Production Management

Production management refers to the application of management

principles to the production function in a factory. In other words, production

management involves application of planning, organizing, directing and

controlling to the production process.

The application of management to the field of production has been the

result of at least three developments. First is the development of factory

system of production. Until the emergence of the concept of manufacturing,

there was no such thing as management as we know it. It is true that people

operated business of one type or another, but for the most part, these people

were owners of business and did not regard themselves as managers as well.

The second essentially stems from the first, namely, the development of the

large corporation with many owners and the necessity to hire people to

operate the business. The third reason stems from the work of many of the

pioneers of scientific management who were able to demonstrate the value,

from a performance and profit point of view, of some of the techniques they

were developing.

Operation Management

Operations management is often used along with production

management in literature on the subject. It is therefore, useful to understand

the nature of operation management. Operation management is understood

as the process whereby resources or inputs are converted into more useful

products. A second reading of the sentence reveals that, there is hardly any

difference between the terms production management and operation

management. But, there are atleast two points of distinction between

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production management and operations management. First, the term

production management is more used for a system where tangible goods are

produced. Whereas, operations management is more frequently used where

various input are transformed into intangible services. Viewed from this

perspective, operations management will cover such service organisation as

banks, airlines, utilities, pollution control agencies, super bazaars,

educational institutions, libraries, consultancy firms and police departments,

in addition, of course, to manufacturing enterprises. The second distinction

relates to the evolution of the subject. Operation management is the term that

is used now days. Production management precedes operations management

in the historical growth of the subject. The two distinctions not withstanding,

the terms production management and operations management are used

interchangeably.

NATURE OF PRODUCTION AND OPERATION MANAGEMENT

Among all the functional areas of management, production is

considered to be crucial in any industrial organization. Production is the

process by which, raw materials and other inputs are converted into finished

products. The other words synonymously used with production are

manufacturing. Some people try to draw distinction between the two terms:

production and manufacturing. Manufacturing is understood to refer to the

process of producing only tangible goods, whereas production includes

creation of both tangible goods as well as intangible services. Though,

distinction of this type is sought to be made, we use these two terms

synonymously.

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Scope of Production and Operations Management

The scope of production and operations management is indeed vast.

Commencing with the selection of location, production management covers

such activities as acquisition of land, constructing building, procuring and

installing machinery, purchasing and storing raw materials and converting

them into saleable products.

IMPORTANCE OF PRODUCTION FUNCTION:

It needs no exaggeration to say that production makes significant

contribution to society’s well being. The standard of living of people

depends on production of goods and services. More the production, higher

the standard of living of the people. Alexander solzhenitsyn in his novel

august 1914 beautifully sums up the importance of production “as for

industry, anyone who has created something with his own hands knows that

production is neither capitalist nor socialist but one thing only, it is what

creates national wealth, the common national basis without which no

country can exist”.

Competitive advantage of companies is highly talked about these days. It

is believed, that a firm, strong in competitive advantage, is well poised to

succeed whatever may be the constraints or restraints. Firms look to

production function to achieve competitive advantage.

Productive function can offer competitive advantage to a firm in the

following areas:

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Short new-product lead time

More inventory turns.

Shorter manufacturing lead time.

Higher quality

Greater Flexibility

Better customer service

Reduced wastage

PRODUCTION AS AN ORGANISATIONAL FUNCTION:

The core of production system is its conversion into sub-system,

wherein workers, materials and machines are used to convert inputs into

products and services. This process of conversion is at the heart of

production function and is present in some form in all organisations. It may

be stated that every organisation, Irrespective of its purpose, has a

production function where departments and personnel play a central role in

achieving the objective of the organisation.

DECISION-MAKING IN PRODUCTION:

Operations manager are required to make a series of decisions in the

production function. They plan, organise, staff, direct and control all the

activities in the process of converting all the inputs into finished products.

At each level, operating managers are expected to make decisions and

implement them too.

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The decisions made by operations managers about the activities of

the production systems tend to fall into three general categories viz;

Strategic decisions relating to products, processes and manufacturing

facilities. These decisions are major ones, having strategic importance

and long-term significance for the organisation.

Operating decisions relating to planning productions to meet demand.

These decisions are necessary in order to ensure that, the ongoing

production of gods and services meets the market demand and

provides reasonable profits for the organisation.

Control decisions relating to planning and controlling operations.

These decisions concern the day to day activities of workers, quality

of products and services, production and overhead costs and

maintenance of machines.

Classification of Decision Areas

The production and operations management function can be broadly

divided into the following four areas:

1. Technology selection and management

2. Capacity management

3. Scheduling/Timing/Time allocation

4. System maintenance

The classification presented earlier has been the traditional

classification which is quite valid even in the present times. However, the

nature of production and operations management function is changing and

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therefore it has become necessary to relook at the classification of decision

areas.

