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Meaning of Production
Production is an intentional act of producing something in an organized manner.
It is the fabrication of a physical object through the use of men, material and some function
which has some utility e.g. repair of an automobile, legal advice to a client, banks, hotels,
transport companies etc. Thus irrespective of the nature of organization, production is some act
of transformation, i.e. inputs are processed and transformed into some output.
The main inputs are information, management, material, land, labour and capital.

Thus the basis of Production is the transformation of inputs into goods and services.
Meaning of Production Management
Production management is a branch of management which is related to the production function.
Production may be referred to as the process concerned with the conversion inputs (raw
materials, machinery, information, manpower, and other factors of production) into output (semi
finished and finished goods and services) with the help of certain processes (planning,
scheduling and controlling etc.) while management is the process of exploitation of these factors
of production in order to achieve the desired results. Thus production management is the
management which by scientific planning and regulation sets into motion the part of an
enterprise to which it has been entrusted the task of actual transformation of inputs into output.
Definition of Production Management
It may be defined as:
(i) The performance of the management activities with regards to selecting, designing,
operating, Controlling and updating production system.
(ii) It is the processes of effectively planning, coordinating and controlling the production,
that is the operations of that part of an enterprise, it means to say that production and
operations
Management is responsible for the actual transformation of raw materials into finished
products.
(iii) Production management is a function of Management, related to planning, coordinating
and controlling the resources required for production to produce specified product by
specified methods, by optimal utilization of resources.
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(iv) Production management is defined as management function which plans, organizes,

coordinates, directs and controls the material supply and Processing activities of an
enterprise, so that specified products are produced by specified methods to meet an approved
sales
programme. These activities are being carried out in such a manner that Labour, Plant and
Capital available are used to the best advantage of the organization.
Objective of Production Management
The objective of Production Management is to produce the desired product or specified product
by specified methods so that the optimal utilization of available resources is met with. Hence the
production management is responsible to produce the desired product, which has marketability at
the cheapest price by proper planning, the manpower, material and processes. Production
management must see that it will deliver right goods of right quantity at right place and at right
price. When the above objective is achieved, we say that we have effective Production
Management system.
Scope of Production Management:
In fact, we apply Principles of Management; and functions of Management in our day-to-day
life. We all know, from morning till night, we plan our activities; we coordinate available
resources and control our activities to achieve certain goals. So also any organization must
follow the Principles of Management for its survival and growth. The same is applicable to
production Management also. Reading and learning Production Management will enable one to
be capable of solving the problems of the organization, may be an Educational Institution,
Production Shop, Hospital, Departmental shop or even a barber shop. The problems a manager
face in various organizations are more or less similar to that of Production department but
smaller in magnitude. Hence the knowledge of Production
Management will help any professional Manager to tackle the problems of his business easily.
For example: The Production Management consists of Planning, selection of materials, planning
of processes, Routing, Scheduling and controlling the activities etc., Take the example of an
Educational Institution/University. Here also selection of raw students, Planning of the Course
Work, Educating the students and conducting the examination. Therefore this knowledge will
enable one to apply the principles of Production Management to any field of life without
restriction. Here, We have to remember that the above is also applicable to the management of a
service organization and the management of a Project. Here it is better to distinguish between
product, Service and Project, so as to know on which particular aspect of Production
Management to put much emphasis, in managing a service organization or a project.
(i) Product: Manufacturing system often produces standardized products in large volumes. The
plant and machinery have a finite capacity. The facilities constitute fixed costs, which are
allocated to the products produced. Variable costs, such as, labour cost and materials costs. While
manufacturing the product use value and economic values are added to the product. Hence the
product is a store of values added during manufacture. Because the input costs and output costs
are measurable, the productivity can be measured with certain degree of accuracy. Product can be
transported to the markets and stored physically until it is sold.
(ii) Service: Service system present more uncertainty with respect to capacity and costs. Services
are produced and consumed in the presence of the customer. We cannot store the service
physically.
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Because of this the service organizations, such as Hotels, Hospitals, Transport Organizations and
many other service organizations the capacity must be sufficiently or consciously managed to
accommodate a highly variable demand. Sometimes services like legal practice and medical
practice involve Professional or intellectual judgments, which cannot be easily standardized.
Because of this the calculation of cost and productivity is difficult.
(iii) Project: Project system does not produce standardized products. The Plant, Machinery, Men
and Materials are often brought to project site and the project is completed. The project is of big
size and remains in the site itself after completion. As the costs can be calculated and allocated to
the project with considerable accuracy, Productivity can be measured. Once the project is
completed, all the resources are removed from site.
Benefits Derived From Efficient Production Management
The efficient Production Management will give benefits to the various sections of the society.
They are:
(i) Consumer benefits from improved industrial Productivity, increased use value in the product.
Products are available to him at right place, at right price, at right time, in desired quantity and of
desired quality.
(ii) Investors: They get increased security for their investments, adequate market returns, and
creditability and good image in the society.
(iii) Employee gets adequate Wages, Job security, improved working conditions and increased
Personal and Job satisfaction.
(iv) Suppliers: Will get confidence in management and their bills can be realized with out any
delay.
(v) Community: community enjoys Benefits from economic and social stability.
(vi) The Nation will achieve prospects and security because of increased Productivity and
healthy industrial atmosphere.
Functions of Production Management Department
The functions of Production Management depend upon the size of the firm. In small firms the
production Manager may have to look after production planning and control along with
Personnel, Marketing, Finance and Purchase functions. In medium sized firms, there may be
separate managers for Personnel, marketing and Finance functions. But the production planning
and control and Purchase and stores may be under the control of Production management
department. In large sized firms the activities of Production Management is confined to the
management of production activities only. As such, there are no hard and fast rule or guidelines
to specify the function of Production Management, but in the academic interest we can mention
some of the functions, which are looked after by the Production Management department. They
are:
(i) Materials: The selection of materials for the product. Production manager must have sound
Knowledge of materials and their properties, so that he can select appropriate materials for his
product. Research on materials is necessary to find alternatives to satisfy the changing needs of
the design in the product and availability of material resumes.
(ii) Methods: Finding the best method for the process, to search for the methods to suit the
available resources, identifying the sequence of process are some of the activities of Production
Management.

