Production / Operations

In a company, the Production area will be in charge (in a few words) of transforming supplies, resources and materials into a final deliverable product; this area will apply the previous planning in order to obtain a high-quality product with a low cost. The use of the facilities, equipment, specialized workers, tools and every device part of the productive chain will be part of this process that ends with the product delivered to the customer.

At the same time, sometimes we hear about the existence of an Operations Area; this area is in charge of transforming raw material, the same as the Production area, but this time it will end up being a service instead of a product, an intangible deliverable. 

Usually, these processes tend to have an input and an output and, in between, we monitor and quantify the efforts made. The information obtained will be registered to assess flaws, correct them, and, if it is possible, avoid them in the future.

In these areas we can see the application of the principles of every business organization:

• Efficiency: the way of taking advantage of the available resources.
• Productivity: how to increase the number of deliverables with the same efforts.
• Cost/benefit: the quantification of the real cost of the final product and the obtained qualities. 
• Quality: the constant search for improving the deliverable, no matter if it is a product or a service, by working constantly on the flaws so that they are avoided in the future.

The difference between one area and the other may seem hypothetical or academic but in real life, you can understand their difference. If we think of a financial company or a bank, they are companies that provide a service but they also have production departments so they are in charge of offering tangible goods such as cards, checks, credits, etc, depending on the case. 

In other words, it is clear that a medium-sized company will provide both services and products focused on comfort and the best experience for the customer.

The development of products and services for their commercialization is an intrinsic part of human beings because, from the beginning of time, they had to work in an organized way and exchange products. In the last few centuries, it took a different direction and started to be based on the principles of modern science, leaving behind empirical methods.

The roots of production management as we know it today, originated during the 18th and 19th centuries, and it reached its climax in the 20th century with the appearance of automated processes and technologies devoted to customer service.

Taken those times as a reference, we can draw the following diagram: 

1. Pre-industrial Revolution: During this period, the Scottish economist Adam Smith, known as the "father of modern economy", established the main guidelines for production management in his book named "The wealth of nations" (1776). Here, the division of labor is approached scientifically in order to get better results. Thanks to his proposal, companies started to organized more efficiently and the production revolution began.
Following Smith's footsteps, Ford modernized his theory by establishing the assembly line and creating the new theory of Fordism. It can also be said that the French engineer Henry Fayol made important contributions to the ideas of the time by publishing his "14 principles of management".

2. Industrial Revolutions: These revolutions have a very important role in the history of production because they involve implementing machines in everyday work to increase production. There was an exodus of workers looking for better working opportunities since the demand was growing and growing; they changed living in the suburbs for living in the city to work in factories. Workers became a new social class ("working class") as opposed to the "capitalists". Even though it meant a great advance in production, it did not necessarily was the same in the quality of the products; that is why Taylor was very important in the study of industrial production and in its use for improving it. Taylorism introduces new processes such as "assembly lines" and "on-time deliveries".

3. World Wars: Motivated by competitiveness and dominance, managers and directors of the companies of the time started to hire specialists in the subject to increase productivity. Together with software and the first computers, they achieved the massiveness they were looking for and which implied greater power both economic and military.

4. End of the 20th century: Taking the 1950s as a starting point, the last advancements have been developing faster and faster since their main tool is the technology which advances even faster than human processes that involved a change in ideology.

We can distinguish two contemporary processes, "operations management" that develops sampling programs together with the "control charts" by the use of statistics and data collection. At that time, there was a change in paradigm because customers and their needs became the most important thing (and not massive and uncontrolled production as it was before).  On the other hand, "operations management" established the needs for intangible goods instead of tangible ones, which would be named "services". Marketing and finances worked at the service of the manager that changed the approach; Tahichi Ohno, known as the father of the "Toyota" system, became important in this stage because his main goal was to deliver products on time through the division of tasks. Even though this method developed in the 1930s, it was after the Oil Crisis in the 1970s that became important. 

5. Present day: current processes focused on rethinking previous strategies and updating them. Now, thanks to modern technologies and artificial intelligence, production is based on the following concepts: