Operation Unit 1

OPERATIONS MANAGEMENT 1
OPERATIONS MANAGEMENT
UNIT-1
Production Function
Operations management- Concept - Functions - Product Design and development - Product design and
its characteristics - Product development process (Technical) - Product development techniques
-Process selection- Project- job- Batch - Mass and Process types of Production Systems- Product
-Process Mix
Operations management – Concept:

'Operations Management' is the term often used with production management; therefore, it is useful to
understand the nature of operations management
• Operations are useful actions or activities which are done methodically as part of plan of work by a
process that is designed to achieve the pre-decided objectives.
• Operations management consists of scheduling work, assigning resources including people,

equipment, managing inventories, assessing quality standards, process type decisions and the sequence
for making individual items is a product mix set.
Operations Management Meaning:
“Operations Management” is the process in which resources/inputs are converted into more useful products.
• Operations management is the management of an organisation’s productive resources or its production
system.
• It is the design, execution, and control of a firm's operations that convert its resources into desired goods and
services, and implement its business strategy.
Operations Management Definition:
“Operations management is defined as the design, operation, and improvement of the systems that
create and deliver the firm’s primary products and services.”
"Operations management is chiefly concerned with planning, organizing and supervising in the
contexts of production, manufacturing or the provision of services."
ACME BUSINESS SCHOOL PGDM

"Operations management is an area of management concerned with designing and controlling the
process of production and redesigning business operations in the production of goods or services."
5 P’s of Operations Management :
1. Plants: The factory, the location where all the activities take place, machinery and heavy equipment’s
2. People: Direct or Indirect workforce
3. Parts: The components, sub-assemblies or even products
4. Processes: Methodologies, technology, tooling’s, fixtures for establishing, maintaining and improving
productivity; and
5. Planning and Control: This is an information management system which initiates, directs, monitors
and collects feedback to enable efficient use of all other resources
Operations Management deals with the design and management of products, processes, services and
supply chains. It considers the acquisition, development, and utilization of resources that firms need to
deliver the goods and services their clients want.
The purview of OM ranges from strategic to tactical and operational levels. Representative strategic
issues include determining the size and location of manufacturing plants, deciding the structure of
service or telecommunications networks, and designing technology supply chains.
Tactical issues include plant layout and structure, project management methods, and equipment
selection and replacement. Operational issues include production scheduling and control, inventory
management, quality control and inspection, traffic and materials handling, and equipment maintenance
policies.
Importance of operations management
Operations Management explores the way organizations produce and distribute goods and services.
Everything you wear, eat, sit on, use or read comes to you courtesy of the operations managers who
organized its production and distribution. Goods such as automobiles, airplanes, computers and houses,

must be produced, as do the services provided by hospitals, ski resorts, trucks, and airlines. It's the job
of an operations manager to make sure these activities occur when and how they are planned.
This explanation reflects the essential nature of operations management: it is the central activity in
organizing things. Operations Management is the systematic development and control of the processes
that transform inputs into goods and services. The operations function comprises a significant
percentage of the employees and physical assets in most organizations. Operations Managers are
concerned with each step in providing a product or service. They determine what should go into an
operating system, such as equipment, labor, facilities, materials, energy, and information, to produce the
output. Operations Managers are also responsible for critical activities such as materials management,
capacity planning, purchasing, scheduling and quality.
The importance of Operations Management has increased dramatically in recent years. Significant
competition, shorter product and service life cycles, better educated and quality-conscious consumers,
and the capabilities of new technology have placed pressures on the operations function to improve
productivity while providing a broader array of high-quality products and services.
Distinction between Production Management and Operations Management
Production Management refers to the application of management principles to the production
function in a productive system such as a factory or a manufacturing plant. (e.g., steel plant, cement
plant, etc.). It involves application of planning, organising, directing and controlling the production
processes employed for the conversion of inputs into outputs in a productive system.
Operations Management refers to a set of activities that creates value in the form of goods and/
or services by transforming inputs into outputs. Operations management designs and operates
productive systems or operating systems such as banks, hospitals, hotels, government agencies and
manufacturing plants. Operations management includes activities such as organising work, selecting
processes, arranging layouts, locating facilities, designing jobs, measuring performance, controlling
quality, scheduling work, managing inventory and planning production.

From the above definition of production management and operations management, it becomes clear that
there is hardly any difference between the two terms. But the two apparent differences between
production management and operations management are:
(i) The term “production management” is mainly used for a productive system where tangible goods are
produced; whereas the term “operations management” is more frequently used where various inputs are
transformed into intangible services.
(ii) Operations management is the more recent term used to activities involved in the process of
transforming inputs into outputs (goods and/or services) in a productive system, whereas the term
“production management” (or manufacturing management) was used earlier to refer to activities related
to the process of transforming inputs into outputs (mainly tangible goods).
Objectives of Production/Operations Management
Some of the important objectives of production/operations management are:
(i) Maximum customer satisfaction through quality, reliability, cost and delivery time.
(ii) Minimum scrap/rework resulting in better product quality.
(iii) Minimum possible inventory levels (i.e., optimum inventory levels).
(iv) Maximum utilization of all kinds of resources needed.
(v) Minimum cash outflow.
(vi) Maximum employee satisfaction.
(vii) Maximum possible production (i.e., outputs).
(viii) Higher operating efficiency.
(ix) Minimum production cycle time.
(x) Maximum possible profit or return on investment.
(xi) Concern for protection of environment.
(xii) Maximum possible productivity.

