Dr.

Mohini Agarwal
Assistant Professor
Key Difference
 Production Management can be defined as the
administration of the set of activities concerning the
creation of goods or the transformation of raw
material into finished goods. Conversely, Operations
Management is used to mean that branch of
management which deals with the administration of
both production of goods and provision of services to
the customers.
 Production Management can only be found in firms
where the production of goods is undertaken. Unlike,
one can find operations management in every
organization, i.e. manufacturing concerns, service-
oriented firms, banks, hospitals, agencies, etc.
Key Difference
 Production administration requires no entry from the
shopper; however, operation administration takes
entry from the shopper as they make the most of
companies.
 Production administration requires extra capital gear
to make the product in the beginning and much less
labor because it offers with the units. On the opposite
hand, operation administration requires much less
capital funding however wants extra work as folks
need immediate outcomes.
 Operation Management turns into referred to as the
method that offers the administration aspect of the
issues relating to the enterprise actions and the
processes coping with effectivity throughout the
group.
 HISTORICAL EVOLUTION OF PRODUCTION AND
OPERATIONS MANAGEMENT
 For over two centuries operations and production management
has been recognized as an important factor in a country’s
economic growth.
 The traditional view of manufacturing management began in
eighteenth century when Adam Smith recognized the
economic benefits of specialization of labour.
 He recommended breaking of jobs down into subtasks and
recognizes workers to specialized 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 view.
TABLE 1: Historical summary of Operations Management
TABLE 1: Historical summary of Operations Management (contd..)
 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 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.
Objectives of Production Management
 Right Quality
 Right Quantity
 Predetermined Time
 Pre established Cost (Manufacturing Cost)
Production/Operations as a System
 This view is also known as “systems concept of production”.
A system is defined as the collection of interrelated
entities. The systems approach views any organization or
entity as an arrangement of interrelated parts that interact
in ways that can be specified and to some extent predicted.
Production is viewed as a system which converts a set of
inputs into a set of desired outputs. A production system
has the following elements or parts : (i) Inputs,
 (ii) Conversion process or transformation process,
 (iii) Outputs
 (iv) Transportation subsystem,
 (v) Communication subsystem and
 (vi) Control or decision making subsystem.
Production/Operations as a
Conversion/Transformation Process
 The conversion or transformation sub-system is the
core of a production system because it consists of
processes or activities wherein workers, materials,
machines and equipment are used to convert inputs
into outputs. The conversion process may include
manufacturing processes such as cutting, drilling,
machining, welding, painting, etc., and other
processes such as packing, selling, etc. Any conversion
process consists of several small activities referred to as
“operations” which are some steps in the overall
process of producing a product or service that leads to
the final output.
Production/Operations as a Means
of Creating Utility
 Production is defined as the process of adding to the value of outputs or the
process of creating utility in outputs. “Utility” is the power of satisfying human
needs. During the process of converting the raw materials into finished goods,
various types of utilities are created while adding value to the outputs. These
 Types of utilities are:
 Form utility:
 This is created by changing the size, shape, form, weight, colour, smell of
inputs in order to make the outputs more useful to the customers. For example,
iron ore is changed to steel, wood is changed to furniture, etc.
 Place utility:
 This is created by changing the places of inputs or transporting the inputs from
the source of their availability to the place of their use to be converted into
outputs. For example the iron ore and coal are transported from the mines to
the steel plant to be used in the conversion process.
 Time utility:
 This is created by storage or preservation of raw materials or finished
goods which are in abundance sometime, so that the same can be used
at a later time when they become scarce due to higher demand
exceeding the quantity available.
 Possession utility:
 This is created by transferring the possession or ownership of an item
from one person to another person. For example, when a firm
purchases materials from a supplier, the possession utility of the
materials will increase when they are delivered to the buying firm.
 Service utility:
 Which is the utility created by rendering some service to the customer.
For example, a doctor or a lawyer or an engineer creates service utility
to a client/customer by rendering service directly to the
client/customer.
 Knowledge utility:
 This is created by imparting knowledge to a person. For example, a
sales presentation or an advertisement about some product
communicates some information about the product to the customer,
thereby imparting knowledge.
Scope of POM
 Production and operations management concern with the
conversion of inputs into outputs, using physical resources, so as
to provide the desired utilities to the customer while meeting the
other organizational objectives of effectiveness, efficiency and
adaptability. It distinguishes itself from other functions such as
personnel, marketing, finance, etc., by its primary concern for
‘conversion by using physical resources.’ Following are the
activities which are listed under production and operations
management functions:
 Location of facilities
 Plant layouts and material handling
 Product design
 Process design
 Production and planning control
 Quality control
 Materials management
 Maintenance management.
The Scope of Operations Management
Operations management has been gaining increased
recognition in recent years because of the following
reasons:
 The application of operations management concepts
in service operations.
 The growing importance of quality.
 The introduction of operation management concepts
to other areas such as marketing and human resources
and
 The realization that the operations management
function can add value to the end product.
Types of Production
 Make to Stock
 Make to Order
 Assemble to Order Production
Make to Stock
 In this system manufacturer stores the finished goods
in inventory for immediate shipment, this is push-type
supply chain.
 MTS (Make to Stock) literally means to manufacture
products for stock based on demand forecasts, which
can be regarded as push-type production.
 MTS has been required to prevent opportunity loss
due to stockout and minimize excess inventory using
accurate forecasts.
 The main advantage of this system is short delivery
time and the limitation being the high costs of
inventory and inability to express customer preference
for the design of the product.
Situations for MTS
 Fairly constant and predictable demand.
 Products are few and they are standardized.
 Shorter delivery time expected by the customers.
 Products are having higher self life.
Information needed:
 Forecasted demand for the planning period.
 Starting inventory level.
 Desired ending inventory level.
 Any previous orders to be fulfilled (back orders).