Traditionally, the focus of production and operations management

discipline has been the product and the process producing the product.

Hence its orientation is towards technology, capacity, and scheduling and

system maintenance. The focus has been on the operations of the company.

Thus, the traditional view may be termed as being ‘product-centric’ or self-

centric (‘self’ meaning company.

Transition from Product-centric to People-centric

However, with the changes in the customers’ requirements and with

the changes occurring in the social; set-up worldwide, the production and

operations discipline is placing increasing emphasis on relationships with

the people that interact with the firm such as customers, employees and

suppliers or business associates. The latter are important for the company to

have its supplies of materials and services flowing in as desired. The firm

interacts with its associates while taking the ‘supply’ decisions.

It is essential to maintain the desired quality of the produce from the

firm. However, it is being increasingly realized now that quality and

productivity are intimately related to the human input, i.e., the employees of

the company, more than anything else. Therefore, another area of decisions

is that of HR decisions. The most important of all the human interactions of

a firm is that with its customers. In addition to quality and productivity the

customer is interested in the timeliness of the delivery of the desired

goods/services. Thus, another area of decision is that of ‘timing’. These

decision areas are, thus, focused on people-on ‘others’ (i.e., other than the

company as represented by the capital). There is one more area, that of

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spatial decisions-decisions regarding the locations and layouts. The former is

related predominantly to the ‘supply’ and ‘timing’ problems. The latter is

related to the ‘timing’ and ‘productivity’ issues. Thus the production

management decisions may be classified as those pertaining to: People,

Supply, Time and Space.

Evolution of Production Function

In order to trace the evolution of production function, we identify six

historical developments: the Industrial Revolution, scientific management,

the human relations movement, operations research, computers and

advanced production technology and the service revolution. A brief

explanation of each stage follows.

The Industrial Revolution

Since times ancient production systems were used in one form or

another. The Egyptian Pyramids, the Greek Parthenon, the Great Wall of

China and the aquaducts and roads of the Roman Empire, dams and anicuts

built by the Chola Kings attest to the ingenuity and industry of the people of

ancient times. But the ways the people in the ancient days produced goods

were different from the production methods of today. Production systems

prior to the 1700s are often referred to as the cottage system, because the

production of goods took place in homes or cottages, where craftsmen

directed apprentices in performing hand work on products.

From 1770 to the early 1800s, series of events took place in England

which together is called the Industrial Revolution. Industrial Revolution

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resulted in two major developments: widespread substitution of machine

power for human power and establishment of the factory system.

The events that took place from 1770 to the 1800s are characterized

by great inventions. The great inventions were eight in number, with six of

them having been conceived in England, one in France and one in the United

States. The eight inventions are-Hargreaves Spinning Jenney, Arkwright’s

Water Frame, Crompton’s Mule, Cartwright’s Power Loom, Watt’s steam

engine, Berthollet’s Chlorine Bleaching Discovery, Mandslay’s Screw-

Cutting Lathe and Eli Whitney’s Interchangeable Manufacture.

As observed from eight inventions, most of them have to do with the

spinning of yarn and weaving of cloth. This is logical from the point of view

that cloth was the principal export commodity of England at that time and

was in short supply owing to the considerable expansion of England’s

colonial empire and its commercial trade.

The availability of machine power greatly facilitated the gathering of

workers in factories that housed the machines. The large number of workers

congregated in the factories, created the need for organizing them in logical

ways to produce goods. The publication of Adam Smith’s The Wealth of

Nations in 1776 advocated the benefits of the division of labour or

specialization of labour, which broke production of goods into small

specialized tasks that were assigned to workers on production lines. Thus,

the factories of late 1700s not only had developed production machinery, but

also ways of planning and controlling the output of workers.

The impact of the industrial Revolution was first felt in England.

From here, it spread to other European countries and to the United States.

The Industrial Revolution advanced further with the development of

the gasoline engine and electricity in the 1800s. Other industries emerged

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and along with them new factories came into being. By the middle of 1800s,

the old cottage system of production had been replaced by the factory

system. As days went by, production capacities expanded, demand for

capital grew and labour became highly dependent on jobs and urbanized. At

the commencement of the 20th century, the one element that was missing

was management-the ability to develop and use the existing facilities to

produce on a large scale to meet massive markets of today.

Scientific Management

The missing input, viz., management, was ably provided by scientific

Management-a philosophy which was propounded by business leaders,

consultants, educators and researchers.

The essential principles of Scientific Management are:

1. Developing a science for each element of a person’s work, which

would replace the old rule of thumb method;

2. Selecting workers scientifically and training and developing them;

3. Cooperating with workers so as to ensure that all the work would be

done according to the principles of science that have been developed;

and

4. Dividing work and responsibility almost equally between

management and workers. Management should take over all the work

for which, it is better fitted than the workers.

