Chapter 10

MANAGING PRODUCTION AND

SERVICE OPERATIONS

Organizations are designed mainly to produce products or services. If these organizations must
survive and grow, the operations function must be undertaken in the most economical manners
possible. As most companies are expected to make profits, any activity, including those for operations
must be managed to contribute to the accomplishment os such objectives.

WHAT OPERATION IS

Operation refers to “any process that accepts inputs and uses resources to change those inputs
in useful ways.” As shown in figure 10.1, the inputs include land, labor, capital, and entrepeneurship.
The transformation process converts the inputs into final goods or services.

Examples of final goods and services are as follows:

1. Industrial chemicals like methylene chloride, borax powder, phosphoric acid, etc.,
which are produced by construction firms;

2. Services like those for the construction of ports, high-rise buildings, roads, bridges, etc.,
which are produced by construction firms;

3. Electrical products like transformers, circuit breakers, switch gears, power capacitors,
etc., which are produced by electrical manufacturing firms;

4. Electronic products like oscilloscope, microwave tests systems, transistors, cable

testers, etc., which are produced by electronics manufacturing firms;

5. Mechanical devices like forklifts, trucks, loaders, etc., which are produced by
manufacturing firms;

Figure 10.1 The Production Process

INPUTS TRANSFORMATION PROCESS OUTPUT

Land
Labor Equipment Products
Capital Procedures Services
Entrepeneurship Technology

6. Engineering consultancy services like those for construction management and

supervision, project management services, etc., which are produced by engineering
consultancy firms.
WHAT OPERATIONS MANAGEMENT IS

Operations is an activity that needs to be managed by competent persons. Aldag and Stearns
accurately defined operations management as “the process of planning, organizing, and controlling
operations to reach objectives efficiently and effectively.” As the terms “planning”, “organizing”, and
“controlling” have already been discussed in the previous chapters, elaborations on the terms
“efficiency” and “effectiveness” will be made.

Efficiency is related to “the cost of doing something, or the resource utilization involved.”
When a person performs a job at a lesser cost than when another person performs the same job, he is
more efficient than the other person.

Effectiveness refers to goal accomplishment. When one is able to reach his objectives, say
produced 10,000 units in one month, he is said to be effective.

Operations management must be performed in coordination with the other functions like those
for marketing and finance. Although the specific activities of the operations divisions of firms slightly
differ from one another, the basic function remains the same, i.e., to produce products or services.

OPERATIONS AND THE ENGINEER MANAGER

The engineer manager is expected to produce some output at whatever management level he is.
If he is assigned as the manufacturing engineer, his function is “ to determine the equipment, tools, and
processes required to convert the design of the desired product into reality in an efficient manner.

The engineer in charge of operations in a construction firm is responsible for the actual
construction of whatever bridge or road his company has agreed to put up. He is required to do it using
the least-expensive and the easiest methods.

The engineer, as operations manager, must find ways to contribute to the production of quality
goods or services and the reduction of costs in his department.

The typical manager is one with several years of experience in the operations division and
posseses an academic backgroung in engineering.

TYPES OF TRANSFORMATION PROCESS

The engineer manager must have some knowledge of the various types of transformation
process. They are as follows:

1. Manufacturing processes
a) job shop
b) batch flow
c) worker-paced line flow
d) machine-paced line flow
e) batch/continuous flow hybrid
f) continuous flow

2. Service processes
 a) service factory
b) service shop
c) mass service
d) professional service

MANUFACTURING PROCESS

Manufacturing processes are those that refer to the making of products by hand or with
machinery.

Job Shop. A job shop is one whose production is “based on sales orders for a variety of small
lots.” Job shops are very useful components of the entire production effort, since they manufacture
products in small lots that are needed by, but cannot be produced economically by many companies.
Depending upon the customer’s needs, a job may produce a lot consisting of 20 to 200 or more similar
parts.

Job shops produce custom products, in general. Products may be manufactured within a short
notice. The equipment used are the general purpose type.

The type of layout used by job shops is the process layout, where similar machines are grouped
together. The typical size of operation is generally small. Job shops are labor intensive and machines
are frequently idle. Figure 10.4 shows a process flow diagram for ajob shop.

