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Operations management.pdf

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LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy
UNIT – I-O.M-R20
Definition of Operations Management
Operations are useful...
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LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy
Scope of Operations Management
The scope of operations management is very ...
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LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy
The Subject of production and operations management is studied under diffe...
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Operations management.pdf

  1. 1. 1 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy UNIT – I-O.M-R20 Definition of Operations Management Operations are useful actions or activities which are done methodically as part of plan of work by a process thatis designed to achieve the pre-decided objectives. •'Operations Management' is the term often used with production management; therefore it is useful to Understand the nature of operations management Operations management consists of scheduling work, assigning resources including people, equipment, managing inventories, assessing quality standards, process type decisions and the sequence for making individual items is a product mix set. •“Operations Management” is the process in which resources/inputs are converted into more useful products. •Operations management is the management of an organization’s productive resources or its productionsystem. •It is the design, execution, and control of a firm's operations that convert its resources into desired goods and services, and implement its business strategy. •Operations management is the conversion of inputs into outputs, using physical resources, so as to provide the desired utility/utilities of form, place, possession or state or a combination there-off to the customer while meeting the other organizational objectives of effectiveness, efficiency and adaptability. Inputs of an Operations SystemIncludes Process (Conversion subsystem) of an Operations System Includes Outputs of an OperationsSystem External inputs such as legal, economic, social, technological Physical (manufacturing) Direct outputs such as goods andservices Market inputs like competition customer desires, product information Location services (transportation) Indirect outputs like waste, pollution, technological advances Primary resources like manpower, material, machinery, money andutilities Exchange services (retailing) Storage Services (warehousing) Other private services (insurance) Government services (federal)
  2. 2. 2 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy Scope of Operations Management The scope of operations management is very vast, commencing with the selection of location, operations management covers such activities as: • Forecasting • Capacity planning • Scheduling • Managing inventories • Assuring quality • Motivating employees • Deciding where to locate facilities • Design of work system • Operations planning and control • Resource requirement planning • Capacity requirement planning • Project management • Quality management • Maintenance management • Just-In-Time system • Supply chain management • Operations function includes all activities directly related to producing goods or providing services Responsibilities of Operations Management/Operations Manager Operations management responsible for the following activities which are more common in every organization u n d e rfollowing functions of operations management. Planning Controlling/ Improving Organizing Staffing Directing Capacity Inventory Degree of centralization Hiring and Laying off Incentive plans Location Quality Process selection Use of overtime Issuance of work orders Products and Services Costs Job assignments Make or Buy Productivity Layouts Projects Scheduling
  3. 3. 3 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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. 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 cine star complexion or they are selling freshness and so on. For a Production Manager: 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 Manager: For him the product is a mix of various cost elements as he is responsible for the profitability at the product. INPUTS Men Machine Materials Money Methods Production Function Outputs goods & Services
  4. 4. 4 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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., 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 the input-output by transformation organization Inputs and Resources Transformation Output Two-Wheeler factory Steel sheets Engine, Dyes Tyres, Tools workers Fabrication and Assembling Motor bikes and Scooters B-School Graduates, Books Classes, Faculty Importing knowledge and skills MBAs Restaurant Food loving customers Food, Chef, Stewards, captains and Food Preparation, Creating Conductive environment Satisfy Customers Supermarket Shoppers, Displays SKUs, Sales persons Promotion of products Fill orders Sales Hospital Patients, Doctors Pharmacy, Rooms Medicines Health care Healthy individuals
  5. 5. 5 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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. 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. ULTIMATE 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
  6. 6. 6 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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 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 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
  7. 7. 7 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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. 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, store room, stock room, 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 Pre-Planning Stage Planning Stage Control Stage Product Development Process Design Sales Forecasting Plant Location Plant layout Materials Methods Machines Manpower Routing Estimating Scheduling Dispatching Inspection Expediting Evaluation
  8. 8. 8 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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. 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)
  9. 9. 9 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy  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 century’s 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 labor. 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. Brief information about the contributions to manufacturing management is shown in the Table Date Contribution Contributor 1776 Specialization of labor in manufacturing Adam Smith 1799 Interchangeable parts, cost accounting Eli Whitney and others 1832 Division of labor by skill; assignment of jobs by skill; basics of time study Charles Babbage 1900 Scientific management time study and work study developed; dividing planning and doing of work Frederick W. Taylor 1900 Motion of study of jobs Frank B. Gilbreth 1901 Scheduling techniques for employees, machines jobs in manufacturing Henry L. Gantt 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: quality control charts W.A. Shewart
  10. 10. 10 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 1935 Statistical sampling applied to quality control: inspection sampling plans H.F. Dodge & H.G. Roming 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 computations available. Sperry Univac 1960 Organizational behavior: continued study of people at work L. Cummings, L. Porter 1970 Integrating operations into overall strategy and policy, Computer applications to manufacturing, Scheduling and control, Material requirement planning (MRP) W. Skinner J. Orlicky and G. Wright 1980 Quality and productivity applications from Japan: Robotics, CAD-CAM. W.E. Deming and J. Juran 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 behavior in the working environment. In addition, economists, mathematicians, and computer socialists contributed newer, more sophisticated analytical approaches. With the 1970s emerge 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. 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)
  11. 11. 11 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 3. Customers (Before or After order) 4. Labor (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 2. Output can be inventoried 3. Low customer contact 4. Long response time 5. Large facilities 6. Capital intensive 7. Quality easily measured 8. Regional national or International markets 1. Intangible, perishable product 2. Output cannot be inventoried 3. High customer contact 4. Short response time 5. Small facilities 6. Labor intensive 7. Quality not easily measured 8. Local 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. 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.
