1 Defining the Production System

1.1 Purpose of Production

What is the purpose of production?

The purpose of existence and mission of any bonafide business entity (private companies, public administration functions, non-profit organizations, professional societies, etc.) usually include:

  1. The production of goods and services,
  2. The delivery of goods and services to customers along with the required support to enable good use of what is delivered,
  3. The overhead functions (corporate administration, human resource management, financial management, IT systems, security of plants, offices, data, systems, and other resources, research, quality management, risk assessment, etc.), whose aim is to support the good execution of production, and
  4. The provision of benefits to both society and economy.

Where did production start? We are taught that Industrial Revolution started in the 18th and 19th Centuries and brought the concepts of mass production and its benefits to our civilization. But I would like to note that rudimentary production lines for creating pottery, the transportation means of the ancient Greek trade, and textile processing for making clothes was evidenced in ancient Greece.

My favorite story how it all began is the ancient Greek story of Prometheus Bound.

‘In this mythic tale we are told how the primitive creatures that were created to be human at first had no knowledge, skills, or culture of any kind and so they lived in caves, in the dark, in constant fear for their lives. Zeus, the tyrannical king of the gods, decided to destroy them, but Prometheus, a demigod (son of the Titan Iapetus) whose name meant forethought (Greek, from promethes ‘thinking before’, from pro=before and ‘methos’, related to mathein=to learn), out of his ‘humanity-loving character’ gave them two powerful, life-enhancing, gifts: fire, which symbolises all knowledge, skills, technology, arts, and science, and ‘blind hope’ or ‘optimism’. The two went together – with fire, humans could be optimistic; with optimism, they could use fire constructively to improve their living conditions’.

The meaning of this old tale is that knowledge, methods, tools, and energy gave us the capability to produce goods to our benefit; and this in turn gave us hope to further improve our lot.

Getting back to the 21st Century, I would like to note that the production function in any business entity, on the same vein, does not exist on its own and not for itself. It is part and parcel of the business enterprise itself.

1.2 General Business Operating Model

How does production relate to the overall business?

In my various consulting assignments related to production in various companies, and to make things easier and more understandable, I have used the following general business operating model to show where production fits in.

A general business operating model, conceptualized as ‘C1P4 Model (C one, four Ps)’ and applicable to all types of companies (small, medium and large) will have five business model dimensions: C1P4 Model (C one, four Ps), ‘C1’ for customers, ‘P1’ for people, ‘P2’ for property, ‘P3’ for production and ‘P4’ for performance, as noted in Figure 1.

First Business Model Dimension – C1: CUSTOMERS

All activities related to identifying, selling, and delivering products and services and in managing and servicing your customers

Second Business Model Dimension – P1: PERSONNEL

All activities related to hiring, utilizing, managing and handling your employees

Third Business Model Dimension – P2: PROPERTY

All activities related to managing and protecting your assets (money, other financial assets, buildings, plants, machinery, furniture, computers, information systems, knowledge repositories, patents, etc.)

Fourth Business Model Dimension – P3: PRODUCTION

All activities related to producing high quality products and optimizing your production processes, as well as delivering the best quality in services to your customers.

Fifth Business Model Dimension – P4: PERFORMANCE

All activities related to measuring, monitoring and improving the performance of your company

Figure 1: General Business Operating Model

This model tells us that we should put our customers in the top of our priority list as a business. We only exist for them and society, in the final analysis. This does not mean a business should not produce profits but these should be the outcome of excellent products and services, and not the other way around.

1.3 Production Functional Definition

The activities related to producing high quality products and services (shown in the fourth business model dimension above) are realized by two distinct components:

  1. Organization of the production function or unit .
  2. Production systems.

Production systems, according to production managers relate to managing the ‘five M’s: men, machines, methods, materials, and money.

