PRODUCTION SYSTEM
The meaning, definition and other basic points covered in this article on a production system are listed
as follows:
I. Meaning of production
II. Meaning of system
III. Definition of production system
IV. Factors that affect production
V. Characteristics of production system
VI. Components of production system
VII.
Important considerations
a. Choice and design the technology to be used
b. Capacity of the system
c. Adaptability of the production volume
VIII.
Categories of production system
a. Make to stock production system
b. Make to order production system
c. Assemble to order production system
IX. Classification of production system
a. Continuous
i. Process / Flow Production
ii. Mass Production
b. Intermittent
i. Batch Production
ii. Job Shop Production
iii. Project
X. Production Management System
Now let's read each point to understand the basics of a production system.
I.
MEANING OF PRODUCTION
Production can be explained as an act of either manufacturing or mining or growing of goods
(commodities) generally in bulk for trade.
Production is a method employed for making or providing essential goods and services for
consumers. It is a process that puts intangible inputs like ideas, creativity, research, knowledge,
wisdom, etc. in use or action. It is a way that transforms (convert) tangible inputs like raw-materials,
semi-finished goods and unassembled goods into finished goods or commodities.
II.
MEANING OF SYSTEM
System is an arrangement or assembly of inter-dependent processes (activities) that are based
on some logic and function. It operates as a whole and is designed (build) with an intension to achieve
(fulfill) some objective or do some work. Huge systems are often a collection (assembly) of smaller subsystems.
III. DEFINITION OF PRODUCTION SYSTEM
Production system may be defined as,
"The methods, procedure or arrangement which includes all functions required to accumulate
(gather) the inputs, process or reprocess the inputs, and deliver the marketable output
(goods)."
“The production system of an organization is that part, which produces products of an
organization. It is that activity whereby resources, flowing within a defined system, are
combined and transformed in a controlled manner to add value in accordance with the
policies communicated by management.’’
Production system utilizes materials, funds, infrastructure, and labor to produce the required output in
form of goods.
All production systems, when viewed at the most abstract level, might be said to be
“transformation processes”—processes that transform resources into useful goods and
services.
As a process, it usually uses common resources such as:
1. Five M’s: men, machinery, methods, materials, and money (Production managers)
2. Factors of production: labor, capital (for machinery and equipment, materials, etc.), and land
(Economists)
IV. FACTORS THAT AFFECT PRODUCTION
1. Land as a Factor of Production
Land is short for all the natural resources available to create supply. It includes raw property and
anything that comes from the ground. It can be a non-renewable resource. That
includes commodities such as oil and gold. It can also be a renewable resource, such as timber.
Once man changes it from its original condition, it becomes a capital good. For example, oil is a
natural resource, but gasoline is a capital good. Farmland is a natural resource, but a shopping
center is a capital good.
The income earned by owners of land and other resources is called rent.
The United States is blessed with an abundance of easily accessible natural resources. These
include fertile land and water. Many countries are covered with mountains or desert, making it
expensive to use the natural resources. It has miles of coastline, lots of oil, and a moderate
climate. That's an advantage over Canada. It has similar natural resources, but they are frozen for
most of the year. Global warming is beginning to change that, making Canada one of the winners
of climate change.
2. Labor as a Factor of Production
Labor is the work done by people. The value of the workforce depends on workers' education,
skills, and motivation. It also depends on productivity. That measures how much each hour of
worker time produces in output.
The reward or income for labor is wages.
The United States has a large, skilled, and mobile labor force that responds quickly to changing
business needs. It also benefits from productivity increases due to technological innovations. On
the other hand, the U.S. labor force faces increasing competition from other countries. That's one
reason why American jobs are being outsourced.
The Bureau of Labor Statistics measures the U.S. labor force. It releases the current U.S. jobs
report the first Friday of each month. The report includes the employed and the unemployed. The
employed only include people over 16 who worked in the past week. It excludes the active military
and any residents of an institution. The unemployed are those who actively looked for a job in the
past month. All the other jobless are not members of the labor force.
3. Capital as a Factor of Production
Capital is short for capital goods.These are man-made objects like machinery, equipment, and
chemicals that are used in production. That's what differentiates them from consumer goods. For
example, capital goods include industrial and commercial buildings, but not private housing. A
commercial aircraft is a capital good, but a private jet is not.
The income earned by owners of capital goods is called interest.
The United States is a technological innovator in creating capital goods, from airplanes to robots.
That's why Silicon Valley is a critical comparative advantage in the global market.
