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COURSE SUMMARY
PRODUCTION MANAGEMENT
CHAPTER 1 AND 2

Chapter 1: Introduction to Production

Management

I / INTRODUCTION :
The enterprise is commonly defined as an organization that allows the implementation of a set
of factors (natural factor, human factor, capital factor) of production combined to manufacture
goods or offer services deliverable on a market.

The natural factor: natural resources used during the production process, components
incorporated into a more elaborate product, raw materials, etc.

The human factor (labor): Labor.

The capital factor: services provided by capital goods.

The company is not isolated but is in permanent communication with its environment to
exchange:

Material flows: Inputs of raw materials, components, packaging, operating products, energy,
material resources, spare parts, outputs of finished products, used products and tools

Information flows: advertising, promotion, price offers, orders, invoices, exchanges:

Financial flows: movement of equity, loans, cash from customers; payment of suppliers,
payment of taxes, salaries, interest on loans, sponsorship, ....

These flows do not only exist in interaction with the outside world. Indeed, within the
company, there are departments (operational and functional) that constantly exchange
information and material flows.

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1.1. Definition of production

Production can be defined as the transformation of material flows in order to create goods
and : or services. This transformation can take very diverse forms:

 Modification of the physical or chemical characteristics of the resources (raw materials

for example), this type of transformation is the most natural, it is the case in most of the
industrial companies.
 Changes in the spatial (transport) or temporal (storage) characteristics of resources. This
type of transformation is mainly carried out by distribution and service companies

1.2. Definition of production management

As soon as a company existed, it was necessary to manage its production, so the role of
production management is as old as the company itself.

Production management can essentially be defined as flow management: physical flows

appear naturally in the classical production cycle as shown in the following figure.

SUPPLY

MP STORAGE

PRODUCTION

PF STORAGE

DELIVERY PF

Production management consists of gathering the elements at the input of the system (supply
and storage of raw materials, components, parts etc.), according to an acceptable production
plan. Based on a given demand, work is planned and controlled (production scheduling) to
provide the required products or services.

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The role of production management: to manage the flow of materials and the related
information flows, according to the priority objectives defined by the company's general
management.

The material flows enter the production process, are transformed, consumed or assembled to
obtain the finished products, which after storage, are delivered to customers. The organization
of these flows is an important part of production management. In parallel to these physical
flows, the company is crossed by a large number of information flows that can be grouped
into two categories:

External flows: these reflect the company's relations with its environment, its market, and
more particularly its relations with customers and suppliers.

Internal flows: these materialize the relations between the operational services and the
functional services of the company.

II. THE OBJECTIVES OF PRODUCTION MANAGEMENT

 Manufacturing of quality products;

 At the lowest cost;
 Within a minimum period of time
 Instantly adapt the offer to the variation in customer demand

Quality: the company's ability to produce according to customer requirements.

The cost: the cost of production must be in line with the standard or pre-established cost. The
company must optimize the use of its production potential both in time and space. The
reduction of costs allows to increase the profit margin and to reduce the prices.

Cost of goods sold + profit margin = selling price

The lead time: the production lead time is the sum of several distinct components
(procurement lead time, manufacturing lead time, assembly and packaging lead time, etc.).
The respect of the deadlines is an important element of the brand image of the company, it
translates the effectiveness of its organization and management.

Flexibility and/or adaptability is the company's ability to adapt in a turbulent context to the
ever-increasing variety of products to be produced and to internal and external disturbances
(variety of products, operations to be coordinated, variation in the quantity and nature of
demand).

II.1. Flow control

Information flow: production management must manage the entire product cycle, the
information must be reliable, precise and selective so as to provide judicious but not excessive
information to the people concerned.

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Flow of materials and products: respect of commitments (at the right time, strictly the
necessary quantity, directly of quality), optimization of the manufacturing cycles of the
products (by playing on all the delays).

II.2. The organization of the production

In addition to the operational tasks of production, there are functional tasks necessary for the
proper execution of production.

QUESTIONS FUNCTIONS MISSIONS

What to produce Studies Design of products,
realization of specifications
How to produce Methods Choice and definition of
work processes
When to produce? How scheduling Planning the work
much to produce?

1. The study function

This function designs the product with precision or elaborates the specifications. Two phases
Feasibility study and detailed study of the products.

2. The method function

The method function establishes the modalities of realization of the products by :

3. The scheduling function

Production scheduling: i.e. planning the date and duration of the production of various
products

Materials Management

Production resource management

II.3. Production planning

The planning is done by successive approaches by taking into account the real and not
maximum capacities (waiting times, breakdowns...) by foreseeing alternative solutions, by
analyzing the bottlenecks.

III. THE MEANS OF PRODUCTION

III.1. Men

The labor factor constitutes the wealth of a company. The qualification of human resources,
the improvement of working conditions, the profit-sharing and the enrichment of tasks can
improve the results of the company.

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III.2. Financing of the operation

In general, every company has suppliers, customers and adds value to a product. The added
value is the economic engine, it allows

 The supply of useful products to customers;

 Economic wealth creation;
 The distribution of this wealth to employees, suppliers, communities, and shareholders
 The financing of the company's future and the possibility of facing external,
political or economic contingencies.

The production process often generates a need for working capital, which is expressed by a
time lag between cash inflows and outflows. This is the time that elapses between the moment
the company pays its suppliers and the moment it is paid by its customers.

IV. PLACE OF GP IN THE COMPANY

In relation to the various functions of the company, production management is confronted

with contradictory objectives. We quote as an example, the constraints related to the
commercial function-production function interface.

 Time constraint

Commercial services: shortest possible lead times

Manufacturing department: as much time as possible

 Quality constraints

Quality commercial service: a product is easier to sell if it is of good quality

Manufacturing service: a quality product is more difficult to obtain

 Price constraints

Commercial service: a product is easier to sell if it is cheap

Manufacturing department: cost constraints are always difficult to meet.

Located at the crossroads of contradictory objectives, production management is a transversal

function, i.e. it is in relation with most of the other functions and most of the company's
information systems.

V. TYPOLOGIES OF PRODUCTION SYSTEMS

Each company can be considered as a unique model of its own production.

It is unique by :

 Its product (structure, nature, ....);

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  Its manufacturing process
 His process;
 Its machines
 Its management method
 His men
 His job
 His culture
 Its environment

There are many criteria for classification

 Customer Relations
 Organization of production stations (flows)
 Quantity manufactured and repeatability
 Structure and nature of the product
 Autonomy of design and control
 Relative durations of the delays (decoupling point)

VI. Classification according to the relationship with the client

According to this criterion, two types of production organization can be identified

 Production from stock

 Production to order
1. Production from stock

This type of organization is used when the manufacturing lead time is longer than the
commercial lead time requested or accepted by the customer (radio, clothing); it is necessary
to produce in advance to satisfy the customer on time. The company, relying on forecasting
techniques, manufactures and stocks its finished products and waits for customer orders.

2. production to order

This type of organization is used when the manufacturing lead time is less than or equal to the
commercial lead time requested or accepted by the customer. The production is committed
only if we have a firm commitment from the customer.

V.2 Classification according to the organization of production flows

There are three main types of production

 Continuous production (in-line implementation) (Flow shop)

The implementation of workstations, machines and manufacturing equipment is done in

production line making the flow of the product linear example: Cement plants

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  Batch production (Job shop): implementation by functional workshop

The workstations are geographically grouped by functional workshop according to the nature
of the operation they carry out: forging, machining, presses, heat treatments, surface
treatment, a batch production is retained when relatively small quantities of many varied
products are processed, carried out from a general purpose machine park.

 Production by project

A production by project is retained when the product to be realized is unique. This is the case
for the construction of a dam, a sports complex or a bridge. It follows that the production
process is unique and is not renewed.

