Operations Management

(18ME56)

Dr Rajanna S
Assistant Professor
Department of Mechanical Engineering
Government Engineering College
Kushalnagar 571234
 SYLLABUS
Module-1
Introduction: Functions within business organizations, the operation
management function, Classification of production systems, Productivity, factors
affecting productivity.
Decision Making: The decision process, characteristics of operations decisions,
.use of models, decision making environments, graphical linear programming,
analysis and trade-offs.
Module-2
Forecasting: Steps in forecasting process, approaches to forecasting, forecasts
based on judgment and opinion, analysis. of time series data, accuracy and control
of forecasts, choosing a forecasting technique, elements of a good forecast.
Module-3
Capacity & Location Planning: Importance of capacity decisions, defining and
.measuring capacity, determinants of effective capacity, determining capacity
requirement, developing capacity alternatives, evaluating alternatives, Need for
location decisions, nature of locations decisions, general procedure for making
locations decisions, evaluating locations decisions, facilities layout – need for
layout decisions, types of processing.
 Module-4
Aggregate Planning & Master Scheduling: Aggregate planning – Nature and
scope of aggregate planning, strategies of aggregate planning, techniques for
aggregate planning – graphical and charting techniques, mathematical techniques.
The master production schedule, Master scheduling process, Master scheduling
methods.

Module-5
Material Requirement Planning (MRP): Dependent versus independent demand,
an overview of MRP – MRP inputs and outputs, MRP processing, ERP capacity
requirement planning, benefits and limitations of MRP.

Purchasing and Supply Chain Management (SCM): Introduction, Importance of

purchasing and SCM, the procurement process, Concept of tenders, Approaches to
SCM, Vendor development.
Course Outcomes:

At the end of the course, the student will be able to:

CO1: Explain the concept and scope of operations management in a business
context.

CO2: Recognize the role of Operations management among various business

functions and its role in the organizations‟ strategic planning and
gaining competitive advantage.

CO3: Analyze the appropriateness and applicability of a range of operations

management systems/models in decision making.

CO4: Assess a range of strategies for improving the efficiency and

effectiveness of organizational operations.

CO5: Evaluate a selection of frameworks used in the design and delivery of

operations.
Reference books :
• Operations Management: Theory and Practice by
B. Mahadevan
 Introduction
• Manufacturing, service and agriculture are the major
activities in any country.

• In India, manufacturing and services together

constituents nearly 75% of GDP(gross domestic
product)
 Introduction
• Manufacturing, service and agriculture are the major
activities in any country.

• In India, manufacturing and services together

constituents nearly 75% of GDP(gross domestic
product)

Operations system is defined as the one in which several

activities are performed to transform a set of inputs into
useful outputs using a transformation process.
 Introduction

• Operations system is defined as the one in which several

activities are performed to transform a set of inputs into
useful outputs using a transformation process.

• Operations management is a systematic approaches to

addressing the issues related to transformation process
that converts input into useful outputs.
 Introduction
What is Operations Management?
Operations management is an area of management concerned
with designing and controlling the process of production and
redesigning business operations in the production
of goods or services.
It involves the responsibility of ensuring that business operations
are efficient in terms of using as few resources as needed
and effective in terms of meeting customer requirements.

Operations management is primarily concerned with planning,

organizing and supervising in the contexts of production,
manufacturing or the provision of services
Basic functions of an organization

Finance/accounting – tracks how well the

organization is doing, pays bills, collects the
money.

 Production/operations – creates the product.

 Marketing – generates demand.

 Why to study OM?
 OM is one of three major functions
(marketing, finance, and operations) of any
organization.

 We want (and need) to know how goods and

services are produced.
We want to understand what operations
managers do.
 OM is such a costly part of an organization.
What does it covers
Basics Management Functions
 Planning
 Organizing
 Staffing
 Leading
Controlling
Definition : OM
It is that part of an organization, which is concerned
with the transformation of a range of inputs into the
required output (products/services) having the
requisite quality level.
Production management
 The set of interrelated management activities,
which are involved in manufacturing certain
products, is called Production Management.
If the same concept is extended to services
management, then the corresponding set of
management activities is called as Operations
Management.
 Concept of Production
 Production is defined as “the step-by-step conversion of one
form of material into another form through chemical or
mechanical process to create or enhance the utility of the product
to the user.” Thus production is a value addition process.