The U.S. Bureau of Economic Analysis measures capital goods production with the
monthly durable goods orders report. It reports on total capital goods order, shipments, and
inventory. It also strips out defense and transportation. Those orders come in large batches. It can
hide the real trends. Capital goods production has declined since the Great Recession. Demand
for them hasn't returned to the same levels. As a result, companies aren't investing in new
equipment. They are buying back stock shares, purchasing new businesses, and looking for
opportunities overseas.
4. Entrepreneurship as a Factor of Production
Entrepreneurship is the drive to develop an idea into a business. An entrepreneur combines the
other three factors of production to add to supply. The most successful are innovative risk-takers.
The income entrepreneurs earn is profits.
The majority of entrepreneurs in the United States own small businesses. That's 5.8 million out of six
million companies. They create 65 percent of all new jobs. One reason small businesses do so well is
that it's relatively easy to get funded compared to other countries. Others raise money on the stock
market by issuing an initial public offering. Shares in these companies are called small-cap stocks.
V.
CHARACTERISTICS OF PRODUCTION SYSTEM
The production system has the following characteristics:
1.
2.
3.
4.
Production is an organized activity, so every production system has an objective.
The system transforms the various inputs to useful outputs.
It does not operate in isolation from the other organization system.
Feedback exists among the activities, which is essential to control and improve system
performance.
VI. COMPONENTS OF PRODUCTION SYSTEM
Production system consists of three main components viz., Inputs, Conversion Process and
Output.
Inputs include raw-materials, machines, man-hours, components or parts, drawing, instructions
and other paper works.
Conversion process includes operations (actual production process). Operations may be either
manual or mechanical or chemical. Operations convert inputs into output. Conversion process also
includes supporting activities, which help the process of conversion. The supporting activities
include; production planning and control, purchase of raw-materials, receipt, storage and issue of
materials, inspection of parts and work-in-progress, testing of products, quality control, warehousing of
finished products, etc.
Output includes finished products, finished goods (parts), and services.
Examples:
1. Tangible goods: Consider an example of a manufacturing industry like a Sugar Industry. Here,
sugarcane is first used as an input, then the juice of sugarcane is processed through a
conversion process, finally to get an output known as a refined sugar (used for mass
consumption).
2. Intangible goods: Consider an example from a service industry that of a software-development
firm or company. Here, initially, written program codes are used as an inputs. These codes are
then integrated in some database and are provided with a user-friendly interface through a
conversion process. Finally, an output is made available in form of an executable application
program.
The three components of a production system are depicted in this diagram.
Hence, we can say that, production system is a union or combination of its three main
components viz., Inputs, Conversion Process, and Output. In short, everything which is done to produce
goods and services or to achieve the production objective is called production system.
VII. IMPORTANT CONSIDERATIONS
1. Choice and design the technology to be used.
This includes the choice of equipment and tooling, the layout of plant space and facilities, the
selection of workers and work procedures, and many other aspects of process design.
a. Mistakes at this early stage can result in a business losing its competitiveness or the ability to
sustain a profitable position in the market.
2. Capacity of the system
The capacity of the system is designed to be a function of the amount of available capital, the
demand forecast for the output of the facility, and many other minor factors.
a. Establishing too much capacity, too soon, can burden a company with excess costs and
inefficient operations.
b. Too little capacity can make it difficult and expensive to increase output later if the market
develops rapidly; this can place a company at a significant cost disadvantage if other
competitors, with larger facilities, produce a product at a lower cost or with more consistent
quality.
3. Adaptability of the production volume to meet the inevitable changes in market demand
that the firm will experience.
VIII. CATEGORIES OF PRODUCTION SYSTEM
1. MAKE TO STOCK PRODUCTION SYSTEM
 Production processes are completed and the product is placed and stock even before customer
order is received
2. MAKE TO ORDER PRODUCTION SYSTEM
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Production processes starts only after receiving a customer order.
This is because manufacturer cannot anticipate the kind of product that each customer
wants.
3. ASSEMBLE TO ORDER PRODUCTION SYSTEM
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The company produces standard modules and stocks them.
These modules are later on assembled together, according to the specifications of a
customer order.
IX. CLASSIFICATION OF PRODUCTION SYSTEM
A.CONTINUOUS PRODUCTION SYSTEM
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These may be flow manufacturing system or mass manufacturing facilities.
These produce high volume products of the same or very similar kind.
These are usually employed by made-to-stock producers.
The manufacturing happens in automated plants, having special purpose equipment.
1. Process Production / Flow Production
Characteristics
1.
2.
3.
4.
5.
Dedicated plant and equipment with zero flexibility.
Material handling is fully automated.
Process follows a predetermined sequence of operations.
Component materials cannot be readily identified with final product.
Planning and scheduling is a routine action.
Advantages
1.
2.
3.
4.
5.
6.
Standardization of product and process sequence.
