Production and operations are a component of all manufacturing companies and quite a few service-based companies depending on how they are structured and managed. Production, of course, refers to the act of making goods, while an operation is defined as the act of working. When you put them together, production and operations turn raw materials, human resources and capital into products and services that can be sold to customers.


Production and operations managers not only oversee the making of goods or delivery of services but also have a principal role in quality control, planning and improving systems and customer satisfaction.

Functions of Production Departments 

Once upon a time, the only function of a production department was to produce products. As Henry Ford famously quipped about his Model T Ford, "Any customer can have a car painted any color that he wants so long as it is black." It was as simple as that, at least for major manufacturers. Throughout the Industrial Revolution, customers and indeed entire societies had to shift their expectations and lifestyles to accept what was being mass produced.

Today, it is much easier and more profitable for production departments to have key roles in a variety of business goals. Increased global competition and advances in technology make it easier for production departments to be just as mindful of a company's business goals as the front office.

Ensuring customer satisfaction by monitoring and improving quality standards and customizing client orders is an important element of production management. Production departments also have a direct role in reducing costs and improving efficiency, which helps the company to be profitable. For companies that are developing new products, the production department often has a vital role in developing and testing prototypes.

Functions of Production/Operations Management

Production and operations management can be divided into three major functions. Each of these functions usually arises at different stages in a production life cycle:

  1. Production planning: Operations managers decide on the details of the plan, such as how production will be done, where site locations should be and what resources will be needed.

  2. Production control: As products are being made or services are being delivered, management's primary role is to control schedules, quality and costs.

  3. Continuous improvement: In the third stage of the production life cycle, the function of operations management is to analyze data and develop more efficient ways of producing the goods or delivering the services. 

Production and Operations in the Big Picture

Production and operations managers have a integral role in a company's success, particularly in small- and medium-sized businesses that rely almost exclusively on producing products to stay in business. In fact, a typical operations manager controls about three-quarters of a company's assets if you include inventory, wages and benefits.

The pivotal role they hold means that production and operations management usually work very closely with other divisions in the company. The role of other divisions, like sales and marketing, finance and human resources is primarily to support production and operations. While boards and executives are responsible for setting goals and launching new products and services, it comes down to the production and operations managers to set the specifics on how it will be done and to implement those plans.

This becomes a complex balancing act, as the need for quality products and services needs to be weighed against available resources. Costs need to be kept low in order to meet budgets and allow for products, while inventory needs to be sufficient for future needs but not in excessive amounts that could depreciate in value and tie up capital unnecessarily.