FULL UNIT 1 - Lecture notes 6 PDF

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BBA-305/Unit-I

Chapter 1 -Production management Production function of an organisation is the part that produces organisation’s product. In some organisation the product is physical goods (refrigerators, breakfast cereals etc.), while in other it is a service (insurance, healthcare etc.). All these organisations share a basic element – they have a conversion process, some resource inputs into the process, the output resulting from the conversion of the inputs and information feedback about the activities of production operation system. Production is the process by which raw materials are converted into finished products. The end product of any production activity is the creation of goods and service for human wants.

Adjustment

Monitor o/p Outputs

Inputs needed Land

Conversion Process Goods & Services

Labour Capital Management

Comparison Actual Vs Desired

feedback

Once goods and services are produced, they are converted into cash (sold) to acquire more resources to keep the production process alive. The main objectives of production process are – 1

BBA-305/Unit-I 1. Optimum use of resources at optimum cost 2. Manufacturing of desired quality and quantity of goods and services What is management? Management as a process consist of planning organising actuating and controlling to determine and accomplish the objectives by the use of people and resources. Organising

Planning

Directing

Controlling

If we combine the concept of production and management we can say that production management involves application of planning, organising, directing and controlling to the production process. In other words “the management of transformation process of inputs into output is production management.” Definitions – According to H.A. Harding – “production management is concerned with those processes which convert inputs into outputs. The inputs are various resources like raw materials men, machines, methods etc, and outputs are goods and services.” According to E. S. Buffa - “production management deals with decision making related to production processes so that the resulting goods and services is

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BBA-305/Unit-I produced according to specifications, in the amounts and by the schedule demanded and at minimum cost.” The definitions explains the following aspects of production management – 1. It is a decision making managerial function; 2. The decisions are made regarding the production processes required for converting the raw materials into finished products and 3. The production or output should be according to specifications in the specified quantities, as per the schedule and at minimum cost. Main activities of production management are – a. Specifications and procurement of input resources namely management, material, land, labour, equipment and capital. b. Production design and development to determine the production process for transforming the input factors into outputs of goods and services. c. Supervision and control of transformation process for efficient production of goods and services.

Operations Management – the production management which was formally considered as manufacturing management only, now after inclusion of services into its scope is broadly known as operations management. The processes of alteration or transportation or storage or inspection or any combination are included in operations management.

Distinguishing between Manufacturing and Service operations A conversion process that includes manufacturing [or production] yields a tangible output: a product in contrast a conversion process that includes service yields an intangible o/p a dead, a performance an effort.

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BBA-305/Unit-I To oversimplify, manufacturing is characterized by tangible outputs [products] ,outputs that customers consume over time, jobs that use less labour and more equipment, little customer contact , no customer participation in the conversion process (in production),and sophisticated methods for measuring production activities and resource consumption as product are made. Service on the other hand is characterized by intangible outputs, outputs that customers consume immediately, jobs that use more labour and less equipment, direct customer contact, frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption. some service equipment based – computer programming services, rail road services, and telephone services whereas other service are people based-tax accounting services and hair styling etc. A Comparison of Manufacturing and Service organisations Manufacturing (Production)

Service (Operations)

Physical, durable product

Intangible, perishable product

Output can be inventoried

Output cannot be inventoried

Low customer contact

High customer contact

Long response time

Short response time

Regional, national, international markets

Local markets

Large facilities

Small facilities

Capital intensive

Labour intensive

Quality easily measured

Quality not easily measured

Demand is predictable

Demand is highly unpredictable

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BBA-305/Unit-I Production Operations System A system is a collection of objects related by regular interaction and inter dependence .systems can vary from the large-nationwide communications networks, e.g.to the small –a system for processing paper work in an office. To help people communicate about a system models are developed that represent a system or some aspect of it. A system model of an organization identifies the sub systems or sub components that make up the organization. An operations or production system receives inputs in the form of materials, personnel, capital, utilities and information. These inputs are changed in a conversion subsystem into the desired products and services which are called outputs. A portion of the output is monitored in the control subsystem to determine if it is acceptable in terms of quantity, cost and quality. If the output is acceptable, no changes are required in the system; if the output is not acceptable, managerial corrective action is required. The control subsystem ensures system performance by providing feedback so that corrective action can be taken by managers.

Production system: A system whose function is to convert a set of inputs into a set of desired outputs. Conversion subsystem: A subsystem of the larger production system in which inputs are converted into outputs. Control subsystem: A portion of the outputs is monitored for feedback signals to provide corrective action if required.

