CHAPTER – 1

ROLE AND SCOPE OF PRODUCTION MANAGEMENT

Production Management Concept:

Production management is the process of designing, manning operating, servicing, and
centralizing the activities of a manufacturing organisation, responsible for the actual
transformation of material inputs into marketable finished goods. Production planning and
control which is an integral and important part of the Production Management has to play a
vital role. Production management is to decide the objectives of production. This will involve
all the functions of planning, organising, directing and controlling the production activities from
the short term and long term aspect.
Production management is a sub-system of the business organisation. Production
management is what a production manager does. The production manager‟s role is that of a
decision maker. After he has planned allocation of inputs, the creation of value through
production process can begin. Once the production processes are started, it must be controlled.
The control involves observing results and checking that they confirm to the original plans. The
management is to plan, organise, direct and control the production activities of a business
concern.
In general, transformation processes can be categorised as follows:
 Physical in manufacturing – raw material into a product
 Location in transportation – sand from sea beach to construction site
 Exchange in retailing – from product sell to price
 Storage as in warehousing – fishes in cold storage for future use.
 Physiological as in health care – fitness instructions
 Information as in telecommunication and education – lessons by teachers.

Scope of Production Management

The scope of production management with various areas of Business Organisation as are
follows: The basic functions of Business Organisation are Finance, Marketing, Finance and
Production and Industrial Engineering.

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Role and Scope of Production Management
1. Finance and Production:
Finance provide the necessary funds for the maintenance of Production and Marketing
activities. Funds not only comes from the sale of goods and services but also acquired
through loans – from banks and other financial institutions, sale of stock investment and
income.
2. Marketing:
The object of production activity is to provide inputs which include raw materials‟ men,
machine, operating supplies, semi finished products, water, power and place etc. the
inputs are assembled and changed to finished goods thereby creating value. The
finished products and services are available so that the marketing functions can be
utilised to provide, sell and distribute them. Thus production and marketing are
separate yet inter-dependent functions in business.

3. Personnel and Production:

The personnel function in any business organisation is mainly concerned with all matters
related to manpower as an input system of business organisation. From the view point
of the production manager following are the various areas of mutual interest.
(i) Recruitment and selection
(ii) Training and development of employees
(iii) Labour relations
(iv) Safety
(v) Wage and salary administration including various incentive programmes.
(vi) Motivating employees to give their best.
4. Production and Industrial Engineering:
This department is responsible for translating the ideas developed in research and
development, marketing research into realities. The main object is to search for the
most efficient way of producing products under certain constraints such as material,
manpower, machines, money etc.
1. Job Production:
In Job Production the whole product is looked as one job which is to be completed
before going on to next. The most common examples are building a ship or a large
civil engineering construction job. Job production is hot confined to large projects, it
could be the making of a special piece of equipment or a tool.

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Role and Scope of Production Management
2. Batch Production:
If qualities of more than one are being made, it is sometimes convenient to split the
production into a series of manufacturing stages or operations. Each operation is
completed as one of the single items being made, before the next operation is started. In
this way a group of identical products, or a batch are made, which move through the
production process together.
3. Flow Production:
When there is a continuous demand for a product, it is sometimes worthwhile setting-up
facilities to make that product and no other product. In these circumstances flow
production may be the best way of operating. Here the manufacturing is broken down into
operations, but each unit moves, or flows, from one operation to the next individually, and
not as one of a batch examples are motor manufacturing, fertiliser, pharmaceutical and urea
manufacturing. Since only one product is being made there are no problems about
priorities, but it is necessary to balance the work load at all stages of manufacture. Examples
are motor car manufacturing.

Functions of Production and Operations Management:

1) Technology Selection and Management:
This is pertaining to long term decision with some spillover into the intermediate region.
Although it is not immediately connected with the day to day short term decisions handled
in the facility plant, it is an important problem to be addressed particularly in a
manufacturing situation in an age of technological advances, so that an appropriate choice
is made by a particular organization to suit its objectives, organizational preparedness and
its microeconomic perspectives.
2) Capacity Management:
The capacity management aspect once framed in a long term perspective revolves
around the matching of available capacity to demand or making certain capacity available
to meet the demand variations. Capacity management is very important for achieving the
organizational objectives of efficiency, customer service and overall effectiveness. While
lower than needed capacity results in non-fulfillment of some of the customer services and
other objectives of the production / operations system, a higher than necessary capacity
results in lowered utilization of resources. There could be a „flexibility‟ built into the
capacity availability but this depends upon the „technology‟ decision to some extent and
also on the nature of the production / operation system, a higher than necessary capacity
results in lowered utilization of resources.

