POM 040: PRODUCTION AND OPERATIONS

MANAGEMENT

BMC
 LECTURE ONE

Introduction to Production and Operations

Management
What is Production and Operations
Management?
Production is the creation of goods and services
-Operation is that part of an organization which is concerned
with transformation of a range of inputs into required output
having the requisite quality level
-Management is the process which combines and transforms
various resources used in operations subsystem into value added
services in a controlled manner as per the policies of an
organization
Operations Management (OM) is the set of activities that
creates value in the form of goods and services by
transforming inputs into outputs
Organizing to Produce Goods and
Services
 Essential functions:
 Marketing – generates demand
 Production/operations – creates the product
 Finance/accounting – tracks how well the
organization is doing, pays bills, collects the
money
Why Study POM?
 POM is one of three major functions (marketing, finance, and operations) of
any organization

 We want (and need) to know how

goods and services are produced
 We want to understand what operations
managers do
 POM is such a costly part of an
organization
What Operations
Managers Do
Basic Management Functions
 Planning
 Organizing
 Staffing
 Leading
 Controlling
The Critical Decisions
 Design of goods and services
 What good or service should we offer?
 How should we design these products and services?
 Managing quality
 How do we define quality?
 Who is responsible for quality?
The Critical Decisions
 Process and capacity design
 What process and what capacity will these products require?
 What equipment and technology is necessary for these processes?
 Location decision
 Where should we put the facility?
 On what criteria should we base the location decision?
The Critical Decisions
 Layout decision
 How should we arrange the facility?
 How large must the facility be to meet our plan?
 Human resources and job design
 How do we provide a reasonable work environment?
 How much can we expect our employees to produce?
The Critical Decisions
 Intermediate and short–term scheduling
 Are we better off keeping people on the payroll during slowdowns?
 Which jobs do we perform next?
 Maintenance decision
 Who is responsible for maintenance?
 When do we do maintenance?
The Production System

 What are systems?

 What are components of a system?
 What is transformation and value adding activities?
 The Production System

Inputs Processes Outputs

• Labor, Production system Goods
•capital, transforms inputs to outputs and
•Raw material in order to increase in services
•Customers for productivity per year. The
service productivity increase is the
result of a mix of capital,
labour and management

Feedback loop
 Characteristics of Goods

 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction
Characteristics of Service
 Intangible product
 Produced and consumed
at same time
 Often unique
 High customer interaction
 Inconsistent product
definition
 Often knowledge-based
Productivity Challenge

Productivity is the ratio of outputs (goods

and services) divided by the inputs
(resources such as labor and capital)

The objective is to improve productivity!

 Productivity

Units produced
Productivity =
Input used

 Measure of process improvement

 Represents output relative to input
 Only through productivity increases
the standard of living improve
Productivity Calculations
Single-Factor Productivity

Labor Productivity
Units produced
Productivity =
Labor-hours used

1,000
= = 4 units/labor-hour
250

One resource input  single-factor productivity

 Multi-Factor Productivity

Output
Productivity =
Labor + Material + Energy
+ Capital + Miscellaneous
 Also known as total factor productivity
 Output and inputs are often expressed
in shillings/dollar

Multiple resource inputs  multi-factor productivity

 Productivity Example
Single-Factor
Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day

Old labor 8 titles/day

productivity = 32 labor-hrs
 Productivity

Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day

Old labor 8 titles/day

productivity = 32 labor-hrs = .25 titles/labor-hr
 Multi-Factor Productivity

Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
New System:
14 titles/day Overhead = $800/day

Old labor 8 titles/day

productivity = 32 labor-hrs = .25 titles/labor-hr

New labor 14 titles/day

productivity = 32 labor-hrs
 Productivity

Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
New System:
14 titles/day Overhead = $800/day

Old labor 8 titles/day

productivity = 32 labor-hrs = .25 titles/labor-hr

New labor 14 titles/day

productivity = 32 labor-hrs = .4375 titles/labor-hr
 Productivity

Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
New System:
14 titles/day Overhead = $800/day

Old multifactor 8 titles/day

productivity = $640 + 400
 Productivity

Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
New System:
14 titles/day Overhead = $800/day

Old multifactor 8 titles/day

productivity = $640 + 400 = .0077 titles/dollar
 Productivity

Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
New System:
14 titles/day Overhead = $800/day

Old multifactor 8 titles/day

productivity = $640 + 400 = .0077 titles/dollar

New multifactor 14 titles/day

productivity = $640 + 800
 Productivity

Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
New System:
14 titles/day Overhead = $800/day

Old multifactor 8 titles/day

productivity = $640 + 400 = .0077 titles/dollar

New multifactor 14 titles/day

productivity = $640 + 800 = .0097 titles/dollar
 Business Strategy

 To achieve strategic competitiveness and

earn superior profit, a company must
analyze its external environment , identify its
opportunities, determine which of its
internal resources and capabilities are core
competences and choose the appropriate
strategy to implement
 What is a strategy

 Is an integrated and coordinated set of action

taken to exploit core competencies and gain
competitive advantages
 Core competencies are the resources and
capabilities that have been determined to be a
source of competitive advantages for a firm
over its arrivals
Strategy- cont’
 Is the detailed action taken to provide
value to customers and gain competitive
advantages by exploiting core
competencies in specific, individual
product markets
 It indicate how an organization intend to
compete in particular, product market and
gain competitive advantages over its
arrivals
Cont.…
Cont
Types of competitive strategies

 Cost leadership strategy

 Differentiation strategy
 Quality strategy
 Quick response strategy
Cost leadership strategy

 Provides goods or services with features acceptable to customers

at the lowest competitive price.
Differentiation strategy

 Provides products that customers perceive as being unique in

ways that are important to them
 Differentiated products offer value to customers
Read on

 Quality strategy
 Quick response strategy
Assignment 1: Group

 Explain the historical Background of Production and operations

management
 Presentation and submission date: 9th June 2020
END