Unit - 1

Introduction of
production and operations
management
contents
Ø Nature and scope of production management
Ø Types of manufacturing system
Ø Differences between manufacturing and
service operations
Ø Role of production and operations management
Ø Strategic planning decision for operations
Ø Demand forecasting for operations
Ø Contribution of henryford ,deming, crossby,
taguchi
Nature and scope of production
management
 Operations management is often used along with production
management in literature on the subject. It is therefore,
useful to understand the nature of operations management
.Operations management is understood as the process
whereby resources or inputs are converted into more useful
products .A second reading of the sentence reveals that,
there is hardly any difference between the terms
produ7ction management and operations management . of
the subject. Operation management is the term that is used
now a days .

Scope of Production and Operation Management

The scope of production and operations management is
indeed vast .Commencing with the selection of location
production management covers such activities as
acquisition of land, constructing building ,procuring and
installing machinery ,purchasing and storing raw material
and converting them into saleable products.
Types of manufacturing system

MAINLY DEPENDS UPON THE NATURE OF GOODS &

SERVICES TO BE PRODUCED
PURPOSE OF THE PRODUCT AND NATURE OF
PRODUCTION PROCESS
STOCK --- SALES FORECAST
PRODUCED TO ORDER --- RAW MATERIAL
MATERIAL NOT CARRIED TO STOCK --- NATURE
AND SIZE OF ORDER


 RECEIPT AND STORAGE OF RAW MATERIALS

 MEANS OF TRANSPORTATION

 INSPECTION OF IN-PROCESS AND FINISHED GOODS

 STORAGE OF FINISHED GOODS

 ACTIVE THROUGHOUT BY INFORMATION AND
CONTROL FUNCTION

MANUFACTURING SYSTEMS
 MANUFACTURING SYSTEMS INTERACTS BOTH
INTERNAL AND EXTENAL ENVIRONMENT


INTERNAL– MARKETING,ACCOUNTS,
PERSONNEL,AND FINANCE


EXTERNAL- CUSTOMERS,LABOUR
UNIONS,SUPPLIERS
Differences between
manufacturing and service
operations
Service Operations:
 The service-profit chain
 Service recovery and empowerment
Service Recovery and Empowerment:
Restoring customer satisfaction to strongly
dissatisfied customers
Empowering workers is one way to speed up
service recovery

Manufacturing Operations
Amount of processing in manufacturing
operations
Flexibility of manufacturing operations
Amount of Processing in Manufacturing
Operations:
Make-to-order operation
 manufacturing does not begin until an order is
received
Assemble-to-order operation
 used to create semi-customized products
Make-to-stock operation
 manufacture standardized products

Manufacturing Operations
 Continuous-flow production
 produces goods at a continuous rate
 Line-flow production
 Pre-established linear processes that produce one
type of product
Batch production
 operation that produces goods in large batches in
standard lot sizes
Job shops
 operation that handles customer orders or small
batch jobs
Project manufacturing
 operation that produces large, expensive,
specialized products




Role of production and operations
management
Operations Management or often referred as
productions and operations management
,relates to the management of such systems
Transformation Approach.
Value Driven Approach.
Value Chain Model.
Strategic planning decision for
operations
S
Demand Management
objects
Demand Management
Qualitative Forecasting Methods
Simple & Weighted Moving Average
Forecasts
Exponential Smoothing
Simple Linear Regression
Web-Based Forecasting
 Demand Management

Independent Demand:
Finished Goods

A Dependent Demand:
Raw Materials,
Component parts,
B(4) C(2) Sub-assemblies, etc.

D(2) E(1) D(3) F(2)

Independent Demand:
What a firm can do to manage it?

