Strategic Production and Operations Management

Concept and Evolution of Production Management

Today, companies are in a process of internationalization, facing intense competition and rapid technological change. The role of the Direction of Production and Operations (DPO) has evolved significantly.

Initially, it followed a technical approach (traditional approach). Currently, the DPO is considered a strategic element within the company.

Approaches to DPO Study

The study of DPO can be conducted through various approaches:

• Systematic approach: Based on systems theory, it considers the company an open and complex entity requiring conscious coordination. The operating system is broken down into three levels: physical, financial, and human. The system owning the basic factors is subdivided into three sub-levels: supply, production, and marketing.
• Strategic approach: The production function is considered a key element in corporate strategies. In this approach, the decisions made regarding operations are grouped into two categories:
  • Strategic decisions: Unstructured decisions regarding processes, products, and facilities. Their effects are long-term, and once taken, correction is very expensive or impossible.
  • Tactical decisions: More structured, routine, and repetitive decisions.
• Lifecycle approach: In this approach, the production system is born, grows, and is directed toward certain goals by following a sequence of decisions.

Strategic Relevance of the Production Function

In recent decades, production strategies have become especially relevant. A company's production system is a set of entities and elements organized by a particular process, aiming to generate a final product.

Categories of Production Decisions

The set of production decisions fits into the following sections:

1. Strategic Decisions

• Technology: Technology relates to the knowledge and tools to be used in the production process.
• Degree of vertical integration: Management must decide the degree of integration to maintain for the final product versus outsourcing.
• Facilities: These concern the size and location of manufacturing capacity, production plants, and warehouses.

2. Tactical Decisions

These are operational decisions that affect current spending and impact profit in the short and medium term.

• Planning systems and production control: Determining if the system is centralized or decentralized and selecting the most suitable production plan.
• Organization: Defining an appropriate structure for the production area.
• HR management: The Human Resources area provides the production staff required for operations.
• Quality management: The company can opt for quality control focused on reducing defects in final products or adopt a quality-based approach to the entire process.

3. Operational Decisions

These refer to the decisions taken for the execution of specific orders.