Management Control Systems (2nd Edition)

Management Control of Production and Operations - I : Overview

Discrete production is used in car manufacturing, television manufacturing, etc., in which a variety of components are combined to make the final product. The extent of mechanization in the production process also directly influences the type of production controls which are built. If the production process is highly mechanized and makes use of advanced techniques like robotics and CNC machines, the control element is built into the production activity itself to a large extent.

Productivity is used as a controlling tool to ensure that all the resources are utilized judiciously and efficiently. It is a measure of the organization's efficiency in terms of the ratio of outputs to inputs. The higher the numerical value of this ratio, the greater the efficiency. Productivity can be measured in relation to a single factor such as labor or material (single factor productivity), a combination of some factors (multifactor productivity), or all the factors taken together (total productivity). A variety of reports are made use of to ensure effective production control like production efficiency report, production planning report, daily production report, downtime analysis report, and shift handover report.

In the context of a business, an operation is a set of activities carried out to achieve a specific purpose. The various operations of a manufacturing organization can be classified from the perspective of internal and external operations. Internal operations are those which are executed within the boundaries of the organization and have limited or no linkages with the external world. The control elements with reference to such operations to a large extent are defined by the organization and the organization can control them easily. Some of the internal operations controls are quality controls and inventory controls. The operations of marketing and sales and purchase have an external focus as they deal with customers and vendors respectively, who are external to the organization. External operations controls include purchasing controls and warehousing controls.

The operations starting from procurement of inputs to distribution of finished goods are grouped together and are collectively referred to as supply chain management. The goal of supply chain management is to ensure that the organization produces those products which are being demanded by the market in the right quantities. The chain dealing with the post-production activities is referred to as the downstream chain and involves controlling the outbound logistics. The chain dealing with purchases and inventory up to production is referred to as the upstream chain and involves controlling the inbound logistics.

The performance of the supply chain can be evaluated with the help of metrics. These metrics help to understand how an organization's supply chain is performing over a given period of time and give an idea on how to optimize it. Some of the metrics used are inventory turns or inventory turnover, projected inventory turns, cycle time, customer order promised cycle time, customer order actual cycle time, cash to cash cycle time, supply chain cycle time, and defects per million opportunities.

Information systems play a crucial role in production and operations management. The advancements in telecommunication technologies and networks have enabled business organizations to develop and implement integrated production and operations information systems. Information systems of the present day integrate the entire supply chain. The present day automated operations information systems plan, execute, and reliably track the logistics of stock movement from the warehouse to the branches or the customer locations.

Chapter 11 : Overview