UNIT – I

INTRODUCTION:
The Subject of production and operations management is studied under different headings – such
as production planning and control (PPC), Production and Inventory Control (PIC). Production
and Operations Control (POC) and many more, whatever may be the title of the subject, the
contents at the subject are more or less one and the same.
There are four-functional areas in a business organization Marketing, Production, Finance and
Personnel. Production is the basic activity of all industrial units. All other activities resolve
around this activity. The end – product of the production activity is the creation of goods and
services for the satisfaction at human wants.
The production activity is nothing but the step-by-step conversion of one form of materials into
another, either chemically or mechanically.

INPUTS
Outputs
Men
Production goods
Machine
&
Materials Function Services
Money
Methods

The Production Cycle

The production cycle starts from market Research. Market research reveals consumer
preferences and needs.Themarketing department will transfer this information to the design
department.
The design department basing on the information received from marketing department, designs
the product to fulfill consumer needs and supplies design specifications and drawings to
production department.

Consumer Consumer Actual Sales

Not Acceptance Producti
Market approved on
Cash sales Credit
Research
Designing Sales
Department Production
Departmen Sell in Revenue
Approved t Market
Labor
Purchase of
Proposals to TOP Charges
Production Dept. Material
management
mmmmmmMMmma Prepares, plans
nagemeM
Approved and test runs
Profits and
Production dept Reserves
to Planning
Dept
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The production department verifies whether the product can be manufactured with the
technology and skill available in the firm. If yes it will give the acceptance. Otherwise the
production manager, design engineer and marketing manager discuss together and make
alternations in the product, without sacrificing the customer needs.
Once this is done the design department conduct the market service and analyze the
demand and submits its sales programme to the top management.
The top management after going through the proposals sanctions the budget and gives
green signal for production.
Production department produces a trail run and sales department release the product in
test markets to get consumer acceptance sells the products.
Meanwhile the production department prepares the detailed production plans and
production scheduling
After getting the acceptance from the marketing department, actual production of product
starts to meet the marketing program.
PRODUCT
In general we can define the product as a bundle of tangible and intangible attributes which along
with the service in meant to satisfy the customer wants. Through many authors define the
product with consumer, orientation, it is better for us to deal with different angles, because it will
be helpful for us to understand the subject of production and operation management.
For a Consumer: The product is a combination of or optional mix of potential utilities. This is
because every consumer expects some use or uses from the product. Hence he/she always
identifies the product in terms of the uses. Eg. Soap can be identified by completion, cleanliness
of body, freshness or health etc, because of this many producers advertise that they are selling
health or they are selling cinestar complexion or they are selling freshness and so on.
For a Production Manger: Product is the combination of various surfaces and processes or
operation. This is because the production manager is solely responsible for producing the
product. While planning he has to see that the required surface is produced by the best and
cheapest method.
For a Financial Manger: For him the product is a mix of various cost elements as he is
responsible for the profitability at the product.
PRODUCTION
According to E.S.Buffa Production is a process by which goods and services are created.
Production means application at processes to the raw material to add the use and economic
values to arrive at desired product by the best method, without sacrificing the desired quality.
Ways of Production
A. Production by Disintegration, by separating the contents of crude oil or a mixture the
cleared products are produced. Eg. The crude oil is disintegrated into various fuel oils. Similarly
salt production is also an example for product produced by disintegrated.
B.Production by Integration; In this type of production various components of the products are
assembled together to get the desired product. In this process, physical and chemical properties
of the materials used may change. Eg. Assembly of two wheelers, four wheelers etc.,

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C.Production by services, Here the chemical and mechanical properties of materials are
improved without any physical change. Eg. Heat treatment of metals.
In general production is the use of any process or procedure designed to transform a set of input
elements into a set of output elements, which have use values and economic values.
Production in other words, is a transformation system where inputs are converted into outputs.
The transformation could be physical (manufacturing), Location (Transport), Exchange – based
(retailing), storage – based (ware housing), physiological (Hospitals) and informational (telecom)

The following table illustrates s the input-output by transformation

organization Inputs and Transformation Output

Resources
Two-Wheeler factory Steel sheets Fabrication and Motor bikes and
Engine, Dyes Assembling Scooters
Tyres, Tools
workers
B-School Graduates, Books Importing knowledge MBAs
Classes, Faculty and skills
Food loving Food Preparation, Satisfy Customers
Restaurant customers Food, Creating Conductive
Chef, Stewards, environment
captains and
Supermarket Shoppers, Displays Promotion of products Sales
SKUs, Sales Fill orders
persons
Hospital Patients, Doctors Health care Healthy individuals
Pharmacy, Rooms
Medicines

PRODUCTION AND OPERATIONS MANAGEMENT

The word “Production Management” arrived first with the emergence of manufacturing
industry and the necessity to manage it is such. The meaning of the term “Production
Management” is clarified in the following definitions
1. “Production Management is the process of planning organizing” directing and
controlling the activities of the production function. Production function is the
conversion of raw materials into finished products
2. According to H.A.Hardubg: Production Management is concerned with those processes
which convert the inputs into outputs. The inputs are various resources like raw
materials, men, machines method, etc and the outputs are goods and services.
Production management which was formerly considered as manufacturing management only,
now after inclusion at services into its scope, is broadly known as “Operations Management”.
Many non-manufacturing organization providing services like hospitals, banks,
transportation, farming, warehousing etc are now covered by operations management.