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(iii) Machines and Equipment: Selection of suitable machinery for the process desired,
designing the maintenance policy and design of layout of machines are taken care of by the
Production Management department.
(iv) Estimating: To fix up the Production targets and delivery dates and to keep the production
costs at minimum, production management department does a thorough estimation of Production
times and production costs. In competitive situation this will help the management to decide
what should be done in arresting the costs at desired level.
(v) Loading and Scheduling: The Production Management department has to draw the time
table for various production activities, specifying when to start and when to finish the process
required. It also has to draw the timings of materials movement and plan the activities of
manpower.
The scheduling is to be done keeping in mind the loads on hand and capacities of facilities
available.
(vi) Routing: This is the most important function of Production Management department. The
Routing consists of fixing the flow lines for various raw materials, components etc., from the
stores to the packing of finished product, so that all concerned knows what exactly is happening
on the shop floor.
(vii) Despatching: The Production Management department has to prepare various documents
such as Job Cards, Route sheets, Move Cards, Inspection Cards for each and every component of
the product. These are prepared in a set of five copies. These documents are to be released from
Production Management department to give green signal for starting the production. The
activities of the shop floor will follow the instructions given in these documents. Activity of
releasing the document is known as dispatching.
(viii) Expediting or Follow up: Once the documents are dispatched, the management wants to
know whether the activities are being carried out as per the plans or not. Expediting engineers go
round the production floor along with the plans, compare the actual with the plan and feed back
the progress of the work to the management. This will help the management to evaluate the
plans.
(ix) Inspection: Here inspection is generally concerned with the inspection activities during
production, but a separate quality control department does the quality inspection, which is not
under the control of Production Management. This is true because, if the quality inspection is
given to production Management, then there is a chance of qualifying the defective products
also. For example Teaching and examining of students is given to the same person, then there is a
possibility of passing all the students in the first grade. To avoid this situation an external person
does correction of answer scripts, so that the quality of answers are correctly judged.
(x) Evaluation: The Production department must evaluate itself and its contribution in fulfilling
the corporate objectives and the departmental objectives. This is necessary for setting up the
standards for future.
PRODUCTION PLANNING
Production planning is concerned with deciding in advance what is to be produced, when to be
produced, where to be produced and how to be produced. It involves foreseeing every step in the
process of production so as to avoid all difficulties and inefficiency in the operation of the plant.
Production planning has been defined as the technique of forecasting or picturing ahead every
step in a long series of separate operations, each step to be taken in the right place, of the right
degree, and at the right time, and each operation to be done at maximum efficiency. In other
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words, production planning involves looking ahead, anticipating bottlenecks and identifying the
steps necessary to ensure smooth and uninterrupted flow of production. It determines the
requirements for materials, machinery and man-power; establishes the exact sequence of
operations for each individual item and lays down the time schedule for its completion.
Objectives of Production Planning
The basic objectives of production planning are as under :
(i) On the basis of the sales forecast and its engineering analysis, to estimate the kind of the
resources like men, materials, machines, methods etc. in proper quantities and qualities. It also
estimates when and where these resources will be required so that the production of the desired
goods is made most economically.
(ii) It also aims to make all necessary arrangement so that the production targets as set in the
production budget and master schedules are reached. While attaining these targets, adjustments
are made for the fluctuations in the demand. For an effective planning of production activities,
the executives concerned must have complete information regarding the following :
(i) Engineering data including complete analysis of the product to be manufactured, the
operations, processes and methods through which each component or class of product must pass
the nature of inspection required, and the method of assembly.
(ii) Machine analysis giving full information regarding speeds of all available machines and their
maximum capacity to perform certain operations, and the rat of output per day, week or month,
and the maximum plant capacity per day for each process or operation.
(iii) The various types and classes of tools and equipment required of production.
(iv) Material analysis giving full information as to the type, quality and quantity of the raw
material to be used in each process or operation. Also, information as to raw materials in stores,
how much are on order, and how much are a located or reserved for current orders.
(v) The characteristics of each job and the degree of skill and personnel if qualifications required
for the effective performance of each such job.
(vi) Information relating to power production and consumption, internal transport and material
handling service.
(vii) Job analysis giving information as to what methods of operation would yield uniformity of
output, ease in production and reduction in costs.
(viii) Information as to the customers orders on hand and the delivery for customers, and what
for stock purposes.
Production Function
The technological physical relationship between inputs and outputs per unit of time, is
referred to as production function.
The relationship between the inputs to the production process and the resulting output is
described by a production function.
The production function is the name given to the relationship between rates of input of
productive services and the rate of output of the product. It is the economists summary of
technical knowledge.-Stigler.

Economist has defined the term production function as the amount of output that is
manufactured when a different mix of input is added to the production assuming the
latest technology is used in the production. The inputs are described by the symbols x in the
production function while the output is described by the symbol y. In the production
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function we have the dependent or the variable factor and the independent variable. The
dependent variable is the output and the independent variable is the input. The dependent
variables in the production function can be grouped into fixed variables or the varying
quantities. A variable quantity can either be a variable that increases or decreases the
output. Variable input expenses are not incurred when there is no production. The fixed
quantity is a quantity that remains the same at the production period. Fixed inputs expenses
are incurred even when there is no production. They do not directly affect the amount of
total output during the production period. Fixed inputs cannot be increased or decreased in
the short run but it is possible to vary them in the long run.
The production function is sometimes referred to as the total physical product curve by
some economists. An illustration of the total physical product curve shows that increasing
the amount of input will increase the total output. At zero input the production curve will
be touching the origin if there are no fixed costs. If we include fixed inputs in this function
it means at zero variable inputs the production function will be cutting the y axis at the
point equal to the fixed input. The production curve has also maximum value or peak. At
this point additional input does not have a positive or negative impact on the production
function.
The normal production function has three stages the increasing, decreasing and the
negative marginal returns. The increasing marginal return stage is the point where an
additional input in the factor of production results to a positive and larger increase in output
than the previous input. The decreasing marginal return implies that any additional input in
the production process results to a positive but lower increase in output as compared to the
previous input. Negative marginal return implies that an addition in one unit of input to the
production process results to a decrease in the total output. The sequence from the
increasing, decreasing and negative marginal return is what is called the law of diminishing
marginal return .The law states that as a series of variable input are added sequentially to
the production process the output will increase but at a decreasing rate up to a certain point
where additional input will reduce the total output at an increasing rate.
From the total physical product we can see other useful economics concepts like marginal
physical product and average physical products. Average physical input is the unit physical
product or the output produced by one unit of the variable input. Marginal physical product
on the other hand is the change in the total physical product that results from the change in
the amount of variable input

The Responsibilities of Production Manager

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In the present era of cut-throat competition at various stages of operations, an enterprise should
produce goods and services keeping into consideration the requirements and satisfaction of the
potential customer. The objective should be to produce good at least costs and to the maximum
satisfaction of the buyer.
To meet this objective the role of Production Manager in an enterprise is most important.
In an organization production manager has to administer a great variety of activities. He
assembles appropriate resources and direct the use of these resources, be they people, machines,
processing etc. in transforming material and time of people into products and services. Managers
also have to respond to other forces from the external environment such as government
regulation, labour organization as well as local, regional, national and international economic
conditions. Thus managers have to pay more attention not only to what their customers might
buy but also to increasing government regulations and behaviour of consumer and environmental
protection groups.
The manager should be able to channelise the production process in a manner which ensures
most efficient use of the resources to the best advantage for the enterprise. He is responsible for
producing right quantity of material at the right time. He should be able to do something real and
constructive about production problems. He should be well conversant with the ways and means
to attain the desired goals. The nature of problems associated in production management are such
that the Production Manager should have the capability as well as the aptitude to use qualitative
and quantitative methods of analysis to get the desired solutions.

