Logistics and Supply Chain

Management
Dr P.Arunagiri
B.E, M.Tech Mfg & Management, PhD Lean Management

www.gibs.edu.in
 The Role of Distribution in the Supply Chain
Distribution plays a critical role in the supply chain by ensuring the efficient
movement of goods from manufacturers to end consumers. This process
involves various activities that directly impact costs, customer experience,
and overall profitability. Below is a comprehensive overview of the key
aspects related to distribution in the supply chain.
1. Definition of Distribution
Distribution refers to the steps taken to move and store products from the
supplier stage to the customer stage within a supply chain. It encompasses
all activities related to transporting finished goods from manufacturers or
suppliers to wholesalers, retailers, and ultimately, the end users

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 Importance of Distribution
Cost Management: Effective distribution strategies help minimize costs
associated with transportation, warehousing, and inventory
management. This is crucial for maintaining competitive pricing and
maximizing profit margins.
Customer Experience: Distribution directly affects customer satisfaction
through factors such as response time, product availability, and order
accuracy. A well-structured distribution network enhances service
quality, leading to improved customer loyalty.
Market Reach: A robust distribution strategy allows businesses to
expand their market presence by efficiently delivering products to
diverse geographical locations

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 Key Components of Distribution Management
Warehousing: Involves storing products until they are needed
by retailers or customers. Proper inventory management
ensures that stock levels are optimized to meet demand without
incurring excess costs.
Transportation: The movement of goods between different
locations is a vital aspect of distribution. Choosing the right
transportation methods can significantly affect delivery times
and costs.
Order Fulfillment: This includes processing customer orders
accurately and efficiently, which is essential for maintaining high
levels of customer satisfaction
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 Factors Influencing Network Design: Value of Information
The value of information is a critical factor influencing
supply chain network design.
It encompasses how data and insights are utilized to
optimize decision-making, enhance operational efficiency,
and improve responsiveness to market dynamics.
Below are key aspects regarding the role of information in
supply chain network design:

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 1. Data-Driven Decision Making
Market Demand Insights: Accurate data on current and future customer demand
enables businesses to forecast inventory needs, adjust production schedules, and
optimize distribution strategies. This helps in aligning supply chain capabilities with
market requirements.
Supplier Performance Metrics: Information regarding supplier reliability, lead times,
and costs can influence decisions about supplier selection and management,
ensuring that the network is resilient and cost-effective.
2. Enhanced Visibility
Real-Time Tracking: Implementing technologies such as IoT and RFID provides
real-time visibility into inventory levels and shipment status. This transparency
allows for better coordination among supply chain partners and quicker responses
to disruptions.
Predictive Analytics: Utilizing advanced analytics to predict trends and potential
disruptions helps organizations proactively adjust their network designs to mitigate
risks associated with demand fluctuations or supply shortages.

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 3. Cost Optimization
Cost Analysis: Information about logistics costs, including transportation and warehousing
expenses, enables businesses to identify cost-saving opportunities within their supply chain
network. This includes optimizing routes, consolidating shipments, or adjusting facility locations.
Performance Benchmarking: By comparing operational metrics against industry standards or
competitors, companies can identify areas for improvement and implement best practices that
enhance efficiency and reduce costs.
4. Risk Management
Scenario Planning: Access to comprehensive data allows companies to model various scenarios
(e.g., changes in demand, supplier failures) and develop contingency plans that enhance the
resilience of their supply chain networks.
Regulatory Compliance: Staying informed about regulatory changes and compliance requirements in
different regions helps companies design networks that adhere to legal standards while minimizing
risks associated with non-compliance.
5. Strategic Collaboration
Information Sharing: Collaborating with suppliers and customers through shared platforms enhances
communication and fosters trust. This collaboration can lead to joint planning efforts that align
inventory levels with actual market demand.
Technology Integration: Leveraging technology for information sharing across the supply chain
improves coordination, reduces lead times, and enhances overall service levels

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 Design Options for a Distribution Network
Designing an effective distribution network is crucial for optimizing
supply chain efficiency. There are six primary design options, each with
distinct characteristics, advantages, and challenges. These options are
influenced by two key decisions: whether products will be delivered to the
customer or picked up from a designated location, and whether products
will flow through an intermediary.
1. Manufacturer Storage with Direct Shipping.
In this model, products are shipped directly from the manufacturer to the
customer, bypassing any retailers. This approach is often referred to
as drop shipping. It allows manufacturers to maintain lower inventory
levels but may lead to higher shipping costs if sourcing from multiple
locations. It is most effective for products with low demand or when the
manufacturer can build-to-order.

