Production management has now become an independent branch for study and specialization with interdisciplinary approach. Although, the tasks of production in organizations are assigned to those who have exposure to technical and engineering disciplines, with management inputs or knowledge they can function better, as timely delivery, productivity, cost effectiveness and quality are now considered crucial for sustaining the competitive pressure. In manufacturing set-up, the term production management is used, whereas, operations management is a wider concept, which not only includes traditional manufacturing but also broadly encompasses process, programmes, plants and people.
Traditionally, production function is considered as the manufacturing function and so also the process, limiting its focus only to engineering aspects. However, production now encompasses services also and in that way it is now like any value-added activity.
Thus, production is not only the traditional manufacturing process of converting inputs to outputs, it encompasses all operational activities of any organization that broadly assist in manufacturing and so also rendering of services. For the purpose of this book, we have used the term production and operations interchangeably.
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Production management is concerned with the decision making related to production processes, so as to ensure that output is cost effective, meeting the delivery schedules, conforming to quality and achieving customer satisfaction.
A general descriptive model of production has following characteristics:
Inputs:
Inputs are those things which are used in the production. Inputs may include raw materials, spare parts, any other consumable items, energy, know-how (knowledge, technical details, etc.), plans, programmes or schedules. Inputs, therefore, may be both physical or abstract.
Process:
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After all the inputs are made available, the next stage of production starts with processing of inputs through a number of operations. Number of operations varies with the nature of output. For achieving efficiency, production processes are conveniently divided into number of operations, entrusting each operation to a separate group with the specialized knowledge in doing the same job. Processing is done using labour services with plants, equipment and machineries.
Outputs:
After processing of inputs, outputs are received both in the physical or abstract form. At the processing stage, functions are monitored to conform the output to customers’ requirements by achieving quality and cost effectiveness and by meeting the delivery schedules.
In addition to the above three important characteristics of a production system, storage, transportation and management information systems are also considered important, as total production system cannot be effective without these three supporting stages.
1. Storage is important both for storing of received input materials, semi-processed materials (work-in-progress, where production process is divided into number of stages) and finished goods or output.
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2. Transportation within the factory or organization is also necessary for carrying semi-processed goods from one shop to another for different stages of operation. This type of transportation is done using battery-operated slow-moving small truck, fork lift, etc.
3. Management information system (MIS) links all physical activities through an efficient feedback mechanism and thus helps in enforcing control and/or correcting deviation from the plan. It also provides the basis of managerial decisions.
Even though the terms ‘production’ and ‘operations management’ have been used interchangeably for the purpose of the present book, we find many authors have delineated the concepts first and then used it integrating the approach, keeping pace with modern corporate practices. Without stretching the debate, we can say that operations management is the management of the conversion of inputs into intended outputs, which may be either tangible (goods) or intangible (services).
Therefore, operations functions have some basic elements, as we could list from the above definition. It has (a) conversion process, which utilizes (b) some inputs to produce some (c) intended outputs. However, this is a more classical way of defining the concepts. Due to its strategic focus and integration with enterprise-wide decision support systems (DSS), the modern approach also integrates information feedback in the model of operations functions.
Adam and Ebert (1995) while explaining the model have pointed out that in a production/operations function, while in the process of conversion, some unplanned or uncontrollable influences may cause deviation in actual output than what has been envisaged. They have categorized such influences as random fluctuations, examples of which are strikes, floods, fire, lightning, etc.
Even though by and large such influences are for exogenous factors, some may also occur due to endogenous or internal factors. In such cases, random fluctuations are controllable. Feedback loop in the model is intended to provide key information, so as to ensure control over operations by suitable intervention.
While explaining the basic framework of production and operations management, Muhlemann, A., J. Oakland and K. Lockyer, (1993) warned that functions of production and operations management are interdependent; hence, dividing the two may destroy the conceptual clarity. Even though distinction between the manufacturing and service operations is difficult, in line with Adam and Ebert, we can differentiate between the two on following counts:
i. Nature of outputs, which may be either tangible or intangible. Manufacturing operations are identified by tangible outputs, whereas, service operations are identifiable by intangible outputs.
ii. In case of manufacturing or tangible outputs, consumption pattern, continue over a time period, but for service operations or when output is intangible, we find that customers consume the same immediately.
iii. Nature of jobs for manufacturing is more technology intensive. In this case, the usage of labour as an input is relatively less. However, for service operations, we find usage of labour more than any equipment.
iv. Degree of customer contact in manufacturing is relatively less than in service operations. This is because even though conversion in manufacturing is essentially done for customers, their physical presence in conversion site is not tenable. However, since services are rendered direct to customers, in service operations, we find a higher degree of customer contact.
v. Customers’ participation in manufacturing operations is, therefore, relatively low, whereas, it is high in service operations.
vi. Performance measurement for manufacturing is quantitative, whereas, for service operations it is qualitative.
However, distinctions between manufacturing and services on the above counts may not be always feasible with the changing technology and management styles and philosophy. To take an example, in the process of making organizations increasingly customer focused for sustaining the competitive edge, we find an increasing trend to customize output using a flexible or job-shop type of manufacturing facilities. In management strategy also, we find that overriding priority is given to customers, whose feedback are used for effecting change.
Six-sigma approach lends to customer-centric recreating process in organizations both for improving the bottom line and enhancing customer satisfaction (by giving them increased value for money). Customer Operations Performance Centre (COPC) approach, primarily for IT-enabled service (ITES) operations, a joint product of Dell, Microsoft and American Express, also emphasizes customer/client satisfaction.
The introductory discussion, therefore, suggests actual differences between manufacturing and services getting narrowed; hence, attributing production to manufacturing and operations to services would be a historic approach.
Using the term ‘operations’ more holistically encompassing manufacturing and services is, in fact, the right approach. However, for the obvious problem of division as explained earlier, using the term ‘production and operations management’ (POM) would be a better choice.
A better definition of POM would, therefore, be a value-added transformation process and not just a conversion of inputs into goods and services of the desired quality by optimum utilization of resources at minimum cost. The elements of definition, therefore, would be:
i. Optimum utilization of resources
ii. Achieving desired quality in goods and services
iii. Achieving cost efficiency in transformation process
iv. Value-added activity
Value addition is ensured by alteration, transportation, storage and inspection. Alteration is a process of change effected in the state of inputs, which is physical in nature, for manufacturing and for rendering services. Transportation is the movement of goods and services from one place to another. Like alteration, transportation also adds value from the customer’s point of view, when outputs are made available at different locations with better logistic support. ATM is a very good example of value-added banking services for customers.
Similarly, supply or distribution chains make the outputs of a manufacturing process available in different locations. This also adds value from the customers’ point of view. Storage also adds value to the customers, when organizations by ensuring the storage of outputs in a protected environment to make the same available to the customers over a period of time.
We know that physical output, with a long shelf life, is stored by organizations to make the same available to customers when they require. Similarly, service outputs in the form of data and information may be made available by a service provider through their data warehouse, which a customer can utilize over a period of time. Inspection process adds value to outputs when through this process organizations ensure that the outputs conform to quality standards.
Apart from these, recent developments in POM (like making POM systems compatible with environment yet efficient), are also offering new opportunities to organizations. Effluent Treatment Plants (ETP) not only reduce the harmful by-products but also provide opportunities to organizations to maximize their gain by waste recycling, generating energy (sintering plant for steel manufacturing unit) or by using recycled water for cooling towers, etc.
Achieving zero defects through six-sigma approach to sustain a competitive advantage is yet another new development in POM. Six-sigma suggests recreating an error-free measurable process through innovation.