Which utility is created when a firm converts raw materials into finished products that are desired by the market?

Production means the transformation of the input into output in form of goods and services to give the desired utility to satisfy human needs.

In very simple words, it is the conversion of raw materials into finished goods.

“Production Management is the process of effective planning and regulating the operations of that section of an enterprise responsible for the actual transformation of materials into finished products.”

Production management also refers to the application of management principles to the production function in a factory. In other words, production management involves application of planning, organising, directing and controlling to the production process.

Production management is the act of producing something useful. It is the creation of goods and services that satisfy human wants and needs. Production management and operations management are differentiated based on tangibilities of finished goods/services.

Operation Management is the process in which resources /inputs are converted into more useful products.

In order to deliver value for customers in products and services, it is essential for the company to do the following:

• Identify the customer needs and convert that into a specific product or service (numbers of products required for specific period of time)
• Based on product requirements, you can do backward working to identify raw material requirements
• Engage internal and external vendors to create a supply chain for raw materials and finished goods between vendor → production facility → customers.

Operations management captures the above identified three points.

Characteristics of Production Management:

1. Decision making managerial function.
2. Deals with several processes.
3. Many Sub-Systems
4. As per specifications.
5. Improving efficiency and productivity.
6. Manufacturing as a competitive advantage.

Objectives of Production Management:

Ultimate Objectives

1. To produce quality products.
2. Producing at least cost
3. Right Quantity.
4. Manufacturing schedule or at the right time

Intermediate Objectives

1.  Optimum use of Materials
2.  Machinery and equipment
3.  Manufacturing services
4.  Manpower

Scope of Production and Operation Management:

1. Selection of Location (Acquisition of land)
2. Plant Layout and Materials handling (constructing buildings, buying and installing machinery)
3. Capacity Planning
4. Product Design (product development, manufacturing, marketing)
5. Process Planning and Designing (routing, estimating, and scheduling)
6. Material Management (Cost reduction and control, identification and specification of material)
7. Maintenance Management (availability, minimum breakdown, optimal capacity)
8. Production Planning and Control
9. Quality Control (size, colour, shape, taste, performance)
10. Methods Study (systematic recording, critical examination, work simplification)

Trends in Production and Operations Management

Recent trends in production and operation management relate to global competition and the impact it has on the manufacturing firms.

Some of the recent trends are:

Global marketplace: Globalisation of business has compelled many manufacturing firms to have operations in many countries where they have certain economic advantages. This has resulted in a level of competition among the manufacturing firms throughout the world.

Production /operation strategy: More and more firms are recognising the importance of production /operation strategy for the overall success of their business and the necessity for relating it to their overall business strategy.

Total quality management(TQM): The TQM approach has been adopted by many firms to achieve customer satisfaction by the never ending quest for improving the quality of goods and services.

Time reduction: Reduction of the manufacturing cycle time and speed to market a new product provides competitive edge to a firm over other firms. When companies can provide products at the same price and quality, quicker delivery provides one firm with a competitive edge over the other.

Supply chain management: Management of supply chain from suppliers to final customer reduces the cost of transportation , warehousing ,and distribution throughout the supply chain.

Lean production: Production systems have become lean production systems which use minimal amounts of resources to produce a high volume of high quality goods with some variety.

Functions of Production Management:

1. Production Planning
2. Production control
3. Industrial Engineering
4. Purchasing
5. Plant Engineering
6. Manufacturing
7. Method Analysis
8. Inventory Control
9. Plant Layout and Materials handling
10. Work Measurement
11. Other Functions like raw material release to production prior to the production process

Production Management deals with decision-making related to production processes so that the resulting goods or services are produced according to the specifications, in the amount and by the schedule demanded and at a minimum cost. —Elwood Spencer Buffa

Importance of Production Management:

Successful organisations have well defined and efficient line and support functions. Production comes under the category of line functions which directly affects customer experience and thereby the future of organisation itself.

The aim of production functions is to add value to products or service which will create a strong and long lasting customer relationships or association. This can be achieved by healthy and productive association between Marketing and Production people. Marketing function people are frontline representatives of the company and provide insights to real product needs of customers.

An effective planning and control on production parameters to achieve or create value for customers is called production management.

The very essence of any business is to cater for the needs of customers by providing services and goods, and in process create value for customers and solve their problems. Production and operations management is the applying of business organisation and management concepts in the creation of goods and services.

The basic philosophy of production management is to launch a frontal attack on costs and effectively use the available manpower weaving new techniques into the whole to keep the production going and the progress of the concern feasible. It is only an efficient production manager who is able to channelize the production process in a manner which ensures most efficient use of the resources to the best advantage of the enterprise

Problems of Production Management:

1. Problem of Location of the plant
2. Problem of Plant Layout
3. Problem of product Designing
4. Problem of Inventory and Production Control
5. Problem of Quality Control
6. Problem of Labour control
7. Problem of Cost Control and Improvement.

Importance Of Production Management to the business firm

An efficient production management ensures the following advantages:

(i) Production of good quality products at a reasonable cost of production,

(ii) Maintains optimum inventory level

(iii) Betters and improves productivity of all inputs,

(iv) provides uninterrupted supply of goods and services

(v) Improves the profitability of the organisation,

(vi) Provides better customer services

(vii) Stabilises employment and removes poverty from masses.

Transformation Process:

The production management department of a manufacturing organisation makes it possible outlining the latest techniques of production of a new product, improvement in the existing product line, catching up newer techniques, improving the quality of goods and controlling the costs of production. Good quality and reasonable prices are the twin blades of one pair of scissors making the growth and expansion of the business possible.

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Four components – time, place, possession and form – make up the utility marketing model. Marketing models educate business owners, marketing and advertising professionals about consumer spending habits. Consumers purchase products for a variety of reasons. The utility marketing model takes into consideration how consumers feel about a product, the convenience of purchasing the product and obtaining the product when they want it.

Four components – time, place, possession and form – make up the utility marketing model. Marketing models educate business owners, marketing and advertising professionals about consumer spending habits.

Ensuring a product is available when the customer wants it adheres to time utility. Consumer demand for products varies depending on the weather, holiday season or everyday wants and needs. For example, the demand for warm coats increases during the winter, and the demand for Christmas, Halloween or Easter decorations increases when these holidays approach, while the demand for soda and other soft drink products may remain the same throughout the year because customers can drink these products at any time.

Place utility is the value consumers put on where they purchase products. Stores make it easier for the consumers to purchase items, as opposed to driving to a factory or warehouse where the products are manufactured or stored. Consumers find what they need in a place conveniently located near home or work.

Possession utility is the value consumers put on purchasing a product and having the freedom to use the product as it was intended or finding a new use for the product. For example, many people use flower pots for planting, but these pots have other uses such as storage for small objects found around the house or as a centerpiece for the dining room table.

Form utility is the value a consumer sees in a finished product. Consumers purchase items such as furniture, electronics or vehicles in part because the consumer is incapable of finding and putting all the parts together to create the product. The customer sees value in the finished product, or the form created by each product part.

Understanding consumer demand allows you to make better business decisions. For example, determining when to increase production and inventory allows you to meet increased demand during specific times of year. Pinpointing which regions sell the most products or the types of retail outlets, including department stores or discount stores, that sell the majority of your inventory helps when determining how much inventory to send and where to send it. Understanding why consumers value your products helps you create more effective marketing campaigns.

Since consumers purchase products for reasons other than the four types described in utility marketing, business owners should not rely solely on this method. Consumers make these decisions based on emotion, necessity, boredom or the need to compete with others.