Before addressing production management, let’s discuss what production is.
What is production? It is a process of creating goods and offering services.
Production is a process by which input resources are transformed to obtain the output of various types of finished goods and services. Input resources are also called production factors. At the output of the production process, the results of the transformation processes are obtained, namely, tangible goods and services.
Production factors are generally classified into:
input resources raw materials, semi-finished products, fuels, energy resources and more.
They are consumed during the production process. The characteristic of them is that their participation in the final product can be directly determined. The accounting records of the company are recorded as current assets.
Technical and technological equipment are the means used in the production process
Technical and technological equipment are the means used in the production process without directly participating in the final product. Their participation is indirectly accounted for through the depreciation charges accrued in the cost of the finished product: buildings, machines and equipment, vehicles and others, which are morally and physically worn out. These are the firm’s fixed assets.
Workforce (human resources) are directly involved in the production process, either as contractors or as management personnel. They are included in the finished product through the work they have recorded as wages.
The concept of production emphasizes the management of the production process
The concept of production emphasizes the management of the production process and includes many and varied activities related to preparation (design and planning), production and realization, as well as control over materials, equipment, people, financial resources and information to achieve certain final economic results. When it comes to such activities, the term Production Management is commonly used.
Manufacturing management covers all these activities related to the creation of goods and the provision of services through the transformation of input resources into finished products.
In today’s market and economic environment, there is an overwhelming predominance of service providers. For them, the production function does not focus on the creation of physical products, but may in some ways be hidden from the public, even by the customer. It is surprising to many that more than 80% of the workforce is employed in services. The manufacturing activities performed in such companies are combined with the term operations. This term is broader in scope and covers activities that are related to both the production of goods and services performed in different organizations – public, private, business or non-profit.
For example, a bank, university, or hospital – even a church has operational functions, even though it has nothing to do with production technology, assembly lines, or finished products.
Operations management is similar to production management
Consequently, operations management is close in meaning to production management, but it concerns a much wider range of problems and organizations whose technologies differ significantly from manufacturing ones. At the same time, some important common features are observed in the movement of materials in the factory, the queue of customers in front of the supermarket, the processing of insurance payments by the insurance company, the enrollment of students at the university and the care of the sick in the hospital.
Both types of operations are seen as a transformation process. In production, inputs – materials, semi-finished products (elemental base) energy, capital are transformed into finished goods of material nature. In operations providing services, the same inputs are transformed into services that are often insubstantial. But in both cases, the transformation process most efficiently and effectively is the main task of every manager at any level of the different company structures. BVOP.org has created similar management principles and rules with its Business Value-Oriented Principles (known as BVOP Ultimate Guide).
For this reason, the meaning of the concepts of production and operations in services is gradually gaining the meaning of synonyms, meaning actions for transforming resources into finished goods and services. This has given rise to a large number of authors to name their books in the field called Production / Operations Management, which gives equal importance to the two groups of activities.
Services industry in the advanced market economies is intensively developing
And as we have already noted, the services industry in the advanced market economies is intensively developing. The relative share of areas of the food industry (fast food establishments), banking, hotel and tourist services, transport services, retail sales, government, institutional services, education, etc. is increasing sharply. In this extended range of activities, many authors, regardless of the results of the activities – a good or service, cover everything with the concept of Operations management, which fully reflects the expanded nature of the activities performed. Scientific management suggests similar management approaches when speaking about production and processes.
Notwithstanding this summary, many professors point out that when they begin a course in Operations Management, students always ask the question – What is Operations Management?
And immediately they emphasize that it is not always easy to answer in a few words, which confirms the complexity of this concept, combining many and varied activities aimed at providing goods and services. However, even with this dominant role of service delivery, the production of goods remains important especially for the provision of basic goods for export and domestic consumption. If we need to narrow down the scope of problems and focus only on production management, we can summarize:
Production management focuses on realizing the current maintenance of optimal proportions between the structural elements of the production process (phase, partial processes and operations), as well as between the last and available resources of the company (production capacity, financial, labor and material resources), to achieve the production of the contracted production within the established volumes, quality and terms.