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 Operations by formal definition is a process of changing input into outputs, with the creation
or adding of value to some entity the process as alteration or transportation or storage or
inspection or any combination thereof to add value to an entity is righty called operations.
The growth of service industry has brought with it the term “Operations Management”. It is a
general term these days.

OBJECTIVES OF THE PRODUCTION MANAGEMENT

Production is an organized activity in a manufacturing organization. Each organized activity
must spell out its objectives so that its existence can be justified on the basis of the degree of
the attainment of these objectives
The objectives of the production function are classified as under

A. UNLTIMATE OBJECTIVES
The primary responsibility of the manufacturing activity is to produce a product or
products at pre-established cost and according to the specified quality.
Thus the ultimate objectives can be sub-classified as under
1. MANUFACTURING COSTS
The unit cost of the product should be estimated carefully and every effort should be made to
stick to the cost standards. For this purpose, the efforts should be made to segregate the costs into
two-direct costs and variable costs. Effetely should be made for the following;
a. Reduction in the variable cost
b. Reduction in the fixed costs
c. Increase in the volume of production
2. PRODUCT QUALITY
Generally the product quality standards are often established by the product specifications or by
the consumers. The manufacturing organization should try to translate such quality prescriptions
into some measurable objectives. It should be noted that the product quality comes in conflict
with the manufacturing cost objective and the manufacturing time schedule. The maintenance of
the quality should not result in increase in manufacturing costs or delay in the production. A
proper balance must be maintained between quality and cost as well as quality and time-
schedule.

B. INTERMEDIATE OBJECTIVES
Production is the result of various types of inputs, like men, materials, machines and
manufacturing services. The intermediate objectives strive to attain the optimum utilization of
these various types of inputs The intermediated goals can be spelled out as under
1. MACHINE AND EQUIPMENT
The objectives in the area of machinery and equipment are divided into
a. Acquisition of machinery and equipment and
b. Utilization of machinery and equipment
The adequacy of the existing machinery should be considers and proper additions and
replacements should be made according to the requirements. Efforts should also be made to
increase the utilization rate of machinery through repair maintenance and maximum occupancy
of the machines.
2. MATERIALS
The materials objective must be prescribed in terms of units, rupee value and space requirements.
The per unit material costs should be specified and efforts should be made to increase the
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inventory turnover of all types of inventories – raw materials, work-in-progress and finished
goods.
3. MANPOWER
Manpower is an important as well as typical input in manufacturing activities. So the objectives
of the production activities are as regards manpower must be closely allied with the objectives of
selection placement training recording and utilization of manpower. To summarize production
has to follow the objectives like Right quality, Right quantity, Right Place, Right Price, Right in
time.

FUNCTIONS OF PRODUCTION MANAGEMENT (or) SCOPE OF PM

The functions of production Management depend upon the size of the firm. In small firms the
production manager may have to look after production planning and control along with
personnel, Marketing, Finance and Purchase functions.
In medium side firms there may be separate managers for personnel, marketing and
Finance function. But the production planning and control and purchase and stores may be under
the control of production management department
In large sized firms the activities of production management is conferred to the
management of production activities only
As such, there are no hard and fast rules or guidelines to specify the function of
production management but in the academic in we can mention some of the functions, which are
looked after by the production manager department they are
1. Pre-planning stage
2. Planning stage
3. Control stage

Pre-Planning Stage Planning Stage Control Stage

Product Development Materials Routing
Process Design Methods Estimating
Sales Forecasting Machines Scheduling
Plant Location Manpower Dispatching
Plant layout Inspection
Expediting
Evaluation

PRE PLANNING STAGE

A. Product Development: The needs and expectations of the consumers must be met by
introducing the relevant and innovative products. The process at converting an idea into a
new product. The process at converting an idea into a new product is called product
development. PD is a continuous activity and is a link between the market and the
production Dept
B. Process Design: is process of conceive the look, arrangement and workings of something
before it is created
C. Sales forecasting and estimating; is an estimate of the amount unit sales for a specified
future period under the proposed market plan or program.

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 D Plant Location: Site selection is an important activity which decides the fate of the
business. A good location may reduce the cost of production and distribution to a
considerable extent.
E Plant Layout; Plant Layout is the overall arrangement of the production processes,
storeroom,stockroom, tool room, material handling equipment arises racks and sub-stores,
employee services and all other accessories.