Elements of Production
The elements of production system can be defined as under:
Inputs: Inputs are those items that are consumed in the production process e.g., raw material, power
and other consumable items.
Resources: These are these assets which help in transforming inputs into outputs e.g., machinery, plant,
building, computers, human resources etc.
Process: These are series of operations which are performed on raw material and other inputs to convert
them into finished goods. These processes can be manual, automated, mechanical, assembly, etc.
Output: Output are the product and services resulting from the conversion process.
RESOURCES
Machinery
Plant
Building
Human Resources
CONVERSION/ OUTPUT
INPUTS TRANSFORMATION Finished Goods
Raw Material Services
Power PROCESS
Consumables
Fig. Elements of Production System
FUNCTIONS OF PRODUCTION/OPERATIONS MANAGEMENT

The major functions of production managers may be categorized as shown below:
(i) Production Techniques: Equipment Design, Process Design, Plant Layout and Shop Layout, Design
of Materials Handling System.
(ii) Capacity Management: Forecasting Demand, Delivery Commitment, Facility Location and
Resource Allocation.
(iii) Industrial Engineering (or Work Study): Method Study, Work Measurement.
(iv) Production Planning and Control: Estimating, Forecasting, Routing, Scheduling, Dispatching and
Progressing.
(v) Inventory Control: Purchasing, Storing and Controlling Inventory Levels and Material Issues.
(vi) Quality Control: Inspection, Quality Control, Quality Assurance and Reliability, Statistical Quality
Control and Total Quality Control.
(vii) Maintenance: Servicing, Repairing, Breakdown/Preventive Maintenance, Spare Parts Inventory

Control and Equipment Replacement.
Production Function:
Production function may be defined as the creation of useful products for sale with the help of inputs
such as materials, machines, labour, land, capital and management. The production function represents
basically a physical relationship between inputs and outputs.
The production function specifies the amount of outputs resulting from the amount of inputs used
during a specified period of time. The productive use of the resources is described by the term
productivity. Productivity is an index that measures outputs (goods and services) relative to the inputs
(materials, energy and other resources).
Productivity is also known as productive efficiency or the efficiency of the production process. It
indicates how well a productive process is carried out to convert a set of inputs into a set of outputs of
value to the customer which also provides reasonable profits to the manufacturer or seller.

Product Design and Development:
Product design:
Product design is the process of deciding on the unique characteristics and features of the company’s
product. Process selection is the development of the process necessary to produce the designed product.
Product design and process selection are typically made together. Product design must support product
manufacturability (the ease with which a product can be made).
Product design defines a product’s characteristics of:
appearance.
materials,
dimensions,
tolerances, and
performance standards
Service design is unique in that the service and entire service concept are being designed. When a
service is designed, the designer must define both the service and service concept.
Service design defines a service’s characteristics such as: Physical elements, aesthetic & psychological
benefits. For example, promptness in service, friendliness during the service, ambiance of the service
premises. In addition, product and service design must match the needs and preferences of the targeted
customer group
Requirements for Product Design
As for the requirements for product design, it all depends on the chosen target audience. There are two
options: the first is when the product is designed for the widest possible audience, and it is almost
impossible to determine who exactly will use it. For this reason, the requirements are rather “blurry”.
For example, the product must be compatible with the latest versions of popular operating systems, be
compact, work quickly, solve user pain points (an obvious requirement), etc.

The second option implies the existence of clear customer requirements for product design (as a rule,
they are presented in the form of requirements specification). Usually, the development company needs
to submit several wireframes of the possible design that would correspond to all requirements, in order
for the customer to choose the option they like most.
Objectives of Product Design:
Now, let’s discuss the goals that (in theory) should be pursued by the team developing the product
design.
Without underestimation, we can say that design determines the value (in the context of solving some
problems or achieving some goals), functionality and usefulness of the product itself. In turn, from the
point of view of the manufacturer, the product should be manufactured as quickly, cheaply, and
accurately as possible. As practice shows, providing a balanced compromise between the goals of
consumers and the manufacturer is not so easy, especially when it comes to a start-up.
Ten Steps of the Product Design Process:
In order to consistently implement all the above five phases, we have developed a universal list of steps
of the product design process and outlined them below. The steps in the product design process include:

Brainstorming
Providing
Defining the
Quality
Product
Assurance
Strarting the Conducting

Production/ the User
Development Research
Steps in Product
Design
Sample
Sketching
Tesing
Producing the
Factory Prototyping
Samples
Compiling
Specifications

1. Brainstorming
The first step to design a product is brainstorming, which appeared in 1953 in the United States. As a
rule, two groups are created for its implementation. The first group includes people who generate ideas
to solve the problem. The second group consists of a “commission” that deals with the processing of the
proposed ideas.
Brainstorming consists of three phases:
Definition of the problem:
In particular, you must announce the problem (in this case, the need to create the “right” product
design) and select participants for both teams.
Idea generation:
This stage involves the most creative approach. Participants of the brainstorming voice every
idea they can imagine, however crazy it may sound. Here, quantity is important, not quality.
Therefore, it is necessary to be guided by the following rules:
Generate as many ideas as possible, without any limitations;
Even the most absurd and non-standard ideas should be considered;
Ideas can and should be combined and improved;
No criticism is allowed – at this stage, ideas should not be evaluated in any way.
Selection of the most viable ideas among proposed:
In this step, appreciation and criticism are welcome. This stage is usually conducted by the
second team
2. Defining the Product
After brainstorming, when all the viable ideas for the future product are chosen, you need to highlight a
certain number of general expectations (requirements) for its implementation. As a rule, the output is a
fairly abstract list, the task of which is not to form an exact guideline on the development, but rather to
determine the directions for the further team activities.
3. Conducting the User Research

