MODULE 3- INTRODUCTION TO

PRODUCTION AND OPERATIONS

MANAGEMENT, FORECASTING AND
FACILITY PLANNING
NATURE AND SCOPE OF PRODUCTION 2
MANAGEMENT
• Production management is a process that combines and transforms distinct resources
utilized to produce an organization’s sub-systems into value-added products or services in
a defined and controlled manner following all the policies of that particular organization.
• Moreover, it is an essential part of an enterprise that is concerned with the transformation
of inputs into finished products maintaining the requisite quality level.
• The distinct interrelated management activities involved in product manufacturing are
known as production management. If the same process is applied for services, then
corresponding activities are defined as operations.
• The importance of production management lies in examining processes by which goods
and services are created and using the available knowledge and techniques to resolve
problems. It has to think and rethink, whether the practices adopted are still appropriate
today.
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PRODUCTION MANAGEMENT DEFINITION
• In literal terms, production means converting inputs into output within the given period.
However, goods and services must be produced of the right quality, the right quantity, at
the right time, and at a minimum cost. Here, the role of production management comes
into the picture. Production Management can be defined as a process of supervising and
administering the conversion process (changing raw materials such as land, labor, and
capital into desired outputs).
• The following are some definitions given by management scholars: According to Elwood
Spencer Buffa, “Production management deals with decision-making related to
production processes so that the resulting goods or service is produced according to
specification, in the amount and by the schedule demanded and at minimum cost.”
• In the words of Mr. E.L. Brech, “Production Management is the process of effective
planning and regulating the operations of that section of an enterprise which is responsible
for the actual transformation of materials into finished products.” Production management
includes decision-making related to the production process and ensures that the finished
products and services are produced based on the specifications.
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PRODUCTION MANAGEMENT DEFINITION
Production management is assigned with the tasks listed as follows:
• Specify and accumulate various input resources including management, labor, materials,
information, capital, and machine
• Design the conversion or assembling procedure to transform the inputs into finished
products, and coordinate the production team and the operation of the production process
to ensure that the desired goods and services are produced effectively and at a low cost.
• The production department of an organization is not only responsible for the leveraging of
facilities and production but also concerned with human factors, which affect production
indirectly, deals with proper utilization of modern production techniques and maintaining
the quality of goods to ensure the satisfaction of the customers of the product.
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NATURE OF PRODUCTION MANAGEMENT
• Fast clock speed industries focus on structural components such as product design,
process, capacity, and location. On the other hand, in the slow clock-speed industries, the
focus is on infrastructural components, i.e., quality, manufacture, outsourcing, planning,
and other components of the transformation process.
• The general nature of production management or operations can be understood through the
following points:
1. Results in Value Addition
2. Inter-disciplinary Approach
3. Transformation Process
4. Operative Function
5. Both Art and Science
6. Management of the Service Sector
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NATURE OF PRODUCTION MANAGEMENT
Results in Value Addition
• Production management is a critical tool available to any organization that assists in the
addition of value to the product.
• It includes distinct processes, which allow the production of best-quality products by
purchasing the right raw materials, in the right form, at an accurate price, and in perfect
quantity. However, these quality products provide better customer satisfaction improving
the organization’s goodwill.
Inter-disciplinary Approach
• It is one of the most popular and on-demand approaches that is derived from various
subjects and disciplines.
• Distinct subjects including mathematics, statistics, engineering, sociology economics, and
human psychology have their contribution to the design and development of the
production management approach.
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NATURE OF PRODUCTION MANAGEMENT
Transformation Process
• The transformation process in which raw materials are transformed or converted into
finished products, and are ready for customer consumption. The quality of production
management focuses on the economical production of products and thus avoiding any
wastage of raw materials used.
Operative Function
• One of the key aspects of production management is to monitor the day-to-day operations
of the business and ensure long-term continuity. Apart from that, production management
also aims to ensure the optimum utilization of the available resources.
Both Art and Science
• Production management can be treated as both art and science. Also, termed art as it is the
major one that assigns, coordinates, and monitors all the production-related activities of
any organization. On the other hand, it is also defined as science that manages all technical
aspects and machines helping in production activities.
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NATURE OF PRODUCTION MANAGEMENT
Management of the Service Sector
• Production management is not only responsible for managing production-related activities
but also related to the production of tangible products. It also monitors the service sector
in which the intangible products are delivered to customers according to their needs.
• The aspects discussed above clearly explain the nature of production management, which
is related primarily to organizations that are engaged in the production of goods and
services. In the early days, almost every organisation was in the form of one-man shops
with several critical production management problems.
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SCOPE OF PRODUCTION MANAGEMENT
• The scope of production management can be derived through the following aspects:
• Facility Location
• Plant Layout and Material Handling
• Product Design
• Process Design
• Production Planning and Control (PPC)
• Quality Control
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SCOPE OF PRODUCTION MANAGEMENT
Facility Location
• Production management deals with the selection of the appropriate location to set up
production facilities of an organization, which affects its long-term growth. However, this
is a crucial decision to be taken as it deals with long-term commitment and higher
investments in land, machinery, and building.

