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Unit 1.

Introduction to
operations management.
Operations management
Production( Manufacturing) is nothing but
conversion of input into output.
Since, Service organizations also have this
feature of converting input into output the
term production is replaced by
That means the term operations includes
both service as well manufacturing
Operations can be defined :
“As the process of changing input into
output thereby adding value to some
Value is added to entity by one of the
following ways:
1. Alteration
2. Transportation
3. Storage
4. Inspection.
Operations Management Can be defined:
As planning, organizing and controlling of
operations functions.
Objectives/Importance of operations management:

1. Effectiveness objective:
Producing right kind of goods and services that
satisfy needs of the customers
2. Efficiency objective:(Productivity objective)
Producing maximum output of goods and
services with minimum input resource

3. Quality objective:
To make sure that goods and services produced
are according to predetermined quality

4. Lead time objective:

To minimize the time required in the conversion
5. Capacity utilization Objective:
Maximum utilization of manpower, machines,

6. Cost objective:
Minimizing cost of producing goods or rendering
1. Product selection and design
 It must be done after detailed evaluation of
alternatives available.
 Technique like value engineering can be used in
creating alternate design
 Wrong selection and poor design may the lead
the organization to be ineffective and non-
2. Process Selection and planning:
 Process selection includes decisions concerning
choice of
 Technology
 Equipment
 Machinery
 Materials handling system etc.
 Process planning includes details of resources
required and their sequence
3. Plant (facilities) location:
 It takes into consideration factors like
 Availability of raw material
 Manpower
 Transportation and marketing facilities
 Availability of resources like water supply,
 Government policy
 Nature of the product produced
 Accessibility to the customers in case of service
4. Plant layout and materials handling:
 Plant layout is concerned with relative location
of one department with other
 It should facilitate material flow and processing
in shortest distance and time.
 Good plant layout and minimum material
handling are said to be two sides of a coin.
 It improves co-ordination and eliminates delays
and congestion
 Layout integrates factors of production
5. Capacity Planning:
 It is concerned with determination and
acquisition of resources after taking into
consideration demand of the product
 Excess capacity results into under utilization of
 Inadequate capacity leads to over utilization of
the resources
 Break even analysis is a valuable tool for
capacity selection.
6. Production planning and control:
 It includes
 Production schedule
 Sequence of operation
 Machines assignment
 Job assignment
 And controlling involves keeping track of
happenings and taking corrective actions
in case of variations
7. Inventory control
 It deals with optimal inventory to ensure
its availability at minimum capital lock up
 Inventory includes raw materials,
components, spare parts, tools, finished
goods etc.
 Material requirement planning (MRP) and
Just in Time (JIT) are the latest
techniques that helps for reduction of
8. Quality Assurance and Control:
 Goods and services produced by the company
should confirm the standards set at minimum
 Total quality assurance system includes aspects
such as:
 Setting of quality standards
 Inspection of purchased and subcontracted parts
 Control of quality during manufacturing
 And inspection of finished goods including
performance testing.
9. Work study and job designing:
 Work study is also called as time and motion
 It is concerned with improvement and
maximization of productivity in the existing and
new jobs.
 Frank B. Gilbreth is considered the founder
father of work study.
 Two principal components of work study
1.Method study
2. Work measurement.
Method study:
 Is defined as systematic recording and critical
examination of the existing and proposed ways
of doing the work
 It helps in applying easier and more effective
methods and reducing the cost.
 When method study is applied
production methods yield the following
1. Improved work environment
2. Improved facility layout
3. Better utilization of facilities
4. Greater safety
5. Lesser materials handling
6. Lower work in progress
Work measurement:
 It is defined as application of techniques
designed to establish the time for a qualified
worker to carryout a specific job under specific
conditions and definite level of performance.
 Work measurement have many uses such as :
1. Manpower planning
2. Production scheduling
3. Cost estimating
4. Cost reduction and control
5. Measuring employees progress.
10. Maintenance and replacement:
 It includes selection of optimal preventive
policy to ensure higher equipment availability
at minimum repair and maintenance cost.
 Preventive maintenance includes:
1. Inspection
2. Planned lubrication
3. Periodic cleaning and upkeep
4. Planned replacement of parts
5. Monitoring the conditions
6. Calibration of instruments and machines etc.
11. Cost control and cost reduction.
Scope & Functions selection and
of operations Cost control design
management & Cost

