Class notes for PGDM Second Semester students. Difference between Production & Operations Management

1. Production V/s Operations Management
Definitions
• Operations Management transforms inputs, such
as people, material, and money, to Outputs which
Production V/s Operations
may be goods and / or services.
Management • Production Management is concerned with the
Presented By: production of goods and services.
Anupam Kumar – It deals with the management of resources (inputs:
Reader machines, raw materials, human skills, etc),
SMS Varanasi – AND the distribution of finished goods and services
(outputs) to the customers.
Goods V/s Services Operations Function
Goods (Products) Services • Operations function is much broader than the
• Tangible product • Intangible product Production function or the activities which
• These Product can be • These Products cannot occur in a factory.
inventoried be inventoried – Products must be developed,
• Low customer contact • High customer contact – Materials must be purchased,
• Longer response time • Short response time – Facilities must be maintained,
• Capital intensive • Labor intensive – Products must be distributed, and so on.
Evolution of Operations Management Evolution of Operations Management
• Until the 19th century, the world was mostly • In the 18th century, most manufacturing was
performed by rural families in their own homes
rural and agricultural. under the domestic or cottage industry system.
• Merchants supplied families in small towns with raw
• Most of the products were made by highly materials and later found markets for the finished
skilled people called artisans. products.
• The development of steam power and the
• Under the apprenticeship system, an artisan introduction of labor-saving equipment (or
automation) early in the 18th century led to the
supervised the work of several apprentices development of the factory system.
during long training period.
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2. Production V/s Operations Management
Evolution of Operations Management Evolution of Operations Management
• The principle of the factory systems was simple: • Manufacturing costs were reduced because no time was
• Assign workers a small set of tasks that they repeat over and needed for setting machines and people to produce other
types of products.
over.
• This reduces the time spent by workers in switching tasks and
• As the sizes of the factories increased, management of these
they become specialized. operations became a major problem.
• The result is improved labor productivity and lower
production costs. • Frederick Taylor introduced systematic approaches to
• Technological developments in 1850s transformed factory operations management at the turn of 19th century.
system into mass-production.
• Factories became larger. They produced huge volumes of • His intent was to eliminate waste, especially the wasted
identical products. effort, in order to minimize costs.
Evolution of Operations Management Evolution of Operations Management
• Henry Ford combined the teachings of Taylor with the • The Hawthorne Studies stimulated the development
concepts of labor specialization and interchangeable parts to of human relations movement.
design the first moving assembly line in 1913. – By demonstrating that worker motivation is a crucial
element in improving productivity.
• In 1920s and 1930s, a series of studies were conducted at the
Hawthorne Works of Western Electric by Elton Mayo. • As the complexity of operations increased,
sophisticated decision-making tools were needed.
• The results showed that psychological factors were as
important as scientific job design.
• This gave rise to the use of quantitative techniques
and statistical tools in Operations Management.
Quantitative Models & Statistical
Evolution of Operations Management
Techniques
• Statistical Quality Control • The 1950s was the beginning of the information
– Uses statistics in the control of product quality by technology era.
controlling the processes by which products are made.
• Economic Order Quantity
– Used for finding the least cost inventory ordering • The discovery of transistor by Shockley led to the
• Gantt charts ability process data and information at continuously
– For sequencing operations decreasing costs.
• Critical Path Method
– For finding optimum completion time of operations. • Monitoring inventories of hundreds of units or
• Linear programming managing a large project without a computerized
– A management tool for optimum resource allocation given system is now unimaginable.
some restrictions of the resources.
Anupam Kumar 2

3. Production V/s Operations Management
Evolution of Operations Management
• In the late 1950s and early 1960s scholars
began to write books dealing specifically with
To Types of Production
the problems faced by operations managers.
Processes…
• These books also contained information
regarding the application of quantitative
models to operations management.
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