PRODUCTION MANAGEMENT

What is Production Management?

Production:
The word production is described in various dictionaries as the act of producing,
manufacturing, creation of an artistic work, a literacy production, and a
presentation – as of a play or other artistic performance.
The word production implies to us for all practical purposes as
Creation of a Utility or Services.
Management:
The word management is described in the various dictionaries as managing or
handling, control, direction, administrative skill, act or art of managing, to conduct
the working of.
The word management implies to us for all practical purposes as Art of
Managing.
Production Management
In short production management is The Art of Managing the Production. It
basically concerns itself with the conversion of inputs into outputs.
Introduction to Production Management and
Production Function
In any production function 3 basic factors will be there

Input Transformation Output

A series of sequential activities and operations, which are indispensable in
transforming material from a given form to a desired form, indicates production.

Is it necessary to study the subject of Production Management even if one is not

interested in manufacturing business or activities?

We now understand that the subject or word “PRODUCTION” is not restricted to only
manufacturing activities as normally will be visualized. End products may be finished
components or consumer products, completed paper work or documentations, serviced
customers or serviced patients. In short it must be some kind of value added products so
that outputs are worth more than just the sum of individual inputs.
According to Peter Drucker “Production is not the application of
tools to materials but is the application of logic to work.”
Obviously we all may be falling in any one of the categories and involved in the
production function. Hence it is very vital and important to know all aspects of this
management science with proper depth and detail and empower us with the skills of
production management to emerge as a versatile and efficient manager.

Production and operations management concerns itself with the conversion or

transformation of inputs into outputs using physical resources so as to provide the
desired utility/utilities – of form, place, possession or state or combination thereof –
to the customer while meeting the objectives of effectiveness, adaptability or
customer satisfaction & efficiency.
Almost all business firms perform two basic functions – Production and Marketing.
PRODUCTION: Providing Products and Services
MARKETING: Promotion, Sale & Distribution
Of course there may be and would be a number of situations in either marketing or
personnel or other management functions, which can be classified, or sub classified under
production/operations management.
For example:

1. Physical distribution of items to the customer

2. Arrangement of collection of marketing information
3. Selection and recruitments process
4. The paper from and conversion of the accounting information in an accounts office
5. The paper flow and conversion of data into information usable by the judge in a
court of law etc can all be put under the banner of production and operations
management.
Conversion here is subtle unlike in manufacturing where it is obvious.
In cases 1 & 2 conversion is in terms of place and possession characteristics of the
products.

In case 3 conversions is in terms of receiving personnel services

In cases 4 & 5 it is the conversion of state characteristics.

This conversion are effected by physical resources (added with other resources such as
information)
Let us analyse three basic factors or elements associated with the subject of production
management in more detail.

INPUT CONVERSION OUTPUT

Raw Materials Manufacturing Physical

(Solid, Liquid or (Such as Car, TV,
Gas, semi finished Freeze, finished
or finished products or assembled
components, components)
equipments etc.).

Paper Work Processing or Books, Legal

(Literature, legal, Compiling of Data agreements, Balance
documentations, Sheets or
financial Project reports
information or data
sheets etc.)

Customers Delivery of (Serviced Customers)

(Requiring services Services Services such as
such as transport, (Repair & airlines, railways,
hotel, maintenance Maintenance hotels, banks
etc.) services, transport
services)

Patients Medical Services (Rehabilitated

(Requiring medical (Treating and Patients)
services) rehabilitating Medical services
patients)

3-M Using physical Outputs can be in form,

Men, Material resources, single or state, possession, place,
& Machinery multi - dimensional time, physical products,
processes or availability of
services or combination
thereof.
All production systems should be directed to achieve following output:
EFFECTIVENESS + CUSTOMER SATISFATION + EFFICIENCY
 FACTORS AFFECTING A BUSINESS SYSTEM

Current external environment factors of competition, supply and demand, trade

unions, banks or financial institutions, government.

External Environment Internal Environment

1. Ethical, social & 1. Strengths & Weaknesses
cultural change 2. History & Culture
2. Technologies 3. The Business
3. Economic Changes

Conversion Or
Transformation
(Business Systems)

Inputs to the System Outputs to the System

1. Capital Management
2. Skills 1. Profit
3. Raw Materials 2. Cash Flow
4. Labour 3. Added Value
5. Power Workers
Job Security, Higher Pay, Job
Satisfaction

Feedback

Effectiveness and economy while engineering the production can be stated as

manufacturing the requisite quantity of product, of required quality in tune with the
predetermined parameters at the required time by the best and most economical method.