2. Manufacturer Storage with Direct Shipping and In-Transit Merge

This option combines elements of direct shipping and in-transit merging.
Products from various manufacturers are shipped to a central location
where they are consolidated and repackaged before being sent to the
customer. This method reduces the number of shipments but requires
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careful coordination among suppliers to manage logistics effectively. It is
 3. Distributor Storage with Carrier Delivery
In this model, inventory is held by distributors rather than manufacturers. Distributors
stock products in warehouses and use package carriers to deliver them to
customers. This approach allows for faster response times and better inventory
management but increases the complexity of logistics operations. Companies like
Amazon utilize this model effectively.

4. Distributor Storage with Last Mile Delivery

Similar to the previous option, this design involves distributors holding inventory;
however, it emphasizes efficient last-mile delivery strategies. Products are delivered
to multiple customers in a single route (often referred to as a milk run), which helps
reduce transportation costs by optimizing delivery routes

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 5. Manufacturer/Distributor Storage with Customer Pickup
In this scenario, customers place orders that are fulfilled either by
manufacturers or distributors, who then send the products to designated
pickup points. Customers retrieve their orders from these locations, which
can be retail stores or specific pickup sites. This method reduces delivery
costs but requires customers to travel to collect their purchases23.
6. Retail Storage with Customer Pickup
This traditional model involves customers visiting retail stores to purchase
products directly from inventory held at those locations. While
straightforward, it limits the reach and flexibility of distribution compared to
other models that leverage online ordering and delivery

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 Overview of Facility Location Models
Facility location models are essential tools used
in operations research and supply chain
management to determine the optimal placement
of facilities.
These models help organizations minimize costs,
enhance service delivery, and improve
operational efficiency.
Below are some of the key quantitative models
used in facility location analysis.
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Types of Facility Location Models
1. Center of Gravity Model
This model identifies a geographic center point that
minimizes transportation costs for distributing products to
customers. It takes into account customer locations, their
demand, and transportation costs to find the optimal facility
site.
.2. Single Facility Location Model
The objective of this model is to find a single facility location
that minimizes total transportation costs while satisfying
customer demand. It considers the locations of customers,
their demand levels, and associated transportation costs.
.3. Multiple Facility Location Model
When multiple facilities are needed, this model determines
the best locations for these facilities to minimize
transportation costs while meeting customer demands across
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 4. P-Median Model
This model seeks to find optimal locations for P
P facilities from a set of potential sites, minimizing the total
transportation costs from these facilities to customers while considering
demand and capacity constraints.
5. Maximal Covering Location Model
Designed to maximize coverage of customers or service areas, this
model identifies facility locations that can cover as many customers as
possible within given capacity limits.
6. Competitive Facility Location Model
In competitive environments, this model incorporates competitor
locations and market share dynamics to optimize facility placement,
ensuring that organizations can effectively compete for customers.

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 7. Network Facility Location Model
This model is suited for complex networks involving multiple facilities and interconnecting
routes. It optimizes facility locations by considering the flow of goods or services between
them.
Capacity Allocation Models
Capacity allocation models are crucial for determining how much capacity should be
assigned to each facility in a network. These models consider various factors,
including regional demand, tariffs, and economies of scale. The objective is to
maximize profit while meeting customer needs over a specified time horizon, typically
spanning several years.
Capacitated Plant Location Model: This model integrates the location of facilities with
their capacity constraints. It requires inputs such as the number of factory locations,
market demands, and production capacities to optimize the allocation of resources
effectively.
Multi-Period Capacitated Maximal-Covering Location-Allocation Model: This specific
model focuses on healthcare services, where it addresses both strategic (long-term)
decisions regarding facility locations and operational (short-term) decisions related
to service allocation over multiple time periods. It emphasizes equity in access and
inter-service referrals.
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Network Optimization Models
Network optimization models are employed to design efficient supply chain
networks by determining optimal facility locations and capacity allocations.
They help in managing the flow of goods and services through various
stages of production and distribution.
Single-Stage vs. Multi-Stage Models: Single-stage models focus on
immediate distribution systems, while multi-stage models consider the flow
of goods across several hierarchical levels. The choice between these
models depends on the complexity of the supply chain being analyzed3.
Demand Allocation Models: These models help managers decide how to
allocate demand among production facilities based on changing market
conditions. They require inputs such as demand from markets and
production capacities of factories

