Production activities come under the core area or main activities of all types of organizations. Whether it’s a manufacturing concern or a service industry, all types of businesses create different products and services for the use of society which is known as Production. Through various conversion processes, inputs are converted into outputs (outcome) for the production of goods and services. So, the main objective of the production is to produce final products from raw material by using manpower and machinery. Production management is associated with managing all those activities that are involved in the production or manufacturing of final products and services for the benefit or use of humans.
In simple terms, Production management involves planning, organizing, directing, and controlling all activities of production. It combines the six main elements i.e. money, men, materials, machines, markets, and methods in order to fulfill different needs of people. It is considered one of the main elements of business management and includes the decision-making process related to production cost, quality. It uses the basic principle of management in production-related activities.
Elwood Spencer Buffa has defined Production Management as the process that handles the decision-making of production-related processes in order to produce final goods and services as per specification, desired quantity, defined timelines, and at the lowest cost.
According to E.L. Brech, Production Management is considered as the process to regulate and effectively plan the operations of an enterprise’s specific area that converts raw materials into final products.
For example, the production process in a Garment manufacturing company consists of inputs of materials, transformation processes, and final output i.e. garment.
Raw material, labor, machines, technology, are considered as the primary requirement which is an input in the production process of cloth or garment. Different raw materials are required in the manufacturing of garments such as yarn, fabric, sewing threads, and accessories i.e. buttons, labels, trims, hangtags, etc.
Further, the transformation process is there which consists of a series of processes in an organized way like cutting, marking, stitching, laying, checking, pressing, finishing, and packaging. This transformation process converts raw materials into final goods.
The finished goods result in the final cloth or garment.
Objectives of Production Management
To produce the right quality products and services in the right quantity, at the right cost and time is the main aim of production management. Improving the efficiency of the organization by ensuring the optimum utilization of available resources of production, is the ultimate objective of production management. Above main objectives are described as below in detail:
1. Production of Goods & Services of “Right Quality”
The product’s quality is decided as per the requirement of customers. The engineering or design department translates the requirements of customers into product specifications. These specifications are further translated into objectives that are measurable and achievable by the manufacturing department of an organization. The product’s final quality is determined and a proper balance between the product quality and manufacturing cost is required to be maintained.
2. Producing Goods & Services in “Right Quantity”
One objective of production management is to ensure that the organization is producing products and services in the right numbers as per their demand. In the case of less demand and comparatively high or more production of products, it will block the capital in stock. Wherein, if the quantity being produced is less than the demand for products and services, then it will create a shortage. So, the decision is required to determine the right quantity to produce.
3. To Ensure Minimum Manufacturing Cost
Manufacturing costs are determined prior to the manufacturing of any product. Product manufacturing must take place in pre-defined manufacturing costs. Keeping the difference between standard cost and the actual cost of manufacturing at the minimum is also the focus area of production management.
4. Production of Products within the Given Timeframe or Schedule
One of the important parameters of determining the effectiveness of manufacturing or production is “timely delivery” as per the specified schedule. However, due to some factors like absenteeism, delay in the availability of raw material, machine breakdown, etc. create adverse effects in the completion of products on time.
Production management aimed at designing schedules for different production-related activities. Its objective also includes monitoring these activities and to ensure disbursement of all operations or tasks according to the specified schedules. Also, in case of finding any discrepancies in scheduling; all required corrective measures are ensured by the production management team to remove such discrepancies. This facilitates keeping the overall production time at a minimum level.
To achieve the above main objectives, there are supporting objectives of production management to ensure optimum utilization of different incoming resources such as manpower, material, and machinery. These supporting objectives are as mentioned below:
-Supporting/ Secondary Objectives
1. To Ensure Equipment and machine quality
This objective includes checking the quality and standards of equipment and machine in order to ensure the production of products with required accuracy and as per pre-defined specifications. This also consists of ensuring the minimum level of running and procurement cost and maximum utilization of machines once purchased and used for production.
