Learning Outcomes

After completing this lesson, learners will be able to:

• Explain production operations and their role in meeting customer expectations.
• Describe principles for efficient, effective and sustainable production.
• Explain how technology supports production operations.
• Identify domestic and global production challenges.
• Distinguish between project, job-shop, batch, mass and continuous production.
• Explain Make to Order, Make to Stock, Assemble to Order and Engineer to Order.
• Describe the main production and service-operation processes.
• Assess production performance using suitable measures.

1. Production Operations

Production operations are the activities used to transform inputs into finished goods or services.

Inputs may include:

• Raw materials
• Components
• Labour
• Equipment
• Technology
• Energy
• Information
• Capital

Outputs may be physical products or services.

Inputs
  ↓
Transformation process
  ↓
Goods or services
  ↓
Customer

2. Role in the Supply Chain

Production connects demand with the supply of finished goods or services.

It interacts with:

• Demand planning
• Procurement
• Suppliers
• Inventory
• Warehousing
• Transport
• Customer-order management
• Maintenance
• Quality management

Production must provide:

• The correct product or service
• In the required quantity
• At the required quality
• Within the required timeframe
• At an acceptable cost

3. Meeting Customer Expectations

Production performance affects customer expectations relating to:

• Product availability
• Quality
• Customisation
• Delivery time
• Reliability
• Price
• Product safety
• After-sales support

If production is late or produces defective goods, warehousing and transport may also fail to meet the customer’s delivery requirements.

4. Production Planning and Scheduling

Production planning determines:

• What must be produced
• How much must be produced
• Which process will be used
• What materials are required
• Which equipment is required
• How much labour is needed
• When production must occur

Production scheduling establishes the timing and sequence of activities.

A production schedule may contain:

• Product
• Quantity
• Start date
• Completion date
• Work centre
• Equipment
• Employees
• Material requirements
• Order priority

5. Capacity Planning

Capacity planning determines whether sufficient resources are available to achieve production requirements.

It considers:

• Equipment capacity
• Labour hours
• Work-centre capacity
• Material availability
• Shift patterns
• Maintenance
• Production time
• Facility space
• Supplier capacity

Capacity Utilisation

Capacity utilisation = Actual output ÷ Available capacity × 100

Example

A production line can produce 10,000 units per week but produces 8,000 units.

Capacity utilisation = 8,000 ÷ 10,000 × 100
Capacity utilisation = 80%

Very high utilisation may reduce flexibility and increase the effect of breakdowns.

6. Quality Control and Quality Assurance

Quality Control

Quality control identifies defects through:

• Inspection
• Testing
• Measurement
• Product checks
• Process monitoring

Quality Assurance

Quality assurance establishes systems intended to prevent defects.

It may include:

• Standard procedures
• Training
• Supplier standards
• Process controls
• Audits
• Document control

7. Inventory in Production

Production relies on the availability of:

• Raw materials
• Components
• Work in progress
• Consumables
• Spare parts
• Finished-goods capacity

Excessive production inventory increases cost and congestion. Insufficient inventory may stop production.

Production and inventory plans must therefore be coordinated.

8. Equipment Maintenance and Reliability

Equipment must be maintained to:

• Reduce breakdowns
• Improve safety
• Protect product quality
• Maintain output
• Extend equipment life
• Reduce unplanned downtime

Maintenance may include:

• Preventive maintenance
• Condition monitoring
• Corrective maintenance
• Emergency repairs
• Planned shutdowns

Production schedules must account for planned maintenance.

9. Workforce Management

Workforce management ensures that sufficient competent employees are available.

It includes:

• Staffing
• Shift planning
• Training
• Supervision
• Performance monitoring
• Safety
• Skills development
• Leave and absence planning

Production targets should not encourage unsafe practices or poor quality.

10. Efficient and Effective Production

Efficient production uses resources with minimum unnecessary cost or waste.

Effective production achieves the required output, quality and customer result.

An operation can be efficient but ineffective. For example, a factory may produce quickly but manufacture the wrong product.

Production must be both efficient and effective.

11. Lean Production

Lean production reduces activities that do not add value for the customer.

Common production waste includes:

• Overproduction
• Waiting
• Unnecessary transport
• Excess processing
• Excess inventory
• Unnecessary movement
• Defects
• Unused employee knowledge

Lean methods may include:

• Just-in-Time production
• Standardised work
• Workplace organisation
• Visual management
• Continuous improvement
• One-piece flow

12. Six Sigma

Six Sigma is a data-based method for reducing process variation and defects.

A common improvement structure is DMAIC:

1. Define the problem.
2. Measure current performance.
3. Analyse the causes.
4. Improve the process.
5. Control the improved process.

Lean focuses mainly on reducing waste and improving flow, while Six Sigma focuses on reducing variation and defects. They may be used together.

13. Sustainable Production

Sustainable production seeks to reduce negative environmental and social effects.

Practices may include:

• Reducing material waste
• Reusing suitable materials
• Recycling
• Improving energy efficiency
• Conserving water
• Preventing pollution
• Controlling emissions
• Using safer materials
• Maintaining safe working conditions
• Responsible sourcing

Sustainability should be considered alongside quality, cost and customer requirements.

14. Types of Production Processes

Project Production

Project production creates a unique, complex output over a defined period.

Examples include:

• Construction projects
• Ships
• Infrastructure
• Custom industrial installations

Characteristics include:

• Unique output
• Defined beginning and end
• Detailed planning
• High coordination
• Changing resource needs

Job-Shop Production

Job-shop production creates low volumes of customised products using flexible equipment and skilled employees.

Examples include:

• Custom engineering
• Specialised repairs
• Bespoke furniture
• Toolmaking

Characteristics include:

• High variety
• Low volume
• Flexible routing
• Skilled labour
• Longer production times

Batch Production

Batch production creates groups of similar products.

Examples include:

• Bakery products
• Clothing
• Pharmaceuticals
• Paint

Characteristics include:

• Moderate volume
• Products made in batches
• Equipment changed between batches
• Some variety
• Setup time between runs

Mass Production

Mass production produces large quantities of standardised products.

Examples include:

• Motor vehicles
• Appliances
• Packaged consumer products

Characteristics include:

• High volume
• Low variety
• Repetitive processes
• Specialised equipment
• Low unit cost
• Assembly-line flow

Continuous-Flow Production

Continuous production operates with an uninterrupted flow.

Examples include:

• Oil refining
• Chemicals
• Electricity generation
• Paper production

Characteristics include:

• Very high volume
• Standard output
• Continuous operation
• High capital investment
• Limited flexibility
• High cost of shutdown

15. Production-Process Comparison

16. Make to Stock

Make to Stock, or MTS, produces finished goods according to forecast demand before confirmed customer orders are received.

Advantages

• Immediate product availability
• Short customer lead time
• Efficient high-volume production

Risks

• Excess inventory
• Forecast errors
• Obsolescence
• Storage costs

MTS commonly uses batch or mass production.

17. Make to Order

Make to Order, or MTO, begins production after a confirmed customer order is received.

Advantages

• Lower finished-goods inventory
• Greater customisation
• Reduced risk of obsolete finished stock

Risks

• Longer customer lead time
• Dependence on material availability
• More complex scheduling

MTO commonly uses job-shop or batch production.

18. Assemble to Order

Assemble to Order, or ATO, holds standard components and completes final assembly after receiving the customer order.

Advantages

• Product variety
• Faster than producing entirely from order
• Lower finished-goods inventory

Requirements

• Standard components
• Accurate component inventory
• Flexible final assembly
• Reliable order information

ATO may use batch, assembly-line or one-piece-flow processes.

19. Engineer to Order

Engineer to Order, or ETO, designs and produces a product according to unique customer requirements.

Characteristics

• Design begins after the order
• High customisation
• Long lead time
• Detailed customer involvement
• Project-based coordination

ETO commonly uses project or job-shop production.