Higher rate of production with reduced cycle time.
Higher capacity utilization due to line balancing.
Manpower is not required for material handling as it is completely automatic.
Person with limited skills can be used on the production line.
Unit cost is lower due to high volume of production.
Disadvantages
1. Flexibility to accommodate and process number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.
2. Mass Production System
Manufacture of discrete parts or assemblies using a continuous process are called mass
production. This production system is justified by very large volume of production. The machines are
arranged in a line or product layout. Product and process standardization exists and all outputs follow
the same path.
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Mass production system are sometimes also referred to as Repetitive Manufacturing
Systems.
Work-In-Progress (WIP) inventory is low because the items move quickly in the plant.
Examples are television, radio, and telephone producers
Characteristics
1. Standardization of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output rates.
3.
4.
5.
6.
7.
8.
9.
Large volume of products.
Shorter cycle time of production.
Lower in process inventory.
Perfectly balanced production lines.
Flow of materials, components and parts is continuous and without any back tracking.
Production planning and control is easy.
Material handling can be completely automatic.
Advantages
1.
2.
3.
4.
5.
Higher rate of production with reduced cycle time.
Higher capacity utilization due to line balancing.
Less skilled operators are required.
Low process inventory.
Manufacturing cost per unit is low.
Limitations
1.
2.
3.
4.
Breakdown of one machine will stop an entire production line.
Line layout needs major change with the changes in the product design.
High investment in production facilities.
The cycle time is determined by the slowest operation.
B.INTERMITTENT PRODUCTION SYSTEM
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The volume of each product is low.
Generally, produces made-to-order, custom products in accordance with design supplied by the
customer.
Each job
o may be unique ; and
o may require a special set of production steps.
Further, each job may require a particular routing.
o There is no standards routing.
o Products may follow different paths.
Needs general-purpose production equipment.
1. Batch Production
Batch production is defined by American Production and Inventory Control Society (APICS):
“A form of manufacturing in which the job passes through the functional departments in lots
or batches and each lot may have a different routing.”
It is characterized by the manufacture of limited number of products produced at regular intervals and
stocked awaiting sales.
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Manufacturing operations that fall between Job Shops and Repetitive manufacturing are called
Batch Production.
o Batch means a single production run.
o Batch size means the quantity produced in a single production run.
o It may be less than 100 units or up to 1000 units.
The batch manufacturing company makes a batch of one product, then may switch over (set
up) the equipment and make a batch of another item.
o Products having same or similar processes may be grouped into a product family.
Production equipment should be:
o More flexible than repetitive manufacturing
o Less flexible than job shop production system.
Characteristics
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is used for the production of item in a batch and change of set
up is required for processing the next batch.
4. When manufacturing lead time and cost are lower as compared to job order production.
Advantages
1.
2.
3.
4.
5.
6.
Better utilization of plant and machinery.
Promotes functional specialization.
Cost per unit is lower as compared to job order production.
Lower investment in plant and machinery.
Flexibility to accommodate and process number of products.
Job satisfaction exists for operators.
Limitations
1.
2.
3.
4.
Material handling is complex because of irregular and longer flows.
Production planning and control is complex.
Work in process inventory is higher compared to continuous production.
Higher set up costs due to frequent changes in set up.
2. Job Shop Production System
Job shop production are characterized by manufacturing of one or few quantity of products
designed and produced as per the specification of customers within prefixed time and cost. The
distinguishing feature of this is low volume and high variety of products.
A job shop comprises of general purpose machines arranged into different departments. Each
job demands unique technological requirements, demands processing on machines in a certain
sequence.
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Job Shop production processes are used in:
o Woodworking shops,
o Metal fabrication shops, etc.
May require an inventory of a few type of the raw materials.
But, the largest percentage of the inventory is Work in Process (WIP)
o Work in Process is the inventory that accumulates in between process stages.
Characteristics
1.
2.
3.
4.
5.
High variety of products and low volume.
Use of general purpose machines and facilities.
Highly skilled operators who can take up each job as a challenge because of uniqueness.
Large inventory of materials, tools, parts.
Detailed planning is essential for sequencing the requirements of each product, capacities for
each work center and order priorities.
Advantages
1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilized.
4. Opportunity exists for creative methods and innovative ideas.
Limitations
1.
2.
3.
4.
Higher cost due to frequent set up changes.
Higher level of inventory at all levels and hence higher inventory cost.
Production planning is complicated.
Larger space requirements.
3. Project Production System
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A project is a highly flexible and low volume type of operation.
Usually the item to be produced stays in a fixed place and all the resources come into it.
At the end of production, resources leaved the place.
