What is Production Management? Nature, Scope, Importance, Objectives, Functions, Components

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What is Production Management?

Production management is a process that combines and transforms distinct resources utilised to produce an organisation’s sub-systems into value-added products or services in a defined and controlled manner following all the policies of that particular organisation.

Moreover, it is an essential part of an enterprise that is concerned with the transformation of inputs into finished products maintaining the requisite quality level. The distinct sets of interrelated management activities involved in product manufacturing are known as production management. If the same process is applied for services, then corresponding activities are defined as operations.

The importance of production management lies in examining processes by which goods and services are created and to use the available knowledge and techniques to resolve problems. It has to think and rethink, whether the practices adopted are still appropriate today.

Production Management Definitions

In literal terms, production means converting inputs into output within the given time period. However, it is important that goods and services are produced of the right quality, right quantity, at the right time and at minimum cost. Here, the role of production management comes into picture. Production Management can be defined as a process of supervising and administering the conversion process (changing raw materials such as land, labour and capital into desired outputs).

The following are some definitions given by management scholars: 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.”

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.” Basically, production management includes decision making related to the production process and ensures that the finished products and services are produced based on the specifications.

Moreover, the production management is assigned with the tasks listed as follows:

  • Specify and accumulate various input resources including management, labour, materials, information, capital and machine

  • Design the conversion or assembling procedure to transform the inputs into finished products, and coordinate the production team and the operating of the production process to ensure that the desired goods and services are produced effectively and at a low cost

The production department of an organisation is not only responsible for the leveraging of facilities and production but also concerned with human factors, which affects the production indirectly, deals with proper utilisation of modern production techniques and maintaining the quality of goods to ensure the satisfaction of the customers of the product.

Nature of Production Management

Fast clock speed industries focus on the structural components such as product design, process, capacity and location. On the other hand, the slow clock-speed industries, the focus is on infrastructural components, i.e., quality, manufacture, outsourcing, planning and other components of the transformation process.

The general nature of production management or operations can be understood through the following points:

Results in Value Addition

Production management is a critical tool available with any organisation that assists in the addition of value to the product. It includes distinct processes, which allow the production of best-quality products by purchasing the right raw materials, in the right form, at an accurate price, and in perfect quantity. However, these quality products provide better customer satisfaction improving the organisation’s goodwill.

Inter-disciplinary Approach

It is one of the most popular and on-demand approaches that is derived from various subjects and disciplines. Distinct subjects including mathematics, statistics, engineering, sociology economics, and human psychology have their contribution towards the design and development of the production management approach.

Transformation Process

The transformation process in which raw materials are transformed or converted into finished products, and are ready for customer consumption. The quality of production management focuses on the economical production of products and thus avoiding any wastage of raw materials used.

Operative Function

One of the most key aspects of production management is to monitor day-to-day operations of the business and ensure long-term continuity. Apart from that, production management also aims to ensure the optimum utilisation of the available resources.

Both Art and Science

Production management can be treated as both art and science. Also, termed art as it is the major one that assigns, coordinates and monitors all the production-related activities of any organisation. On the other hand, it is also defined as science that manages all technical aspects and machines helping in production activities.

Management of Service Sector

Production management is not only responsible for managing production-related activities but also related to the production of tangible products. It also monitors the service sector in which the intangible products are delivered to customers according to their needs.

The aspects discussed above clearly explain the nature of production management, which is related primarily to organisations that are engaged in the production of goods and services. In the early days, almost every organisation was in the form of one-man shops with several critical production management problems.

Scope of Production Management

The scope of production management can be derived through the following aspects:

Facility Location

Production management deals with the selection of the appropriate location to set up production facilities of an organisation, which affects its long-term growth. However, this is a crucial decision to be taken as it deals with long-term commitment and higher investments in land, machinery and building.

Plant Layout and Material Handling

Plant layout deals with the physical arrangement of the facility, which is set up by the business. It includes work centre machines and other necessary equipment within the facility to ensure better productivity.

Product Design

It involves bringing shapes to the ideas of products and then converting them into reality. Every business should come up with innovative ideas to develop their products in the market after conceiving new thoughts and ideas according to the market requirements.

Process Design

The designing of the process is an overall route that is followed by every business to transform raw materials into finished goods. It is a key decision that needs to be taken as it is the key element to determine the effectiveness of business. It includes selecting appropriate technology, deciding the business process sequence and facilities layout.

Production Planning and Control (PPC)

Production management deals with controlling different aspects involved in production. Moreover, it is a process of deciding production in advance, selecting the production sequence, deciding the beginning and endpoints for each product, and then directing production orders to other centres.

Quality Control

Production management deals in checking and maintaining the specified quality standards of production activities within the organisation. It ensures that goods produced are of top quality by fixing checkpoint maintenance and measuring performance from time to time.