PLANNING – STAGE
A. MATERIALS: The Selection of materials for the product. Production manager must
have sound knowledge of materials and their properties, so that he can select appropriate
materials for his product. Research on materials is necessary to find alternatives to satisfy
the changing needs of the design in the product and availability of materials resumes.
B. METHODS: Finding the best method for the process, to search for the methods to suit
the available resources, identifying the sequence of process are some of the activities of
the production management
C. MACHINES AND EQUIPMENT: Selection of suitable machinery for the process
desired, designing the maintenance policy and design of layout of machines are taken
care of by the production management department
D. MANPOWER: Manpower is an important as well as typical input in manufacturing
activities. So the objectives of the production activities are as regards manpower must be
closely allied with the objectives of selection, placement, training, regarding and
utilization of manpower

CONTROL STAGE
A. ROUTING: This is the most important function of production management department.
The routing consists of fixing the flow lines for various raw materials, components etc
from the stores to the packing of finished product, so that all concerned knows what
exactly is happening on the shop floor.
B. ESTIMATING: To fix up the production targets and delivery date and to keep the
production costs at minimum, production management department does a thorough
estimation of production times and production costs. In competitive situation this will
help the management to decide what should be done in arresting the costs at desired level.
C. SCHEDULING: is to draw the timetable for various production activities, specifying
when to start and when to finish the process required. It also includes of drawing the
timings of materials movement and plan the activities of manpower.
D. DISPATCHING: is a process of preparing various documents such as job cards, route
sheets, move cards, Inspection cards for each and every component of the product.
E. INSPECTION: Is a process of checking the quality during, production but a separate
quality control department does the quality inspection not by PD. This is true because, if the
quality inspection is given too production management then there is a chance of quality the
detective products also.
F. EXPEDITING: once the documents are dispatched, the management wants to know
whether the activities are being carried out as per the plans or not. Expediting engineers go
round the production floor along with plans, compare the actual with the plan and feedback the
progress of the work to the management.

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 G. EVALUATION: The production department must evaluate itself and its contribution in
fulfilling the corporate objectives and the departmental objectives. This is necessary for
setting up the standards for future

HISTORICAL EVOLUTION:

Operations Management is not very old. It can however be said that seminal
concept of “Division of Labor” propagated by Adam Smith, in the year 1776 led to the evolution
of the present day operations management.
 In the year 1832, Charles Babbage advocated the use of scientific methods for
shop-floor problems.
 In the year 1878, F.W.Taylor described as the pioneer in this field. Taylor
developed scientific management which consists of the following concepts.
 Working conditions / performance standards
 DPRS (Differential Piece Rate System)
 Time Study
 Motion study
 In the year 1911, Frank Gilbreth developed the concept of chrono-cycle-graphs
 In the year 1913, Henry Gantt made known his studies of production scheduling Gantt
Charts used even today
 In the year 1928, Wilson developed the concept of EOQ (Economic Order Quantity)
 In the year 1924, stewhart developed the control charts and laid the foundation of SQC –
Statistical quality control.
 In the year 1931, Roming put forward the concept of sample inspection and produced
statistical tables
 In the year 1937, Tipett developed the concept of work – sampling to set up work
standards.
 In the year 1958, DuPont and U.S.Navy developed PERT/CPM concepts which is used
for planning and control of large projects.
 Quality circles
 Six sigma
 Kanban system
 Kaizen
 Just In Time
 Zero defect System
 Five “S” principles

HISTORICAL EVOLUTION OF PRODUCTION AND OPERATIONS MANAGEMENT

For over two centuries operations and production management has been recognised as an
important factor in a country’s economic growth.The traditional view of manufacturing
management began in eighteenth century when Adam Smith recognised the economic benefits
of specialisation of labour. Here commended breaking of jobs down into subtasks and recognises
workers to specialised tasks in which they would become highly skilled and efficient. In the early
twentieth century, F.W. Taylor implemented Smith’s theories and developed scientific
management. From then till 1930, many techniques were developed prevailing the traditional

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view. Brief information about the contributions to manufacturing management is shown in the
Table

Date Contribution Contributor

1776 Specialization of labour in manufacturing Adam Smith

1799 Interchangeable parts, cost accounting Eli Whitney and others
1832 Division of labour by skill; assignment of jobs by Charles Babbage
skill;basics of time study
1900 Scientific management time study and work study Frederick W. Taylor
developed; dividing planning and doing of
work
1900 Motion of study of jobs Frank B. Gilbreth
1901 Scheduling techniques for employees, machines jobs Henry L. Gantt
in
manufacturing
1915 Economic lot sizes for inventory control F.W. Harris
1927 Human relations; the Hawthorne studies Elton Mayo
1931 Statistical inference applied to product quality: W.A. Shewart
quality control charts
1935 Statistical sampling applied to quality control: H.F. Dodge & H.G. Roming
inspection sampling plans
1940 Operations research applications in World War II .M. Blacker and others.
1946 Digital computer John Mauchlly and J.P. Eckert
1947 Linear programming G.B. Dantzig, Williams &others
1950 Mathematical programming, on-linear and stochastic A. Charnes, W.W. Cooper processes
1951 Commercial digital computer: large-scale Sperry Univac
computations available.
1960 Organizational behaviour: continued study of people L. Cummings, L. Porter
at work
1970 Integrating operations into overall strategy and W. Skinner J. Orlicky and G. Wright
policy, Computer applications to manufacturing,
Scheduling and control, Material requirement
planning (MRP)
1980 Quality and productivity applications from Japan: W.E. Deming and J. Juran
robotics, CAD-CAM.

