Production management involves planning and regulating operations to transform materials into finished products, focusing on aspects like product quality, quantity, cost, and timeliness. Key elements include input management, cost control, and operational management, emphasizing inventory control and compliance with regulations such as good manufacturing practices. Recent expansions in production management also incorporate material management, along with the strategic and operational activities necessary for effective production processes.

1. PRODUCTION
MANAGEMENT
Lecture by:
Ms. Kanwal

2. What is Production Management?
• Production management is the process of effectively
planning and regulating the operations of that part of an
enterprise which is responsible for the actual
transformation of materials into finished products.
• A process necessary to transfer different inputs into a
product or service.
• Confined earlier to the management of manufacturing
activities for products or services.

3. 5 P’s of Production Management
• PRODUCTS
• PLANT
• PROCESS
• PROGRAMS
• PEOPLE
When this five element integrated a successful production
management takes place.

4. Objective of Production Management
• RIGHT QUALITY
• RIGHT QUANTITY
• PRE-DETERMINED TIME
• PRE-ESTABLISHED COST
Other objectives are :
• Machinery and Equipment
• Materials
• Manpower
• Supporting Service

5. Scope & Activities of PM
• There are two types of scope & activities of PM :
1. Strategic level:
(a) Design & development of new product
(b) Process design & Planning
(c) Facilities location & layout planning
(d) Design of material handling
(e) Capacity planning
2. Operational level:
(a) Production Planning
(b) Inventory Control
(c) Product maintenance & replacement
(d) Cost Control & Cost Reduction

6. Rules and Regulations
• The pharmaceutical production & operational management
involves regulation of the transformation of inputs in
accordance with high standards into outputs
(products/services).
• The output must meet all the official specifications, which is
accomplished by carrying out production activities in
compliance with the:
• Good Manufacturing Practices (GMP) in the Drug Act 1976.
• Regulations regarding production, personnel, manufacturing facilities,
space allocation equipment and the environmental condition for each
section in a pharmaceutical firm.
• QC assessments under Quality Assurance Program.
• QC testing to confirm the quality of output and the validity of
production process further.

7. • In recent years, the area of production management has been
expanded into:
• Material Management (Comes under Input Management):
• Comprises of control over purchasing, warehousing, accounting &
financing.
• Besides material management, encompasses control of personal,
methods, machines and money.
• Cost Control:
• Involves the management of various elements of cost such as
materials, labor and direct & indirect costs.
• Operational Management:
• Refers to control on the activities necessary to produce and deliver a
physical product or service to the customers.
Elements of Production Management

8. 1. Input Management
• A multi-departmental task and the responsibility all these
inputs rests with the departments of material, human
resource department and that of production.
• Control of personnel (Staffing)
• Controlling
• Material Management Requires maintenance of a
sufficient inventory in a manufacturing firm.
• Adequate inventory of items must be required to ensure their
continuous flow in manufacturing process to meet production and
customer demands.
• The control on purchases, the first element in material
management can be instituted by inventory control.

9. Inventory Control
• A stock of materials which are used to facilitate
production in every business.
• Hospitals have inventories of:
• Medicine
• Surgical supplies
• All types of housekeeping items
• A pharmaceutical industry has the inventories of raw materials,
excipients, packaging materials, etc.
• Inventory control implies securing & maintaining the optimal
quantities and types of physical resources required to meet the
organization’s production goals.

10. • In attempting to control inventories, managers often are
inclined toward keep inventory levels on the higher side.
• Involves greater investment that may bind money yields a
lower return on the amount invested.
• This is one of the contradictory demands made upon the
manager with respect to keeping inventory.
• Fundamentally, inventory control is deciding how much to
buy and when.
• Inventory is important to an organization in various
terms.
• Helps to deal with uncertainties in supply & demand.
• Facilitates more economic purchases because materials are
usually cost low when purchased in bulk at one time.

11. • Inventory may be a useful means of dealing with
anticipated demand fluctuations.
• Also important for an organization since it represents considerable
costs.
• Ordering Cost:
• Cost on time spent
• Paperwork and postage
• Carrying or Holding cost:
• Storage cost
• Pilferage
• Breakages
• Stockout cost is the economic consequences of items running
out of stock. Includes
• Loss of customers 'goodwill
• Possible loss of sales

12. • The inventory management is executed to:
• Meet customer demand at the lowest possible cost and with a
minimum of investment.
• Minimize the inventory investment.
• Promote smooth production.
• Balance of supply and demand.
• Minimize procurement costs and carrying costs.

13. Tools of Inventory Management
• Various tools are:
• ABC concept
• Money limitation on purchase order
• Inventory turnover based order
• Determination of economic order quantity
• Re-order quantity level
• Just-in-time inventory control

14. 1. ABC concept:
• Material classified as:
• Highest value items------ A:
• Few items with more cost.
• Medium value items------B:
• More items with bit less cost.
• Lowest value items-------C:
• Highest number but lowest cost.
• The combined value of items in A&B classification though less
in number than that of items on C but cost more comparatively.
• When there are substantial number of items to be controlled:
• Emphasis should be given on A&B items, as these items constitute
the major portion of total inventory value (usually about 90% or
more).
• Level C items should be given little attention and can even be kept
at a high level since they contribute only a small percent of rising
or lowering of inventories costs.

