Understanding Production Economics, Management, and Quality
Production Economics: A Conceptual Overview
From an economic standpoint, production involves the creation of goods using basic productive resources to satisfy needs. From a technical perspective, it’s the combination of elements to obtain property or services. Functionally, production adds value to things and creates property value.
Factors of Production
Effective production requires a combination of:
- Material Factors: Natural resources
- Human Factors: Labor
- Capital: Financial resources
- Organizational Factors: Business organization
Technology’s Role
Technology combines these factors in specific ways to produce goods or services. Research and development (R&D) systematically increases the volume of knowledge, leading to new applications.
Production Costs: A Breakdown
Understanding different types of costs is crucial for effective production management:
- Fixed Costs: Costs that remain constant regardless of production quantity.
- Variable Costs: Costs that change with production volume.
- Direct Costs: Costs directly associated with production and easily measurable.
- Indirect Costs: Costs affecting the production process in general.
Production Management: Planning and Control
Production management involves planning, organizing, managing, and controlling inputs. Key aspects include:
- Production Capacity: The maximum quantity of a product that can be produced.
- Demand: The level of demand for a product, determining the quantity a firm can sell.
- System Design: Structuring productive processes.
- Economic Environment: External situations affecting the company.
Production Planning Phases
Production planning is structured around specific phases:
- Strategic Plan: Long-term forecast targets, including production capacity and investment plans.
- Sales Forecast: Predicting sales to meet production needs.
- Master Plan: Structuring material and labor needs in relation to costs.
- Production Program: Determining production orders.
- Operational Control: Programming and regulating production, monitoring costs.
Enterprise Quality: Ensuring Excellence
Quality is a critical element in production, influencing the achievement of objectives. Both excess and lack of quality impact costs. Approaches to quality include:
- Inspection Techniques: Ensuring products meet required quality standards.
- Process Control: Designing systems to prevent problems.
- Integral Quality Management: Involving all business areas in product quality.
- Total Quality: Comprehensive quality scope across the entire organization.
Quality Certification
Quality certification acknowledges a company’s quality system. ISO standards regulate and determine the conditions for quality systems, often verified by organizations like AENOR.
Business and Environmental Management
Environmental management provides resources for production while addressing waste. Incorporating environmental considerations is driven by:
- Regulations: Increasingly restrictive legislation.
- Societal Concerns: Deterioration affecting company image.
- Economic Factors: Enhancing competitive advantages.
- Business Ethics: Managers assuming environmental awareness.
Externalities and Social Costs
Production activities can generate costs not included in the company’s expenses due to negative externalities. These are the negative effects of production on the environment.
Environmental Management: Business Opportunities
Society’s demand for environmental responsibility creates new business opportunities. New technologies enable processes that reduce ecological impact through pollution control and improved production processes.