Historical summary of operations management

Production management becomes the acceptable term from 1930s to 1950s. As F.W. Taylor’s
works become more widely known, managers developed techniques that focused on economic
efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful efforts
and achieve greater efficiency. At the same time, psychologists, socialists and other social
scientists began to study people and human behaviour in the working environment. In addition,
economists, mathematicians, and computer socialists contributed newer, more sophisticated
analytical approaches. With the 1970s emerges two distinct changes in our views. The most
obvious of these, reflected in the new name operations management was a shift in the service
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and manufacturing sectors of the economy. As service sector became more prominent, the
change from ‘production’ to ‘operations’ emphasized the broadening of our field to service
organizations. The second, more suitable change was the beginning of an emphasis on synthesis,
rather than just analysis, in management practices.

DEFERENCES BETWEEN MANUFACTURING AND OPERATIONS

Manufacturing organizations are producing the products while service
organizations are, of course, those organizations whose, primary outputs are not manufactured
goods, but instead services to individuals.
Eg:- Legal services, accounting services, banking, insurance are all examples of “Production”
outputs that are services
There are clearly some major differences between a service and manufacturing
environment, and these differences do impact the formality and approach taken in the application
if these principles, but often the principles do still apply.
There are five main differences between service and manufacturing organization
1. Goods (Tangibility vs Intangibility)
2. Inventory (Stock Hold vs un hold)
3. Customers (Before or After order)
4. Labour (Cost vs Skill)
5. Location (Physical site or Communication network)
The following table shows the differences between manufacturing and service operations fall
into the eight categories
MANUFACTURING OPERATIONS
1. Physical, Durable product 1. Intangible, perishable product
2. Output can be inventoried 2. Output cannot be inventoried
3. Low customer contact 3. High customer contact
4. Long response time 4. Short response time
5. Large facilities 5. Small facilities
6. Capital intensive 6. Labor intensive
7. Quality easily measured 7. Quality not easily measured
8. Regional national or International 8. Local markets
markets

GOODS: The key difference between service firms and manufactures is the tangibility of their
output
Manufacturers produce Tangible (physical) goods that customers can see and touch.
Service firm produce intangible goods such as consultancy, training or maintenance etc. which is
difficult to measure.
INVENTORY: Manufacturers produce goods for stock, with inventory levels aligned to forecasts
of market demand. Some manufactures maintain stock levels, relying on the accuracy of demand
forecasts and their production capacity to meet demand on a just – in – time basis. Inventory also
represents a cost for a manufacturing organization.
Service firms, unlike manufacturers, do not hold inventory, they create Inventory (service)
when a client requires it
CUSTOMERS: Manufacturers can produce goods without a customer order or forecast of
customer demand. However, producing goods that do not meet market needs is a poor strategy.

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 Service firms do not produce a service unless a customer requires it although they
design and develop the scope and content of services in advance of any orders. Service firms
generally produce a service tailored to customers’ needs, such as 12 hours of consultancy, plus
14 hours of design and to hours of installation

LABOR: Manufacturers can automate many of their production processes to reduce their labor
requirements, although some manufacturing organizations are labor intensive, particularly in
countries where labor costs are low.
A service firm recruits people with specific knowledge and skills in the service
disciplines that it offers. Service delivery is labor intensive and cannot be easily automated,
although knowledge, management systems enable a degree of knowledge capture and sharing
LOCATION: Manufacturers must have a physical location for their production and stock holding
operations. Production does not necessarily take place on the manufactures own site it can take
place at any point in the supply chain.
Service firms do not require a physical production site the people creating and
delivering the service can be located anywhere. For example, global firms such as consultant’s
Delloit use communication networks to access the most appropriate service skills and knowledge
from offices around the world.

PRODUCTION SYSTEM
A System is a logical arrangement of components designed to achieve particular objectives
according to a plan. According to Webster, “system is a regularly interacting inter – dependent
group of items forming a unified whole.”
A system may have many components and variation in one component is likely to affect the
other components of the system eg. Change in rate of production will affect inventory, overtime
hours etc.
Production system is the framework within which the production activities of an organization are
carried out. At one end of system are inputs and at the other end output. Input and output are
linked by certain processes or operations or activities importing value to the inputs. These
processes, operations or activities may be called production systems.
The nature of production system may differ from company to company or from plant to plant in
the same firm. A simplified production system is shown below

SCHEMATIC PRODUCTION SYSTEM

Inputs Transformation Process Outputs

Men Product design Products
Machines Process Planning (Goods and
Materials Production Services)
Methods Control
Money Maintenance

Continuous
Process

Inventory,
Quality cost 10
ELEMENTS OF PRODUCTION SYSTEM
1 Inputs: Inputs are the physical and human resource utilized in the production process.
They consist of raw material parts, capital equipments, human efforts etc.
1. Conversion Process: It refers to a series of operations which are performed on materials
and parts
2. Outputs: Outputs are the products or completed parts resulting from the conversion
process. Output generates revenue
3. Storage: Storage takes place after the receipt of inputs, between one operation and the
other and after the output.
4. Transportation: Inputs are transported from one operation to another in the production
process
5. Information: It provides system control through measurement, comparison, feedback,
and corrective action.

