Production management: what it is and how to run it in 6 steps

How is production management going in your company? Every business owner needs to answer that question to understand whether the business is really efficient at delivering.

Many issues, such as bottlenecks, unnecessary costs and rework, can make your product lose competitiveness in the market. After all, these factors raise your price compared with a more effective competitor.

Mapping every production stage and understanding which solutions contribute to continuous improvement of the process is one of the purposes of production management.

So if you want to improve productivity to increase your company’s market share, this article is for you. In the next lines, you will learn:

• What is production management?
• What is the role of production management?
• Why is production management so important?
• Other benefits of good production management
• What are the main components of production management?
• What are the production control tools?
• How to do production management
• What mistakes must be avoided?
• The role of production management consulting
• Why invest in technology in production?
• How to track production management day to day

Enjoy the read!

Before moving on, a gift for you! Siteware prepared a complete kit to improve your productivity and your team’s. Download it now: COMPLETE KIT: Productivity methodsopens in a new tab (in Portuguese).

What is production management?

Production management concerns the planning, coordination and control of production processes, aiming to optimize resources, increase efficiency and ensure the quality of the final product. It involves strategic and tactical decisions to align production with market demand and organizational objectives.

For those results to be achieved, you need to consider several activities as part of the scope, including:

• control and handling of raw materials;
• production of the finished product;
• transport between production stages;
• quality management.

The aim of this management is to establish standards that prevent bottlenecks and, as a result, increase operational effectiveness, which leads to more productivity and lower production costs per unit.

In a highly competitive market, any unnecessary cost during one of the production stages can cause budget loss or even a lower product margin at the time of sale.

Also, problems such as rework and bottlenecks can affect the company’s delivery deadlines, and it ends up losing customers.

What is the role of production management?

The main role of production management is to know what to do and how to do it in the most efficient and economical way possible. In practice, the manager must eliminate unnecessary spending and create the best process logistics in the business.

To reach that goal, you need to invest in machinery and technology for process management, as well as in critical analysis by the manager and supervisors.

To help with the process and measure performance, setting reliable comparison parameters, there are production-specific performance indicatorsopens in a new tab.

Why is production management so important?

Good production management is important because it brings more agility, productivity and lower costs, factors that contribute to higher company profit. We can also mention:

• better execution of activities;
• deliveries within the deadline;
• more productivity.

One of the main consequences of good management is that the product reaches the customer with quality and in the shortest possible time. That is why we say the result of production management is a flow based on consumer satisfaction.

After all, synergistic processes and satisfying deliveries make customers not only buy again but also recommend the business to other companies. Efficiency also allows the organization to grow over the long term.

Other benefits of good production management

The benefits of good production management also include: optimized allocation of financial resources, real-time goal tracking, better order control, less waste and a sharper view of strategic reports.

1. Optimized allocation of financial resources

With good production management, it is easier to identify which processes are making a profit or a loss, and which are the main production bottlenecks.

That makes it possible to define action plans to eliminate waste, improve investments and, as a result, improve the allocation of financial resources.

2. Real-time goal tracking

Another benefit of production management is the ability to track goals in real time. As a result, it is easier (and faster) to identify improvement points.

Also, when a machine is below its capacity, the problem becomes clearer, so maintenance can be done preventively and quickly.

3. Better order control

Controlling and planning the orders that enter and leave production is crucial to avoid delivery delays and even to determine the best inventory volume for a given product.

With more efficient production management, it is easier to plan order control, avoiding delivery delays and idle inventory.

4. Less waste

More efficient management prevents raw material waste in production. As a result, the product cost is also lower.

That avoids raw material shortages and even purchasing errors, which can happen when there is more waste than expected.

5. A sharper view of strategic reports

Good management gives leaders a sharper view of strategic reports. It becomes possible to compare performance across equivalent periods and spot sudden changes much faster, since the parameters will be well defined.

As we can see, good production management has many advantages. Let us now understand its main components.

What are the main components of production management?

The main components of good production management are:

1. planning;
2. organization;
3. command and monitoring;
4. execution and control.

These stages, although they seem linear, work as a kind of cycle, since they develop at the same time, in a relationship of interdependence. Let us look at each one.