A working definition of a Production System according to the IPORS Model (extension of the classical IPO Model) that I have found useful is:

A production system consists of:

  1. Input (I): A set of raw materials, semi-finished goods, sub-assemblies, parts, ideas, information, data, knowledge, etc.
  2. Processing (P): The use of several methods, techniques, systems and tools and a well-defined set of step-by-step sequence of activities or course of action (with definite start and end points) that must be followed in the same order to correctly perform a task.
  3. Output (O): A pre-determined number of finished goods and services that provide value to customers and society.
  4. Resources (R): The required managers, staff, industrial and knowledge engineers and other workers, land, plants, tools, equipment, supplies, IT systems, etc., to execute the production process and produce the pre-defined goods or services.
  5. Storage (S): The location (or locations) where raw inputs or finished or semi-finished goods are placed for possible use at a later point in time or to be shipped to customers.

There are four common types of basic production systems: the batch system, the continuous system, the project system and the craft system.

Batch system: In the batch system, general-purpose equipment and methods are used to produce small quantities of output (goods or services) with specifications that vary greatly from one batch to the next.

Examples are: Manufacturing of specialized machine tools or heavy-duty construction equipment; specialty chemicals; processed food products; and the system for processing claims in a large insurance company.

Continuous system: In this system (also called continuous assembly or mass production system), items to be processed flow through a series of steps or sequential operations which are common to most other products being processed.

Examples are: Systems for assembling automobile engines, automobiles, televisions, washing machines, and personal computers.

Project system: In this type of production system inputs, resources and methods are only applied once to produce the required product. Examples are: A product prototype; a building; a ship.

Craft system: This type of production system also called craft production, defines the process of manufacturing by hand with or without the aid of tools, is also beyond the scope. The term craft production refers to a manufacturing technique applied in the hobbies of handicraft, pottery, hand-made cars, etc.

Their common control aspects are, however, within the scope of this course and we will therefore deal with these accordingly.

To get a better idea of what production systems are, you can see the following three examples of production systems presented next.

Example 1: IT Payroll System

The production function of an IT system for payroll according to the IPORS model consists of:

  1. Input (I): The payroll data flowing into the system from outside.
  2. Processing (P): The use of computer software in a well-defined set of step-by-step sequence of activities to produce the payroll for the employees of the company.
  3. Output (O): The payroll reports and processed data stored in computerized files.
  4. Resources (R): The IT staff (programmers, analysts, operators, user-support, data base administrators, etc.) and the end-user personnel feeding and running the system.
  5. Storage (S): The hardware and data base servers and storage facilities where raw and processed payroll data are maintained safely.

Example 2: Car Factory

Input: Steel, engines, parts

Processing: Fabrication and assembly of cars

Output: High quality cars

Resources: Workers, tools, equipment, supplies, IT systems

Storage: Automobile warehousing facilities

Example 3: Hospital

Input: Patients

Processing: Health care

Output: Healthy people

Resources: MDs, nurses, medical supplies, equipment, IT systems

Storage: Hospital facilities

All these must be managed and controlled appropriately so that the desired goods and services are produced in a cost-benefit manner.

To conclude: Production controls are designed to manage the activities of production processes of organizations. A production system uses resources to transform inputs into some desired output.

1.4 Business Controls

How are all these organized, managed and controlled?

Usually, the management of companies, as representatives of shareholders or society (in case of public organizations), craft and implement effective business controls to organize, manage, control and run their companies and organizations. These business controls relate to all areas of a typical company or organization: legal incorporation issues, corporate governance, risk, administration, strategy, finance, IT, sales, production, etc.

Control is one of the managerial functions like planning, organizing, staffing and directing. It is an important function because it helps to check the errors and to take the corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in desired manner. According to modern concepts, control is a foreseeing action whereas earlier concept of control was used only when errors were detected. Control means “to check, verify, regulate”. Control in management means setting standards, measuring actual performance and taking corrective action.

The following are deemed to be the most crucial controls in managing better the whole production function and its critical components:

  1. Production management controls
  2. Production Policies and Procedures
  3. Manufacturing Process Controls
  4. Standardization and Quality Management Procedures and
  5. Performance Management Controls .

In conclusion, when you think of the production system aspects identified in this lesson (purpose of production, how production fits into your business operating model, the IPORS Model for production, etc.) and what they may mean to you and your business, consider the following quotation by the noted American IT Guru and Apple Co-Founder, Steven Jobs:

‘You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new’.

Recommendation 1: Define a well-structured production system. Ensure that it is aligned to your corporate vision, brand-name and business operating style.