2. Availability of raw materials as and when required
Production management looks after the availability of raw materials on time according to the specifications i.e. quality, size, shape, color, etc. It ensures that material is utilized up to a maximum extent with the minimum level of scrap or wastage.
3. Adequate and right manpower
The aim of Production management also includes providing adequate manpower as it is considered an important input in the production process and the success of output also depends a lot on the type of manpower. So, production management ensures the balance and right match between the workers and assigned jobs to them.
Types of Production Management System
The production management system is mainly of two types i.e.
1. Continuous Production Management System
This is considered as a primary production management system and includes a continuous flow of material physically and without any type of interruption. Machines for special purposes are used in this to produce standardized products in bulk quantity. Organizations that use this production system, continuously produce different products or services by a chain of connected processes.
For example, different industries such as Sugar, Paper, Chemical, Oil Refineries, Petroleum, Fertilizers, Power stations, Natural Gas Processing, etc. adopt the continuous production management processes or systems.
Practical Examples of Continuous Production Management System
1. Production Management System of Oil Refineries
Crude oil is converted into various common products of petroleum i.e. diesel, gasoline, etc. Liquids being used in plastics and chemicals are also produced by a refinery. Multiple units are used in complex and large oil refineries to disintegrate crude oil. Further, the process starts for reconfiguration of the disintegrated crude oil into new products using different chemical-based processes. Large tanks are arranged to store finished products before making them available for transport at different places. This process is a continuous process that functions every day and 24/7 hours in a year.
2. Production Management System of Food and Beverage manufacturing industry
Unlike small organizations where batch production system is more suitable due to limited quality of production, large organizations are required to produce products in high volumes in the most efficient way and so, the continuous production system is more effective in these. Such as Coca-Cola, Amul’s Milk, etc. produces products in large volumes and also, these big brands have enough capital for investment purposes and they use the advanced and latest technology for mass productions of products.
3. Production management system of the paper manufacturing industry
Manufacturing paper is considered a complicated process and includes different processes and machinery in order to convert logs into finished products i.e. paper. This industry adopts a continuous production manufacturing system so that it can produce a huge quantity of standardized products. The continuous production management process in paper manufacturing includes different steps. It starts with putting logs in machines to eliminate the bark and further ground into chips of wood. A special solution is there to cook wood chips and the solution is placed in a large vas known as a digester. The design of digester is made in such form that it is able to tackle large volumes and run in continuous form. Through this running process, wood chips are turned into a pulp effectively. The next step is related to the pumping of the pulp into automated machines and moving it by rollers for pressing and drying.
4. Production management system of the Cement manufacturing industry
A continuous process is an essential requirement in the cement manufacturing industry for ensuring the transformations of the right chemical. Usually, cement is manufactured by crushing raw materials like clay and limestone. After that combining crushed rocks with other types of materials like iron ore takes place and ground with each other. After mixing properly, it is further forwarded into a kiln where it is being heated at a certain temperature. Once there are chemical changes, then materials further run under different other automation processes until the finished product (cement) is produced.
The continuous production system is further categorized into two categories i.e.:
1.1 Mass Production System
This includes producing standardized components of a product in bulk or a large scale. Economies of scale can be achieved through mass production systems due to a large volume of output. Uniform and high-quality products are manufactured due to the mechanization and standardization process.
For example, producing spare parts of a particular vehicle comes under mass production.
Another example can be Coca-Cola, which is a bottling company that works on mass production under a continuous production system. The products are highly automated and standardized and production is in high volumes. Coca-Cola’s production process includes transferring sub-parts or sub-assemblies from production’s one stage to another stage through a continuous flow or process. Products are added at each stage of mass production. This mass production method being used by Coca-Cola is due to the wide variation of products of the company that are being distributed in bulk orders. The company has a different range of products in its distribution range such as Diet Coke, Coke, Flavored soft drinks, Bottled water, etc. So, the production of such a huge range of products can be best achieved through mass production and a continuous production system.
1.2 Process Production System
Continuous production is there in this production system due to uniformity and standardization in the sequence of operations. Also, machines that are being used in the manufacturing process are automated and highly sophisticated. Process production is used while processing certain materials in bulk quantity.
