Key Differences Between Production and Operation Management

1.Production Management can be defined as the administration of the set of activities concerning the creation of goods or
transformation of raw material into finished goods. Conversely, Operations Management is used to mean that branch of
management which deals with the administration both production of goods and provision of services to the customers. 2. In
production management, the manager has to make decisions regarding the design, quality, quantity and cost of the product
manufactured by the department. On the contrary, the scope of operations management is larger in comparison to the
production management wherein the operations manager looks after the product design, quality, quantity, process design,
location, manpower required, storing, maintenance, logistics, inventory management, waste management, etc. 3. Production
Management can only be found in the firms where production of goods is undertaken. Unlike, one can find operations
management in every organization, i.e. manufacturing concerns, service-oriented firms, banks, hospitals, agencies, etc. 4. The
basic objective of production management is to provide the right quality goods in the right quantity at right time and best price.
In contrast, operations management aims at making the best possible use of organization’s resources, in order to fulfil the
customer’s wants.
What are the Current Challenges of Operations Management? 1.Globalization “a process of interaction and integration
among the people, companies, and governments of different nations.” It is driven by a reduction in trade barriers,
advancements in information technology, and transportation technology. Operation managers face competition from the
company across the street, as well as, from across the country and across the world. 2.Sustainability “method of evaluating
whether a business can maintain existing practices without putting future resources at risk.” When discussing the concept of
sustainability, it is often referred to as the Three Pillars of Sustainability which are social, environmental, and economic.
Operations managers must concern themselves with the outcomes of each of the pillars including how their work affects
safety, welfare, communities, the environment and economic sustainability. Effective operations managers must implement
best practices with a concern for all three pillars of sustainability. They also need to initiate and verify corrective action when
any outcome of one of the three pillars becomes jeopardized. 3.Ethical Conduct “meant to ensure that the production
function and/or activities are not damaging to either the consumer or the society.” In particular organizations should consider
the effects new technologies, defective services, animal testing and business deals have on people, safety, and the
environment. Being ethical across all business functions such as accounting, human resource management, marketing and
sales, and production are clearly within the purview of the operations manager. 4.Effective Communication Being consistent
and effective when communicating can be difficult anyone in any position within an organization. The challenge for the
operations manager is to be able to communicate effectively with all internal and external stakeholders. Whether they are
talking to someone on the factory floor, or in the boardroom, they must be able to effectively communicate their message as
well as process the messages being directed to them. Mastering oral, written, and non-verbal communication is integral to
making day-to-day operations run smoothly. Effective and efficient communication is also necessary for building employee
morale and deepening trust with management. Operations managers who take the time to be self-reflective, the initiative to be
authentic, and the effort to work on their communication skills are bound to be both productive and successful. The
development of these skills are frequently the most requested of upper level management of their new and mid-level
managers and required to be successful in any company. 5.System Design: organizations must develop systems capable of
“producing quality goods and services in demanded quantities in acceptable time frames.” Designing the system, planning the
system, and managing the system present a wide variety of challenges to even the most savvy operations managers. As
operations managers work in multidisciplinary environments, they must be aware of and effectively respond to the challenges
presented by globalization, sustainability, ethical conduct, effective communication, and system design. Doing this calls for
operations managers to excel in the business, technical, and interpersonal aspects of their work as they actively support the
mission and vision of their organization.
Problem-solving skills every Operations Manager should possess
Operations management is an ever-changing and satisfying career for many, but it requires a very broad skill set and is not for
everyone. With as many problems as we are faced with in our work, it seems as if there is never enough time to solve each one
without dealing with some adversity along the way. Problem-solving is the essence of what a real professional exists to do. The
motive is to minimize the occurrence of problems – which means we must be courageous enough to tackle them head-on
before circumstances force them on us. We must be resilient in our attempt to create and sustain momentum for the
organization and people we serve.
Here’s an overview of the most important qualities one needs to have to become a successful operations manager.
Transparency in communication
Transparent communication enables a boundary-less organization whose culture is focused on the betterment of a stronger
whole. It welcomes efficient cross-functional collaboration and problem-solving attitude in the entire team. As an operations
manager, one must embrace an entrepreneurial spirit where employees can freely navigate and collaborate to connect the
dots. In the absence of this, problem-solving is more difficult because you will deal with individual contributors rather than
team players, fostered by a cross functional environment. This is when problem-solving becomes a discouraging task. As a
responsible professional, one needs to engage employees to solve problems together. The aim should be to find resolutions
and make the organization stronger.
Strong initiative and leadership
In addition to being a good communicator, an operations manager must be a self-starter. Proposing changes to how an
organization works, no matter how small or big, requires a lot of initiative, and one has to be able to justify the
recommendations. Like any manager, those in operations must be able to lead and motivate employees. They should also be
comfortable dealing with employee issues, working in team environments, and delegating work to others.
Analytical Skills
The primary role of an operations manager is to direct and improve workflow for services and employees, to ensure the
organization runs as efficiently as possible. An ideal candidate is someone who can look at existing processes, examine them,
and come up with necessary solutions. Operations management involves a lot of creativity. One needs to be creative and
innovative enough to come up with ideas that ensure seamless execution of processes, leading to results.
Strategizing skills A solid strategy must be implemented in order to solve any problem. Many professionals attempt to dissect
a problem rather than identify the strategy for change that lies within the problem itself.
Important factors to consider before starting your Business/Manufacturing Process.
Knowledge/Expertise• Knowledge and expertise about the product or service are keys to a successful business.• In case of
limited knowledge the owner may not be able to sustain the business and can be fooled by the vendors, suppliers and
competitors.• When you ask yourself a question “What business shall I start?” you need to get a convincing reply about what
you intend to do and how you are going to go about it. Market/Demand• Once a decision is taken on the business you intend
to start, the next step is to explore the demand / market for the product / service. Certain products will only have a domestic
market for them whereas others can be successful on an international level. Total Project Costs• It is important to correctly
assess the total project cost required to set up and run the business successfully.• In a capital intensive business such as
starting a manufacturing plant, the start up costs can be very high. You need to identify the total amount which will be spent on
the land & building, plant & machinery, furniture and office equipment, vehicles etc.• An office or firm can be started at a
relatively lower cost initially with only the basic requirements.• One also needs to take care of the working capital requirement.
Financing/Capital• After identifying the initial costs required for starting the business, the financing pattern will need to be
decided. The financing pattern will be mainly by way of capital introduction by the owner and borrowed funds.• Depending on
how much capital the owner can introduce the balance amount will need to be borrowed. Funds borrowed will be either short
term loans or long term loans. Once the financing pattern is identified the owner will need to decide how the money is going to
be utilized. Competition• Before entering new business, information about market competition needs to be found out. In case
a product is a monopoly then the competition will not matter. Otherwise the success of the business will depend upon the
demand and supply gap. Thus if there is a huge demand then you can enter the business in spite of the market competition.
Otherwise you will need to be stronger than the competitors to gain an entry. Location• Deciding an optimum location for the
business is a strategic and an important one. A good location goes a long way in making the business successful. The location
needs to be carefully chosen.• Some places have advantages over the others. You can save out on taxes, water and electricity
costs if you are located in some areas. The raw materials can be easily sourced, the manpower would be easily available and
you can save out on transportation costs in case of certain locations. Setting up a business in certain location could lead to
subsidy and rebates from the Government. Laws, Rules, & Regulation• Setting up a new business would require compliance
with various laws & regulations. Each country is governed by separate laws and regulations which require that any new
business be registered with certain authorities and meets certain compliance. Thus registration of the name of the company
may be required with Ministry of Commerce for instance. Non-compliance with the statute could lead to huge fines and penalty
and hamper the success of a new business. Return on Investment• Return on Investment (ROI) is calculated as Net Profit
divided by the Investment made. The ROI is low in the initial years and is expected to grow on a year on year basis.• The ROI
needs to be compared with the return that would be earned from alternative business options available. For instance it could
be compared with any other source of income such as money earned from investment in the stock market. Similarly the Return
On Capital must be greater than the rate of interest earned from a fixed deposit kept with a bank. Staff/Manpower• Any
business requires efficient manpower to succeed. The staff needs to be carefully chosen since they are the ones who could
make or break the business.• The cost of manpower varies depending on the location of the business and thus this needs to be
factored well. The business needs to be set up in a location where there is sufficient availability of manpower both skilled as
well as unskilled. Technology• It is always better to invest in the best technology at the time of start up itself. Post investment,
monitoring of the technology purchased is required. Technology would include plant & machinery as well as latest office
equipment. One should not exclude the software required to monitor the business. Choosing optimum software is a
challenging task. A technologically advanced business is expected to perform much better in the longer run.
Forecasting is a process of predicting or estimating the future based on past and present data. Forecasting provides
information about the potential future events and their consequences for the organisation. It may not reduce the
complications and uncertainty of the future. However, it increases the confidence of the management to make important
decisions. Forecasting is the basis of premising. Forecasting uses many statistical techniques. Therefore, it is also called
as Statistical Analysis. Features of Forecasting. Steps in Forecasting
Procedure, stages or general steps involved in forecasting are given below:-
Analysing and understanding the problem : The manager must first identify the real problem for which the forecast is to be
made. This will help the manager to fix the scope of forecasting. Developing sound foundation : The management can develop
a sound foundation, for the future after considering available information, experience, type of business, and the rate of
development. Collecting and analysing data : Data collection is time consuming. Only relevant data must be kept. Many
statistical tools can be used to analyse the data. Estimating future events : The future events are estimated by using trend
analysis. Trend analysis makes provision for some errors. Comparing results : The actual results are compared with the
estimated results. If the actual results tally with the estimated results, there is nothing to worry. In case of any major difference
between the actual and the estimates, it is necessary to find out the reasons for poor performance. Follow up action : The
forecasting process can be continuously improved and refined on the basis of past experience. Areas of weaknesses can be
improved for the future forecasting. There must be regular feedback on past forecasting.
Importance of Forecasting Merits, significance or importance of forecasting involves following points:- 1.Forecasting provides
relevant and reliable information about the past and present events and the likely future events. This is necessary for sound
planning. 2. It gives confidence to the managers for making important decisions. 3.It is the basis for making planning premises.
4.It keeps managers active and alert to face the challenges of future events and the changes in the environment.
Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine
how others achieve their performance levels, and to understand the processes they use.
Strategic Benchmarking Used when businesses need to improve overall performance, strategic benchmarking examines the
long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level
aspects such as core competencies, developing new products and services, and improving capabilities for dealing with changes
in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and take a long
time to materialise.
Performance or Competitive Benchmarking Used when businesses wish consider their position in relation to performance
characteristics of key products and services. Benchmarking partners are drawn from the same sector. This type of analysis is
often undertaken through trade associations or third parties to protect confidentiality.
Process Benchmarking Focuses on improving specific critical processes and operations. Benchmarking partners are sought from
best practice organisations that perform similar work or deliver similar services. Involves producing process maps to facilitate
comparison and analysis. Often results in short term benefits
Functional Benchmarking Businesses look to benchmark with partners drawn from different business sectors or areas of
activity to find ways of improving similar functions or work processes. Can lead to innovation and dramatic improvements
Factors affecting Customer Satisfaction
Customer satisfaction is the overall impression of customer about the supplier and the products and services delivered by the
supplier. Following are the important factors that could affect customer satisfaction:
Departmentwise capability of the supplier. 2Technological and engineering or re-engineering aspects of products and services.
Type and quality of response provided by the supplier.
Supplier’s capability to commit on deadlines and how efficiently they are met.
Customer service provided by the supplier.
Complaint management.
Cost, quality, performance and efficiency of the product.
Supplier’s personal facets like etiquettes and friendliness.
Supplier’s ability to manage whole customer life cycle.
Compatible and hassle free functions and operations.
The above factors could be widely classified under two categories i.e. suppliers behaviour and performance of product and
services. The supplier’s behavior mostly depends on the behavior of its senior subordinates, managers and internal employees.
All the functional activities like customer response, direct product and maintenance services, complaint management etc. are
the factors that rely on how skillful and trained the internal and human resources of the supplier are. The second category is
regarding all the products and services. This depends on the capability of supplier to how to nurture the products and service
efficiently and how skilled the employees are. It’s all about how the skills are implemented to demonstrate engineering, re-
engineering and technological aspects of the products and services. The quality and efficaciousness of the products is also an
important factor that enables compatible and hassle free functions and operations. This bears to lower maintenance and higher
life of the product which is highly admired by the customers.

Job-shop production are characterized by manufacturing one or few quantity of products designed and produced as per the
specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of
products. A job-shop comprises of general-purpose machines arranged into different departments. Each job demands unique
technological requirements, demands processing on machines in a certain sequence.
Batch Production. American Production and Inventory Control Society (APICS) defines Batch Production as a form of
manufacturing in which the job pass through the functional departments in lots or batches and each lot may have a different
routing. It is characterized by the manufacture of limited number of products produced at regular intervals and stocked
awaiting sales. Mass Production. Manufacture of discrete parts or assemblies using a continuous process are called Mass
Production. This production system is justified by very large volume of production. The machines are arranged in a line or
product layout. Product and process standardization exists and all outputs follow the same path.
Continuous Production. Production facilities are arranged as per the sequence of production operations from the first
operations to the finished product. The items are made to flow through the sequence of operations through material handling
devices such as conveyors, transfer devices, etc.