Unit 4 Production and Operations Management focus points

Unit 4 Production and Operations Management
focus points only 

Meaning of Production Management 

The term production is used to indicate a process through which raw materials are converted into finished product. Production Management refers to the application of management principles to the production function in a factory. In other words, production management involves application of planning, organising, directing and controlling the production process. 

Difference between Production and Operation 

Major Decisions of Production Management 

Decisions can be classified into 

a. Strategic b. Tactical and c. Operational. 

  1. Strategic Production Planning
    It involves deciding and developing strategic plans to achieve strategic goals. Top level management usually develops strategic plans. These plans are long-term decisions. They will have an impact on the next five years and beyond. Decisions include technical decisions, capacity decisions, facility decisions, and vertical integration. 
  2. Tactical Production Plan
    Tactical plans are plans that middle level management prepares for two to three years in relation to deciding how to use the organization's resources to achieve strategic goals. This includes the following 
    1. Establishing the parameters for measuring operational efficiency and productivity. 
    2. Making plans to improve utilization of existing resources. 
    3. Prepare an equipment and manpower planning. 
    4. Planning for modernization of the facilities and automation. 
    5. Developing specific technology and tools to enhance production efficiency or productivity. 
    6. Prepares work plans for process redesign, methods improvement and job design. 
    7. Make or buy decision 
  3. Operational Level Production Planning:
    The operational planning decisions are taken at the lower level of management and these are routine decisions. These plans are prepared to establish actions necessary for achieving operational goals. Operational level planning includes; 
    1.  What is the job 
    2. On which machine/machines it is to be processed (sequence of operations) 
    3. Who should do this job – operator details 
    4. Starting and finishing times of each job in each of the workstation or machines or facilities 
    5. Quality specifications and inspection, and test details 

Plant Location and factors affecting plant location 

The location of a plant should be fixed in such a manner that the firm can sell their products most profitably and manufacture them with the least expense. 

Factors affecting plant location 


  • 1.Nearness to raw materials 
  • 2.Accessibility of raw materials 


  • 1.Proximity to large adaptive labour 
  • 2.Nearness to sources of power 
  • 3.Ready accessibility to repair shops 
  • 4.Nearness to good banking and credit facilities 
  • 5.Adequate transport and communication facilities 
  • 6.Ability to build and expand plant cheaply 
  • 7.Government regulation and subsidy
  •  8.Adequate fire fighting facilities 
  • 9.Stateof organisations and development of learning 
  • 10.Suitable soil, climate and topography 

Association with other Industries 

  • 1.Complementary industries 
  • 2.Competing industries 
  • 3.Momentumof an early start 

Plant Layout 

Plant layout refers to the arrangement of physical facilities such as machines, equipment, tools, furniture etc. in such a manner so as to have quick flow of material at the lowest cost. 

Types of Layout 

  1. Product or Line Layout
    In this layout, the machines and equipments are arranged in one line depending upon the sequence of operations required for the product. The output of one machine becomes input of the next machine. 
  2. Process Layout
    In this layout the machines of a similar type are arranged together at one place. This layout is used for batch production. 
  3. Combined Layout
    A combination of process & product layout is known as combined layout. 
  4. Fixed Position or Location Layout
    Fixed position layout involves the movement of manpower and machines to the product which remains stationary. Example of such type of layout is locomotives, ships, boilers, generators, wagonbuilding, aircraft manufacturing, etc. 

Aggregate Planning 

Aggregate Planning is the planning, including sales forecasts, production levels, inventory levels, customer backlogs, workforce, and working capital for an organization over a period of three to 18 months. 

Aggregate Planning Strategies 

  1. Level Strategy: Level Strategy seeks to maintain a constant production rate and work force. The firm must raise or lower inventory levels to satisfy changes in demand. 
  2. Chase strategy: This strategy adjusts the demand period and the capacity period. This can lead to significant hiring and dismissal of employees. 
  3. Hybrid Strategy: Balances Level Strategy with Chase Strategy. 

Master Production Schedule(MPS) 

MPSis a company plan developed for production, inventory, staffing, etc. It determines the amount of end product to be completed each week .It ensures a proper balance between demand and supply. 

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