2 Production Management Controls

2.1 Purpose of production management controls

Production management controls are designed to enable and facilitate the organizing and management aspects of the whole production function of your organization.

More specifically these are concerned with issues related to:

Issue (1) Establishing your production function;

Issue (2) Selecting and appointing production human resources; and

Issue (3) Crafting and executing your production policies and procedures.

Issue 1: Establishing the production function of your business

Establishing the production function of your company includes the following three actions.

Action 1: Establish your company’s production mission and goals.

This is achieved after the corporate vision, mission and business goals are established and communicated to all parties. Your corporate mission, vision, beliefs and core values shape the culture and the philosophy of the production function of the organization, and ultimately lead to a set of general strategic performance goals and specific production objectives.

Action 2: Develop a strategy and structure for your production function. This is achieved in the following seven steps:

Step 1: In the first step you collect and understand your customer demands, as customer requirements and expectations drive and show the way your company responds with products and services to local, national, and global market opportunities.

Step 2: In the second step you formulate and implement your production and services strategy (see example later), as the strategic process of your company provides the specific business objectives to meet your customer demands, needs and expectations and achieve the desired performance goals.

An example of a Production and Services Strategy is shown in Figure 2.

‘Our company’s (Company XXXAB (a fictitious entity)) production and services strategy concentrating on the following central themes by which our company will provide high quality products and services to our customers. These themes are:

Central Theme 1: Treat every customer in a friendly, polite and helpful way,

Central Theme 2: Provide our products and services at the highest quality and at the minimum cost, both for the customer and the company,

Central Theme 3: Price the offered products and services in a competitive manner,

Central Theme 4: Provide a variety of service-delivery mechanisms to suit customer needs and expectations.’

Figure 2Production and Services Strategy for ‘XXX’

Step 3: In the third step you identify, obtain and allocate resources and funds to complete the addition of the new initiatives to the current operation of your organization to improve its performance;

Step 4: This step of Action 2 pertains to your production budget. A production budget is a schedule showing planned production in units which must be made by your production or manufacturing unit during a specific period to satisfy your expected demand for sales and the planned finished goods inventory.

Step 5: In this step of Action 2 you execute initiatives to enable and improve your production. New initiatives provide new information to successfully meet the new production challenges and test the production and business strategy of your company.

Step 6: In this step of Action 2 you design, develop and implement a production and manufacturing records system to ensure you’re your company complies with all relevant national, international and industry regulations.

Step 7: In this last step of Action 2 (Develop a strategy and structure for your production function) you ensure the security of your production as frauds and thefts are a major source of inventory and product discrepancies. This means that you must take several actions to do this.

Further to the above and to complete your establishing the production function of your business you need a production methodology to drive and enable you to do things the right way.

Action 3: Design and implement the production system to suit your specific business purposes. You may use a Production Management Methodology for this purpose. This is necessary to control scope, cost, schedule and quality of every production project undertaken by your company.

This production management methodology should detail for each product what is required to produce it effectively and efficiently. It should have phases for:

  1. Definition and design of each product,
  2. Organizing and designing the production processes and lines (assembly lines) for the specific product or products of your company,
  3. Obtaining inputs, resources and other tools and methods,
  4. Managing production risks and quality,
  5. Establishing all organizational functions related to production and defining their scope (see example for the Purchasing Function below); and appointing the management production team (production manager, purchasing officer, warehouse manager, engineers, staff, etc.) and officer responsible for each product,
  6. Designing the production or manufacturing fabrication formula and testing it on a prototype,
  7. Executing the processes for creating each product and collecting performance data during the production process,
  8. Tracking the production of each product,
  9. Setting up the performance management and measurement system and reviewing the performance of the production for the specific product, and
  10. Closing out the production project for the product going out of production.

Establishing the purchasing function (see phase 5 of Action 3 above) is the job of the board of directors of the company or organization. This entails the following:

  1. Describing the strategic objectives of the purchasing process
  2. Planning, designing, ratifying the purchasing procedure
  3. Setting up a budget for purchasing
  4. Instituting the proposal evaluation criteria, the management controls and budget approval level
  5. Setting the scope of the purchasing process and what issues it will pertain to: purchase of raw materials, ready-made systems, equipment, services, computer, hardware, networking, cabling installations, etc., contracting for system development services, maintenance for systems and hardware, outsourcing and offshoring operations and services, retiring of software and equipment, etc.

To execute all these successfully, however, you need staff and policies (detailed in the next lesson).

These staff should have specific duties, responsibilities and roles, as presented next.

Issue 2: Selecting and appointing production human resources

Selecting and appointing the required human resources to implement the production function of your company is handled at two levels: The senior executives deal with management appointments and each production-related manager deals with his team members. In both cases the corporate human resources function is heavily and seriously involved in the complete selection, hiring, and appointing process according to the company standards and policies.

The following production-related management positions are deemed the most crucial for the production function of any company.

2.2 Production manager

This is the first crucial production-related management position for your company.

The duties, role and responsibilities of a typical production manager, in general terms, are:

  1. To manage, control and co-ordinate the production activities of the production function (manufacturing plant, department, unit, etc.).
  2. To plan and develop production systems and procedures to improve the operating quality of production activities and the efficiency of the department.
  3. To supervise production staff in accordance with company policies and procedures.
  4. To hire, train, support and coach the employees of the production function.
  5. To review the performance of each staff member as well as the whole production function.
  6. To report to top management and the board (as required) both the usual production output, as well as the ad hoc problems and issues related to all production aspects (staff, processing, systems, security, etc.).
  7. To ensure that emergency procedures are designed and tested on a periodic basis for the complete production facility and staff.

In conclusion, when you think of the production management controls described in this lesson (production unit mission, goals, strategy, methodology, security plan, and the duties of several management staff, etc.) and what they may mean to you and your company, consider the following quotation by the famous American entrepreneur, investor and CEO of Berkshire Hathaway, Warren Buffett:

‘Rule number 1: Never lose money. Rule number 2: Never forget rule number 1’.

Recommendation 2: Craft and communicate a meaningful vision, mission and strategy for your production. Hire the best people to manage your production function. Guide, coach, sponsor and support them. Give them the most capable human and other resources to execute their activities.