Production management models play an extremely important role in ensuring that businesses operate effectively. cost optimization and enhance competitiveness. Therefore, it is necessary to choose the right model to achieve effective production - business - sustainable development.
In this article, Bizzi will introduce the 3 most widely applied production management models through analyzing concepts, advantages and application methods.
Overview of production management
Effective production management is vital for manufacturing enterprises – helping to optimize costs, improve quality, respond quickly to the market and develop sustainably.
When combined with digital technology (Cloud ERP, MES, AI…), the application of production management models is not only more accurate but also more flexible and intelligent.
What is production management?
Production management is a set of activities from planning, organizing to operating and controlling production activities. The main goal is optimize resource utilization (human resources, machinery, materials, time) to produce quality products/services, meet market demand and ensure profits.
Basic features include:
- It is an effective planning process that helps to regulate operations and ensure smooth flow.
- Closely related to the actual production process, with products/services produced based on quantitative specifications and minimum costs.
- Summarizes general principles for manufacturing, including facility design, inventory control, job design, budget control, quality control, job study, and costing.
The role of production management for business
- Timely response: Provide services and goods to customers on time.
- Cost optimization: Reduce production costs through new technology and methods.
- Improve quality: Improve product and service quality, build reputation and strengthen customer loyalty.
- Increase productivity: Improve labor productivity through training and human resource development.
- Safe working environment: Build a healthy working environment, minimize the risk of occupational accidents.
Core elements of an effective production management model
To have an effective production management model, it is necessary to focus on the following factors:
- Design: Technology and product process.
- Forecast: Production needs to understand the market.
- Control: Production, quality and inventory systems.
- Capacity: Management and production capacity, determining capacity scale.
- Positioning: Choose suitable production and consumption areas.
- Assignment/Arrangement: Layout of premises, machinery and production lines.
- Human resources: Resource planning based on production needs.
- Moderation: Set up schedule, divide work.
3 Most Popular Production Management Models
Below are the 3 most popular production management models today, widely applied depending on the type of business and industry characteristics:
Lean Manufacturing/Lean Production Management Model
- Concept: Modern management models focus on reduce waste and streamline production to improve business efficiency. It focuses on identifying and eliminating activities that do not create high value.
- Common types of waste: Inventory, processing, overproduction, downtime, transportation, product damage, operations, human resources.
- Benefits of Lean Manufacturing Management Model:
- Reduce shipping costs, improve responsiveness to customer needs.
- Reduce waste and increase investment efficiency, reduce production costs and lower prices
- Use resources effectively, limit defective products, achieve Just In Time goals.
- Application cases: When a business has poor data sources, there are many products in inventory, many raw materials in stock, it is difficult to achieve production targets, revenue forecasts are incorrect, and the production cycle is long.
Six Sigma Production Management Model
- Concept: Standards for measuring and managing performance, quality of production processes, finding and handling causes of errors from the early stages. Allows maximum 3-4 defects per 1 million products/process (error rate about 0.00034%).
- Benefit:
- Increase profits and reduce costs, understand and increase customer engagement
- Develop specific business strategies, focusing on corporate culture
- Scale your business, ensuring a flexible ecosystem.
- Application Instructions (DMAIC Process):
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- Define: Understand customer profile, quality requirements, and key business areas.
- Measure: Collect data on the manufacturing process to assess current quality.
- Analyze: Identify the gap between goals and results, the root cause of the problem.
- Improve: Design, develop and implement problem solving solutions.
- Control: Ensure solutions are effective and stable, monitor performance metrics.
Theory of Constraints (TOC) Production Management Model
- Concept: Methodology for determining limiting factors ("bottleneck") that hinder the achievement of business goals to improve them. There is always at least one constraint. There are two main types of constraints: Internal (limits of the system and the business) and external (outside the system limits).
- Purpose: Maximize production line capacity to generate maximum profits. Focus on optimizing cash flow, profitable investment, and converting inventory into sales.
- How to apply (5-step process):
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- Step 1: Identify system limitations.
- Step 2: Exploiting the bottleneck: Improve processes to achieve optimal capacity without upgrading equipment.
- Step 3: Bind other processes to constraints: Improve speed of dependent processes.
- Step 4: Improve productivity of bottlenecks: Upgrade or improve if capacity is not up to standard.
- Step 5: Repeat the process: Re-evaluate the system, find new limitations, and repeat the steps.