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 Gravity Location Models
Gravity location models are used to determine optimal facility locations
based on the principle that the attractiveness of a location is proportional
to the demand it serves and inversely proportional to the distance from
that location.
Center of Gravity Method: This method identifies a central point that
minimizes transportation costs by considering customer locations and
their respective demands. It is particularly useful for businesses looking to
reduce logistics costs while maximizing service coverage2.
Applications in Healthcare: In healthcare settings, gravity models can be
adapted to ensure that facilities are located strategically to provide optimal
coverage for patient populations, balancing accessibility with operational
efficiency

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 Importance of SCM
Supply Chain Management (SCM) plays a vital role in modern business operations,
influencing efficiency, cost management, customer satisfaction, and competitive
advantage.
Here are the key reasons why SCM is important:
1. Efficiency and Cost Reduction
SCM optimizes the flow of goods, information, and finances across the supply chain, which
helps organizations reduce waste and lower operational costs. By streamlining processes
and eliminating redundancies, companies can enhance resource utilization and improve
overall productivity.
2. Improved Quality Control
Effective components of the supply chain adhere to high standards of quality. This
oversight minimizes defects and SCM ensures that all enhances product reliability,
ultimately leading to increased customer satisfaction.
3. Enhanced Customer Service
With efficient supply chain practices, companies can respond more swiftly to customer
demands. This responsiveness ensures timely delivery of products and improves service
quality, fostering greater customer loyalty and satisfaction.
.
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4. Risk Mitigation
SCM enables organizations to identify potential risks within the supply chain and implement
strategies to mitigate them. This proactive approach helps prevent disruptions caused by
factors such as supplier failures or logistical challenges

5. Competitive Advantage
Organizations with robust SCM capabilities can deliver products faster and at lower costs
than their competitors. This efficiency not only enhances market position but also allows for
better pricing strategies and improved market share.

6. Sustainability
SCM facilitates the implementation of environmentally friendly practices throughout the
supply chain. By optimizing logistics and reducing waste, companies can lower their carbon
footprint and contribute to sustainability goals.

7. Integration Across Functions

SCM integrates various business functions such as procurement, manufacturing, logistics,
and sales. This holistic approach ensures that all departments work collaboratively towards
common objectives, improving overall organizational effectiveness.
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 Supply chain frameworks provide
structured approaches to managing and
optimizing supply chain processes.
These frameworks help organizations
streamline operations, enhance
efficiency, and improve overall
performance.
Here are some of the most recognized
supply chain frameworks:
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 1. SCOR Model (Supply Chain Operations Reference)
• The SCOR model is one of the most widely used frameworks for supply chain management.
Developed by the Supply Chain Council, it categorizes supply chain processes into five main
components:
• Plan: Involves creating strategies to meet demand and manage resources effectively.
• Source: Focuses on procuring goods and services to fulfill demand.
• Make: Covers the processes of transforming raw materials into finished products.
• Deliver: Encompasses logistics and distribution activities to deliver products to customers.
• Return: Manages the return of products from customers back through the supply chain.
The SCOR model helps organizations evaluate their supply chain performance and identify areas for
improvement by providing standardized definitions and metrics across industries.

.2. GSCF Framework (Global Supply Chain Forum)

• The GSCF framework emphasizes the integration of various business functions within the supply
chain. It identifies eight key processes: Customer Relationship Management
• Customer Service Management
• Supplier Relationship Management
• Demand Management
• Order Fulfillment
• Manufacturing Flow Management
• Product Development and Commercialization
• Return Management
This framework promotes collaboration across departments, ensuring that all aspects of the business36
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.3.SC Framework (Model for Supply Chain)
• The framework focuses on aligning business strategies with supply chain execution. It provides a
blueprint of key activities necessary for effective management, emphasizing four main capabilities:
• Align Strategy
• Networks
• Processes
• Resources
This model facilitates communication among supply chain professionals and aids in translating strategic
objectives into actionable plans
4. Holistic SCM Framework
This framework encompasses all planning and execution processes from demand management to
customer delivery. It emphasizes end-to-end visibility in the supply chain, enabling organizations to make
informed decisions based on real-time data regarding inventory levels, supplier performance, and
customer demands
5.Importance of Supply Chain Frameworks
• Supply chain frameworks are crucial for several reasons:Standardization: They provide common
terminology and processes that facilitate communication among stakeholders.
• Efficiency Improvement: By outlining best practices, frameworks help organizations streamline
operations and reduce costs.
• Performance Measurement: Frameworks enable businesses to assess their supply chain effectiveness
through established metrics.
• Risk Management: They assist in identifying potential risks and developing strategies to mitigate them.