 Elwood Buff defines production as ‘a process by which goods

and services are created’.

Some examples of production are manufacturing standards

products like car, bus, motorcycle, radio and TV etc. and
construction of buildings, roads and bridges etc. and services are
financial, communication, legal, medical, educational etc.
Production system
 Production System
 The production system of an organization is that part, which
produces products/goods in an organization.

 It is that activity whereby resources, flowing within a defined

system, are combined and transformed in a controlled manner

to add value in accordance with the policies communicated by

management.
Characteristics of production system
Production is an organized activity, so every production system
has an objective.
The system transforms the various inputs to useful outputs.
 It does not operate in isolation from the other organization
system.
 There exists a feedback about the activities, which is essential
to control and improve system performance.
 Classification of Production System

Production system can be classified as job shop, batch, mass

and continuous production.
 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.
e.g. Printing press.
 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, capacities for each
work centre and order priorities.
 Advantages and Limitations
Advantages
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
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.
 BATCH PRODUCTION

Batch production is defined “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.

E.g. : Medicines.
 Examples for Batch production

•Baked goods.
•Clothing.
•Computer chips.
•Computer software.
•Die- or mold-making.
•Electrical goods.
•Flat-pack furniture.
•Jet engine production.
 Characteristics of BATCH PRODUCTION

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 and Limitations
Advantages
1. Better utilization of plant and machinery.
2. Promotes functional specialization.
3. Cost per unit is lower as compared to job shop production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.
Limitations
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.
 MASS PRODUCTION
Manufacture of discrete parts or assemblies using a
continuous process (Assembly line) 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. Hennery ford
is the father of mass production.
Examples : Automobile Production like car, trucks.
household appliances.
 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 and Limitation
Advantages
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.
Limitations
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 .
 CONTINUOUS PRODUCTION
In this type of production system the production line
will operate continuously day and night. All machines
are arranged on the factory floor so that the product is
passed from machine to machine. 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.

Example : Oil Refinery, metal smelting etc.

Characteristics
Continuous production is used under the following
circumstances:
1.Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of
operations.
4. Component materials cannot be readily identified
with final product.
5. Planning and scheduling is a routine action.
 Advantages and Limitations
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
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.
 Production Management
 It is a process of planning, organizing , directing and
controlling the activities of the production function.

 According to E.S. Buffa : “Production Management

deals with the decision making related to production
processes so that the resulting goods or services are
produced according to specifications, in the amount and
by the schedule demanded and out of minimum cost”
 Production Management
1. Right Quality
 Quality of the product is established based upon customer
needs.
Right quality of a product is determined by the cost of the product
and technical characteristics as suited to specific needs.
2. Right Quantity
 Implications of producing quantity in excess and in dearth.
3. Right Time
4. Right manufacturing cost
 These are established before the product is actually produced.
Hence all attempts should be made to produce the products at pre
established cost, to reduce the variation between the actual cost
and standard cost.
Objectives of the Operation Management
 These objectives can be categorized into :
 Customer Services and Resource Utilization.
 Customer Services : It is the satisfaction of
customer wants. Customer can be satisfied by
providing the right thing at a right price at the
right time.
 The aspects of the customer services can be
described as such :
 RESOURCE UTILISATION
 Effective utilization of resources is one of the major
objective of operation management to obtain maximum output
from resources or to minimizing their loss, under utilization or
waste.
 The two objectives of the operation management may be
summarized as :
 Customer service : to provide the adequate levels of
customer services and hence customer satisfaction by
providing goods or services with the right specification , right
cost and right time.
The Resource utilization : to achieve agreed level of
resource utilization of material, machine and labor. – minimum
water reduction and efficient utilization of resources.
 Scope of Production and Operation Management

