Introduction to Business Dersi 6. Ünite Özet

Production, Production System and Production Management

Production along with marketing and finance is an essential and vital business activity in an organization. The production function exists in order to provide goods and services demanded by customers. Briefly production could be defined as the transformation or conversion of a set of inputs, such as raw materials, labor, knowledge, into one or more outputs such as tables, cars, and banking services.

A system is a collection of interacted, interrelated, or interdependent elements or components that are organized for a common purpose. From this point, the main purpose of production systems is to produce goods and/or survives. Inputs, transformation process, outputs and feedback are the main elements of a production system. In this system inputs such as raw materials, materials, machine are transformed into outputs which are goods and services. The production system has the following characteristics:

• Production is an organized activity; thus every production system has an objective.
• The system transforms the various inputs to useful outputs.
• It does not operate in isolation from the other organizational systems.
• There exists a feedback about the production activities, which is essential to control and improve system performance.

During the transformation process , the production function in the company involves four specific sub- functions which are design, scheduling, operation, and transformation control.

Another important point which is needed to be kept in mind is production management . It involves application of planning, organizing, directing, and controlling the production process. It encompasses both services and manufacturing; it’s important in effectively and efficiently managing productivity; and it plays a strategic role in an organization’s competitive success.

Types of Production Processes

The production system of a company refers to how the flow of work is configured and that differs from company to company. Production can be configured in a number of different ways, depending on the nature of the product, customer requirements, and available production technologies. In addition, the selection of a process structure is determined by many factors. According to all these points, Flow process, Job-shop process, Cellular process, and Project process can be indicated as four main types of processes.

The flow process is employed where all products require the same type of processing in the same sequence of tasks. This type of process is used when the product is built up through many separated stages in a sequence. Continuous flow process, Repetitive or discrete flow process and Disconnected or batch flow process are three types of flow processes.

Advantages of the flow processes: Since specialized equipment is used operations are efficient; workers can benefit from repetition of a narrow range of tasks; material handling can be simplified; work-in process inventories are small; space utilization is efficient; quality conformance is easier to achieve; and production scheduling and coordination are relatively easy. Disadvantages of the flow processes: Initial costs are high; work can become tedious and boring; and the production system is extremely vulnerable.

Job-shop process is characterized by manufacturing of one or few quantity of products according to the needs and requirements of customers. This process is used when a company manufactures several different products that require different types of processing and the processing for different products is performed in different sequences. While producing wide variety of products and more skilled operators are some it’s advantages, high material handling costs and high material flow distance can be given as some of its disadvantages

Cellular manufacturing is a process that produces families of parts within a single line or cell of machines operated by operators who work only within the line or the cell. All necessary machines and manpower are contained within this cell, thus giving it a degree of operational autonomy. Companies often capture some of the efficiencies of flow processes and the flexibility of job- shop processes by creating hybrids of the two, which is called cellular process.

Project process is characterized by a high degree of job customization, a large scope for each project, and need for substantial resources to complete the project. These processes are used when there is high customization and low product volume, because each product is unique. The major strength of this type of process is its flexibility to meet the individual needs of customers. Examples for the project processes are construction projects like building, highway and bridges, cargo airplanes, and ships.

The Historical Evolution of Production Management

Systems for production have existed since ancient times. The production of goods for sale, at least in the modern sense, and the modern factory system had their roots in the first Industrial Revolution in the 19th century. During the First Industrial Revolution , many new inventions were implemented that allowed goods to be manufactured with greater ease and speed. Throughout the years, there have been some thinkers and their breakthroughs. Adam Smith’s Wealth of Nations (1776) proposed the division of labor , in which the production process was broken down into a series of small tasks, each performed by a different worker. In the early 1900s Frederick W. Taylor approached the management of work as a science. Based on observation, measurement, and analysis he identified the best method for performing each job.

The year 1913 saw the introduction of one of the machine age’s greatest technological innovations: The moving assembly line for the manufacture of Ford automobiles. This technological breakthrough, coupled with the concepts of scientific management, represents the classic application of labor specialization and still exists today in both manufacturing and service operations. This type of production yielded the name of mass production. American manufacturers became adept to mass production over the next 50 years and easily dominated manufacturing worldwide. However, Japanese manufacturers changed the rules of production from mass production to lean production. Lean production prizes flexibility (rather than efficiency) and quality (rather than quantity). The quality slogan has since spread across the globe and is the underlying force for successful operations today.

In 1990s by the emergence of Internet, the way of making business and the production systems were affected deeply. Finally, the field of supply chain management was born to manage the flow of information, products, and services across a network of customers, enterprises and supply chain partners.

