4.2 The Production function
The Production function undertakes the activities necessary to provide the organisation’s products or services. Its main responsibilities are:
- production planning and scheduling
- control and supervision of the production workforce
- managing product quality (including process control and monitoring
- maintenance of plant and equipment
- control of inventory
- deciding the best production methods and factory layout.
Close collaboration will usually be necessary between Production and various other functions within the organisation, for example:
- Research and Development, concerning the implications of product design for production methods and cost
- Marketing, concerning desired product functionality, appearance, quality, durability and so on
- Finance, concerning the availability of funds for purchase of new equipment and the acceptability of inventory levels.
- Human Resource Management, concerning staff motivation implications of job design and production methods.
Although many of the principles of good management in a manufacturing environment also apply in organisations that provide services (rather than manufacture products), service businesses, such as banking and professional firms of accountants and solicitors, do have a number of distinctive features which have implications for how they are managed.
- Services are less easily standardised than manufactured products and so service quality tends to be more variable. This makes human resource management and motivation more critical.
- Services are often ‘intangible’ (i.e., something that cannot be precisely measured or assessed) and multi-dimensional – what exactly is the ‘service’ being offered by a bank, a private hospital or educational establishment? This can make attracting customers more difficult as it often depends on promoting an intangible item.
- Unlike manufactured products, services cannot be stored, but must be consumed as they are produced or they are wasted. This creates additional problems matching productive capacity with customer demand. This is reflected in, for example, the common practice of commercial airlines offering very cheap flights based on marginal cost to fill empty seats – a plane flying empty to New York is a service provided but wasted!
- Ascertaining the cost of individual services is often also problematic, as the cost structure of many service businesses is such that costs are often shared among different services. This makes, among other things, pricing and the analysis of profitability of different services more difficult than with most manufactured goods.