Production: the creation of products and services by turning inputs, such as natural resources, raw materials, human
resources, and capital, into outputs, which are products and services
Operations management: management of the production process
Production and operations management involves three main types of decisions that are made finding the most efficient
changes in producing the goods or services
at three different stages: consumer
1. Production planning: The ﬁrst decisions come at the planning stage, at which time tcompetitionand rethinking where, when and
how the organization
managers decide where, when and how production will occur. will produce products and
2. Production control. The decision-making process focuses on scheduling, controlling quality services
and costs, and the actual day-to-day operations of running a factory or service facility.
3. Improving production and operations: The ﬁnal stage focuses on developing more efﬁcient
methods of producing the ﬁrmʼs goods.
These three types of decisions are ongoing and often occur simultaneously.
Production planning: the aspect of operations management in Short-Term Medium-Term
which the ﬁrm considers the competitive environment and its own Long-Term
1 Year 2 Years 3-5 Years
strategic goals in an effort to ﬁnd the best production method
During production planning, the ﬁrm considers the competitive Type of Production Process
environment and its own strategic goals in an effort to ﬁnd the
best production methods. Site selection
Production planning involves three phases: long-term planning Production
Facility layout Planning
(time of 3-5 years), medium-term planning (time of 2 years),
and short-term planning (time of 1-year).
Four important decisions must be made in production planning. 8
They involve the type of production process that will be used, Copyright © 2011 by Nelson Education Ltd.
site selection, facility layout, and resource planning.
Production process: the way in which a good is made
Mass production: the ability to manufacture many identical goods at once
Mass customization: a manufacturing process in which goods are mass produced up to a point and then custom
tailored to the needs or desires of individual customers
Customization: the production of goods or services one at a time according to the speciﬁc needs or wants of
Job shop: a manufacturing ﬁrm that produces goods in response to customer orders Inputs -> outputs
.Process manufacturing: a production process in which the basic input is broken down into one or more outputs
Assembly process: a production process in which the basic inputs are either combined to create the output or
transformed into the output
Continuous process: a production process that uses long production runs lasting days, weeks, or months without
equipment shut-downs; generally used for high volume, low variety products with standardized parts
Intermittent process: a production process that uses short production runs to make batches of different products;
generally used for low-volume, high-variety products
Factors in Facility Location Decisions
1. Availability of production inputs: Assess the availability of raw materials, parts, and equipment, as well and
availability and cost of labor.
2. Marketing factors: Evaluate how their facility location will affect their availability to serve their customers. Locating
near customers can provide market advantages. Consider the location of competitors. With more than one facility,
consider how far to spread their locations in order to maximize market coverage.
3. Manufacturing environment: When a large number of manufacturers are already located in an area, that area is
likely to offer greater availability of resources, better accessibility to suppliers and transportation, and other factors
that increase efﬁciency.
4. Local incentives: Incentives offered by countries, states, or cities, such as tax breaks and exemptions.
5. International location considerations: Labor costs are lower in countries like Singapore, China, and Mexico.
Foreign countries may have fewer regulations.
Designing the facility
All _____Stand here:
Process layout: a facility arrangement in which work ﬂows according to the production process. All workers
performing similar tasks are grouped together, and products pass from one workstation to another
Moving down the line:
Product (assembly line) layout: a facility arrangement in which work-stations or departments are arranged in a line
with products moving along the line
Fixed-position layout: a facility arrangement in which the product stays in one place and workers and machinery
move to it as needed
A Start-to-Finish Focus:
Cellular manufacturing: Production technique that uses small, self-contained production units, each performing all or
most of the tasks necessary to complete a manufacturing order !"#$%&'%()*+,$-./.&0/+
Quantity of items needed
Standard or Bill of material: a list of the items and the number of each
nonstandard items required to make a given product
Purchasing: the process of buying production inputs from
Factors Size of components various sources; also called procurement
Make-or-buy decisions: the determination by a ﬁrm of
whether to make its production materials or buy them from
Special design features outside sources
Outsourcing: the purchase of items from an outside source
Quality and reliability of suppliersather than making them internally
Copyright © 2011 by Nelson Education Ltd.
Inventory: the supply of goods that a ﬁrm holds for use in pr