e and
replacement Plant Location

Work study management
and job Plant layout

assurance Capacity
and control Utilization

Inventory planning
control and control
Evolution Of Manufacturing System and
factory system.
Before Industrial Revolution:
 Goods were produced using craft production
 Highly skilled workers using simple, flexible tools
produced goods according customers
 Because product was made by skilled craftsmen
production was slow and costly
 There was no economies of scale
 Many small companies emerged each with its
own set of standards.
The industrial Revolution:
 It changed the face of production substituting
human by machines.
 Invention of steam engine played a significant
role in industrial revolution since, it provided a
source of power to operate machines in
 Coal and iron provided material for generating
power and machinery
 Development of standard gauging system which
reduced the need of custom made goods.
 Factories began to grow rapidly
Evolution of operation management
Year Contribution Contributor
1776 Division of labour Adam Smith
1800 Standardized parts Whitney
1883 Specialization as Charles Babbage
advantage of division of
1881 Scientific management F. W. Taylor
1917 Work study Frank B. Gilbreth
1913 Coordinated assembly Henry Ford
1913 Gantt Charts Henry Gantt
1913 Emerson Efficiency Harrington Emerson
1914 Economic lot size F.W. Harris
1924 Statistical quality Walter Shewhart
1931 Sampling Inspection F.H. Dodge, H.G.
Homings, &
W. Shewhart
1937 Work sampling L.H.C. Tippett
1940-1980 Till present day numerous developments
have been there.
Adam smith(1776):
 He was Scottish economist.
 He was the person who initiated the thought of
managing the production activities
 He is said to be the originator of concept of
production management.
 He advocated “division of labour” through his
book titled ‘The wealth of nations’.
 He gave three major benefits of division
of labour.
1. Workmen performing work in repetition attain
higher skills.
2. Time can be saved while changing one activity
to another
3. Improvement can be made in production
methods when workmen are made to
specialize on certain task
2. Charles Babbage (1883)
 He was English Mathematician
 He agreed with Adam smiths theory of division
of labour.
 He suggested specialization as yet another
advantage of division of labour
 And advanced the concept of specialization as
next logical stage to the division of labour.
 He demonstrated the world benefits of
specialization by giving example of pin industry
and its seven operations.
 Drawing, straightening, pointing, twisting,
cutting heads, heading, and tinning to highlight

3. Whitney (1800)
 Showed that machine tools could make
standardized parts to exact specification
 This parts can be used for other purposes also.
4. F.W. Taylor (1881):
 He was known as ‘father of scientific
 In 1881 as chief Engineer of Midvale steel, he
studied how tasks were performed.
 He disagreed with the managements approach
to allow the workers to do their own task,
decide their own methods and get themselves
trained on the job.
 He advocated four duties of
1. Development of science for each element of
man’s work
2. Selection of best worker for each particular
task and then training and developing the
3. Striving for cooperation between workers and
management to obtain both maximum
production and higher worker wages.
4. Division of work between workers and
 These four duties developed into great
expansions which are:
 Method study and work measurement
 Training, selection and placement & industrial
 Today management takes the function of
planning and control while supervisors and
workmen are left to the execution of the plan.
 His direct contribution also includes
 Principles of ‘functional organization’ and
‘Taylor’s differential piece rate method’.
Taylor also did remarkable work of direct
advantage to production management:
a) The Task under study should be analyzed part
by part, each part being called as element.
b) Each element should be examined and those
which do not form a part of work cycle should
be dropped
c) Element should be timed accurately using stop
d) A small allowance of time should be added to
the time of each element to compensate for the
unforeseen contingencies.
5. Frank B. Gilbreth:
 He is the founder father of “work study”
 He was assisted by his wife Lilian Gilbreth.
 He envisioned motion study as a part of work
 He emphasized the importance of relationship
between operator’s output and his physical
 He devised a system of classifying motion into
seventeen basic divisions which he called as
 Lilian who was psychologist pioneered the
concept of human factor in the industry.
 Gilbreth has introduced the concept of micro
motion camera studies as a substitute to stop
watch studies to measure the time of short
cycles of job.
6. Henry ford (1913):
 He created Ford Motor Company in1903
 He was the person who first used conveyorised
assembly line.
 Unfinished products moved by the conveyor
and passed from one work station to another
 He gave to the world the concept of mass
7. Henry Gantt (1913):
 He used visual diagrammatic tool which is
known as “Gantt Chart”
 It is used for production schedule and machine
load schedules.
 It is still in practice
8. Harrington Emerson (1913):
 He evolved “Emerson’s Efficiency Plan”
 To emphasize labour efficiency as a basis for
basis for payment of wages
9. F.W. Harris (1914):
 He was the first to develop economic lot size
model (EOQ)
 At present Wilson’s Economic lot size formula is
being used.
9. Walter Shewhart (1914):
 He pioneered the concept of statistical quality
 He introduced the concept of control charts for
monitoring quality of production process.
10. F.H. Dodge, H.G. Roming & W.
Shewhart (1931):
 Developed the concept of sampling inspection.