 Production and operation management are concerned with the

conversion of inputs to outputs, using physical resources so as to
provide the desired utilities to the customer.
 Activities which are listed under the production and operation
management function are :
 Location of facilities
 Plant layouts and material handlings
 Product design
 Process design
 Production and planning control
 Quality control
 Material Management
 Maintenance Management
 LOCATION OF FACILITIES
 It is a long term capacity decision which involves a long
term commitment about the geographically factors that
affect a business organization. It deals with the questions
such as : Where our main operation should be based.
 E.g. : locations of Tata nano plant at sangrur.
 An improper location of plant may lead to waste of all
the investments made in
plant and machinery equipment. This decision should be
based on
 Company’s expansion plan and policy,
 Diversification plan for the products,
 Changing source of raw material and many other factors.
PLANT LAYOUT AND MATERIAL HANDLING

 Plant layout refers to the physical arrangement of

facilities including personal, operational equipment,
storage space, material handling equipments and all
other supporting services that meet the required
output quality and quantity most economically. It is
the configuration of departments, work centers and
equipment in the conversion process.

 Material Handling : is art and science of moving,

packing and storing of products in any form.
 PRODUCT DESIGN
 It deals with conversion of ideas into reality. Every
business organization have to design, develop and
introduce new products as a survival and growth strategy.
The entire process of need identification to physical
manufactures of product involves three functions:
marketing, product development, manufacturing.
 Product development translates the needs of customers
given by marketing into technical specifications and
designing the various features into the product.
 Manufacturing has the responsibility of selecting the
processes by which the product can be manufactured.
 PROCESS DESIGN
 Process design is a macroscopic decision-making
of an overall process route for converting the raw
material into finished goods.

This decision involves

 The selection of process,
 Choice of technology,
 Process flow analysis and layout of the facilities.
 Hence the important decision in process design
are to analyze the work flow for converting raw
material into finished products.
 PRODUCTION PLANNING

 It can be defined as the process of planning and

producing in advance.
 Setting the exact route of each item,
 Fixing the starting and finishing dates of each item,
To receive production order and to follow up the
progress of product according to the order.
 The principle of production planning and control
lies in the statement ‘First Plan Your Work and then
Work on Your Plan’.
Main function included in Production Planning and Control are :

 Planning : is deciding in advance what to do, how to do it, when

to do it and who will do it.
 Routing : the selection of path which each part of the product
will follow
 Scheduling : Determines the program for the operations- the
fixation of time and date for each operation.
 Dispatching : gives necessary authority so as to start a particular
work, which has already been planned under ‘Routing’ and
‘Scheduling’.
 follow-up: is to report daily the progress of work in each shop in
a prescribed Performa and to investigate the causes of deviations
from the planned performance.
 QUALITY CONTROL
It may be defined as - a system that is maintain a desired level of
quality in a product or service. Quality control aims at prevention of
defects at the source, relies on effective feed back system and
corrective action procedure.
The main objectives of quality control are:
 To improve the companies income by making the production more
acceptable to the customers i.e., by providing long life, greater
usefulness, maintainability, etc.
 To reduce companies cost through reduction of losses due to
defects.
 To ensure satisfaction of customers with productions or services or
high quality level,
 To build customer goodwill, confidence and reputation of
manufacturer.
 To check the variation during manufacturing.
 MATERIALS MANAGEMENT
 It is primarily concerned with the acquisition, control and use of
materials needed and flow of goods and services connected with
the production process having some predetermined objectives in
view.
The main objectives of materials management are:
 To minimize material cost.
 To purchase, receive, transport and store materials efficiently
and to reduce the related cost.
 To cut down costs through simplification, standardization, value
analysis, import substitution, etc.
 To trace new sources of supply and to develop cordial relations
with them in order to ensure continuous supply at reasonable rates.
 To reduce investment tied in the inventories for use in other
productive purposes and to develop high inventory turnover ratios .
 MAINTENANCE MANAGEMENT

 Maintenance of plant and machinery is a very important

part of the total productive efforts. The main objectives of
maintenance management are:
 1. To achieve minimum breakdown and to keep the plant
in good working condition at the lowest possible cost.
 2. To keep the machines and other facilities in such a
condition that permits them to be used at their optimal
capacity without interruption.
 3. To ensure the availability of the machines, buildings and
services required by other sections of the factory for the
performance of their functions at optimal return on
investment.