Batch Flow. The batch flow process is where lots of generally own designed products are
manufactured. It is further characterized by the following:

1. There is flexibility to produce either low or high volumes.

2. Not all procedures are performed on all products.
3. The type of equipment used are mostly for general purpose.

Figure 10.4 Process Flow Diagram for a Job Shop

materials
Inspection
grouping of
Lathe
Milling Grinding and
and
Work
Shipping
Preparation

4. The process layout is used.

5. The operation is labor intensive, although there is less machine idleness.
6. The size of operation is generally medium sized.

Examples of factories using the large batch flow are wineries, scrap-metal reduction plants, and
road repair contractors.

Worker-Paced Assembly Line. An assembly line refers to a production layout arranged in a

sequence to accommodate processing of large volume of standarized products or services.Shown in
figure 10.6 is a diagram of the work flow in an assembly line.
 The quality and quantity of output in aworker-paced assembly line depends to a great extent to
the skill of the labor utilized. Examples of worker-paced assembly lines are food marts like McDonalds
and Shakeys.

The worker-paced assembly line is characterized by the following:

1. The products manufactured are mostly standarized.

2. There is a clear process pattern.
3. Specialized equipment is used.
4. The size of operation is variable.
5. The process is worker-paced.
6. The type of layout used is the line flow.
7. Labor is still big cost item.

Machine-Paced Assembly Line. This type of production process produces mostly standard
products with machines playing a significant role. Among its other feature are as follows:

1. The process is of clear, rigid pattern.

2. Specialized type of equipment is used.
3. The line flow layout is used.
4. Capital equipment is bigger cost item than labor.

Figure 10.6 Assembly Line for Production or Service

Raw Station 1 Station 2 Station 3 Station 4 Finished item

materials (or Materials Materials Materials Materials (or completed
customer) and/or labor and/or labor and/or labor and/or labor service)

5. Operation is large.
6. The process is machine paced.

Examples of machine paced assembly line are automobile manufacturers like General Motors
and Ford Motors.

Continuous Flow. The continuous flow processing is characterized by “ the rapid rate at which
items move through the system.” This processing method is very appropriate for producing highly
standardized products like calculators, typewriters, automobiles, televisions, cellular phones, etc.

Its other characteristics are as follows:

1. There is economy of scale in production, resulting to low per unit cost of production.
2. The process id very rigid.
3. Specialized equipment are used.
4. The line flow layout is used.
5. Operations are highly capital intensive.
6. The size of operations is very large.
 7. Processing is fast.

Batch/Continuous Flow Hybrid. This method of processing is a combination of the batch and
the contonous flow. Two distinct layouts are used, one for batch and one for the continuous flow. The
typical size of operation is also very large giving opportunities for economies of scale.

Examples of companies using the batch/continuous flow hybrid are breweries, gelatin
producers, and tobacco manufacturers.

Service Processes

Service processes are those that refer to the provision of services to persons by hand or with
machinery.

Service Factory. A service factory offers a limited mix of services which results to some
economies of scale in operations. This also affords the company to compete in terms of price and speed
of producing the service.

The process layout preferred by the service factory is the rigid pattern of line flow processing.
McDonalds and Shakeys are examples of service factories.

Service Shop. A service shop provides a diverse mix of services. The layout used are those for
job shops or fixed position and are adapatable to various requirements.

Service shops abound throughout the Philippines. Examples are Servitek and Megashell.
Among services provided by these shops are car engine tune-up, wheel balancing, wheel alignment,
change oil, etc.

Mass Service. A mass service company provides services to a large number of people
simultaneously. A unique processing method is therefore, necessary to satisfy this requirement. To be
able to serve many people, mass service offer limited mix of services.

The process layout used is typically fixed position where customers move throughout the
layout.

Professional Services. These are companies that provide specialized services to other firms or
individuals. Examples of such are as folows:

1. Engineering or management consulting services with help in improving the plant layout
or the efficiency of a company.
2. Design services which supply designs for a physical plant, products, and production
materials.
3. Advertising agencies which help promote a firm’s products.
4. Accounting services.
5. Legal services.
6. Data processing services.
7. Health services.
 Professional service firms offer a diverse mix of services. There is a lower utilization of capital
equipment compared to the service factory and the service shop. The process pattern used is very
loose. The process layout used is identical to job shop

Professional service firms are, oftentimes, faced with delivery problems brought about by
nonuniform demand. Strategies that may be used depending upon the situation are as follows:

1. The use of staggered work-shift schedules.

2. The hiring of part-time staff.
3. Providing the customer with opportunity to select the level of service.
4. Installing auxiliary capacity of hiring subcontractors.
5. Using multiskilled floating staff.
6. Installing customer self-service.