Can take an active role to influence

demand
Can take a passive role and simply
respond to demand
Types of Forecasts

Qualitative (Judgmental)
Quantitative
Time Series Analysis
Causal Relationships
Simulation
Components of Demand
Average demand for a period
of time
Trend
Seasonal element
Cyclical elements
Random variation
Autocorrelation
 Finding Components of Demand

Seasonal
Seasonalvariation
variation

x
x x Linear
Linear
x x
x x Trend
x x Trend
Sales

x x x
x
x
xx
x xx x x
x
x
x x x x x x
x x x x x x
x x x
x xxxxx
x
x x

1 2 3 4

Year
 Qualitative Methods

Executive Judgment Grass Roots

Qualitative Market Research

Historical analogy
Methods

Delphi Method Panel Consensus

Henry Ford
 Henry Ford (July 30, 1863 – April 7, 1947) was a prominent
American industrialist, the founder of the 
Ford Motor Company, and sponsor of the development of
the assembly line technique of mass production. His
introduction of the Model T automobile revolutionized
transportation and American industry. As owner of the Ford
Motor Company, he became one of the richest and best-
known people in the world. He is credited with "Fordism":
mass production of inexpensive goods coupled with high
wages for workers. Ford had a global vision, with
consumerism as the key to peace. His intense commitment
to systematically lowering costs resulted in many technical
and business innovations, including a franchise system that
put a dealership in every city in North America, and in
major cities on six continents. Ford left most of his vast
wealth to the Ford Foundation but arranged for his family to
control the company permanently.
 He was known worldwide especially in the 1920s for a system
of Fordism that seemed to promise modernity, high wages
Henry Ford.
 An assembly line is a manufacturing process in which parts (usually 
interchangeable parts) are added to a product in a sequential manner
using optimally planned logistics to create a finished product much faster
than with handcrafting-type methods. The assembly line developed by 
Ford Motor Companybetween 1908 and 1915 made assembly lines famous
in the following decade through the social ramifications of mass production
, such as the affordability of the Ford Model T and the introduction of high
wages for Ford workers. Henry Ford was the first to master the assembly
line and was able to improve other aspects of industry by doing so (such as
reducing labor hours required to produce a single vehicle, and increased
production numbers and parts). However, the various preconditions for the
development at Ford stretched far back into the 19th century, from the
gradual realization of the dream of interchangeability, to the concept of
reinventing workflow and job descriptions using analytical methods (the
most famous example being scientific management). Ford was the first
company to build large factories around the assembly line concept. Mass
production via assembly lines is widely considered to be the catalyst which
initiated the modern consumer culture by making possible low unit cost for
manufactured goods. It is often said that Ford's production system was
ingenious because it turned Ford's own workers into new customers. Put
another way, Ford innovated its way to a lower price point and by doing so
turned a huge potential market into a reality. Not only did this mean that
Ford enjoyed much larger demand, but the resulting larger demand also
allowed further economies of scale to be exploited, further depressing unit
price, which tapped yet another portion of the demand curve. This
INTRODUCTION OF DEMING

Dr . W . Edwards
Deming
1900 - 1993

“We have learned to live in a world of mistakes and

defective products as if they were necessary to life. It is
time to adopt a new philosophy in America.”
Deming was born in a small town, in Iowa state in 20th century. He
later moved from Iowa to Wyoming and in 1917 he entered the
University of Wyoming. He was working as a janitor to fund his
education. He graduated in 1921 and went on to the University of
Colorado, where he received a M.S. in Physics & Mathematics. He got a
doctoratre in Physics from Yale University.
He gravitated towards statistics. Completion of the 1940 census, Deming

began to introduce Statistical Quality Control into industrial

operations. After one year, he and two other experts began teching
Statistical Quality Control to inspectors and engineers. He started
his own privatepractice in 1946. For more than forty years, his firm
served its clientele—manufacturers, telephone companies, railways,
trucking companies, census takers, hospitals, governments and
research organizations. With his ideas, product quality improved and
thus also popular satisfaction. His influential work in Japan,
instructing top executives and engineers in quality management, was
a driving force behind that nation’s economic rise. He contributed
directly to Japan’s phenomennal export-led growth and its current
technological leadership in automoblies, ship-buliding and
electronics. In 1960, the Emperor of Japan bestowed on Dr. Deming the
Second Order Medal of the Sacred Treasure.
 The American Society for Quality Control awarded him the
Shewhart Medal in 1956



contd..
Contd..


In 1983, Dr. Deming receivedthe Samuel S. Wilks Award from the American Statistical
Association and election to the National Academy of Engineering. President Reagan honored

him with the National Medal of Technology in 1987 and in 1988, the National Academy of

Sciences lauded him with the Distinguished Career in Science award .