  12. 12. 12 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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 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. Inputs Men Machines Materials Methods Money Continuous Process Inventory, Quality cost Outputs Products (Goods and Services) Transformation Process Product design Process Planning Production Control Maintenance
  13. 13. 13 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 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 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 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 CLASSIFICATION OF PRODUCTION SYSTEM Continuous production system Mass production system Flow process production system Intermittent production system Job shop production system Batch type production system Assembly line production system Project type production system
  14. 14. 14 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy A. JOB SHOP PRODUCTION Job shop production are characterized by manufacturing of one or few quantity of products designed and produced as per the specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of products. A job shop comprises of general purpose machines arranged into different departments. Each job demands unique technological requirements, demands processing on machines in a certain sequence. Characteristics The Job-shop production system is followed when there is: 1. High variety of products and low volume. 2. Use of general purpose machines and facilities. 3. Highly skilled operators who can take up each job as a challenge because of uniqueness. 4. Large inventory of materials, tools, parts. 5. Detailed planning is essential for sequencing the requirements of each product, capacitiesfor each work centre and order priorities. Advantages Following are the advantages of job shop production: 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 opportunities. 3. Full potential of operators can be utilized. 4. Opportunity exists for creative methods and innovative ideas. Limitations Following are the limitations of job shop production: 1. Higher cost due to frequent set up changes. 2. Higher level of inventory at all levels and hence higher inventory cost. 3. Production planning is complicated. 4. Larger 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.” It is characterized by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales.
  15. 15. 15 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy Characteristics Batch production system is used under the following circumstances: 1. When there is shorter production runs. 2. When plant and machinery are flexible. 3. When plant and machinery set up is used for the production of item in a batch and change of set up is required for processing the next batch. 4. When manufacturing lead time and cost are lower as compared to job order production. Advantages Following are the advantages of batch production: 1. Better utilization of plant and machinery. 2. Promotes functional specialization. 3. Cost per unit is lower as compared to job order production. 4. Lower investment in plant and machinery. 5. Flexibility to accommodate and process number of products. 6. Job satisfaction exists for operators. Limitations Following are the limitations of batch production: 1.Material 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. 4.Higher set up costs due to frequent changes in set up. 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”. CONTINUOUS 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 through the sequence of operations through material handling devices such as conveyors, transfer devices, etc. Characteristics Continuous production is used under the following circumstances: 1. Dedicated plant and equipment with zero flexibility. Material handling is fully automated. 2. Process follows a predetermined sequence of operations. 3. Component materials cannot be readily identified with final product. 4. Planning and scheduling is a routine action.
  16. 16. 16 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy Advantages Following are the advantages of continuous production: 1. Standardization of product and process sequence. 2. Higher rate of production with reduced cycle time. 3. Higher capacity utilization due to line balancing. 4. Manpower is not required for material handling as it is completely automatic. 5. Person with limited skills can be used on the production line. 6. Unit cost is lower due to high volume of production. Limitations Following are the limitations of continuous production: 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. A. MASS PRODUCTION Manufacture of discrete parts or assemblies using a 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 Mass production is used under the following circumstances: 1. Standardization of product and process sequence. 2. Dedicated special purpose machines having higher production capacities and output rates. 3. Large volume of products. 4. Shorter cycle time of production. 5. Lower in process inventory. 6. Perfectly balanced production lines. 7. Flow of materials, components and parts is continuous and without any back tracking. 8. Production planning and control is easy. 9. Material handling can be completely automatic. Advantages Following are the advantages of mass production: 1. Higher rate of production with reduced cycle time. 2. Higher capacity utilization due to line balancing. 3. Less skilled operators are required. 4. Low process inventory. 5. Manufacturing cost per unit is low.