11. L.H.C. Tippet (1937):

 Developed the concept of work sampling to
determine machine and manpower utilization
 For setting performance standards for long-
From 1940-1980 number of developments took
place which are as follows:
 Around 1950 two major developments took
place such as operation research and “Value
Engineering” and “Value Analysis”

Value Engineering: It is application of scientific

methods and using mathematical models to
solve managerial decision making problems.
Value Analysis: It is an organized approach to
identify unnecessary cost in product or system
and eliminating it (unnecessary cost ) without
impairing the quality, reliability and functional
ability of product or system.

 Development in computers led to development

of MIS and DSS
Development of CPM and PERT
 CPM was developed by Du Pont and the
emphasis was on the relation between the cost
of the project and its overall completion time.
 Used : Production management - for the jobs of
repetitive nature
 PERT was developed by the US Navy for the
planning and control of the Polaris missile
program and the emphasis was on completing
the program in the shortest possible time
 Used In: Production management for non-
repetitive jobs (research and development)
 In 1960’s the concept of production also
included non-manufacturing organizations which
replaced the production management by
operations management.
 In 1970-1980 :The following development took
 Kanban System
 Quality circles
 Group technology
 Cellular manufacturing
 Flexible manufacturing system
 Computer aided design or manufacturing
 World class manufacturing
 Lean manufacturing
 Total quality management and quality
The process of development is….Still going on.
Typical Organization Pre Past
Typical Organization Past
Contribution of Dr. Philip B. Crossby

 He was born in 1926 in Florida, USA and died in

 He was a businessman and author who
contributed to quality management practices.
 Crosby initiated the “Zero Defects” program at
the Martin Company Orlando, Florida.
 As the quality control manager of the Pershing
missile program, Crosby was credited with a 25
percent reduction in the overall rejection rate
and a 30 percent reduction in scrap costs.
 Crosby started the management consulting
company “Philip Crosby Associates” which
provided educational courses in quality
 Also in 1979, Crosby published his first business
book, Quality is free.
 He was called as quality guru and was known for
four absolutes of quality management
Four absolutes :
1.Quality means conformance to requirements, not
2.Quality comes from prevention, not detection.
3.Quality performance standard is Zero Defects
(ZD), not Acceptable Quality Levels.
4.Quality is measured by the Price of Non-
conformance ,not by indexes.
 Six sigma which is the quality standard permits
3.4 defects in 1 million.
“ Crosby said that if you think you will make
mistake then you will make mistake”
“ He suggested there should be zero defect which
is the perfection of work performance”
“ His belief was that an organization that
established a quality program will see savings
returns that are more than they pay for cost of
the quality program and hence ‘quality is free’.
Contribution by Edward Deming

 William Edwards Deming was born on 14th Oct

1900,Lova,USA and died in 1993.
 He was an American statistician, professor,
author, lecturer, and consultant
 He is best known for his work in Japan.
 Ford Motor Company was the first American
corporations to seek the help from Deming in
Contribution of Deming:
“ Deming was best known for reminding
management that worker are responsible for
only 10-20 % of the quality problems and that
management is responsible for 80-90% for it”
 Plan-do-check-act Cycle
 7 deadly diseases
 14 points for management.
7 Deadly Diseases for quality crises
1. Lack of constancy of purpose
2. Emphasis on short-term profits
3. Evaluation by performance, merit rating, or
annual review of performance
4. Mobility of management
5. Running a company on visible figures alone
6. Excessive medical costs
7. Excessive costs of warranty, fueled by lawyers
who work for contingency fees
14 points for management:
 Create constancy of purpose toward
improvement of product and service, with the
aim to become competitive and stay in business,
to provide jobs.
 Adopt the new philosophy, management must
awaken to the challenge, must learn their
responsibilities, and take on leadership for
 Cease dependence on inspection to achieve
quality. Eliminate the need for massive
inspection by building quality into the product in
the first place.
 End the practice of awarding business on the
basis of price tag. Instead, minimize total cost.
Move towards a single supplier for any one item,
on a long-term relationship of loyalty and trust.