Importance of Production Management

Production management assists a company to churn raw material into end products within a specified time period. It subsumes decision making so that the finished goods and services can be achieved in a quantitative way. Production management is a set of general principles incorporated in the production process.

The following points explain the importance of production management:

Common living place

Production management performs continuous analysis to enhance the design and development. To manufacture newly enriched and higher types of products, individuals make use of these products and then revel in a better place of living.

Employment generation

Production associates produce distinct kinds of job opportunities in and around the country directly or indirectly. However, products employment is generated in the production space whereas indirect employment is generated through supporting areas like finance, selling, customer support, etc.

Enhanced quality and reduced cost

Production management helps to improve the product standards by analysis and development. This is helpful to bring down the cost of production.

Spread effect

Different sectors are owing to production management that additionally expands. The distinct sectors include banking, communication, BPO, transport, insurance, etc. This even unfolds the impact by offering additional employment opportunities and therefore boosts the economy.

Utility creation

Production creates various utility types. The customers will get these utilities within the form, style, and size of the merchandise. Additionally, production creates time utility, which results in the merchandise whenever the consumer requires it.

Boost in economy

Production management is responsible for the quality and thus ensures the optimum resource utilisation and then efficiently utilises the production of products and services. This results in a fast economic process and the well-being of society.

Objectives of Production Management

To make sure that all resources are allocated properly in operations, it is essential to record, monitor and review every aspect of production performance. A crucial task in this procedure is to identify appropriate measures of performance that relate to the factors that are relevant to organisational competitiveness.

The scope of production management can be explained using the five basic objectives, which allow organisations to measure their production performance. The production objectives are quality, dependability, speed, cost and flexibility. Furthermore, each of these objectives is measured based on the terms of significance and measurement to the organisational competitiveness.

Functions of Production Management

Production management infers to planning, organising, directing and controlling a range of production tasks with an aim to produce quality end products. The following are the functions of production management:

Production control

This is the place where the production manager directs and supervises the process of production. The manager must find out a plan to make sure that the plan is exactly followed during the manufacturing process. If there exists any deviations, the manager has to take the necessary precautions to make them correct.


This is the critical function where the planning and actual production will take place.

Quality control and cost

Every organisation will have an idea of how essential quality control and the product cost is. But, every company wants to provide the customers with the lowest possible price without compromise in the quality.

Machine maintenance

The production management team is also responsible to ensure that the instruments, equipment and machinery used is in a good working condition. Moreover, it also includes replacing the underperforming or damaged parts with new ones; thereby, enabling the machine to function optimally.

Components of Production Management

Production management is primarily used to describe the concerned processes that deal with distinct stages including planning, coordinating, and supervising the entire production process. To produce and deliver products successfully on time, many components must be addressed.

The primary components of production management are listed as follows:


Making product-related decisions is based on analysing historical data, facts and figures. A company cannot make a decision of producing a product randomly. Efficient forecasting is necessary to determine the quantity of product that should be produced. In this way, the company’s facility will produce what is needed and thereby preventing wastage.

Location strategies

This component of production management involves selecting the appropriate plant location. Selecting the right location includes a thorough analysis of number of factors. For instance, the plant location of a manufacturing company is selected based on factors such as availability of skilled labour, proximity to raw materials, transportation costs, product demand and so on.


This component of production management involves performing regular maintenance checks of machines and equipment. Timely machine maintenance creates a safer workplace environment for workforce and at the same time reduces the risk of unexpected breakdowns and failures that can hinder the production process.


This component involves ensuring that an adequate amount of raw materials is available to meet customers’ demand for products.


This component includes assigning jobs to the right machine or labour resource. This helps an organisation to reduce overall production time and make timely delivery; thereby maintaining a competitive advantage in the market.

Total Quality Management (TQM)

TQM is a strategy lays emphasis on improving processes instead of outcomes and enables the organisation to work towards having zero defects.

Materials Requirements Planning (MRP)

This component of production management ensures that the right amount of the right material is received at the right time so that the production is completed on time.


This component is crucial for every organisation to build long-lasting relationships with customers. Quality is all about conforming to product specifications and meeting customer demands.

Just-In-Time (JIT)

It is the process of scheduling operations in a way that they can start and get completed “just-in-time” or when they are really required.

Process and system performance

This component involves analysing and comparing the expected time and quantity of items produced to the actual time and quantity produced. This helps an organisation to gauge whether the production facility is meeting its targets or falling short.

Layout of facilities

This component helps in ensuring that the most optimal workflow is used within the production facility. An ideal facility layout is one that is free from unnecessary movement of items throughout the facility. Such movement takes place due to poor workflow, poor layout and inconsistent working methods.

Thus, the components of production management concern the firm’s success in various ways. It can lead to several accomplishments, which helps in taking the business to greater heights.

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