  17. 17. 17 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy Limitations Following are the limitations of mass production: 1. Breakdown of one machine will stop an entire production line. 2. Line layout needs major change with the changes in the product design. 3. High investment in production facilities. 4. 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 Recent Trends in Operations Management Many recent trends in production/operations management relate to global competition impacting manufacturing firms: Some of the recent trends are; •Global market place: Globalization of business has compelled many manufacturing firms to have operations in many countries where they have certain economic advantage. This has resulted in a steep increase in the levelof competition among manufacturing firms throughout the world. •Operations strategy: More and more firms are recognizing the importance of operations strategy for the overall success of their business and the necessity for relating it to their overall business strategy. •Total quality management: TQM approach has been adopted by many firms to achieve customer satisfaction by a never ending quest for improving the quality of goods and services. •Flexibility: The ability to adapt quickly to changes on volume of demand, in the product mix demanded, and in product design or in delivery schedules, has become a major competitive strategy and a competitive advantageto the firms. This is sometimes called Agile Manufacturing. •Time reduction: Reduction in manufacturing cycle time and speed to market for a new product provides
  18. 18. 18 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy products at the same price and quality. Quicker delivery provides one firm competitive edge over the other. •Technology: Automation, computerization, information and communication technologies have revolutionized the way companies operate. Technological changes in products and processes can have great impact on competitiveness and quality, if the advanced technology is carefully integrated into the existing system. •Worker involvement: The recent trend is to assign responsibility for decision making and problem solving to the lower levels in the organization. This is known employee involvement and empowerment. •Re-engineering: This involves drastic measures or break-through improvements to improve the performance of a firm. It involves the concept of clean-slate approach or starting from scratch in redesigning the business processes. i.e. BPR Business Process Re-engineering. •Environmental issues: Today’s production managers are concerned more and more with pollution control and waste disposal which are key issues in protection of environment and social responsibility. There is increasing emphasis on reducing waste, using less toxic chemicals and using biodegradable materials for packaging. •Corporate downsizing (or sizing): Downsizing or right sizing has been forced on firms to shed their obesity. This has become necessary due to competition, lowering cost, productivity, need for improved profit and for higher dividend payment to shareholders. •Supply chain management: Management of supply chain, form suppliers to final customers reduces the cost of transportation, warehousing and distribution throughout the supply chain. •Lean production: Production system has become lean production system which uses minimal amounts of resources to produce a high volume of high quality goods with workforce to have advantages of both mass production and job production. Challenges faced by Operations Managers The key challenges facing service operations managers are: 1.Managing multiple customers Many service organizations often serve heterogeneous group of customers, in different ways and different types of customers. Understanding who the curious customers are, understanding their needs and expectations, developing relationships with them and managing the various customers are key tasks for service operations managers.
  19. 19. 19 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy 2.Understanding the service concepts There may be differing views about what service an organization is selling and/or the customer is buying. Articulating and communicating the service concept is critical for classifying the organization service product to all its customers and for ensuring that it can be delivered to customer specification. 3 .Managing the outcome and experience For many services, there is no clear boundary between experience and the outcome. E.g. customers in a restaurant are buying both the meal and the way they are served. The intangible nature of the experience provides particular problems for both specification and control. 4 .Managing the real time Many services happen in real time. They cannot be delayed or put-off. e.g. aircrafts coming into land cannot be puton hold while controllers take a break. Also, during a service encounter, it is not possible to undo what is done. In manufacturing operations it is possibleto scrap defective products and remake them, but in service operations it is not possible to undo defective service rendered to a customer. 5 .Knowing, implementing and influencing strategy •Operations which are the doing part of the business are also responsible for implementing strategy of the serviceorganisation. Service operations managers must understand their role, not only in implementing strategy but also in contributing to it or influencing the strategy. •Service operations managers need to provide platform for their organisations for competitive advantage through competence in service operations. 6.Continually improving operations Service operations managers are faced with a challenge of how continually to improve and develop their real improvements. They should manage the increased complexity resulting from change and also improve efficiency as well as quality of service operations. 7.Encouraging innovations Innovation looks for what is new rather than improving the existing service operations usually require elements of financial risk because innovations require time and money and personal risk for service managers champion changeputting their reputation on the line. 8.Managing short term and long term issues simultaneously •Organisations are under pressure to perform in the short term which leaves little time for medium term operationalimprovement or long term strategic planning. •Many service operations managers focus their time and effort on managing day to day operations to ensure thedelivery of an appropriate quality of service operations management are frequently neglected . Just-In-Time (JIT) Problems before JIT system were that companies cannot properly calculate their material flows. Also, there were problems with warehouses because there were situations that in one moment warehouses are full with stocks, and in other they are almost empty. Because of these problems it was really difficult for engineers and managers to deal with logistics. JIT, however, is not new. The technique was first used by the Ford Motor Company during 1920s, but the techniquewas subsequently adopted and publicized by Toyota Motor Corporation of Japan as part of its Toyota production System (TPS). In 1954 Japanese giant Toyota implemented this concept in order to reduce wasteful overstocking in car production.