Research implies several aspects: market research to define the presence of competitors, the definition
of trends, the assessment of the product’s prospective longevity, etc. As a rule, this task is solved by
marketers and business analysts. The results of this research provide grounds to build so-called
customer portraits. In turn, these portraits would give your team a better understanding of what the final
product should be. A properly-composed portrait includes such parameters as gender, age, marital
status, income level, place of residence (geography), employment, job position, typical problems, needs,
fears, and desires, and so on.
In no case should you neglect this step in the hope of creating a universal product “for everyone”. With
a high probability, you simply will not please anyone and drain your entire budget “into the pipe”.
4. Sketching
Any large project with a significant budget will only benefit from the creation of sketches. Before time
is invested in finding solutions, the direction of the search must be coordinated with the client. Sketches
allow to somewhat narrow down this very direction when choosing the main concept, and only then
work with composition, layouts, edits, refinement of the concept, etc., would follow.
5. Prototyping
Creating a prototype is no less important and crucial task than developing a design itself. Note that the
obtained result is not a beautiful final appearance, but rather a “skeleton” of the future product’s look.
Nevertheless, it allows demonstrating the functionality, ways of user interaction with the product and its
basic appearance. The creation of the prototype allows to avoid many errors and corrections in the
future. This will help save time, money and nerves, both of the customer and performers.
6. Compiling Specifications
Creation of a list of specifications is, in fact, the process of the above-mentioned requirement
specification’s elaboration. It allows reviewing all the requirements for the finished product and
possible solutions in maximum detail. Also, these specifications should contain the final delimitation of
responsibilities, deadlines, and costs. These documents would be essential at the product development
stage.
7. Producing the Factory Samples
Manufacturing the pre-production samples will help you understand whether the core idea of the
product would be viable and attractive to the real users or if, perhaps, it’s worth to shift the activity

vector to other key points. In the case of a physical product, it also allows understanding how much the
varying manufacture departments/manufacturing contractor are ready to produce the developed goods
with required speed and quality.
In the case of software, such samples are called MVP – a kind of wireframe application that contains the
most essential functionality.
8. Sample Testing
Testing samples allows you to timely identify the flaws of the product or inconsistencies with the
requirements. That is before you even begin an expensive (as a rule) procedure of its implementation.
Manufacturing and testing the samples can be iterated as much as needed until they correspond to all the
requirements and gain enough of the positive feedback from customers.
9. Starting the Production/Development
At the time of starting the manufacturing/developing the product, you will already have a full set of
technical specifications with clearly defined requirements, tasks, responsibilities, deadlines, and budget.
Your goal is to break the major tasks into smaller subtasks (so that the deadline for their implementation
does not exceed several weeks) and assign priorities. In the software industry today, Agile
methodologies are employed for this, such as Scrum or Kanban.
10. Providing Quality Assurance
In fact, quality assurance activities cover all stages of product development, including release and
further maintenance. Nevertheless, their main responsibilities lay in ensuring the quality of the finished
product. In case of app development, QA team is responsible for pre-release testing conducted to ensure
the quality of the released solution, its accordance with the requirements specification, and the
expectations of the target audience (they are determined at the stage of forming the customer portraits).
Characteristics of Good Product Design:
A good product design must ensure the following:

(i) Function or performance: The function or performance is what the customer expects the product to
do to solve his / her problem or offer certain benefits leading to satisfaction. For example, a customer
for a motor bike expects the bike to start with a few kicks on the kick peddle and also expects some
other functional aspects such as pick - up, maximum speed, engine power and fuel consumption etc.
(ii) Appearance or aesthetics: This includes the style, colour, look, feel, etc. which appeals to the human
sense and adds value to the product.
(iii) Reliability: This refers to the length of time a product can be used before it fails. In other words,
reliability is the probability that a product will function for a specific time period without failure.
(iv) Maintainability: Refers to the restoration of a product once it has failed. High degree of
maintainability is desired so that the product can be restored (repaired) to be used within a short time
after it breaks down. This is also known as serviceability.
(v) Availability: This refers to the continuity of service to the customer. A product is available for use
when it is in an operational state. Availability is a combination of reliability and maintainability. High
reliability and maintainability ensure high availability.
(vi) Producibility: This refers to the ease of manufacture with minimum cost (economic production).
This is ensured in product design by proper specification of tolerances, use of materials that can be
easily processed and also use of economic processes and equipment’s to produce the product quickly
and at a cheaper cost.
(vii) Simplification: This refers to the elimination of the complex features so that the intended function
is performed with reduced costs, higher quality or more customer satisfaction. A simplified design has
fewer parts which can be manufactured and assembled with less time and cost.
(viii) Standardization: Refers to the design activity that reduces variety among a group of products or
parts. For example, group technology items have standardized design which calls for similar
manufacturing process steps to be followed. Standard designs lead to variety reduction and results in
economies of scale due to high volume of production of standard products. However, standardized
designs may lead to reduced choices for customers.
(ix) Specification: A specification is a detailed description of a material, part or product, including

physical measures such as dimensions, volume, weight, surface finish etc. These specifications indicate
tolerances on physical measures which provide production department with precise information about

the characteristics of products to be produced and the processes and production equipment’s to be used
to achieve the specified tolerances (acceptable variations).
x) Safety: The product must be safe to the user and should not cause any accident while using or should
not cause any health hazard to the user. Safety in storage, handling and usage must be ensured by the
designer and a proper package has to be provided to avoid damage during transportation and storage of
the product. For example, a pharmaceutical product while used by the patient, should not cause some
other side effect threatening the user.
Product Development:
Product development is a specialized activity which may result in creation of new products or
modification in the production process to produce the same product. Development is necessary to fulfil
old and new wants as well and to adjust with the changes in the consumer’s demand or with an object to
achieve greater production efficiency and more profits.
Definition of Product Development
Product development is the next step to product planning. It is the process of finding out the possibilities
of producing a product. It includes the decisions such as whether it would be feasible or not to produce
the product.
The term ‘product development’ has been defined as under:
“Product development encompasses the technical activities of product research, engineering and
design.”
— William J. Stanton
“Product development involves the adding, dropping, and modification of item specifications in the
product line for a given period of time, usually one year.”
— Limpson and Darling