He was elected in 1986 to the Science and Technology Hall of Fame in Dayton. From the University of
Wyoming, Rivier Colloege, the University of Maryland , Ohio State University, Clarkson College of
Technology, Miami University, George Washington University, the University of Colorado, Fordham
University, the University of Alabama, Oregon State University, the American University, the
University of South Carolina, Yale University, Harvard University, Cleary College and Shenandoah
University, he received the degrees L.L.D and Sc.D. honorius causa. From Yale University, he won the
Wilbur Lucius Cross Medal and the Madeleine of Jesus from Rivier College.
 Dr. Deming authored several books and 171 papers. His books, Out of the Crisis
(MIT/CASE,1986) and The New Economics (MIT/CASE,1994) have been translated into several
languages. Myriad books, filmsand videotapes profiles his life, his philosophy and the
siccessful application of his worldwide teachings.

 N G
M I
D E
O F
H Y
O P
O S
I L
P H
Constancy of purpose

Create constancy of purpose for continual

improvement of products and service to society,
allocating resources to provide for long range
needs rather than only short term profitability,
with a plan to become competitive, to stay in
business, and to provide jobs.
The new philosophy

Adopt the new philosophy. We are in a new

economic age, created in Japan. We can no
longer live with commonly accepted levels of
delays, mistakes, defective materials, and
defective workmanship. Transformation of
Western management style is necessary to halt
the continued decline of business and industry.
Cease dependence on mass inspection

Eliminate the need for mass inspection as the

way of life to achieve quality by building quality
into the product in the first place. Require
statistical evidence of built in quality in both
manufacturing and purchasing functions.
End lowest tender contracts

End the practice of awarding business solely on

the basis of price tag. Instead require
meaningful measures of quality along with
price. Reduce the number of suppliers for the
same item by eliminating those that do not
qualify with statistical and other evidence of
quality. The aim is to minimize total cost, not
merely initial cost, by minimizing variation. This
may be achieved by moving toward a single
supplier for any one item, on a long term
relationship of loyalty and trust. Purchasing
managers have a new job, and must learn it.
Improve every process

Improve constantly and forever every process

for planning, production, and service. Search
continually for problems in order to improve
every activity in the company, to improve
quality and productivity, and thus to constantly
decrease costs. Institute innovation and
constant improvement of product, service, and
process. It is management's job to work
continually on the system (design, incoming
materials, maintenance, improvement of
machines, supervision, training, retraining).
Institute training on the job

Institute modern methods of training on the job

for all, including management, to make better
use of every employee. New skills are required
to keep up with changes in materials, methods,
product and service design, machinery,
techniques, and service.
Institute leadership

Adopt and institute leadership aimed at helping

people do a better job. The responsibility of
managers and supervisors must be changed
from sheer numbers to quality. Improvement of
quality will automatically improve productivity.
Management must ensure that immediate
action is taken on reports of inherited defects,
maintenance requirements, poor tools, fuzzy
operational definitions, and all conditions
detrimental to quality.
Drive out fear

Encourage effective two way communication

and other means to drive out fear throughout
the organization so that everybody may work
effectively and more productively for the
company.
Break down barriers

Break down barriers between departments and

staff areas. People in different areas, such as
Leasing, Maintenance, Administration, must
work in teams to tackle problems that may be
encountered with products or service.
Eliminate exhortations

Eliminate the use of slogans, posters and

exhortations for the work force, demanding Zero
Defects and new levels of productivity, without
providing methods. Such exhortations only
create adversarial relationships; the bulk of the
causes of low quality and low productivity
belong to the system, and thus lie beyond the
power of the work force.
Eliminate arbitrary numerical targets

Eliminate work standards that prescribe quotas

for the work force and numerical goals for
people in management. Substitute aids and
helpful leadership in order to achieve continual
improvement of quality and productivity.
Permit pride of workmanship

Remove the barriers that rob hourly workers,

and people in management, of their right to
pride of workmanship. This implies, among
other things, abolition of the annual merit rating
(appraisal of performance) and of Management
by Objective. Again, the responsibility of
managers, supervisors, foremen must be
changed from sheer numbers to quality.
Encourage education

