“Develop success from failures. Discouragement and failure are two of the surest stepping stones to success.”
Unit – 2
Production and operations management: Production and operations management is a critical management role in the regulated transformation of raw materials into goods and services with an added value per the organisation’s policies. Although production and operations management concepts and techniques have been developed throughout time owing to global competitiveness, these concepts and methods are supplemented by newer/modified concepts and designs to fit the evolving needs of business houses.
As businesses operate in an environment where they have to offer goods, services or ideas to potential customers to earn revenue for their shareholders and also in order to expand, diversify, grow and create goodwill for themselves, they have to undertake operations with the resources that they have. The primary function of any business is the objective for which the industry has been set up. For example, for a company who sells cold drinks, operations will include all the necessary steps that are important to produce and store and finally sell the cold drinks bottles to the end customer in such a way that it ensures utmost efficiency.
Production and Operations Management involved two distinct ideas: “Production” and “Operations”. Operations management, in particular, became a popular field in academics only after the services became a matter of mass production in the new industrial revolution. When the show became intangible along with the conventional tangible, to fill this gap and to broaden the understanding of the field of production management in the services sector, the advent of operation management began.
Location of Facilities:
Location decision is one of the most important decisions of production and operations management. The decision about where the plant facility will be established concerns the location decision. For example, the idea of setting up a manufacturing plant in an industrial town of Haryana will majorly be based on several factors, including the availability of raw material, labour, ancillary activities, the customer’s geographic location etc., in no particular order.
The decision concerning the location of the facilities is typically a key decision because it has a long-term impact on the firm. Once set up, it takes much work for the firms to step back from the decision.
Plant Layout & Material Handling
The layout is the structure in which the physical components of any production facility are arranged. A production facility typically has various centres of production where each centre has a different role to play in the production process. Think of a car manufacturing plant at Manesar, Haryana. They do not just let the steel sheets, Tires, Paint cans, electrical wiring, Glass, Fibre panels, screws and bolts into the building from one side and get the final finished car out from the other. Rather there are dedicated facilities for every operation.
For metal fabrication, there is a separate setup, another set-up for the engine, another for paint etc. Similarly, each set-up requires different kinds of inputs and materials also. Sometimes the material has to be taken from one place to another. All these decisions regarding the handling of material and setting up of the physical arrangement of the plant have to be taken keeping in mind the required quality that is to be achieved with minimum wastage and costs. Thus, Plant layout and material handling are crucial decisions under production and operations management.
Quality Control
A method used to maintain a standard of quality for goods and services can be termed quality control. It involves systematically overviewing several elements that have an impact on the product's quality. Quality control also uses an efficient feedback system and corrective action mechanism to avoid faults at their source.
Inventory Management
One of the critical responsibilities of a production and operations manager is to ensure that the organization maintains adequate inventory levels to meet customer demands. Inventory management decisions include determining the optimal quantity to order, when to place an order, and how much safety stock to maintain. A manager must strike a balance between maintaining adequate inventory levels to meet demand and minimizing the costs associated with holding inventory.
Faculty Location: Facility location plays an important role in operations management. Every business has some kind of facilities, operating space, and storage space for machinery, bulk stock, types of equipment, etc., to perform their day-to-day operations smoothly. So, they require adequate space to run the business operations without compromising on time, and money and use their resources to their full potential.
Facility location is a strategic decision for the business to decide and assess whether a particular location will reduce the operating economy and increase operating efficiency by computing and controlling operational cost and labor availability, and ensuring easy arrival of raw material and distribution of the final product. While there are several mathematically derived methods to determine the optimum facility location,the business owner should also assess the qualitative aspects, i.e., that are not measurable in numbers, to ensure the best possible site location forthe optimum day-to-day operations of the business. For example, a location that is far from a major city may face higher transportation costs, unavailability of unskilled and skilled labor, and delayed supply of raw materials.Therefore, after a critical analysis of both quantitative and qualitative factors, the best possible facility location is selected. The various factors affecting the choice of location have been discussed in the following section.
Facility location is also an important concept for supply chain management (Melo, Nickel, &
Saldanha-da-Gama, 2009). The efficiency of the distribution system and the logistic system, and the ability to fulfill the order requirements on time are the key components of the supply chain which are heavily dependent on where the facility is located. Therefore, the facility should be located in the proximity of other suppliers as well as retailers. The emergence of technology in terms of artificial intelligence (AI) and the internet of things (IoT), as well as the growing awareness of various stakeholders about environment-friendly practices, have also impacted supply chain decisions.Therefore, the facility location and the operations in the facility location should adopt technological changes for efficient operations as well as ensure environmental sustainability. This has also led to the concept of green supply chain management. The linkage between facility location and supply chain network design is crucial (Petrisor&Cozmiuc, 2017).
