SpeakersLarry M. Malapit

Ginalyn M. MendozaJacqueline B. Gamana

Production and Operations Management,

Materials Management, andInventory Management In A

Global Environment

Production and Operations Management

in a Global Environment

By:

Larry M. Malapit

Production/operations management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/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 into the required (products/services) having the requisite quality level. The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to services management, then the corresponding set of management activities is called as operations management.

 

Production function is that part of an organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level.

Production is defined as “the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user.” Thus production is a value addition process.

CONCEPT OF PRODUCTION

Objectives of Production Management1. RIGHT QUALITY The quality of product is established based

upon the customers needs. The right quality is not necessarily best quality. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements.

2. RIGHT QUANTITY The manufacturing organization should

produce the products in number. If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage

Objectives of Production Management3. RIGHT TIME Timeliness of delivery is one of the

important parameter to judge the effectiveness of production department. So, the production department has to make the optimal utilization of input resources to achieve its objective.

4. RIGHT MANUFACTURING COST Manufacturing costs are established

before the product is actually manufactured. Hence, all attempts should be made to produce the products at pre-established cost, so as to reduce the variation between actual and the standard (pre-established) cost.

OPERATIONS MANAGEMENT

A Framework for Managing Operations Managing operations can be

enclosed in a frame of general management function.

Operation managers are concerned with planning, organizing, and controlling the activities which affect human behaviour through models.

 

Operations Management

Operationsthe methods, systems, and mental framework by which a company transforms the inputs into outputsoperations management is the analysis and implementation of this processmany varied factors impinge on a company’s operations

Effects of changeoperations management is in a period of transitionthe pace of change today is different from the past

The Transformation Process

INPUTSHuman Resources • Facilities & Processes•Technologies • Materials

OUTPUTS • Goods • Services

CUSTOMER FEEDBACK

PERFORMANCE INFORMATION

Context of operations management

-operations management means:• responding to the needs of diverse parties

within the company • satisfying parties in the larger arena

-in the digital age:• we are witnessing mass customization

-ability to manufacture many variations of the same product

• access to increasing amounts of information• focus has become the customer’s experience of

the product-managers must view operations through a variety of lenses• product specifications customer

satisfaction• cost limitations

MANUFACTURING

ORGANIZATION

SERVICE ORGANIZATO

N

* Physical Product* Product can be inventoried

* Low customer contact

* Capital intensive

* Long response time

* Intangible Product

•Product cannot beinventoried

* High customer contact

* Short response time* Labor intensive

CHARACTERISTICS OF MANUFACTURING AND SERVICE ORGANIZATIONS

STRATEGIC DECISIONS

*Broad in scope*Long term in

nature*All

encompassing

TACTICAL DECISIONS

*Narrow in scope*Short term in

nature*Concerning a small group of

issues

The relationship between strategic and tactical decisions

OPERATIONS MANAGEMENT

STRATEGIC DECISIONS

Decisions that set the direction for the entire company; they are broad in scope and long term in nature.

Operations Management

TACTICAL DECISION

SDecisions that are specific and short term in nature and are bound by strategic Decision.

Operations Management

Functions That Support Operations Management

OperationsmanagementOperationsmanagement

Operationsmanagement

Strategicplanning

Marketing

Research andengineering

Research andengineering

HumanresourcesHuman

resourcesPurchasing

Logistics

Finance

Corporate OrganizationCommon functions support the operations management system

strategic planning - good strategic planning seeks to anticipate change, then plan for it

promotes effective coordination of all functions throughout the organization

marketing - of all functions, marketing is closest to the customer

plays important support role for operations managementoperations managers must restate what marketing has communicated in terms that will bring an appropriate response from the production mechanism

Corporate Organization (cont.)Common functions support the operations management system (cont.)

research and engineering - develop and refine the product and the manufacturing processes

interact with both customers and operationsidentify and implement solutions not currently in useend result of this work affects all of the other functional areas

human resources - must seek, attract, and keep individuals having the skills, human qualities, and experience required by the operational management system

effective use of employees will provide operations managers with a valuable source of innovation and productivity gains

