What is the production strategy?

The production strategy as a function of the cooperative choice supports and concretizes the general strategy of the large business organization or the specific strategy of the individual business unit.

The production strategy is a set of decisions and actions that determine the role, goals, and capabilities of the production operating system so that they contribute to the overall strategy and maintain the competitive advantages of the enterprise.

Thus, in general, the operational strategy is the effective use of production capabilities and technologies to achieve cooperative and business goals. In each enterprise, it is possible to distinguish between different areas of strategy, and whether it is a corporate or business strategy, the implementation of the strategic decisions set out in them is carried out by optimizing and coordinating functional activities in managed subsystems and units of the enterprise. Other strategies can be distinguished – functional strategies.

They support strategic decisions, whether the latter is for a corporation or a separate business unit. As a result, FS operate with a tactical plan, because their decisions and actions have the character of subordinates and rather manifest themselves as “tactics”.

Logically, senior management must define the strategic importance of each function in the context of the overall mission of the enterprise.

At the functional level itself, the requirements prescribed by the corporate and business level must be met through the relevant strategies, taking into account the factors and features of the environment, potential, and state of production providing its own and organizational competitive advantage in general. In practice, several main approaches are used to build a production strategy:

Within the built potential – analyzes the potential of the enterprise and monitors the degree of capacity utilization and implementation of the main technical-economic indicators. The production system focuses on improving production;

Within market-oriented strategies. Here, production strategy is seen as a function of the market, and the driving forces are “cost leadership”, “product differentiation” or marketing segmentation;

Resource-oriented strategies. This approach is based on the assumption that the development, maintenance, and impact of specific operational resources increase the ways and opportunities to achieve competitiveness. Reference: “A systematic approach in management”,

In strictly formal terms, the approach and definition of the production strategy is 1 important and responsible act of choice in 1 changing set of categories of strategies.

The overall methodology for strategic decision-making includes the following recommendations (Reference: “Managerial decision making: methods and models”,

Providing conceptual frameworks for strategic decisions in the field of production.

Convincing that business strategy and product strategy are in sync.

Inspection of the current production system, to identify strengths and weaknesses by elements of production function and in comparison in groups as desired.

Classification of products into groups according to their life cycle and according to the community of objectives related to them.

Review of the degree of specialization in each production site.

Summarizing the conclusions and identifying guidelines for the strategic development of the production functional area.

Forecasting in production management – types of forecasts, quantitative forecasting methods.

The activity of production and operational management is performed in 2 main stages, of which the planning is the first.

The initial stage here is the planning activity forecasting, often defined as the art and science of predicting future events.

Planning is associated with determining future, desired conditions and in practice, these are the planned goals, because only with a pre-set goal and only with a preliminary forecast can seek some meaning and direction.

On the other hand, forecasting is a starting point in planning and, more importantly, is research to predict the future. In general, the objects of forecasting are the changes that may occur in the production enterprise and its environment and, as should be taken into account when making planning decisions.

Forecasting is ahead of planned activities and gives an idea of ​​the great variety and variety of types, approaches, and techniques for forecasting applied in practice. Thus, for production management, different types of forecasts can be useful, which should be grouped by appropriate characteristics:

Depending on the aspect of the forecast, economic, demographic, social, technological, etc. forecasts are possible;

According to the time horizon, they are subdivided into – long-term (over 2 years), medium-term (from 3 months to 2 years), short-term (up to 3 months);

According to the device used, the forecasting methods are quantitative and qualitative.

Quantitative (statistical) methods are based on finding the appropriate dependence on the behavior of the object of forecasting based on statistical information in past periods. Most often such objects in the production management are the demand and sales of certain goods or groups of them. By determining the dependence in question, it becomes possible to predict the behavior of the product and demand in the future. Quantitative methods are divided into 2 groups:

Time series analysis – these are forecasting with average values, taking into account seasonal influence, etc. These methods are mainly used in short-term forecasting if there are data for the relevant time series and in the medium term. The other type of quantitative method is the Causal method. They are based on the idea of ​​research and establishment of causal relationships in the phenomena with subsequent use of the relationship to manage and predict the phenomena in question.

The most commonly used method for establishing such relationships is linear regression, and a one-factor regression model is used for prediction. The possibilities and the need for various forecasts in the production management must know and take into account in their practice the advantages and limitations arising from the different forecasting methods.

By Robert Brown

Robert Brown is a longtime manager of a technology organization and author of a management book. In his spare time, Mr. Brown helps students get a better education by helping to publish free study materials.

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