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Note for Operations Management - I - OM1 By Manoj Kumar Rout

  • Operations Management - I - OM1
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BIJ BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES, BHUBANESWAR, ODISHA (Nature & Scope of Production & Operation Management) 1 Module- Nature of Production: Production: 1) Production is the process by which raw materials and other inputs are converted into finished good (End Product/ output) 2) In other words, the creation of goods and services to satisfy human wants. 3) Production is a process of combining various material inputs and immaterial inputs (plans, knowhow) in order to make something for consumption (the output). It is the act of creating output, a good or service which has value and contributes to the utility of individuals. 4) In general , the act of producing; creation; manufacture 5) Production is said to take place when input changes to output. Figure: Production Factor of Production: The factors of production are resources required for the manufacturing for the different types of goods or services in the attempt to make an economic profit. They are said to be rewarded for the contribution that they make towards production. i. ii. iii. iv. Land Labour Capital Entrepreneurship Land: This factor of production refers to the land itself and its natural resources that it offers, including the sea. There are two types Renewable Resources & Non-renewable Resources. 1|P a ge

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BIJ BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES, BHUBANESWAR, ODISHA Labour: This factor of production refers to the human inputs of work to produce the goods and services. Labour can be classified as: i. ii. iii. iv. Unskilled, Semi-skilled, Skilled And Professional Capital: This refers to resources such as money and other assets that are necessary in the process of production. Capital includes: buildings, machinery, stock, money, and so on. Things that are needed in the day to day operation of the business. Capital can be divided into; i. ii. Physical capital Social capital Entrepreneurship: Entrepreneurship is said to be the fourth factor of production. This refers to a person who coordinates all the factors of production (land, labour, and capital) in order to produce goods and services. Level of Production: The levels of production basically describe the manner in which people wants and needs are satisfied. Which are; 1) Traditional or Subsistence Production 2) Domestic or Local Production 3) Surplus or Export Production Traditional or Subsistence Production: This is known to be the basic level of production. This level I where people sought to provide for just their basic survival, no more, no less such as food, clothing and shelter. Domestic or Local Production: This is the level of production that uses local inputs such has: land, labour, capital and enterprise. It is the production of goods and services for the needs of the family and the country. Surplus or Export Production: This is the level of production that is over and above the domestic needs of a country and is a feature of mature or developed economies. The needs of the family, country and exports are satisfied. 2|P a ge

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BIJ BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES, BHUBANESWAR, ODISHA Types of Production: There are different types of productivity activities that are carries on in the region. There are known to be three different types of production. 1) Extractive or Primary Production 2) Manufacturing and Constructive or Secondary Production 3) Services or Tertiary Production Extractive or Primary Production: This involves the extract of raw materials from our surroundings or nature. The primary stage of production or goods in the raw state. Examples, agriculture, mining, quarrying and soon. Manufacturing and Constructive or Secondary Production: This is the secondary stage of production involves the transformation of raw materials into finished or semi-finished goods. Examples, bauxite into alumina, mining of oil into gasoline, trees into wood and so on. Services or Tertiary Production: This is concerned with the provision of services (direct or indirect). This refers to commercial services for goods and services to reach buyers. Examples, transportation, gas stations, and so on. Manufacturing: 1) The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications. 2) Manufacturing process are the steps through which raw materials are transformed into a final product. 3) Manufacturing is the making of goods by hand or by machine that upon completion the business sells to a customer. Types of Manufacturing: Make-To-Stock (MTS) – A factory produces goods to stock stores and showrooms. By predicting the market for their goods, the manufacturer will plan production activity in advance. Make-To-Order (MTO) – The producer waits for orders before manufacturing stock. Inventory is easier to control and the owner does not need to rely as much on market demand. Customer waiting time is longer and the manufacturer needs a constant stream of orders to keep the factory in production. 3|P a ge

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BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES, BHUBANESWAR, ODISHA BIJ Make-To-Assemble (MTA) – The factory produces component parts in anticipation of orders for assembly. By doing this, the manufacturer is ready to fulfill customer orders but if orders do not materialize, the producer will have a stock of unwanted parts. Nature of Production: 1) Production is the process by which raw materials and other inputs are converted into finished products, the other word synonymously used with production is manufacturing. 2) Usually, the term production and manufacturing is used interchangeably, but both term are different in management. 3) Manufacturing is used in the case of tangible goods and production includes both tangible goods as well as services. 4) Production can be easily understood if we view the manufacturing function from three angles: a. Production as a system: Convert a set off inputs into a set of desired outputs. b. Production as an organizational function: Achieving the objectives of the organizations. c. Production as a decision making function: Operation managers are required to make a series of decisions in production function. Example: Plan, organize, staff, directing and control all the activities in the process of converting all the into finished products. Features of Nature of Production: 1) 2) 3) 4) 5) 6) 7) 8) Transformational process Results into value addition Its include system itself Exists for certain objectives Carried out in part of organization Specialization of function Interrelation among of the system Increase in productivity 4|P a ge

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