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 thinking of starting a car manufacturing company. What does this car company need, and how should you run it to gain an edge in the fiercely competitive automotive market? The answer to these questions can be found in production management, a branch of industrial engineering. Production management is a very important part of industrial engineering. Production management refers to a comprehensive set of methods that help companies that provide products or services minimize costs and operate more efficiently. This field deals with the overall production activities of a company, so its importance is directly linked to the survival of the company.
In particular, as competition in the global market intensifies, production management has gone beyond simple cost reduction and has become a core strategy that enables innovative product development and rapid market response.
For manufacturing companies that produce products, the entire process from purchasing raw materials to manufacturing products and finally selling them is called the supply chain. This supply chain does not simply refer to the flow of physical materials and parts, but also includes the flow of information and funds. Therefore, the main task of production management is to manage all aspects of business activities along this supply chain to maximize production with minimal resource input.
You can better understand the scope of production management by considering the activities required to assemble and sell a car along the supply chain of an automobile manufacturer. To assemble a car, parts must first be purchased from subcontractors. At this point, it is necessary to consider which subcontractors to choose, the quality and price of parts, and the stability of supply. It is also necessary to determine the order in which parts will be assembled, how much labor will be required, and the schedule for completing the product. Quality must also be managed by identifying defective products among the finished products. Quality management goes beyond simply determining whether a product is defective or not, and plays an important role 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, effective inventory management is essential to reduce costs. Excessive inventory can tie up funds, while insufficient inventory can lead to situations where customer demand cannot be met. Therefore, inventory management goes beyond simple cost reduction and acts as a factor that directly affects customer satisfaction and corporate reliability.
It is also important to deliver products 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 a company’s service level and customer satisfaction. In production management, scientific methodologies researched in industrial engineering are used to achieve higher productivity in all of these activities.
Production management begins with establishing relationships with effective subcontractors and partners. These relationships go beyond simply signing contracts and involve building cooperative systems that maximize mutual benefits. Production management also uses mathematical models to select the optimal factory location, forecast demand, and calculate warehouse storage capacity. This enables us to provide rational and effective solutions to issues such as inventory management and minimum-cost distribution planning. We simplify complex real-world situations using mathematical models, mainly through optimization and linear programming, and calculate answers mathematically. This allows us to find more specific and scientific answers than general management theory.
For example, when an automobile company wants to build a new assembly plant, we use mathematical methods to select the optimal location. The company selects candidate locations and assigns scores to various factors such as distance from suppliers, distance from customers, labor costs, climate, ease of air distribution, and accessibility to ports. These scores are then multiplied by the weightings assigned by the company, and the candidate location with the highest score is selected as the most reasonable choice. This example is simple, but it shows one of the methods used in production management.
Recently, it has become common for multinational companies to set up production plants in regions with low labor costs and conduct business activities worldwide. For this reason, production management is also studying a wider range of business management activities to reflect this aspect. For example, unlike traditional supermarkets that only had warehouses in the United States and distributed goods domestically, Amazon, which conducts business worldwide, must consider where to locate its distribution warehouses around the world. In this case, production management plays an important role in maximizing competitiveness through global supply chain optimization, rather than simply selecting a location for a factory.
In today’s highly competitive market, only companies that perform production management efficiently can remain competitive and survive. Production management is a concept that originated in the manufacturing industry, where it refers to the manufacturing and distribution of products. However, in recent years, it has also been used in the service industry to combine services and products, attracting considerable attention. For example, the principles of production management can also be applied to the management of intangible products such as IT services. As such, production management is an essential factor in maintaining a company’s competitiveness by adapting to the ever-changing market environment.
