PRODUCTION MANAGEMENT

UNIT - I

1. PRODUCTION SYSTEM

Introduction

A “Production System” is a system whose function is to transform an input into a desired

output by means of a process (the production process) and of resources. The definition of a
production system is thus based on four main elements: the input, the resources, the
production process and the output.

Most of the organizations (including non-profit organization) can be described as production

systems. These organizations transform (or convert) a set of inputs (such as materials, labour,
equipment, energy etc.) in to one or useful outputs. The outputs of a production system are
normally called products. These products may be:
(a)Tangible goods (b)Intangible services (c)combination of (a) and (b)
(Steels, chemicals etc.) (Teaching, health care etc.) (fast food, tailoring etc.)

Production system refers to manufacturing subsystem that includes all functions required to
design, produce, distribute and service a manufactured product. So this system produces goods
and/or services on a continuous and/or batch basis with or without profit as a primary
objective.

Production is the basic activity of all organizations and all other activities revolve around
production activity. The output of production is the creation of goods and services which satisfy
the needs of the customers. In some organization the product is physical (tangible) good. For
example, refrigerators, motor cars, television, toothpaste etc., while in others it is a service
(insurance, healthcare etc.).The production system has the following characteristics:

 Production is an organized activity, so every production system has an objective.

 The system transforms the various inputs (men, material, machines, information, energy) to
useful outputs (goods and/or services).

 Production system doesn’t oppose in isolation from the other organization system such as
marketing, finance etc.

 There exists a feedback about the activities which is essential to control and improve system
performance. The transformation process involves many activities and operation necessary to
change inputs to output. These operations and activities can be mechanical, chemical,
inspection and control, material handling operation etc.

Types of Production Systems

There are two main types of production systems :

(i) Continuous System
(ii) Intermittent System

i) Flow or Continuous System : Continuous flow production situations are those where the
facilities are standardized as to routings and flow since inputs are standardized. Therefore a
standard set of processes and sequences of process can be adopted”. Thus continuous or flow
production refers to the manufacturing of large quantities of a single or at most a very few
varieties of products with a standard set of processes and sequences. The mass production is
carried on continuously for stock in anticipation of demand.

(ii) Intermittent Production System : Intermittent situations are those where the facilities must
be flexible enough to handle a variety of products and sizes or where the basic nature of the
activity imposes change of important characteristics of the input (e.g. change. in the product
design).

2. MEANING OF PRODUCTION

Production is an intentional act of producing something in an organized manner. It is the

fabrication of a physical object through the use of men, material and some function which has
some utility e.g. repair of an automobile, legal advice to a client, banks, hotels, transport
companies etc.
 Thus irrespective of the nature of organization, production is some act of transformation,
i.e. inputs are processed and transformed into some output. The main inputs are information,
management, material, land, labour and capital.

The basis of Production is the transformation of inputs into goods and services. The main
objectives of a production process are :

(i) optimum use of resources at optimum cost.

(ii) manufacture of the desired quality and quantity of goods and services.

4. PRODUCTIVITY:

Meaning:

Productivity is defined as a total output per one unit of a total input. In control
management, productivity is a measure of how efficiently a process runs and how effectively it
uses resources. ... Managing production levels is part of the control process.

In general sense, productivity is some relationship between inputs and output of an

enterprise. It is the quantitative relationship between what we produce and the resources
used. The only way of raising the living standard of the society is to increase productivity.
Productivity can be increased by increasing output from each unit of input.

The level of concepts of productivity measurement is many sided. It can relate to every
item/activity on which money is spent to get the final product.

The fundamental concept of productivity:

(i) Productivity is measure of how much input is required to produce a given output i.e. it is
ratio of output to input.

(ii) Productivity is the ratio between the amount produced and the amount of resources used in
the course of production. The resources may be any combination of materials, machines, men
and space.

(iv)Productivity means balance between all factors of production that will give the maximum
output with the smallest effort.
Productivity calculation :

PT : Total productivity
L : Labour input
C : Capital input
R : Raw material and purchased parts input
M : Other miscellaneous goods and services input factors
QT : Total output

Importance of Productivity:

I. The concept of productivity is of great significance for undeveloped and developing countries.
In both the cases there are limited resources that should be used to get the maximum output
i.e. there should be tendency to perform a job by cheaper, safer and quicker ways.

II. The aim should be optimum use of resource so as to provide maximum satisfaction with
minimum efforts and expenditure. Productivity analysis and measures indicate the stages and
situations where improvement in the working of inputs is possible to increase the output.

4. PRODUCTION MANAGEMENT :

Production management is a branch of management which is related to the production

function. Production may be referred to as the process concerned with the conversion inputs
(raw materials, machinery, information, manpower, and other factors of production) into
output (semi finished and finished goods and services) with the help of certain processes
(planning, scheduling and controlling etc.) while management is the process of exploitation of
these factors of production in order to achieve the desired results.

