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Businesses can be of different types. Some industries focus on providing the customers with different types of services. Some others concentrate on selling of products. Majority of ventures are in the business of manufacturing something or the other. To start with, you would need some basic raw materials to which you would add some value to make something else. Simply put, this is production.
Therefore, we can say that production is a business process in which a raw material is converted into finished or semi-finished products, in the process adding value to the of utility of products. This production procedure is measured by calculating the difference between the value of what goes into the production and the value of what is produced in the end. The things which go into the making of things are called the inputs and what is produced in the end is called the outputs. Say for example, if you want to manufacture dresses you will need cloth, labor, and machines at the primary level. These are all inputs. The end product, that is the dress, is the output.
What is meant by production?
Production can be described as a process of manufacturing or producing goods for trading purpose. It is a method that uses the intangible inputs like creativity, ideas, knowledge, research and perception in action. With the help of these intangible inputs, the tangible inputs like the raw materials are converted into finished products and made ready to be sold in the market.
In mathematics, a function determines the relation between a set of inputs and the set of outputs. Similarly production function is that kind of a function through which assumed specification is made by the industry or a firm about the output in relation to all the input which went into the project. Production function serves to cater to the customer needs and demands in a cost effective way. Therefore planning and carrying out the production function in an efficient way is of prime importance to obtain this objective.
Managing anything has to include proper planning at the initial level. The same thing is applicable in case of production management. You start with planning about how the production procedure will take place. Then you organize it according to your needs or requirements only after which you can execute the plan, direct and control the production activities. Hence, we can say that production management is the managing process which deals with the conversion of raw materials to the finished products that too in an economical way. Production management is guided by 6 'M's- a) money, b) men, c) materials, d) machines, e) methods and f) markets. If the same concept is applied to the management of services then the subsequent management activities are termed as operation management.
Definitions of Production Management
Here are some common and widely accepted definitions of production management:
"Production management deals with decision-making related to production processes so that the resulting goods or service is produced according to specification, in amount and by the schedule demand and at minimum cost." - Elwood Spencer Buffa
"Production management,Â also calledÂ operations management, deals with planning and control of industrial processes to ensure that they move smoothly at the required levelâ€¦.In manufacturing operations, production management includes responsibility for product and process design, planning and control issues involving capacity and quality, and organization and supervision of the workforce."
Hence, we can easily say that, production management is the conversion of production inputs into outputs which when distributed in the market will cater to meet the demands of consumers.
History of Production and Operation Management
Industrial Revolution - For over two and half centuries, production and operation management has been regarded as one of the important factors responsible for the economic growth and development of any country. With the outbreak of the industrial revolution in England in the mid 1700s a havoc change was observed in the industrial sectors. The changes began to be observed when the stream engine was invented by James Watt in 1764. It largely replaced the man power in the factories. In the year 1776 Adam Smith published his revolutionary book, The Wealth of Nations, where he talked about the 'specialization of labors in manufacturing' and the economic benefits it avails to an industry. Therefore, the factories of the late 18th century experienced not only the use of the power by the newly invented machines but also new means of planning and controlling a factory production. About the same time the concept of division of labors came into being. Rapidly the industrial revolution spread from England to the other parts of Europe and also to America. Further development was observed as an American named Eli Whitney came up with the concepts of 'interchangeable parts' and cost accounting'. Early 1800s saw the advent of electricity and gasoline engines which enhanced the industrial revolution to a great extent. During the post civil war period an increased rate of production capacity was recorded which on the other hand led to growth of the capital. A massive production explosion followed in the newly developed U.S. market.
Scientific Management- The concepts of 'scientific management', 'work study' and 'time study' was introduced by Frederick Taylor. He talked of the 'shop system' as well which brought the skill, strength and learning ability of the workers into question. The shop system was the first to initiate the idea of the incentive pay. Specification of materials, methods of work and routing systems were used to organize the shop. It was the Ford Motor Company who embodied the major facets like 'interchangeable parts', 'low manufacturing cost', 'mass production', and 'standardized designs of the product' of scientific management in 1920s. The scientific management was popularized by Henry Ford, who used it in his firms. These approaches helped him in maximizing the production at the plant.