Faculties Location:
The basic production, distribution, and feedback (PDF) model is explained in Figure 1.1. The key elements of any such production and distribution network include raw material supplier, factory or production unit, warehouse or storage unit, wholesaler, retail store, and customers. There is also a reverse process resulting in providing information, requirement, and feedback.
The raw material supplier will ensure the availability and transportation of raw materials to the factory or production unit for further processing. The factory or production unit will process that raw material into the finished goods and will send it to the warehouse or storage unit. The warehouse or storage unit will preserve the finished goods and ensure their safety. Upon the order requirement received from the wholesaler, the warehouse manager will prepare the consignment ready to be delivered to the wholesalers’ location. Now it is the job of the marketing manager as well as the wholesaler to provide the finished goods to a preferred chain of retail stores. These retail stores are selected strategically to ensure maximum coverage of the target customers and be available at locations where the customers are shopping. And lastly, a feedback mechanism works in the background where all the involved elements will provide information, requirement, and appropriate feedback.
Fig 2.1: Flow of production, distribution, and feedback(Source: Author’s compilation)
The facility location decisions will ensure that the above production and distribution model works seamlessly. Therefore,it is very crucial to decide upon the facility location strategically after considering all the elements discussed above. The facility location or the production unit should be accessible to suppliers as well as wholesalers. As the volume of business operations increases, the businesses tend to keep the production unit and the warehouses at the same location in close proximity to wholesalers and retailers.
Big businesses move a step ahead with the help of a strategic decision to adopt either forward integration or backward integration or both. In forward integration, they acquire their suppliers and become their own retailers by opening their own branded stores. For example, exclusive stores of Nike, Reliance, etc. In the case of backward integration, the manufacturer acquires their supplier of raw materials to save cost and time. In both strategies, the business is trying to have more control over the production and distribution network. For example, China is known for its world-class manufacturing unit, wherein they invite small suppliers of raw material by giving them space in the production unit itself and also have their warehouses situated at the same location and the manufacturing unit is the size of a small city. This is one of the reasons why China is famous around the world for its production infrastructure and for producing goods at the cheapest possible cost.
There could be various circumstances under which a business decides to explore a new location for its operations. Some of the common reasons are:
• Opening a new segment of the business
• Expansion of existing manufacturing operations
o To cater to the increased demand
o For increasing presence in a new region or covering a new territory
• To strategically reduce costs of the existing business operations
• Due to the uncontrollable external factors in the socio-cultural, regulatory, or legal environment.
It is recommended that a business should be flexible enough to adapt to any unforeseen external changes and have a provision for shifting to an alternate location, beforehand. Many large businesses share the same facility location to manufacture different segments of goods in order to save costs and reach economies of scale.
Globalization of operations: Due to the globalization and opening of the economy, customers have easy access to global products and global markets. When a business goes global by launching its operations around the world, they face a very diverse set of geo-political challenges.In order to tackle these challenges and the competition in global markets for providing world-class quality, businesses have spread their operations in various cost-effective manufacturing hubs around the world. It is also called the expansion of manufacturing hubs and can be seen as a growth strategy of a business. Not only does the global presence helps in catering to a different set of customers, but it also helps in lowering the overall operating costs by reducing the cost of various factors. The main reasons are:
Reduced labor costs, Reduced raw material costs, Easy access to buyer markets, Tax rebates, Trade agreements and benefits from government.
Factors affecting location decisions: It must be now clear why facility location is so important, as it affects the whole supply chain network. But still, there is no clear-cut shortcut to estimate the best possible location. As discussed earlier, a wise decision-making manager should consider both qualitative and quantitative factors. The qualitative factors will include land acquisition, construction and building, transportation, electricity, and other utility costs. The quantitative factors on the other hand will include the supply and demand of labor, climate conditions, regulations of the state, legal requirements, environment-related laws, and the political and cultural environment. For example, in the year 2008, while manufacturing the Nano car, Tata had to move its existing manufacturing plant location from West Bengal due to political disturbance in the state. This caused delays and an increase in the cost of production for Tata.A list of factors is compiled and given in Table 1.1:
Table 2.1: Factors affectinglocation decisions (source: Author’s compilation)
Operational Factors, Labor Factors, Logistic Factors, Socio-cultural, Regulatory and Climatic conditions.
Location planning methods: As discussed above, there are various qualitative factors affecting the decision about facility location. However, there are some quantitative measures to guestimate the operating cost. Various options for facility location can be assessed based on certain benchmarks and the best performer in those ranking or ratings or scores can be selected.
Maintenance and Repair:
Production and operations managers are responsible for ensuring that equipment and machinery are in good working condition to maintain the production process. This requires a plan for maintenance and repair to minimize downtime and avoid costly repairs. Decisions related to maintenance and repair include choosing the best equipment maintenance strategy, scheduling maintenance and repair work, and identifying the right suppliers to provide the necessary equipment parts and services.
Quality: Quality is sometimes defined as "meeting the requirements of the customer."
The term quality assurance describes any systematic process for ensuring quality during the successive steps in developing a product or service. ISO 9000 is a standard for ensuring that a company's quality assurance system follows best industry practices.
Quality in business, engineering and manufacturing has a pragmatic interpretation as the non-inferiority or superiority of something; it is also defined as “fitness for purpose”.
Consumers may focus on the specification quality of a product/service, or how it compares to competitors in the marketplace.
There are five aspects of quality in a business context:
Meaning of the term – quality
Quality has many meanings – many of them are subjective, such as the term “excellent” or “outstanding” quality. In the quality management field, quality has a more specific meaning.
“According to ISO 9001:2008, quality is defined as “the degree to which a set of inherent characteristics fulfills requirements”.
The very favorable experience of the client of a business when they have received a good or service that significantly surpasses what they had initially anticipated.
A marketing department can use instances of customer delight to a company’s advantage by requesting referrals and obtaining testimonials from delighted customers that can help attract new customers.
Definition: Quality assurance
It refers to the processes and procedures that systematically monitor different aspects of a service, process or facility to detect, correct and ensure that quality standards are being met.
Assurance: The act of giving confidence, the state of being certain or the act of making certain.
Quality Assurance: The planned and systematic activities implemented in a quality system so that quality requirements for a product or service will be fulfilled.
Control: An evaluation to indicate needed corrective responses; the act of guiding a process in which variability is attributable to a constant system of chance causes.
Quality Control: The observation techniques and activities used to fulfill requirements for quality.
Customers demand high-quality print jobs without variations or defects. Specifications, measurements, and controls must be established in every department to ensure predictable, reliable printing and a quality finished product. Quality controls facilitate the superior and consistent results you expect and that your customers demand.
Definition: Process control refers to the methods that are used to control process variables when manufacturing a product. For example, factors such as the proportion of one ingredient to another, the temperature of the materials, how well the ingredients are mixed, and the pressure under which the materials are held can significantly impact the quality of an end product. Manufacturers control the production process for three reasons:
What is Total Productive Maintenance (TPM)?
In industry, total productive maintenance (TPM) is a system of maintaining and improving the integrity of production and quality systems through the machines, equipment, processes, and employees that add business value to an organization.
TPM focuses on keeping all equipment in top working condition to avoid breakdowns and delays in manufacturing processes.
Analyzing the three words of T, P, M we have
The 5 Pillar of TPM-Concept
What is Total quality management (TQM)?
TQM is a set of systematic activities carried out by the entire organization to effectively and efficiently achieve company objectives so as to provide products and services with a level of quality that satisfies customers, at the appropriate time and price.
TQM – Definition “Explanation of key terms”
A scientific, systematic, companywide activity “in which a company is devoted to customers through its products and services.
Focuses on customer satisfaction – the only guarantee for long term survival assured “quality” in every process is the objective of TQM.
What is ISO?
The International Organization for Standardization (ISO) is an international standard setting body composed of representatives from various national standards organizations.
Founded on 23 February 1947, the organization promotes worldwide proprietary, industrial and commercial standards. It is headquartered in Geneva, Switzerland and as of March 2017 works in 162 countries.
QUALITY CONTROL PROCESS:
A system for maintaining desired standards in a product or process by inspecting samples of the product.
Maintenance of standards of quality of manufactured goods.
Quality is the key element in every stage of the production process from raw materials to finished product. Every manufacturer is faced with the problem if maintenance of the quality of his product.
Quality Control is systematic control by management of the variables in the manufacturing process that affect goodness of the end product. Quality control may be defined as that technique or group of techniques of the industrial management by means of which products of uniform acceptable quality are manufactured.
Elements of success
1. Management support
2. Mission statement
3. Proper planning
4. Bottom line
5. Focus on customer
6. Measurement system
7. Empowerment of employees
8. Teamwork
9. Continuous improvement process
10. Dedicated resources
4. Bottom line Growth
The TQM resources grant access to a wealth of knowledge that can help foster the development of any organization. Resources to help you improve your quality management system include:
Basic elements of Total Quality Management
Human resource
Five Ground Rules for Stimulating and Encouraging Suggestion System are:
1. Be Progressive by regularly asking your employees for suggestions
2. Remove fear by focusing on the process and not on the person.
3. Simplify the process so it is easy to participate
4. Respond quickly to suggestions and within specified period of time
5. Reward the idea with published recognition so that everyone knows the value of contribution.
Development and management
Performance Management and Development in the General Work System
Develop and administer a coaching and improvement plan if the employee is not meeting expectations.
Internal management development can include the following opportunities for employees' growth and ongoing development.