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 Effective supply chain management (SCM) involves a structured
approach to decision-making, which can be categorized into
three main phases: Supply Chain Design/Strategy, Supply Chain
Planning, and Supply Chain Operations. Each phase plays a
critical role in optimizing the flow of goods, information, and
finances within
Supply Chain the supply chain.
Design/Strategy Phase
• In this initial phase, organizations define the overall framework
of their supply chain. Key decisions include: Configuration of
the Supply Chain: Determining the layout and structure,
including the selection of suppliers and distribution centers.
• Resource Allocation: Deciding how resources will be allocated
across various functions such as production and warehousing.
• Long-term Methodologies: Establishing production methods
and transportation modes that align with future business
goals.
These decisions are typically made for the long term and require
a comprehensive understanding of market conditions and
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 Supply Chain Planning Phase
The second phase focuses on translating strategic decisions into actionable plans. It includes:
Flexibility Incorporation: Preparing to adapt to changing market conditions to optimize
performance.
Inventory Decisions: Determining optimal inventory levels to balance costs while meeting
customer demands.
Production Scheduling: Planning for timely production runs based on demand forecasts.
Benchmarking: Comparing operations against competitors to identify best practices.

Supply Chain Operations Phase

• The final phase involves day-to-day management of supply
chain activities. Key aspects include:
• Order Fulfillment: Managing the processing of customer
orders efficiently.
• Daily Production Planning: Making immediate decisions
regarding production schedules and distribution logistics.
• Transportation Coordination: Setting delivery schedules and
selecting transportation modes for product distribution.

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 Understanding Strategic Fit
 Strategic fit refers to the consistency between a
company's competitive strategy and its supply chain
strategy. It is achieved when the supply chain is
designed to meet customer demands while
managing uncertainties effectively. This involves:
 Aligning customer priorities with supply chain
capabilities.
 Ensuring that all functional strategies within the
organization support this alignment.
 Recognizing that any misalignment can lead to
inefficiencies, increased costs, and ultimately a
failure to meet business objectives
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 Key Steps to Achieve Strategic Fit
Understanding Customer Requirements and Uncertainties
Identify customer needs, which may vary by segment,
including:
 Quantity of products needed.
 Response times acceptable to customers.
 Variety of products required.
 Service levels expected.
 Pricing considerations.
 Desired innovation rates

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 1.Assessing Supply Chain Capabilities Evaluate the
responsiveness and efficiency of the supply chain to
meet identified customer needs.
This includes analyzing:
 Current operational capabilities.
 Flexibility in production processes.
 Inventory management strategies (e.g., Just-In-Time
systems).
 Logistics and distribution efficiency.
 Aligning Strategies: Develop a cohesive strategy
integrating insights from customer understanding and
supply chain capabilities.
 This involves Ensuring all organizational functions are 43
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 Importance of Strategic Fit
Achieving strategic fit is crucial for several reasons:
 Enhanced Efficiency: A well-aligned supply chain
reduces waste and optimizes resource use, lowering
operational costs.
 Increased Responsiveness: Companies can better
adapt to market changes and customer demands,
improving service levels.
 Competitive Advantage: Organizations that
successfully align their supply chains with their
competitive strategies can differentiate themselves
in the market, leading to increased customer loyalty
and profitability.
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 Key Challenges to Achieving Strategic Fit

1. Increasing Product Variety and Shrinking Life Cycles

The growth in product variety and the reduction in product life cycles pose
significant challenges.
2. Companies face greater uncertainty as they attempt to manage a wider
array of products that have a shorter market presence.
3. This situation complicates the alignment of supply chains, as firms must
balance responsiveness to new products with cost-efficiency for
established ones.
4. For example, Apple successfully limits its product variety while
introducing new items, allowing for a more focused supply chain strategy.

