Production management is concerned with planning and controlling industrial processes which produce and distribute products and services. Techniques of production management are also used in service industries: here they are called operations management. During production processes, inputs are converted into outputs. These processes take many forms: from basic agriculture to large-scale manufacturing. Much manufacturing takes place in factories, where assembly lines allow a steady flow of raw materials (inputs) and finished products (outputs).
People in production focus on efficiency and effectiveness of processes in order to maximize productivity. To achieve overall success, it is important to measure, analyze and evaluate these processes. However, other activities also contribute to success: purchasing, inventory control, quality control, storage, logistics.
Production varies according to the inputs, processes and outputs. Other important factors are the place of production and the resources. In addition, stock, a major cost, needs to be carefully controlled, and the equipment must be regularly maintained to remain productive and prevent breakdown.
A production planning system is essential to ensure that a company's processes, machinery, equipment, labour skills and material are organized efficiently for better profitability. There are many factors that need to be considered in the planning system. For example, a firm may require a large number of different components. Also demand can vary daily in this ever-changing world. New sales orders come in. Some get cancelled; there may be breakdowns in theorkshop; backlogs build up; there may be late or early delivery from suppliers. It is difficult to keep track of all these changes manually. To handle these situations, many companies keep safety stock. However, if a company has an effective production planning system there is no need to keep high safety stock. The money blocked in the excessive safety stock can be released. At the same time, opportunity costs due to stock-outs can be minimized.
All areas of management require careful planning and organizing. Planning and organizing production is essential for efficient operations.