Operational Research System- During the Second World War enormous resources were installed. Military operational research squads were formed to deal with the complications of the deployment. P.M. Blacker is regarded as one of the main contributors in the field of operational research application in the Second World War. The operational system brought to the fore front the positive aspects of the system which helped the operational manager to control the complexities of production.
Service Revolution- The publication of the Hawthorne studies in the 1930's revealed that human factors are influencing the production process to a great extent. The study report said that the ambiences, sociological and psychological conditions of the worker are affecting the production. It was the behavioralists who talked about these factors which made the industrialists change the way of treating the factory workers. The idea of the labors responding positively to the attention thus paid to them came to be acknowledged as the Hawthorne effect. The change in the thought process and the introduction of this new philosophy had a tremendous impact on the production planning and control system of the factories. Studies showed that the due to the increased use of machineries work became monotonous to the workers which affected the rate of production. In order to resolve this problem the workers were conferred a greater role in the planning procedure of the whole production so that they can find interest in their work.
Computer Revolution- It was the 1930s which witnessed the advent of the computer age. There was an explosive growth in the communication technology.
Gathering information became very easy as everyone had an effortless access to it. Advancement in the software technology made the people aware about the usage of e-mails. More and more plants took initiation in starting E- Business. A special computerized system known as the Material Requirement Planning was developed which proved to be very useful in managing the business.
Where we stand now?
Today the whole production or operational management wholly stands on the demands and needs of the customers and providing them with quality products. This is because the competition level in the market is very high and in order to build and maintain the image and reputation of a company, customer satisfaction is the absolutely necessary. Other factors which are influencing the operational management these days are the advancement of the technologies, competition in the world wide market, cost challenges etc.
Why Production and Operation Management is required?
Any firm or industry needs production management.
To achieve all its objectives- Every firm or industry possesses certain objectives behind the projects they undertake. Production management enables the firm to fulfill all its objectives in time and at the same time fulfill the demands of the customer.
To gain reputation as well as to build up a good image in the market- One of the main objectives of production management is to satisfy the consumers. Production management helps in achieving this goal.
Aids other functional fields- Production management aids the functional field of the industry or firm. Other functional sphere includes finance, personnel and marketing. It will be easier for the marketing department to sell good quality goods which in turn helps the financial department to gain more finances due to the increase of the sale of the products. This will also enable the company to acquire loans for expanding the firm. Proper management of the production will also help the personnel sector to handle the human resources properly and increase the efficiency of the resource.
Aids in promoting new products- Production management controls the research and development section of the firm. It enables to study the market and needs of the customer depending on which they can introduce newly manufactured goods in the market.
Helps in coping up with the competition level in the market- Same products may be produced by other companies as well. Production management helps the firm to cope up with the competition level in the market by keeping the quality, price, quantity of the products as per needs of the consumers.
Produce the goods in a cost effective way- Cost of production can be checked and reduced to a great extent through proper management of production. It tries to minimize the input keeping the output to the optimum level.
Maximize the use of resources- Production management assists in maximization of the use of resources like machines, human resources etc.
Helps the firm to grow- Production management helps the company to expand itself which in turn enables the firm to yield greater profit.
Production management is important to the consumers because-
Improves the standard of living of the people - The research work that the production department carries out reveals the demands and needs of the consumers which the industries cater to fulfill. This increases as well as improves the standard of lining of the people as they get to use good and new products.
Enhances the economy- Production management helps to produce goods in a cost effective way. This leads to the proper economic growth of the country.
Decreases the problem of unemployment- Unemployment is a major problem of our country. The activities of the production department of any firm open up many job prospects for the people.
Quality of the products increases- As mentioned earlier production management controls the research and development sector of a firm. These researches help to provide the customers with the better quality of the product.
Provides the customers with low cost products- Production management facilitate the customers with low cost products so that the majority of the population can avail that product for use.
What is a system?
System as we understand comprises of various sects which works together as a unit. All the processes are interdependent and function as a whole. The system operates with a distinct intention to fulfill the predetermined objectives. Massive systems are often a compilation of various sub-systems.
In a broader sense production system is the framework which supports all kinds of production activities that may take place within an organization. The process of manufacturing involves the conversion of inputs into outputs. A suitable designing of production system makes sure the coordination of the different procedures which undergoes in the production. There is no hard and fast rule that only a single pattern of production system is to be followed universally and have to be applied to all kinds of productions. It differs from one project to another.