For example, different industries that are based on process production include Milk diaries, Fertilizer plants, and Petrochemical plants as these industries work on highly automated systems.
Usually, the process of this system includes taking output (finished goods or services) of one process as an input (raw material) of the next process till the end of the manufacturing or production process. Also, in most industries, a single main raw material is used in the transformation process to produce various products at different levels of production or operation.
For example, Crude oil is transformed into different finished products such as gasoline, kerosene, and other related products.
2. Intermittent Production System
In this production system, there are irregular intervals or breaks in the manufacturing of products as products or services are produced as per the orders of customers. So, rather than mass production, it includes the production based on specific requirements or orders, and thus, the production flow is irregular. Products that are produced under this system are generally of different sizes or verities. So, this system depends upon the orders received from customers.
For example, A Bakery shop produces cookies every day for customers who demand it. To produce another product i.e. Muffins as per the demand of customers, the same production line is being used after reconfiguring machines.
Similarly, Tailor also stitches clothes based on the customer requirement and the total number of orders given by customers. Stitching, Designing are customer-specific based on individual measurements. The clothes are made to meet the number of orders given by each customer, so the production is not mass production.
Intermitted production system includes two types i.e.
2.1 Job Production
This includes producing goods and services as per the orders received from the customers because there is no assurance of continuous demand for these. It focuses on the production of a single product at a time i.e. from the first phase to the ending phase. Small scale businesses such as individual service or product providers, small restaurants use job production. Different large companies also use this type of production system.
Different examples of Job Production include:
- Building a house through a contractor
- Doing audits of the big public limited organization
- Wedding arrangements by wedding planners for specific wedding
2.2 Batch Production
In this production system, a product is manufactured in different batches or groups as per the orders received from the customers or based on the assumption of the product’s continuous demand. Batch production is mainly used in different industries such as FMCG, Chemical (producing medicines), Consumer durable, Steel manufacturing, etc. as a verity of products is large in these industries, and demand is variable. The required units of the product are already known and produced in a single batch.
For example, a consumer durable company, Samsung manufactures different types of electronic products. Also, there are different variants of the same product that are being produced. Like, there are different types of Samsung washing machines alone in the product range of the company. So, it produces these variants of a single product in different batches i.e. through batch production. One type of washing machine will be manufactured first and after that, the next type of washing machine will be produced as per the demand.
Production Management Activities
Various activities involved in production management are as under:
- Identifying required materials, acquisition of the knowledge related to processes, and installing equipment that is required for transforming raw materials into finished products.
- The next activities include finding out how many quantities are required to be produced, detailing specifications, establishing processes, etc.
- Decisions related to facility location, variety of required machinery for installation, technologies to be included, workforce hiring, and their training to perform different activities, facilities that need to be provided, what items to outsource, or produce in-house. With the help of these decisions, productivity can be achieved with high efficiency.
- For transformation through processes, various types of materials are purchased, stored in the organization. A smooth flow of information is ensured for monitoring and controlling the processes that ultimately control the related costs and to widen the scope of continuous improvement.
- Formulation of strategies at different levels along with procedures of proper implementation.
- Designing flexibility to look at aftermarket fluctuations.
- Accommodating changes at the technology front.
Production Management Functions
1. Choosing Product and It’s Design
With the help of production management, a firm is able to select the right product and its design. It is essential for businesses to choose the appropriate product and its proper design in order to be successful and survive in the competitive market. Also, various research campaigns are performed under this to know the desires and needs of customers. This helps in making decisions on selecting the right type of product. Once the product is finalized, the next step is to select the most appropriate design of the product so that customers must get the maximum value of the product at a minimum cost.
2. Choosing the Process of Production
Another function of production management is related to selecting the appropriate production process. This includes deciding upon machines, technology type, a system of material handling, etc.
3. Selection of Correct Production Capacity
This includes choosing the production capacity according to the product demand as problems may arise in case of excess or less capacity. For this, the production manager plans the production capacity as per the short-term and long-term demand for the production.