Contribution to Scientific Management

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Contributor Life Span Contributions

1. F.W.Taylor 1856-1915 Scientific Management

principles, exception principle,

time study, methods analysis,

standards, planning and

control

2. Frank.B. Gilbreth 1868-1924 Motion Study, methods,

therblings, construction

contracting, consulting

3. Lillian M. Gilbreth 1878-1973 Fatigue studies, human factor

in work, employee selection

and training

4. Henry L. Gantt 1861-1919 Gantt charts, incentive pay

systems, humanistic approach

to labour, and training.

5. Carl G. Barth 1860-1939 Mathematical analysis, slide

rule, feeds and speeds studies,

consulting to automobile

industry

6. Harrington Emerson 1885-1931 Principles of efficiency,

million dollars-a-day savings

in rail roads, methods control

7. Morris L. Cooke 1872-1960 Scientific Management its

application to education and

Government.

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Scientific Management became a powerful force as it contributed to

increased efficiency in industrial establishments. This force was so

successfully applied during the US build up of output for World War I and

after the War, European countries imported Scientific Management methods

to develop their factories.

However, the main thrust of Scientific Management was workers at

the shop floor, foremen, superintendents and lower middle management.

Taylor and his associates concentrated on the shop level because it was here

that management problems of the day were found. What was need was

production and efficiency, which means doing things right and implies

focusing on the details of operations. Scientific Management methods met

the challenge. Later, focus was shifted on developing the overall

organization’s effectiveness, which meant doing the right things.

The Human Relations Movement:

The term human relations refer to the ways in which managers

interact with their employees. When people in management stimulate

more and better work, the organization has effective human relations;

when morale and efficiency deteriorates, its human relations are said to

be ineffective. The human relations movement arose from early

attempts to systematically discover the social and psychological factors

that would create effective human relations.

Before describing the human relations movement in detail, it

would be useful to recollect the environment in which workers were

operating. Factory workers of the Industrial Revolution were

uneducated, unskilled, indiscipline and starving peasants straight from

farms. These peasants’ abhorred factory jobs, but they were essential

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for them, otherwise starvation was the consequence. Factory managers

developed-rigid controls to force workers to work hard. This legacy of a

work environment structured around rigid controls carried over into the

1800s and early 1900s. Basic to this management philosophy, was the

assumption that workers were to be given jobs, where they would work

hard and efficiently.

Towards the mid 1900s, a realization dawned on the job-givers

that, workers deserved to be treated as human beings, while on their

respective jobs. The human relations movement began in Illinois with

the work of Elton Mayo, F .• J. Roethlisberger, T.N. Whitehead, and

W.J. Dickson at the Hawthorne, Illinois, plant of the Western Electric

Company in the 1927-1932 period. The Hawthorne Studies were

initially begun 'by industrial engineers and were aimed at determining

the optimal level of lighting to get- maximum output from workers.

When these studies produced confusing results about the relationship

between physical environment and worker productivity, the researchers

realized that human factors must be affecting productivity. This was

perhaps, the first time that. Researchers and managers alike recognized

that, psychological and sociological factors affected not only employee

motivation but their productivity as well.

These early human relations studies and experiments, soon gave

way to a broad range of research into the behavior of workers in their

work environment. The works and writings of Chester Bernard,

Abraham Maslow, Frederick Herzberg, Douglas McGregor, Peter

Drucker, and others disseminated to industrial managers, a basic

understanding of workers and their attitudes towards their work. Not

that a total understanding of how best to motivate employees has been

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obtained, but research is on to discover ways to better utilize the

unutilized energy and capacities of workers.

Operations Research:

Popularly known by its acronym OR, operations research refers

to the "use of mathematical techniques to solve management problems.

OR has interesting history. At the beginning of World War II,

Great Britain, desperately needed to solve a number of new and

complex problems in warfare. With their survival at stake, the British

formed the first OR teams by pooling the expertise of mathematicians,

physicists, and other Scientists. With such teams, the British were able

to achieve significant technological and tactical breakthroughs.

When the War was over, the applicability of OR to problems in

industry gradually became apparent. New industrial technologies were

being put into use and transportation and communication were

becoming more complicated. These developments brought with them, a

host of problems that could not be solved easily by conventional means.

Increasingly, OR specialists were called in to help the management

come up with answers to these new problems.

Although Scientific Management, human relations and operation

Research have affected the ways that managers in production manage today,

perhaps no other development is an important to these managers as the

growing presence of computers in their jobs.

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Computers and Advanced Production Technology:

Ever since 1954, when the first computer was put to use, the number

of computers and their areas of application in business have increased

enormously. In the beginning computers were used for clerical duties such

as payrolls, billings, inventory transactions and cost reports. As on today,

computers are used as Decisions Support System (DSS), expert systems and

artificial intelligence. Analysts and managers now use computers to analyze

problems and obtain solutions. What would be the shape and use of

computers 10 or 15 years hence, is almost impossible to predict.