15. 2. Money limitation on purchase order:
• Many managers exercise a power of control over the volume of
purchases by placing a money limitation on the purchase order.
• Multiple small orders in long run for material purchase is more
costly for the organization.
• This method in not commonly employed in the pharmaceutical
industry.

16. 3. Inventory turnover based order:
• A modern and reliable means of inventory control is the
computation of inventory turnover.
• A ratio of the cost of goods consumed or used during the fiscal
period by the average of opening and closing inventories.
• This gives the number of times the inventory has been “turned”
during the fiscal period which may be low or high.
• A low turnover indicates:
• Duplication of stock: ordering of items already present in surplus
quantities.
• Large purchases of slow-moving items: purchasing of items having
less turnover.
• Dead inventory: the items with no or very little turnover.

17. • A high turnover may be due to small purchasing.
• Large volume purchasing may take advantage of the maximum
quantity discounts due to bulk purchase.
• A turnover of 6-8 times a year is considered satisfactory for
most institutions.
• However, institutions with limited budget may wish to increase
their turnover rate.
• This is a policy decision & should be arrived at by discussion
with the administration of the firm.

18. 4. Economic order quantity:
• Determination of most economic size of purchase.
• Another way to control inventory.
• Decision of inventory volume is based on the cost keeping in
view:
• Larger the purchase volume, lesser would be the cost.
• Determination of how much to order is the EOQ factor. Two
main considerations are:
• Ascertaining the ordering cost:
• All labor in purchasing
• Supporting labor cost; stock room, receiving and material control
• Cost applicable to payment of invoices
• Cost of general operating supplies; pencils, papers, forms, etc.
• Freight and telephone cost
• Cost of carrying the inventory

19. • Cost of carrying the inventory:
• Space occupancy
• Labor costs for storage operations
• Cost of supplies for storage operations
• Cost of the time spent for storage
• Costs on provision of storage conditions (if applicable)
• Material deterioration
• Material pilferage
• In general carrying charges may range from 18%-30%.
• Formula for determining EOQ:

20. 5. Reorder Quantity Level:
• The components are:
• Safety stock
• Order point
• Order quantity
• Reorder (RO) is determined by:
RO=AU/13 x AVLT + SF
• AU: average usage rate of material per month
• 13: number of months in a year plus 1
• AVLT: Average vendor lead time
• SF: safety factor

21. 6. Just-In-Time Inventory Control:
• Emphasizes on having the required material arrived just they are
needed in the production process.
• Organization has right material at the right place right time and
there is no need for holding backup material inventory for a period
of time.
• The possible drawback of JIT is:
• The halt of production process in case of delayed arrival of materials.

22. 2. Cost Control
• The cost control involves the various management of cost.
Critical components are:
• Material
• Represents largest part of goods cost
• Purchased according to the needs expressed in the production forecast
• Employs a batch sheet to workout bulk yields so as it can be
compared with theoretical yields
• Two costs involved:
• Procurement cost: vary with the number of orders
• Carrying cost: may be reduced for a given item if smaller purchase orders
are placed. Vary with the inventory investment and inversely with the
number of orders.

23. • Labor:
• Personal services are needed for manufacturing procedures. An
effective management and careful use of labors are important for cost
control.
• The production is expressed as the number of direct labor hours
needed to produce specified number of units for every product made.
• The involvements of indirect labors must be identified as repair
hours, equipment cleaning hours, line changeover, time spent by
quality control inspectors etc.
• Burden:
• Burden is the expenditure on the intangible elements and is
categorized as direct and fixed burden.
• Direct burden refers to the expenditure on supervision, lost time,
clerical help and employee benefits as compensation on overtime,
sick pay and employee hospitalization etc.
• Fixed burden includes the expenditure on electricity, land, sales tax
and depreciation of the instruments and facilities used in the quality
control department.

24. 3. Operational Management
• The operational management refers to regulating the process of
activities necessary for transforming inputs into goods and
delivering a product or service to its customers.
• The primary elements used in operational management are
forecasting, capacity planning, aggregate production planning,
scheduling, material requirements planning and purchasing.
FORECASTING: is the process of making predictions about
future events that may affect the organization. In operational
management, forecasting is the prediction primarily for the
demand of products or services for short to long term.

25. CAPACITY PLANNING: implies the maximum output capability
of a productive unit within a given period of time.
• determination of the major resources such as personnel,
equipment, finance and buildings required to achieve the
production objectives of the organization.
AGGREGATE PRODUCTION PLANNING: is process of
predicting how match supply with product demand over some
specified time horizon. This planning is usually for one year but is
updated monthly.
• Aggregate planning depends on two facts;
• First the maximum capacity of major facilities such as plans and
equipment is fixed with the time frame.
• Second, product demand is subjected to fluctuations due to
uncertainties, seasonal influences or other market related factors.