The methods which include all functions required to collect the inputs, process or reprocess the inputs and produce the saleable outputs.
Ray Wild defines production or operation system as "a configuration of resources combined for the provision of goods and services."
Production system has three main components namely- inputs, conversion process and outputs. Inputs comprise of machines, man-power, capital, raw materials, drawings, paper works. Conversion process includes all kinds of processes and procedures which can be mechanical or manual or chemical. These operations are responsible for converting all the inputs into the desired outputs. This stage of production system also has some supporting operations like obtaining of raw materials, storing, production planning, product designing etc. Outputs comprise of the end products which the firm will provide it to the customers like services, finished goods etc.
A Systematic Diagram of Production System
Types of Production System
In general there are two types of production system. They are-
Continuous Production- It is a process which is used to produce products without any hindrance in a continuous way. This type of production system is void of any interruption. Continuous production is often referred to as continuous flow process or continuous process. It is so named because the raw materials which go into making of the product are continuously moving and at the same time are exposed to chemicals or heat or cold as required in the making of the product. By 'continuous' we mean running twenty four hours a day, seven days a week, with rare shutdown of the working force which can be quarterly, semi-annually or annually. Goods are manufactured on a massive scale in a continuous production. They are not produced depending on the customers' orders. This system of production requires huge investment in machineries. This type of production system is found in oil refineries, power stations etc.
Characteristics of Continuous Production
Production is continuous.
Large scale production of goods takes place.
Does not depend on the customers' orders.
Standardized products are produced.
Quality of the goods is predetermined.
Types of Continuous Production System
Mass production flows-Here same kind of product is manufactured to fulfill the demand of the market. This system needs good planning for material, process, maintenance of machines and instruction to operators.
Process production flows- The distinction between mass and process production is the kind of product a firm produces. Mass production manufactures the same products and is produced in a large scale. If the demand ceases, the machineries are used for manufacturing products of similar nature after slight modification. In process production, the plant and equipment is designed for a specific product. Hence if the demand falls for the product or ceases, the firm cannot be used for manufacturing other products.
Intermittent Production System
Unlike continuous production system intermittent production system as the name suggests is such a system where goods are produced on the basis on customers' orders. Usually the goods are produced in a small scale. The production flow is not constant. Various types of products of various sizes are produced in this type of system. The system is very plastic. Ex- Production found in automobile plants, electric goods plants.
Characteristics of Intermittent Production System
Production is not continuous. Halts are made frequently.
Various kinds of goods are produced.
Machines used for general purpose is used.
Production depends on the order of the clients.
The level of production is usually small.
Types of intermittent production system
Project Production Flows- Here a firm accepts a single complex contract or order. The project has a deadline within which the contract has to be finished that too within an approximate calculated cost. Project production flows include projects like building a high rise, constructing a dam or an airport. Resource requirements are high at the beginning of the project but ultimately ceases as the project nears its end.
Job Production Flows- Items are manufactured only on the basis of specifications made by the customers. The cost is determined at the time of signing the project. Highly skilled labors are required in job production flows. Ex- Services the tailoring shops, repairing stores provide.
Batch Production Flows- The production schedule is decided before commencing on the project. It depends on the estimate of consumers' demands or upon the specific customers' orders. The manufacturing process of the product is divided into a number of batches sequentially. Each batch is to be completed first to start with the next. A detailed production planning is required in batch production flows. Ex. - Manufacturing of drugs.
Factors Influencing Production Process
Supplies - The production or manufacturing process largely depends on the supplies of raw materials. If the supply of materials is hampered due to problems like transportation or bad weather, the fixed target cannot be achieved within the promised time. On the contrary if there is a smooth supply of materials then the flow of production will be normal and the production schedule can be easily followed.
Power Supply- For running any plant, supply of incessant power is required. Even if the power supply is gets disrupted temporarily can have a great impact on the production process.
Machineries and Equipments- A sudden shut down of any of the machineries of the equipments used in the production of product can lead to minimization of the production rate. Continual operations of the equipments are necessary in order to improve the efficiency of the machines.
Man Power- The labors directly associated with the manufacturing process can influence the production in many ways. For example, sick leaves and vacations taken by key workers have a negative impact on manufacturing.