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Role and Scope of Production Management
 As the product variety increases, the systems of production / operations change in a system
characterized by large volume low variety, one can have capacities of machinery and men which
are inflexible while taking advantage of the repetitive nature of activities involved in the system.

3) Scheduling:
Scheduling in another decision area of operations management which deals with the timing of
the various activities – time phasing of the filling of the demands or rather the time phasing of
the capacities to meet the demand as it keeps fluctuating, it is evident that as the span of
fluctuations in variety and volume gets wider the scheduling problem assumes greater
importance. Thus in job shop (i.e. tailor made physical output or service) type operations
system, the scheduling decisions are very important which determine the system effectiveness
(eg. Customer delivery) as well as the system efficiency (i.e the productive use of machinery and
labour).

4) System Maintenance:
The fourth area of operations management is regarding safeguards – that only desired outputs
will be produced in the „normal‟ condition of the physical resources and that the condition will
be maintained normal. This is an important area whereby „vigilance‟ is maintained so that all
the good work of capacity creation, scheduling etc. is not negated. Technology and / or process
selection and management has much to contribute towards the problem. A proper selection
and management procedure would give rise to few problems. Further the checks (quality
checks, physical / non physical output) on the system performance and corrective action (ex-
repair of equipment) would reduce the chances of the desired output being served. In a
manufacturing industry there may be physical defects. In service operations, it could be a
breach of confidence of the customers like the stealing of credit and accounts of the customers.

Functions of Production Manager:

The functions of Production Manager, like any other manager involves the following six steps:
i. Organising
ii. Planning
iii. Directing Operations
iv. Controlling Results
v. Appraising Performance
vi. Improving Effectiveness.

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Role and Scope of Production Management
 i. Organising:
The first task in developing an effective production planning and control group is to
organise all the significant factors affecting the department‟s activities. The production
planning and control function must have a solid framework which has purpose,
direction and continuity in order to help maintain the basic structure of the department
as operation changes take place over the years. Without this framework, the
department would not be properly integrated with company objectives. The following,
in brief, enumerates the organising activities:
(a) Obtain a statement of corporate objectives from top management.
(b) Prepare a statement of departmental objectives
(c) Develop a policy manual for the production planning and control department.
(d) Draw up a department organisation chart.
(e) Evolve departmental job descriptions.
(f) Compile a system and procedures manual.
(g) Introduce a manpower rating and inventory system.
(h) Establish basic criteria for the management of developmental performance.
ii. Planning:
The role of planning is a multiple one. However, one of the basic purpose that it serves
to is relate the organisation to actual operations. Effective direction, control, appraisal
and improvement of operations cannot be done, no matter how well the production
department is organised, unless the activities are first planned. To try to operate
without continuous planning on both-a short and a long range basis will lead to results
which are far less than the optimum that is achievable. The following gives the
elements or steps that are part of the overall concept of production, planning and
control; hence they should be integrated with each other, as well as with the elements
of other managerial skills.
(a) Prepare a statement of long and short term planning requirements.
(b) Develop operating plans (short and long term).
iii. Direction:
The production planning and control manager must direct the activities of his people
within the framework of the total organisation, the manner in which it is done will
determine the precision and effectiveness of the plans themselves, as well as the quality
and value of the organisational planning.

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Role and Scope of Production Management
 Some of the basic elements that are essential to success in directing the activities are:
(a) Effective decision making.
(b) Effective communication and delegation.
(c) Effective motivation and supervision
(d) Effective coordination and unification.
iv. Controlling:
Control serves to ensure that the activities will be carried out in accordance with the
Plans. Without effective control of his operations, the manager may find that his
planning and organising are in vain. Basic steps for control are:
(a) Measurement of progress and results.
(b) Comparison of results with plans
(c) Taking corrective action, if called for.
v. Appraising Performance:
Appraisal is primarily aimed at evaluating the results of operating plans on a continuous
basis. In other words, the performance measured in the control phase of management
is reviewed, then thoroughly analysed to establish the cause of any deviation, so that
the proper changes can be made in either plans or practices. Appraisal and control, are
of course, very closely allied and are often considered to be the part of the same
management.
The appraisal of result consists of:
(a) The analysis of variances
(b) Performance evaluation.
vi. Organisation of Production Department:
The Production Department Organisation varies from industry to industry. It depends
on the type of product, quantity of product, manufactured, quality of product, number
of people working etc.

