Difference between Production

management & Operation management

 Production Operation
Management Management
• Operation management is
• [Link]
about the management of
• Production management is
overall business operations
about managing activities
which includes production
related to production only
and post-production stages
 Production Operation
Management Management

• 2. Area of
Decision making • Related to the regular

• Related to aspects of business activities in an

production only organization

 Production Operation
Management Management

• 3. Found In • It is found in places like

• it is found in enterprises Banks, Hospital, Companies

where production is etc which are providing

undertaken service
 Production Operation
Management Management

• [Link] Requirement
• More capital requirement • Fewer capital requirements
initially
 Production Operation
Management Management

• Scope of operation management is much

broader as it deal with all aspect of the

• [Link]
company, An operational manager is
• Production management scope is
responsible for formulating a strategy

limited to production only. which ensure best utilization of available

resources.
 Production Operation
Management Management

• 6. Objective
• the objective of operations management is
• Production management aims to
to ensure the best use of company
provide the best quality product at resources..

minimal cost and on time.

 Production Function

A production function in economics represents the relationship between

inputs and outputs in the production process of goods and services. It
shows how various inputs are combined to produce a certain level of
output.

The general form of a production function is often expressed as:

Q=f(K,L,…)

where:

Q: represents the quantity of output,

K: represents the quantity of capital input,

L: represents the quantity of labor input,

…… may represent other inputs, such as raw materials, Information,

Knowledge.
Production Function
Scope Of Production / Operation Management

At Macro Level

1. Application of Production management to manufacturing sector

2. Application of Production management to Retailing & Trading

3. Application of Production management to agriculture

1. Application of Production management to manufacturing sector
2. Application of Production management to Retailing & Trading
3. Application of Production management to agriculture
Scope Of Production / Operation Management

At Micro Level (OR)

Activity of production management department

Responsibility of Production manager (OR)

1. To Understand the demand forecast for the finished goods

2. To Prepare the production plan

3. To do MRP

4. To do LRP

5. To do CRP

6. Maintenance planning

7. Quality assurance

8. Detailed production planning

9. Production control

10. To help in capital purchase decision

11. To Conduct work study

12. To do various HR functions

13. To help top management in strategic decision.

14. To interact with other heads of department

15. To help in proper inventory control.

16. To do value analysis

 Significance (Importance) of production management

1. Maximum amount of cost is related to manufacturing expenditure.

2. Production management mainly responsible for value addition for the product.

3. Maximum no of employee are working in production department.

4. There is a principle called “Money save is money earned”

5. Production department is the heart of any organization.

6. Wide scope of production management.

7. Critical to survive in competition.

Types of Production system
 What Is Continuous Production?

1. Continuous flow type

2. Assembly line

Continuous production is a type of production system in which materials being processed are

continuously in motion. Continuous production, like mass production, is a flow production method.

During continuous processing, distinct parts flow from one machine to the next to make a finished product.

There are no interruptions between the stages of production. It’s a very organized system involving

advanced machinery and producing high volumes. In general, continuous production is characterized by:

 Equipment dedicated to specific tasks

 Automated material handling

 Identical products

 Use of specialized machinery and tools

1. Continuous flow type

Example: Petroleum, Chemical, Sugar, Cement, etc

2. Assembly line

Example: Automobile, Telephone, Computer, Refrigerator, Air conditioner, etc

Advantages of using Continuous Production system

1. Standardization: Continuous production is a carefully monitored, consistent process

that uses advanced machinery to produce standardized goods. Manufacturers can

expect less risk of human error and products that are identical in quality. This also leads

to reduced waste and less downtime.

2. Higher production rate: Continuous production never stops running. Without the

need to shut down or reset machinery, manufacturers can produce large quantities in

less time than a factory that only runs one or two shifts. Continuous production ensures

a company can keep up with increasing consumer demand.

3. Increased worker safety: With continuous production, materials are handled fully by

machinery and flow through a sequence by conveyors or other transfer equipment. It’s an

automatic process that doesn’t put workers in strenuous or dangerous situations.

4. Economies of scale: Economies of scale refers to a decrease in overall costs due to increased

production. For example, machinery is most efficient when running at one speed. When

machinery slows down or stops, it can cause financial loss to a company. A large manufacturer

who produces continuously only slows down for certain occasions, such as scheduled

maintenance. Otherwise, they can produce 24/7 without the expense of stopping machinery.

They can turn raw materials into consumer goods efficiently, and charge consumers affordable

prices as a result.
Disadvantages of using Continuous Production system

1. Requires a high investment: Setting up a continuous production plant requires a substantial

amount of capital. Automated machinery and robotics are not cheap – nor is the floor space needed
to hold such equipment. For this reason, smaller companies typically do not start with a continuous
production method.