Institute a vigorous program of education, and

encourage self improvement for everyone. What
an organization needs is not just good people; it
needs people that are improving with education.
Advances in competitive position will have their
roots in knowledge.
Top management commitment and action

Clearly define top management's permanent

commitment to ever improving quality and
productivity, and their obligation to implement
all of these principles. Indeed, it is not enough
that top management commit themselves for
life to quality and productivity. They must know
what it is that they are committed to—that is,
what they must do. Create a structure in top
management that will push every day on the
preceding 13 Points, and take action in order to
accomplish the transformation. Support is not
enough: action is required!
Philip B. Crosby
(1926-2001):
Zero Defects

Effectively this concept implies that “poor” or “high” quality

has little or no meaning and that in fact it is either
conformance or non- conformance to customer/product
requirements which is of central importance. Quality
management equates to defect prevention.
Crosby’s 14 Steps
to Quality
Improvement
•Make it clear that
management is committed
to quality
•Form quality improvement
teams with representatives
from each department
•Determine how to measure
where current and potential
quality problems exist
Crosby’s 14 Steps
to Quality Improvement
•Evaluate the cost of quality and
explain its use as a management tool
•Raise the quality awareness and
personal concern of all employees
•Take formal actions to correct
problems identified through
previous steps
Crosby’s 14 Steps
to Quality Improvement
•Establish a committee for the zero
defects program
•Train all employees to actively
carry out their part of the quality
improvement program
•Hold a “zero defects day” to let all
employees realize there has been a
change
Crosby’s 14 Steps
to Quality Improvement
•Encourage individuals to
establish improvement goals for
themselves and their groups
•Encourage employees to
communicate to management
the obstacles they face in
attaining their improvement
Crosby’s 14 Steps
to Quality Improvement
•Recognize and appreciate those
who participate
•Establish quality councils to
communicate on a regular basis
•Do it all over again to emphasize
that the quality improvement
program never ends
Crosby’s
Absolutes
•Quality means conformance
to requirements – if you
intend to do it right the first
time, then everyone must
know what it is
 Crosby’s
Absolutes
•Quality comes from prevention.
Vaccination is the way to
prevent organizational disease.
Prevention comes from training,
discipline, example, leadership,
and so forth.
Crosby’s 6 C
Comprehension (understanding)
Commitment (by all).
Competence (Improvement).
Correction (Elimination of errors).
Communication (Support of all people,
customers, suppliers etc)
Continuance (Improvement).

Absolutes of quality management

1.Quality is defined as conformance to

requirements and not “goodness”.
2.The system for achieving is prevention and
not appraisal.
3.The performance standard is Zero defects,
not “that is” close enough
4.The measurement of Quality is the price of
non-conformance, not indexes.
14 steps towards Quality
improvements.
1. Management commitment
2. Quality improvement team.
3. Establish Quality measurements.
4. Establish the Cost of Quality.
5. Corrective actions.
6. Quality awareness
7. Zero defect planning
8. Employee education.

9. Zero defects day.
10. Employee goal setting.

11. Error cause removal.

12. Establish recognition.

13. Establish and hold regular meetings of

Quality councils.
14. Do it all over again.
 The Management Maturity Grid (Quality
Maturity Grid)

Uncertainty.
Awakening.
Enlightenment.
Wisdom.
Certainty.

Crosby’s Triangle (Crosby’s Quality
Vaccine)
Integrity,
policies

Systems,
Communicat
ion operatio
 CONTRIBUTION OF
TAGUCHI TO TOTAL
QUALITY MANAGEMENT
LIFE AND CAREER
Genichi Taguchi born on January 1, 1924 in Tokamachi,
Japan is an engineer and statistician. From 1950s
onwards, Taguchi developed a methodology for applying
statistics to improve the quality of manufactured goods.
Genichi Taguchi, was an engineer and author of the
Taguchi statistical methods
Taguchi is famous for his pioneering methods of
modern quality control and low-cost quality
engineering. He is the founder of what has come to
be known as the Taguchi method, which seeks to
improve product quality at the design stage by
integrating quality control into product design, using
experiment and statistical analysis. His methods have
been said to fundamentally change the philosophy
and practice of quality control.
In 1962, Taguchi was awarded his doctorate by
Kyushu University. He worked for ECL in a
consulting role and became part of the associate
research staff of the Japanese Standards Association,
where he founded the Quality Research Group. In
1964, he took up a professorship at Aoyamagokuin
University in Japan, where he spent the next 17 years
developing his methods.


Throughout this time, Taguchi methods Taguchi methods
are statistical methods developed by Genichi Taguchi to
improve the quality of manufactured goods and more
recently to biotechnology marketing and advertising.
CONCEPT OF TAGUCHI
He developed his concept of the quality loss function in the
early 1970s, but it was during the 1980s that Taguchi
methods became established, when he revisited AT & T
Bell Laboratories in the US, as director of the Japanese
Academy of Quality.
TAGUCHI METHODS
Taguchi developed methods for both online (process)
and offline (design) quality control. This formed the
basis of his approach to total quality control and
assurance within a product's development life cycle.
His approach emphasised improving the quality of
product and process prior to manufacture (that is, at
the design stage) rather than the more traditional
approach of achieving quality through inspection.
a. QUALITY LOSS FUNCTION
 He developed a concept of quality loss occurring as soon as there is
a deviation away from the target value, and worked in terms of
quality loss rather than just quality. He defined quality loss as `the
loss imparted to society from the time the product is shipped', and
this related the loss to society as a whole. Thus, it included both
company costs such as reworking, scrapping and maintenance,
and any loss to the customer through poor product performance
and lowered reliability
 Taguchi associates a simple, quadratic (mathematical expression
of the second degree in one or more unknown loss function
with deviations from the target). Thus:
* The smaller the performance variation, the better the quality
of the product.
* The larger the deviation from the target value, the larger the
loss to society.
A loss will occur even when the product is within the
specification allowed, though it is minimal when the product
is on target.
b. SIGNAL TO NOISE RATIO
One of Taguchi's most innovative ideas was to utilise a
`quality' measure called the signal to noise ratio,
which was then used by communications engineers to
find the strength of an electrical signal. Taguchi
applied this measure to everyday products, and used
it as a measure to choose control levels that could
best cope with changes in operating and
environmental conditions, or noise.
c.ROBUST QUALITY OF DESIGN
On the basis of the signal to noise measure, Taguchi
was able to develop the concept of robustness, which
enables a product to be designed to be less affected
by noise. Given normal variations in process
operations, the product in question would be less
likely to fail acceptable quality criteria.
 PRODUCT DESIGN IMPROVEMENT

During the product design and production engineering

phases, Taguchi set out three steps that must be followed.



1. SYSTEM DESIGN
This may involve the development of a prototype design
and will determine the materials, parts, and assembly
system to be used. The manufacturing process has also to
be considered.
2.PARAMETER DESIGN
 Taguchi's parameter design aimed to find the most cost-effective way of
controlling noise.
 Taguchi process and design improvements are gained by identifying easily
controllable factors and settings that minimize performance variation.
Controllable factors are design factors that a designer can set or easily
adjust. Uncontrollable factors are noise, or external variations, and a higher
signal to noise ratio means better quality. Taguchi found that if controllable
factors were set at optimal levels, the product would be robust to external
changes. This was achieved through parameter design applied at the design
(offline) stage to reduce or remove the effect of noise factors, and design
in robustness. His new approach dramatically reduced the number of
experiments and prototypes required and, in consequence, costs were
much lower. He developed various experimental designs which allowed
the variability of the noise factors on each controllable factor setting to be
simulated. The settings that minimised variability could then be
determined.

3. TOLERANCE DESIGN
If parameter design failed, Taguchi suggested using
tolerance design to identify the most crucial noise factors.
Tolerances could be reassigned so that the overall
variability was reduced to acceptable levels.
 Taguchi moved quality control even further back, to the design
stage, thus completing the total quality loop. Taguchi's
techniques and statistical experimental designs have
complemented many for quality improvement. It has been said
that Deming's work inspired a revolution in the old
management culture whilst Taguchi inspired evolution.
Certainly, Deming provided mainly a theory for management,
while Taguchi provided important techniques for improving a
process at every stage, from design to production, and for
keeping the improved processes under control.