Product Development Process

Product development is a strategic approach. It should be well planned and systematically executed to
achieve desired results and avoid loss.
Given below is the step by step process for introducing a new product in the market:

Idea Generation: The first step is knowing customer’s requirement through market research by taking
feedback, conducting surveys and going through the competitor’s product. From this research, a product
idea is developed.
Idea Screening: The product idea is to be well studied and investigated to find out the need for
introducing the new product, the requirement of additional machinery, selection of marketing
channel and its break-even point.
Concept Testing: The next stage is enquiring about the product feasibility by conducting concept
testing. The new product idea is revealed to a group of consumers, and they are asked to share their
response over it. If the majority is in favour of the product, then further steps are to be taken.
Business Analysis: In this step, the organization decides whether the product is financially viable for it
or not. Product’s demand, cost, competitiveness, profitability, expected sales, overheads, etc. are
analysed.
Product Development: At this stage, the manufacturing of a new product, it’s financing, marketing and
distribution as well as advertisement and promotion takes place. However, initially, a small quantity is
produced as a test batch.
Test Marketing: The product is then launched in the market on a small scale. If it attains success and
can generate customers, the large-scale production is planned.
If the product is rejected in the market, the company finds out the shortcomings and rectifies it. If the
product fails again in the market, the company tends to dump it.
Commercialization: At this point, the company executes large-scale production and distribution of the
successful new product. It advertises and markets the product on a massive scale to acquire a
considerable customer base.
Review Market Performance: Lastly, the company keeps track of the product’s performance in the
market to know customer satisfaction level, demand, profitability, sales volume, competitor’s strategy,
the satisfaction of the middlemen involved, etc.
Product development is essential for the growth of all; the business, the consumers and the economy.
No business can survive the competition without adding the element of innovation to its product line.

Developing a successful product for the consumers require a lot of brainstorming, planning, research,
trials and rectification.
Product Development Techniques:
Principles of Product Development:
The five basic principles and integral part of product development, are discussed below:
A. Standardization,
B. Simplification,
C. Specialization,
D. Diversification, and
E. Interchangeability.
A. Standardization:
Standards are at the base of all mass production. They make possible thousands of different articles to
be placed within the reach of everybody. When one purchases a new spark plug for a scooter or car, he
knows that it will screw into the engine head all right. Why? Because spark plug threads are
standardized Standards convey the sense that there are only certain specific sizes made and sold.
Standards are carefully established specifications for products, materials, etc.
Standardization means producing maximum variety of products from the minimum variety of (i.e.,
standardized) materials, parts, tools and processes. Standardization is one way which leads to
economical products. Standardization usually means that non-standard products will not be produced-
except when a customer orders them to be made. Standardization is the process of establishing standards
or units of measure by which extent, quality, quantity, value, performance, etc., may be compared and
measured.
Standardization procedure:
Steps involved:

(a) With the help of market research, sales statistics, etc. decide what to sell in future.
(b) Then, define a standard range of products.
(c) From the range, ask the designer to develop minimum variety of components to match the range.
Introduce new materials, components, etc. if necessary.
An approach to standardization necessitates the classification of materials and component parts.
Classification:
‘Classification’ is of great value in material and component standardization. Classification aims at,
systematically, grouping items, together by their common features and subdividing them by their special
features. A system of classification and coding is necessary for the design of new products within the
range defined.
Such a system should readily:
(i) Identify and locate identical items.
(ii) Facilitate the use of standard items in new designs.
(iii) Identify substitutes in case of stock outs.
(iv) Help developing Group Technology.
(v) Aid to improve parts location in the store.
Classification procedure involves the following steps:
(i) Define all items.
(ii) Classify each item according to its basic characteristics.
(iii) Identify each item by allocating to it some meaningful code number.
A code consists of letters and numbers. The aim is to classify from general to particular. Taking an
example of grinding wheels for classification and coding purposes, various wheel features are denoted
by letters and numbers. A code is marked on the grinding wheel.
According to Indian Standard Specifications, for example, a grinding wheel is specified as follows:

Advantages of standardization:
All sections of a company benefit to some degree from standardization.
1. Design department:
a. Fewer specifications, drawings and part lists have to be prepared and issued.
b. Thus more time is available to develop new designs or to improve established designs.
c. Better resources utilisation.
d. Allocation of work to suit available talent.
e. Lesser design mistakes and design alterations.
f. Less qualified personnel can handle routine design work.
2. Manufacturing department:
a. Lower unit costs.
b. Better quality products.
c. Accurate delivery dates.
d. Better methods and tooling.
e. More effective training.
f. Better services of production control, stock control, purchasing, etc.
g. Fewer tool changes and process set-ups.
h. Increased interchangeability of parts.
i. Better utilisation of manpower and equipment.

