Production Management: Principles and Processes
Production Management
Introduction
Production encompasses the creation of products or services. It involves coordinating and organizing various elements in a logical sequence, applying them to a predetermined process for optimal efficiency. This process, known as production management, should be technologically and economically sound. This introduction also aims to introduce the concept of measuring productivity.
Objectives of the Production Function
Physical Objectives
- Tangible: Durable or non-durable goods.
- Intangible: Services that cannot be touched or separated from the provider, are variable, and cannot be stored.
Economic Objectives
- Costs
- Profitability
- Efficiency
- Effectiveness
Social Objectives
The dynamics of technology influence the quantity and quality of required manpower, impacting the social context of the enterprise’s environment. Higher specialization often leads to higher wages for fewer employees.
Planning and Production Control
This involves a set of plans designed to systematically direct production, indicating how, when, where, and at what cost to produce. It requires data on output, plant demand, and storage costs.
Steps Involved
- Detailed product description
- Developing a sales forecast
- Determining production capacity
- Investment in equipment spending plan
- Labor planning
- Inventory program
- Costing
- Minimum volume production
Factors to Consider in Planning
Key factors include revenue, costs, and profits. Profits arise from the difference between revenue and costs. Management concepts have two determinants:
- Income from product sales should be maximized.
- Production costs should be minimized.
If earnings change, investment alternatives should prioritize higher profits over minimizing costs (cost-benefit analysis). If income is constant, analysis focuses on minimizing costs.
Tools for the Production Process
Planning requires understanding the phases and activities for a specific product, along with their costs and distribution over time. Graphical models like the Load Chart or Gantt Chart, and mathematical models like linear programming, are commonly used.
- Load Chart: Illustrates the workload of a machine or factory section at any given time.
- Gantt Chart: A more comprehensive chart indicating the start and end times of activities, margins, and required resources. It allows for tracking actual plan implementation and taking corrective actions for deviations.
Control and Measurement of Production
Inventory control and production control should be integrated. Production control is a continuous system of measurements to identify deviations from planning and implement corrective actions.
- Continuous Production: Control is carried out through flow.
- Batch Production: Control is done by order.
Control can be centralized or decentralized, with the latter requiring greater coordination between different areas. The trend is towards implementing control in all companies due to its efficiency benefits.
Production Sectors
Primary Sector (Agriculture and Quarrying)
- Agriculture: Requires human, material, and natural resources. Management considers human and material resources, with production rates dependent on market demand and cultivation practices.
- Quarrying: Requires heavy investment in equipment.
Secondary Sector (Manufacturing or Processing)
The final product may be raw material or incorporate additional materials. This sector requires significant expertise and creates interdependence among firms. The workforce is typically divided into specialized operations.
Tertiary Sector (Services)
Primarily focused on service production, although supplies and materials are also involved. Management emphasizes education and training of human resources. Human capital is the key driver of profitability, with inputs playing a supporting role.
Production Methods
Continuous Production
The process and facilities are arranged for a continuous flow of operations without interruption. Provisioning should be adjusted to avoid unnecessary movement. This method is suitable for predictable and sustained short-term demand and requires both skilled and unskilled labor.
Batch Production
Specific quantities of one product are produced before switching to another, utilizing available resources fully or partially. This method is employed when product demand is lower than factory capacity, allowing for the production of multiple products. It requires more specialized labor.
Project-Based Production
Typically used for one-time or pilot production, involving the entire organization. It requires the ability to obtain, process, analyze, and select objective, real potential, and technical studies. This is the most expensive system, as design costs are not absorbed by a large production volume.
Procurement
The procurement cycle involves qualified personnel with expertise in production and accounting. This sector, or individual, is responsible for acquiring all resources, connecting suppliers with the company.
Objectives
- Low prices
- Low but safe inventories
- Alternative suppliers
- Awareness of new products
Coordination with the finance sector for payment terms, production for quantities and timing, and legal for documentation is crucial.
Inventory Management
Focuses on maintaining optimal quantities of raw materials, additional process materials, and finished products. Inventory costs include acquisition, provisioning, and maintenance. Key aspects include determining replenishment points (when to purchase inputs or outputs) and turnover rate (average time merchandise remains in stock).
Quality Control
Maintaining consistent quality is essential for market retention and indicates well-planned and controlled production. Control should be applied to materials, processes, and finished products, with reliable documentation.
Engineering Works
Involves both teams working on processes and staff involvement, considering the environment.
Maintenance
- Preventive: Based on statistical studies.
- Predictive: Incipient fault detection.
- Corrective: Addressing faults without disrupting production.
- Emergency: Required when production is interrupted.
Fault monitoring can indicate when equipment replacement is necessary.
Hygiene and Industrial Safety
Prioritizes accident prevention, ensuring a suitable work environment, reducing occupational diseases, and protecting the environment from pollution.
Activities Include
- Maintaining safety elements (fire protection, harmful gas protection, etc.)
- Installing protective measures (around machinery, railings, lighting, signage, etc.)
- Ongoing staff training in preventive and corrective measures.
Supply
This process involves detecting the need to buy, storing stockable products in a warehouse, or notifying the relevant sector if a non-stockable product is required. The purchasing department pre-selects potential suppliers and requests quotes. A comparative form is used to evaluate quotes based on factors like vendor, product, price, delivery, sales conditions, and internal supplier qualification. A purchase order is issued to the chosen supplier. The warehouse receives and controls the order, verifying correspondence between the quote, delivery note, and purchase order. The product is then stored, and a reference is sent to the shop.
The supplier receives the quote request, checks stock, and responds. Upon receiving the order, they verify correspondence with the quote, stock availability, customer credit, and order balance. The sales order is then issued, the product is physically prepared, a packing slip is generated, stock is adjusted, and a roadmap for delivery is created. Finally, a reception reference is generated and sent to sales.
Just-in-Time (JIT) Method
The Just-in-Time method is a production organization system aimed at increasing productivity and reducing management costs and storage losses due to unnecessary stock. It operates based on actual orders rather than assumptions.