MODULE 1 A Bird view of Production System Marketing Engineering Research Plant department Department & Engineering Development Department Materials Customer Management Production In Department Division Target Market (shop floor) Raw Vendor/ Materials Suppliers Stores Quality Factory Assurance Sales Management Department Department & Liasioning Management Information Customer Finance Human System Support Department Resource Department Department Department Introduction • Production and operations management (POM) is the management of an organization’s production system. • A production system takes inputs and converts them into outputs. • The conversion process is the predominant activity of a production system. • The primary concern of an operations manager is the activities of the conversion process. Today's Factors Affecting POM • Global Competition • U.S. Quality, Customer Service, and Cost Challenges • Computers and Advanced Production Technology • Growth of U.S. Service Sector • Scarcity of Production Resources • Issues of Social Responsibility Different Ways to Study POM • Production as a System • Production as an Organization Function • Decision Making in POM Production as a System Production System Conversion Inputs Outputs Subsystem Control Subsystem Inputs of a Production System • External – Legal, Economic, Social, Technological • Market – Competition, Customer Desires, Product Info. • Primary Resources – Materials, Personnel, Capital, Utilities Conversion Subsystem • Physical (Manufacturing) • Location Services (Transportation) • Exchange Services (Retailing) • Storage Services (Warehousing) • Other Private Services (Insurance) • Government Services (Federal, State, Local) Outputs of a Production System • Direct – Products – Services • Indirect – Waste – Pollution – Technological Advances Production as an Organization Function •U.S. companies cannot compete using marketing, finance, accounting, and engineering alone. •We focus on POM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside. •To succeed, a firm must have a strong operations function teaming with the other organization functions. Decision Making in POM •Strategic Decisions •Operating Decisions •Control Decisions Strategic Decisions •These decisions are of strategic importance and have long-term significance for the organization. •Examples include deciding: –the design for a new product’s production process –where to locate a new factory –whether to launch a new-product development plan Operating Decisions •These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits. •Examples include deciding: –how much finished-goods inventory to carry –the amount of overtime to use next week –the details for purchasing raw material next month Control Decisions •These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. •Examples include deciding: –labor cost standards for a new product –frequency of preventive maintenance –new quality control acceptance criteria What Controls the Operations System? •Information about the outputs, the conversions, and the inputs is fed back to management. •This information is matched with management’s expectations •When there is a difference, management must take corrective action to maintain control of the system What is Operations Management? Defined Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services Why Study Operations Management? Systematic Approach to Org. Processes Business Education Operations Career Opportunities Management Cross-Functional Applications •The Future of Operations –Outsourcing everything –Smart factories –Talking inventory –Industrial army of robots –What’s in the box –Mass customization –Personalized recommendations –Sign here, please Operations Management Decision Types •Strategic (long-term) •Tactical (intermediate-term) •Operational planning and control (short-term) What is a Transformation Process? Defined A transformation process is defined as a use of resources to transform inputs into some desired outputs Transformations •Physical--manufacturing •Location--transportation •Exchange--retailing •Storage--warehousing •Physiological--health care •Informational--telecommunications Core Services Performance Objectives Quality Operations Flexibility Speed Management Price (or cost Reduction) The Importance of Operations Management •Synergies must exist with other functional areas of the organization •Operations account for 60-80% of the direct expenses that burden a firm’s profit. The Basics of Operations Management •Operations Management –The process of managing the resources that are needed to produce an organization’s goods and services. –Operations managers focus on managing the “five Ps” of the firm’s operations: •People, plants, parts, processes, and planning and control systems. The Production System •Input –A resource required for the manufacture of a product or service. •Conversion System –A production system that converts inputs (material and human resources) into outputs (products or services); also the production process or technology. •Output –A direct outcome (actual product or service) or indirect outcome (taxes, wages, salaries) of a production system. Types of Production system Manufacturing System Service System Continuous Production Intermittent Production Batch Production Job Production Processing Production Mass production( Flow) Basic Types of Production Processes •Intermittent Production System –Production is performed on a start-and-stop basis, such as for the manufacture of made-to-order products. •Mass Production –A special type of intermittent production process using standardized methods and single-use machines to produce long runs of standardized items. Mass Customization –Designing, producing, and delivering customized products to customers for at or near the cost and convenience of mass-produced items. –Mass customization combines high production volume with high product variety. –Elements of mass customization: •Modular product design •Modular process design •Agile supply networks Continuous Production Processes –A production process, such as those used by chemical plants or refineries, that runs for very long periods without the start-and-stop behavior associated with intermittent production. –Enormous capital investments are required for highly automated facilities that use special-purpose equipment designed for high volumes of production and little or no variation in the type of outputs. Mass Production System (Flow) Continuous Production •Anticipation of demand •May not have uniform production •Standardized Raw material •Big volume of limited product line •Standard facility- high standardization. •Fixed sequence of operation •Material handling is easier •High skilled operator not required •More Human problem is foreseen •Huge investment. •High raw material inventory. Processing Production System •Extended form of mass production system •F.G of one stage is fed to next stage •More automatic machines •One basic raw material is transferred into several products at several stages. •Less highly skilled workers required •More human problems foreseen •Highly standardized system Batch Production System •Highly specialized Human resource is required •Highly specialized multi tasking machines •Machines are shared. •Production in batches •Production lots are based on customer demand or order. •No single sequence of operation •Finished goods are heterogeneous Custom built / job order production system •Highly specialized Human resource is required •Highly specialized multi tasking machines •Machines are shared •Raw material is not standardized •Process is not standardized •No scope for repetition of production Comparative study of different production systems Type Mass/ Flow Process Job Batch Parameter Per unit High Low High High manf.cost Size & Large V. Large Small Medium Capital Less High Low High Invest. Flexibility No No More More Technical Less Less High High ability Skills Orgn. Line staff Line staff Functional Functional Structure Industrial Automobile Chemical Construction Consumer application Sugar Petroleum Bridges prod. Refinery Milk SPM M/c. Tools proces. Competitiveness, Strategy, and Productivity Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services Businesses Compete Using Marketing •Identifying consumer wants and needs •Pricing •Advertising and promotion Businesses Compete Using Operations •Product and service design •Cost •Location •Quality •Quick response Businesses Compete Using Operations •Flexibility •Inventory management •Supply chain management •Service Why Some Organizations Fail •Too much emphasis on short-term financial performance •Failing to take advantage of strengths and opportunities •Failing to recognize competitive threats •Neglecting operations strategy Why Some Organizations Fail •Too much emphasis in product and service design and not enough on improvement •Neglecting investments in capital and human resources •Failing to establish good internal communications •Failing to consider customer wants and needs Mission/Strategy/Tactics Mission Strategy Tactics How does mission, strategies and tactics relate to decision