2. Lack of flexibility: Continuous production plants are usually designed to produce a single product.
As consumer needs frequently change, this lack of flexibility can be risky. To produce different
items, a continuous production manufacturer would have to redesign their whole system.

3. Skills of employees can not be used as most of the operations are highly automatic.

4. Requires extremely careful planning and design: Manufacturers must work with engineers and
other design specialists to very carefully plan and create a continuous production operation. Any
failure in equipment in an assembly line stops the entire manufacturing process.

5. May lead to excess inventory: Continuous production creates high volumes. If consumer demand
drops, manufacturers may not be able to sell enough of their products. This can lead to an inventory
buildup.

[Link] in one department may affect entire production

[Link] production system.

It is a type of production system where the production flow is intermittent or irregular. It means the

production process begins and stops at irregular intervals.

Here the production is carried out based on the customer orders, i.e. Make-to-order. Consequently, the

producer can customize their products as per the orders received.

 Features of Intermittent Production

 Order-based production of goods.

 Production on a smaller scale.

 Flexibility in production.

 Production of a greater variety of products.

a. Batch production system

A batch production system is a manufacturing process where a group of identical products are

made at the same time. The manufacturer decides how many products to make in each batch and

how often to make them, Example, Cold drink, Medicine

b. Job-shop Production

Job-shop production or Unit Production facilitates the manufacturing of customized products. Here, the

production of one or a few products takes place. Moreover, it is completely based on the user

specifications and within a stipulated period and cost.

Advantages

 A wide variety of products can be offered to customers.

 The workers are more skilled in comparison to other systems.

 Ease in management due to limited resources and workers.

 Flexibility in process and creative methods to generate unique output.

Disadvantages

 The cost of production is high due to small-scale production.

 The higher lead time of the system.

 Under-utilization of equipment.

 Requirement of highly skilled labours.

[Link] Point of Difference Continuous Production Intermittent Production
System System

1. Definition

Nature of
2.
Production

3. Product Variety

4. Flexibility

5. Production Flow

Machines &
6.
Equipment

Workforce Skill
7.
Requirement

Inventory
8.
Requirement

9. Lead Time

10. Production Cost

11. Example
[Link] Point of Continuous Production Intermittent Production
Difference System System

A production system where

A production system where
production runs
1. Definition production occurs in batches
continuously without
or at intervals.
interruptions.
Mass or large-scale Small or medium-scale
Nature of
2. production of standardized production of customized or
Production
products. varied products.

Produces a limited variety of Produces different products

3. Product Variety
standardized products. based on customer demand.

Low flexibility; changes in High flexibility; production can

4. Flexibility
product design are difficult. be adjusted based on demand.

Continuous and sequential Irregular workflow depending

5. Production Flow
workflow. on customer orders.

Special-purpose machines General-purpose machines

Machines &
6. designed for high-volume that can be adapted for
Equipment
production. different tasks.
Requires semi-skilled or Requires highly skilled workers
Workforce Skill
7. unskilled workers for for customization and
Requirement
repetitive tasks. adjustments.
Low inventory of raw High inventory of raw
Inventory
8. materials but high finished materials but low finished
Requirement
goods inventory. goods inventory.

Short lead time due to Long lead time due to batch

9. Lead Time
continuous production. processing and customization.

Higher cost per unit due to

Lower cost per unit due to
10. Production Cost lower volume and
economies of scale.
customization.

furniture making, printing

11. Example Cement, Sugar, Petroleum
press, Bakery, customized car
Production Function in Production Management

The production function is a key concept in production management that describes the relationship between

input resources and output production. It shows how different combinations of inputs (such as labor,

capital, raw materials, and technology) are transformed into output (goods or services) efficiently.

Definition

A production function is a mathematical representation of the output produced based on various input factors. It is usually

expressed as:

Q=f(L,K,M,T) Where:

Q = Output (quantity of goods or services produced)

L = Labor (human effort)

K = Capital (machines, tools, infrastructure)

M = Materials (raw materials, energy)

T = Technology (knowledge, techniques, efficiency improvements)

Cobb-Douglas Production Function

The Cobb-Douglas production function is a widely used mathematical model in economics and

production management that explains the relationship between inputs (labor and capital) and output. It is

particularly useful for analyzing returns to scale and input elasticity.

Mathematical Form

The standard Cobb-Douglas production function is expressed as: Q=ALαKβ where

Q = Total output (quantity of goods/services produced)

A = Total factor productivity (a constant representing technology or efficiency level)

L = Labor input (number of workers, hours worked)

K = Capital input (machines, equipment, infrastructure)

α\alphaα = Output elasticity of labor (percentage change in output due to a change in labor)

β\betaβ = Output elasticity of capital (percentage change in output due to a change in capital)