FLASH SALE! - "FINANCIAL MODELING COURSE BUNDLE AT 60% OFF" Enroll Now

Production Department

Updated on January 3, 2024
Article byRutan Bhattacharyya
Reviewed byDheeraj Vaidya, CFA, FRM

What Is The Production Department?

Production department refers to a department or functional area in an organization or business that shoulders the responsibility of the manufacturing process. The primary aim of this department is to reduce production costs by ensuring the optimal usage of resources like labor, equipment, and raw materials.  

Production Department

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Production Department (wallstreetmojo.com)

The conversion of raw materials to finished goods takes place in this part of the organization. The department works closely with other areas within an organization, for example, the purchasing, quality assurance, and finance departments. Depending on a business’s size, such a department can have teams or sub-departments, making a major contribution toward a business’s competitiveness and overall success.

Key Takeaways

  • The production department refers to a specific division with an organization that takes responsibility for the production process.
  • The production department structure includes different sub-divisions. Some examples of these sub-divisions include quality assurance, production planning, manufacturing and assembly, and manufacturing engineering.
  • Unlike a production department, a business’s service department is responsible for providing customer service.
  • Key production department objectives include planning, scheduling, and carrying out manufacturing processes to make sure that labor, raw materials, and equipment are used in the most efficient manner.

Production Department Explained

The production department refers to a certain section of an organization that is responsible for achieving the desired results in the manufacturing process. It is directly involved in the planning, implementing, and directing operations to transform the procured raw materials into the business’s finished goods.

Some key production department objectives include cost minimization, production planning, optimization of resource usage, ensuring an efficient schedule, and choosing design and product. Moreover, it aims to deliver the right output levels and produce within timelines.

This area of a business could be the largest department in an organization. It can employ machine operators, maintenance personnel, and machine installation specialists. An important focus area of this area of any business is efficiency. By carrying out a cost-effective and efficient manufacturing process, such a department plays a vital role in increasing profit margins and improving an organization’s overall financial performance.

Financial Modeling & Valuation Courses Bundle (25+ Hours Video Series)

–>> If you want to learn Financial Modeling & Valuation professionally , then do check this ​Financial Modeling & Valuation Course Bundle​ (25+ hours of video tutorials with step by step McDonald’s Financial Model). Unlock the art of financial modeling and valuation with a comprehensive course covering McDonald’s forecast methodologies, advanced valuation techniques, and financial statements.

Organizational Structure

The production department structure of an organization includes the following components:

#1 – Facility Management

This part of the structure controls the cost, facility, and safety of facilities utilized to manufacture products. Precisely, facility management ensures facility security, routine facility maintenance, efficient usage of the production floor space, and workers’ safety. Popular job titles for people related to facility management in production departments are ‘facility technician’ and ‘maintenance technician’.

#2 – Manufacturing Engineering

It deals with designing and developing systems, such as work methods, software applications, etc., utilized when manufacturing. Moreover, it involves developing equipment repair processes to reduce production-related delays and ensuring the machinery and production process comply with industry standards and customer expectations. ‘Manufacturing engineer and ‘industrial engineer’ are common designations for persons engaged in manufacturing engineering.

#3 – Production And Manufacturing

This involves a section of the department using various techniques and processes to convert inputs, for example, partially finished products and raw materials, into finished products. ‘Chief operating officer’ is a very popular job title in the case of production and manufacturing.

#4 – Manufacturing And Assembly

This part of the department has the responsibility of creating finished products. Production techniques rely on the goods being manufactured, consumer demand, and corporate strategy. Possible production techniques include just-in-time or JIT manufacturing, rapid manufacturing, lean manufacturing, mass customization, and agile manufacturing. ‘Production associate’ and ‘assembler’ are two common job titles with regard to facility management.

#5 – Quality Assurance

Quality assurance deals with thoroughly examining materials and products before, after, and during production to identify deviations from specifications and defects. The persons responsible for quality control record inspection results in their test reports and help in analyzing and rectifying issues in the manufacturing process. Common job titles for key individuals engaging in quality assurance are ‘quality assurance specialist’ and ‘quality control inspector’.

#6 – Production Planning

Persons engaged in production planning get the job title of production assistant or production planner.