The figure shows that the inputs are classified into three categories – external, market and primary resources. External inputs generally are informational and 5

BBA-305/Unit-I tend to provide operations mangers with knowledge about legal, political, social, economical and technological environment that may affect the system. Like external inputs, market inputs tend to be informational in nature. Information concerning competition, product design, customer desires and other aspects of the market is essential if the system is to respond to the needs of the market. Inputs that directly support the production and delivery of goods and services are referred to as primary resources. These are materials and supplies, personnel, capital and capital goods and utilities (water, gas, oil, coal, electricity) The direct outputs of production systems are usually of two forms, tangible or intangible. A number of tangible products are produced each day automobiles, calculators, hairdryers and mobiles etc. Similarly, services – the intangible outputs that pour from production systems are education, haircuts, tax accounting, hospitals, banking, insurance etc. There are some indirect outputs of production system. Taxes, waste and pollution, technological advances, wages and salaries and regional development are examples of indirect outputs. The core of a production system is its conversion subsystem wherein workers, materials and machines are used to convert inputs into products and services. The process of conversion is at the heart of production and operations management and is present in some form in all organizations.

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Production as an organisation function Every organisation has a few important activities. These include production, marketing, finance and human resource management. The production function deals with management of the conversion process. The marketing function is responsible for understanding the requirement of the customers, creating a demand for products and services produced and satisfying customer requirements by delivering the right products and services to customers at right time. Both production and marketing activities require estimates of the financial needs, tapping the market for funds, and management of working capital. These activities constitute the finance function. Every organisation

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BBA-305/Unit-I employs a number of people who have varied skills, backgrounds and work requirements. The HRM function deals with such issues.

Finance

Production

Marketing

HRM

The four functions have mutual interaction among them. The decision made in each of these functional areas form an important input in another functional area. For example organisations begin their yearly plan with the marketing function making an estimate of the next year’s sales. The input forms the basis for production. Depending upon production planning procurement planning is done and all these factors lead to a certain estimate of the funds requirements. This forms an input for the finance function. At the time these plans are executed, the interactions between these functions are even greater. The HRM function influences the productive capacity of labour. The actual production of goods and services influences the marketing activities to be undertaken and the quantity and timing of available funds from sales. Objectives of Production Operation Management  Quality – Toyota cars  Cost efficiency(low product price) – McDonalds, AirAsia 8

BBA-305/Unit-I  Dependency(reliable timely delivery of orders to customers) – Dominos 30 min delivery promise  Flexibility(responding rapidly with new products) Scope of production management The various activities that forms scope of production function can be studied in the following broad areas-

 Product selection and design: The product mix makes the production system either efficient or inefficient. Choosing the right products, keeping the mission and overall objectives of the organizations in mind is the key to success. Design of the products, which gives it enough functional and aesthetic value, is of paramount importance. It is the design of the product which makes the organization competitive or noncompetitive. Value engineering does help to retain enough features, while eliminating the necessary ones.

 Process selection and planning: decision related to the production system design is one of the most important activities of the production management. This activity is related to the engineering and includes problems regarding design of tools and jigs, the design, development and installation of equipment and the selection of the optimum size of the firm. All these areas require the technical expertise on the part if the production manager and his staff.

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BBA-305/Unit-I  Facilities location: the selection of an optimum plant location very much depends upon the decision taken regarding production engineering. A wrong decision may prove disastrous. Location should as far as possible cut down the production and distribution cost. There are diverse factors to be considered for selecting the position of the plant.

 Facilities layout and materials handling: Plant layout deals with the arrangements of machines and plant facilities. The machines should be so arranged that the flow of production remains smooth. There should be overlapping, duplication r interruption in production flow. Product layout, where machines are arranged in a sequence required for the processing of a particular product, and process layout where machines performing the similar processes are grouped together are two popular methods of layout. The departments are laid out in such a way that the cost of material handling is reduced. There should be a proper choice of material handling equipment. These days, computer software is available for planning the process layout (e.g. CRAFT, CORELAP etc.) Group Technology (G.T.), Cellular Manufacturing System (C.M.S.) and Flexible Manufacturing System (F.M.S.) have made our concepts of layout planning undergo a tremendous change.

 Capacity Planning: This deals with the procurement of productive resources. Capacity refers to a level of output of the conversion process over a period of time. Full capacity indicates the maximum level of output. Capacity is planned for short term as well as long term. Process industries pose challenging problems in capacity planning requiring in 10

BBA-305/Unit-I the long run, expansion and contraction of major facilities in the conversion process. Some tools that help us in capacity planning are marginal costing (Break Even Analyses), learning curves, and linear programming and decision trees.

