Introduction to Operation Management

Introduction to Operation Management:

Strategic growth and competitiveness of organization are depending upon the effective utilization of the critical productive resources of the organization. Operation or Production management is a concern with the design and control system responsible for the productive use of raw materials, human resources, equipment and facilities in the development of a product or service.

Production is a creation of utility. The production function creates utility by providing form, time and place utilities for the produced goods. Manufacturing provides form utility while physical distribution provides the time and place utilities. The operation is often defined as a transformation process.

In operation management, we try to ensure that the transformation process is transformed efficiently and that the output is of greater value than some of the input. Thus the role of operation management is to create value.

The transformation process is itself can be viewed as a series of activities along the value chain extending from supplier to customer. Any activity that does not add the value that is waste and decreases out efforts towards efficiency.

“The operations management may be defined as a process, which combines and transforms various resources used in the production operations subsystem of the organization into value-added products/service in a controlled manner as per the policies of the organization.”

“A set of various activities, which are involved in manufacturing certain products, is named as Production Management.” If the same concept is extended to service management, then the set of various management activities are called “Operation Management”.

§ Production System:

The production system of an organization is the part which manufactures the product.

The Production system has the following characteristics-

i) Production is an organized activity, so every production system has an objective.

ii) The system transforms the various inputs into useful outputs.

iii) Production system does not operate in isolation from the other organization system such as
      finance, marketing etc.

iv) The exists a feedback about the activities, which is essential to control and improve system 
      performance.

Production and Production Management:

Production is defined as the step-by-step conversion of one form of material into another form through the chemical or mechanical process to create or enhance the utility of the product to the user.

Elwood Buffa defines production as “a process by which goods and services are created.”

Production management is a process of planning, organization directing and controlling the activities of the production function.  

Elwood Buffa defines production management as “Production management deals with decision-making related to production process so that the resulting goods or services are produced according to specifications, in the amounts and by the schedule demanded and out the minimum cost.”

§ OBJECTIVE OF PRODUCTION MANAGEMENT

Production is an organized activity and each organized activity has its objective. Which helps to evaluate its performance against the set objectives.

The objective of production is stated as To produce goods services of right quantity at the predetermined time and pre-established cost.

The objective of production/operation management-

i) Right Quality

ii) Right Quantity

iii) Predetermined time

iv) Pre-established cost (Manufacturing cost)

i) Right Quality:

         The quality of the product is established based on the customer’s need. Customer’s needs are translated into product specifications by the design or engineering department. The manufacturing department then translates these specifications into a measurable objective.

ii) Right Quantity:

         The manufacturing organization should produce the products at the right numbers.

If the products are produced in quantity excess of demand the capital will block up in the form of inventory and if it is produced in quantity short of demand, there will be shortages of products. Thus the decision is to be taken regarding how much to produce. 

iii) Predetermined time:

         The manufacturing of the products should be completed at the given or predetermined time by the department. Value of money is very important therefore time must be saved, On time production always increases the productivity of the organization and make gross profitable.

vi) Manufacturing Cost:

         Manufacturing costs are established before the product is actually manufactured. The manufacturing department has to manufacture the products at the pre-established cost, in any case, any variation between the actual costs and the standard should be kept at the minimum.

Intermediate objectives:

The intermediate objectives can be stated as-

i) Machinery and equipment

ii) Materials

iii) Manpower

iv) Supporting Services

i) Machinery and equipment:

         The objective concerned with these areas is that the machine and equipment should be such that they should be able to produce the products as per the specifications and accuracy required. The total cost of procurement and running cost should be minimum. Once the machines are procured and put to productive use, and then the next objective is to utilize these resources to the maximum extent.

ii) Materials:

         The materials should be made available when required as per the specification and at the most economical price. The production department should aim at maximum utilization of the material with minimum wastage and scrap.

iii) Manpower:

         Manpower is an important resource or input to production and the success of production depends to a greater degree upon the type of manpower an organization has.

Thus there should be a perfect matching between the workers and jobs and the manufacturing department climate should be such that the potential kill and energies for the workers should be channelized into constructive outputs. The objective is set with respect to productivity per worker.

iv) Supporting services:

         This helps indirectly to achieve the other objectives and adequate provision of the services helps to utilize other inputs effectively. The objective should be set for each of the services like water steam power, material handling etc.

Thus intermediate objectives are supporting to the primary objectives. The achievement of these objectives helps the company to satisfy the customer needs and increase the market share resulting in increased profitability.

§  HISTORY AND DEVELOPMENT OF OPERATION MANAGEMENT:

The production system has existed since the earliest days of civilization as evidenced by the pyramids of Egypt, the Great Wall of China etc. The widespread production of consumer goods and thus production management did not begin until the Industrial Revolution in the 1700s. Prior to that time, the skilled craftsmen and their apprentice's fashioned goods for individual customers. The typical production facility has a handful of apprentice’s workers under the supervision of master craftsman cum owner. Its technology was embedded in minds and hands rather than equipment. Product design and production process were united in the person of the owner, materials and quality control, personnel scheduling was done from experience using simple rules. Markets were small and distribution was uncomplicated.

Crafts Production, the process of handcrafting product for individual customers. Every piece was unique, hand fitted and made entirely by one person.

The availability of coal, iron ore and steam power set into motion a series of industrial inventions that revolutionized the work was performed. Mechanically powered machines replaced the labor as the primary factor of production and brought workers to a central location to perform tasks under the direction of a supervisor in a place called ‘Factory’. During the same time, Adam Smith’s Wealth of Nations (1776) proposed the division of labor in which the production process was broken down into a series of small tasks, each performed by different workers. The specialization of the worker limited, respective tasks made him an expert on the tasks and further encouraged the development of machinery.

The introduction of interchangeable parts by Eli Whitney (1790s) allowed the manufacturing of firearms; watches, sewing machines, and other goods shift from customized one at a time production to volume production of standardization parts. Thus, the system of measurements and inspecting, a standard method of production and supervisors to check the quality of the worker’s production had started. Advances in technology continued through the 1800s. Cost accounting and other control systems were developed bout the management theory and practice virtually non-existent.

At the beginning of the 1900s, Frederick W. Taylor approached the management of work as a science, based on observation, measurement, and analysis, he identified the best method of doing each job i.e. the method are standardized for all workers and economic incentives are established to encourage workers to follow the standards. Taylor’s philosophy became famous as “Scientific Management”. This idea was extended by efficiency experts Frank and Lillian Gilbreth and Henry Grant, among others.

Mass Production, American manufacturers became adept at mass production over the next five decades and almost dominated manufacturing worldwide. The mass production refers to high volume production of a standard product for a mass market.

The human relations movement o 1930s, led by Mayo Elton and Hawthorne studies, introduced the idea that worker motivation as well as technical aspects of work, affected productivity. Theories of motivation were developed by Herzberg, Maslow, McGregor, and Others, Quantitative models, and techniques by the operation research groups of World War II continued to develop and were applied successfully manufacturing and services. Computers and automation led to another breakthrough in technological advancements applied to operations.

Operation management today, Mass production can produce large volumes of goods quickly but it cannot adapt very well to changes in demand. Today’s consumer market is characterized by product proliferation, shortened product life cycles, shortened product development times, changes in technology, customized products, and segment markets.