PRO DU CTION MANAGEMENT

PRODUCTION AND PRODUCTION MAN AGEM ENT

Production is defined as the step by step conversion of one form of material into another form through
chemical or mechanical process to create or enhance the utility of the product to the user. Thus economists
define production as an activity by which form utility is created or enhanced.
For example, the iron ore exists in the nature. It will be converted into steel by a chemical process, which is
put to various uses like, making bars, pipes, angles, channels etc. Thus production is a value addition
process. At each stage of processing, there will be a value addition.
Edward Buffa defines production as ”a process by which goods and services are created”
Edward Buffa defines production management as follows:
Production management deals with decision making related to production processes so that the resulting
goods or services are produced according to specification, in the amounts and by the schedule demanded
and at minimum cost.

OP ERA TION MAN AGEM ENT

Operation is often defined as a transformation process. The transformation process itself can be viewed as a
series of activities along the value chain extending from supplier to customer.
Operation management may be defined as a process which combines and transforms various resources
used in the production operations subsystem of the organization into value added products/services in a
controlled manner as per the policies of the organization.
A set of various activities which are involved in manufacturing certain products is named as ‘Production
Management’ if the same concept is extended to service management, then the set of various management
activities are called “Operation Management” In general the concept of manufacturing products/offering
services is called Production/Operation Management.
The activities of Production/Operation management include organizing work, selecting processes, arranging
lay out, locating facilities, designing jobs, measuring performance, controlling quality, scheduling work,
managing inventory and planning production.
Production management is more used sor systems where tangible goods are produced. Operation
management is more used where various inputs are transformed in to intangible services. Viewed from this
perspective, operation management will cover such service organizations as banks, airlines, utilities, pollution
control agencies, super bazaars, educational services etc in addition to manufacturing enterprises.

PRODUCTION as a SYST EM
There are three systems 1) Production system 2) Conversion sub system 3) Control sub system
1 Production System A system whose function is to convert a set of inputs into a set of
desired outputs
2 Conversion sub system A sub system of the larger production system where inputs are
converted into outputs
3 Control sub system A subsystem of the larger production system where a portion of the
output is monitored for feed back signals to provide corrective action,
if required

The production system is a part of a larger system- the business firm..

The production system can be viewed as a frame work of activities within which the creation of value can
occur. Briefly the difference between the value of inputs and the value of output represents the value created
through production activities
At one end of the production system .are the inputs and the other end-outputs. connecting the inputs and
outputs are a series of operations or processes, storage and inspections.

(1)INPUTS
MEN
MATERIALS
MACHINES
MONEY
INFORMATION
ENERGY

(2)CONV ERSION PR OCES S

• PROVIDED NEEDED ADJUSTMENTS
• OUTPUT IS MONITORED
• ACTUAL VS DESIRED IS COMPARED

(3) OUTPUT
• GOODS
OR
• SERVICES

The production system of an organization is that part which produces the organization’s products. Production
is the basic activity of all organizations and all other activities revolve round production activity. The output of
production is the creation of goods and services which satisfy the needs of the customer.

PRODUCTION FUNCTION
A function is the relationship among a number of variables. The value of one variable depends upon the value
of the other
Production function is concerned with the creation of a product. It establishes the relationship between the
quantity of output furnished or given out by a productive process and quantities of different inputs used in the
process A product function that involve a wide range of activities like plant location, production planning and
control. Research, development etc.
The function of production personnel are
• Forecasting the demand for the products and using the forecast to determine the requirements of
various factors of production
• Arranging the procurement of required factors of production
• Arranging for the services such as maintenance, storekeeping, material handling, inspection and
quality control etc that would be required to attain the targeted level of production.
• Utilizing effectively the factors of production and service facilities available to produce the required
product.
• Reducing rejection rate, minimizing re-work, maintaining delivery schedules, controlling idle machine
and man hours
• Controlling overtime, eliminating accidents, good house keeping
• Controlling absenteeism, effective grievance handling, effective training, enhancing customer
satisfaction, Total Quality Management
• Automation

NEED OF PR ODUCTION FUNCTION

Competitive advantages of companies is highly talked about these days. It is believed, that a firm, strong in
competitive advantages, is well poised to succeed whatever may be the constraints or restraints, firms look to
production to achieve competitive advantage.
Production function can offer competitive advantage to a firm in the following areas.
Shorter new -product lead time.
Inventory control
Shorter manufacturing lead time.
Higher quality
Greater flexibility
Better customer service
Reduced wastage

Many causes that deny competitive advantages to any firm can be attributed manufacturing function-specially
to poor quality and reliability, delayed deliveries, high production costs and lack of adequate inventory at the
right time. It may be stated that that the production function offers vast scope for achieving productivity with
effective management of materials and lead time and better control on cost

