System approach of production function

System Approach of
Production Function

System Approach of Production Function
 A system is the combination of subsystems.
 Every system is the sub system of larger system.
If we consider a global economic system, a national
economy are sub systems.
If we consider a national economy is a
system, different industries are sub systems.
When a industry is a system different organization or
firms are sub system
An organization is a combination of different
components (Departments) working together to achieve
specific goal(s).
It is a set of different sub-systems ( departments). So it
is called a system.
Among the different Departments, production
management is one of the them.

Contd……….
 An Organizational Structure as a
system

The Operation Department is considered as POM

Contd……….
When considering POM itself POM is system
of different sub systems.
The components or sub systems are
input, process, output, feedback and random
fluctuations.
 Strong interaction makes the production
function supportive to meet organizational
goal(s).
The components of system always inter
related and having interaction each other to
achieve the same (organizational) goal(s).

The Economic System Transforms
Inputs to Outputs
Random Fluctuations (
Disturbances)

Input Process Outputs
s
Materials, Land Goods and
, Labor, Capital Services
, Management,
Time
Conversion Process

Feedback loop

Inputs:
 Inputs are the basic needs or resources of the
production system.
 Inputs may be
land, building, labour, capital, management, raw
material and WIP.
 The quality and nature of input determine the
quality of output.
 Land and building should be located at the
facilite area of customers.
 Capital should be having low cost (i.e. low cost
of capital)
 Raw material should have quality and low cost.
 Labour or human resource is an important input
for production and operation management

Process:
 It is the conversion process of inputs to outputs.
 It includes
machine, equipments, technology, and
processing steps.
 Major function of the process is creating
utility(ies) in inputs (raw materials) and add
economic values.
 The pace of technology differs in conversion
process.
 It creates noise, light, wastage, which are not
environment friendly.
 In the age of consumerism the management
should choose environment friendly conversion
process.
 Selection of appropriate, efficient and

Outputs:
 Output Is the desired result of the
(production) system.
 It will tangible or intangible in nature.
 Production organization- tangible (car, cloths
ect.)
 Service organization- intangible ( bank
services, hair services)
 Some time outputs may be quasi in nature
(mixed)- restaurant
 The output should be of desired utility in
terms of quality, cost and delivery or of
stakeholder’s interest
(customer, shareholders)

Random Fluctuations or
disturbances:
It is the unplanned or uncontrolled
environmental influences in the conversion
process that causes planned and actual
output differ.
It may be categorized as:
 Internal Factors- Human
Resources, Breakdown of machines, supply
of raw materials ( controllable but unplanned)
External Factors- Electricity
supply, flood, earthquake, government
policies. ( Uncontrollable and unplanned)

Feedback:
Feed back is the control mechanism of the
production function which support
management whether organizational
activities need adjustment??
It has three phases:
 Set the goal
 Determine the actual result
 Comparison with the plane or actual result- (
+, - or = )
 + or - result: need adjustment

Conclusion:
 POM system is the part of organization that produces
the organizational physical product or services.
 Inputs are the basic need of production functions.
 Conversion process is the process of creation of
unility(ies) and economic value added to the inputs.
 Output is the desired physical product or services
which fulfill the desired of the customer as well as
stakeholders.
 Random Fluctuations are the unplanned or
uncontrolled environmental influences which
influence the production process.
 Feedback is the control mechanism of the production
function.
“Production Function is the system of conversion of
inputs into outputs with addition of economic values
and utility(ies).”

System approach of production function

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System approach of production function