CHARACTERISTICS OF PRODUCTION SYSTEM

The production system has the following characteristics
1. Production is an organized activity, so every production system has an objective
2. The system transforms the various inputs to useful output
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve
performance.

CLASSIFICATION OF PRODUCTION SYSTEM

CLASSIFICATION OF PRODUCTION
SYSTEM
Continuous production system Intermittent production system

Job shop production system

Mass production system

Flow process production system Batch type production system

Assembly line production system Project type production system

There are two main types of production systems

1. Intermittent System 2. Continuous System

INTERMITTENT STSTEM
According to Buffa “Intermittent situations are those where the facilities must be flexible enough
to handle a variety of products and sizes or where the basic nature of the activity imposes change
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of important characteristics of the input (eg. change in the product design). In instance such as
these, no single sequence pattern of operations is appropriate, so the relative location of the
operation must be a compromise that is best for all inputs considered together.
The Intermittent System classified as follows
A. Job-Shop Production: Job-Shop is also called as unit production JSP are characterized
by manufacturing of one or few quantity of products designed and produced as per the
specification customers within preferred time and cost. This is a special type of
production each job or product is different from other and no repetition is involved.
Hence without customer order there is no production
CHARACTERISTICS
*High variety of products and low volume
*The product manufactured in custom-made or non-standardized
*Use of general purpose machines and facilities
*High skilled operators who can take up each job as a challenge because of uniqueness
MERITS
1. Because of general purpose machines and facilities variety of products can be produced
2. Operators will become more skilled and competent, as each job gives them learning
opportunity
3. Full potential of operators can be utilized
4. Opportunity exists for creative methods and innovative ideas
DEMERITS
1. Higher cost due to frequency setup changes
2. Higher level of inventory at all levels and hence higher inventory cost
3. Production planning is complicated
4. Large space requirements

B.BATCH PRODUCTION: Batch production is defined by American production and

Inventory control society (APICS) as a form of manufacturing in which the job passes through
the functional departments in lots or batches and each lot may have a different routing.
CHARACTERISTICS: Batch production is used under the following conditions
1. When there is shorter production runs
2. When plant and machinery are flexible
3. When plant and machinery setup is used for the production of item in a batch
MERITS
1. Better utilization of plant and machinery
2. Cost per unit is lower as compared to job order production
3. Job satisfaction exists for operators
DEMERITS
1. Materials handling is complex because of irregular and longer flows
2. Production planning and control is complex
3. Work in process inventory is higher compared to continuous production

2. CONTINUOUS SYSTEM
According to Buffa “Continuous flow production system are those where the facilities are
standardized as to routing and flow since inputs are standardized. Therefore a standard set of
processes and sequences of process can be adopted”.

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A.MASS PRODUCTION: Manufacture of discrete parts or assemblies using aa continuous
process are called mass production this production system is justified by very large volume of
production. The machines are arranged in a line or product layout. Product and process
standardization exists and all outputs follow the same path.
CHARACTERISTICS
1. Standardization of product and process sequence
2. Large volume of products
3. Shorter cycle time of production
4. Production planning and centered is easy
MERITS
1. Higher rate of production with reduced cycle time
2. Less skilled operators are required
3. Manufacturing cost per unit is low
DEMERITS
1. Breakdown of one machine will stop an entire line
2. High investment in production facilities
3. The cycle time is determined by the slowest operation
B.FLOW PRODUCTION: Production facilities are arranged as per the sequence of production
operations from the first operations to the finished product. The items are made to flow though
sequence of operations through material handling devices such as conveyors, transfer devices etc
CHARACTERISTICS
1. Standardization of product and process sequence
2. Higher rate of production with reduced cycle time
3. Manpower is not required for material handling and it is completely automatic
DEMERITS
1.Flexibility to accommodate and process number of products does not exist
2. Very high investment for setting flow lines
3. Product differentiation is limited

O.M.SCENARIO TODAY
A new management specialization has joined hands with the fields like financial
management, supply chain management, Business management, Insurance management and that
field has really a influence on the working of present organizations and that management field is
“Production and Operations Management”.
Although, the concepts introduced with POM, as it is commonly referred as, are not
a new one for example time study, motion study, and scheduling techniques. These concepts
come into picture around 19th century. The modern day focus on POM has largely developed out
of the work of Frederick W.Taylor
The following concepts are used by POM in the present scenario
1. TOTAL QUALITY MANAGEMENT: TQM can be destined as managing the entire
organization so that it excels in all dimensions of products and services that are important
to customer. TQM takes quality from the shop floor to every conceivable activity in an
organization, with the customer at the centre of al thoughts, processes, and decisions. ISO
has defined TQM as “Management approach of an organization centered on quality based
on participation of all its members and during at long-tem success through customer
satisfaction and benefits to all members of the organization and society.

