Production and Operations Management – Meaning and Important Concepts

Introduction

The very essence of any business is to cater needs of customer by providing services and goods, and in process create value for customers and solve their problems. Production and operations management talks about applying business organization and management concepts in creation of goods and services.

Production

Production is a scientific process which involves transformation of raw material (input) into desired product or service (output) by adding economic value. Production can broadly categorize into following based on technique:

Production through separation: It involves desired output is achieved through separation or extraction from raw materials. A classic example of separation or extraction is Oil into various fuel products.

Production by modification or improvement: It involves change in chemical and mechanical parameters of the raw material without altering physical attributes of the raw material. Annealing process (heating at high temperatures and then cooling), is example of production by modification or improvement.

Production by assembly: Car production and computer are example of production by assembly.

Importance of Production Function and Production Management

Successful organizations have well defined and efficient line function and support function. Production comes under the category of line function which directly affects customer experience and there by future of organization itself.

Aim of production function is to add value to product or service which will create a strong and long lasting customer relationship or association. And this can be achieved by healthy and productive association between Marketing and Production people. Marketing function people are frontline representative of the company and provide insights to real product needs of customers.

An effective planning and control on production parameters to achieve or create value for customers is called production management.

Operations Management

As to deliver value for customers in products and services, it is essential for the company to do the following:

1. Identify the customer needs and convert that into a specific product or service (numbers of products required for specific period of time)
2. Based on product requirement do back-ward working to identify raw material requirements
3. Engage internal and external vendors to create supply chain for raw material and finished goods between vendor → production facility → customers.

Operations management captures above identified 3 points.

Production Management v/s Operations Management

A high level comparison which distinct production and operations management can be done on following characteristics:

• Output: Production management deals with manufacturing of products like (computer, car, etc) while operations management cover both products and services.

• Usage of Output: Products like computer/car are utilized over a period of time whereas services need to be consumed immediately

• Classification of work: To produce products like computer/car more of capital equipment and less labour are required while services require more labour and lesser capital equipment.

• Customer Contact: There is no participation of customer during production whereas for services a constant contact with customer is required.

Production management and operations management both are very essential in meeting objective of an organization.