Capacity of the plant is also influences the production procedure of a firm. The larger the firm, the larger will be the production, all the other factors remaining constant.
Flexibility- The production process should be elastic in order to adapt to the changes that take place during the production process.
Designing a product by a firm includes a strategic procedure of planning to create a new product to be sold to the customers. The product design is one of the most crucial and sensitive aspect for an organization. Success or failure of the sale of the product depends on a number of factors which ultimately decides the reputation and image of the company in the market. So during the designing period of the product there are a number of things which need to be paid heeded to. Everything is analyzed while designing a product right from what the general public likes to the cost and the process which undergoes in making the product.
Production Planning and Control (PPC)
The main aim of any manufacturing plant is to produce the products. Therefore the production is the core of the entire business operations. It is the driving force to which all the other functions of the plant depend. Once the industrialist has taken the decision about the product design, the next step he takes is planning the production and chalk out the controlling process. This is very much important for the economical aspect of the project. PPC is absolutely necessary for the small scale industries. A question may arise that why controlling of the manufacturing process is required. Well production planning without production control is like a school without the Headmaster. Planed decisions when put to action can go wrong, but checking the damage due to the mishap is production control.
Objectives of Production Planning and Control
a) To determine the ability of all producing sectors
b) To plan the manufacturing activities in a systematic order depending on the sales demand of the market
c) To endorse the fullest utilization of the firm
d) To train labors for effective performance
e) To ensure means of finding out the manufacturing needs and requirements so that the materials needed for the production can be attained at right time in the right quality as well as quantity
f) To maintain coordination between the various sectors of the production process.
Stages of Production Planning and Control
The following tree will show you what the stages of PPC are
Production Planning and Control Process
It is a practice of foreseeing the stages of production process before commencing on a distinct project and also to judge the efficiency level of all those stages through which the maximum profit of the industry can be brought about at the scheduled time. It enables the entrepreneur to estimate the quantity of raw materials, money and labors to be needed for the production.
It helps in determining the course and progression of the production activities of a plant. The machines which will be required for the operations and the executives to be engaged for the work are determined in the routing stage. The main intention of routing is arrange the production procedure in a cost effective manner. It also makes sure that the decided sequential arrangement is followed firmly. The discussion about the quality and estimation of the cost of the product to be produced is also done in the routing stage.
Scheduling means determining the approximate time to be taken by each production activity and also all the operations taken together. It highly differs from one job to the other. Time is the main factor which is worked upon at this stage of production planning.
Here the schedule planned in the previous step is put into practice. Loading therefore decides who will be given the responsibility to do the work at hand. It helps in judging the existing work load and also to predict how early the remaining work can be finished.
As mentioned earlier every production process must be controlled to keep the process running smoothly and fulfill the production of the products within the specified time. The production control department can perform effectively only when the financial manager, personnel manager, work manager and purchase manager works together in case of small scale industry.
To start a production process an authorization is required which is done in this stage. From the movement of materials to the different work stations, keeping a track of the cost occurred in each operation of the production, inspection of the activities are all looked after in the dispatching stage of the production control. This step is very significant because it converts the production plan into action.
Follow up, also regarded as reporting, is that stage of production control where the follies of the production plan or in the schedule structure of the operations are recorded. The main objective behind the follow up stage is to make sure all the decided plans and programs are been followed. It finds out whether there is any deviation from the production plan or not. And if there is any, immediate action is taken to resolve the fault and finish the production within the scheduled time.
This stage is concerned about checking the quality of the finished goods because it is the most vital factor as the image, the name and the reputation of the company in the market depends on it
Corrective measures involve all those activities which are done to rectify the faults which may have occurred in the routing, scheduling, loading scheduling or in any of the stages of the production planning or control system. Decisions regarding the inclusion of more labors, transfer of personnel to other work stations, training of the employees are also taken in the corrective stage.
From the above discussion one thing can be easily understood that without efficient planning and control no business company can fulfill its objective of earning a profit. Production planning and control becomes very much crucial for the small scale industries because they frequently face the challenge of producing goods at a very low cost. Production planning not only aids the companies to determine the convenient production procedure they need to follow but also reveals the risk factors which they are likely to face during the manufacturing process.