Applying technology in parallel with applying production management models
Applying technology in parallel with production management models helps businesses optimize performance, reduce costs, increase flexibility and control the entire production process. Below are the benefits and recommendations for technologies that support each production management model more effectively:
Outstanding benefits when applying technology
Applying technology brings many significant benefits to production management:
- Order management: Overview, detail, comprehensive, shorten working time, build comprehensive data system.
- Understand production information: Update and store information on product norms, capacities, orders, plans and production realities in real time.
- Effective price management: Improve accuracy in managing quotes, price ladders, and reduce confusion.
- Efficient warehouse management: Arrange and manage warehouse scientifically, update inventory information, import and export, defective products, support decision making.
- Comprehensive and accurate financial management: Update, store invoice information, manage cash flow, control budget, limit deficit.
Technology solutions to support production management
- Enterprise Resource Planning (ERP) System
- Concept and characteristics: Integrated systems manage core business processes (finance, HR, manufacturing, supply chain, sales, purchasing) in real time, providing a unified view and a single source of information. Many modern ERP systems integrate AI and predictive analytics.
- Typical modules involved in production:
- Manufacture: Supports production planning and scheduling, material requirements planning (MRP), plant floor control and quality management.
- Supply Chain Management (SCM): Oversee the entire supply chain, including inventory management, logistics, warehouse management, and order fulfillment.
- Purchase/Purchasing: Handles sourcing of materials and services, supplier management, purchase order creation and tracking.
- Use cases in production: Manufacturers use ERP to optimize production schedules, manage inventory levels, meet product quality goals, and control costs.
- Typical example: FPT IS has deployed SAP ERP resource management system for Truong Thanh Wood; ERPViet provides comprehensive ERP solutions for manufacturing enterprises.
- Manufacturing Execution System (MES)
- Concept and features: Comprehensive production management system, connecting and collecting real-time production data, digitizing the entire production process (from planning, creating orders, managing materials, tracking progress, quality control to managing finished product warehouse), visualizing data, flexibly integrating with other systems (ERP, CRM, SCM) and optimizing resources.
- Typical example: DACO provides SEEACT-MES solution, which has been successfully deployed at Tan Long Packaging Factory and Chau Thai Son Packaging Factory.
Bizzi.vn and its role in supporting financial management in the production management model
Bizzi.vn is a specialized financial automation platform that can Full integration with ERP systems existing to increase efficiency and accuracy in financial processes related to manufacturing operations. Bizzi is seen as a tool to help Optimize financial back-office processes, thereby indirectly supporting effective production management.
Features indirectly related to production:
- Input invoice processing (IPA + 3way): Automate the processing, checking, and reconciliation of invoices with purchase orders (POs) and warehouse receipts (GRs) using RPA and AI. This feature helps detect discrepancies, verify suppliers, store invoices, ensure accuracy and transparency of raw material costs and input services for production, contributing to optimize production costs and reduce financial waste.
- Business Expense Management (Bizzi Expense): Allows you to set budgets for each department or project, monitor spending against the allocated budget in real time, and alert you when spending exceeds the limit. This is extremely important in tight budget control for production resources (such as raw materials, labor costs, machine maintenance), helping businesses maintain production costs within allowable limits.
- Accounts Receivable Management (ARM): Including tracking customer and supplier debts, debt due alerts and automatic debt reminders. Although not directly part of the production process, effective cash flow management from debt collection helps ensure a continuous and stable source of finance for planned production activities.
- Integration capabilities: Bizzi.vn emphasizes the ability to seamlessly integrate with leading ERP systems such as Oracle NetSuite, SAP, Microsoft Dynamics 365 Finance, Odoo. This strategy allows businesses to enhance specific financial processes within the framework of the existing ERP system without replacing the entire infrastructure, thereby providing a more comprehensive view of production-related financial data.
- Related Benefits: Bizzi.vn claims to bring cost savings of up to 80% compared to other solutions in invoice processing and cost management, helping CEOs effectively control finances through setup, control and monitoring.
Conclude
The production management model Modern practices such as Lean, Six Sigma and TOC provide powerful frameworks for businesses to optimize processes, improve quality and reduce waste. The application of technology, especially ERP and MES systems, is a key factor to achieve superior performance in the context of the Industrial Revolution 4.0.
In particular, financial automation solutions such as Bizzi.vn plays an important supporting role. Although it does not directly manage production, Bizzi.vn helps businesses closely control production-related costs through automated invoice processing, expense and debt management, as well as the ability to seamlessly integrate with existing ERP systems. This ensures that financial resources are used effectively, contributing to the overall success of production operations and business goals of the enterprise.
Click here to explore and try out Bizzi's features: https://bizzi.vn/dang-ky-dung-thu/.