Factors of Production:
The economics aspect of production can be analysed by studying the factors of
production. The inputs are conventionally called “factors of production:. Factors of production
are essential elements which co-operate with one another in the production process. These are
divided into four categories viz: Land, Labour, capital and entrepreneurship.
(i) Land:
It refers to all natural resources which are free gifts of nature and includes soil, rivers, waters,
forests, mountains, mines seas, climate, air, sun etc.

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Role and Scope of Production Management
(ii) Labour:
Human efforts or work done mentally or physically with the aim of earning income is known
as labour. The compensation given by labourers in return for their work is called wages.
The Land and Labour are the primary factors of production as their supplies are determined
more or less outside the economic system.
(iii) Capital:
See the inputs or man made goods which are used for further production of wealth are
included in capital. An increase in the capital of an economy means an increase in the
productive capacity of the economy.
(iv) Entrepreneur:
An entrepreneur is a person who organises the other factors and undertakes the risks along
with uncertainties involved in the production. The entrepreneur hires the other three
factors, brings them together, organises and co-ordinates them so as to earn maximum
profit. An entrepreneur acts as a boss and decides how the business shall run. The
entrepreneur hires and organises other factors for producing goods and services, he pays
them compensation in the form of wages to labour; rent to landlord and interest to the
owner of capital. The balance goes to entrepreneur in the form of profit which he gets for
rendering entrepreneurial services. Production is the result of combined and joint efforts of
the four inputs and production as output. Similarly services rendered by the factors of
production are known as factors services and compensation received by them in return as
factor income. Factor income is also known as factor payment from enterprise point of view
because the same is paid by the enterprise or production unit.

Types of Production:
There are three types of production depending on the quantity of articles produced and the
nature of their manufacture the types of production can be classified into three categories
viz.,piece meal system lot system and mass production system.
(i) Piece Meal Production System:
It is characterised by the output of small quantities of articles of diverse nomenclature. On
the piece production system each article is made by consecutive operations specified in the
flow process charts.
(ii) Lot Production System:
It is characterised by the output of recurrent batches of articles. It is sub-divided into small
lot and large lot production. The lot production process is based on the principles of

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Role and Scope of Production Management
 parallel – consecutive operations, sub-divided into separate elements. Lot production is
recorded in operating process charts.
(iii) Mass Production System:
It is characterised by manufacturing one type of article in large numbers. The mass
production process is based on the principle of “parallel operations”. In mass production
greater efficiency of labour is achieved due to high specialisation.

Similar types of Production can also be classified as under:

(a) Line Production:
The main characteristics of line production are the use of line layout, and the
minimisation of the transfer quality. Line production can be used for matching – in all
industries –and also for assembly. Although the term line production can be used in a
general sense to cover several of variants described below, one particular established
product. Because the work centres in this case are left permanently set-up, run and set-
up frequencies are low. Because the machines are adjacent and in the transfer quantities
of one can be used, and transfer frequencies are therefore very high.
(b) Line Batch Production:
Line layout can also be used for families of similar items of established design which are
all tooled to use the same machines or assembly line in the same sequence. In this case,
batches of the different components follow each other down the line, each machine
being reset as it completes the last item in a run. The transfer quantity is again
minimised but cannot achieve the high transfer frequencies obtained with pure line
production. In this instance the capacities of the different station on the line are
balanced to the total requirements of different components at different stations on the
line, there is generally some ebb and flow of work in progress stock between the
machines.

(c) Group Batch Production:

Group batch production is characterised mainly by the use of group layout. Because in
this case all machining operations for each components in the group family are
controlled by one supervisor, it is possible to start some operations before the previous
operations are completed, but it is generally impossible to achieve the high transfer
frequencies attainable with line production.