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 3. Fragmentation of Supply Chain Ownership
 The trend towards less vertical integration has resulted in fragmented
supply chains where multiple stakeholders operate independently.
 This fragmentation can hinder coordination and alignment among
supply chain members, leading to inefficiencies.
 Each entity may prioritize its own objectives over the collective goals
of the supply chain, which can diminish overall profitability.

• 2.Globalization and Increasing Uncertainty

As businesses expand globally, they encounter various and
geopolitical risks. uncertainties such as fluctuating demand across
different markets
 Companies like Honda have adapted by creating flexible
manufacturing systems that can pivot between different product lines
based on market demands, demonstrating the need for adaptable
supply chain strategies to maintain fit amidst global challenges.
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 4. Changing Technology and Business Environment
Rapid technological advancements and shifts in consumer preferences require
companies to continuously reassess their supply chain strategies.
For instance, Dell's initial success with customized PCs necessitated a shift to
retail sales as market dynamics changed towards laptops. Organizations must
remain vigilant and adaptable to maintain strategic fit in a fast-evolving
landscape.

5. Environmental Sustainability Concerns

Increasing awareness of environmental issues compels companies to integrate
sustainability into their supply chain strategies. This involves not only compliance
with regulations but also adapting practices to meet consumer expectations for
sustainable products.
Companies like Starbucks have taken proactive measures to ensure that their
sourcing practices align with environmental standards, showcasing the dual
challenge of achieving sustainability while maintaining efficiency
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 Key Steps to Maintain Strategic Fit
1. Understand Customer Requirements and Uncertainties
Organizations must first identify and analyze customer needs, including
factors such as quantity, response time, product variety, service levels,
pricing, and innovation rates. This understanding helps in anticipating
demand uncertainties that can impact supply chain operations.
2. Align Supply Chain Capabilities with Business Strategy
Once customer needs are understood, companies should evaluate their
supply chain capabilities to ensure they can respond effectively.
This involves assessing whether the supply chain is designed for efficiency
(low cost) or responsiveness (quick response) based on the nature of
customer demand.
For example, a company focusing on customization must have a flexible
supply chain that can handle diverse product configurations efficiently.

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 3. Foster Coordination Across Functions
Achieving strategic fit requires that all functional areas within the organization
—such as marketing, production, and logistics—work cohesively towards
common goals.
Each function's strategy should support the overall competitive strategy to
prevent conflicts that could undermine efficiency or responsiveness.
For instance, if marketing promotes a wide product variety but distribution
focuses solely on cost savings, it may lead to delays and customer
dissatisfaction.
4. Monitor and Adapt to Market Changes
The business environment is dynamic; thus, maintaining strategic fit is an
ongoing process.
Companies must continuously monitor market trends and customer
preferences to adapt their supply chain strategies accordingly.
This adaptability ensures that the supply chain remains aligned with evolving
business objectives and customer expectations
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 Challenges in Maintaining Strategic Fit
Increased Product Variety and Shorter Life Cycles: The growing demand
for diverse products with shorter market presence complicates the ability
to maintain efficient supply chains.
Globalization: Operating in multiple markets introduces complexities
such as varying regulations and cultural differences, which can affect
alignment.
Technological Changes: Rapid advancements necessitate constant
reevaluation of supply chain processes and capabilities.
Sustainability Pressures: Increasing emphasis on environmentally
friendly practices requires companies to integrate sustainability into their
supply chain strategies without compromising efficiency.

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 Thanks

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Production and operations
management:
 Production Management: Production management means applying
the principles of management to build an effective outline for
production.
 It involves various tasks like planning, supervising, scheduling and
enforcing adequate regulation to maximise output.
 Operations Management Operations management applies the
principles of management to manage the everyday activities of a
company.
 It guarantees the smooth and effective running of an organisation.
It involves planning, designing and supervising production as well
as other non-production activities.
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 Major distinction between production vs
operations management
Basic for Production Management Operations Management
Comparison

It revolves around the management

Definition It revolves around managing of complete overall business
all production activities. operations, including production and
post- production stages.