4. Choosing Right Location for Production Facilities
Production management ensures the smooth functioning of production by selecting a proper location to set up production facilities. This is considered as a decision of long-term capital investment because businesses may get affected by this in the future. Production management examines the setup area in a proper way before fixing different facilities and plants related to production. Different geographical and other related factors are considered into it so that the availability of sufficient manpower, raw materials, and different infrastructure facilities can be ensured.
5. Production Planning and Control
A predetermined process that includes planning, managing, and controlling the allocation of machinery, raw material, and manpower for the purpose of gaining maximum efficiency level is known as Production Planning and control.
Production planning is generally the initial step of production management. This includes a series of phases through which the production process can be optimized in the best suitable form. This facilitates manufacturers to manage their internal resources efficiently in order to fulfill the demand of customers.
The marketing department of an organization provides required data for production planning as it forecasts the product demand and also, determines how many quantities are required of different products to meet the demand of orders received. This also includes establishing delivery schedules. To meet the different demands, decisions related to produce or purchase (Make or Buy) have to be taken for avoiding any excess or deficit using two ways, i.e. level capacity and matching demand.
- Level Capacity
This method includes keeping production capacity constant at an appropriate level. Stock, overtime, backlog, etc. are maintained in order to meet different demands.
- Matching Demand
In this method, the adjustments are made in production capacity to meet future demand by adjusting the workforce level through new hiring or staff layoff.
Main Functions of Production Planning
Below are the three main functions of production planning in production management:
This includes identification of manpower needs, required raw materials (both quality and quantity), and machine capacity for the purpose of meeting the production targets that are already planned.
This is considered as a process to determine the order of operations or a path for the smooth flow of raw materials within a manufacturing concern. In Simple words, routing into manufacturing indicates the flow of operations and work. Through routing, the production process is systemized and resources are utilized in an optimum way for attaining better results.
It also monitors if operations are being completed according to the specifications or not, gives confirmation that inspections have been done at each phase, and keeps informing the next operation.
This function of production planning focuses on the time period or duration of the completion of production. It is aimed at prioritizing different jobs and its major concern is to see if jobs are being completed as per the pre-defined timelines. Due to this, load balance on work areas and utilization of labor time can be achieved. So it is an important function to ensure timely delivery and gain cost-effectiveness. Different types are there in scheduling such as Operation Schedule, Master Schedule, Daily Schedule, and many more.
This is also one of the important functions of production management. Production control is used to regulate the sequential flow of materials in the process of manufacturing i.e. from the initial stage of raw material to the end-stage of finished goods. Its main objective is to achieve production targets, enhancement of profits by productivity, optimum utilization of resources, production of products, and services of more economic benefit. The production manager also takes care of the control activities in production and compares actual production with the scheduled production plans. Through this, he/she examines deviations and does the needful to remove those deviations.
The two main functions under production control are Dispatching and Follow-up.
Dispatching: This includes setting production activities in progress by the release of orders and appropriate instructions as per the schedule that is pre-planned and sequence of operations incorporated in loading schedules. Each department of processing is considered in this and accordingly, the output is planned from tools, machines, and other related work areas in order to complete the production orders as per the given schedule. Once ordered, the next stage is to combine different inputs such as labor, plant, equipment, material, etc. So, dispatching is associated with allotting different jobs to various machines. Dispatching includes various activities such as checking the available stock of materials, ensuring the availability of aids related to inspection and production, etc.
Follow-up: To ensure the smooth flow of work by examining activities related to production comes under follow-up. It includes measuring the output or finished goods as per the plan, performance analysis for finding out deficits, and follow-up for applying corrective steps in case of over underperformance. Follow-up activities are performed at all the main stages of production i.e. input, work-in-progress, and output.
6. Controlling Cost and Quality
Production management consists of cost and quality control too. Customers prefer products of good quality at cheaper prices. To provide customer satisfaction, production management involves the function of controlling and improving the quality of products. Also, it includes reducing the costs of products by taking the required measures.
7. Inventory Control
The production manager ensures inventory control by monitoring inventory levels. This ensures that the optimum level of inventory is maintained by avoiding understock or overstock of it.