New Trends in Production Processes

The ultimate goal of production management is to provide high-quality goods and services instantaneously in response to customer demand by the lowest possible cost. Several major developments have radically changed the production process and production management and created new approaches in production process.

Flexible manufacturing system was introduced in response to a new demand for more variety and for greater responsiveness to changes in products, production technology, and markets. The FMS is based on the concept of group technology, as it is designed to produce parts within a specific range of styles, sizes, and processes. FMS flexibility is limited to the production of a single part family or a limited range of part families. A part family is defined as a number of parts with similar dimensions, geometric features, and tolerances or processing requirements or both. FMS reduces or eliminates waste by ensuring that non-value added tasks occur outside the processing cycle.

Lean production is the production of goods using less human effort, less manufacturing space, less investment in tools and less engineering time to develop a new product. Lean production is based on the premise that nothing will be produced until it is needed. LP systems use a highly skilled workforce and flexible equipment, which means incorporating advantages of both mass production (high volume, low unit cost) and job - shop production (variety and flexibility).

Just-In-Time production (JIT) is a Japanese management philosophy applied in manufacturing which involves having the right items of the right quality and quantity in the right place and the right time. The manufacturing process is a network of interconnected work centers. Every piece is expected to be correct when received, every machine is expected to be available when needed to produce parts. İt is reported that the proper use of JIT production has resulted in increases in quality, productivity, and efficiency, improved communication and decreases in costs and wastes.

In computer integrated manufacturing (CIM) , computers help workers to design products, control machines, handle materials, and monitor and control the production function in an integrated fashion. it is a new type of automation organized around the computer. CIM stands for a holistic and methodological approach to the activities of the manufacturing enterprise in order to achieve vast improvement in its performance. Manufacturing engineers are required to achieve objectives to be competitive in a global context:

• Reduction in inventory
• Lower the cost of the product
• Reduce waste
• Improve quality
• Increase flexibility

in manufacturing to achieve immediate and rapid response to product changes, production changes, process changes, equipment changes, and the change of personnel.

Customization aims to make a unique product or provide a specific service to specific individuals. This is now practiced widely with mass customization. Mass customization means tailoring products to meet the needs of a large number of individual customers. Mass customization brings the personalization and flexibility of custom-made business manufacturing together and takes it to another level of mass production with lower unit cost. Therefore, different mass customer groups are targeted in mass customization rather than targeting a single customer. E-manufacturing is a system methodology that enables the manufacturing operations to successfully integrate with the functional objectives of an enterprise through the use of Internet, tether-free (i.e. wireless, web, etc.), and predictive technologies.

The Scope of Production Management

Nowadays, companies try to produce a wide variety of products in order to meet customers’ changing and developing needs and requirements. High competition, technological improvements, the structure of the business, source of capital, social developments, and industrial relations bring pressure on companies for paying more attention to production management. Beside all this, production management tries to achieve its goals at the maximum efficiency level. Other issues like customer satisfaction, minimum levels of inventory, and the effective and efficient usage of production resources also forces production management to expand its horizon.

The scope of production management ranges across the company. People working for production management are involved in product design, process selection, selection and management of technology, design of work systems, location planning, facilities planning and quality improvement of the company’s goods or services.

At the heart of all operational decisions is the product itself. The design characteristics of the product will affect the way the production system should be designed and operated. By considering production implications while the product is being designed, companies can make a higher-quality product at lower cost. Therefore, many companies include staff from operations as part of the product design team. Two fundamental design issues are how to produce the firm’s products and how much production capacity to have. The design of the production process is crucial to supporting the marketing strategy of the organization. The design of the production process requires decisions to be made regarding the arrangement of individual production activities, the division of work and specialization of labor, and the choice of equipment and technology. Many production management problems have important spatial aspects. The decision on where to locate a factory or a facility have long-term strategic importance because they determine how much it will cost to make products and how well customers can be served. Facility location is the determination of the best geographic location for a company’s facilities.

Aggregate planning is concerned with the determination of production, inventory, and work force levels to meet fluctuating demand requirements over a planning horizon that ranges from six months to one year. The objective of inventory management has been to keep enough inventory to meet customer demand and also be cost effective. An inventory system controls the levels of inventory by determining how much to order and when to order. Materials requirement planning is a material control system that attempts to keep adequate inventory levels to assure that required materials are available when needed. Quality management is a formalized system that documents processes, procedures, and responsibilities for achieving quality policies and objectives. This system helps coordinate and direct a company’s activities to meet customer and regulatory requirements and improve its effectiveness and efficiency on a continuous basis. The term total quality management ( TQM ) refers to a quest for quality in an organization. There are three key components of the TQM philosophy: One is a never- ending push to improve, which is referred to as continuous improvement; the second is the participation or involvement of relevant parties in organizational processes; and the third is the goal of customer satisfaction which means meeting or exceeding customer expectations. Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer, wholesaler, retailer, and consumer. Supply chain management coordinates and integrates these flows both within and among companies.

