The Concepts of

Production Management

Topic 1
• Concept Of Production management refers to the
application of management principles to the
production function in a factory.
• In simple words production management involves
planning, organizing, directing and controlling in
the production process.
 Production Management

• Production is the creation of goods and

services
• Production: Is the process of creating a product
or service by combining the factors of production.
• The factors of production are:
• Land,
• Capital ,
• Labour and
• Entrepreneurship
• Production management; means planning,
organizing, directing and controlling of production
activities.
• Production management deals with converting raw
materials into finished goods or products. It brings
together the 6M's i.e. men, money, machines,
materials, methods and markets to satisfy the wants
of the people.
• According to Elwood Spencer Buffa, "Production
management deals with decision-making related to
production processes so that the resulting goods or
service is produced according to specification, in the
amount and by the schedule demanded and at
minimum cost."
 Nature of Production Management
• Production management results in value addition
• Decision making system
• An inter-Disciplinary approach
• Operation function
• Part of general management
• Is both Art and Science
• Transformation process
 Benefits of Production Management
The benefits of production management to the business
firm:
• Accomplishment of firm's objectives : Production
management helps the business firm to achieve all its
objectives. It produces products, which satisfy the
customers' needs and wants. So, the firm will increase
its sales. This will help it to achieve its objectives.
• Reputation, Goodwill and Image : Production
management helps the firm to satisfy its customers.
This increases the firms reputation, goodwill and
image. A good image helps the firm to expand and
grow.
• Supports other functional areas : Production
management supports other functional areas in
an organisation, such as marketing, finance, and
personnel. The marketing department will find it
easier to sell good-quality products, and the
finance department will get more funds due to
increase in sales.
• Helps to face competition : Production
management helps the firm to face competition in
the market. This is because production
management produces products of right quantity,
right quality, right price and at the right time.
• Optimum utilization of resources : Production
management facilitates optimum utilization of
resources such as manpower, machines, etc. So,
the firm can meet its capacity utilization objective.
This will bring higher returns to the organisation.
• Minimizes cost of production : Production
management helps to minimize the cost of
production. It tries to maximize the output and
minimize the inputs. This helps the firm to achieve
its cost reduction and efficiency objective.
• Helps to introduce new products : Production
management helps to introduce new products in
the market. It conducts Research and
development (R&D). This helps the firm to
develop newer and better quality products. These
products are successful in the market because
they give full satisfaction to the customers.
• Expansion of the firm : The Production
management helps the firm to expand and grow.
This is because it tries to improve quality and
reduce costs. This helps the firm to earn higher
profits.
• The benefits of production management to
customers and society:
• Higher standard of living : Production management
conducts continuous research and development
(R&D). So they produce new and better varieties of
products. People use these products and enjoy a
higher standard of living.
• Creates employment : Production activities create
many different job opportunities in the country,
either directly or indirectly. Direct employment is
generated in the production area, and indirect
employment is generated in the supporting areas
such as marketing, finance, customer support, etc.
• Improves quality and reduces cost : Production
management improves the quality of the products
because of research and development. Because of
large-scale production, there are economies of
large scale. This brings down the cost of
production. So, consumer prices also reduced.
• Spread effect : Because of production, other
sectors also expand. Companies making spare
parts will expand. The service sector such as
banking, transport, communication, insurance,
BPO, etc. also expand. This spread effect offers
more job opportunities and boosts economy.
• Creates utility : Production creates Form Utility.
Consumers can get form utility in the shape, size
and designs of the product. Production also
creates time utility, because goods are available
whenever consumers need it.
• Boosts economy : Production management
ensures optimum utilization of resources and
effective production of goods and services. This
leads to speedy economic growth and well-being
of the nation.
 Production Management
Philosophies
• Production Concept
– Consumers will favor those products that are widely
available and low cost
– Therefore increase production and cut down costs
– Build profits through Volume
• The product concept
– Buyers admire well made products and can appraise
product quality and performance
– Produce quality products( Practically sells itself, if it
gives most quality for money)
 Means of Production Management
• The means that are used to produce goods and
services, including the social relations between
workers, technology, and other resources used.
• The term is prominent in Marxist theory, since
Marx's characterization of capitalism hinges on
the distinction between those who own the
means of production (capitalists), and those who
have nothing to sell but their own labour-power
(proletarians).
• In economics and sociology, the means of
production (also called capital goods) are physical
and non-financial inputs used in the production of
economic value. These include raw materials,
facilities, machinery and tools used in the
production of goods and services.
• In the terminology of classical economics, the
means of production are the "factors of
production" minus financial and human capital.
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