KARAIKUDI – 630 003, TAMILNADU
DIRECTORATE OF DISTANCE EDUCATION
BACHELOR OF BUSINESS ADMINISTRATION (BBA)
PAPER – 1
PRODUCTION AND MATERIAL MANAGEMENT
PAPER 3.1 : PRODUCTION AND MATERIALS MANAGEMENT
Introduction: Production function – Design of production – Systems – Types of process – Productivity – Ergonomics
Unit – 2
Production Planning and Control: Planning – Routing – Scheduling - Despatching –
Inspection – Gnatt Charts – Make or Buy Decisions
Unit – 3
Plant Location and Layout : Factors influencing plant location – Relocation – Types of layouts – Process and product layout.
Unit – 4
Materials Management: Concept - Purchasing – Vendor rating – Material Handling: Importance – Selection of material handling equipments.
Unit – 5
Stores Management : Functions – Stores location – Stores layout – Essentials of good layout – Stock verification.
Unit – 6
Inventory Management : Concept – Importance – Techniques.
1. E.S. Buffa : Modern Production Management
2. J.L. Lundy : Effective Industrial Management
3. Bunga and Sharma : Production Management
4. Samuel Eilon : Production Management
Lesson – 1
Production management is the process of effectively planning, organizing, directing the controlling the production function or production system i.e. the operations of that part of an enterprise which is responsible for the actual transformation of materials into finished products. It deals with man – machine organisation to accomplish both productivity and satisfaction – the desirable end results.
Scope of Production Management
Major activities included under the production management are:
(1) Product planning and development, i.e. evolution of new products and designing
of those products on the basis of specific demands received from marketing or
(2) Production administration which deals with three specialized parts of production
; production engineering
; production planning, and
; production control
(3) Execution of plans, policies and decisions, i.e. implementation function
(4) Department services and departments, e.g. standardization, simplification,
specialization, inspection and quality control, inventory control, research and
development, diversification, employee amenities etc.
Major Decisions of Production Management
The are two major areas of responsibilities of production, management requiring management decisions.
1. Strategic Decisions:
The design of the production system involves decision on many problems such
as selection of product, equipment and process, location and layout plant etc.
They may need large capital investments.
These decisions are called strategic decision. They are also long-run decision.
Such major decisions of production management are taken by the top
management and not by production or manufacturing managers.
2. Tactical Decisions:
The tactical or short-run or recurring decision relating to the operations and
control of the production system are usually taken by production manages.
These tactical decision are on the problems such as forecasting, production
planning, production control, inventory control, quality cost control and
When competitive, economic, social and technological changes occur in the
environment of the enterprise new approaches and adoptions are required in
both the areas to justify its existence and to ensure steady growth.
The production function of a business is concerned with the creation of a product
or service required to satisfy customer needs, wants and desires. In any
business that supplies a needed product or service, it is quite obvious that
activities of product system must be closely related to the customer demand as
reflected in the continuous flow of order.
Production function involves an organized activity for converting materials into a finished product desired by customers.
Production function will be considered most effective when it serves a dual purpose.
1) It must operate primarily to satisfy customer demand particularly relating to
quality, quantity, price and above all timing of delivery as scheduled in the order.
2) It must permit production activities to operate in an economical and efficient
manner because cost of production is a vital factor is facing the market
competition and in ensuring normal profit or return on the investment. Higher
costs may wipe off normal profit and sooner or later enterprise will be wiped out
of the market.
SCOPE OF PRODUCTION FUNCTION
The scope of production function is very wide in the present era of intense competition and sophisticated technology. The production function in an enterprise is not only
concerned with the proper and full use of production facilities, utilization of latest techniques of production, and production of quality goods satisfying the varied segments of customers, but also with the human factor. The scope of production function is not fixed. It depends upon a multiplicity of factors. The scope of production function is not fixed. It depends upon a multiplicity of factors, two more important ones being nature of business and activity and size of business operations. However, in a large manufacturing concern, the various activities that generally from part of production function include the following:
1. Production Planning:
Production planning deals with the preparation of production programmes, that is,
about number and types of product to be manufactured, the technique of
production to be employed, the quality specification to be met, the delivery
schedules to be adhered to, and utilizing all production facilities with optimum
results. Thus, production planning is a comprehensive function which decides in
advances about the production objectives and the methods to realize those
2. Plant (or works) Engineering:
This function is concerned with installation of plant and equipment, and provision
of plant services (like power, steam, compressed air, water etc., plant and
building maintenance; safety precautions; and the like.
After production planning and plant engineering, the function of purchasing
becomes relevant. Purchasing activity is aimed at meeting the requirements of
production department for raw materials, intermediate products, and
consumables. In order to be useful, the purchasing activity must pay due
attention to such aspects of quantity, quality, source, price, delivery time,
planning and control etc.
4. Production (or manufacturing) Engineering:
This is a specialized function of process design, plant layout design, materials
handling, method engineering, design of tooling and equipment, work
This is the function of actual conversion of physical inputs into outputs of product
and services. There could be various operations, depending on the nature of
products and production for example, matting, grinding, pressing, cutting, heat
treating, welding, finishing etc. or fabrication and assembling. It may be pointed
out that the functions of production planning, plant engineering, purchasing and
production engineering are undertaken with the object of facilitating
manufacturing. They all set stage for the actual manufacturing operations by
providing production programmes, routes, schedules and work orders, by
installing plant and equipment and making available plant services, by buying
raw materials, intermediate products, and consumables, and specifying methods,
processes and standards of operations.
