Production Management

Production management involves planning and control of industrial processes to ensure that they move smoothly at the required level. Techniques of production management are employed in service as well as in manufacturing industries. It is a responsibility similar in level and scope to other specialties such as marketing or human resource and financial management. In manufacturing operations, production management includes responsibility for product and process design, planning and control issues involving capacity and quality, and organization and supervision of the workforce.

Production management's responsibilities are summarized by the «five M»s»: men, machines, methods, materials, and money. «Men» refers to the human element in operating systems. Since the vast majority of manufacturing personnel work in the physical production of goods, «people management* is one of the production manager's most important responsibilities.

The production manager must also choose the machines and methods of the company, first selecting the equipment and technology to be used in the manufacture of the product or service and then planning and controlling the methods and procedures for their use. The flexibility of the production process and the ability of workers to adapt to equipment and schedules are important issues in this phase of production management.

The production manager's responsibility for materials includes the management of flow processes — both physical (raw materials) and information (paperwork). The smoothness of resource movement and data flow is determined largely by the fundamental choices made in the design of the product and in the process to be used.

The manager's concern for money is explained by the importance of financing and asset utilization to most manufacturing organizations. A manager who allows excessive inventories to build up or who achieves level production and steady operation by sacrificing good customer service and timely delivery runs the risk that overinvestment or high current costs will wipe out any temporary competitive advantage that might have been obtained.

Financing a Company

Let us take an example. The Smiths were planning to start up a small retail business. Before making the final decision, they looked at the amount of personal capital they had to invest. The remaining funds they would have to finance through various short-term and long-term arrangements. Another consideration was the type of equipment they would have to purchase initially. Similarly, the Smiths evaluated the costs of inventory, employee salaries and benefits, and other general expenses. After reviewing all these factors, the Smiths decided to open their business.

So, when going into business money is one of the most important factors. Without sufficient funds a company cannot begin operations. The money needed to start and continue operating a business is known as capital. A new business needs capital not only for ongoing expenses but also for purchasing necessary assets. These assets — inventories, equipment, buildings, and property — represent an investment of capital in the new business. Capital is also needed for salaries, credit extension to customers, advertising, insurance, and many other day-to-day operations. In addition, financing is essential for growth and expansion of a company. Because of competition in the market, capital needs to be invested in developing new product lines and production techniques and in acquiring assets for future expansion.

How this new company obtains and uses money will, in large measure, determine its success. The process of managing this acquired capital is known as financial management. In general, finance is securing and utilizing capital to start up, operate, and expand a company. In financing business operations and expansion, a business uses both short-term and long-term capital. A company utilizes short-term capital to pay for salaries and office expenses that last a relatively short period of time. On the other hand, a company seeks long-term financing to pay for new assets that are expected to last many years. When a company obtains capital from external sources, the financing can be either on a short-term or a long-term arrangement. Generally, short-term financing must be repaid in less than one year, while long-term financing can be repaid over a longer period of time.