Corporate Organization (cont.)Common functions support the operations

management system (cont.)purchasing - select inputs that support the

company’s orientation and vision provide information about the variety of materials and

systems available for use by the production process cost effective supply of the right materials potentially

represents enormous savings for the companylogistics - coordinate the flow from supplier of

materials to delivery to the customer poor coordination of the flow from materials supplier

to delivery to the customer has repercussions throughout the channel

Corporate Organization (cont.)Common functions support the operations

management system (cont.)finance - serves as the interface between the

firm and the financial community accounting derives cost implications of new

technologies must be aware of firm’s and suppliers’

creditworthiness

A team operation operations management:

works hand in glove with the other functions must be alert to any harmful fragmentation or lack

of communication

Preparing For The Future In The New Economy

Globalizationthe entire world is today’s operating arena

presents the operations management system with a new range of possibilities

outsourcing - success of producing elsewhere depends on the characteristics of the “elsewhere” those who anticipate potential problem areas are ahead

of the game in the decision to manufacture offshorethe globe represents a vast marketplace

requires product design that accounts for differing tastes operations management systems able to make product

alterations more easily

Preparing For The Future In The New Economy (cont.)

Environmentmanagers must be sensitive to the

environmental impact of operations on the future of the planet without imperiling today’s operations

progress has been made in handling the most blatant environmental effects of manufacturing

managers must be aware of the potential negative effects of production processes

Preparing For The Future In The New Economy (cont.)

Knowledge and informationknowledge and information have supplanted (in value)

the material inputs into productsconsumers more knowledgeable, have higher

expectations not locked into only a few sources for their information

employees will be drawn to (and stay with) a specific job if: it provides the possibility of experiencing personal satisfaction

and growth it offers satisfaction in the human interaction prevalent in the

firmemployees do not expect to be supervised, but rather

coached along the path of success

Preparing For The Future In The New Economy (cont.)

Technologytechnological innovation can be helpful or harmfultechnologies exist in various stages of developmentin its development, a technology tends to move to

the hands of the user the shift of a technology to the user is not always smooth technology can advance only at the rate at which it can

be used effectivelyeffective operations managers have a formal

technology management in place also, have a means for looking ahead, preparing for the

effects of new technologies

The InternetOpportunities and pitfalls abound in the Web

three ways have emerged as options for exploiting the Web “brick and mortar” business can create its own in-

house web group “brick and mortar” business can partner with a

dot.com company that will operate the web-end of its operations for them

business can elect to sell its products only on the Internet

managers have to learn how to seamlessly integrate web activities into their operations poorly integrated systems can wreak havoc

the Web may help lure customers into stores instead, may bring the Web into the store

The Internet (cont.)Opportunities and pitfalls abound in the Web

(cont.)retailers are in various stages of deploying new

technologies to offer the benefits of online shopping at the retail site

approximately one-quarter of the 200 public Internet companies are profitable under standard accounting rules profitable companies sell information, not products

customers ultimately cast their votes for those companies that provide the best product experience

Internet (cont.)

Company-wide resonance sales and marketing data collection is turned

on its headrecord information about users’ habits which

becomes crucial to successful marketing decisions

business intelligence software extract information from computer systemspresent the information in a way that

anyone can grasprelatively inexpensive and can pay off

quickly

Internet (cont.)Mountains of data

purchasing function benefits from the Web from sheer availability of data

businesses seeing a realignment of the traditional relationships among producers, wholesalers, distributors, and retailers

Web-based companies becoming the new intermediaries between producers and buyers

Internet becoming the intermediary between employers and employees e.g., job searches

logistics, scheduling, and distribution plugged into Web-based networks

Internet (cont.)

Changing information patternscompanies are digitizing informationcompanies are posting information on the Web

there may be repercussions e.g., information may affect more than one

department

Intellectual propertymust provide certain information to various

parties, which gives rise to new information needs information may be supplied in different formats

Value Of Human Attributes

Today’s managers must:be aware of shifts in trends, habits, and

customshave or develop the vision to foresee the range

of possibilitieshave imagination to create solutionshave courage to strike out in new directionsbe alert to adjustments required by new

directionsbe flexible enough to make adjustmentsbe steadfast in the face of misunderstandings

and mistakesbe persistent in following the chosen path