Managing Information

With the evolution of information systems, management of information systems and technology have also evolved. Today’s information systems allow greater use of information throughout the company, but they generate new challenges in organizing, analyzing, and protecting information. Fort that, the key is to managing the flood of information. Eliminating the information that is not relevant to the top priorities can reduce the amount of information flow. This point is rather crucial for today’s companies because they compete in a market where customers can order clothes online, arrange a home mortgage loan by phone or computer, or buy a computer on the Internet at any time they choose. Here information technology allows businesses to deliver goods and services whenever and wherever it is convenient for the customer. In such environment businesses could only be successful if they cope with effectiveness of management information.

Knowledge is information charged with enough intelligence to make it relevant and useful . Knowledge technology (KT) adds a layer of intelligence to filter appropriate information and deliver it when it is needed. KT changes the traditional flow of information; instead of an individual going to the database, the database comes to the individual. This technology “thinks” about the facts according to an individual’s needs, reducing the time that a person must spend finding and getting information. As KT became more sophisticated in the mid-2000s it became better known as business intelligence (BI). BI refers to a variety of software applications that analyze an organization’s raw data and take out useful insights from it. The effectiveness of management information depends on four characteristics: Quality, Completeness, Timeliness, and Relevance. The term information refers to data that have been gathered and converted into a meaningful context. A database is a systematic collection of data that supports storage, update and manipulation of data. The database management system (DBMS) provides users and programmers with a systematic way to create, retrieve, update, and manage data. Data mining is the process of analyzing data from different perspectives and summarizing it into useful information.

Information Technology

There are many ways to use information technology (IT) in business because there are business activities to be performed, business problems to be solved, and business opportunities to be pursued. Information technology includes hardware, computer networks, and software. A company’s information technology provides the foundation for serving customers, working with vendors, and managing internal company business processes. Furthermore, as they trigger changes in marketing, operations, e-commerce, logistics, human resources, finance, accounting, and relationships with customers and business partners, new developments in information technology should be closely followed by all business disciplines.

New developments in information technology are important to all business disciplines because they trigger changes in marketing, operations, e-commerce, logistics, human resources, finance, accounting, and relationships with customers and business partners. Nothing about business or corporate strategy is untouched by IT.

Information Systems

Information systems manipulate data into usable information by combining computers, data mining tools, and human resources. Information system (IS) is any organized combination of people, hardware, software, communications networks, data resources, and policies and procedures that stores, retrieves, transforms, and disseminates information in an organization. Information systems can be classified into two categories based on the general type of support they provide: Managerial support and operational support. Management Support Systems are also divided into two as follows: Management Information Systems and Decision Support Systems. Similarly, Operations Support Systems are classified as follows: Process Control Systems and Transaction Processing Systems (See Figure 6.5 at page 212). Improving such systems is very important for companies, because they could add greater flexibility and business support than any of the individual system roles could provide. Operations support systems process business transactions, control industrial processes, support enterprise communications and collaborations, and update corporate databases.

Information Systems for Decision Making

Using information systems to support business decision making has been one of the primary thrusts of the business use of information technology. The fast pace of new information technologies made decision support available from lower levels of management to upper level of management. In this point there are new type of information systems ranging from general tools to specialized ones. Management information systems, decision support systems, executive information systems and expert systems are some of the prominent systems.

Management information system (MIS) broadly refers to a computer-based system that provides managers with the tools to organize, evaluate, and efficiently manage departments within an organization. Effective use of management information systems improves the decision making and customer service processes which enables the company to be more competitive in the market. A decision support system (DSS) is an information system that quickly provides relevant data to help decision maker make decisions and choose courses of action. Some of the most important benefits of the DSS are to improve the efficiency and speed of decision-making activities, increase the control, competitiveness and capability of futuristic decision-making of the organization, facilitate interpersonal communication, encourage learning or training, and help automate managerial processes. An executive information system (EIS) is a decision support system used to help senior executives in decision-making processes in the company. An expert system is a software that uses artificial intelligence technologies to simulate the judgment and behavior of a human or an organization that has expert knowledge and experience in a particular field.