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Role and Scope of Production Management
 (d) Functional Batch Production:
It is characterized mainly by the use of functional layout. Due to the administrative
complication with this type of layout. It is generally essential to fix the same values for
order, run, set-up, and transfer quantity for each component processed. This type of
production is therefore generally accompanied by very low rates of stock turnover.

(e) Line Jobbing Production:

Jobbing production is a type in which the product design is not established, but is only
known with the customer‟s order is received. Where there is specialisation in the type of
product for which orders are accepted, line production can still be used. It is much more
difficult to achieve a balanced line, and such devices as variable overtime for different
parts of the line may have to be used to maintain balance and minimise the stock
between stations.
(f) Group jobbing Production:
In this instance group layout is used, each group being equipped to produce a general
type of product.
(g) Functional Jobbing Production:
Functional jobbing production finally is jobbing production with functional layout.
Because production is infinitely variable, it is probably impossible to design a
classification system which will cover all possible differences, even in simple production
systems. In most companies there is a wide variety of flow types, and the type varies
according to the level which is being examined and from one process to the next. In
spite of these difficulties the above classification has been found in practice to give a
useful indication of the general type of material flow in use.

Basic Approaches to production Management:

Three main approaches in modern production management are:
1. The Decision Theory Approach
2. The Systems Approach
3. The Contingency Approach
1. The Decision Theory Approach:
It has adopted elements from decision theory. The approach is based upon the assumption
that there is a general decision and problem hierarchy which provides a logical structure to
describe the subject.

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Role and Scope of Production Management
 Problems which fall outside the hierarchical structure tend to be looked as non-production
management problems. The approach is oriented towards the decision maker and the
ambition is to provide the decision maker with a set of techniques that makes rational
decisions possible for example, the first decision is the decision as to which process
orientation is the best. The process can be made other process design decisions must
follow. This includes selection of equipment, detailed design of the process, make or buy
decision facility location and the way in which the process facilities are laid out or decisions
that follow subsequently. Then the focus is shifted to the work station. Once the process
has been designed it must be scheduled operate land control. A fore caste is required to
draw the schedule. Routine inventory planning and control system must be employed.
Finally the quality of product must be periodically sampled to ensure that actual output
complies with process objectives.

2. The Systems Approach:

The system approach is characterised by the use of the general systems theory framework.
Systems theory helps us to get insides into the overall structure of production management
problems. It tends to be a strong instrument for description and it has some sort of
analytical appeal. It emphasis a total few rather than isolated problems.

It has been demonstrated that the most common approach includes the idea that we are
dealing with two separate systems: a production system and a decision and information
system. The decisions can be categorised into two groups – those related to the design of
the system and those related to the control of the system. The design of the system
includes problem areas such as the selection and design of products, selection of equipment
and process, job design, location of the system and facility layout. The control of the system
includes inventory control, production control, maintenance, quality control, labour control
and so on.
3. The Contingency Approach:
This approach is characterised by the assumption that there are some important
contingencies determining the relevance of different problems and therefore determining
the problem structure in a given situation. The contingency approach seems to offer a
significantly better instrument for description as well as better framework for explanation
and prediction concerning management problems. However, it is not based on imperical
dates.

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Role and Scope of Production Management
 M.C.Qs
1. Time Study refers to
(a) Improving work Methods
(b) Developing a standard time to do a particular task
(c) Value Analysis
(d) Value Engineering

2. Acceptance Quality level is

(a) Maximum number of defective that the consumers will accept
(b) Fraction defective(s) that the consumer considers acceptable
(c) Fraction defective(s) that the producer considers acceptable
(d) Maximum number of defectives that the producer will allow

3. PERT stands for

(a) Programme Evaluation and Review Technique
(b) Project Evaluation and Review Technique
(c) Programme Examination and Review Technique
(d) Project Examination and Review Technique

4. What is / are methods used in Transportation Method?

(a) North west Corner Rule
(b) Vogel‟s Approximation Method
(c) Least Cost Method
(d) All of the above

5. PERT and CPM are

(a) Networking techniques
(b) Project Evaluation Techniques
(c) Scheduling Tools
(d) Quality Control Tools
ANSWERS

1 2 3 4 5

B B B D B

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Role and Scope of Production Management