Functions

Some noteworthy functions of such a department are as follows:

  • Procurement: This department procures the resources required for the manufacturing process.
  • Planning: Such a department creates a plan and schedules the manufacturing process. Planning involves figuring out the resources necessary for production, for example, equipment and raw materials.  
  • Inventory Management: The department manages inventory levels of the organization and ensures that the finished products and the required materials are available if and when required.
  • Maintenance: Such a department takes the responsibility of maintaining the production equipment. They keep the machines in optimal condition by scheduling repairs and maintenance activities.
  • Cost Management: The department manages all costs connected to the manufacturing process. As part of the cost management responsibility, such a department optimizes production procedures to minimize costs and ensures the purchase of the required resources at the best prices.
  • Quality Control: This department is responsible for ensuring that the products manufactured fulfill the set quality standards. Note that this includes ensuring that quality control procedures are conducted efficiently, monitoring the manufacturing processes, and testing the final products.
  • Manufacturing: Such a department controls the production or manufacturing process controls the production process, which includes ensuring the fulfillment of manufacturing targets, quality control, and managing production lines.

Examples

Let us look at a few production department examples to understand the concept better.

Example #1

Suppose Company ABC is a company that manufactures t-shirts. The production process of the organization requires key resources, like labor, machinery, and raw materials. Examples of raw materials in the process include tags, labels, fabric, buttons, etc. Different people in the production department of the organization are responsible for different tasks. For example, —

  • The production manager sets the product-related deadlines and goals
  • The manufacturing engineering team carries out maintenance of the production equipment.
  • The facility technician ensures the security of the facility.

In addition, the quality assurance team ensures the final products meet the predetermined standards.

The top-level managers of the organization make the necessary changes based on the performance delivered to minimize costs and maximize output.

Example #2

Panasonic Energy, a popular name in the battery vehicle technology space, is set to increase its production department’s output with regard to lithium-ion batteries of high capacity by 4 times within 2031. This seems to be a wise move considering the battery electric vehicles’ demand is significantly increasing worldwide.

The organization will have supply chain partners near its important manufacturing facilities in North America. This will help Panasonic Energy to secure both the quantity and quality of the materials required to boost production in the years to come.

Importance

One can go through the following points to understand the importance of this department:

  • It helps in meeting consumer demand by manufacturing products per a predefined schedule.
  • Such a department optimizes resource usage, which minimizes the cost of production.
  • The department plays a crucial role by ensuring that the products manufactured fulfill certain standards in terms of quality.
  • When such a department is efficient, it can positively impact an organization’s competitiveness.
  • The proper functioning of this department is vital for customer satisfaction.

In addition, efficient production with streamlined operations can increase productivity. This can benefit the organization and its investors.

Production Department vs Service Department

Let us check out the differences between them:

Production DepartmentService Department
It is responsible for converting raw materials and other inputs into finished products.This division of a business offers customer service.
The primary aim of this department is to minimize the cost of production and ensure the efficient usage of all available resources.Its aim is to fulfill customers’ requirements and ensure their satisfaction.
Typically, people working in the production department do not interact with customers.People working in the service department need to interact with customers.

Frequently Asked Questions (FAQs)

1. How to handle manpower in the production department?

Let us look at some tips that may help in handling manpower efficiently.
– Hire people diligently
– Focus on workforce retention
– Hire efficient supervisors and managers
– Prioritize internal promotions
Finally, measure individuals’ productivity to understand which areas require improvement.

2. How is the production department connected with the purchasing department?

The procurement or purchasing team gets requisition of all resources required in the manufacturing process from the production team. Simply put, the purchasing team acquires the necessary resources for manufacturing finished products.

3. What are the challenges of production departments?

There can be various challenges faced by the production department of an organization. Some of them are as follows:
– Adapting to technological changes
– Inventory management
– Labor shortage
– Automation
– Inefficient manufacturing process
– Lack of or inefficient consumer demand forecasting
Another noteworthy challenge faced by production departments of various businesses is supply chain disruption.

This article has been a guide to what is Production Department. We explain its functions, organizational structure, importance, & comparison with service department. You may also take a look at the useful articles below –

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *