The Basics of the Operations Management

Manufacturing industries produce and supply products to customers at a price that they are willing to pay. Manufacturing industries achieve this aim while making a profit for their shareholders. The manufacturing industries have to compete in the open market. The product price is therefore determined by the competition, and the only way to increase profit is to reduce production and distribution costs. This means managing and operating the organization in an efficient manner.

Operations Management has been recognized as an important factor in an organization’s economic growth. The traditional view of manufacturing management is the concept of Production Management with a focus on economic efficiency in manufacturing. Later the new name Operations Management was identified.

What is Operations Management?

Operations management is the management of processes or systems, which utilize maximum available resources while creating goods or services in a controlled manner as per the policies of the organization. Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs such as materials, facilities, techniques, and procedures & manpower into the required quality products or services.

Operations Management may be easily understood as The set of interrelated administration of business management activities to create the highest level of possible efficiency within an organization, that is involved in manufacturing certain products or services. It encompasses forecasting, Capacity planning, Scheduling, Managing Inventories, Managing a safe environment, etc.

Operations Management Framework

Rapid changes in technology have posed numerous opportunities and challenges which have resulted in the improvement of manufacturing capabilities through operations management. Managing operations can be enclosed in general management functions such as planning, organizing, and controlling the activities.

PLANNING

Planning is the activities that establish a course of action and guide future decision-making. Planning includes clarifying the role and focus of operations in the organization’s overall strategy. It also involves product planning, facility designing, and production process.

ORGANIZING

Organizing is the activities that establish a structure of tasks and authority. Organizing includes establishing a structure of roles and the flow of information within the organization it also includes the activities required to achieve the goals and assign authority and responsibility for carrying them out.

CONTROLLING

Controlling is the activities that assure the actual performance in accordance with planned performance. To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual outputs and comparing them to planned operations management. Controlling costs, quality, maintenance, safety, and schedules are important functions here.

Objectives of Operations Management

The objectives of operations management can be divided into customer service and resource utilization categories.

1. CUSTOMER SERVICE

The first objective of operations management is customer satisfaction. Therefore, customer service is a key objective of operations management. The operating system must provide products that can satisfy the customer in terms of quality and cost.

There are three aims in terms of customer services as follows:

• Specification Of products
• Cost Of products
• Timely Delivery

In simple words “The Right Thing at the right time at the right price“.

2. RESOURCE UTILISATION

Resource Utilization is another major objective of operations management. with the proper use of all available resources such as Manpower, Machines, Material & Method, an organization not only reduce its expenses but also increase its profit.

Insufficient use of resources and bad customer service leads to the commercial failure of operations management.

Managing Global Operations

The term ‘globalization’ describes businesses’ deployment of facilities and operations around the world. As per The Peterson Institute for International Economics Globalization is the word used to describe the growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information.

It can also be defined as a worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments.

There are four developments, which have spurred the trend toward globalization as follows:

1. Improved transportation and communication technologies
2. Opened financial systems
3. Increased demand for imports
4. Reduced other trade barriers.

When an organization sets up international facilities it involves complications in its operation. There are Different trends, different languages & different quality standards in different countries. 

Also, there must be a good understanding of their competitors. Some other important challenges of managing multinational operations include other languages and customs & the company’s laws and regulations.

Scope Of Production And Operations Management

We have already noted that the operations manager is responsible for the creation of goods and services. This encompasses the acquisition of resources and the conversion of those inputs into outputs using one or more transformation processes. That involves planning and controlling the processes, manpower, equipment, facilities, utilization of resources to provide the products to the customer while meeting the other organizational objectives of effectiveness, efficiency, and adaptability.

It distinguishes itself from other functions such as personnel, marketing, finance, etc., by its primary concern for ‘conversion by using physical resources.’ The following are the activities which are listed under production and operations management functions:

• Location of facilities
• Plant layouts and material handling
• Product design Process design
• Production and planning control
• Quality control
• Materials management
• Maintenance management.

1. LOCATION OF FACILITIES

The location of facilities for operations is a long-term capacity decision that involves a long term commitment to the geographically static factors that affect a business organization. The purpose of the location study is to find the optimal location that will results in the greatest advantage to the organization. The selection of location is a key-decision as large investment is made in building plant and machinery. It is an important strategic level decision-making for an organization.

An improper location of the plant may lead to a waste of all the investments made in plant and machinery. Hence, the location of the plant should be based on the company’s changing sources of raw materials, expansion plan, Ease of transportation, diversification plan for the products, and many other factors.

2. PLANT LAYOUT AND MATERIAL HANDLING

In a manufacturing organization, a job to be manufactured spends most of the time in moving and waiting. For the reduction of this moving and waiting time of jobs/parts, it is necessary to have a proper plant layout and proper scheduling procedure.

Plant layout refers to the physical arrangement of facilities. It is the configuration of departments, work centers, and equipment in the conversion process. The overall objective of the plant layout is to design a physical arrangement that meets the required output quality and quantity most economically.

In simple words “Plant layout is such a systematic and efficient functional arrangement of various departments, machines, tools, equipment and other supports services of an industrial organization that will facilitate the smooth processing of the proposed or undertaken product in the most effective, most efficient and most economical manner in the minimum possible time”

The plant layout of an industrial organization comprises of all the aspects connected with the industrial enterprise, viz., grounds, buildings, machinery, equipment, departments, methods of manufacturing, factory services, material handling, the flow of production, working conditions, safety, maintenance, hygiene, labor and shipment of goods, etc. 