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 2. SIX – SIGMA: It has become a new mantra in quality management. It refers to a
approach for eliminating detects in any process whether it relates to product or service. It
is basically aimed at having zero defects in manufacturing of any product a service. This
technique is the latest and highest form of quality management, and surpasses ISO 9000.
Six sigma means faultless quality right across the company management. The Greek
letter sigma is the statistical short-hand for standard deviation and is an indicator of
degree of variation. Mathematically to attain efficiency of one sigma is to have around 30
percent efficiency, but it increases drastically when we move from one sigma is to six
sigma i.e., 30% to 99.9997% .It really refers to the extent to which a process is capable of
deviating from pre-set specifications without causing errors. The higher the sigma rating
the greater is this capability. The following table gives the defect rate per million and
competitive level.

Sigma Defect rate PPM Competitive level

One Sigma 6,90,000 Non competitive
Two Sigma 3,08,537 --Do--
Three Sigma 66,807 Industry average
Four Sigma 6,210 --Do--
Five Sigma 233 World class
Six sigma 3.4 --Do--

3. CAPACITY PLANNING: Capacity is elusive, and is therefore oftenqualified by terms like

licensed capacity, installed capacity, rated capacity etc. It all depends on how look at capacity.
Capacity of a facility is its limiting capability toproduce an output over a period of time. Plan
about the capacity at organization keeping in mind the demand of the particular product or
service. It is directly related with plant location.
Capacity planning has the following steps:
 Forecasting the demand
 Convert this into a capacity requirement
 Asses capacity of existing facilities
 Asses the gap between the needed and available cap
 Make alternative plans to fill the gap
 Compare these alternative plans and choose the best
 Implement the best plan and check and control its progress
4. AGGREGATE PLANNING: Aggregate planning is concerned with matching the demand
and supply of output over the medium range of time, say 12 months. It thus considers the
forecast demand and planned capacity, to design a production plan for each family of products,
typically for each of the following few months.
In otherwords, the plan indicates the amount of facilities to satisfy the total
expected demand, period by period.
The following are the basic strategies of AP
A. Constant Rate
B. Chase Demand
C. Mixed policy
5. PRODUCTIVITY: Productivity is the conversion ratio by which a input is been converted in
output. The base for production and operations management lied with this only.
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The productivity in a most simple way may be defined as a ratio of output to input. It is
expressed as order
P=O/I or Productivity = output/Input
The concept of productivity and that of production are totally different. Production refers to the
absolute output, while productivity is a relative term where in output is always expressed in term
of input.
6. FORECASTING TECHNIQUES: Forecasting is judging in advance the outcome. Be it in
regard to demand or in regard to any other thing. When we consider the function of production
management, no doubt production department will produce goods as per the sales program given
by the sales department, but it has to prepare forecast regarding machine capacity required,
material required and time required for production and soon
POM describes forecasting techniques as
A. Moving Average method
B. Exponential smoothing
C. Regression Analysis
D. Correlation Analysis
E. Delphi technique
7. LOCATION ANALYSIS: It is concerned with selecting the best location out of the various
options available selecting a plant site plays a important role for the success of the plant various
techniques like
A. Dimensional Analysis
B. Brown and Gibson model
C. Factor rating method
D. Break Even Analysis
8. OPERATION STARATEGY: Operation strategy is concerned with selecting up broad
policies and plans for using the resources of the firm to best support the firm’s long term
competitive strategy.
9. PRODUCT DESIGN AND DEVELOPMENT: Various product development and design
techniques have been introduced. Standardization, simplification and diversification named as
few
10. INVENTORY MANAGEMENT: Management of Inventory of the organization is
inventory management. EOQ model and reorder level are used in present scenario.
These concepts have given a different view to look at various sections of the
organization. Thus POM gives the answer to following questions-Where to locate the plant?
How to select the best one? What is capacity? How much to produce?How a product will
develop? And many other questions

COMPUTER AIDED MANUFACTURING (CAM) & COMPUTER AIDED DESIGN (CAD)

