Production Control and Its Relation to Supply Chain Management
In the world of industrial production and goods distribution, production control and supply chain management (SCM)are two key elements for ensuring operational efficiency and meeting market demands. Although these concepts are often discussed separately, they are deeply interrelated, and their synchronization is crucial for the success of any business.
What is Production Control?
Production control is the process of planning, monitoring, and correcting all activities related to the manufacturing of goods or the delivery of services. Its main goal is to ensure that products are made according to quality standards, in the correct quantity, and within the set time and cost limits.
Key functions of production control include:
Production planning: Establishing the sequence and timing of production.
Process supervision: Continuously monitoring the workflow to avoid bottlenecks or delays.
Corrective actions: Making adjustments when the production process deviates from the original plan.
The Relationship Between Production Control and Supply Chain Management
Supply chain management involves all stages a product goes through, from raw material procurement to final delivery to the customer. Production control plays a crucial role within SCM, as it directly impacts the efficiency and responsiveness of the entire chain.
Here are some ways these concepts are interconnected:
- Inventory Synchronization: Proper production control ensures that products are manufactured according to forecasted demand, avoiding inventory excesses or shortages. This reduces storage costs and optimizes the flow of materials across the supply chain.
- Meeting Deadlines: Effective production control ensures that products are ready for distribution within the agreed-upon timeframes. Meeting deadlines is essential for maintaining an efficient supply chain.
- Waste Reduction: By closely monitoring each phase of the production process, errors, and material waste can be minimized, resulting in lower costs for the supply chain as a whole.
- Improved Collaboration: Accurate control allows for better coordination between suppliers, manufacturers, and distributors. This leads to a more integrated and efficient supply chain.
- Flexibility to Adapt: Production control also allows for quick adjustments in production in response to market demand changes or material availability, making the supply chain more agile and adaptable.
Manufacturing:
Since the Industrial Revolution, manufacturing has evolved from handmade to machine-made goods, with recent innovations like micro and nano manufacturing, computer-aided production, and advanced supply chain management. Manufacturing is essential for corporate success, and its strategy must align with overall business goals. Integration across various areas is key to effective manufacturing.
Lean production, developed in Japan, helped companies like Toyota and Honda reduce waste through methods such as Just-In-Time (JIT) production, Total Quality Management (TQM), and concurrent engineering.
Today, competitive pressure requires companies to excel in multiple performance areas simultaneously, such as cost, quality, delivery, and flexibility. Manufacturing strategies must resolve trade-offs between these objectives. Skinner identified five key decision areas to support manufacturing objectives:
- Plant and equipment
- Production planning and control
- Labour and staffing
- Product design and engineering
- Organization and management
These ideas laid the foundation for modern manufacturing strategy, which involves decisions that shape a manufacturing system’s capabilities and how it meets objectives aligned with business goals. Analyzing trade-offs between competitive priorities is crucial, particularly in selecting a product mix. Managing synergies among products in broader product lines can enhance coordination and efficiency across manufacturing activities.
Manufacturing decisions
Manufacturing produces physical products that customers use over time, relies more on machinery than labor, involves minimal customer interaction or participation in production, and uses advanced techniques to track production and resource use. Each dollar in manufacturing sales generates $1.37 in other sectors, while financial services contribute only 50 cents per dollar of activity.
Manufacturing strategy
The term “manufacturing strategy” has become common since the 1980s, but there is still confusion about its place in a company’s overall strategic planning. Some wonder if concepts like JIT (Just-In-Time) and TQM (Total Quality Management) have replaced manufacturing strategy, as managers sometimes struggle to distinguish between these programs.
Two key definitions summarize manufacturing strategy:
- It is a series of decisions that help shape a company’s manufacturing structure, infrastructure, and capabilities over time (Hayes and Weelwright, 1984).
- It involves using manufacturing strengths as a competitive tool to achieve business goals (Swamidass, 1987).
Manufacturing strategy relates to three key concepts:
- Manufacturing mission: Links to corporate strategy.
