Production Management

Lecture # 1

Introduction to Production Management

Why and How of Production? Demand and Supply mechanics; Marketing and Production Initiatives.

How much to Produce? Marketing Initiative; History Check, forecasting, market research data; Mass production after and before world war; New mechanics is demand and supply.

Production: Is simply a process of putting INPUT to generate OUTPUT.

Economies of Scale: More production less unit cost; Marketing creates demand.

“Production management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded and out of minimum cost.”

Objectives of Production Management

1. Right Quality2. Right Quantity3. Right Time4. Right Manufacturing cost

Introduction to Production Management

Production Process: Powder Milk Production; Packaging Production; Batch nos; distribution

Job Production: Involves producing a one-off product for a specific customer. Its associated with small (repairing a computer for a specific customer, wedding planners) & large firms e.g. customized cars & bikes (Harley Davidson, Ferrari, Nike).

Pros: High quality work; customization to meet exact requirement; flexibility of work.

Cons: high cost; specialist labor; slow compared to other methods such as mass prod.

Mass Production (also called Flow Production, Repetitive Flow Production or Series Production) is the production of large amounts of standardized products on production lines.

History: Started by Henry Ford in early 20th Century for Ford Model T; to meet the demand; early 20th century was the era of mass production; industrialization started and people switched to factory products instead of man made products.

Introduction to Production Management

Production Concept: The more we produce the more we cell – early 20th century philosophy.

Mass production is Capital Intensive, as it uses a high proportion of machinery in relation to workers. With fewer labor costs and a faster rate of production, capital is increased while expenditure is decreased. However the machinery that is needed to setup a mass production is so expensive that there must be some assurance that the product is to be successful so the company can get a return on investment. Mass production suited to serve large, HOMOGENOUS population of consumers.

PROS: reduction in labor cost, increased rate of production, economies of scale, minimum time maximum output.

Cons: Similar products (whether you like it or not); difficult to alter design; complex process.

Vertical Integration: is a business practice that involves gaining complete control over a product’s production, from raw material to final assembly. New era is of network organization (e.g. Harley Davidson, Nike)

Introduction to Production Management

Craft Production: is the process of manufacturing by hand with or without the aid of tools. A common method of manufacture in the pre-industrialized world. E.g. in case of vehicle each vehicle was unique, replacements parts had to be manufactured from scratch.

Production Function: A production function can be defined as the specification of the minimum input requirements needed to produce designated quantities of output, given available technology.

In general mathematical form a production function can be expressed as:

Q = F(x1, x2, x3,…..xn); where Q is quantity of output; X is factor inputs (such as capital, labor, land or raw materials).

Exp: Share of production function in pricing a product; inclusion of overhead cost, an outcome of production function.