Implantation definition examples

Single product or The productions are Electronics, pharmaceuticals
multipurpose line or chain organized around a product
or a product family
Functional workshop The workstations are Carpentry, gear
geographically grouped manufacturing
according to the nature of the
operations they perform
Organization by project The means of production are Shipyard, building
organized around the product

V.3 Classification according to quantity and repeatability

Launches Repetitive launches Non-repetitive launches

Series
Unit production Rocket motor Public works
Nuclear reactor Construction of engineering
structures
Mould for press
Small and medium series Tools Subcontracting
Machine tools Preseries
Large series Appliances Newspapers fashion articles

V.4 Classification according to the structure of the product

1. Convergent structures: this is the case of standardized products incorporating many

components. The diversity of the finished products is generally quite low, but the components
are numerous. E.g.: manufacture of electronic circuits

2. Divergent structures: this is the case of companies that start with a very small number of
raw materials, or even a single one, but which have a large diversity of finished products. Ex:
dairy industry

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3. grouping point structures: this is the case of companies incorporating standard sub-
assemblies that form the grouping points. The finished products are generally numerous, as
are the basic components. Ex: automotive industry

4. parallel structures

This is the case for companies with few finished products and few raw materials. The finished
products incorporate very few elements in one. Example: packaging industry

V.5.Classification according to control and design autonomy

In general, there are three levels of corporate autonomy:

The designer and manufacturer: the company assumes technical responsibility for the
design of its products, its manufacture, and even after-sales service.

The subcontractor: he carries out production operations while being held to conform exactly
to the directives or technical specifications that a principal decides in last resort.

The shaper: like a subcontractor, it carries out production operations according to a schedule
of conditions given by the principal. However he does not have autonomy of the orders of raw
materials, they are provided to him by the principal.

Chapter 2: Sales Forecasting

THE MOST USED FORECASTING METHODS

Forecasts for product groups tend to be more reliable than those for individual products. And
short-term forecasts are more accurate than long-term ones. Quantification also improves the
objectivity and accuracy of forecasts.

The following table shows some of the most commonly used forecasting methods.

Method Description Horizo Relative cost

n
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 Opinion and judgment (qualitative methods)
Composite sales Summary of sales force estimates CT-MT B-M
force
Opinions of Marketing, production and finance CT-LT B-M
executives managers prepare the forecast
together
Sales forces and Local estimates from regional MT M
product managers vendors are compared to projections
from product managers
Historical analogy Forecast by comparison with CT-LT B-M
products sold in the past
Delphi Answers to a series of questions by LT M-E
experts (anonymously) feedback and
review
Market research Questioning potential customers to MT-LT M-E
anticipate market behavior
Extrapolation over time (quantitative methods)
Naïve Forecast=actual plus or minus a CT B
certain %.
Sliding moving Averages of n most recent periods CT B
average
Trend projection Linear, exponential or other MT-LT B
projection of the past trend.
CT: short term LT: long term MT: medium term

B; low

E; high

M : medium

MOVING AVERAGE METHOD

III.1 Definition

A moving (sliding) average is obtained by taking the average of a fixed number of

consecutive data, deleting the oldest data at each period and adding the current data.

III.2. Hazard smoothing

Quarter 1 2 3 4 5 6 7 8 9 10 11 12
Sale 900 1100 1300 1050 950 1250 1500 1200 1000 1350 1500 1300
Moving 1100 1150
average

1+2+3 /3=2 case

900+1100+1300 / 3=1100

3+4+5 /3=3 case

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1100+1300+1050=1150

4+5+6=5

Let's calculate the 3rd order moving average

We can see that the curve obtained from the moving averages has much less abrupt variations.
The moving averages attenuate the fluctuations, while preserving the general appearance of
the data (the longer the period over which the moving average is calculated, the greater the
attenuation).

However, this has the disadvantage of obtaining a smoothed chronicle (from which
fluctuations have been removed: extreme values) that is shorter than the raw series.

Remark:

The moving average operator as defined above is often used to smooth time series before
forecasting to remove volatility

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