IMPORTANT PARTS OF PRODUCTIVE SYSTEMS

Productive systems consist of six important activities as follows:

1. Product design
2. Production planning and scheduling
3. Purchasing and materials management
4. Inventory control
5. Work flow layout
6. Quality control

Product Design

Customers expect that the products they but would perform according to assigned functions. A
good product design assures that this will be so. Customers avoid buying products with poor product
design. An example is that certain brand of ballpen which fails to write after one or two days of actual
use. This happens because of poor product design.

Product design refers to “the process of creating a set of product specifications appropriate to
the demands of the situation.”

Companies wanting to maintain or improve its market share keeps a product design team
composed of engineers, manufacturing, and marketing specialists.

Production Planning and Scheduling

Production planning may be defined as “forecasting the future sales of a given product,
translating this forecast into the demand it generates for various production facilities and arranging for
the procurement of these facilities.”

Production planning is a very important activity because it helps to make decisions regarding
capacity. When the right decisions are made, there will be less opportunities for wastages.
 Scheduling is the “phase of production control involved in developing timetables that specify
how long each operation in the production process takes.” Efficient scheduling assures the
optimization of the use of human and nonhhuman resources.

Purchasing and Materials Management

Firms need to purchase supplies and materials required in the various production activities. The
management of purchasing and materials must be undertaken with high degree of efficiency and
effectiveness specially in firms engaged in high volume production. The wider variety of supplies and
materials needed adds to the necessity of proper managing and purchasing materials.

Materials management refers to “the approach that seeks efficiency of operation through
integration of all material acquisition, movement, and storage activities in the firm.

Inventory Control

Inventory control is the process of establishing and maintaining appropriate levels of reserve
stocks of goods. As supplies and material are required by firms in the production process, these must
be kept available when they are nedded. Too much reserves of stocks will penalize the firm in terms of
hish storage costs and other related risks like obsolescence and theft. Too little reserves, on the other
hand, may mean lost income opportunities if production activities are hampered. A balance between
the two extremes must be determined.

There are ways of achieving proper inventory control. They are as follows;

1. determining reader point and reorder quantity

2. determining economic order quantity
3. the use of just-in-time (JIT) method of inventory control
4. the use of the material requirement planning (MRP) method of planning and controlling
inventories

Work-Flow Layout

Work-flow layout is the process of determining the physical arrangement of the production
system. In the transformation process, the work flow may be done either haphazardly or orderly.

The job of the operations manager is to assure that a cost-effective work-flow layout is
installed. A good work-flow layout will have the following benefits:

1. Minimize investment in equipment.

2. Minimize overall production time.
3. Use existing space most effectively.
4. Provide for employee convenience, safety, and comfort.
5. Maintain flexibility of arrangement and operation.
6. Minimize material handling cost.
7. Minimize variation in types of material-handling equipment.
8. Facilitate the manufacturing (or service) process.
9. Facilitate the organizational structure.
Quality Control

Quality control refers to the measurement of products or services against standards set by the
company. Certain standard requirements are maintained by the management to facilitate production
and to keep customers satisfied.

Poor quality control breeds customer complaints, return merchandise, expensive lawsuits, and
huge promotional expenditures.

SUMMARY

The management of operations is very crucial to the survival of frims. Operations refer to the
changing of inputs into useful outputs. In the effort to manufacture products (or serveices), operations
management must contribute its share in the accomplishment of the company’s objectives.

The function of the operations manager is to plan, organize, and control operations in order to
achieve objectives efficiently and effectively. The engineer manager is, oftentimes, assigned to
perform the tasks of the operations manager.

The transformation process may be classified generally as manufacturing or service processes.

These two are subclassified into various types, each with built-in advantages on certain conditions.

Production systems consist of various parts that complement one another in the production task.
The engineer manager needs to be familiar with these various parts.