Examples are:
o Ship construction
o Bridge construction
o Buildings
o Large machines
X.
PRODUCTION MANAGEMENT SYSTEM
Production management means planning, organising, directing and controlling of production
activities. Production management deals with converting raw materials into finished goods or
products. Production management also deals with decision-making regarding the quality, quantity,
cost, etc., of production. It applies management principles to production.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 called operations management, planning and control of
industrial processes to ensure that they move smoothly at the required level. Techniques of
production management are employed in service as well as in manufacturing industries. It is a
responsibility similar in level and scope to otherspecialties such as marketing or human resource
and financial management. In manufacturing operations, production management includes
responsibility for product and process design, planning and control issues involving capacity and
quality, and organization and supervision of the workforce.Definition of production management. It
may be defined as:
• The performance of the management activities with regards to selecting, designing, operating,
Controlling and updating production system.
• It is the processes of effectively planning, coordinating and controlling the production, that is the
operations of that part of an enterprise, it means to say that production and operations Management
is responsible for the actual transformation of raw materials into finished products.
• Production management is a function of Management, related to planning, coordinating and
controlling the resources required for production to produce specified product by specified methods,
by optimal utilization of resources.
• Production management is defined as management function which plans, organizes, coordinates,
directs and controls the material supply and Processing activities of an enterprise, so that specified
products are produced by specified methods to meet an approved sales program. These activities
are being carried out in such a manner that Labour, Plant and Capital available are used to the best
advantage of the organization.
IMPORTANCE OF PRODUCTION MANAGEMENT
The importance of production management in a business is that it will spearhead the process which
will ultimately bring in profit to the business. There are several responsibilities and tasks that a
production management team is responsible for and it is a very stressful job because a product
manager needs to make sure they are constantly making profit from the manufactured services that
they are selling. It is also stated that it is very important for the management to form good relations
with the various teams within the organization as well.The importance of production management
to the business firm:
1. 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.
2. Reputation, Goodwill and Image:
Production management helps the firm to satisfy its customers. This increases the firms reputation,
goodwill and image. A good image helps the firm to expand and grow.
3. 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.
4. Supports other functional areas:
Production management supports other functional areas in an organisation, 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 modernisation. The personnel department will be able to
manage the human resources effectively due to the better performance of the production
department.
5. 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.
6. Optimum utilisation of resources:
Production management facilitates optimum utilisation of resources such as manpower, machines,
etc. So, the firm can meet its capacity utilisation objective. This will bring higher returns to the
organisation.
7. Minimizes cost of production:
Production management helps to minimise the cost of production. It tries to maximise the output
and minimise the inputs. This helps the firm to achieve its cost reduction and efficiency objective.
8. 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.
The importance of production management to customers and society:
1. Higher standard of living:
Production management conducts continuous research and development (R&D). So they produce
new and better varieties of products. People use these products and enjoy a higher standard of
living.
2. Generates employment:
Production activities create many different job opportunities in the country, either directly or
indirectly. Direct employment is generated in the production area, and indirect employment is
generated in the supporting areas such as marketing, finance, customer support, etc.
3. Improves quality and reduces cost:
Production management improves the quality of the products because of research and
development. Because of large-scale production, there are economies of large scale. This brings
down the cost of production. So, consumer prices also reduce.
4. Spread effect:
Because of production, other sectors also expand. Companies making spare parts will expand. The
service sector such as banking, transport, communication, insurance, BPO, etc. also expand. This
spread effect offers more job opportunities and boosts economy.
5. Creates utility:
Production creates Form Utility. Consumers can get form utility in the shape, size and designs of
the product. Production also creates time utility, because goods are available whenever consumers
need it.
6. Boosts economy:
Production management ensures optimum utilisation of resources and effective production of goods
and services. This leads to speedy economic growth and well-being of the nation.
REFERENCES
Chopra, S. (2012). Production system: important considerations. Encyclopedia Britannica. Retrieved from
https://www.britannica.com/technology/production-system/Important-considerations
Gaurav, A. (2012). Types of production system – intermittent and continuous. Kalyan city of life: Sharing
wisdom and vivid memories of life. Retrieved from https://kalyan-city.blogspot.com/2012/02/types-ofproduction-system-intermittent.html
Gaurav, A. (2012). What is production system? Definition, meaning, examples. Kalyan city of life: Sharing
wisdom and vivid memories of life. Retrieved from https://kalyan-city.blogspot.com/2012/02/what-isproduction-system-definition.html
Production system – production and operations management (n.d.). Production System in Production and
Operations Management Tutorial (9436): Wisdom Jobs India. Retrieved from
https://www.wisdomjobs.com/e-university/production-and-operations-management-tutorial295/production-system-9436.html