Throughout the history of our industrial society, many inventions’ have been patented and
whole new technologies have evolved.
Perhaps the single development that has impacted manufacturing more quickly and
significantly than any previous technology is the digital computer. Computers are being used
increasingly for both design and detailing of engineering components in drawing office.
Hence the organizations are using fully automated factory. Fully automated factory implies
CIM (Computer – Integrated Manufacturing). It includes specification of the production process.
These can be done through a common database which incorporates computer – Aided Design
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(CAD), Computer Aided manufacturing (CAM), Robotics, Materials requirement planning
(MRP)
1. COMPUTER – AIDED – DESIGN (CAD)
CAD is defined as the application of computers and graphics software to aid or enhance the
product design from conceptualization to documentation.
The blueprints (Drawings) are put into the computer screen and the printout of the
(drawings) blueprints can be taken and linked to manufacturing.
CAD is most commonly associated with the use of an interactive computer graphics
system, referred to as a CAD system. Computer – aided design systems are powerful tools and in
the mechanical design and geometric modeling of products and components.
There are several good reasons for using a CAD system to support the engineering design
function.
 To increase the productivity
 To improve the quality of the design
 To create a manufacturing database
 To eliminate inaccuracies caused by hand-copying of drawings and inconsistency
between drawings.
COMPONENTS OF CAD
A complete CAD system has three components
A. Design calculations such as strength of materials, stress analysis, thermal calculations.
B. Parts classification: Codifies and classifies existing parts by using a coding system. The
existing parts are identified by dimensions and function. A numerical code is used and
parts can be accessed from database. Unnecessary parts are eliminated
C. Link to manufacturing: is the last element of CAD. Proper machines and tooling are
facilitative.
CAD is extensively used in car, Aircraft manufacturing, ship building, construction and
electronics. It is labor saving redesign is achieved in reduced time. Design time is
reduced it makes the company competitive.
2. COMPUTER – AIDED – MANUFACTURING (CAM)
It is used to develop routing jobs automatically through the manufacturing system from one
machine to the next.
CAM is process of using computer technology effectively in manufacturing planning and
control.
CAM is defined to be the effective utilization of computer technology in the management,
control and operations of the manufacturing facility through either direct or indirect computer
interface with the physical and human resources of the company.
DIRECT APPLICATIONS: The computer is used either to monitor or to control the
manufacturing operations.
INDIRECT APPLICTIONS: The computer is used in support of the manufacturing activities in
the plant, but there is no direct connection between the computer and the production process.
CAM is most closely associated with functions in manufacturing engineering, such as
process and production planning, machining, scheduling, management, quality control and
numerical control (NC) part programming.

REASONS TO USE CAD/CAM

These are some reasons why a company might make a conversion from manual processes
to CAD/CAM
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  Increased productivity
 Better quality
 Better communication
 Common database with manufacturing
 Reduced prototype construction casts
 Faster response to customers
APPLICATIONS OF CAD/CAM
The emergence of CAD/CAM has had a major impact on manufacturing, by standardizing
product development and by reducing design effort, tryout and prototype work, it has made
possible significantly reduced costs and improved productivity.
Some typical applications of CAD/CAM are as follows
 Programming for NC and industrial robots
 Designs of dies
 Design of tools and Fixtures and EDM electrodes
 Quality control
 Process planning and scheduling

VALUE ANALYSIS
Value Analysis or value Engineering had its birth during World War – II, Lawrence D.Mileswas
responsible for developing the technique and naming it.
Value analysis is one of the major techniques of cost reduction and cost prevention. It is
disciplined approach that ensures the necessary functions at minimum cost without
compromising on quality, reliability, performance and appearance.
According to the society of American Value Engineers “Save Value Analysis is the systematic
application of recognized techniques which identify the purpose (function) for a product a
service establish a monetary value for the function and roved the necessary function reliably at
the lowest overall cost.
It is an organized approach to identify unnecessary cost associated with any product, material
part, component, system or service by analysis of function and efficiently eliminating them w/o
impairing the quality, functional reliability or its capacity to provide service.
Value is not inherent in a product it is a relative term, and value can change with time and place.
It can be measured only by comparison with other products which perform the same place. It can
be measured only by comparison with other products which perform the same function. Value is
the relationship between what someone wants and what he is willing to pay for it. In fact, the
heart of value analysis technique is the functional approach. It relates to cost of function whereas
other relate cost to product. It is denoted by the ration between function and cost.
Value=Function/Cost=Worth to you/Price you pay
WHEN TO APPLY VALUE ANALYSIS
One can definitely expect very good results by initiating value Analysis programme when are or
more of the following symptoms are observed
 Company’s products show decline in sales
 Company’s prices are higher than those of its competitors
 Raw materials cost has gone up suddenly
 New designs are being introduced
 Rate of return on investments has a falling trend
 The firm is unable to meet its deliver commitments

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TYPES OF VALUES
Values, in any value investigation, refers to economic value which itself can be divided
into four types
Cost Value: It is the summation of the labor, material, overhead and all other elements of cost
required to produce as item or provide a service
Exchange Value: It is the measure of all the properties, qualities and features of the product.
Exchange value refers to the price that a purchaser will offer for the product.
Esteem Value: It involves the qualities and appearance of a product (Like TV Set) which attracts
persons and creates in them a desire to possess the product. Therefore esteem value is the price
paid by the customer beyond the use value.
Use Value: It is also known as the function value, the use value is equal to the value of the
function performed. Therefore it is pries paid by the buyer or the cost incurred by the
manufacturer in order to ensure that the product perform its intended functions efficiently
The use value is the fundamental form of economic value an item w/o use value can have
neither exchange value or esteem values.

