Pom unit 1

Production and Operations Management
Unit – 1
Dr. Shivani Sharma

1.1. An overview, Definition of Production
and operation management

Overview of POM
• Production refers to the use of any
process which is designed to
transform a set of input elements
into set an output elements.
• POM is defined as the process which
transforms the inputs/resources of
an organization into final goods (or
services) through a set of defined,
controlled and repeatable policies.
• POM are more similar than different:
if manufacturing products is a prime
concern then it is called production
management, whereas management
of services is somewhat broader in
scope and called operations
management.
• Production is a term which has
caught the fancy of every
industrialist ever since Adam Smith
propounded the idea of
“specialization of labor”.
18-10-2021 DrShivaniSharma/PIMG 3

There are a few decision areas which
are of utmost importance in POM, such
as
Design,
Quality,
Location selection,
Human resource allocation,
Supply chain management, and
Maintenance.
The decisions arising from a POM
perspective often decide the core
priorities of an organization—
What makes us better than the
competitors?
Will we compete on cost, quality,
delivery time, design/form factor, ease
of use, or something else?

Few More Definitions of POM
 Operations Management is responsible for planning, coordinating, and
controlling the resources needed to produce products and services for a
company.
The set of interrelated management activities, which are involved in
manufacturing certain products, is called as production management. If the
same concept is extended to services management, then the corresponding
set of management activities is called as operations management.
Production and Operations Management (POM) provides tools, techniques,
concepts, models, ideas to design, dimension, control, improve production
systems.
A management function
An organization’s core function
In every organization whether Service or Manufacturing, profit or Not for
profit

Production Cycle (information flow)

Production Cycle (Decisions and Activities)
• Decisions that must be made in the production cycle include:
1. What mix of products should be produced?
2. How should products be priced?
3. How should resources be allocated?
4. How should costs be managed and performance evaluated?
• The four basic activities in the production cycle are:
1. Product design
2. Planning and scheduling
3. Production operations
4. Cost accounting
• Accountants are primarily involved in the fourth activity (cost accounting) but must
understand the other processes well enough to design an AIS that provides needed
information and supports these activities.

Product Design 1st Activity
• The objective of product design is to design a product that strikes the optimal balance
of:
• Meeting customer requirements for quality, durability, and functionality; and
• Minimizing production costs.
• Simulation software can improve the efficiency and effectiveness of product design.
• Key documents and forms in product design:
• Bill of Materials: Lists the components that are required to build each product,
including part numbers, descriptions, and quantity.
• Operations List: Lists the sequence of steps required to produce each product,
including the equipment needed and the amount of time required.

Planning and Scheduling 2nd Activity
• The objective of the planning and scheduling activity is to develop a production plan
that is efficient enough to meet existing orders and anticipated shorter-term
demand while minimizing inventories of both raw materials and finished goods.
• There are two common approaches to production planning:
• Manufacturing Resource Planning (MRP): Seeks to balance existing production
capacity and raw materials needs to meet forecasted sales demands. Often
referred to as push manufacturing.
• Lean Manufacturing: Seeks to minimize or eliminate inventories of raw materials,
work in process, and finished goods. Theoretically, produces only in response to
customer orders, but in reality, there are short-run production plans. Often
referred to as pull manufacturing

Production Operations (Conversion) 3rd Activity
• Production operations vary greatly across companies, depending on the type of product and
the degree of automation.
• The use of various forms of IT, such as robots and computer-controlled machinery is called
computer-integrated manufacturing (CIM).
• Can significantly reduce production costs.
• Sharing information across cycles helps companies be more efficient by timing purchases to
meet the actual demand.
• Although the nature of production processes and the extent of CIM vary, all companies need
data on:
• Raw materials used
• Labor hours expended
• Machine operations performed
• Other manufacturing overhead costs incurred

Cost Accounting 4th Activity
• Accountants are primarily involved in the fourth activity (cost accounting)
but must understand the other processes well enough to design an AIS that
provides needed information and supports these activities.
• The objectives of cost accounting are:
• To provide information for planning, controlling, and evaluating the
performance of production operations;
• To provide accurate cost data about products for use in pricing and
product mix decisions; and
• To collect and process information used to calculate inventory and
COGS values for the financial statements.

1.4 Process Selection and Design

Process Selection Concept
• Process selection decisions determine the type of productive process to be used and the
appropriate span of that process.
• For example, the managers of a fast-food restaurant may decide whether to produce food
strictly to customer order or to inventory. The managers must also decide whether to
organize the process flow as a high-volume line flow or a low-volume batch-production
process.
• Furthermore, they must decide whether to integrate forward toward the market and/or
backward toward their suppliers.
• All these decisions help define the type of process which will be used to make the product.
Process selection is sometimes viewed as a layout problem or as a series of relatively low-level
decisions, but this is a mistake, since process selection is, on the contrary, strategic in nature
and of the greatest importance.
• Process decisions affect the costs, quality, delivery, and flexibility of operations. Before the
process selection decision can be made, the planned volume of product output must be
known.

Process Design Concept
• Process Design: Process design is concerned with overall sequence of operations required to
achieve the product specifications.
• It specifies the type of work stations, the machines and equipment necessary ad the quantities
in which each is required
• Sequence of operations determined by:
1. Nature of the product Materials used Quantities being produced, and
2. Existing physical layout of the plant
• Design of manufacturing process starts with the receipt of product specifications and ends
with the final plan for the manufacturing of the product.
1. Steps involved in process design are –
2. Careful review of product design and specifications to ensure that economical manufacture
is feasible
3. Determination of the method of manufacture that will result in the optimum manufacturing
cost
4. Selection or development and procurement of all machines, tools, jigs and fixtures etc.
required for manufacturing product at the required quantity level/rate of production.