Total Production= Forecasted Demand+ Back orders +

ending inventory-opening inventory
Make to Order
 Make to order (MTO), is a business production strategy
that typically allows consumers to purchase products that
are customized to their specifications.
 It is a manufacturing process in which the production of an
item begins only after a confirmed customer order is
received.
 This type of manufacturing strategy is referred to as a pull-
type supply chain operation because products are only
made when there is firm customer demand.
 The pull-type production model is employed by the
assembly industry where the quantity needed to be
produced per product specification is one or only a few.
 This includes specialized industries such as construction,
aircraft and vessel production, bridges, and so on. MTO is
also appropriate for highly configured products such as
computer servers, automobiles, bicycles, or products that
are very expensive to keep inventory.
Situations for MTO
 Products are manufactured according to customer
specifications.
 Customer's can wait till the order is being processed
(longer delivery time).
 Product is non standardized and expensive to store.
 There are several product options available at the
store.
It’s a demand responsive strategy and only the product
and some component designs and some standard raw
material and components are held in stock.
Assemble to order production system
 Assemble to order (ATO) is a business production
strategy where products ordered by customers are
produced quickly and are customizable to a certain
extent.
 The assemble-to-order (ATO) strategy requires that
the basic parts of the product are already
manufactured but not yet assembled.
 Once an order is received, the parts are assembled
quickly and sent to the customer.
 The assemble-to-order (ATO) strategy is a hybrid between
a make-to-stock strategy — where products are fully
produced in advance — and the make-to-order strategy —
where products are manufactured once the order has been
received.
 The ATO strategy attempts to combine the benefits of both
strategies —getting products into customers' hands quickly
while allowing for the product to be customizable.
 Enabled by technology, advancements in production
processes and inventory management systems have played
a big part in making assemble to order strategies a reality.
Add cheaper methods of shipping products, and it's been a
boon for product customization opportunities.
Difference
Factors Affecting Operations
Management
 Global Competition
 Quality, Customer service and cost challenges
 Rapid expansion of advanced technologies.
 Growth of service sector.
 Social responsibility issues.
 Scarcity of capital, materials etc.
Operations objectives
Objectives of operations management can be categorized
into customer service and resource utilisation.

Customer service:
The first objective of operating systems is the customer
service to the satisfaction of customer wants. Therefore,
customer service is a key objective of operations
management. The operating system must provide something
to a specification which can satisfy the customer in terms of
cost and timing. Thus, primary objective can be satisfied by
providing the ‘right thing at a right price at the right time’.
Aspects of customer service
RESOURCE UTILISATION
 Another major objective of operating systems is to
utilize resources for the satisfaction of customer wants
effectively, i.e., customer service must be provided
with the achievement of effective operations through
efficient use of resources. Inefficient use of resources
or inadequate customer service leads to commercial
failure of an operating system.
The twin objectives of operations
management
The customer service objective. The resource utilization objective.

To provide agreed/adequate levels of To achieve adequate levels of resource

customer service (and hence customer utilization (or productivity) e.g., to
satisfaction) by providing goods or achieve agreed levels of utilization of
services with the right specification, at materials, machines and labor.
the right cost and at the right time.
Criteria of performance for the production
and operations management System
Three objectives or criteria of performance of the
production and operations management system are

1. Customer satisfaction
2. Effectiveness
3. Efficiency
 Customer satisfaction refers to the extent to which
customers are happy with the products and services
provided by a business. Customer satisfaction levels
can be measured using survey techniques and
questionnaires.
 Effectiveness is any kind of practice which allows a
business or other organization to maximize the use of
their inputs by developing products at a faster pace
than the competitors or reducing defects.
 Efficiency is performing in the best possible manner
with the least waste of time and effort.
 Company usually seek to increase and improve the
efficiency of their operations and sales processes.
When working with limited resources they would
prefer to maximize the use of each of these resources.
Efficiency Versus Effectiveness
 The difference between efficient and effective is that
efficiency refers to how well you do something,
whereas effectiveness refers to how useful it is.
 For example, if a company is not doing well and they
decide to train their workforce on a new technology.
The training goes really well - they train all their
employees in a very short time and tests show they
have absorbed the training well. But overall
productivity doesn't improve. In this case the
company's strategy was efficient but not effective.
 Difference between Production
Planning and Production Control
Production Planning Production Control
It is a pre production technique. It will be in action when production
activity begins.
Production planning is concerned with The production control function
the determination, acquisition and involves the co-ordination and
arrangement of all facilities necessary integration of the factors of production
for future operations. for optimum efficiency.
Production planning fixes the goals for Production control achieves these goals.
production.
Production-planning fixes the plans, Production control puts these plans,
strategies, etc. strategies, so on; into action, i.e. it
implements the plans, strategies, etc.
Production planning decides who Production control ensures that each
should do the work and when. department complete its work on
schedule.
Production planning decides the Production control regulates and
operations which are required for supervises the operations required
production. for production.
Production planning estimates the Production control makes available
resources that are required for resources that are required for
production. production.
It shows the directions. It follows the directions.
Production-planning makes Production control collects information
modifications (changes) in the about the production process. It finds
production plans to remove the out the weaknesses in the production
weakness in the production process. process and informs the production
planners about it.