1. Introduction to Business
Lecture 9
Introduction to Business
Basics of production and operations management

2. Definitions of production & manufacturing
Production is the total process by which a company produces finished goods or services.
Production involves many such as the work, ideas, plans, the production manager, supervisors, workers.
Manufacturing refers to the physical process of producing goods out of materials and parts, generally some items made by someone.
Manufacturing involves the production of tangible goods only.

3. Operations
Operations include the total functions that are needed to keep the company producing.
Operations generally includes purchasing, raw materials inventory, maintenance, quality control, production, manufacturing, equipment management, plant management, etc.

4. Activities of operations in a plant
Reject levels,
Quality costs,
Rework
costs
Variances,
Labor efficiency,
On-time production
Stock outs,
Inventory levels
Senior management
Production
Inventory management
Purchasing
Quality
Maintenance
Materials cost,
Availability
Machine utilization,
Maintenance costs

5. Mass production
Mass production refers to the production of goods in bulk or large quantities.
Mass production is done through the use of assembly lines and division of labour where each worker does one small but specialized part of job.
By producing in large quantities, companies can reduce the CM and thus it enables consumers to buy in a competitive price.

6. History of Industrialization
The early industrialization was among the countries like Japan, Germany and USA.
USA was a dominating industrialist country in the world during 50s, 60s, and 70s.
American products and services that dominated in the world were food products, toys, automobiles, trucks, electrical parts, soft drinks, medicines, etc.
After the World War II, Europe started rebuilding their industries and started exporting their goods to the World.

7. Typical job of a production manager
Production managers are responsible for producing the goods that business needs to sell.
Their job is to oversee a number of company operations which include:
Product planning
Site location
Inventory control
Purchasing
Manufacturing and production
Quality control
Plant management

8. Planning site location
Considerations in planning site location
Cost – building, land, taxes, insurances, etc
Nearness to suppliers, raw material industries, warehouses, low cost and quality labor force
Air, environment and water conditions
Availability of workforce or employee needs such as housing, schools, transportation, religious facilities, day care, shopping & recreational facilities
Community acceptance

9. Planning site layout Considerations in planning site layout
Type of production held
Production areas – cutting, finishing, pattern making, order handling, assembling, designing, etc
Conference areas
Storage areas – normal storage, freezers
Parking, loading docks and transport areas
Interior layout – office space for different departments like top management, marketing, etc

10. Managing materials, purchase & inventory
Materials include office supplies, raw materials and other general supplies.
Procurement of these materials should be done economically and adequately so that don’t run short on these during production & operations.
Inventory means stocking. A business usually stocks their own goods and raw materials (outside sources) which are needed to produce their finished goods.

11. “Just in time” inventory management
Just in Time (JIT) inventory control was developed at Toyota Motor Corporation on Japan.
JIT is named like this because the raw materials that are required to stock comes just-in-time when they are needed for production.
Companies who use this system carries very little inventory just for emergency. Suppliers or other departments know when the actual production begins and they deliver accordingly.

12. Controlling production
Production is controlled through scheduling and it requires perfect use of labor, materials, and facilities in a timely manner.
PERT Charts. Program evaluation and review technique chart was first developed by the US navy for scheduling their missile project.
Nowadays this PERT chart is very widely used by business for accomplishing their projects.

13. Controlling production (contd.)
Steps in producing a PERT chart.
Break the project into event; label the amount of time required to finish it.
List the first event of the task/project.
List the event that follows the first one. If two events follows, list both & draw arrows to those events.
Chart all the events needed to complete the project in the same way till the project work is finished.
Label the arrows with the amount of time it takes to complete each activity.

14. Use of technology
Computer Aided Design (CAD) and Computer Aided Engineering (CAE) have made easier to produce millions of designs and patterns for products in a very small time frame.
Computer Aided Manufacturing (CAM) includes the use of computerized robots in manufacturing products. Use of these robots makes the production faster and with less errors.
Industries such as automobiles, electronics, computers, steel, machineries, and equipments use these technologies extensively.

15. Improving quality What is quality? How do we define it?
Quality is something that is superior in terms of usability and useful life.
Germans praise about their automobile quality, Swiss prides for their watch and chocolate quality & Italians boost for their marble and fashion quality.
Who evaluates the quality in general?
Consumers evaluates the quality of a product or service by comparing it with other similar products or services.

16. Dimensions of quality Dimension Example
Performance (Product’s primary characteristics)
Sony TV’s richness of color & sound
Features (Secondary or additional characteristics)
Hilton hotel’s complimentary breakfast
Reliability (Consistent performance within a period)
Honda Integra’s rate of repair services
Conformance (Degree to which this product meets or complies with other products)
Dell’s compatibility with Intel’s processor
Durability (Length of a product’s useful life)
Average 30 year life of Zippo lighters
Serviceability (Speed, courtesy, ease of repair)
48 hour parts replacement of LG products
Aesthetics (Outlook, taste, feeling, sound, smell, etc of a good or service)
Slimmer & stylist look of Apple iPODs
Perceived quality (Quality achieved via marketing, brand image or reputation)
Nokia’s reputation in mobile batteries

17. Improving productivity
Productivity is the rate at which goods and services are produced or created.
The common form of measuring productivity is the labor productivity, which is expressed in amount of money produced per hour worked.
Labor and technology combined generate the outputs and these costs are added along with products that are sold to consumers.

18. Maintaining safety
Production managers and the whole production unit should ensure that the workplace is safe and nobody gets hurts while working.
Worker’s safety is a corporate responsibility of business to its employees.
Even if anyone gets hurt, the company should provide compensation for that.
Production managers should also ensure the product safety and that is also a social responsibility to consumers.