Introduction to Production and Operations Management
We typically use the term production to denote the process of converting or
transforming resources - materials, machines, employees, time - into goods or
services. The goods and services might be automobiles, computers, health care, or
financial transactions.
The term operations broadly describe the set of all activities associated with the
production of goods and services. Operations involves not only production but also
transportation, whereby the location of something or someone is changed; supply,
whereby the ownership or possession of goods is changed: and service, the principal
characteristic of which is the treatment or accommodation of those activities of
something or someone.
Managing the resources needed to produce goods needed to produce goods and services
is called production/operations management (P/OM), or simply operations management.
Production/operations management is the process, which combines and transforms
various resources used in the production/operations subsystem of the organization
into value added product/services in a controlled manner as per the policies of the
organization.
Scope of Production/Operations Management
Production and operations management activities are not confined to the
manufacturing of products. It is true that the production activities carried on in
manufacturing companies form the backbone of our consumer society through the
production of a broad array of products. But people also perform production
activities in organizations which provide services. In fact, in recent years, more
and more effort has been directed toward the management of productive effort in the
service sector of our economy.
In general, however, production and operations management deals with the supply
side of the work of organizations, and marketing deals with the demand side. Other
functional areas of responsibility include finance, which is concerned supplying
enough equity and debt capital at the right time to pay for labor materials, and
facilities.
Why Study About Production and Operations Management
1. P/OM deals with the supply side of organizations.
All organizations exist to meet demand through their production functions. With a
basic understanding of what it takes to build and operate production system: a.
Marketing managers can better serve their markets and manage their sales forces if
they understand the capabilities and limitations of their demand- supply system.
2. Asset concentration is controlled by P/OM.
Approximately 70% of the assets in manufacturing and processing organizations are
in inventories, plant and equipment which are directly or indirectly under the
control of production or operations managers, materials managers, maintenance
managers and production supervisors, all members of the P/OM organization. In
service organizations, direct labor often accounts for the majority of operating
expenses. Scheduling of this resource is the responsibility of operations.
3. Career opportunities in P/OM and purchasing are excellent for creative
individuals.
People well educated and experienced in purchasing procedures, contract
negotiation, legal aspects of purchasing, value and make-or-buy analysis,
international trade, and inventory control, as well as purchasing's interfaces with
production, marketing, engineering, and finance will find that they are in high
demand by business and public organizations.
4. Understanding of P/OM and strategic business decision making is necessary since
the product and the service strategies have a large impact on the design of the
production process.
There are six basic strategies which have to be addressed to for the manufacturing
company to determine it is in the right track.
a. Positioning of the production system. The production system must be flexible in
such a way that it can adapt to changing customer's demands, tastes, fads
b. Capacity and location factors
C. Product and process technology. The technology should be based on applicability,
appropriateness, producibility and low cost.
d. Work force and job design
e. Strategic implications of operating decisions to reduce costs and control
quality
f. Strategies regarding supplies
5. P/OM and social responsibility
High level production and operations managers are in a dual position. They try to
serve their employers, who are a company's stockholders or legislative bodies. At
the same time, they operate in a social system and have certain obligations to
society. Many of these obligations to society are written into laws, but others in
the production area, such as trying to maintain stable employment, to pay fair
wages, produce quality and safe products.
6. P/OM and our "Productivity Crisis"
Productivity is a measure of the effectiveness with which an organization uses its
resources in transforming inputs to outputs; in other words, the ratio of the
output of a production system to the input.
