An operation may be defined as the process of changing inputs into outputs thereby adding value to some entity. Right quality, right quantity, right time and right price are the four basic requirements of the customers and as such they determine the extent of customer satisfaction. And if these can be provided at a minimum cost, then the value of goods produced or services rendered increases.
Operations management is concerned with managing the resources that directly produce the organisation service and products. The resources are generally consist of people, material, technology and information but may go wider than this. These resources are brought together by a series of processes so that they are utilized to deliver the primary service or product of the organization. Thus operation management is concerned with managing inputs (resources) through transformation processes to deliver outputs (service or products). The objectives of production management are “to produce goods and services of the right quality, in the right quantities, according to the time schedule and a minimum cost”.
Objectives of production management may be amplified as under:
- Producing the right kind of goods and services that satisfy customers’ needs (effectiveness objective).
- Maximizing output of goods and services with minimum resource inputs (efficiency objective).
- Ensuring that goods and services produced conform to pre-set quality specifications (quality objective).
- Minimizing throughput-time- the time that elapses in the conversion process- by reducing delays, waiting time and idle time (lead time objective).
- Maximizing utilization of manpower, machines, etc. (Capacity utilization objective).
- Minimizing cost of producing goods or rendering a service (Cost objective).
Key Elements of Operations Management
Product selection and design: The right kind of products and good designs of the products are crucial for the success of an organizing. A wrong selection of the product and/or poor design of the products can render the company’s operation ineffective and non-competitive. Products/services, therefore, must be chosen after detailed evaluation of the product/services alternatives in conformity with the organization’s objectives. Techniques like value engineering may be employed in creating alternate designs, which are free from unnecessary features and meet the intended functions at the lowest cost.
Process selection and planning: Selection of the optimal “conversion system” is as important as choice of products/services and their design. Process selection decisions include decisions concerning choice of technology, equipment, machines, material handling systems, mechanization and automation. Process planning involves detailing of processes if resource conversion required and their sequence.
Facilities (Plant) location: Plant location decisions are strategic decisions and once plant is set up at a location, it is comparatively immobile and can be shifted later only at a considerable cost and interruption of production. Although problem of location choice does not fall within preview the production function and it occurs infrequently, yet it is of crucial importance because of its major effect on the performance of every department including production. Therefore, it is important to choose the right location, which will minimize total “delivered customer” cost (Production and distribution cost). Locational decisions involve evaluation of locational alternatives against multiplicity of relevant factors considering their relative importance to the organization and selecting those, which are operationally advantageous to the organization.
Facilities (Plant) layout and materials handling: Plant layout is concerned with relative location of one department (Work center) with another in order to facilitate material flow and processing of a product in the most efficient manner through the shortest possible time. A good layout reduces material handling cost, eliminates delays and congestion, improves co-ordination, provide good housekeeping etc. while a poor layout results in congestion, waste, frustration, inefficiency and loss of profit.
Capacity Planning: Capacity planning concerns determination and acquisition of productive resource to ensure that their availability matches the demand. Capacity decisions have a direct influence on performance of production system in respect of both resource productivity and customer service (i.e. delivery performance). Excess capacity results in low resource productivity while inadequate capacity leads to poor customer service. Capacity planning decisions can be short-term decisions. Long-term capacity planning decisions concern expansion/contraction of major facilities required in the conversion process, economics of multiple shift operation, development of vendors for major components etc. Short-term capacity planning decisions concern issues like overtime working, sub-contracting, shift adjustments etc. Break-even analysis is a valuable tool for capacity planning.
Production Planning and Control (PPC): Production planning is the system for specifying the production procedure to obtain the desired output in a given time at optimum cost in conformance with specified standard of quality, and control is essential to ensure that manufacturing takes place in the manner stated in the plan.
Inventory control: Inventory control deals with determination of optimal inventory levels of raw materials, components, parts, tools; finished goods, spares and supplies to ensure their availability with minimum capital lock up. Material requirement planning (MRP) and just in time (JIT) are the latest techniques that can help the firm to reduce inventory.
Quality assurance and control: Quality is an important aspect of production system and it must ensure that services and products produced by the company conform to the declared quality standards at the minimum cost. A total quality assurance system includes such aspects as setting standards of quality, inspection of purchased and sub-contracted parts, control of quality during manufacture and inspection of finished product including performance testing etc.
Work-study and job design: Work-study, also called time and motion study, is concerned with improvement of productivity in the existing jobs and the maximization of productivity in the design of new jobs. Two principal component of work-study are: Method study and Work measurement.
Method study has been defined as the systematic recording and critical examination of the existing and proposed ways of doing work, as a means of developing and applying easier and more effective methods and reducing costs. Method study when applied to production methods yields one or more of the following benefits:
- Improved work environment
- Improved facility layout
- Better utilization of facilities
- Greater safety
- Lesser materials handling
- Smooth production flow
- Lower work-in-process
- Higher earnings for the workmen
Maintenance and replacement: Maintenance and replacement involve selection of optimal maintenance (preventive and/or breakdown) policy to ensure higher equipment availability at minimum maintenance and repair cost. Preventive maintenance, which includes preventive inspection, planned lubrication, periodic cleaning and upkeep, planned replacement of parts, condition monitoring of the equipment and machines, etc. is most appropriate for critical machines.
Cost reduction and cost control: Effective production management must ensure minimum cost of production and in this context cost reduction and cost control acquires significant importance. There are large number of tools and techniques available that can help to make a heavy dent on the production cost.