OBJ ECTIVES OF PR ODUCTION MANAG EMENT

Production is an organized activity and the objective is stated as
To [produce goods and services of right quantity and quality at predetermined time and pre established cost
Thus objective of prod uc tio n manag ement are reflected in
• Right qua lity
• Right qua ntit y
• Pr edetermi ned time
• Pr e estab lished cost

To achieve the above objective, the production departments have to make the optimum utilization of
various inputs like men, material and machine. These objectives are called
intermediate.objectives.Production management aims at satisfying the needs of the customers through
offering organizations products/services

TY PES OF PR ODUCTION

Basically the production system can be categorized as

• Make to stock production
• Make to order
• Assemble to order

MAK E TO ST OCK -
The manufacturer stocks the finished goods in inventory for immediate shipment. This system ensures
immediate delivery of goods. Examples are bearings, ready to wear garments, television, motors etc etc . in
this system, customer will not accept delay in delivery and the management required to keep adequate stock
of finished products. Operation management focuses entirely on replenishment of inventory. The main
advantage of this system is short delivery time.
Situations required for this system are
• Fairly constant and predictable demand
• Products are few and they are standardized.
• Shorter delivery time expected by customers
• Products having higher shelf life
Make the stock items are generally mass consumed and proper details or foretasted demand, requirements,
opening inventory are required

MAK E TO ORDER -
Some companies make products after the receipt of firm order from customer. Make to order is a demand
responsive strategy and examples are custom tailored cloths special machinery and product made to
customers specification.
Situations are,
• Products are made to customer specifications
• Customer can wait till the material is ready
• Product is expensive and non standard to store

AS SEMB LE TO ORD ER-

Here the customer is not ready to wait until product is made. Manufacturers produce and stock the standard
component parts, when customers place order the customer does the assembly from the selected
components. Only assembly time is required here. Examples are computers and consumer electronics.

Base d on vo lume of prod uc tio n, pr oduction sys tem is fu rther classified as

Job work
Batch or interm it tent pro duction
Contin uous prod uction
Mass p roduction
Cell ular pr oduction

JOB ORD ER-

• job order type production applies to situations where products are to be manufactured against
specific requirements of the customer.
• The production shop usually has all facilities needed for that category of jobs
• It should have skilled workmen
• High varieties of products and low volume
• Jobs are mostly of similar in nature. Eg. Sheet metal job shop does only sheet metal work.
AD VANT AGES.
• Investment is comparatively less
• Manpower requirement is less
• Overhead expenses are less
• Operators will become more skilled and competent that each job gives him learning opportunity and
therefore utilization of full potential of operators

LIMIT ATIONS
• High dependence on the skill of workmen
• Need close supervision and management
• Some machines will be under utilized
• Delayed payment from customers will affect the business

BA TCH PR ODUCTION
In batch production, the job pass through the functional departments in lots or batches and each lot may have
a different routing. Batch production aims at satisfying the continuous customer demand for an item..
however, the plant is capable of production rate that exceeds demand rate.

Characteristics
• Shorter production runs
• Plant and machinery set up is used for the production of items in a batch and set up required to be
changed for processing next batch of items

AD VANT AGES
• Amount of supervision required is less compared to job order
• Lower investment in plant and machinery
 • Batch size can be increased for larger orders increasing profit.
• Better utilization of plant and machinery
• Job satisfaction exists for operators
• Promotes functional specialization
LIMIT ATIONS
• Material handling is complex because of irregular flows
• Production planning and control will be more complex
• Work in process inventory is higher compared to continuous production
• Longer production times
• Higher set up costs due to frequent changes in set up
CONTINUOUS PR ODUCTION
The production is a continuous process Eg Cement, refinery, fertilizers etc. investment will be very high
and specified machinery and equipments are required. The throughput capacity of the line decides the
production capacity of the plant. The production process cannot be normally stopped. Once stopped, it is
expensive and time consuming to restart the process. Preventive maintenance is very important and a
breakdown of any one of the equipment will stop the entire production. Operator skill requirement is less.
Product quality is built into production process, high investment is required to increase the capacity even
marginally
AD VANT AGES
• Cost of production per unit is low.
• Production and quality control are automatic
• Manpower requirement is less
DISAD VANT AGES
• Require large investment
• Production cannot normally be stopped or reduced if market off take is low
• Restarting will be expensive and time consuming
• Preventive maintenance is very important.
• Breakdown of one equipment lead to temporary disruption of the process
• Production volume cannot be increased
characteristics Job order Batch production Mass production
Volume/quantity One or few jobs Limited number jobs Large quantity
Product variety Large variety Few variety One or few products
Lay out Process or functional lay Process or functional lay Product or line lay out
out out
Set up time high high low
Equipment& machinery General purpose General purpose Special purpose and
dedicated
flexibility high high Very low & routine
Prod. planning complex complex Simple routine
Work in process high medium low
inventory
Cost/unit high medium low
Skill of labor Highly skilled skilled Semi/unskilled
investment low medium high
Material handling mannual Manual/semi auto automatic
Plant utilization low medium high