Plant Layout and Material Handling

• Plant layout deals with the physical arrangement of the facility, which is set up by the
business. It includes work center machines and other necessary equipment within the
facility to ensure better productivity.
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SCOPE OF PRODUCTION MANAGEMENT
Product Design
• It involves bringing shapes to the ideas of products and then converting them into reality.
Every business should come up with innovative ideas to develop their products in the
market after conceiving new thoughts and ideas according to the market requirements.
Process Design
• The designing of the process is an overall route that is followed by every business to
transform raw materials into finished goods. It is a key decision that needs to be taken as it
is the key element to determine the effectiveness of business. It includes selecting
appropriate technology and deciding the business process sequence and facilities layout.
Production Planning and Control (PPC)
Production management deals with controlling different aspects involved in production.
Moreover, it is a process of deciding production in advance, selecting the production
sequence, deciding the beginning and endpoints for each product, and then directing
production orders to other centres.
IMPORTANCE OF PRODUCTION 12
MANAGEMENT
Production management assists a company in churning raw material into end products within
a specified time period. It subsumes decision-making so that the finished goods and services
can be achieved in a quantitative way. Production management is a set of general principles
incorporated in the production process.

The following points explain the importance of production management:

• Common living place
• Employment generation
• Enhanced quality and reduced cost
• Spread effect
• Utility creation
• Boost in economy
OBJECTIVES OF PRODUCTION 13
MANAGEMENT
To make sure that all resources are allocated properly in operations, it is essential to
record, monitor and review every aspect of production performance. A crucial task in
this procedure is to identify appropriate measures of performance that relate to the
factors that are relevant to organisational competitiveness.

The scope of production management can be explained using the five basic
objectives, which allow organisations to measure their production performance. The
production objectives are quality, dependability, speed, cost and flexibility.
Furthermore, each of these objectives is measured based on the terms of significance
and measurement to the organisational competitiveness.
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MEANING – OPERATIONS MANAGEMENT
Operations management is a business area that implements practices ensuring the
conversion of inputs into goods and services with maximum efficiency. The goal is
to increase an organization’s income by improving its operations and maximizing the
use of existing resources. It also includes the provision and delivery of excellent
customer service.

Management of the operations department is essential to achieve optimal utilization

of resources. It ensures that goods or services of appropriate specification and cost
are produced within the stipulated time. As a result, an organization will achieve
good rates of profit and adequate levels of customer satisfaction when all these
coincide.
OBJECTIVE – OPERATIONS 15
MANAGEMENT
• Operations management in business involves converting input into efficient
outputs to achieve desired results. In other words, it aims to improve profits by
achieving customer satisfaction.
• This is done by fulfilling customer requirements and realizing the organization’s
management objectives.
• Operations management is, therefore, a vast field and can involve product and
process designs, plant layouts, material management, maintenance, quality
control, production plan, and control, etc.
• The operating system is the central point of any business operations management.
It is the design to work out resource utilization processes and operations.
• It converts the available inputs such as capital, labor, raw materials, and
information to create desired outputs effectively.
OBJECTIVE – OPERATIONS 16
MANAGEMENT
• The creation of goods or services involves many transformational processes such
as storage, transportation, cutting, etc.
• As the name suggests, a typical operations manager manages the overall
operations process.
• Accordingly, these managers shall oversee activities related to designing products
and processes, planning on achieving targets, controlling resources and activities,
and productivity improvement.
• They also have to interact indirectly with managers of other functional areas of
the organization such as production, marketing, finance, accounting human
resources, etc.
• Therefore, the role of an operations manager gives us the importance of
operations management.
OBJECTIVE – OPERATIONS 17
MANAGEMENT
FUNCTIONS – OPERATIONS 18
MANAGEMENT
FUNCTIONS – OPERATIONS 19
MANAGEMENT
1 – Forecasting
• Forecasting is an attempt to predict the future with the help of systematic analysis
and scientific methods.
• It is an essential part of operations management as it assesses the controllable and
uncontrollable factors and makes predictions for the organization.
• It may also involve provisions or suggestions for dealing with those predicted
scenarios.
2 – Capacity Planning
• Capacity measures the rate of the production capability of a facility.
• One of the most important operations management responsibilities is finding out the
kind and quantity of capacity needed and the time by which it needs to be produced.
• It involves assessing the facility’s current capacity, forecasting future needs,
identifying and analyzing possible resources to fulfill those needs, evaluating
alternative resources, and selecting the best among them.
FUNCTIONS – OPERATIONS 20
MANAGEMENT
3 – Location Facility
• It is important to determine a location facility of the plant that can ensure
maximum operating efficiency.
• For example, a coal plant is best located near a water source with the availability
of coal nearby; it provides efficiency, cost control, and profit
• But the selection of facilities is based on the easy and regular supply of labor,
resources, and raw materials.
• Factors like nearness to the market, power availability, transportation facilities,
climate suitability, and government rules are also considered.
• An ideal location contributes to an organization’s smooth working, the opposite
of which will hinder its growth.
FUNCTIONS – OPERATIONS 21
MANAGEMENT
4 – Layout
• A good plant layout plan for placement of machines, pieces of equipment, utilities,
service areas, storage areas, and arrangement of other facilities.
• In addition, it ensures a safe workspace, ease of maintenance, fulfillment of
requirements, and long-run efficiency in its operations with minimal investment.
5 – Integration of Activities
• Successful execution of an organization’s operations includes cordial and efficient
workflow between various departments such as sales, production, and accounting.
• The Operations management system ensures the allocation of financial resources
for purchases from the accounting department, receiving products from the
production department, making the product reach the sales department, and
effective delivery of goods or services from the customer service department.
• In addition, it ensures there is uninterrupted functioning of the organization
through back-and-forth communications, continuous coordination, and feedback.