Notes on Production/Operations Management, Manufacturing Methods, and Plant Location

1.1 INTRODUCTION

  • Production/Operations Management broadens beyond the factory view to include goods and services across sectors.
  • Factory definition includes premises where work is done; broader concept: production is the process by which goods and services are produced.
  • Essential feature: unite people, machines and materials to satisfy wants; both manufacturing and service sectors fall under Operations Management.

1.2 OPERATION CONCEPT OF PRODUCTION

  • "Operations" covers both manufacturing and service organizations; they add value through purposeful activities.
  • Definition: an operation is the process of changing inputs into outputs, thereby adding value via:
    • (i) Alteration in form/state (physical in production, or psychological in services)
    • (ii) Transportation of the entity
    • (iii) Storage of the entity
    • (iv) Inspection to verify properties and inform decisions
  • Since these activities add value, both manufacturing and service sectors are included in Operations/Production Management.

1.3 PRODUCTION AS THE CONVERSION PROCESS

  • All organizations can be viewed as conversion systems: inputs (raw materials, labor, energy, capital, information) are transformed into outputs (goods/services).
  • Conceptual model (inputs → conversion process → outputs) with feedback: actual vs planned.
  • Example mappings:
    • Manufacturing: inputs = iron ore, coke, labor, capital; outputs = steel sections.
    • Services: inputs = customers; outputs = serviced customers.
    • Hospitals: inputs = patients; outputs = cured patients.
    • Public transport: inputs = commuters; outputs = serviced/transported commuters.

1.4 PRODUCTIVITY OF CONVERSION PROCESS

  • Effectiveness of production management = efficiency of converting inputs to outputs.
  • Productivity = ext{Output} / ext{Input}
  • Higher productivity implies a more efficient production system.
  • Waste reduction = key to improving productivity (unnecessary/defective output, delays, etc.).
  • Common wastes in conversion:
    • Idling of resources (inventory, idle machines, waiting orders, patient queues)
    • Production of defective goods/services
    • Higher conversion costs (inefficient methods, poor tools, bad machines, wrong materials, poor training, weak supervision)
    • Longer throughput time due to waiting or queueing

1.5 OBJECTIVES OF PRODUCTION MANAGEMENT

  • Deliver right quality, right quantity, right time, right price at minimum cost.
  • Expanded objectives:
    • Right kind of goods/services to satisfy customer needs (effectiveness)
    • Maximise output with minimum resource inputs (efficiency)
    • Conformity to predefined quality specifications (quality)
    • Minimise throughput time (lead time)
    • Maximise utilisation of manpower and machines (capacity utilisation)
    • Minimise cost of producing goods or services (cost)

1.6 COMPONENTS OF PRODUCTION FUNCTION

  • Production management vs production engineering: management focuses on planning, organizing, controlling; engineering focuses on design of equipment.
  • Twelve components of the production function:
    • 1) Product selection and design
    • 2) Process selection and planning
    • 3) Facilities (plant) location
    • 4) Facilities layout and materials handling
    • 5) Capacity planning
    • 6) Forecasting
    • 7) Production Planning and Control (PPC)
    • 8) Inventory control
    • 9) Quality assurance and control
    • 10) Work study and job design
    • 11) Maintenance and replacement
    • 12) Cost reduction and cost control
  • Typical organization structure (engineering/production context):
    • Managing Director → GM (Finance, Quality Assurance, Manufacturing, Marketing) → GM (Personnel) → Maintenance, Materials, PPC, Industrial Engg.; Foremen for various shops.

1.7 THE RESPONSIBILITIES OF A PRODUCTION MANAGER

  • Key duties:
    • i) Forecast the requirement of factors of production to meet targets
    • ii) Utilize factors efficiently
    • iii) Reduce quality costs via analysis of non-conformances and corrective actions
    • iv) Reduce material handling costs via efficient systems and layouts
    • v) Devise efficient manufacturing methods using method study and economic principles
    • vi) Improve labour productivity through training and performance standards
    • vii) Minimise throughput time and WIP via planning and execution
    • viii) Build team spirit and motivate through involvement and incentives

1.8 PRODUCTION AS A CO-ORDINATION FUNCTION

  • Production coordinates with:
    • Marketing: forecasts, capacities, balance of demand and production capacity
    • Finance: profitability and investment implications
    • Personnel: skills, recruitment, and training needs
  • Interaction with Purchase for procurement based on specifications and capital approvals.