6. Production Control:
The final activity that forms part of production function relates to production
control. Production control mainly deals with bringing actual performance at par
with planned performance in terms of quantity and quality requirements, time
schedules and cost standards. As such, production control is closely related to
Organizing production function
To understand how production function is organized in a business enterprise, it is pertinent to know (a) who is responsible for performing production function in a business enterprise, and (b) what organizational set-up is followed to perform production function in a business enterprise. These aspects are briefly described below.
Responsibility of Product Function
The responsibility of performing production function varies in different types of business enterprises. In sole-proprietary organization, for instance, the owner (i.e. sole proprietor) looks after this responsibility. In partnership firm, the responsibility of production department can be entrusted to one of the active partners. In a company, which is generally organized on a large scale, the responsibility of production function is given a formal shape. A separate department (generally known as Production Department) is created and put under the charge of an individual (generally known as Production Manager), who functions under the overall guidance, superintendence, and control of the Chief Executive (Manager or Managing Directors), or Board of Directors. It is this
organ of company management (i.e. top management) that is responsible for taking broad policy decision about production activities.
Relationship of production with other functions of business
Production functions, in a typical manufacturing organisation, operates in a network of inter-dependencies and interactions with other major functions such as marketing, finance and accounting, personnel, office, and research and development (R&D). the nature of relationships between production and other functions of business is briefly given below.
Production in Relation to Marketing Function
In the nature of things, two functions are more closely interrelated than other functions. At every stage, right from conceiving the product idea down to after-sales service, production and marketing departments have to work in unison. Several decisions in marketing the production have common premises and inputs. Production designs, sizes and quality ranges have to be determined keeping in view the preferences of the various customer groups, as studied by the marketing people. Decision on introduction of new products, improvement of existing product and elimination of slow-moving and obsolete products have to be taken in consultation with the manufacturing department. There are several areas in which both the departments can cooperate and integrate their activities. For instance, new product ideas that may emanate from research laboratories attached to production department may be taken up by the marketing department to build up potential customers. Similarly, production department can furnish details of the distinct technical features of products to add grist to the sales promotional campaigns. Sometimes even marginal changes in product design can contribute greatly to the attractiveness and utility of the products.
Production in Relation to Finance and Accounting Function
Production function is closely interlinked with finance and accounting function in a business enterprise. Long range and short range financial planning has to take into consideration production costs which are a sizeable component of total costs of products. In evaluation of production performance, aspects of cost minimization get the attention of finance manager. In the task of product on planning, the production people have to depend on costing and other accounting units to provide the needed estimates
and computations of costs of alternative product designs, process and plant engineering, methods, processes, standards, and production programmes. Further, any proposal for capital expenditure for acquisition and replacement of assets, balancing equipment etc. emanating from production department should be cleared by the finance department. Thus, both departments should work in close cooperation with each other and appreciate the complexities and compulsions of each other‟s job responsibilities.
Production in Relation to Personnel Function
The personnel manager in a manufacturing organisation helps the production department in several matters such as man-power planning, recruitments and selections, training, design or wage incentive systems, discipline and grievance settlement process, welfare and safety programmes, and relations with labour unions. Apart from these aspects, personnel manager also assists the production department in motivating employees and works, in establishing communication with them, and in injecting humanism in work units.
Production in Relations to Office Function
Like other functions, production stands in interdependent and interactional position with office function. The production function can not be satisfactorily performed if an efficient office does not exist in the organisation. It is the office that will inform the production department, through relevant records, about the time schedules of production, the quantities of production, and the quality specifications of production. it is the office that makes arrangement for the procurement of raw material and other production inputs at reasonable rates. It is from the office that raw materials and other supplies are issued to the production department, on requisition. It is the office that keeps a periodic check on the inventories and ensures their proper management. Thus, production department and office are closely related.
Production in Relation to R & D Function
In a large sized manufacturing organization there is an organic link between the production department and R & D unit. R & D is a melting pot of ideas with regard to products, processes and techniques employed in production. it feeds the production department with new, improved and innovative product idea and production methods. All technical aspects, specifications and designs of products are generally cleared in R & D unit. Likewise, R & D unit has to depend on production department for understanding the environmental setting in which production people work, availability and acquisition of plant and equipment, skills of personnel and so on. Manufacturing,
industrial and quality control engineers are also associated with R & D with respect to several aspects of product engineering. This close inter-relationship between production and R & D needs continuous communication and coordination among them.
A business enterprise may be a manufacturing or service organisation. It may produce a product or a service, i.e. provide advice, information, help or any assistance. In either case it is producing something which did not exist before.
Such a business organisation can b e regarded as a system, whose elements are production, marketing, finance and personnel relations. A system is a complex unity formed of many and often diverse parts which are interconnected and are also interrelated. All the parts making a system are subject to common plan for serving a common purpose. A business is a system because the four functions mentioned above are interrelated and they can be coordinated and integrated to achieve common organisation objectives namely, profit and satisfaction. Production function is regarded as a subsystem of the business firm – a system within a system. It represents a
regularly interacting or interdependent group of items forming a unified whole.
Production manager must concern himself with a number of interrelated areas. These areas are:
; production planning
; production control
; quality control
; methods analysis
; material handling
; plant layout
; inventory control
; work measurement
; wage incentives, and
; working conditions