Production management includes management of the stages of design, development, and testing. The BVOP product management certification program includes these additional topics, which makes the certification organization unique and different. See the BVOP Ultimate Guide for reference. (BVOP: https://bvop.org/productmanagement/) And taking the certification exam still involves many more topics. In this article, we will discuss only production management.
What is production? – it is a process of creating goods and offering services.
Production is a process in which the transformation of input resources is performed to obtain the output of different types of finished goods and services. Input resources are also called factors of production. At the end of the production process, the results of the transformation processes are obtained, namely – material goods and services.
Factors of production are generally classified into:
Input resources – raw materials, semi-finished products, fuels, energy resources, etc.
They are consumed in the course of the production process. The characteristic of them is that their participation in the final product can be determined directly. They are kept in the company’s accounting as current assets.
Technical and technological equipment – these are the tools that are used in the production process without participating directly in the final product. Their participation is reported indirectly through the depreciation deductions accrued in the cost of finished products: – buildings, machinery and equipment, vehicles, and others, which are depleted morally and physically. These are the fixed assets of the company. Reference: “Product deployment and tasks in production processes”, https://mpmu.org/product-deployment-and-tasks-in-production-processes/
Labor force (human resources) – participate directly in the production process, as contractors or as management staff. They are included in the finished product through their labor, reported as wages.
The concept of production emphasizes the management of the production process and includes many and varied activities related to preparation (design and planning), production, and implementation, as well as control over materials, equipment, people, finances, and information to achieve certain goals. economic results. When it comes to such activities, the term Production Management is usually used. Reference: Definition and tasks of production management
Production management covers all these activities related to the creation of goods and the provision of services through the transformation of input resources into finished products.
In the modern market and economic environment, there is a predominance of companies providing services. In them, the production function does not focus on the creation of physical products but can be in a sense “hidden” from the public, even from the customer. It is surprising to many that more than 80% of the workforce is employed in services. The production activities carried out in such companies are combined with the term operations. This term is broader in scope and refers to activities that are related to the production of goods and services performed in various organizations – public, private, commercial, or non-profit.
For example, a bank, a university, or a hospital – even a church has operational functions, even though they have nothing to do with production technology, assembly lines, or finished products.
Therefore, operations management is close in terms of production management, but it refers to a much wider range of problems and organizations whose “technologies” differ significantly from production ones. At the same time, the movement of materials in the factory, the queue of customers in front of the supermarket, the processing for payment of insurance by the insurance company, enrollment of students at the university, and health care of patients in the hospital are some important common features. Both types of operations are seen as a process of transformation. In production, the inputs – materials, semi-finished products (element base) energy, capital are transformed into finished products of material nature. In services offering services, the same inputs are transformed into services that are often intangible. But in both cases, the process of transformation to be carried out most efficiently and effectively is the main task of every manager at any level of the various company structures. For this reason, the meaning of the terms “production” and “operations” in services is gradually gaining the meaning of synonyms, meaning actions for the transformation of resources into finished goods and services. This has led a large number of authors to title their books in this field under the title Production / Operations Management (POM), which gives equal importance to both groups of activities.
And as we have already noted, the service industry is developing intensively in countries with developed market economies. The relative share of the areas of the food industry (fast food restaurants), banking, hotel, and tourist services, transport services, retail sales, government, institutional services, education, etc. is increasing sharply. In this expanded range of actions, many authors, regardless of the final results of the activities – goods or services cover everything with the concept of “Operations Management” (Operations management) (OM), which fully reflects the expanded nature of the activities. Despite this summary, many teachers point out that when they start a course in “Operational Management”, students always ask the question – “What is Operational Management?”. And they immediately emphasize that it is not always easy to give an answer in a few words, which confirms the complexity of this concept, which combines many and varied activities aimed at providing goods and services. However, even with this dominant role in the provision of services, the production of goods remains important, especially for the provision of basic goods for export and domestic consumption. If we need to narrow the scope of problems and focus only on those related to production management, we can summarize:
Production management – focuses on the implementation of the current maintenance of optimal proportions between the structural elements of the production process (phase, partial processes, and operations), as well as between the latest and available resources of the company (production facilities, financial, labor and material resources) to achieve production of the agreed production in the established volumes, quality, and deadlines.
Tasks of production management
In the dynamically developing, but not yet regulated market environment, the increased interest in production management is understandable.
Emerging companies are influenced by the many mechanisms operating in this environment – quality and competition, technological innovation, pricing, tax, and inflation policy.