26. RESOURCE ALLOCATION: After aggregate planning, the next
step is allocation of inputs; materials, employees, financial sources
and various equipment.
• The basic resource allocation decision is choosing between the
options of manufacturing by itself or manufacturing from a
third party.
SCHEDULING MASTER PRODUCTION: Aggregate planning
approximates groundwork for the master production schedule
(MPS).
• The MPS that translates the aggregate plan into a formalized
production plan encompassing specific products to be
produced and specific capacity requirements over a designated
time period.

27. • MATERIAL REQUIREMENTS PLANNING: The MRP is
the determination of the requirement of materials for products
specified in master schedule and initiates the action necessary
to acquire the material when needed.
• In MRP, raw material, packaging components and other items
used in the production of an end product are determined for all
products on a batch sheet.
• The MRP is necessary to carry out the scheduled production.
After MRP, the requirement is sent to the material department
of the organization for the supply of materials.
• Thus, the purchasing needs of an organization are identified
through MRP.

28. QUALITY CONTROL: An additional control needed in
pharmaceutical operations are the implementation of quality control.
• The quality control department controls all starting materials,
monitor the quality aspects of manufacturing operations and
ensures the quality and stability of drugs.
• Thus, quality control testing is one of the important
components of material management, operational management
and cost control.

29. Batch Record Maintenance
• Batch number (or lot number):
• A distinctive combination of numbers and/or letters which
uniquely identifies
• a batch on the labels, its batch records and corresponding
certificates of analysis, etc.
• Batch records:
• All documents associated with the manufacture of a batch of
bulk product or finished product.
• They provide a history of each batch of product and of all
circumstances pertinent to the quality of the final product.

30. Good Manufacturing Practices by
WHO
Batch Processing records:
• A batch processing record should be kept for each batch
processed. It should be based on the relevant parts of the
currently approved specifications on the record. The method of
preparation of such records should be designed to avoid errors.
(Copying or validated computer programmes are
recommended. Transcribing from approved documents should
be avoided.)
• Before any processing begins, a check should be made that the
equipment and work station are clear of previous products,
documents, or materials not required for the planned process,
and that the equipment is clean and suitable for use. This check
should be recorded.

31. • During processing, the following information should be
recorded at the time each action is taken, and after completion
the record should be dated and signed by the person
responsible for the processing operations:
(a) the name of the product;
(b) the number of the batch being manufactured;
(c) dates and times of commencement, of significant
intermediate stages, and of completion of production;
(d) the name of the person responsible for each stage of
production;
(e) the initials of the operator(s) of different significant
steps of production and, where appropriate, of the
person(s) who checked each of these operations (e.g.
weighing);

32. (f ) the batch number and/or analytical control number and the quantity
of each starting material actually weighed (including the batch number
and amount of any recovered or reprocessed material added);
(g) any relevant processing operation or event and the major equipment
used;
(h) the in-process controls performed, the initials of the person(s)
carrying them out, and the results obtained;
(i) the amount of product obtained at different and pertinent stages of
manufacture (yield), together with comments or explanations for
significant deviations from the expected yield;
(j) notes on special problems including details, with signed
authorization for any deviation from the master formula.

33. • Batch Packaging Records:
• A batch packaging record should be kept for each batch or part
batch processed. It should be based on the relevant parts of the
approved packaging instructions, and the method of preparing
such records should be designed to avoid errors. (Copying or
validated computer programmes are recommended.
Transcribing from approved documents should be avoided.)
• Before any packaging operation begins, checks should be
made that the equipment and work station are clear of previous
products, documents or materials not required for the planned
packaging operations, and that equipment is clean and suitable
for use. These checks should be recorded.

34. • The following information should be recorded at the time each action
is taken, and the date and the person responsible should be clearly
identified by signature or electronic password:
(a) the name of the product, the batch number and the quantity
of bulk product to be packed, as well as the batch number
and the planned quantity of finished product that will be
obtained, the quantity actually obtained and the reconciliation;
(b) the date(s) and time(s) of the packaging operations;
(c) the name of the responsible person carrying out the
packaging operation;
(d) the initials of the operators of the different significant steps;
(e) the checks made for identity and conformity with the
packaging instructions, including the results of in-process
controls;

35. (f) details of the packaging operations carried out, including references
to equipment and the packaging lines used, and, when necessary, the
instructions for keeping the product unpacked or a record of returning
product that has not been packaged to the storage area;
(g) whenever possible, samples of the printed packaging materials used,
including specimens bearing the approval for the printing of and regular
check (where appropriate) of the batch number, expiry date, and any
additional overprinting;
(h) notes on any special problems, including details of any deviation
from the packaging instructions, with written authorization by an
appropriate person;
(i) the quantities and reference number or identification of all printed
pack aging materials and bulk product issued, used, destroyed or
returned to stock and the quantities of product obtained to permit an
adequate reconciliation.

36. Recommended Book:
 Organization Management, Tariq Academy. “Production Management” Chapter#10
 Page 44-46; Quality Assurance of Pharmaceutical Industry-BRM by WHO