Production Management

Coordinating and controlling the activities required to make a product or provide a service, such as ______ (apply to case).

Activities can include:

Inventory management systems
Quality control assurance systems
Procurement of inputs (how often deliveries arrive, people required, etc)
Process management (maintenance, scheduling of labour, etc)

PURPOSE

Its aim is to produce the right quality products and services at the right quantity, at the right cost and time.

1) Improve efficiency and reduce manufacturing costs:

Product must be able to be manufactured at a cost that consumers are willing to pay but is still profitable for the business.

This is achieved through controlling labour and inventory costs, reducing waste, and maintaining/improving ethical and sustainable practices.

2) Fulfil customers’ needs and wants:

Must provide the product at the right quality to satisfy customers requirements, right quantity to fulfil consumer demand, in a timely manner that efficiently fulfils demand on time, and at the right price that is cost effective to ensure consumers are willing to pay the amount.

Quality Management

The monitoring of activities and processes to maintain a desired standard.

Business may implement one or several types of quality management, including:

Quality CONTROL
Quality ASSURANCE
Quality IMPROVEMENT

Quality is important because: It affects business image and reputation, must meet government standards, and must comply with international standards.

Quality can be measured by monitoring product returns, customer complaints, customer satisfaction, customer loyalty, market share, etc.

May need to adapt quality standards based on continuously changing needs and wants of customers.

	QUALITY CONTROL	QUALITY ASSURANCE	QUALITY IMPROVEMENT
Define:	Process of inspecting, testing and sampling.	Guarantee that predetermined standards are met on EVERY product.	Incremental change that continuously improves and redefines set standards.
Describe:	Detects faulty inputs or outputs that do not reach standards. Reactive traditional approach. Any stage of the production process.	Proactive - PREVENTS faulty products. All employees are responsible for reaching quality standards.	Proactive approach, goes beyond set standards. Continuous improvement. Everyone is responsible for quality
Explain:	Qualified inspectors with an understanding of predetermined standards use technology to inspect a batch or random sample of the inventory. → Minimises faulty products arriving to the consumer.	All staff are trained to be aware of specified criteria required, so are able to recognise and solve issues as they arise to prevent errors. → Improves job satisfaction and morale, and greater customer satisfaction.	All employees are trained and involved in problem solving. → Maintain a global competitive advantage and continuously improve products/processes to reduce costs.
Advantages:	Cheaper. Complies with industry standards.	Gives competitive advantage Part of ISO criteria for accreditation High level of customer satisfaction High staff morale as all employees work together for common goal Less wastage - reduces production costs	Maintain a competitive advantage in a globally competitive environment. Focus on all aspects of the business - product, process, people, etc. Reduce wastage - reduces costs and environmental impact.
Disadvantages:	Does not prevent mistakes being made - wasted expenses. Some faulty products may reach consumers.	Costly and timely to train staff Downtime may occur along production lines when faults are detected, with no production until it is fixed.	Time consuming to implement continuous change. High training costs as all staff must be on board.

Inventory Control Techniques

Inventory control is the scheduling and storage of raw materials and components required to process the product.

(Inventory is used in further processing, including raw materials or partially finished products, while stock is the physical completed products you sell.)

Differing features of inventory control techniques include:

Maximum storage levels - most amount of inventory that business stores.
Lead times - amount of time it takes for the order of inventory to arrive.
Buffer - minimum amount of inventory needed to fulfil demand in case of delays based on lead times.
Re-order level - point when inventory must be purchased again so that production is not halted.

Why - Ensure the inventory amount is enough to keep up with customer demand and avoid production delays without wasting resources.

How - Develop relationships with suppliers and determine the most appropriate inventory technique, including:

JUST IN TIME
JUST IN CASE

When determining which inventory technique to use, the business must consider the lifespan of the inventory/stock, the type of storage required, and the amount of space required.

	JUST IN CASE	JUST IN TIME
Define:	Technique where an extra inventory is kept in reserve	Technique that focuses on receiving inventory when needed to fulfil predicted current demand.
Describe:	Excess levels of buffer stock Bulk purchases High levels of storage requirements	Minimum buffer levels of inventory More frequent deliveries Inventory fulfils current needs only Requires clear organisation and control Must have strong relationships with suppliers to ensure clear and reliable lead times
When to use:	Customer demand is inconsistent or difficult to determine. Global supply chain is inconsistent or difficult to manage due to likely interruptions.	Demand is predictable. Inventory supply chain is reliable - e.g. local area or does not need to pass through multiple customs procedures.
Advantages:	Can meet a rise in demand or unexpected orders. Can make bulk orders, achieving economies of scale. Less production downtime, as not waiting for inventory to arrive.	Reduce cost of storage requirements. Better cash flow - large amounts of capital not waiting in inventory in the form of storage or future sales. Allows for customisation of products as goods are produced when customer orders. More focus on zero defects as there is limited inventory.
Disadvantages:	High storage costs of space required and running costs. High wastage as less worried about minimising defects, plus less likely to spoil from going out of date or becoming obsolete.	Relies on relationship with suppliers. Can’t cope with sudden increase in demand. Small deliveries can be expensive and negatively effect public image due to high carbon emissions. Relies on inventory management technology and trained staff, which can be costly.