1. Planning

Production planning is the first stage of the whole process. This is where the sales team makes a sales forecast or, depending on the company, hands the orders to the planners.

Based on those orders or forecasts, it is time to analyze the best production plan to optimize time and avoid unnecessary stoppages.

This stage must be coordinated with the finance team because, in many cases, certain orders must take priority.

Why? Because they may have a shorter payment term, which means cash comes in faster, avoiding defaults and a higher cost of capital.

2. Organization

The organization stage consists of evaluating processes and restructuring them, if necessary, to receive the month’s demand, always seeking productivity gains.

In other words, it is a way of adjusting production to make better use of human, material and technological resources, outlining a kind of roadmap.

3. Command and monitoring

Once production is planned and organized, execution must begin. This stage requires attentive command and careful monitoring of the whole process.

The manager is responsible for organizing the team on the production line, correcting failures, following progress and motivating the team.

In this scenario, the RACI matrix can be an essential tool so that everyone involved knows their roles and responsibilities in a given task.

That way, the manager can respond quickly to any pauses and failures that happen during the production process.

4. Execution and control

Production execution takes the goals set in planning as its guide. Definitions can be daily, weekly, biweekly or monthly.

Control, in turn, consists of evaluating each employee’s individual performance and organizing parts in periods of higher demand.

It is also responsible for adjusting waste, occupancy rate and material handling so that the goals are met.

What are the production control tools?

MRP (Material Requirements Planning) and MPS (Master Production Schedule) are fundamental tools in production control and management, especially in manufacturing companies.

Here is why they matter for production management:

1. MRP (Material Requirements Planning)

MRP, or Material Requirements Planning, is a production planning and control system that calculates the materials and components needed to manufacture products. It uses demand data for finished products to plan the purchase and scheduling of raw materials and components.

So one of the goals of MRP is to make sure all the materials needed are available for production at the right time. With MRP, production can be planned more efficiently, avoiding delays and interruptions due to lack of materials.

2. MPS (Master Production Schedule)

The MPS is a detailed plan that describes how the company plans to meet demand for its finished products. It sets the quantity of each item to be produced in specific periods.

The MPS also seeks to align production with market demand, planning the quantity and timing of production of each product. That lets the company respond quickly to changes in demand or in the market, adjusting its production plan as needed.

How to do production management

Production management requires logical alignment, as well as organization and control of materials, to pursue the highest productivity in the shortest time.

The manager also needs to watch for waste of materials and human capital so that the product is delivered on time and with quality.

Below is a short step-by-step for your company to apply production management in the best way.

1. Anticipate demand

First, the production planning and control team needs to be at least one month ahead of production itself.

For that reason, constant alignment between the sales team and production planning is crucial so that sellable items are delivered quickly.

During planning, it is essential to align the finance and logistics departments to organize cash flow, as well as delivery availability on the agreed dates.

This avoids delays, inventory imbalance and other unexpected events that compromise the result.

2. Match demand to production

Once planning is done, you need to assess whether the organization will have the production capacity to carry it out.

At this point, it is important to raise a few questions such as:

• raw material needed;
• labor available;
• accessible capital;
• machinery available;
• physical space available.

All of these components are essential so that production has no failures. So ask yourself: will raw material run short? If so, will the supplier’s delivery time avoid production stoppages?

Also consider whether labor is sufficient, as well as the company’s working capital, the machinery available and the space to store produced items until they are shipped to customers.

3. Create a production strategy

Once you have established there will be no shortage problems, it is time to think about the best production strategy.

To do that, you need to study production logistics, each employee’s role, the transport of materials throughout the production process and the company’s daily capacity.

This is when goals are set. Usually, the manager meets with the team to coordinate deliveries and the role each person will play next month.

4. Adjust urgencies before execution

With all alignment done, you need to make sure there will be no change of plans during the process. It is time, therefore, to assess urgencies.

Make sure the best-selling products will have enough stock for a possible growth in demand, without having to replan all of production during the month.

Assess whether production deliveries will be enough to fill customers’ orders without delays, and that there will be no shortage of products to supply them.

5. Execute and control production

Usually, the production sector never stops. That is why all the previous stages are done while production is delivering orders from previous months.

So planning takes effect on the first day of the month, on the understanding that production will do its part without delivery delays and may go through some changes to adjust to new demands that arise.