20. Order Strategy and Process Selection

The appropriate strategy depends on demand stability, product variety, customer lead time and customisation.

21. Service Operations

Service operations transform resources into services rather than physical products.

Examples include:

• Transport
• Banking
• Healthcare
• Telecommunications
• Repairs
• Consulting

Service operations may involve:

• Customer participation
• Limited ability to store the output
• Variable demand
• Time-sensitive capacity
• Direct interaction with the customer

An unused hotel room or delivery slot usually cannot be stored and sold later as inventory.

22. Key Production Processes

Demand Planning

Estimates future production requirements.

Procurement

Obtains the materials, components and services needed for production.

Production Scheduling

Allocates products, equipment, labour and time.

Materials Planning

Determines what materials are required and when.

Production Execution

Performs the transformation activities.

Quality Management

Monitors products and processes.

Maintenance

Keeps equipment available and reliable.

Inventory Management

Controls raw materials, work in progress and finished goods.

Monitoring and Reporting

Measures output, cost, quality, time and resource use.

23. Production-Process Interaction

Customer demand
       ↓
Production planning
       ↓
Materials and capacity planning
       ↓
Procurement and inventory
       ↓
Production scheduling
       ↓
Production execution
       ↓
Quality control
       ↓
Finished-goods inventory
       ↓
Distribution to customer

A failure in one process can affect the whole chain. For example, late materials may reduce output and delay customer deliveries.

24. Production Technology

Technology may improve:

• Speed
• Accuracy
• Visibility
• Traceability
• Quality
• Scheduling
• Maintenance
• Decision-making

It also requires investment, training, maintenance, security and accurate information.

25. Domestic Production Requirements and Challenges

Production within South Africa may need to consider:

• Availability of materials
• Supplier reliability
• Transport infrastructure
• Electricity interruptions
• Labour availability
• Equipment maintenance
• Safety requirements
• Environmental requirements
• Customer locations
• Production cost

Controls may include backup supply arrangements, maintenance plans, flexible schedules and appropriate inventory protection.

26. Global Production Requirements and Challenges

Global production may involve:

• International suppliers
• Long lead times
• Customs
• Currency fluctuations
• Different regulations
• Language and cultural differences
• Quality variation
• International transport
• Political instability
• Limited visibility
• Intellectual-property concerns
• Supply disruption

Organisations must balance lower sourcing or production costs with additional lead time and risk.

27. Production Performance Management

Production performance management involves:

1. Establishing targets.
2. Collecting operational data.
3. Comparing actual results with targets.
4. Identifying deviations.
5. Investigating root causes.
6. Implementing improvements.
7. Monitoring whether improvement is sustained.

28. Production Performance Measures

Measures must be evaluated together. High output is not acceptable if it produces excessive defects, unsafe work or late orders.

29. Root-Cause Analysis

Root-cause analysis identifies the underlying reason for a production problem.

Possible causes may relate to:

• Materials
• Methods
• Machines
• People
• Measurement
• Environment

Corrective action should address the cause rather than repeatedly treating the visible symptom.

30. Continuous Improvement

Production improvement may involve:

• Removing bottlenecks
• Reducing setup time
• Improving maintenance
• Training employees
• Correcting material shortages
• Standardising procedures
• Improving quality controls
• Revising production schedules
• Introducing appropriate technology
• Reducing waste

Improvements should be measured to confirm that they are effective.

31. Lesson Summary

• Production operations transform inputs into goods or services.
• Production must balance quantity, quality, cost, time and safety.
• Planning, scheduling, capacity, inventory, quality, maintenance and labour must be coordinated.
• Project, job-shop, batch, mass and continuous processes suit different volumes and levels of variety.
• MTS, MTO, ATO and ETO determine when production begins relative to customer demand.
• Lean reduces waste, while Six Sigma reduces variation and defects.
• Technology improves production visibility, accuracy and control.
• Domestic and global production face different supply, infrastructure and regulatory challenges.
• Performance management measures output, cost, quality, time and resource use.