  20. 20. 20 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy Just-in-time (JIT) inventory systems are not just a simple method that a company has to buy in to; it has a whole philosophy that the company must follow. The ideas in this philosophy come from many different disciplines including; statistics, industrial engineering, production management and behavioral science. In the JIT inventory philosophy there are views with respect to how inventory is looked upon, what it says about the management within the company, and the main principle behind JIT. Firstly, inventory is seen as incurring costs instead of adding value, contrary to traditional thinking. Under the philosophy, businesses are encouraged to eliminate. Just-In-Time Concept Since the emergence of this term it was difficult for sciences and business people to define it. Even today many companies think that they are using JIT concept, but actually, they are not realising that JIT must be integrated in company philosophy and no just dead letters. Just in Time (JIT) production is a manufacturing philosophy, which eliminates waste associated with time, labor, and storage space. Basics of the concept are that the company produces only what is needed, when it is needed and in the quantity thatis needed. The company produces only what the customer requests, to actual orders, not to forecast. JIT can also be defined as producing the necessary units, with the required quality, in the necessary quantities, at the last safe moment. It means that company can manage with their own resources and allocate them very easily. Benefits and Problems Benefits that JIT concept can provide to the company are huge and very diverse. The main benefits of JIT are listed below: •Reduced set up times in warehouse - the company in this case can focuses on other processes that might needimprovement; •Improved flows of goods in/through/out warehouse employees will be able to process goods faster; •Employees who possess multi-skills are utilized more efficiently the company can use workers in situations when they are needed, when there is a shortage of workers and a high demand for a particular product; •Better consistency of scheduling and consistency of employee work hours if there is no demand for a productat the time, workers don’t have to be working. This can save the company money by not having to pay workers for a job not completed or could have them focus on other jobs around the warehouse that would not necessarilybe done on a normal day; •Increased emphasis on supplier relationships - having a trusting supplier relationship is important for the companybecause it is possible to rely on goods being there when they are needed; •Supplies continue around the clock keeping workers productive and businesses focused on turnover - employees will work hard to meet the company goals. •Also, the benefits of JIT include: better quality products, higher productivity and lower production costs. For better understanding of JIT benefits, Table 9.1 shows comparing between flexible systems (based on Just-In- Time systems) and buffered/rigid systems. •It is certain that JIT concept can improve business performance and efficiency. Employee morale is likely increased and that is one most important benefit that comes from using the foregoing concept. Of course, we must not forget that now the company is allowed to remain competitive.
