Production Management: Concepts, Efficiency, and Planning
Production Concept
From an economic viewpoint, production is creating products from basic resources, intended for purchase or consumption. Technically, it’s combining labor, materials, and energy through set procedures to produce goods or services, adding value in the process.
Production Factors
- Natural Resources/Land: Raw materials, energy, and supplies.
- Labor: Manpower and time spent by workers.
- Capital: Financial resources and capital goods like machinery and facilities.
Technology
A set of procedures or methods combining production factors to create goods or services. Each product has an associated production technology.
Production Function
Lists resources used against total output. Expressed as q = f(l, k), where q is output, l is labor, and k is capital.
Productivity
The ratio of output to input, measuring performance. Total productivity is the value of production divided by the total cost of inputs.
Production Efficiency
Achieving the same output with fewer inputs or more output with the same inputs. Technology A is efficient over B if it uses fewer resources.
Company Costs
- Fixed Costs: Independent of production level.
- Variable Costs: Change with production level.
- Total Costs: Sum of fixed and variable costs.
- Average Cost: Total cost divided by output.
- Variable Environment: Variable cost divided by output.
- Marginal Cost: Increase in total cost per additional unit.
- Direct Costs: Directly associated with production.
- Indirect Costs: Affect production generally, not directly assignable.
Profitability Threshold
The production quantity where the company starts profiting.
Production Management
Factors include production capacity, product demand, system design, and economic environment.
Production Planning
- Strategic Plan: Long-term objectives and capacity.
- Sales Forecast: Sales potential related to production needs.
- Master Production Plan: Material and labor needs.
- Production Program: Production orders, inputs, and timelines.
Planning requires operational and economic control systems.
PERT/Gantt
Techniques for planning, scheduling, and controlling production.
Critical Path
The project part requiring close monitoring to avoid delays.
Company Quality
- Inspection Techniques: Ensure expected quality.
- Design Processes: Prevent problems through design.
- Comprehensive Quality Management: Involve all areas.
- Total Quality: Meet all customer expectations.
Certified Quality
Recognition and regulation (e.g., ISO) to ensure quality standards.
Business and the Environment
Factors include regulations, societal impact, economic factors, and business ethics.