What is Production Management? Meaning

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.

Production management also deals with decision-making regarding the quality, quantity, cost, etc., of production. It applies management principles to production.

Production management is part of business management. It is also called "Production Function." Production management is slowly being replaced by operations management. The main objective of production management is to produce goods and services of the right quality, right quantity, at the right time, and at minimum cost.

It also tries to improve efficiency. An efficient organization can face competition effectively. Production management ensures full or optimum utilization of available production capacity.

Meaning of Production Management

Production Management refers to the application of management principles to the production function in a factory. In other words, production management involves the application of planning, organizing, directing, and controlling the production process.

The application of management to the field of production has been the result of at least three developments: 

(i) First is the development of the factory system of production. Until the emergence of the concept of manufacturing, there was no such thing as management as we know it.

It is true that people operated business of one type or another, but for the most part, these people were owners of the business and did not regard themselves as managers as well,

(ii) Essentially stems from the first, namely, the development of the large corporation with many owners and the necessity to hire people to operate the business,

(iii) Stems from the work of many of the pioneers of scientific management who were able to demonstrate the value, from a performance and profit point of view, of some of the techniques they were developing.

Definition of Production Management:

It is observed that one cannot demarcate the beginning and endpoints of Production Management in an establishment. The reason is that it is interrelated with many other functional areas of business, viz., marketing, finance, industrial relation policies, etc.

Alternately, Production Management is not independent of marketing, financial, and personnel management due to which it is very difficult to formulate some single appropriate definition of Production Management.

The following definitions try to explain the main characteristics of production management:

(i) In the words of Mr, E.L. Brech:

Production Management is the process of effective planning and regulating the operations of that section of an enterprise which is responsible for the actual transformation of materials into finished products. This definition limits the scope of production management to those activities of an enterprise which are associated with the transformation process of inputs into outputs. & the definition does not include the human factors involved in a production process. It lays stress on materialistic features only.

(ii) Production Management deals with decision-making related to the production process. So that the resulting goods and services are produced in accordance with the quantitative specifications and demand schedule with minimum cost. According to this definition design and control of the production system are two main functions of production management.

(iii) Production Management is a set of general principles for production economies, facility design, job design, schedule design, quality control, inventory control, work-study and cost, and budgetary control.

This definition explains the main areas of an enterprise where the principles of production management can be applied. This definition clearly points out that production management is not a set of techniques.

Importance of Production Management

The importance of production management to the business firm:

1. The 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.

2. Reputation, Goodwill and Image :

Production management helps the firm to satisfy its customers. This increases the firm's reputation, goodwill, and image. A good image helps the firm to expand and grow.

3. 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.

4. Supports other functional areas :

Production management supports other functional areas in an organization, 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 an increase in sales.

It will also get more loans and share capital for expansion and modernization. The personnel department will be able to manage the human resources effectively due to the better performance of the production department.

5. Helps to face competition :

Production management helps the firm to face competition in the market. This is because production management produces products of the right quantity, right quality, right price, and at the right time.

These products are delivered to the customers as per their requirements.

6. Optimum utilization of resources :

Production management facilitates the 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 organization.

7. 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 objectives.

8. 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. These profits help the firm to expand and grow.

The importance of production management to customers and society:

1. The 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.

2. Generates 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.

3. 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 reduce.

4. 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 spreading effect offers more job opportunities and boosts the economy.

5. Creates utility :

Production creates Form Utility. Consumers can get form utility in the shape, size, and designs of the product. The production also creates time utility, because goods are available whenever consumers need it.

6. 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.

Functions of Production Management:

The definitions discussed above clearly show that the concept of production management is related mainly to the organizations engaged in the production of goods and services. Earlier these organizations were mostly in the form of one-man shops having insignificant problems of managing the productions.

But with the development and expansion of production organizations in the shape of factories more complicated problems like location and layout, inventory control, quality control, routing and scheduling of the production process, etc. came into existence which required more detailed analysis and study of the whole phenomenon.

This resulted in the development of production management in the area of factory management. In the beginning, the main function of production management was to control labor costs which at that time constituted the major proportion of costs associated with production.

But with the development of factory systems towards mechanization and automation, the indirect labor costs increased tremendously in comparison to direct labor costs, e.g., designing and packing of the products, production and inventory control, plant layout and location, transportation of raw materials and finished products, etc.

The planning and control of all these activities required more expertise and special techniques.

In modern times production management has to perform a variety of functions, namely: 

    • Design and development of the production process.
    • Production planning and control.
    • Implementation of the plan and related activities to produce the desired output.
    • Administration and coordination of the activities of various components and departments responsible for producing the necessary goods and services.

However, the responsibility of determining the output characteristics and the distribution strategy followed by an organization including pricing and selling policies are normally outside the scope of Production Management.

Scope of Production Management:

The scope of production management is indeed vast. Commencing with the selection of location, production management covers such activities as the acquisition of land, constructing a building, procuring and installing machinery, purchasing and storing raw materials and converting them into saleable products.

Added to the above are other related topics such as quality management, maintenance management, production planning and control, methods improvement and work simplification, and other related areas.