j. Longer production runs are possible with fewer changeovers; wider use of automation and
mechanisation.
k. The operations can be analysed and broken down into short repetitive cycles which can be easily
mastered.
3. Marketing department:
Marketing section gets better quality products of proven design at reasonable prices.
This leads to a greater sales volume.
i. Increased margin of profit.
ii. Less pressure of after-sales-services.
iii. Better product deliveries.
iv. Easy availability of spare parts.
4. Production planning section:
i. Scope for improved methods, processes and layouts.
ii. Opportunities for more efficient tool design.
iii. Greatly reduced pre-production planning activities. Fewer issues of new planning cards.
5. Production control department:
i. Well proven design and methods improve planning and control.
ii. Chasing small batches (of products) consumes less time.
iii. Fewer delays arise from waiting for materials, instructions, tools, etc.
iv. Accurate delivery promises.
6. Purchase and stock control section:
i. Holding stock of standard items, (i.e., less variety of materials and components) means less paper
work and fewer requisitions and orders.
ii. Storage and part location can be improved.
iii. Because of large purchase quantities involved, favourable purchase contacts can be made.

iv. Newer techniques can be used for better control of stocks.
7. Quality control department:
i. Better inspection and quality control is possible.
ii. Operators become familiar with the work and produce jobs of consistent quality.
iii. Quality standards can be more clearly defined.
8. Work-study section:
i. Efficient break down of (limited) operations into short repetitive cycles and effective work
measurement afford considerable opportunities for work-study.
9. Supervision:
i. All the above points help the supervisor to run his department efficiently and more effectively.
ii. Less time is wasted in resolving production snags such as wrong information’s, faulty tooling, etc.
iii. Reduced rejections and scrap.
iv. More time is available to the supervisor to make useful records and preserve statistics.
10. Costing:
i. Costing can obtain better control by installing standard costing.
Disadvantages of standardization:
i. Reduction in choice because of reduced variety and consequent loss of business or custom.
ii. Changes in public taste seriously affect a company producing only standardized product range.
iii. It becomes difficult to introduce new models because of less flexible (existing) production facilities
and due to the high cost of specialised production equipment.
iv. Standardization tends to favour large famous companies, because small or new concerns can rarely
get much business even by producing same items and by selling them at the same price as the big
companies.
v. Standards once set, resist change and thus standardization may become an obstacle to progress.
Applications of standardization:

Standardization can be applied to a major extent in the following fields:
1. Finished products, e.g., cars and televisions.
2. Subassemblies and components, e.g., automobile gearboxes and auto-electric bulbs.
3. Material Standardization, e.g., both of direct materials (plain carbon and alloy steels, arc welding
electrode core wires, etc.) and indirect materials (such as oils and greases).
4. Production equipment standardization, e.g., that of machine tools, presses, welding equipment, etc.
International standardization:
It becomes very necessary to follow international standards if a country has to capture the export
market. The work of international standardization is carried out under the aegis of ISO (International
Organization for Standardization). Most industrialized countries are members of ISO. ISO was founded
after World War II. ISO does not issue independent standards of its own but it makes recommendations
which are included in the national Standards of the collaborating countries.
National standardization:
Every country has its own national standards. Is in India, BS in UK, DIN in Germany are a few
examples of national or home standards.
B. Simplification:
The concept of simplification is closely related to standardization. Simplification is the process of

reducing the variety of products manufactured (known as variety reduction). Simplification is concerned
with the reduction of product range, assemblies, parts, materials and design. A manufacturer may reduce
the number of different types of radio sets from a dozen to three or four to simplify his range.
Simplification makes a product, assembly or design, simpler, less complex or less difficult.
Simplification removes the superfluous. It decreases variety of sizes; for example, a garment factory
making tea-shirts in sizes 16,16¼, 16½ ,16¾ ,17,17¼ etc., can eliminate superfluous sizes such as
16¼,16¾,17¼, etc., and thus simplify its production line. A production line is generally simplified when
it possesses unnecessary complexity and confusion. Often variety reduction will reveal that a
subassembly or component needs simplification.

Variety reduction:
(i) Variety reduction consists in identifying the existing variety and then removing unnecessary items
from the system.
(ii) Classification and codification help locating and identifying all items (i.e., products, materials,
components, etc.).
The availability of suitable standards assists in simplification.
Considerations in simplifying items (i.e., products, components, etc.):
(i) Can simplification be effectively achieved depending upon the nature of item?
(ii) How the simplification will affect customer demand and volume of sale?
(iii) Does market competition permit simplification or it encourages product diversification?
Advantages:
(1) Simplification involves fewer, parts, varieties and changes in products; this reduces manufacturing
operations and risk of obsolescence.
Since simplification reduces variety, volume of remaining products may be increased. Simplification
provides quick delivery and better after-sales service. Simplification reduces inventory and thus results
in better inventory control. Generally speaking, simplification implies fewer parts and fewer the parts,
the lower the production costs. Thus, simplification reduces price of a product. Simplification improves
product quality.
C. Specialization:
Specialization is the natural outcome of the application of standardization and simplification.