- Manufacturing concept: Provides a vision for future manufacturing.
- Manufacturing implementation plan: Outlines the pace and scope of change.
In short, manufacturing strategy is a pattern of decisions shaping a system’s capabilities to meet objectives that align with business goals.
Formulating a strategy
Formulating a manufacturing strategy involves analyzing current activities and reviewing existing strategies. A manufacturing strategy is a working document that defines the company’s competitive advantage, key challenges, strategic goals, and initiatives to achieve them. While not all companies have a formal manufacturing strategy, most operate with a business plan and corporate strategy. Competitive advantage can be achieved through a strong combination of skilled people, technology, clear focus, and direction—all of which are addressed in a manufacturing strategy.
Formulation of Strategy
Following, is the process of formulation of manufacturing strategy which includes quality, technology, skills requirements, and training and make-or-buy decisions.
Appoint a Project Team
The full-time attention of numerous knowledgeable people from the management team is required for planning a strategy. Team members need to have a detailed understanding of the aims of the organization, its products and markets, skills in competitor analysis and manufacturing technology.
Gain and understand the existing market position.
A thorough understanding of your existing products is essential to the strategy formulation process. Following questions must be answered:
What strategy does your organization compete?
The three generic strategies are competing on cost (cost leadership), on superior features or service (differentiation), or on a subset of the market (niche market focus).
What family products do you have?
Use product life cycles as a framework to think about the manufacturing requirements of different products.
Plotting product life cycles for existing key products and future projects can build a picture of the size and shape of the business in the future.
In addition, measure the performance of each product.
Focus upon the contribution, market share, and market growth.
Identify the competitive edge produced by each family product. Competitive features might include quality, delivery lead time, delivery flexibility, design flexibility or price.
Determine the criterion which gives you the greatest competitive advantage.
Identify Drivers of change
In identifying the drivers of change, consider the business criteria, i.e., product performance, market demands, the evolution of manufacturing philosophies and management structures. We should also consider the change in technological developments and financial pressures. Subsequently, we should analyze the external influence on the organization, internal resources and capabilities, and the skills and competencies of the staff by undertaking a SWOT analysis.
Analyze your current performance
Assessment of the performance against competitive edge criteria can be difficult. Some factors are not easy to measure directly, while comparative data may be difficult to obtain. Thus, we can use techniques such as Pareto Analysis and activity sampling to facilitate data collection and obtain comparative data through published reports, databases, or by directly talking to customers and suppliers. Consider destructive analysis of a competitor’s product. Participate in benchmarking studies. We should also focus upon product performance features, such as quality, delivery, flexibility, material costs and capital costs.
Identifying critical components
The identification of those components most critical to the long-term success of the organization helps you to maximize the use of the limited investment capital available. Components can be placed on a continuum of high or low business content, with those at the high-end being of strategic importance. Components with a high added value should be added to the list of strategic components whilst those with low business content should be considered for buying in.
Asses Your manufacturing operations
This can be the most complicated task, which requires lots of time. In assessing manufacturing operations, we examine current practice regarding a range of criteria. The nine key areas most often covered include facilities, span of process (the degree of vertical integration), capacity, processes, and the way they are organized, human resources, quality, control policies, suppliers and new products. Thereafter, gaps should be found out by comparing the strengths and weaknesses of current practice with the established competitive edge criteria.
Set new targets
Targets can cover tooling costs, the utilization of equipment, defective materials or inventory. Without targets, it is difficult not only to measure achievement but to maintain the pressure to achieve them.
Develop a new manufacturing strategy
Now the new manufacturing strategy is formulated. But in order to formulate the new manufacturing Strategy, Company they must have a thorough understanding of existing manufacturing strategy and ensure it has the knowledge of strengths and weaknesses of existing product line.
Develop your supplier network
We should consider the relationship with each supplier.
For those components which we have decided to buy in, we should go through the process of identifying a potential supplier network and evaluating its ability to meet the demands of in-house manufacture. (1)
References:
Neha Tikoo. Logistics and Supply Chain Management.
(1) Extract.