The Service Revolution

One of the Startling developments of our time is the mushrooming of

services in every economy. In our economy too, the share of the services

sector (also called tertiary sector) in the GDP is much higher than that of

industry or agriculture.

The impact of this explosion of service organizations on production

management has been enormous. It is a challenge for manufacturing

managers, that they should evolve strategies and actions to manage service

areas for better productivity, quality and competitiveness.

One should wait for the type of actions that would emerge in future

for managing service economies effectively. In the meantime, it is useful to

bring out characteristics of the systems that produce services.

In the factory of the future there will be a greater role for

professionals like design engineers, computer operators and production

planners. It is these people who will have a greater say in the production

process.

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With increasing customization and product variety, the service

component of a product will assume more importance. Days are not far off

when a customer will be able to walk into an automobile dealership, order a

car based on his preferences for colour, style and the like, and arrange all

necessary financing using a computer terminal. The order will be relayed to

the factory, where a car meeting the customer’s specific requirements will be

manufactured and readied for delivery in a short time. Obviously, corporate

profitability depends on how best the service component is integrated into

the product.

Conclusion

Economic history and manufacturing history are both important in the

sense that these would suggest some lessons that can be learnt for the future.

History helps us to know the trends and to take a peek at the future. If the

21st century organizations have to manage their operations well, they will

have to try to understand the ‘what and how’ of the productivity

improvements in the past and what led to the various other developments in

the field of production and operations management. The past could tell us a

thing or two about the future if not everything. Looking at the speed with

which technology, economies, production and service systems, and the

society’s values and framework seem to be changing; one may tend to think

that ‘unprecedent’ things have been happening at the dawn of this

millennium. However, there seems to be a common thread running all

through.

Limiting ourselves to history of production or manufacturing, we see

that the effort has always been on increasing productivity through swift and

even flow of materials through the production system. During the Taylor era,

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the production activities centered on an individual. Hence, methods had to

be found to standardize the work and get the most out of the individual thus

making the manufacturing flows even and fast. Ford’s assembly line was an

attempt at further improving the speed and the evenness of the flows.

Thereafter, quality improvements reduced the bottlenecks and the variability

in the processes considerably, thus further facilitating the even and rapid

flow of goods through the production system.

The attempt has always been to reduce the ‘variability’, because

variability could impede the pace and the steadiness of the flow. Earlier,

variability came mostly through the variability in the work of the workers.

However, in the later decades the variability came from the market.

Customers started expecting a variety of products. Manufacturer, therefore,

started grouping like products together. The flows of materials for those

products were, therefore, exposed more easily; this helped in quickly

attending to bottlenecks, if any, and in ensuring a speedy and even flow

through the manufacturing system. Cellular manufacturing or Group

Technology was thus born. Materials Requirement Planning (MRP) and

Enterprise Resource Planning (ERP) were other efforts at reducing the

variability by integrating various functions within the operations system and

the enterprise as a whole, respectively.

The customer expectation from the manufacturing system increased

further. They started asking for a variety in the products that had to be

supplied ‘just in time’. In order to realize this, the manufacturing company

had to eliminate the ‘unevenness’ or variations within its own plant as also

limit the variations (unevenness) in the inputs that came from outside. This

required the ‘outside system’ to be controlled for evenness inflow despite the

requirements of varied items in varied quantities at varied times. This could

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not be done effectively unless the ‘outsider’ became an ‘insider’. Therefore,

the entire perspective of looking at suppliers and other outside associates in

business changed.

However, it is also extremely important to take adequate cognizance

of further developments in science and technology, the changes in value

systems and in the social structures that are taking place worldwide.

Developments in science and technology give rise to certain social mores

like, for instance, the mobile phones are doing today. Similarly, the changed

social interactions and value systems give rise to changed expectation from

the people. The type of products and services that need to be produced

would, therefore, keep changing. Today a ‘product’ represents the certain

group of characteristics; a ‘service’ represents certain other utility and group

of characteristics. These may under go changes, perhaps fundamental

changes, in days to come. We may see rapid shifts in the lifestyles. So,

whether it is for consumption or for the changed lifestyle, the type of

products demanded and the character of services desired may be quite

different. Production and operations management as a discipline has to

respond to these requirements. That is the challenge.

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Bibliography

1. Ashwathappa.K and Shridhara Bhat, Production and Operations

Management, Himalaya Publishing House, Mumbai, Pg. No 1-10

2. Chary S N, Production And Operations Management, The McGraw-Hill

Companies, New Delhi, Third Edition, Pg. no 1.10,1.13,1.14

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