Thus production management is the management which by scientific planning and

regulation sets into motion the part of an enterprise to which it has been entrusted the task of
actual transformation of inputs into output

DEFINITION :

According to Elwood S. Buffa, “Production management deals with decision making related
to production process so that the resulting goods or services are produced according to
specifications in amounts and by the schedules demanded, and at a minimum cost”.
5. OBJECTIVES OF PRODUCTION MANAGEMENT:

1. Right Quality:

The quality of the product is established based upon the customers’ needs. Customer’s needs

are translated in to product specifications by the design or engineering department. The

manufacturing department then translates these specifications in to measurable objectives.

Thus the cost quality trade off decides the final quality of the product. Thus a proper balance

must be obtained such that the product quality offered to the customer should be within the
pre-established manufacturing cost.

2. Right Quantity:

The manufacturing organization should produce the products at the right number.

If the products are produced in quantity excess of demand the capital will block up in the form

of inventory and if it is produced in quantity short of demand, there will be shortages of

products. Thus a decision is to be taken regarding how much to produce. (Right quantity)
3. Right Costs:

Manufacturing costs are established before the product is actually manufactured. The

manufacturing department has to manufacture the products at the pre-established cost. In any

case, any variation between the actual costs and the standard (pre established) should be kept
at minimum.

4. Right Time:

Timeliness of delivery (schedule) is one of the important parameter to judge the effectiveness

of production department. There are many reasons like non-availability of materials at right

time, absenteeism, machine break down etc. Which affect the timely completion of the

products. So the manufacturing department should organize its activities in such a way that the
products will be manufactured as per schedule.

6. Function & Scope of Production Management:

1. Selection of Product and Design
Production management first selects the right product for production. Then it selects the right
design for the product. Care must be taken while selecting the product and design because the
survival and success of the company depend on it. The product must be selected only after
detailed evaluation of all the other alternative products. After selecting the right product, the
right design must be selected. The design must be according to the customers' requirements. It
must give the customers maximum value at the lowest cost. So, production management must
use techniques such as value engineering and value analysis.

2. Selection of Production Process

Production management must select the right production process. They must decide about the
type of technology, machines, material handling system, etc.

3. Selecting Right Production Capacity

Production management must select the right production capacity to match the demand for
the product. This is because more or less capacity will create problems. The production
manager must plan the capacity for both short and long term's production. He must use break-
even analysis for capacity planning.

4. Production Planning
Production management includes production planning. Here, the production manager decides
about the routing and scheduling.

Routing means deciding the path of work and the sequence of operations. The main objective
of routing is to find out the best and most economical sequence of operations to be followed in
the manufacturing process. Routing ensures a smooth flow of work.

Scheduling means to decide when to start and when to complete a particular production
activity.

5. Production Control
Production management also includes production control. The manager has to monitor and
control the production. He has to find out whether the actual production is done as per plans or
not. He has to compare actual production with the plans and finds out the deviations. He then
takes necessary steps to correct these deviations.

6. Quality and Cost Control

Production management also includes quality and cost control. Quality and Cost Control are
given a lot of importance in today's competitive world. Customers all over the world want
good-quality products at cheapest prices. To satisfy this demand of consumers, the production
manager must continuously improve the quality of his products. Along with this, he must also
take essential steps to reduce the cost of his products.
7. Inventory Control
Production management also includes inventory control. The production manager must
monitor the level of inventories. There must be neither over stocking nor under stocking of
inventories.

If there is an overstocking, then the working capital will be blocked, and the materials may be
spoiled, wasted or misused.

If there is an understocking, then production will not take place as per schedule, and deliveries
will be affected.

8. Maintenance and Replacement of Machines

Production management ensures proper maintenance and replacement of machines and
equipments. The production manager must have an efficient system for continuous inspection
(routine checks), cleaning, oiling, maintenance and replacement of machines, equipments,
spare parts, etc. This prevents breakdown of machines and avoids production halts.

7. Relationship of production with other Functional Areas :

An organization is considered as a system having several sub-systems. ...

In other words, an organization utilizes the available facilities to satisfy the market. While
manufacturing products, the production function organizes its resources in accordance with
the production plan.

1. Relationship with Marketing:

Production and marketing work together on new products. Production can

tell marketing what it takes to produce the item, and how adding features changes
price/production time. They work together to create a product that both the market wants, and
they are able to efficiently produce.
The marketing department will need to work closely with the production department to
ensure that:
 Adequate research and development is planned to satisfy current and future customer
needs
 The item can be manufactured to the quality and design specifications laid down by the
consumer
 The volume of orders generated by marketing can be met within the time schedule
required for delivery

It is likely that the marketing department will set deadlines that may stretch the capabilities of
the production department. Marketers will wish to get products to market as soon as possible
to ensure competitive advantage, whereas production will want to test and develop products
fully to ensure that they do not have to repair or replace defective items and that they meet
health and safety requirements.

2. Relationship with Finance Department:

Production of goods requires raw material, machinery and labor and these three things
require monetary expenditure which is a function of finance because finance basically involves
making budgets for production of goods or service, allocating funds towards various expenses
on production and so on.

Both finance and production are closely related to each other and company should try to
maintain balance between the two functions because if any one of the function is neglected
than it will lead to problems.

3. Relationship with Human Resource:

The HR Department helps the firm in reducing the cost with maximizing the profit, there are
two ways. One is increasing the revenues and the other is reducing the cost.

The main objective is to provide the right person for the right job to maximizing the
productivity.