Broader scope because operations

Scope is limited because it management revolves around
Scope of focuses on the design, pricing, routine business activities like
Operation quality, and quantity of goods workforce management, inventory
production management, and more

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Major distinction between production vs operations
management
Ensures that the right quality of Focused on leveraging organizational
Objective products are produced at the right resources in the most effective way to
time meet customer requirements
Area of Decision- Relevant specifically for different Relevant for daily business operations in
Making aspects of production any organization
Capital Requirement Revolves around high capital Less capital requirements.
requirement initially
Technical skills, IT skills, project Leadership skills, data entry and
Skills Required management skills, communication processing skills, decision-making skills,
skills, and confidence conflict management skills, and
organizational skills
Meeting deadlines without Development of technology and
Challenges compromising quality is a major innovative business models pose new
challenge for production managers challenges to operations managers
Delivering high quality products on Utilization of resources to improve
Advantages time at low costs regular business operations and
improving business reputation
Prevalence Applicable only in organizations Applicable in all types of organizations
where products are manufactured like banks, hospitals, and more
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 Scope of Production
Management:
 The scope of production management applies to
directing, controlling, planning, and organizing
production operations.
 This is the process that helps encourage raw
material conversion into finished goods.
 The notion of production management includes a
large chain.
 Production starts with input and ends with output,
which is the finished good. The following is a list
of the scope of production management ranges.
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Scope of production
management
Location of Facilities
The selection of location is a key decision as a large investment is made in
building, land, and machinery.
Plant Layout & material handling
Plant layout refers to the physical arrangement of facilities. Material
handling refers to the moving of material from the storeroom to the
machine & from one machine to the next during the process of
manufacturing.
Product Design
Product design deals with the conversion of ideas about the product into
the reality
Process Design
It is the decision-making on the overall process route for converting the
raw material into the finished goods
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Scope of production
management
Production Planning & Controlling ( P.P.C)
PPC can be defined as the process of planning the production in advance, setting the exact
route of each item, fixing the starting & finishing dates for each item to give production
orders to shops & to follow up on the progress of products according to the orders.
Quality Control
Quality control may be defined as a system that is used to maintain a desired level of quality
in a product & service.
Material Handling
Material management is that aspect of management function that is primarily concerned
with the acquisition control & use of the needed material.
Maintenance Management
Maintenance deals with taking care of factory layout, and types of machinery. This is
essential for equipment & machinery which are a very important part of the total production
process.

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Production System:
◦ A production system transforms input to output. Meaning, it’s the
systems that manufacture a product consisting of whatever
components is needed to make it a reality.
◦ There are usually five types of ways of transforming input into output:
◦ Separating – One item enters and two or more exit. Example: A wooden plank
is cut into two.
◦ Putting together – Several items enter and one exits. Example: Wooden
planks that are glued together.
◦ Detaching – And item enters and exits shaped differently, alongside waste.
Example: A block of wood is shaped with a lathe.
◦ Forming – An item enters and exits in a different shape, without waste.
Example: A piece of metal is shaped by hammering the object.
◦ Quality adaptation – An item enters and exits with different characteristics.
Example: Surface treatment of a metal object.
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Types of production:

 Mass production
 Batch production
 Job production
 Service production
 Customised production