Virtues Desired

• Sincere meaningful persistent scientific & goal oriented efforts

• Information of-planning, system of collecting, correcting & compiling of
comprehensive data
• This will require thorough knowledge, systematic vision and great deal of
involvement.
 6

BUSINESS SYSTEMS
(Two Basic Functions)

Production Marketing

A production system must be designed in the context of overall corporate effectiveness, for even the
most efficient business system is virtually useless if there is no market for its output.

AIM OF A PRODUCTION SYSTEM

Practically Tailored to Suit

Oriented Objective of the
Company

OBTAIN OVERALL CORPORATE EFFECTIVENESS

Maintain Stability & Growth

Optimality in Fulfillment of
Multiple Objectives with
prioritization of objectives
To be Viewed in terms of Short
Term & Long Term Horizons
Combat Uncertain Eventualities
Not Be only Profitable and/or
Efficient but also necessarily
satisfy many Customers

Ability to Adapt
• External environment factors
of competitors
• Supply & Demand
• Trade Unions
• Banks/financial institutions
• Government
 Production System

POLICY

PLAN

PRODUCTION
FUNCTIONS

POLICY
The overall specification of production system must commence at policy stage by determining
company’s aims in market terms within the corporate strategy.
PLANNING
To achieve this objectives tool employed is production planning. The future can not be for seen,
It can only be gust mated and therefore for obtaining objectives effectively, economically and
efficiently the best course of action among the available alternatives is chosen and all the pros
and cons, strengths and weaknesses of available means are weighed and then the course of
action is determined this is termed as planning phase. A good planning will ensure systematic
procedure, improved methodology, control at appropriate and strategic location to achieve and
attain desired efficiency.
PRODUCTION FUNCTIONS
Once company has formulated the policy and plans the next logical step is to go for production.
Production Management subject deals in detail about various production functions, which we
will deal in detail in subsequent chapters.

Inter relationship of production management with other areas of

management:
A Marketing
• Identifying customer requirements
• Product Life Cycle
• Distribution
• Product
• Price
• Customer Feedback on Products
B Finance
• The Operation Budget
• Break Even Point Analysis
• Working Capitol
• Provision of finance for improvements
• Provision of info. on general condition of firm
C Accounting
 • Cost Data
• Special Reports
• Data Processing Services
D Industrial Engineering
• Methods
• Work Measurement Information
• Plant Layout & Material Handling Info.
E Procurement (Materials Management)
• Determination of Items to be Purchased
• Delivery Schedules
• Updating info. On new products, materials and process
• Inventory planning & Control
F Personnel
• Recruitment, hiring and firing of people
• Training
• Labour relations
• Motivation to workers & Safety factors.
G Research & Development
• For ideas concerning new products, process and new tools for
production

TYPES OF PRODUCTION SYSTEMS

Intermittent Continuous

Job Batch Mass Process

Production is an organizational function, which is responsible for the management

process intended to convert a set of inputs into a predetermined set of outputs in the form
of goods and services in accordance with the objective assigned to the management.
The function of production management is putting together inputs of men, capital,
information & energy and transforming them into products and services in the quantity,
quality, time and location that will best meet the organizational objectives.
It is as simple as to convert resources inputs into end outputs.
Complexity of production function is best studied by developing a
conceptual framework, which more precisely and effectively ties together
all the functional efforts, contributions, and knowledge with a common
goal. This is called “System Concept”
If a system is considered as complex a change in one variable within system will affect
many variables of the system. Thus in a production system, a change in production rate
may affect inventories hours worked per week, overtime hours, facilities, layout and so
on.
JOB TYPE PRODUCTION SYSTEM:
• Job production is the manufacture of a single complete unit by an operator or a
group of operators.
• Goods are produced according to definite customer requirements
• Manufacturing status depends on the receipt of specific items
• There is no assurance of continued demand
• This type of production is intermittent in nature

Job Production has following specific characteristics:

• Resources in a job shop are general rather than specialized
• Basic materials with different specifications can be used in many different jobs
• Equipments should be adoptable to different users/customers
• The skills of employees/operators would be wide enough to enable them to work
on any job
Limitations of Job Production are:
• Since each job is distinct in nature hence machines are general purpose and may
not be economical or efficient
• Machines need to be set up very frequently to suit needs of variety of jobs. This
may result in loss of production time
• Job execution location many times may be out of manufacturing unit
• As the resources such as manpower, process machine tools are employed on
varieties of non standard jobs it may not be used economically
• Productive techniques like work study, value analysis etc. may not be possible to
be introduced
Examples: Bridge building, ship building, installing a capital plant in
factories
BATCH TYPE PRODUCTION SYSTEM:
In the batch production the work on any production is divided into operations, it
means that the work content of each unit is broken into a number of operations
not necessarily of equal work content, and the operators are again divided into
groups. The first group will then complete the first operations of all the units, passing
the batch as a whole on the next group and so on until the manufacture is complete on
that operation.
 Salient features of Batch Production are as hereunder:

• Some degree of specialization of labour is possible.

