Production management means planning, organizing, directing and controlling of production activities. Production management deals with converting raw materials into finished goods or products. It brings together the 6M’s i.e. men, money, machines, materials, methods and markets to satisfy the wants of the people.
Production management is a part of business management. It is also called “Production Function.” Production management is slowly being replaced by operations management.
The main objective of production management is to produce goods and services of the right quality, right quantity, at the right time and at minimum cost. It also tries to improve the efficiency. An efficient organization can face competition effectively. Production management ensures full or optimum utilization of available production capacity.
Production management also deals with decision-making regarding the quality, quantity, cost, etc., of production. It applies management principles to production.
The importance of production management to the business firm:
Accomplishment of firm’s objectives: Production management helps the business firm to achieve all its objectives. It produces products, which satisfy the customers’ needs and wants. So, the firm will increase its sales. This will help it to achieve its objectives.
Reputation, Goodwill and Image: Production management helps the firm to satisfy its customers. This increases the firm’s reputation, goodwill and image. A good image helps the firm to expand and grow.
Helps to introduce new products: Production management helps to introduce new products in the market. It conducts Research and development (R&D). This helps the firm to develop newer and better quality products. These products are successful in the market because they give full satisfaction to the customers.
Supports other functional areas: Production management supports other functional areas in an organization, such as marketing, finance, and personnel. The marketing department will find it easier to sell good-quality products, and the finance department will get more funds due to increase in sales. It will also get more loans and share capital for expansion and modernization. The personnel department will be able to manage the human resources effectively due to the better performance of the production department.
Helps to face competition: Production management helps the firm to face competition in the market. This is because production management produces products of right quantity, right quality, right price and at the right time. These products are delivered to the customers as per their requirements.
Optimum utilisation of resources: Production management facilitates optimum utilization of resources such as manpower, machines, etc. So, the firm can meet its capacity utilisation objective. This will bring higher returns to the organization.
Minimizes cost of production: Production management helps to minimize the cost of production. It tries to maximize the output and minimize the inputs. This helps the firm to achieve its cost reduction and efficiency objective.
Expansion of the firm: The Production management helps the firm to expand and grow. This is because it tries to improve quality and reduce costs. This helps the firm to earn higher profits. These profits help the firm to expand and grow.
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