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Types of production:
 Mass production means there is continuous production and all
employees work continuously to produce the same items at the same
time.
 In this kind of production, the forms and size of the products remain the
same and every employee focuses on the same product.
 All resources are utilized to produce the same range. To make
production more efficient and effective, multiple tasks may be carried
out at once to get quick results.
 If one company is producing only white bread on a huge level, all
employees will focus on the white bread packets only.
 In this process, most employees will be working towards white bread
making: preparing the dough, baking, etc.
 Others will be working on packing the produced loaves of white bread at
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Types of production:
 Batch production is similar to mass production. However, the products
may be produced in batches. This means that the production may be
divided based on product size, colour, form, etc.
 We can understand this with the example of T-shirt production. The T-
shirt manufacturing company may opt for batch manufacturing, as they
would want to manufacture in different sizes from small, medium and
large, and also in different colours, say red, blue, green, and yellow.
 Hence, the team may be divided for every batch on the basis of
production of the respective size and colour.
 Job Production Job production means the products are produced in a
limited quantity and may be specific to customer preferences. Job
production is small-scale, and the task of producing an item or product
is completed before taking up other jobs.
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Production
This method of production involves rendering services via an automated process, such as
technical support for customers.
One example in current business in terms of service production is delivery services.
Consumers now have the benefit of ordering goods and services from the comfort of their
own homes and receiving them directly at their doorstep due to the sheer amount and
scope of delivery services available.
Production
◦ Customized production is a process in which goods and services are produced on the
basis of the customer's needs. This can be divided into 2 categories:
Craft Production
◦ This category of customised production involves a personal touch based on the
specific customer's demand. One of the classic examples of this is designer clothes.
Say one dress is specifically designed for a celebrity for a particular award show, on-
demand, with a choice of colour and pattern, and customised to the event's theme.
Mass-customised Production
◦ Mass-customised production is similar to craft production. However, the customised
selection is produced in mass quantity. The customisation may be on the basis of
shape, colour, pattern, product material, etc.
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Benefits of Production Management:
Advantages to consumers:
 A well planned production function will lead to good quality products, higher rate of
production and lower cost per unit. The consumers will be benefitted from prices of goods
and will get good quality products. The availability of goods will also be satisfactory and the
consumers will be saved from a lot of botheration which may otherwise be caused by
scarcity of products.
Advantages to Investors:
 An enhancement in productivity will increase profitability of the business. The investors will
get higher returns on investment if profitability is better. This will also result in appreciation
of assets values and ultimately the prices of shares will go up which will also benefit
investors.
Advantages to employees:
 Higher productivity will benefit employees in the form of better remuneration,
stability in employment, good working conditions, etc.
Better productivity to a worker will give him job satisfaction and improve his morale.

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 Benefits of Production Management:
Advantages to suppliers:
Every enterprise depends upon supplies of raw materials, finished goods,
spare parts etc. The suppliers will always like to deal with a concern having
sound financial position. The company and its suppliers will have an
enduring relationship only if both are satisfied with each other’s dealings.
Advantages to the community:
The economic and social stability of a community is linked with growth and
development of its industrial structure. An overall improvement in
productivity will improve economic welfare of the society.
Advantages to the nation:
The advantages of various segments of society improve welfare of a nation.
Better Production management will result in proper and economical use of
natural resources and elimination of wastages. An improved industrial
climate will bring all round development and prosperity.
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 Responsibility of a Production Manager:
Production planning:
Production planning is the first function performed by the production manager.
 Production planning is concerned with thinking in advance what is to be
produced,
 How it is to be produced and
 By what time should it be produced.
 It is concerned with deciding about the production targets to be achieved
by keeping in view the sales forecasts.
Production control:
 Production planning cannot be properly achieved without an effective
system of production control.
 It is in fact concerned with successful implementation of production
planning.
 It aims at completing production well in time and also with lesser costs.
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 Responsibility of a Production Manager:
Production planning:
Quality control:
 The production manager is also concerned with maintaining required
quality of the product.
 Quality control is concerned with controlling the negative variables which
affect the ultimate quality of a product.
 It is concerned with use of all the ways and means where by quality
standards could be maintained.
Method analysis:
 There are many alternative methods for manufacturing a product.
 Some methods are more economical than others. The production
manager should study all the methods in detail by analysing them in
detail and select the best alternative out of them.
 The process of selecting the best alternative is known as methods of
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analysis. 76
Methods of analysis are considerably helpful in minimising the cost of
production and improving productivity of the concern.
Inventory control:
 The next important function to be carried by a production manager is to
exercise proper control over the inventory.
 He should determine economic order size, maximum, minimum, average
and danger levels of materials so that problems of overstocking and
understocking do not arise.
 This also helps in minimising wastages of materials.
Plant layout:
 Plant layout is primarily concerned with the internal set up of an
enterprise in a proper manner.
 It is related to orderly and proper arrangement and use of available
resources viz., men, money, machines, materials and methods of
production inside the factory.
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
Methods of analysis are considerably helpful in minimising the cost
of production and improving productivity of the concern.
Work measurement:
 Work measurement methods are concerned with measuring the
level of performance of work by a worker. Time and motion
studies techniques can be used for work measurement. If a
worker works below the level fixed by work-measurement
techniques, his performance must be improved through positive
or negative incentives.
Other functions:
 Apart from the above-mentioned functions, the production
Department also carries certain other functions viz., cost control,
standardization and storage, price analysis and provision of wage
incentives to workers etc.

