Production and other functional areas


An organization is considered as a system having several sub-systems. Marketing sub-system has to make available the products to the consumers for their consumption. It receives sales orders, which are communicated to the production sub-system. Production utilizes raw materials, which are processed on plant and machinery to turn out a value-added finished product. In other words, an organization utilizes the available facilities to satisfy the market.

While manufacturing products, the production function organizes its resources in accordance with the production plan. The finance function makes available finance necessary to carry out their functions to all other departments. Personnel function is a support function which plans and provides manpower to all other sub-systems. It formulates suitable personnel policies.

All business sub-systems are inter-linked and inter-dependent. Marketing may fail, if the production does not fulfill the expectations of customers by providing suitably manufactured products.

Production may fail in the absence of the working capital necessary to buy raw material for turning out the product. If skilled manpower is not available all other plans will come to a naught. The co-ordination amongst the various sub-systems is necessary for effective functioning of any organization.

Interface of Production and other Functions

Accountants have to understand the basic inventory management and capacity utilization.

Management Accountants must know process costing and variance analysis.

Financial Managers take capital budgeting decision, based on production requirements. Cash flow statements and current asset management has to be examined in the light of production decisions. Make-or-buy or plant expansion has financial implications.

Marketing Managers have to understand production schedules to meet their delivery requirements. They should understand ho-w products can be customized. Production has a great role to play in new product development. In service industries, marketing and operation overlap each other.

Personnel department is interested in understanding job analysis, job descriptions, job specifications and job evaluation. They develop compensation plans and incentive system, keeping production requirements in mind.

MIS has to install suitable control systems for production control which takes inputs from marketing information system and provides output to purchasing information system.

Entrepreneurs owe their success to successful production planning supported by working capital management and inventory management.