 Production Planning: The decision in the production planning include preparation of short term production schedule, plan of maintaining the records of raw materials, finished and semi-finished stock, specifying how the production resources of the concern are to be employed over some future time in response to the predicted demand for products and services. The production planning takes a given product or line of products and organizes in advance the manpower, materials, machines and money required for a predetermined output in a given period of time.

Thus, production planning is a management technique which attempts to gain the best utilization of a firm’s manufacturing facilities. It is gained by the integration and coordination of the manpower, machines, materials and plant services employed in the manufacturing cycle.

 Production control: After planning, the next managerial production function is to control the production according to the production plans because production plans can’t be activated unless they are properly guided and controlled. For this purpose, production manager has to

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BBA-305/Unit-I regulate work assignment, review work process, check and remove discrepancies, if any, in the actual and planned performances.

According to Soriegel and Lansburgh :“Production control is the process of planning production in advance of operations, establishing the exact route of individual item, part or assembly, settings, starting and finishing dates for each important item, assembly and the finished products and releasing the necessary orders as well as initiating the required follow up to effect the smooth functioning of the enterprise. Thus production control involves the following stages:1. Planning: setting targets of the production. 2. Routing: to decide the route or flow of production activity. 3. Dispatching: to issue materials and authorizations for the use of machine and plant services. 4. Follow-up: It compares the actual production with a targeted production. Deviations are found out and corrected and reasons are investigated.

 Inventory Control: It deals with the control over raw materials, work-inprogress, finished products, stores, supplies, tools and so is included in production management. The raw materials, supplies etc. should be purchased at right time, of right quality in right quantity, from right source and at right price. This five R’s considerations enable the scientific purchases. Store-keeping is also an important aspect of inventory control. 12

BBA-305/Unit-I The raw material, work-in-progress, finished products, stores, supplies, tools etc. should be stored efficiently. The different levels of inventory should be managed properly and the issue of materials to the departments should be made promptly and effectively. Proper records should also be kept for various items of inventory control. The production manager has to look after the inventory control activities at three levels: Control of inventories such as raw materials, purchased parts, finished goods and supplies to the inventory control technique.  Control of flow of materials into the plants through the technique of judicious purchasing.  Control of work in progress through production control.

 Quality control: The other important decision taken by the production manager concerns quality control. Product quality refers to the composite product characteristics of the engineering and manufacturing that determines the degree to which the product in use will meet the expectations of the customers. Quality control can be ensured through the techniques of inspection and statistical quality control.  Method study: the next decision regarding production system design concerns the use of those techniques which are concerned with work environment and work measurement. Standard methods should be devised for performing the repetitive functions efficiently. Unnecessary movements should be eliminated and suitable positioning of the workers for different processes should be developed. Such methods should be devised with the help of time study and motion study. Workers should be trained accordingly.

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BBA-305/Unit-I  Maintenance and Replacement: In this we cover preventive methods to avoid machine breakdowns, maintenance, policies regarding repair and replacement decisions. Maintenance manpower is to be scheduled and repair jobs are to be sequenced. There are some preventive replacements also. Machine condition is to be constantly monitored. Effective maintenance is a crucial problem for India which can help better capacity utilization and make operation systems productive enough.

 Cost reduction and Control: Cost reduction ultimately improves productivity. The industries become competitive. Essentially cost reduction and cost elimination are productivity techniques. Value engineering, budgetary control, standard costing, cost control of labour and materials etc. help to keep cost optimal. Decision making in production operations management The decisions made by operation managers about the activities of production system tend to fall into three general categories i.e.

Strategic

(Top Level Mgt)

Decisions Level of decision

Tactical Decisions

(Middle Level Management)

Operational Decisions

(Lower Level Management)

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Frequency of decision making

The production decisions are fall under three categories: Strategic Decisions: Decisions about product, processes and facilities. These decisions are of strategic importance and have long-term significance for the organisation. Tactical Decisions: Decisions about planning production to meet demand. These decisions are necessary if the ongoing production of goods and services is to satisfy the demands of the market and provide profits for the company. Operational Decisions: decisions about planning and controlling operations. These decisions are concerned with day-to-day activities of workers, quality of products and services, production and overhead costs and maintenance of equipment. Strategic Decisions: these are concern with strategies and the long range plan for the firm....