1.5 Responsibilities of an Operation
Manager

Responsibilities of an Operation Manager
1. Prepare the production budget and achieve the budgeted output.
2. Receive work orders from customers and to distribute the same for execution to the production control
department.
3. Design the factory building and equip it with the most up-to-date and efficient operating plant in
consultation with the chief engineer.
4. Undertake efficient designs, productive efficiency and reduction of the cost by simplification and
standardisation.
5. Compare actual results of production with the targeted production and ascertain how far the target has
been attained.
6. Provide the best possible working conditions to the employees in the production department.
7. Organise a system of periodic meeting of work executives and workers so as to bring about greater
coordination and create a spirit of fullest cooperation among all.
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18-10-2021

Responsibilities of an Operation Manager
8. Engage in constant research and development programme so as to discover new methods of
production to minimize wastages and ensure economical production.
9. To investigate into actual running time and idle time of the machines as that would often
reveal the weak spots in the production work and thus strict control could be exercised.
10. To inspect the manufacturing processes, machinery and equipment and to control the
production cost.
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Plant Location Decisions
 Plant location may be understood as the function of determining where the
plant should be located for maximum operating economy and effectiveness.
 Location of business involves large and relatively permanent investment.
 There fore the site for factory should be selected very carefully. While
selecting a site it is necessary to consider technical, commercial and financial
aspects to maximize business profits.
 The need of selection of the location may arise under the following conditions:
When the business is newly started,
Existing business has outgrown its original facilities,
A lease expires,
Other social economic reasons.
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Steps (Procedure) of Location Selection
1. National Decisions
• Political; Social; Economic stability; Currency exchange rates…..
2. Regional Decisions
• Climate; Competition; Nearness to the market; Government policy;
Customer concentrations; Availability of raw material/power
3. Community/Locality Decisions
• Labour availability; Transportation system availability; preference of
management; Finance & research facilities; Disposal of waste….
4. Site Decisions: Urban, Sub urban or Rural location…..
• Site size/cost; environmental impact; local restrictions….

Factors Influencing Plant Location
Controllable Factors
1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. External economies
7. Capital
Uncontrollable Factors
1. Government policy
2. Climate conditions
3. Supporting industries and services
4. Community and labour attitudes
5. Community Infrastructure

Facility Layout Planning
• Facility layout may be defined
as the arrangement of
machinery, equipment, and
other amenities in a facility,
which should ensure a smooth
movement of materials.
• Layout planning is deciding the
best physical arrangement of
all the resources within a
facility.
• Facility resources arrangement
can significantly affect
productivity .
Factors
affecting
Layout
Planning
Material
Product
Manpower
Machinery
Type of
Industry
Location
Managerial
Policies

Objectives of a Good Layout
• Minimizing the…….
i. Material Handling costs
ii. Movement of people and
material
iii. Hazard to personnel
iv. Accidents
• Improve the…………
i. Production capacity
ii. Labour efficiency
iii. Employee morale
iv. Space utilization
v. Ease of supervision and
maintenance

Types
of
Layout
1. Process
Layout
2. Product
Layout
3. Fixed
Position
Layout
4. Cellular
Manufacturing
Layout
5. Combination
or Hybrid
Layout

1.Process Layout: Group Similar resources together
• Process layout also called functional
layout or batch production layout, is
characterised by the grouping together
of similar machines, based upon their
operational characteristics.
• Process layout is particularly suitable
when different products are produced
in lots or batches. Machines are
arranged in no particular sequence, as
the processing requirements differ
from product to product.
• Example: Banks, Post offices,
Universities.

2. Product Layout: Designed to produce a specific product
efficiently
• In product layout, also called as
straight line layout, machine is
arranged in one line as per the
sequence of production
operations. Materials are fed into
the first machine and finished
products come out of the last
machine.
• A product layout is suitable when
a product having standard
features in to be produced in
large volume.
• Example : Car Manufacturing

3. Fixed Position Layout: Product is too large to
move
• This type of facility layout is used
to assemble products that are too
large, heavy to move to a location
for completion.
• In the fixed position layout,
machinery, men, as well as other
pieces of material, are brought to
the location where the product is
to be assembled.
• Example: Construction of a
building, dam or a factory, Drilling
crude oil, construction of ship,
rocket or aeroplane.

4. Cellular Manufacturing Layout: Every cell contains a
group of machines
• Cellular manufacturing is a type of layout
where machines are grouped according to
the process requirements for a set of
similar items (part families) that require
similar processing. These groups are
called cells. Therefore, a cellular layout is
an equipment layout configured to
support cellular manufacturing.
• Processes are grouped into cells using a
technique known as group technology
(GT). Group technology involves
identifying parts with similar design
characteristics (size, shape, and function)
and similar process characteristics (type of
processing required, available machinery
that performs this type of process, and
processing sequence).

5. Combination or Hybrid Layout
• Hybrid layout modify and/or combine some
aspects of the three basic layouts to satisfy the
some types of product needs. For example some
firms can utilize a process layout for the majority
of its process along with an assembly in one
area.
• Alternatively, a firm may utilize a fixed-position
layout for the assembly of its final product, but
use assembly lines to produce the components
and subassemblies that make up the final
product.
• Example: aircraft manufacturing and Hospitals:
process layout and fixed position layout as well
(patient care).

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