Production Concept

Production management means planning, organising, directing and controlling of production activities.
Production management deals with converting raw materials into finished goods or products. It brings together the
6M's i.e. men, money, machines, materials, methods and markets to satisfy the wants of the people.
Production management also deals with decision-making regarding the quality, quantity, cost, etc., of production. It
applies management principles to production. Production management is a part of business management. It is also
called "Production Function." Production management is slowly being replaced by operations management.
The main objective of production management is to produce goods of the right quality, right quantity, at the right time
and at minimum cost. It also tries to improve the efficiency. An efficient organisation can face competition effectively.
Production management ensures full or optimum utilisation of available production capacity.
Definition
In the words of
Mr, E.L. Brech:
“Production Management is the process of effective planning and regulating the operations of that section of
an enterprise which is responsible for the actual transformation of materials into finished products.” This
definition limits the scope of production management to those activities of an enterprise which are associated
with the transformation process of inputs into outputs. & the definition does not include the human factors
involved in a production process. It lays stress on materialistic features only.
Elwood Spencer Buffa –
"Production management deals with decision-making related to production processes so that the resulting
goods or service is produced according to specification, in the amount and by the schedule demanded and at
minimum cost."
According to this definition design and control of the production system are two main functions of production
management.
In short, the main activities of production management can be listed as:
(i) Specification and procurement of input resources namely management, material, and land, labour,
equipment and capital.
(ii) Product design and development to determine the production process for transforming the input factors
into output of goods and services.
(iii) Supervision and control of transformation process for efficient production of goods and services.
The importance of production management to customers and society:

 Higher standard of living : Production management conducts continuous research and development (R&D).
So they produce new and better varieties of products. People use these products and enjoy a higher standard of
living.
 Generates employment : Production activities create many different job opportunities in the country, either
directly or indirectly. Direct employment is generated in the production area, and indirect employment is
generated in the supporting areas such as marketing, finance, customer support, etc.
 Improves quality and reduces cost : Production management improves the quality of the products because
of research and development. Because of large-scale production, there are economies of large scale. This
brings down the cost of production. So, consumer prices also reduce.
 Spread effect : Because of production, other sectors also expand. Companies making spare parts will expand.
The service sector such as banking, transport, communication, insurance, BPO, etc. also expand. This
spreading effect offers more job opportunities and boosts the economy.
 Creates utility : Production creates Form Utility. Consumers can get form utility in the shape, size, and
designs of the product. The production also creates time utility, because goods are available whenever
consumers need it.
 Boosts economy : Production management ensures optimum utilization of resources and effective production
of goods and services. This leads to speedy economic growth and well-being of the nation.
Defining Operations Management
Productive systems are those that convert or transform resource inputs into useful goods and services as outputs.
Such productive systems are generally referred to as Operations systems. Operations Management, often
described as Production and Operations Management (POM), relates to the management of such systems. Of the
many developments taking place in the discipline in the recent past, the most radical is perhaps the concept of
what the discipline represents. Up to the 1970s, Operations Management was considered as a ‘centre’ system with
its basic focus on ‘cost reduction’. Since the 1990s, it has been increasingly recognized as a ‘basis’ for ‘value
creation’ within the organization.
Both these views on Operations Management co-exist today. In smaller organizations where the competition is
price sensitive, markets are small and the customer needs are well defined, the focus is on the cost reduction
aspect of Operations Management. However, as organizations grow, the parameters of competition increase,
market logistics become more complex and customers become more demanding, the focus of Operations
Management as a ‘value creation’ function, provides greater rewards.
There are, therefore, two ways – traditional and modern – in which Operations Management is viewed:
1. The traditional view perceives Operations Management as a system that is involved with the manufacture and
production of goods and services.
2. The more modern view perceives Operations Management as a system designed to deliver value.
The traditional definition considers Operations Management to be a transformation system.
According to this view:
“ Operations Management is the business function that manages that part of a business that transforms raw
materials and human inputs into goods and services of higher value.”

Interface with other Functions Well-designed manufacturing and service operations exploit a company’s
distinctive competencies – the strengths unique to that company – to meet these needs. Such strengths might
be a particularly skilled or creative workforce, strong distribution networks, or the ability to rapidly develop new
products or quickly change production-output rates. A good operations manager will interface with other
functions in order to exploit the competencies of the organization. We can analyze the interface requirements
from another angle also—from the point of view of Operations Management’s processes. Generally, processes
involve combinations of people, machines, tools, techniques, and materials in a systematic series of steps or
actions. The overall value chain extends from suppliers to customers. Inputs consist of the sources related to
materials like capital, equipment, personnel, information, and energy used to produce the desired outputs.
Inputs typically are selected by the operations function in association with other functions. Outputs are the final
product whether of tangible goods or intangible services.

Some of the interfaces with other functional areas in the organization are described below:

1. Operations Management-Marketing Interface: Marketing is responsible for understanding customer needs,

generating and maintaining demand for the firm’s products, ensuring customer satisfaction, and developing
new markets and product potential. The firm’s strategic positioning and its market segmentation decisions
to a large extent determine the manufacturing and operations strategy. In addition, marketing is the key
information gatekeeper between operations and the product markets. Marketing determines the kind of
product customer’s value. This starts prior to product development, positioning, pricing, forecasting and
promotions both before and after product launch. Interdisciplinary co-operation involving operations and
marketing decisions go back over many decades. Conflicts between operations and marketing in most
organizations result from the lack of broad agreement on critical organizational decisions such as the width
of the product line, the amount of time taken to deliver the product, and service or quality levels. The
interface between these two functions offers wide leverage in most organizations—increased understanding
and trust between operations and marketing propels many organizations to higher levels of effectiveness.
2. Operations Management-Finance Interface: Capital equipment, cost-control policies, price volume decisions
and inventories constitute the interface with financial decision making. As acquisition and management of
assets is an important part of decision making, finance and operations need to work together to understand the
nature of technology used in operations and the practice-performance gap in their organization. Tracking
performance requires that the organization develops common, objective platforms for performance evaluation.
Finance provides data on product and service costs that help managers evaluate operational performance.
Operations managers should have knowledge of financial procedures, limits, and capabilities. The
effectiveness of operational planning and budgeting is often driven by the level of co-operation between these
two areas.
3. Operations Management-Design Interface: Shrinking product lifecycles have been adding Notes to the
demands on the product development process. This is especially true for industries that have a high clock-
speed. Launching more new products faster requires tight integration between the design and Operations
Management functions. Initiatives such as simultaneous engineering and early supplier involvement in the
product design process not only add to the role of operations but also improve the perception of value
provided in the product and service concept design process. In addition, process development and engineering
is responsible for production methods necessary to make the products. This function has a great impact on
operations. Therefore, co-operation between these three functions, i.e., process engineering, design and
operations, leads to improved organizational performance.

4. Operations Management-Human Resource Interface: No plant manager anywhere would ignore the role of
good people management in running an efficient operation. The human resource function includes
operation’s approaches such as continuous improvement and total quality that rely mainly on human inputs.
Decisions about people and the organization of the operations function interact significantly with both
structural and infrastructural decisions. Such issues are not unique to the operations function, however; they
impact other functions and are dealt with more effectively through the human resource management
function. As organizations increasingly opt for ‘flextime’, the operations function has to develop unique
process configurations to accommodate employees with minimum disruption in the flow of work.
Operations Management and Human Resource departments have to co-operate for recruiting and training
employees, enhancing employee well-being and development, and fostering motivation that are vital to the
success of management policies in practice.
5. Operations Management-Information Systems: Information systems provide, analyze, and co-ordinate the
information needs of operations. The distributed processing environment and the growth and evolution of
Enterprise Resource Planning (ERP) systems for the organization have a direct impact on operations. It allows
organizations to generate relevant information and make appropriate information available when needed.
The operational plans become the driver of all business planning including recruiting, cash flows, and
marketing promotions. With Computer Integrated Manufacturing (CIM) systems IT plays a very important
role.