Plant Location
Plant : A plant is a place, where men, materials, money, machinery etc. are brought together for
manufacturing products. The objective of minimization of cost of production can be achieved
only when the plant is of the right size and at a right place where economies of all kinds in
production are available.
A good location of a production or service facility will give cost advantage to production or
services and may also reduce the raw material and distribution costs. The location aspect is
particularly advantageous to small business enterprises and service units. Location adds to
competitive advantages and improved profits. Usually location question arises when (1) a
new plant or service facility is planned (2) there is addition to the existing business or
added capacities in the other regions (3) existing facilities are to be relocated or modified to
remove drawback (4) to get advantage of better infrastructure or incentives from the
government sources. Location of organization plant or service facilities is a permanent
fixture and has considerable expenditure. The selection has to be done considering all
relevant aspects. If there is any mistake or wrong choice of location, all the expenditure in
the form of site development, factory construction, installation of machinery and other
infrastructure development will go waste.
The location selection has three main issues:
(i) Selection of the region: It is imperative to produce near the raw material base or
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customer to meet set competition, trade agreement and transport costs.

(ii) Selection of locality: The choices are the rural place, the urban place or suburban area
near the metro. The selection usually boils down to developed industrial area or having
government sponsored advantages.
(iii) Selection of site: Advantages of low labour cost, low land cost, infrastructure or
transport facilities chosen. After the selection of location of manufacturing or services, the
next important activity is facilities layout. The arrangement of various departments,
machines in the building and plant services is to be done in order to get the maximum
efficiency by the optimum usage of resources. The type of production equipment and
product characteristics are to be considered while evolving a good factory layout. A factory
layout means location of different departments, like foundry, forging, machine shop, tool
room, administration, maintenance shop whereas a plant layout means the location
sequence or arrangement of machines and equipments in a department.
Selection of proper location is very important for the success of any business. Plant
location is considered as the function of determining where the plant should be located for
maximum operating economy and effectiveness.
Factors Affecting Location decision
Manufacturing and service companies make location decisions based on many criteria.
Following are the factors that should be considered for location of an industry or service
unit :
(1) Primary Factors :
(a) Nearness to Customers: Nearness to customer helps a plant to incorporate customer
needs into the products being made in the unit. Finished goods to customers can reach
faster and in less cost. There is less chance of breakage or damage during transportation.
(b) Nearness to raw materials: Cost of raw material input is a large cost in case of
manufactured goods. The time & cost of transporting raw material is less if the plant is
located near the source of raw material. For example, thermal power plants are located near
to the coal mines.
(c ) Supply of capital: Short term and long term funds are required for any manufacturing
or service industry. A company decides to locate its plant in such a location where fund
movement is hassle free.
(d) Logistic facilities and Infrastructure: Adequate roads, rail, phone, postal and
transportation facilities are to be considered while deciding on the location of plant and
service facilities.
(e ) Skilled labour Supply: Regular supply of skilled labour is one of the major factors to be
considered while deciding on the plant or service location. Example: Software companies
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are located in Bangalore, Hyderabad and New Delhi.

(f) Power Supply: This is a very critical factor to be analyzed. Uninterrupted power supply
with proper voltage is one of the prerequisites of plant location decision.
(g) Business Climate: Companies must find a positive business climate or environment in
the area, state or a country to set-up manufacturing or service facility there.
(2) Secondary Factors :
(a) Host community and political factors: The community near the industry proposed
location should be willing to welcome the new industry. Local people should feel that there
will be improvement in their quality of life due to the new industry
(b) Natural Factor: Land, water, climate condition, sources of material attract and help
some industries Example: Tea industry, cotton industry, coffee industry,coconut oil industry
etc.
(c) Historical factors: Capitals of old kingdoms of yesteryears, large religious places
sometimes attract companies to set up their plants.
(d) Initial start and living conditions: Some industries were started earlier in certain places
during the British era in its early stages. The industries since then have developed making
good living conditions. The related industries start getting located in the place. e.g:
Jamshedpur, Kirloskarwadi.
(e) Personal factors: The history of the entrepreneuring company or family or personal
considerations play a key role in location decision.
(f) Government policies: Government play their own role in the location decision of new
industries. The Government of India and the state governments have made special efforts in
making industries grow and made manufacturing and service units all over India with a
view to have a balanced developmental spread all over the country and the region.
(g) Environmental considerations: Environmental issues for certain industries for a
particular location are to be checked before deciding on location.
(h) International factors: For companies deciding to go overseas for locating a unit for
manufacturing or service must consider behavioral aspects, cultural differences,
technology, government policies etc.
Meaning of Plant Layout:
After deciding above the proper site for locating an industrial unit, next important point to be
considered by an entrepreneur is to decide about the appropriate layout for the plant. Plant layout
is primarily concerned with the internal set up of an enterprise in a proper manner.
It is concerned with the orderly and proper arrangement and use of available resources viz., men,
money, machines, materials and methods of production inside the factory. A well designed plant
layout is concerned with maximum and effective utilisation of available resources at minimum
operating costs.
The concept of plant layout is not static but dynamic one. It is on account of continuous
manufacturing and technological improvements taking place necessitating quick and immediate
changes in production processes and designs. A new layout may be necessary because of
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technological changes in the products as well as simple change in processes, machines, methods
and materials.
A new layout also becomes necessary when the existing layout becomes ineffective and poor or
is not conducive to the changed circumstances. There are certain indications which raise alarm
for immediate changes in the existing layout of plant.
These indications may be in the form of excessive manufacturing time, improper storage, lack of
control over materials and employees, poor customer service, excessive work in progress and
work stoppages etc.
Definitions:
Plant layout is the arrangement of machines, work areas and service areas within a factory.
George R. Terry
Plant layout involves the development of physical relationship among building, equipment and
production operations, which will enable the manufacturing process to be carried on efficiently.
Morris E. Hurley
Any arrangement of machines and facilities is layout. F.G. Moore
Plant layout can be defined as a technique of locating machines, processes and plant services
within the factory so as to achieve the greatest possible output of high quality at the lowest
possible total cost of manufacturing. Sprigal and Lansburg Plant layout ideally involves the
allocation of space and the arrangement of equipment in such a manner that overall operations
cost can be minimised.
J. Lundy
From these definitions it is clear that plant layout is arrangement and optimum utilisation of
available resources in such a manner so as to ensure maximum output with minimum input.
Objectives of Plant layout:
A properly planned plant layout aims at achieving the following objectives:
1. To achieve economies in handling of raw materials, work in- progress and finished goods.
2. To reduce the quantum of work-in-progress.
3. To have most effective and optimum utilisation of available floor space.
4. To minimise bottlenecks and obstacles in various production processes thereby avoiding the
accumulation of work at important points.
5. To introduce system of production control.
6. To ensure means of safety and provision of amenities to the workers.
7. To provide better quality products at lesser costs to the consumers.
8. To ensure loyalty of workers and improving their morale.
9. To minimise the possibility of accidents.
10. To provide for adequate storage and packing facilities.
11. To workout possibilities of future expansion of the plant.
12. To provide such a layout which permits meeting of competitive costs?

Principles of a good plant layout are

1. A good plant layout is the one which is able to integrate its workmen, materials,
machines in the best possible way.
2. A good plant layout is the one which sees very little or minimum possible movement of
the materials during the operations.
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3. A good layout is the one that is able to make effective and proper use of the space that is
available for use.
4. A good layout is the one which involves unidirectional flow of the materials during
operations without involving any back tracking.
5. A good plant layout is the one which ensures proper security with maximum flexibility.
6. Maximum visibility, minimum handling and maximum accessibility, all form other
important features of a good plant layout.
Types of layouts
1. Process layout These layouts are also called the functional layouts and are very
suitable in the conditions, when the products being prepared are non standard or involve
wide variations in times of processing of the individual operations.
Such layouts are able to make better utilization of the equipment that is available, with
greater flexibility in allocation of work to the equipment and also to the workers.
Imbalance caused in one section is not allowed to affect the working of the other sections.
2. Product layout These layouts are also known as the line layouts or the layout by
sequence. In such layouts, the manufacturing cycle is small with minimum material
handling. The space required is small and quality control is easy to exercise.
3. Project layout Such layouts are also referred to as the fixed position layouts. In these
layouts, the components, heavy materials, sub assemblies all remain fixed at one place
and the job is completed by movement of machines, men and tools to the location of the
operations

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