At this point, the manager starts to follow the performance of machines and employees, request raw material from the warehouse and make sure goals are met.

The manager is responsible for tight control and a quick response to any problems that may appear, such as a machine that breaks down unexpectedly during the day.

6. Monitor results and motivate the team

Finally, monitoring results is essential. Here, a note about preventive maintenance of machinery, to avoid unpleasant surprises.

A good manager takes advantage of production pauses overnight (or, when production runs 24/7, creates scheduled pauses) for preventive maintenance of the machinery.

This practice prevents a stoppage during production, which in turn delays all of the company’s product deliveries. With good monitoring, it is possible to follow results.

This is when bottlenecks are identified and fixed, and the team is motivated so that goals are met every day.

Now you know how to do good production management. However, since it is a complex and potentially transformative process, it is worth taking time to understand how not to do it as well.

What mistakes must be avoided?

The main mistakes to avoid in production management are:

• not investing in technology;
• not tracking information in real time;
• lack of training for employees;
• mistakes in demand forecasting.

1. Not investing in technology

Technology is one of the main pillars for gaining efficiency in any company’s production management. That is why not investing in innovation is a mistake that can compromise the business’s competitiveness.

It is worth noting that modern machinery serves as a right-hand tool for managers to automate repetitive activities, extract key data, monitor performance and free up team time, increasing deliveries.

So for anyone who wants better production management, failing to invest in technology is a mistake to avoid.

2. Not tracking information in real time

With the arrival of the Internet of Things (IoT), it became easier to track information from a production line in real time.

Any company that cares about the quality of its products and the speed of its deliveries needs to pay attention to the topic.

You need to create methods to extract as much information as possible in real time and, based on those insights, make the changes needed to improve the management of the business.

Using smart monitoring dashboardsopens in a new tab is one option for those who want to stand out in the market.

3. Lack of training

Even though investment in technology is crucial, it will not have the desired effect without constant investment in training to improve and foster goal achievement.

It is the leader’s role to identify which training should be offered and when it needs to happen. With constant investment in learning, the team tends to meet goals more consistently.

4. Demand forecasting errors

Getting the demand forecast wrong can be serious for an organization, since it leads to a shortage of products to meet market needs or, otherwise, to excess inventory, creating a cash shortage.

To avoid this scenario, you need to invest in technology systems that provide enough data for a more accurate market analysis.

Also, keeping an eye on the national and international economy helps build a stronger basis for demand in your sector.

Now that you know the production management process in depth, including practices to avoid, how about a suggestion to make it easier to build these processes into your routine?

We are talking about production management consulting, the topic of the next section.

The role of production management consulting

Management consultingopens in a new tab focused on production can help companies identify bottlenecks and fix problems that come up often. After all, the consultant has an outside view of the company and is not used to the habits that people immersed in the business have already absorbed.

Large companies usually hire consultants to point out the main flaws in the production process and find problems in the business.

That makes it easier to identify bad habits and fix flaws that may cause delays in order delivery and other bottlenecks.

In some cases, consultants identify the flaws and propose practical, operational or strategic improvements.

In others, consultants suggest adopting new tools, such as investment in technology, especially when they find that this is the main problem causing frequent delays.

Why invest in technology in production?

Investment in technology is essential to give production more effectiveness and control. And we are not talking only about ultra-modern machinery, although equipment is also necessary in a competitive scenario.

Here, we mean having a management system that makes monitoring faster and helps prevent errors. With a good system, the production manager can:

• identify possible bottlenecks;
• track production indicators, such as OEE, in a single dashboard;
• record deviations and define action plans;
• create clearer, smoother communication.

Also, when indicators are tracked frequently, performance drops show up earlier, which makes them easier to correct.

How to track production management day to day?

Production management pays off when the bottleneck, the waste and the delay show up in the indicator and turn into action with an owner and a deadline. Without that trail, the same problem comes back the following month.

In Stratwsopens in a new tab, the strategic and performance management platform created by Siteware, production indicators live in a visual dashboard, and each deviation is recorded with a root-cause analysis, using tools such as PDCA and Five Whys, and tracked through an action plan until completion.

Visit our website and explore the Routine Management and Continuous Improvement solution in Stratwsopens in a new tab.