‘Material Handling’ refers to the ‘moving of materials from the storeroom to the machine and from one machine to another machine during the process of manufacture’. It is also defined as the ‘art and science of moving, packing and storing of products in any form’.

Material handling devices increase the output, improves quality, speed up the deliveries, and decrease the cost of production. Hence, material handling is a prime consideration in designing new plants and several existing plants.

3. PRODUCT DESIGN

An industrial designer’s first task is the evaluation of customer needs during the Product design & development phase. Industrial designers are expected to have the skills necessary to interview customers and research the market for identifying customer needs. 

Product design deals with the conversion of ideas into reality. Every business organization has to design, develop, and introduce new products as a survival and growth strategy. Developing new products and launching them in the market is the biggest challenge faced by organizations.

The entire process of need identification to physical manufactures of the product involves three functions as follows:

• Marketing
• Product development
• Manufacturing.

Product designing has the responsibility of designed well for manufacturability as well Manufacturing has the responsibility of selecting the processes by which the product can be manufactured.

4. PROCESS DESIGN

Process Planning refers to the optimal selection of the sequence of the manufacturing operations for the components or product. Recently a new name PPAP( Part Production approval process) was identified. Process design is a sequence of an overall process route for creating the raw material into finished goods.

These decisions include the selection of a process, choice of technology, process flow analysis, and layout of the facilities. Hence, the important decisions in process design are to analyze the manufacturing process for converting raw material into the semi-finished to complete product and to select the workstation and quality checks for each included in the workflow.

5. PRODUCTION PLANNING AND CONTROL

Production planning and control can be defined as the process of planning the production in advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow up the progress of products according to orders.

The principle of production planning and control lies in the statement ‘First Plan Your Work and then Work on Your Plan’. The main functions of production planning and control include planning, routing, scheduling, dispatching, and follow-up.

• Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it. Planning bridges the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen.
• Routing may be defined as the selection of path which each part of the product will follow, which is transformed from raw material to finished products. Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape.
• Scheduling determines the program for the operations. Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as determine the sequence of operations to be followed.
• Dispatching is concerned with starting the processes. It gives the necessary authority so as to start a particular work, which has already been planned under ‘Routing’ and ‘Scheduling’.

Therefore, dispatching is ‘release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts’.

The function of the follow-up is to report daily the progress of work in each shop in a prescribed proforma and to investigate the causes of deviations from the planned performance.

6. QUALITY CONTROL

Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of quality in a product or service’. It is a systematic control of various factors that affect the quality of the product. Quality control aims at the prevention of defects at the source, relies on an effective feedback system and corrective action procedure.

Quality control can also be defined as ‘that industrial management technique by means of which product of uniform acceptable quality is manufactured’. It is the entire collection of activities that ensures that the operation will produce the optimum quality products at minimum cost.

The main objectives of quality control are:

• To improve the companies income by making the products more acceptable to the customers i.e., by providing long life, greater usefulness, maintainability, etc.
• To achieve interchangeability of manufacture in large scale production. To reduce the company’s cost through the reduction of losses due to defects.
• To produce optimal quality at a reduced price.
• To check the variation during manufacturing.
• To make inspections prompt to ensure quality control.
• To ensure the satisfaction of customers with productions or services or high-quality level, to build customer goodwill, confidence, and reputation of the manufacturer.

7. MATERIALS MANAGEMENT

Materials management or inventory management is that aspect of operations management function which is primarily concerned with the acquisition, control, and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view.

Keeping inventory is expensive. It needs storage space, some amount of money is invested in the inventory, and there are carrying and maintenance costs. Good production planning optimizes issues involved in inventory policies.

• The main objectives of materials management are:
• To purchase, receive transport, and store materials efficiently and to reduce the related cost.
• To cut down costs through simplification, standardization, value analysis, import-substitution, etc.
• To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply at reasonable rates.
• To minimize material cost. To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios.

8. MAINTENANCE MANAGEMENT

In manufacturing, equipment and machines are very important resources that are constantly used for producing products. So, these must be kept in the best operating condition. Otherwise, Poor working of machines & equipment will lead to quality-related problems or there will be excessive downtime and also interruption of production if it is used in a mass production line. Hence, Industrial maintenance is necessary to maintain the equipment in good operating conditions.

Industrial Maintenance includes two following actions:

• Control or prevent the deterioration process leading to failure of a machine or equipment by preventive maintenance.
• Restore the object to its operational state through corrective actions after a breakdown or failure.

The main objectives of maintenance management are:

To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost. To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption. To ensure the availability of the machines, buildings, and services required by other sections of the factory for the performance of their functions at the optimal return on investment.

Conclusion

As operation managers plan, organize, and control the manufacturing processes, they face many problems and must make many decisions. They can simplify their difficulties using models like aggregate planning models for examining how best to use existing capacity in short-term, break-even analysis to identify break-even volumes, linear programming, and computer simulations for capacity utilization, decision tree analysis for the long-term capacity problem of facility expansion, the simple median model for determining the best locations of facilities, etc.