Classification of Decision areas in operations

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

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

Technology selection and management:

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 (1) undesirable effects of deterioration, (2) potentially harmful waste by-products and (3) potential risk to the users and nonusers alike, due to variety of reasons. A technology decision is closely linked with the capacity and system maintenance areas.

Capacity Management:

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 ad thus the demand characteristics of the operation system.

As the product variety increase, the systems of production/operations change. In a system characterized by large volume low variety one can 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. It is evident that as the span of fluctuations in variety and volume gets wider, the scheduling problem assumes greater importance. Thus, in job-shop (i.e. tailor made physical output or service) type operation systems, the scheduling decisions are very important which determine the system effectiveness (e.g. customer delivery) as well as the system efficiency (i.e. the productive use of the machinery and labor). Similarly, we can also say that the need for system effectiveness coupled with system efficiencies determine the system structure and the importance of scheduling. When ‘time’ is viewed by the customers as an important attribute of the output from a production/operations system, then whatever may be the ‘needs of variety and flexibility’, the need for scheduling is greater and the operations system choice is also accordingly influenced . Thus, when a mass production of output is envisaged but with a ‘quick response’ characteristic to the limited mild variation, the conventional mass production assembly line needs be modified to bring in the ‘scheduling element so that the distinctive time element is not lost in the mass of output. This necessitates significant modifications in the mass production system and what emerges is a new hybrid system particularly and eminently suited to meet the operations systems objectives.

The capacity management and scheduling cannot be viewed in isolation as each affects the other.