Production and Operations Management

 
Production (or Operations) management is an umbrella term which encompasses a gamut of ideas within the jingoistic managerial circles, mostly exemplified by the varied literal definitions of these terms based on the source. But we’ll confine ourselves to straightforward (and understandable) definition to answer the basic question – ‘What is operations management?
 

Definition:

Production / Operations Management is defined as the process which transforms the inputs/resources of an organization into final goods (or services) through a set of defined, controlled and repeatable policies.

By policies, we refer to the rules that add value to the final output. The value added can be in different dimensions, but the industrial set-up is mostly concerned with the duo of quality and throughput.
 

Difference between Production and Operations Management

Production and operations management are more similar than different: if manufacturing products is a prime concern then it is called production management, whereas management of services is somewhat broader in scope and called operations management (because manufacturing services sounds absurd, right?).

The line between products-based and services-based organizations is blurring rapidly as well— car manufactures need to service their cars and the retailers manufacture their own brand labels.

We will be referring to them jointly as POM from here on in this article, for the benefit and convenience of all the parties involved.
 

The fuss about production and systems

  • Production is a term which has caught the fancy of every industrialist ever since Adam Smith propounded the idea of “specialization of labor”.

    It is best envisioned as a piece-wise process (think about a typical production line with every worker doing one and only one task at a frenetic speed), and this piece-wise production enabled better quality, higher throughput, lower individual dependency and lesser labor costs.

    It is a bit hard to fathom that the same fundamental idea is responsible for both cheap cars (Ford pioneered large scale manufacturing sequences through assembly lines) and cheap burgers (though McDonald’s is actually in the real estate business).

  • The production systems are frequently classified in the following buckets:
    • Mass Production: Utilizes standardized discrete assemblies in a continuous process, suitable for very large volumes of production—all outputs following the same path. Generally associated with mind-numbing repetition, very specific machinery and a labor force low on skill/creativity.
    • Continuous Production: Non-flexible mode of production in which the whole sequence of operations is pre-arranged in a definite set-up.
    • Batch production: American Production and Inventory Control defines batch production as “a form of manufacturing in which the job passes through the functional departments in lots or batches and each lot may have a different routing.” Enough said.
    • Job Shop Production: Characterized by custom specifications by customers for a limited quantity of products, use of general purpose machines and comparatively more creative/skilled labor.
  • There are a few decision areas which are of utmost importance in POM, such as design, quality, location selection, human resource allocation, supply chain management and maintenance.
  • The decisions arising from a POM perspective often decide the core priorities of an organization— What makes us better than the competitors? Will we compete on cost, quality, delivery time, design/form factor, ease of use, or something else? Et cetera et cetera.
  • There are some pre-defined objectives of production management, which can be broken down into:
    • right quality,
    • right quantity,
    • right time and
    • right cost
  • Production management can essentially be seen as an optimization problem — the goal is to make the process as predictable as possible (as all of us do not share the same enthusiasm for surprises).
  • The objectives of operations management are a tad more extensive and take a couple of things more into the fold: customer service and resource utilization.
    • Almost all the things in operation management converge towards a single focal point: the customer. Customer satisfaction is a barometer of things moving in the right direction.
    • Resource utilization is equally imperative — the process of obtaining the output from input through the path of least resistance, i.e. through least wastage and maximum utilization of resources.
    • Scoring high on one usually leads to deterioration in performance of the other (utilization v/s customer service), and their balance is usually the nightmare of an operations manager — but is definitely a worthy goal to look forward to.

 

Salary and Jobs in Operations Management

According to PayScale, POM is a male dominated profession with highly satisfied professionals (we refrain from making any hasty conclusions).

Professionals in Operations management jobs earn a decent pay package as well. The average salary of an operations manager is around Rupees 7.2 Lakhs (annually).

While IT majors like TCS, IBM and Amazon recruit a good chunk of people for jobs in operations management, Tata Motors et al seem to have a special liking towards them, perhaps because of the bigger potential leaps in operational efficiency.

Operations management is sufficiently entwined with a couple of terms which have managed to catch the fancy of almost every multi-national corporation out there: supply chain management and logistics.

In an increasingly small world where the average coffee pouch might have visited more countries than the average consumer, supply chain and logistics is definitely here to stay.

Organizations like Apple can boast of millions of phone sales every quarter due to the lean supply chain practices and impeccable logistics which they have cared to develop smartly over the years. Being in touch with the ground reality and getting your hands dirty seems to be a smart choice after all.
 

Most important subjects in Operations Management

Logistics and Supply Chain Management
Operations Research
Supply Chain Simulation Games

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2 Comments

  1. Kalpesh soni says:

    Q.1 what is the reason that term “production management” is being replaced by”operations management”?

  2. HUGH ADU-ASANTE says:

    Production management is different from Operations management in the sense that production management deals with the combinations of the necessary resources to make outputs available to the customers, and it involves all the departments to have their take in decision making because every department has it goals to achieve and it should be manifested before, during and after, for example research and development department must be able to come out with unique ideas that will be attracted to the customers based on their needs and wants, and that will be given the firm the competitive edge over its competitors to be the market leader, but the operations management deals with breaking down the goals of every department into tactics, that should be achievable. It deals with setting of the administrative offices, laying out, scheduling, work breakdown system by using Gantt Charts, the process that the inputs will be transformed into either semi or finished goods. The operations management makes proper use of the available resources for the organization to achieve its objectives and goals. Production management differ greatly from operations management.

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