• Capital investment is low
• The planning required to ensure freedom from idle and waste time is
considerable.
• The planning of resources can be done sufficiently and adequately, however
possibility of underutilization of certain machines and man power can not be
ruled out
• Cost minimisation is one of the criteria for considering the size of a batch
• The production control department can derive greatest benefits

Example: Pharmaceutical production.

MASS PRODUCTION SYSTEM:

This type is adopted when one or a few standard products are to be manufactured
on large scale. In this system demand for the product is continuous and ongoing. As
demand pattern is known well in advance all the resources can be planned very well.
Salient features of Mass Production are as hereunder:
• Planning for optimum utilization of resources can be ensured.
• A product wise layout and balance production line can be designed
• Semiskilled or even unskilled labour can be utilized; very small numbers of
skilled workers are required.
• High output rating automatic machines can be utilized.
• Maintenance or breakdown must be attended most efficiently and promptly
otherwise it may result into heavy loss of production
• There is lot of scope for introducing productive techniques to increase
productivity
• Product quality can be better controlled in this system

Example: Various Electrical appliances, Electronic components, Dry

battery cells. Etc.
PROCESS PRODUCTION:
This system is an extended form of mass production in which manufacturing is
carried on continuously through a uniform sequence of operations.
Salient features of Process Production are as hereunder:
• Process production calls for the setting up of highly sophisticated automatic machines
as far as possible
• In this system usually one principal raw material is transferred in to several products
at different stages of the operations.
Example: Petroleum Refining, Heavy Chemicals etc.
Comparison of various production types Vs Production Capacity & Flexibility
We can observe that Job Type will offer highest production flexibilities however
production volumes will be lower.
Where as process Type will offer minimum or no flexibilities and generate very high
volumes.
Functions of Production Management & Production Cycle:
The functions of production management were limited and also simple in the earlier days
where production was conducted on a low scale using very simple methods and
techniques and products manufactured were very simple.
With the progress of time new technologies have developed resulting into advance
products with large volume being produced. This has necessarily increased the
importance of the production management at the same time added responsibilities.

Classification of decision areas:

Production and operations management functions can broadly be divided into the
following four areas:
1. Technology selection & Management
2. Capacity Management
3. Scheduling/Timing/Time Allocation
4. System Maintenance
Some of the basic functions of the production management are as follows:
1. Design and development of production process
2. Production planning and control
3. Implementation of plan and related activities to produce the desired output
4. Administration and co-ordination of the activities of various components and
departments responsible for producing the necessary goods and services.
5. Monitoring and controlling of men, machineries and materials.
6. Developing system of monitoring through feed back
7. Comparing results and
8. Taking corrective actions.
In short production cycle can be defined as
Planning – Operations – Control.

1.Planning.

3.Control 2.Operations

1. PLANNING:

Effectiveness and economy while engineering the production can be studied as

manufacturing the required quantity of a product of required quality in tune with the
required time by the best and economical method.
To realize this objective the tool employed is known as production planning.

Planning

Insight Experience Feelings Ideas Market Resources

Foresight Objectives regarding & disposal
Assumptions kind of Economy
Risks business

Effects on Business Effects on people outside business

Choice of Rational Course of Action

Action Plan or
Plan for Operation
While designing the corporate planning control system it is indeed needed to chart out
both the long range and short time plans programme, procedure and policies using all the
insight, foresight and experience at disposal. It should take care of feelings, objectives,
risks, assumptions; it should be planned keeping in mind the kind of business (Like
seasonal or otherwise). It should utilize inputs of information from market and economy,
in short, utilize all information and input at your disposal.

2. OPERATIONS:
The second phase is operations. The production plan set the standard.
The actions are performed in tune with these pre-set details in this phase.
Scope of Production (Operation) Functions

Quality Process Capacity Inventory Work force

• QUALITY: it is an important operations responsibility, which requires total

organizational support. Quality decisions must ensure that quality is built into the
product in all stages of production.
• PROCESS: these decisions determine the physical process or facility utilized to
produce the product. The decisions include type of equipment and technology, process
flows, layout of facilities etc.
• CAPACITY: capacity decisions are aimed at providing the right amount of capacity
of the right place, at the right time. In short run, available capacity must be allocated
to specific tasks and jobs in operations b scheduling people, equipment and facilities.
Long run capacities are determined by the size of the physical facilities, which are
built.
• INVENTORY: these decisions determine what to order, how much to order and when
to order. Inventory control systems are used to manage materials from purchasing, raw
materials through semi-finished products or work in process to finished products.
• WORK FORCE: people who make the product are ultimate to any production
system without which nothing will be produced. Hence this is area of very crucial
decisions. It includes selection, hiring, firing, supervision, training, and above all
compensation. Managing work force in a creative productive and humane way is key
task for operation.
3. CONTROL:
It is always desirable to compare where we are standing at present and
where we want to go and accordingly corrective action can be initiated to
bridge the gap
STAGES OF PRODUCTION:
1. Market research: it probes the market in attempt to ascertain the need for a new
product
2. Design for a prototype is prepared based on technical research and information
3. Design work to start to produce as basic unit.
4. Development work to start to develop a designed product

Control

Monitoring performance through feedback

Comparing results with pre-set targets
Corrective actions

5. Prototype production done to evaluate the product design, prepare, catalogues etc.,
getting market feed back, experimenting and testing.
6. Pre-production: during this stage all the components of product as nearly as designed
are produced under as much as possible. Actual factory conditions using the tools,
equipments, raw materials, which ultimately are to be used on the production, line.
These samples are very critically tested with micro accuracies for type tests and
performances. Some of them are sent to customers for field trials and feedbacks and
criticisms.
7. Manufacturing: the product after all the above steps and after all the corrections are
frozen for design and other parameters and then put into full production,
Initially a predetermined build up of finished product is manufactured to ensure and
take care of contingence, rejection etc. This is a confidence building stage for all
concerned.
Marketing can simultaneously start of the initial orders
The goods then leave for the warehouse and become the responsibility of the sales
organization.
Even after all the above steps and pre-production stage all bugs are not ironed out and
it is advisable to plan for initially low level to have the damage control within
manageable limits.
PRODUCT & PROCESS DESIGN:
Designing is the most important & crucial stage of production system. Many
companies have a separate Design & Development department. Services of Industrial
Designers are being taken for the development of product & process designs. This is a
pre-requisite stage before initiating the production
Design indicates the determination of size, shape, standard and pattern of the products
to be produced. It also includes functional parameters and technical specifications.

Functional designs are transformed to product design so as to make manufacturing

easy and feasible. Product designs are further integrated to process designs to establish
production systems.
Computers have proved to be boon to the designing industry and CAD (Computer
Aided Designs) and other specially developed soft wares are available to help the
product designers and drafts men. It not only helps in efficiency of designing but also
for better accuracies and selection of best designs apart from storing and retrieving of
the drawings.

DESIGN

PRODUCT DESIGN PROCESS DESIGN

PRODUCT DESIGN:

PRODUCT DESIGN

FUNCTIONAL AESTHETIC TECHNICAL PACKAGING

& &
PRODUCTION MARKETING

Factors to be considered in designing of the product:

1. Product should be fashion leader and not fashion follower.

2. It should utilize as far as possible standard parts and aim at simplifications and
diversification of the product.
3. It should be attractive enough to draw the attention of the customers and have
utility, cost effectiveness & salient USP (Unique Selling Points).
4. Introduction of New Models at regular interval helps in expanding customer base
and establishing better Brand equity and good will for the company. Normally it is
seen that products are designed by adoption of concepts from leaders in the
 industries, however large industries have their own R & D departments and do
huge investments to be innovative and industry leader.
5. Selection and optimizing of varieties & models of products to support the
marketing and yet remaining economic in production is a challenge to be met by
the production management. It is a corporate decision and involves discussions
with marketing, finance, procurement & engineering departments. It takes care of
factors like product life cycle and break-even point analysis.