Specialization means concentrating efforts on a particular field of action or towards a specific attempt.
A worker is said to be specialized in a work when he acquires skill and proficiency in it by
concentrating solely on it (i.e., on that particular work or job).
A mechanic, brick-layer or an engineer is a specialist in his field. A factory producing spark plugs only
is a specialist in its production. Specialization as applied to human activities on shop floor can be
defined as ‘Division of Labour’. This means that if a worker instead of completing the full product

performs one small operation on the product and attains proficiency in that one activity, he becomes a
specialist in that.
Advantages:
(1) Workers achieve a high state of skill and proficiency.
(2) They take smaller times to complete the activity in which they are specialized.
(3) Thus they raise their salaries and their standard of living.
Limitation:
(1) Specialized labour and equipment are not flexible, i.e., they cannot be used for other purposes.
(2) Specialization may result in monotony.
Applications:
(1) Specialization is universal in application; it is a rule rather than exception in today’s industry.
(2) Specialization has been applied to;
(i) Products,
(ii) Processes,
(iii) Individuals,
(iv) Companies,
(v) Jobs, and
(vi) Equipment, etc.
D. Diversification:
Diversification is just contrary to simplification. Diversification means addition of new products or

introduction of established products into new markets. This tends to increase complexity of the methods
of manufacturing, because, sometimes consumers like to have variety in type, size, color and quality of
products being manufactured.

This adds to the cost characteristic of the production which is of varied nature. The extent to which
diversification programme can be carried out must be determined by market analysis of probable
volume at varying levels of diversification compared with production cost of the volumes obtainable at
those various levels.
Industries generally expand. An automobile concern may think in terms of diversifying in its own
product lines, an aircraft concern may like to expand in the field of propulsion or electronics, and so on.
Diversification adds to the classes of consumers served, by developing new technical knowledge.
Reasons for diversification:
Given below are the reasons why companies diversify:
(A) Survival:
i. To offset declining or vanishing markets.
ii. To offset obsolete facilities.
iii. To offset declining profit margins.
iv. To compensate for technological obsolescence.
(B) Stability:
i. To offset seasonal slumps.
ii. To offset cyclical fluctuations.
iii. To provide balance between high margin and low margin products.
iv. To maintain market share.
v. To meet new products of competitors.
vi. To tie customers to the firm.
vii. To distribute risk by serving several small markets.
viii. To develop a strong competitive supply position by offering several close substitute products.
(C) Productive utilization of resources:
i. To utilize waste or by-products.

ii. To make use of basic raw materials.
iii. To utilize excess productive capacity.
iv. To make use of innovations from internal technical research.
v. To make full, use of management resources.
vi. To capitalize on a firm’s market contacts.
(D) Adaptation to change in customer needs:
i. To meet the demands of diversified dealers.
ii. To meet the specific requests of important groups of customers.
iii. To improve performance of existing products through adding accessories.
(E) Growth:
i. To counter market saturation on present products.
ii. To reinvest earnings.
iii. To take advantage of unusually attractive opportunities.
(F) Miscellaneous:
i. To maintain reputation for industrial leadership.
ii. To realise maximum advantages from the tax structure.
iii. To comply with the desires (or whims) of owners or management. Probably the easiest route to
diversification is through merger or acquisition.
E. Interchangeability:
The system of interchangeable manufacture is considered as the eighth great invention of the Industrial
revolution. The credit to first establish such a system of interchangeable manufacture in 1798 goes to an
American, Eli Whitney, who carried out a contract for ten thousand muskets.

Interchangeable manufacture played an extremely important role in the growth of mass production
techniques and is very common today. The concepts of specialization, standardization and
simplification are closely inter-related and lead to interchangeability.
Interchangeability or interchangeable manufacture means that any standardized component will

assemble correctly with any mating component, both being chosen at random. For an interchangeable
system to work, the parts produced should be as near identical as possible, and for continuous
production, a transfer line will achieve this best because it eliminates the human control of the
machines. Interchangeability reduces cost because the task of assembly is simplified. Moreover,
standard replacement parts can be drawn from the stock with the certainty that they will fit without
alteration.
In order to achieve interchangeability:
(i) Appropriate component tolerances must be specified (from the standard) to suit the type of fit
required.
(ii) Manufacturing process should be selected to make components within the specified tolerances.
(iii) A system of inspection and quality control should check that only components within the specified
tolerances are accepted for use.
Elements of interchangeable system:
In interchangeable system is also called a limit system or system of limits and fits
Process selection:
Process Selection plays an important part in overall design of production and operations management
systems. Process Selection allows an organization to offer a safe and reliable Product and service
through pragmatic design and effective capacity planning. With the help of process Selection, we can
understand the different types of processing including manual, rigid, and flexible as well as various
automated approaches to processing. Process selection allows an operations manager to better
understand need for management of technology. Together with capacity planning it helps
an organization to develop different approaches to
meet the irregular demand pattern of the customers

Process Selection refers to the way an organization chooses to produce its good or services. It takes into
account selection of technology, capacity planning, layout of facilities, and design of work systems.
Process selection is a natural extension after selection of new products and services.
An organization process strategy would include
1. Make or Buy Decisions. The extent to which an organization will produce goods or provide in
house as opposed to relying on an outside organization to produce or provide them.
2. Capital Intensity. The mix of equipment and labor will be used by the government.
3. Process Flexibility: The degree to which the system can be adjusted to changes in processing
requirements due to such factors as changes in product or service design, changes in volume
processed, and changes in technology
Production System:
The production system of an organization is that part, which produces products of an organization.
It is that activity whereby resources, flowing within a defined system, are combined and transformed
in a controlled manner to add value in accordance with the policies communicated by management.
A simplified production system is shown below:

The production system has the following characteristics:
1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve
system performance.