The chances of survival are many and varied. Economists advise making investments but from where? Designers and technologists are advising for more research, but that is also why funds are needed. Proponents of human relations argue that the approach to managing people needs to change – but isn’t this the most difficult resource to manage with its unpredictability? Reference: “Trends and features of modern management”, https://www.policymatters.net/trends-and-features-of-modern-management/
As a final result, it all comes down to organizing the production of goods and services that meet the emerging needs of customers. It is the managers who can put the best ideas into practice. But the difficulties come from the fact that production in many areas has stopped and if it starts to develop, the driving force must be Production Management.
Following the development of the world industry – steel, automotive, electronics, and others. It is recognized that low levels of labor productivity are one of the main problems in the economies of many countries around the world. Even countries like the United States have not kept up with the competition in their core industry from countries like France, Japan, and Germany. It is also reported that some business activities were concentrated in clever advertising, financial and product tricks, without paying due attention to production management. This has led to a critical state of business in many companies and countries.
In countries where it is just starting in the market economy, the emphasis should be on working with new technologies. To introduce productions ensuring high productivity and modern management of production and human resources. This is a necessary and important condition for the international competitive state of the country as a whole and the companies in it.
Production management is an opportunity, an important tool for increasing the efficiency of the company (revenue versus cost). Production management influences the improvement of the technical and economic characteristics of the company and has a positive impact on the following important indicators:
- 1) Compliance with the agreed deadlines, through uniform and rhythmic implementation of production tasks;
- 2) Full load and use of available equipment;
- 3) Reducing the labor absorption of production;
- 4) Reducing the volume of work in progress – (products in which labor and materials have been invested, but it is not yet ready for sale);
- 5) Improving the quality of production;
- 6) Reducing the cost of products.
Revealing the essence of Production Management (PM), the following main tasks can be outlined:
The production management must ensure the production and delivery of products following the provisions of the forecasts and/or with the contracts concluded with customers for volumes, nomenclature, quality, and deadlines;
The production management must ensure the necessary commitment in the work of the individual units over time and saturation of all phases of production with the required amount of reserves;
Production management must ensure the uniform operation and a high degree of load on equipment, space, and labor;
The production management must ensure maximum continuity in the movement of material flows in the phases of the production process, which will increase the speed of the process;
Production management must ensure continuity in the management of production as its hierarchical levels, ie. in space, as well as for each planned time interval, ie. in the time.
Increased interest in product management can be seen in the following areas:
Emphasizing quality, realizing that not most costs create a high-quality product. Leading companies have even proven that the costs of a high-quality product should be reduced, as long as we can reduce errors. (Japanese experience). It is also known that quality is key in non-price competition and is an advantage in many industries.
Much attention is paid to production and inventory tracking systems. Computerized inventory tracking systems (MRPs) and on-time delivery assurance (JIT) principles are used. These approaches are integrated into many production systems.
Introduction of new unique technologies, applying computer equipment, robotics, automated offices, laser processing, non-waste technologies, etc. Managers are leaders in the development and implementation of these technologies.
The dominant role played by staff in the production of goods and services. This requires attention to teamwork in innovation. Human resources are considered to be the most important resource of production rather than new technologies or control systems.
Production management may not be “everything for everyone”, but it is a key factor in the ultimate success of any company
When creating goods and providing services, each production structure, regardless of its subject of activity, incorporates into its corporate strategy three main concepts: Marketing, Logistics, and Management.
The market, including consumers of goods and services, forms the corporate strategy of the company. Marketing strategy is the subject of entrepreneurship. It provides a reliable forecast of demand and answers the questions: What? From what ?, How much ?. Marketing “informs” the production about each claim of consumers to the quality, delivery time, etc. Based on the needs and capabilities makes the product – the subject of production. He deals with packaging, advertising and is looking for a buyer with the main economic goal – maximizing turnover (largest sales volume).
The logistics strategy answers the question – How will we act ? as always the goal is minimal costs and delivery “just in time”. While marketing seeks to shape product demand, logistics is focused on meeting that demand. The process of satisfaction consists in reducing the time for the physical delivery and the cost of doing so.
The management implements the ideas set out above, as well as the organization of living labor, management, personnel policy, and others.
And if for marketing and logistics it can be summarized that they are concepts of the global company strategy, the organization and implementation of these concepts are the subjects of management and that of Production Management. Looking for its place in this variety of activities, he describes himself by transforming inputs into a finished product. This transformation is the main goal of the production process. From the point of view of transformation, great importance is attached to the main technological processes. They are directly related to the impact on resources to create a finished product or service.
In many productions the products are multi-detailed and the technological processes are very complex. Organizing them involves solving a set of problems, sometimes difficult to implement. Therefore, if we have to answer the question “Why study Production Management?” – The answer is: Production management is one of the three main functions in any organization, integrally related to all other business functions and provides knowledge about it:
- How to manage production technology
- How to organize people (human resources) in the manufacturing plant,
- How to increase the efficiency (productivity) and profitability of the organization.