 Improve constantly and forever the system of

production and service, to improve quality and
productivity, and thus constantly decrease costs.

 Institute training on the job.

 Institute leadership, the best supervisors are
leader and coaches and not dictators.

 Drive out fear: create a fear free environment so

that everyone can work effectively and
contribute to the organization.
There is economic loss associated with fear.

 Break down barriers between departments.

 Eliminate the slogans aimed at work force.
 Eliminate numerical goals, work standards or
 Remove barrier that hinder pride in
 Institute a vigorous program of education and
 Create structure in top management that will
promote first 13 points.
Contribution of Genichi Taguchi

 Born on 1st Jan 1924, in Tokamachi Japan.

 He is an Engineer and statistician
 He has developed a methodology for applying
statistics to improve the quality of manufactured
 He was honored as “Quality Guru”
His contribution was as follows:
1. Loss function
2. Off-line quality control
3. Statistical design of experiments
1. Loss function:
 Used to measure financial loss to society
resulting from poor quality.
 The quality costs are simply represented by
the number of items outside specification
multiplied by the cost of rework or scrap.
 Taguchi insisted that manufacturers to
broaden their horizons to consider cost to
 Any item manufactured away from nominal
would result in some loss to the customer,
through early wear-out, safety etc.
 These losses are externalities and are usually
ignored by manufacturers, which are more
interested in their private costs than social costs.
 Taguchi specified three situations:
1. Larger the better (for example, agricultural
2. Smaller the better (for example, carbon dioxide
emissions) and
3. On-target, minimum-variation.
2. Offline quality control
 Taguchi realized that the best opportunity to
eliminate variation is during the design of a
product and its manufacturing process. The
process has three stages:
1. System design
2. Parameter design
3. Tolerance design
System design
 This is design at the conceptual level, involving
creativity and innovation.
Parameter design
 Once the concept is established, the nominal
values of the various dimensions and design
parameters need to be set.
Tolerance design
 With a successfully completed parameter design,
and an understanding of the effect that the
various parameters have on performance
 Resources can be focused on reducing and
controlling variation in the critical few
dimensions .
3. Statistical design of experiments.
 He suggested use of statistical methods to
carryout number of experiments for selecting
the system process or product design.
Mass Customization:
 Mass customization, is the use of flexible
computer-aided manufacturing systems to
produce custom output.
 It is the combination of low unit costs of mass
production processes and flexibility of individual
 It is used in marketing, manufacturing, call
centers and management.
 Its aim is tremendous increase in variety and
customization without a corresponding increase
in costs.
 It provides strategic advantage and economic
 Mass customization is the method of “Effectively
postponing the task of differentiating a product
for a specific customer until the latest possible
point in the supply network."
Types of mass customization:

 Collaborative customization -firms talk to

individual customers to determine the precise
product offering that best serves the customer's
For example, some clothing companies will
manufacture blue jeans to fit an individual
customer, call centers etc, paint industry.
 Adaptive customization - firms produce a
standardized product, but this product is
customizable in the hands of the end-user (the
customers alter the product themselves)
For e.g. Multi-purpose products ( Zandu
balm, mobile phones, laptops)
 Transparent customization - firms provide
individual customers with unique products.
for e.g. Designing costumes for film stars or
making some vehicle for particular class of
people or interior designing.

 Cosmetic customization - firms produce a

standardized physical product, but market it to
different customers in unique ways.
Q1 a) Explain the Nature and Importance
(objectives) of operations management.
b) State Scope (functions) of operations

Q2 a) Evolution of operations management

b) Evolution of manufacturing
Explain development of manufacturing
Q3. Explain contribution made by :
a) Philips Crosby
b) Edward Deming
c) Genichi Taguchi
d) Henry Ford
Q4. Short Note on : Mass Customization