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Decisions of Production Management:

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Decisions of Production Management:
Major Decision Areas of Production management A
number of decision areas in an organization are touched
by production management. These decision areas can
be classified under three heads:
Strategic Decisions
Tactical Decisions
Operational Decisions

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Decisions of Production Management:
 Strategic Decisions: These are the decisions which are taken by the
top level of management.
 Some of such decisions are as under:
 a)Distribution System Decisions
 b)Plant Layout Decisions
 c)Mergers and Acquisitions
 d)Research and Development Decisions
 e)Compensation Planning Decisions
 f)Decisions Regarding Commissioning of New Plant
 g)Warehousing Location Decisions
 h)New Product planning
 i)Quality Decisions
 j)Dropping Product from Product Mix k)Social Responsibility Planning
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Decisions of Production Management:
Tactical Decisions:These decisions are initiated by middle level management. Some
of these decisions are:
a)Project Scheduling Decisions
b)Preventive Maintenance Decisions
c)Designing Reward System
d)Make or Buy Decisions
e)Equipment Decisions
f)Pricing of the Product
g)Budget Analysis
h)Product Improvement
i)Evaluating Credit of Buyers
j)Short-term Forecasting, etc.
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Decisions of Production Management:
 Operational Decisions: These are the decisions taken by
the bottom level of management and are much related to
managing production.
 Some of these decisions are:
 a)Production Scheduling Decisions
 b)Machine Loading Decisions
 c)Designing sample plans at the time of receiving raw
material.
 d)Daily Operator Scheduling
 e)Maintenance Scheduling
 f)Deciding Incentives of Salesman
 g)Order Entry Decisions, etc.
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Key Functions within Operations Management

Some of the key functions of operations

management include:
 Finance - In any manufacturing organization,
finance plays a crucial role in ensuring that
financial resources are properly allocated and
utilized to their full extent.
 Finance in operations management helps create
a budget that will allow the organization to meet
its production goals and can help evaluate
various investment opportunities to make the
best decision.
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Key Functions within Operations Management
Some of the key functions of operations management include:
 Strategy - Strategic management is the planning,
monitoring, analysis, and assessment of tall aspects
of an organization on a continuing basis.
 Attention to these elements ensures that a strategy
is developed and then implemented in the
manufacturing facility.
 The benefits of strategic management will help
manufacturing organizations make better decisions
regarding production planning and scheduling, keep
customers happy and allow the facility to meet its
overall goals.
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Key Functions within Operations Management
Some of the key functions of operations management include:
 Operation - This function of operations
management is concerned with planning,
organizing, directing, and overall control of all
activities within the organization.
 This is the primary function of operations
management and will effectively aid in
converting raw materials and human efforts
into a durable good and service that consumers
will be able to utilize.
 Operations within production must be
scheduled in a way that minimizes the amount
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 Key Functions within Operations Management

 Product Design - With new technology becoming

available, the selling of a product becomes much
more simple.
 One of the main duties of operations management
is to ensure that a product is designed properly
and caters to market trends and satisfies the needs
of consumers.
 In addition, introducing new product designs can
be challenging due to the existing product mix and
available resources.
 Those are important factors to consider when
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 Key Functions within Operations Management

 Forecasting - Demand forecasting is the process of

predicting what the demand for certain products will be
in the future.
 It identifies what both current and future customers will
want to buy and tells manufacturing facilities what they
should actually produce.
 Ideally, manufacturing companies want to be able to
accurately predict customer demands so that they can
produce the right amount of products.
 Producing too few items leads to stock shortages and
can negatively impact customer relationships. On the
other hand, having too much inventory is costly and can
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 Key Functions within Operations Management
 Quality Control - In addition to the product
design function, operations managers should
strive to produce the best quality product
possible.
 Modern-day consumers are concerned about
quality instead of quantity, which is why it is so
crucial to develop a durable and top-notch
quality product.
 This is especially important when evaluating the
existing processes as improving production
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 ◦ Thank you

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 Bar Chart

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 Comparison
Compare A Compare B

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 Table
GRADE 1 GRADE 2 GRADE 3 GRADE 3

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 Pie Chart Infographics

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 SWOT Analysis Infographics

Strengths Weaknesses
Jupiter is a gas giant
Mercury is the closest
and the biggest
planet to the Sun and
planet in the Solar
the smallest one
System

SWO
Opportunities T Threats
Venus has a beautiful Despite being red,
name and is the Mars is actually a cold
second planet from place full of iron oxide
the Sun dust

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 Thanks!
Any questions?
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