1.9 SUMMARY

  • Production = process of producing goods/services across manufacturing and services.
  • Effectiveness = efficiency in converting inputs to outputs.
  • Main objectives: right quality, quantity, time, cost.
  • Production management = planning, organizing, controlling; main components listed in 1.6.
  • Organization structure and manager responsibilities tailored to firm needs.

1.10 KEYWORDS

  • Factory, Production, Operations, Production Management, Productivity
  • Productivity = rac{ ext{Output}}{ ext{Input}}

2.1 INTRODUCTION

  • Manufacturing method = an independent group of sub-systems performing distinct functions; they interact with internal (engineering, marketing, personnel, accounts) and external (customers, competitors, suppliers, unions) environments.
  • Manufacturing method choices are strategic and influence cost and quality; changes later can be costly.

2.2 FACTORS INFLUENCING CHOICE OF MANUFACTURING METHOD

  • No single best method; decisions must meet two basics: meet product specifications and be cost-effective.
  • Key factors:
    • 1) Volume/Variety: High variety requires skilled labor and general-purpose machines; high volume favors automation and mass production.
    • 2) Capacity of the plant: Continuous processes have high fixed costs; continuous is economical at high volumes; intermittent cheaper at low volumes.
    • 3) Flexibility: Ability to satisfy varied customer requirements; more variety often reduces process standardization.
    • 4) Lead time: Competitive delivery demands; batch/mass may be used to stock for faster delivery.
    • 5) Efficiency: Mass production offers high efficiency; depends on volume and variety.
    • 6) Environment: New technologies and market changes push process adaptation.

2.3 CLASSIFICATION OF MANUFACTURING METHODS

  • Five basic groups:
    1) Project production
    2) Jobbing production
    3) Batch production
    4) Mass and flow production
    5) Process production
  • Brief characteristics:
    • Project: Unique, complex, output immobile, fixed-position layout, definite start/end, high cost overruns, multi-agency coordination.
    • Jobbing: One/off or few units, high flexibility, materials purchased on order, decentralized planning, small batch scheduling, large WIP, limited PPC.
    • Batch: Limited quantity per product, short runs, skilled trades, general-purpose machines, process-layout by function, significant planning/control needs, large WIP, queues.
    • Mass/Flow: Standard products, continuous or discrete lines, special-purpose machines, product/layout by sequence, low WIP, short cycles, limited flexibility, easy supervision.
    • Process: Single product, highly automated, near-zero cycle time, highly skilled supervision, negligible WIP, limited PPC/functions.

2.4 SELECTION OF THE MANUFACTURING METHODS

  • Most firms use hybrids (e.g., batch components with flow final assembly).
  • Product life cycle impact:
    • Introduction: project form, low volume, high fixed cost, labour-intensive
    • Growth: batch production
    • Maturity: mass/flow with high fixed costs but lower cost per unit
  • Break-even analysis aids selection of the optimal method.

2.5 SUMMARY

  • Extreme forms: Project (one-off) vs. Continuous (infinite run).
  • Intermediate forms: Jobbing, Batch, Mass, Process.
  • Influencing factors: volume, variety, capacity, flexibility, lead time, efficiency, environment.
  • Hybrid usage and lifecycle considerations guide manufacturing method selection.

3.1 INTRODUCTION

  • Plant location decisions are strategic and long-term for both manufacturing and service operations (e.g., fertilizer, steel, banks, hospitals).
  • Poor location increases cost, transportation, marketing challenges, and may constrain growth; relocation is expensive.

3.2 NEED FOR LOCATION DECISIONS

  • Occurs due to: new social/political/economic conditions; product developments outgrowing current plant; policy changes promoting decentralization.

3.3 FACTORS GOVERNING PLANT LOCATION

  • Location studies in three phases:
    • General territory selection
    • Community selection
    • Site selection
  • Three factor areas:
    1) Regional factors: proximity to markets, proximity to raw materials, utilities, transport, climate, laws.
    2) Community factors: availability of labor, attitudes, social structure, service facilities.
    3) Site factors: land availability/cost, land suitability, etc.
  • Proximity to market is prioritized due to selling costs rising with distance; advantages include easier liaison with dealers, reduced middleman costs, faster settlement of accounts.
  • Proximity to sources of raw materials is crucial since raw materials can be 50–60% of total cost; lead times affect inventory costs.
  • Raw materials classification for location decisions:
    • Gross materials: lose weight in transformation (e.g., iron ore, coal, limestone, sugarcane); locate near sources.
    • Pure materials: add weight to finished product (e.g., bakery products, ice); may be located away from material sources depending on other factors.