  21. 21. 21 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy There are several problems, which are connected within JIT concept. •The major problem with JIT operation is that it leaves the supplier and downstream consumers open to supplyshocks. •With shipments coming in sometimes several times per day, the company is especially susceptible to an interruption in the flow. For that reason, some companies are careful to use two or more suppliers for most oftheir assemblies. •The hidden costs are present and they include labor union leverage, problems with flexible manufacturing systems (FMS), problems developing for the flexible workforce, difficulties with supplying commodities usingJIT, increased expenses for suppliers. Lean Manufacturing Lean is about doing more with less. (less time, inventory, space, labor, money) Lean manufacturing a shorthand commitment to eliminating waste, simplifying procedures and speeding up production Lean manufacturing is alsoknown as Toyota Production System (TPS).The systematic elimination of wastes like, overproduction, waiting, transportation, inventory, motion, over processing, defective units and the implementation of the concepts of continuous flow and customer pull. The five areas of Lean manufacturing or production are: •cost •quality •delivery •safety •morale Just as a mass production is recognized as the production system of the 20th century lean production is viewed asthe production system of the 21st century. Lean Production Overview •Non-value added activities or waste are eliminated through continuous improvement efforts. •Focus on continuous improvement of processes – rather than results - of the entire value chain. •The lean manufacturing mindset: concept, way of thinking – not techniques; culture – not the latest management tool. •Continuous product flow is achieved through physical rearrangement and system structure and control mechanisms. •Single-piece flow / small lot production: achieved through equipment set up time reduction; attention to machine maintenance; and orderly, clean work place. •Pull reduction / Just-in-Time inventory control. Basic Elements of Lean Manufacturing •The basic elements are waste elimination, continuous one piece workflow, and customer pull. •When these elements are focused in the areas of cost, quality and delivery, this forms the basis for a lean production system. •The lean production concept was to a large extent inspired by the Kaizen the Japanese strategy of continuous improvement. •Employee empowerment and promotion among them of a way of thinking oriented at improving
  22. 22. 22 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy processes, imitation of customer relationships, fast product development and manufacturing, and collaboration with suppliers are the key strategies of leading lean companies. Characteristics of a Lean Manufacturing •Integrated single piece continuous workflow. •Close integration of the whole value chain from raw material to finished product through partnership oriented relations with suppliers and distributors. •Just-in-time processing: a part moves to a production operation, is processed immediately, and moves immediately to the next operation. •Short order-to-ship cycles times; small batch production capability that is synchronized to shipping schedules •Production is based on orders rather than forecasts; production planning is driven by customer demand or "pull" and not to suit machine loading or inflexible work flows on the shop floor. •Minimal inventories at each stage of the production process. •Quick changeovers of machines and equipment allow different products to be produced with one- piece flow in small batches. •Layout is based on product flow. •Total quality control. Active involvement by workers in trouble shooting and problem solving to improve qualityand eliminate wastes. •Defect prevention rather than inspection and rework by building quality in the process and implementing realtime quality feedback procedures. •Team-based work organizations with multi skilled operators empowered to make decisions and improve operations with few indirect staff. Key Feature of Lean Production Following are the key features of lean production •Reduced Setup Cost and Times (for semi-versatile machinery such as big stamping presses) – from months to hours thus making small-lot production economically viable; achieved by organizing procedures, using carts, and training workers to do their own setups, •Small-Lot Production – allowing higher flexibility and pull production (or just-in-time manufacturing) •Employee Involvement and Empowerment – organizing workers by forming teams and giving them training and responsibility to do many specialized tasks, for housekeeping, quality inspection, minor equipment repair and rework; allowing also them time to meet to discuss problems and find ways to improve the process •Quality at the Source – total quality management (TQM) and control; assigning workers, not inspectors, the responsibility to discover a defect and to immediately fix it; if the defect cannot be readily fixed, any worker can halt the entire line by pulling a cord (called jidoka) •Pull Production, or Just-In-Time (JIT) – the method wherein the quantity of work performed at each stage of the process is dictated solely by the demand for materials from the immediate next stage; thus reducing wasteand lead times, and eliminating inventory holding costs •Continuous Equipment Maintenance – as pull production reduces inventories, equipment breakdowns must also be reduced; thus empowered operators are assigned primary responsibility for basic maintenance since they arein the best position do detect signs of malfunction •Multi- Skilled Workforce – as employees are empowered to do many jobs, they must be provided with adequate training •Supplier Involvement – the manufacturer treats its supplier as a long-term partners; they often must be trainedin ways to reduce setup times, inventories, defects, machine breakdowns, etc. in order to enable them to take responsibility for delivering the best possible parts/services to the manufacturer in a
  23. 23. 23 LBRCE-R20-MBA-2 nd Sem-O.M-Dr.V.V.Narsi Reddy timely manner. Benefits of Lean Production Establishment and mastering of a lean production system would allow you to achieve the following benefits: •Waste reduction by 80% •Production cost reduction by 50% •Manufacturing cycle times decreased by 50% •Labor reduction by 50% while maintaining or increasing throughout •Inventory reduction by 80% while increasing customer service levels •Capacity in current facilities increase by 50% •Higher quality •Higher profits •Higher system flexibility in reacting to changes in requirements improved •More strategic focus •Improved cash flow through increasing shipping and billing frequencies However, by continually focusing on waste reduction, there are truly no end to the benefits that can be achieved.

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