WORLD CLASS MANUFACTURING

The economy is integrated to the global economy and industry is facing global
competition. It is therefore, necessary to improve performance. Performance measures indicate
the real problems and how to overcome them. If a system does not deliver the blame cannot be
placed at the door of culture, level of technology, or labor, Mostly it is due to faculty
performance measures.
World class manufacturing concept has emerged of late the following
characteristics of WCM are used to fulfill the consumer exceptions;
 Products of High quality
 Products at the Right price
 Products with Enhanced features
 Products in a wide variety
 Products delivered in time, in fact short time
 Products delivered with shorter lead times
 Flexibility in fulfilling the demand for the product
The above listed performance measures are external to the manufacturing system
but are vital for the success of the organization these can measured internally. Such performance
measures improve the acceptability of the product.

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 LBRCE, SMS, MBA-2nd SEM-OM-UNIT-1 END QUESTIONS

Section A
1. What do you mean by ‘Production’?
2. What do you mean by production system?
3. Mention the different types of production systems.
4. What is job shop production?
5. What is batch production?
6. What is mass production?
7. What is continuous production?
8. Mention any four advantages of job shop production.
9. Mention any four limitations of job shop production.
10. Mention any four advantages of batch production.
11. Mention any four limitations of batch production.
12. Mention any four advantages of mass production.
13. Mention any four limitations of mass production.
14. Mention any four advantages of continuous production.
15. Mention any four limitations of continuous production.
16. Define production management.
17. Mention any four objectives of production management.
18. Define operating system.
19. How do you manage operations?
20. What do you mean by operations?
21. What do you mean by manufacturing operations?
22. What do you mean by service operations?
23. What do you mean by ‘globalization’?

Section B
1. Briefly explain the production system and its characteristics.
2. What is job shop production? What are its characteristics, advantages and limitations?
3. What is batch production? What are its characteristics, advantages and limitations?
4. What is batch production? What are its characteristics, advantages and limitations?
5. What is mass production? What are its characteristics, advantages and limitations?
6. What is continuous production? What are its characteristics, advantages and limitations?
7. Explain in brief the objectives of production management.
8. Explain in brief the objectives of operations management.
9. Distinguish between manufacturing operations and service operations.
10. Explain the key issues to be considered for managing global operations.

Section C
1. Explain the different types of production systems.
2. Explain the framework of managing operations.
3. Explain the scope of production and operations management.

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 CASE STUDY-1
SHEENA
Sheena had worked for the same Fortune 500 Company for most 15 years. Although the
company had gone through some tough times, things were starting to turn around. Customer
orders were up, and quality and productivity had improved dramatically from what they had been
only a few years earlier due company wide quality improvement program. So, it comes as a real
shock to Sheena and about 400 of her co-workers when they were suddenly terminated following
the new CEO’s decision to downsize the company.
After recovering from the initial shock, Sheena tried to find employment elsewhere. Despite her
efforts, after eight months of searching she was no closer to finding a job than the day she
started. Her funds were being depleted and she was getting more discouraged. There was one
bright spot, though: She was able to bring in a little money by mowing lawns for her neighbors.
She got involved quite by chance when she heard one neighbor remark that now that his children
were on their own, nobody was around to cut the grass. Almost jokingly, Sheena asked him how
much he’d be willing to pay. Soon Sheena was mowing the lawns of five neighbors. Other
neighbors wanted her to work on their lawns, but she didn’t feel that she could spare any more
time from her job search. However, as the rejection letters began to pile up, Sheena knew she had
to make an important decision in her life. On a rainy Tuesday morning, she decided to go into
business for herself taking care of neighborhood lawns. She was relieved to give up the stress of
job hunting, and she was excited about the prospects of being her own boss. But she was also
fearful of being completely on her own. Nevertheless, Sheena was determined to make a go of it.
At first, business was a little slow, but once people realized Sheena was available, many asked
her to take care of their lawns. Some people were simply glad to turn - the work over to her;
others switched from professional lawn care services. By the end of her first year in business,
Sheena knew she could earn a living this way. She also performed other services such as
fertilizing lawns, weeding gardens, and trimming shrubbery. Business became so good that
Sheena hired two part-time workers to assist her and, even then, she believed she could expand
further if she wanted to.
Questions
1. In what ways are Sheena’s customers most likely to judge the quality of her lawn care
services?
2. Sheena is the operations manager of her business. Among her responsibilities are forecasting,
inventory management, scheduling, quality assurance, and maintenance.
(a) What kinds of things would likely require forecasts?
(b) What inventory items does Sheena probably have? Name one inventory decision she has to
make periodically.
(c) What scheduling must she do? What things might occur to disrupt schedules and cause
Sheena to reschedule?
(d) How important is quality assurance to Sheena’s business? Explain.
(e) What kinds of maintenance must be performed?
3. What are some of the trade-offs that Sheena probably considered relative to:
(a) Working for a company instead of for herself?
(b) Expanding the business?
4. The town is considering an ordinance that would prohibit putting grass clippings at the curb
for pickup because local landfills cannot handle the volume. What options might Sheena
consider if the ordinance is passed? Name two advantages and two drawbacks of each option.
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[Source: Production/Operations Management by William J.Stevenson, Irwin/McGraw-Hill]

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