By controlling overstocking, production management prevents blockage of working capital, wastage, or misuse of materials. Similarly, by controlling understocking, it ensures the production as per the given schedule and smooth deliveries.
8. Replacement and Maintenance of Machines
This is a crucial function of production management as it oversees the replacement or maintenance requirements of equipment and machines in a timely manner. Machinery should function properly in order to produce products in an uninterrupted way. To ensure this, production management develops an efficient system for conducting regular inspections i.e. routine checks of machinery, oiling, cleaning, etc. It also ensures that any damaged equipment or spare part must be replaced or removed without any unnecessary delay. These preventive measures keep machines safe from any breakdown and prevent any production blockage.
Advantages of Production Management
Various benefits or advantages of production management are as under
Advantages to Organizations
1. Facilitates achieving the organization’s goals: With the help of production management, an organization can achieve its overall goals by manufacturing goods and services as per the need and desires of customers. This ultimately generates more sales and profits. Hence, production management helps the organization in fulfilling its ultimate goals i.e. revenue or profit generation.
2. Facilitates new product launch: Production management facilitates companies in introducing new products or services in the market. By conducting Research & Development (R&D), it supports the organization in the development of new products of better quality. The success ratio of these products is comparatively high due to proper customer satisfaction.
3. Supports in gaining competitive advantage: Production management helps firms in gaining a competitive advantage over its competitors by manufacturing products of high quality and in the right quantity. It also ensures that products can be available at the right place, right time, and at minimum cost.
4. Supporting hand for other functions: By the support of production management, other departments or functions of an organization such as marketing, HR, IT, finance, etc. perform their tasks in a better way. Like, it is easier for the sales & marketing department to sell products of the right quality. Similarly, more funds can be released to the finance department due to an increase in sales volume. Moreover, if the production department will perform better, then it is easier for the HR department to manage the production staff effectively.
5. Helps in building reputation and goodwill of the firm: With the support of production management, organizations are able to satisfy their customers by providing better quality products at minimum cost; and this ultimately enhances the goodwill and reputation of them.
6. Optimum use of available resources: Firms can utilize their available resources i.e. machines, manpower, materials, etc. in an optimum way with the help of production management. This leads to better returns to the firm.
Advantages to Society and Customers
1. Helps in generating employment: Production management involves different production activities or tasks and, adequate manpower is required to perform such tasks. So, it helps in creating various job openings in society in a direct or indirect way. The production area initiates direct employment, wherein, supporting departments such as marketing, sales, accounts, customer service, etc. generates indirect employment.
2. Facilitates expansion of other related sectors: Production management supports society by providing expansion opportunities to different other sectors like transport, banking, spare parts, BPO, communication, etc. This ultimately helps in generating more employment and acts as an economy booster.
3. Quality improvement and cost reduction: Improvement in product quality is also one of the significant benefits of production management as it focuses more on R&D activities. Due to mass production, an economy of scale is achieved through production management that minimizes the production cost and leads to low prices to customers.
4. Economy Booster: Fast economy growth can be achieved by production management as it ensures the effective manufacturing of products or services and appropriate use of resources.
Integrated Production Management System
In today’s time organizations are focusing on using the advanced technology of manufacturing products and services such as TQM (Total quality management), JIT (Just-in-time), robotics system, automation processes, etc. The use of these advanced technologies in production is termed as Integrated Production.
So, Integrated Production Management System is those computer-based systems that are used in manufacturing and facilitate providing the correct information at the correct time. It also provides directions to the production manager on the optimization of current manufacturing conditions for improving the output of production.
Productivity in Production Management
The production system’s efficiency is termed as productivity. This concept provides guidance in the production management system. It indicates whether the utilization of production factors such as capital, land, energy, and labor, etc. are being consumed in a proper way or not. Productivity is defined as the ratio (relation in quantitative terms) between the finished products that an organization produces and resources that are used as an input to produce finished products in the production process.
We’ve thoroughly explained Productivity with examples in a separate article here: