Production Management Essentials
What is Production Management?
Production Management, or Operations, is the management of an organization’s productive resources. This area is responsible for planning, organizing, directing, controlling, and improving the systems that produce goods and services.
Administration of production or operations is the transformation process that converts inputs (infrastructure, labor, capital, and management) into end products.
Administration of production resources is the direct production of the company, which can be considered as the 5 Ps of operations management:
- People: the workforce, both direct and indirect.
- Plants: factories or service industries where production takes place.
- Parts: materials or, in the case of services, supplies passing through the system.
- Processes: the steps necessary to achieve production.
- Planning and Control Systems: the procedures and information used by management to operate the system.
Key Functions
Planning: Setting goals for the organization’s subsystems, as well as policies, programs, and procedures to achieve those goals.
Organization: Providing a structure and activities to carry out the conversion process, systems, and information flows required to achieve the goals.
Control: Ensuring that the planned subsystem operations are carried out as intended. Progress should be measured to determine consistency with the plan.
Behavior: Understanding how actions influence human behavior to effectively plan, organize, and control.
Decisions: Making appropriate decisions related to the internal and external production processes of the company.
Emphasis Points
1. Function: The responsibilities of the department or leader in the production of goods and services. Production Process = A + B + AB.
2. Systems: A set of processes responsible for transforming a good. This approach defines operations within the factory system and provides information for design, production system management, and control.
3. Decisions: Decision-making is crucial in operations management, focusing on capital stock, processing capability, HR, quality, etc.
Product vs. Service
- Products are tangible, while services are intangible.
- Products are generally standard offerings, while services are heterogeneous and variable.
- The manufacture of products is independent of consumption, while services are produced and consumed simultaneously.
- Products are generally more durable than services.
Differences in Production Operations
- Intangibility
- Heterogeneity
- Inseparability of production and consumption
- Customer participation in production
Capacity and Inventories
A service is perishable and cannot be stored as inventory. Goods producers can use existing capacity to create inventory for future consumption.
Quality
Since services are intangible, potential customers cannot assess quality before the service is provided.
Scatter
Service organizations are often geographically dispersed, as services must be produced at the point of consumption or the client must come to the service location. Goods producers can centralize operations.
Marketing and Operations
In service organizations, marketing and operations are closely related. In goods-producing organizations, they are separate functions.
Fordism
Fordism refers to the production method implemented by Henry Ford, involving assembly lines, specialized machinery, high wages, and a large workforce. It is profitable when products can be sold at a low price in a developed economy.
Features
- Appeared in the 20th century, promoting specialization, industrial layout transformation, and cost reduction.
- Increased division of labor.
- Deepened control of workers’ productive time.
- Reduced costs and increased circulation of goods.
- Policies of agreement between organized labor (unions) and capitalists.
- Mass production.
Taylorism
Taylorism is the division of tasks in the production process to increase productivity and prevent worker control over production time.
Taylor’s 5 Principles
- Find adept workers to analyze their work methods.
- Define the exact series of movements and materials used.
- Determine the time required for each movement and choose the simplest.
- Remove unnecessary movements.
- Combine the fastest movements for efficiency.
Features
- Increased worker skill through specialization.
- Greater control of time, leading to capital accumulation.
- Initial idea of technical individualism and mechanization of roles.
- Study of movement science and uptime.
- Division of labor to reduce costs and reorganize work scientifically, leading to Fordism.