STEPS INVOLVED IN PRODUCT DESIGN:

1 Visualization of need for the product in consultancy with the marketing

department and market research done. Marketing department makes and
submits a brief on the product to be designed to the design department.
2 Preparation of schematic drawings and aesthetic design and design’s portfolios
prepared to take corporate feedback and approvals.
3 Preparations of engineering drawings, technical specifications, short listing of
components and preparing of bill of inventories with cost projections and other
details. Preparations for proto type designs.
4 Reviewing the design in relation to Cost analysis, value analysis, maintenance
and reparability. Improvements, corrections and freezing of the designs.
5 Design & development of tools, jigs, fixtures and other production accessories
and preparations of drawings and specifications etc for the same.
6 Preparation of PERT (Programme Evaluation & Review Techniques) charts and
CPM (Critical Path Method) charts also known as network analysis are drawn
to have overall control on the product development work.
7 Designing of packaging and marketing portfolios and literature etc. to start
simultaneously with other developments.
8 Final cost studies and pricing carried out in consultancy with the procurement
and costing departments.
PROCESS DESIGN:
While product design concerns itself with the Design & Development of the product,
Process Designs defines the steps and processes in sequential order, detailing all the
inputs and specifications of tools, machines, operations and/or processes to produce
the desired product with the shortest possible route and best of engineering practices
so as to meet the objects of quality, quantity and economy in the defined time frame.
It also ensures best possible layout for the machines, material and men power to
achieve highest degree of efficiency in the production process with the least degree of
 rejections and wastages of material, labour and time. Thus ensuring optimum
utilization of production capacities.
Process design is the most important step of the production system and requires best
of the engineering expertise, knowledge and management. It must take care of all the
marketing needs including short term and long term corporate goals and visions of the
company.

Total capital exposure and layout of facilities have direct relativity with the process
design. Thorough study and knowledge of latest technological developments in the
field is a prerequisite to process design.
In nutshell adoption of a particular process design is the most important and crucial
decision of the production management.

PLANT LOCATION & LAYOUT

Plant:
The Physical means of production such as buildings, machineries, dies tools, jigs fixtures,
service machineries and/or workshop equipments erected and equipped at a given
location for the purpose of converting the raw materials to finished goods using men,
machineries and materials is called plant.
The economy of operations, effectiveness and efficiency of production is directly
attributed to the type of plant and its location. In other words the optimum utilization of
the available resources and capitol employed is in direct proportion with the right
decision of plant location and layout.
Location:
Location may be defined as a particular area/site/place selected for setting up of a
manufacturing/production unit or plant.
Biggest question that needs to be answered before one sets up the production plant is
where should our main operations be based?
Once the manufacturing plant is erected it is a long-term commitment on the capacity
created. Capacity not only in terms of the machinery and equipments but also in terms of
arrangements and development for the resources such as raw material suppliers, labour
force, market and distribution channels, conveyance and transport arrangements and
adjustments with the environments.
Once a decision is taken in favor of a particular location, then the organization has to live
for a long time with the prospects and problems of that location in regards to the raw
materials, labour, other resources and market etc.
Thus selection of site and location of the plant has to be done with considerable thought,
taking into account the various aspects leading to the end profitability of the enterprise.
The ideal location for the plant will be one where lowest cost and maximization of
profitability is possible.
To help in selection of the best and most ideal location for the plant number of factors
needs to be analysed. They can broadly be grouped into two areas, Primary and
Secondary factors.

FACTORS TO BE CONSIDERED FOR THE SELECTION OF PLANT

LOCATION:
The factors connected with the location needs careful consideration at the time of
establishing plant or/and at the time of adding new plants to substantiate/expanding the
existing production and/or to add new products/diversify the activities, and/or shifting of
the plant from one location to another due to one or other reasons.
PRIMARY FACTORS:
• Market
• Raw Materials
• Labour Availability
• Transportation
• Fuel & Power
Secondary Factors:
• Climate
• Water Supply and infra structure development
• Legislation/ Government and Local authorities’ industrial policies
• Political factors
• Socio-economic factors
• Emotional factors
• Law and order situation
• Availability or Expiry of the lease arrangements
• Financial Aids availability
• Banking facilities
• Geographic Locations like Urban, Rural, City, suburb etc.
• Draught prone, Seismic Zones or other climatic hazards.
• Developing Zones/Industrial Zones
• Proximity of Ports, Airports, Railway Stations or Highways.
• Topography & Contour of the land
• Government’s incentive Schemes etc.
• Availability of land for future expansions.
• Existence of auxiliary industries.
• Facility of technical research
• Religious & Vastu Shashtra Principles
 • Economics of the land and financial aspects.
Steps in selection of the location:
• For International operations-Selection of country of operations
• Region- State or province
• Locality – City or suburb
• Exact Site for the plant.