Types of production
Intermittent production system:
Intermittent means something that starts and stops at irregular intervals (time intervals). In the
intermittent production system, goods are produced according to customer orders. These products are
produced on a small scale. The production flow is intermittent (irregular). In other words, the
production flows are not continuous.
In this type of production system, large varieties of products are produced. These products are of
different sizes. The design of these products keeps changing. It keeps changing based on product design
and size. Therefore, this system is very flexible.
The following are examples of the intermittent production system:
(i) The work of a goldsmith is based exclusively on the frequency of customer orders. The goldsmith
manufactures goods (ornaments) on a small scale according to the requirements of his client. Here,
ornaments are not made continuously.
(ii) Similarly, a tailor’s work is also based on the number of orders he receives from his clients. The
tailor sews the garments for each client independently according to measurement and size. Products

(sewn clothing) are manufactured on a limited scale and is proportional to the number of orders received
from customers. Here, sewing is not done continuously.
Characteristics of an intermittent production system are listed below:
(i) The production flow is not continuous. It is intermittent.
(ii) Wide varieties of products are produced.
(ii) The production volume is small.
(iii) (iv) General-purpose machines are used. Different types of products can be produced by the
use of these machines.
(v) The sequence of operations continues to change according to the product design.
(vi) The quantity, size, shape, design, etc. Product depends on customer orders.
The types of intermittent production system include:
Project production flows,
Jobbing production flows, and
Batch production flows.
Project production flows:
Here, in the project’s production flows, the company accepts a single complex order or contract. The
order must be completed within a certain period of time and at an estimated cost. Consider making a
boat. Such products are never manufactured in large quantities. Labour, facilities and other resources
focus on these products. Therefore, each product can be treated as a project, which requires the
sequencing of certain activities, either in series or simultaneously. PERT/CPM or network analysis is a
useful technique to plan and control such projects.
Examples of project production flows mainly include the construction of airports, roads, buildings,
shipbuilding, dams, etc.
Characteristics of project production flows:
A resource requirement varies with the production phases.

Many agencies are involved and their jobs are interrelated.
Generally. Delays take place at the end of the project.
As routing and programming changes, inspection is required.
Jobbing production flows:

In the job production flows, the company accepts a contract to produce one or a few units of a product
strictly according to the specifications given by the customer. The product is produced within a certain
period and at a fixed cost. This cost is fixed at the time of signing the contract.
Examples of such job production flows include services provided by clothing workshops, repair shops,
manufacturers of special machine tools, etc.
Characteristics of jobbing production flows:
The production of items takes place in small batches.
Items are manufactured according to customer specifications.
Highly skilled labour is needed for specialized jobs
There is a disproportionate manufacturing cycle time.
Batch production flows:

In batch production flows, the production schedule is decided according to specific orders or is based on
demand forecasts. Here, the production of items takes place in lots or lots. A product is divided into
different jobs. All jobs in a production batch must be completed before starting the next production
batch.
Examples of batch production flows include, manufacture of drugs and pharmaceuticals, medium and
heavy machinery, etc.
Characteristics of batch production flows batch instruction:
Products are manufactured and stored until demand arises.
General-purpose machines and equipment are installed.

There is a possibility of major work in progress.
You need detailed production planning and control.
2. Continuous production system:
Continuous means something that operates constantly without irregularities or frequent stops. In the
continuous production system, goods are constantly produced according to the demand forecast. The
goods are produced on a large scale for storage and sale. They are not produced at the customer’s
request. Here, the inputs and outputs are standardized together with the production process and the
sequence.
The following are examples of the continuous production system.
(i) The production system of the food industry is based solely on the demand forecast. Here a large-
scale food production takes place. It is also a continuous production.
(ii) Similarly, the production and processing system of a fuel industry is also based solely on the
demand forecast. Crude oil and other raw sources are continuously processed on a large scale to obtain a
usable form of fuel and offset global energy demand.
The characteristics of a continuous production system are listed below:
(i) The production flow is continuous. It is not intermittent
(ii) The products are standardized.
(ii) Products are produced with predetermined quality standards.
(iv) Products are produced in anticipation of demand.
(v) Standardized roadmaps and schedules are prepared.
The types of continuous production systems include:
1. Mass production flows
2. Process production flows.

Mass production flows:

Here, the company produces different types of large-scale products and stores them in warehouses until
they are demanded in the market. Products are produced with the help of a single operation or use a
series of operations.
E.g. Mass production is the production of toothpaste, soaps, pens, etc.
Characteristics of mass production flows:
1. Continuous production flow, depends on market demand.
2. Here, there is limited work in progress.
3. Supervision is easy: few instructions are necessary.
4. The material is mainly handled by machines.
5. The flow of materials is continuous with little or no glue.
Processes Production:
Here, a single product is produced and stored in warehouses until it is demanded in the market. The
flexibility of these plants is almost nil because only one product can be produced.
Examples of production process flows include steel, cement, paper, sugar, etc.
Characteristics of process production flows:
1. Highly mechanized system for material handling.
2. Low skilled labour and skilled technicians are required.
3. Very little work in progress, since the flow of material is continuous.
4. Production planning and programming can be decided in advance.
5. The complete production system is designed to produce a single item.
Characteristics of Continuous System:

The following characteristics below are;
The volume of output is generally large (mass production) and goods are produced in
anticipation of demand.
The product design and the sequence of the operations are standardized i.e. identical products
are produced.
Special purpose automatic machines are used to perform standardized operations.
Machine capacities are balanced so that materials are fed at one end of the process and the
finished product is received at the other end.
Fixed path materials handling equipment is used due to the predetermined sequence of
operations.
Product layout designed according to a separate line for each product is considered.
Advantages of Continuous System:
The following advantages below are;
The main advantage of the continuous system is that work-in-progress inventory is minimum.
The quality of output is kept uniform because each stage develops skill through repetition of
work.
Any delay at any stage is automatically detected.
Handling of materials is reduced due to the set pattern of the production line. Mostly the
materials are handled through conveyor belts, roller conveyors, pipelines, overhead cranes, etc.
Control over materials, cost, and output are simplified.
The work can be done by semi-skilled workers because of their specialization.
Utility of Accounting: Types, Explain with Understand
The disadvantages of Continuous System:

