In this blog post, we will look at how production management and supply chain optimization contribute to strengthening the global competitiveness of the automotive industry.
Let’s say you are reading this article and you are going to start a car manufacturing company. What should be in this car company and how should you run this company to gain an edge in the fierce competition in the car market? The answer to this question is production management, a branch of industrial engineering.
Production management is a field that plays a very important role in industrial engineering. Production management is a comprehensive term that refers to various methods that help companies that provide products or services minimize costs and manage their business activities more efficiently. Since this field deals with the overall production activities of a company, its importance is directly linked to the survival of the company. In particular, as competition in the global market becomes fiercer, production management is becoming a key strategy that goes beyond simple cost reduction to enable innovative product development and rapid market response.
In the case of a manufacturing company, the entire process from purchasing raw materials to manufacturing products and finally selling products is called the supply chain. This supply chain does not simply refer to the flow of physical materials or parts, but also includes the flow of information and funds. Therefore, the main task of production management is to manage the supply chain to ensure that all parts of the company’s activities produce the maximum output with the least input of resources.
If you think about what activities are required to assemble and sell a car along the supply chain of an automobile company, you will have a better understanding of the scope of production management. To assemble a car, you must first purchase parts from subcontractors. At this point, you need to consider which subcontractor to choose, the quality and price of the parts, and the stability of supply. You also need to decide which parts to assemble in which order, how much labor to put in, and what schedule to complete the product. You also need to identify defective products among the finished products and manage their quality. Quality management goes beyond simply determining whether a product is defective or not, and it serves as an important factor in meeting customer needs and maintaining brand value.
The finished products are stored in a warehouse with raw materials until they are sold. At this point, it is necessary to effectively manage inventory to reduce costs. Excessive inventory can lead to a lack of funds, and conversely, insufficient inventory can lead to a situation where customer demand cannot be met. Therefore, inventory management goes beyond simple cost reduction and directly affects customer satisfaction and corporate reliability.
It is also important to deliver the products sold to consumers in the shortest time and at the lowest cost through an effective distribution network. The choice of distribution network is an important factor in determining the level of service and customer satisfaction of a company, and in production management, it is to use scientific methodologies studied in industrial engineering to achieve higher productivity in all activities.
Production management starts with establishing effective relationships with subcontractors and partners. These relationships go beyond simply signing a contract and mean establishing a cooperative system that maximizes mutual benefits. Production management also involves selecting the optimal factory location using a repair model, forecasting demand, and calculating based on warehouse storage capacity. This allows them to manage inventory and provide rational and effective answers to problems such as calculating the least-cost distribution plan. They mainly use optimization and linear programming to create mathematical models that simplify complex real-life situations and calculate answers mathematically. This allows them to obtain more specific and scientific answers than in general business administration.
For example, when a car company wants to build a new assembly plant, they use mathematical methods to select the optimal location. The company scores the candidate regions selected on various factors, including the distance from suppliers, the distance from customers, the cost of labor, the climate, the ease of air distribution, and access to ports. The company then calculates the weighted score and selects the most reasonable choice when the candidate region with the highest score is selected. This example is simple, but it shows one of the methods used in production management.
In recent years, it has become common for multinational companies to set up production plants in regions with low labor costs and conduct business activities worldwide. Therefore, production management is also studying a wider range of corporate management activities to reflect this aspect. For example, unlike traditional supermarkets that distribute their products from warehouses in the United States only, Amazon, which operates globally, must consider where to locate distribution warehouses around the world. At this point, production management plays an important role in maximizing competitiveness by optimizing the global supply chain, not just in selecting the location for establishing a factory.
In today’s fiercely competitive market, only companies that perform production management efficiently can survive and remain competitive. Production management is a concept that originated in the manufacturing industry, which is the manufacture and distribution of products. However, it has recently been used in the service industry and is attracting attention as a system that combines services and products. For example, the principles of production management can be applied to managing intangible products such as IT services. As such, production management is becoming an essential element in maintaining a company’s competitiveness by adapting to the ever-changing market environment.
