1.1 Introduction
Production/Operation management
is the process which
combines and transforms various
resources
used in the production/operation subsystem of the
organization
into value added products/services
in a controlled
manner as per the policies of
the organization.
Resources used in
production/ operation subsystem
Transform
(In controlled
manner as
per
the policies of the
organization)
Production/Operation
function:
Range
of inputs
The set of interrelated management activities which are involved in manufacturing certain products is called production management and for service management, then corresponding set of management activities is called
as operation
management.
Examples:
(Products/goods)
Boiler with a specific capacity,
Constructing flats,
Car, bus, radio,
television.
Examples: (Services)
Medical facilities,
Travel booking services.
In the process of managing
various subsystems of the organization executives at different levels of the organization need to track several management decisions. The management decisions are Strategic, tactical and operational.
Strategic (Top level) Tactical (Middle level) Operational (Bottom level)
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Defining goals
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Plant location
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effective
and
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Making policies
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new product
establishment
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efficient
utilization
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Monitoring of budgets
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of resources
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Corrections from feedback information:
v Tight quality check
on the incoming raw-material.
v Adjustment
of machine settings.
v Change of tools.
v Proper
allocation
of operations to machines
with
matching skills.
v Change in
the
production plans.
1.2 Productivity:
Productivity is a relationship
between the output (product/service)
and input (resources
consumed in providing them)
of a business system. The ratio
of aggregate output to the
aggregate input is called productivity.
Productivity = output/Input
v For survival of any organization,
this
productivity ratio must be
at least 1.If it is
more
than 1, the organization is in a comfortable position. The ratio
of output produced to
the input resources utilized
in the production.
1.3 Importance:
Benefits derived
from
higher productivity are as follows:
ü It helps to cut down cost per
unit and thereby improve the
profits.
ü Gains from
productivity can
be transferred
to the consumers in form
of lower priced
Products or better quality products.
ü These gains
can
also be shared
with workers or employees by paying them at higher rate.
ü A
more productive entrepreneur can have better
chances to exploit expert opportunities.
ü It would
generate more employment opportunity.
ü Overall productivity reflects
the
efficiency of production system.
ü More output
is produced with same
or less input.
ü The
same output is produced with lesser input.
ü More output
is produced with more input.
ü The proportional
increase in output
being more than the proportional
increase in input.
1.4 Productivity Measurement:
Productivity may be measured
either on aggregate basis or on
individual basis, which
are
called total
and partial measure.
Total productivity Index/measure = Total output/ Total input
= Total production of goods
and services
Labour+material+capital+Energy+management
Partial productivity indices, depending upon
factors used,
it measures the efficiency of
individual factor of production.
Labour productivity Index/Measure
= Output in unit
Man hours worked
Management productivity
Index/Measure
= Output
Total cost
of management
Machine productivity Index/Measure
=
Total
output
Machine hours worked
Land productivity
Index/Measure = Total output
Area of Land used
Partial Measure =
Output or
Output or Output or Output
Labour Capital
Materials Energy
Solution:
Total measure = Total Output = 13,500 = 0.89
Total Input 15,193
Multi factor measure =
Total
Output = 13,500 = 4.28
Human+Material 3,153
Multi factor measure = Finished units = 10,000 = 3.17
Human+Material
3,153
Partial Measure1 = Total
Output = 13,500 = 25
Energy 540
Partial Measure2= Finished units
= 10,000
= 18.52
Energy 540
Note: For multifactor and partial
measures it is not
necessary to use total
output as numerator. Often, it is
describe to create
measures that represent
productivity as
it relates to some particular output
of interest.
Other fields for
the measurement of
partial measures of productivity are:
Business Productivity Measure Restaurant
Customers (Meals) per
labour hour Retail Store
Sales per square foot
Utility plant
Kilowatts per ton
of coal
Paper mill
Tons of paper per cord
of wood
Example-2
A furniture manufacturing company has
provided the following
data. Compare
the labour, raw materials and supplies and total productivity
of 2015 and 2016.
Output: Sales
value of production in dollar ($)
22,000
(in 2015) and 35,000 (in 2016)
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2015
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2016
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Inputs: Labour
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10,000
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15,000
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Raw materials and Supplies
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8,000
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12,500
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Capital equipment
depreciation
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700
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1,200
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Other
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2,200
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4,800
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Solution:
a. Partial productivities
2015
2016
Labour 2.20 2.33
Raw
materials and Supplies 2.75 2.80 b. Total
Productivity 1.05 1.04
1.5 Productivity measurement approaches at the enterprises level:
As stated above total
productivity is expressed
as
the ratio of aggregate
output to the aggregate
input. That the total overall performance is captured in this
ratio,
becomes apparent,
if
we examine the
relationship between this
ratio
and the age-old
performance
measure of profit.
If the outputs and input
for the period for which
productivity is measured, are expressed
in rupees, then under such restrictive assumptions one
can write:
Aggregate
output =Gross Sales=G (Say) Aggregate input=Cost =C (Say)
Total
Productivity=P(Say)= G ………………..(1)
C
From the definition of profit, we have;
Profit= π = G-C ………………….(2)
By dividing eqn (2) by C,
p = G - 1
C C
So from (1),
Þ
For Zero profit ( p =0), P = 1
For a
Loss, ( p á 0), Pá1
p
=P-1
C
For a profit, p ñ0, Pñ1
Zero profit will give a productivity value
of 1, while a loss will give
productivity value
less than
1.The profit to
cost ratio will determine the increase in
productivity.
The above relationship
that
demonstrates that increased profit
to cost ratio will lead
to increased overall productivity, is constituent
with our expectation on how an overall performance measure
should behave. However it suffers
from a number of drawbacks. Some of
which are listed here,
a) Given that our objective in productivity measurement is to capture the efficiency
of utilization of
resources, the
effect of price
variations over time need to be corrected. Thus aggregate output should be equal to gross sales suitably inflated or deflated with respect to a
base year.
b) Equating output to sales implies, whatever is produced in the particular period is sold.
Possibility of inventory, material manufactured for own use, etc. are n’t taken in to
consideration.
c) Equating aggregate input to cost raises a host of problems and involves several restrictive
assumptions. How to account for the fixed investment and working
capital, whether to take
the fringe benefits
in to account etc. are some of the
problems.
The different approaches to measurement have arisen mainly
in the context of correcting the above drawbacks.
1.6 Techniques for Productivity
Improvement:
Higher productivity in organization leads to national prosperity and better standard of living
for the whole community. The
methods contribute to the improvement of productivity are method study and work measurement by reducing work
content and Ineffective time.
Work content means the amount of work “contained in” a given product or process measured
in man-hour or machine-hour. Except in some
cases like in processing industries, actual
operation times are
far in excess
of the theoretical minimum.
Ineffective time is the time for
which the worker or machine or both are idle due to the
shortcomings of the management
or the worker.
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