The continuous system, however, is very rigid and if there is a fault in one operation the entire process
is disturbed. Due to continuous flow, it becomes necessary to avoid piling up of work or any blockage
on the line. Unless the fault is cleared immediately, it will force the preceding as well as the subsequent
stages to be stopped. Moreover, it is essential to maintain stand by equipment to meet any breakdowns
resulting in production stoppages. Thus, investments in machines are fairly high.
Product process mix
Product-process mix helps us understand why and how manufacturing organizations change their
production operations. With changes in products, market requirements and competition, the
equipment’s, processes, procedures and human resources skills also will change. If process changes are
not carried out to accommodate process life cycles, products and processes become incompatible,
resulting in competitive disadvantage.
The product-process mix is a tool for analysing the relationship between the product life cycle and the
technological life cycle. It was introduced by Robert H. Hayes and Steven C. Wheelwright in two
classic management articles published in Harvard Business Review in 1979, entitled "Link
Manufacturing Process and Product Life Cycles" and "The Dynamics of Process-Product Life Cycles."
The authors used this matrix to examine market-manufacturing congruence issues and to facilitate the
understanding of the strategic options available to a company. The matrix itself consists of two
dimensions, product structure/product life cycle and process structure/process life cycle. The production
process used to manufacture a product moves through a series of stages, much like the stages of
products and markets, which begins with a highly flexible, high-cost process and progresses toward
increasing standardization, mechanization, and automation, culminating in an inflexible but cost-
effective process. The process structure/process life cycle dimension describes the process choice (job
shop, batch, assembly line, and continuous flow) and process structure (jumbled flow, disconnected line
flow, connected line flow and continuous flow) while the product structure/product life cycle describes
the four stages of the product life cycle (low volume to high volume) and product structure (low to high
standardization). Later writers on the subject sometimes insert an additional stage in the extreme upper-
left corner of the matrix: the project.
A company can be characterized as occupying a particular region on the matrix (see accompanying
Figure). This region is determined by the firm's stage in the product life cycle and the firm's choice of

production process. At the upper left extreme, firms are characterized as process oriented or focused
while the lower right extreme holds firms that are said to be product focused. The decision of where a
firm locates on the matrix is determined by whether the production system is organized by grouping
resources around the process or the product. Note from the figure that the vertices of the matrix result in
four distinct types of operations (described by the appropriate process choice) located on the diagonal of
the matrix.
Uses of Product process mix
Analysing the product entry and exit.
Determining the appropriate mix of manufacturing facilities, identifying the key manufacturing
objectives for each plant, and monitoring progress on those objectives at the corporate level.
Reviewing investment decisions for plants and equipment in terms of their consistency with
product and process plans.
Determining the direction and timing of major changes in a company's production processes.
Evaluating product and market opportunities in light of the company's manufacturing

capabilities.

Selecting an appropriate process and product structure for entry into a new market.

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OPERATIONS MANAGEMENT 1

Operations management – Concept:

• Operations management consists of scheduling work, assigning resources including people,

Operations Management Meaning:

Operations Management Definition:

ACME BUSINESS SCHOOL PGDM

5 P’s of Operations Management :

2. People: Direct or Indirect workforce

3. Parts: The components, sub-assemblies or even products

Importance of operations management

ACME BUSINESS SCHOOL PGDM

Distinction between Production Management and Operations Management

Production Management refers to the application of management principles to the production

ACME BUSINESS SCHOOL PGDM

Objectives of Production/Operations Management

Some of the important objectives of production/operations management are:

(ii) Minimum scrap/rework resulting in better product quality.

(iii) Minimum possible inventory levels (i.e., optimum inventory levels).

(iv) Maximum utilization of all kinds of resources needed.

(v) Minimum cash outflow.

(vi) Maximum employee satisfaction.

(vii) Maximum possible production (i.e., outputs).

(viii) Higher operating efficiency.

(ix) Minimum production cycle time.

(x) Maximum possible profit or return on investment.

(xi) Concern for protection of environment.

(xii) Maximum possible productivity.

ACME BUSINESS SCHOOL PGDM

The elements of production system can be defined as under:

Fig. Elements of Production System

FUNCTIONS OF PRODUCTION/OPERATIONS MANAGEMENT

ACME BUSINESS SCHOOL PGDM

The major functions of production managers may be categorized as shown below:

(vii) Maintenance: Servicing, Repairing, Breakdown/Preventive Maintenance, Spare Parts Inventory

ACME BUSINESS SCHOOL PGDM

Product Design and Development:

Product design defines a product’s characteristics of:

Requirements for Product Design

ACME BUSINESS SCHOOL PGDM

Objectives of Product Design:

Ten Steps of the Product Design Process:

ACME BUSINESS SCHOOL PGDM

Strarting the Conducting

ACME BUSINESS SCHOOL PGDM

Brainstorming consists of three phases:

Definition of the problem:

Therefore, it is necessary to be guided by the following rules:

Generate as many ideas as possible, without any limitations;

Even the most absurd and non-standard ideas should be considered;

Ideas can and should be combined and improved;

Selection of the most viable ideas among proposed:

2. Defining the Product

3. Conducting the User Research

ACME BUSINESS SCHOOL PGDM

7. Producing the Factory Samples

ACME BUSINESS SCHOOL PGDM

9. Starting the Production/Development

10. Providing Quality Assurance

Characteristics of Good Product Design:

A good product design must ensure the following: