Criteria of performance for the operations management System

Three objectives or criteria of performance of the production and operations management system are

1. Customer satisfaction
2. Effectiveness
3. Efficiency

The case for ‘efficiency’ or ‘productive’ utilization of resources is clear. Whether, the organization is in the private sector or in the public sector, is a ‘manufacturing’ or a ‘service’ organization, or a ‘profit making’ or a ‘non-profit’ organization, the productive or optimal utilization of resource inputs is always a desired objective. However, effectiveness has more dimensions to it. It involves optimality in the fulfillment of multiple objectives, with a possible prioritization within the objectives. This is not difficult to imagine because modern production and operations management has to serve the so-called target customers, the people working within, as also the region, country or society at large. In order to survive the production/operations management system, has not only to be ‘profitable’ and/or ‘efficient’, but, must necessarily satisfy many more ‘customers’. This effectiveness has to be again viewed in terms of the short and long time horizons (depending upon the operations system’s need to remain active for short or long time horizons) – because , what may seem now like an ‘effective’ solution may not be ‘all that effective in the future. In fact, the effectiveness of the operations systems may depend not only upon a multi-objectives satisfaction but also on its flexibility or adaptability to change situations in the future so that it continues to fulfill the desirable objectives set while maintaining optimal efficiency.

Typically, what are the different decisions taken in production and operations management? As a discipline of ‘management’ which involves basically planning, implementation, monitoring, and control, some of the jobs/decisions are involved in the production and operations management.

The production and operations management function can be broadly divided into the following four areas:

1. Technology selection and management
2. Capacity management
3. Scheduling /Timing,Time allocation
4. System maintenance

This is primarily an aspect pertaining to the long term decision with some spillover into the intermediate region. Although it is not immediately connected with the day-to-day short term decisions handled in the plant, it is an important problem to be addressed in an age of spectacular technological advances, so that an appropriate choice is made by a particular organization to suit its objectives, organizational preparedness and its micro economic perspectives. It is a decision that will have a significant bearing on the management of manpower, machinery, and materials capacity of the operations system and also on the type of disturbances it can create within and outside the system by generating (i) undesirable effects of deterioration, (ii) potentially harmful waste by-products, and (iii) potential risk, to the users and non-users alike, due to a variety of reasons. A technology decision is closely linked with the capacity and system maintenance areas.

The capacity management aspect once framed in a long term perspective revolves around matching of available capacity to demand or making certain capacity available to meet the demand variation. This is done on both the intermediate and short time horizons. Capacity management is very important for achieving the organizational objectives of efficiency, customer service and overall effectiveness. While lower than needed capacity results in non-fulfillment of some of the customer services and other objectives of the production/operations system, a higher than necessary capacity results in lowered utilization of the resources or, in other words, lower efficiency of the conversion operations. There could be a ‘flexibility’ built into the capacity availability, but this depends upon the ‘technology’ decision to some extent and also on the nature of the production/operations system. While some operations systems can ‘flex’ significantly, some have to use inventories as the flexible joint between the rigidities of a system. The degree of flexibility required depends upon the customers demand fluctuations and thus the demand characteristics of the operations system.

As the product variety increases, the systems of production/operations change. In a system characterized by large volume low variety, one have capacities of machinery and men which are inflexible while taking advantage of the repetitive nature of activities involved in the system; whereas in a high variety (and low volume) demand situation, the need is for a flexible manufacturing system even at some cost to the efficiency. It may be noted that the relationship between the flexibility, capacity and the desired system-type holds good even for the ‘service’ industry.

Scheduling is another decision area of operations management which deals with the timing of various activities – time phasing of the filling of the demands or rather, the time phasing of the capacities to meet the demand as it keeps fluctuating.

System Maintenance: The fourth area of operation management is regarding safeguards – that only desired outputs will be produced in the ‘normal’ condition of the physical resources, and that the condition will be maintained normal. This is an important area whereby ‘vigilance’ is maintained so that all the good work of capacity creation, scheduling, etc is not negated.