3 Production Policies and Procedures

3.1 Purpose of production policies and procedures

The purpose of production management controls is to enable and facilitate the operation of running the whole production function of your organization. In lesson 2, we dealt with issues related to: Establishing your production function; and selecting and appointing production human resources. Crafting and executing your production policies and procedures is described in this lesson.

Developing and implementing detail production policies and procedures may be done by the functional managers of the various production units (manufacturing, quality, inventory control, purchasing, etc.). All these production policies and procedures should be ratified by the board before they are put into operational status.

The most crucial production policies and procedures you need to run your production function are presented next.

3.2 Production Policies and Procedures Manual

For the full execution of the production process of your business organization you need:

  1. A set of production policies (specifying what is to be done) and
  2. A set of procedures (detailing how what is specified in policies is to be done).

These should to be cost effective and they should align with your company’s corporate vision, mission, values and objectives.

Developing basic production policies and procedures helps to make production more flexible and enhance quality. Producing goods and delivering services and quality frequently rely on what may seem like two obvious elements: communication and coordination.

My consulting experience has shown that: production policies and procedures must be ratified by the board; these enable and facilitate the communication process in production issues; and these (policies and procedures) can help may the coordination of people, materials and equipment more consistent.These policies and procedures should be included in a manual, and should be reviewed annually and kept current at all times. These policies and procedures should cover the following issues:

  1. Purchasing/Procurement
  2. Supply chain management
  3. Freight management (incoming/outgoing and customer)
  4. Inventory management
  5. Business Continuity and Emergency management (evacuation instructions and plan)
  6. Manufacturing (of new products) or assembly of new products on pre-fabricated parts and sub-assemblies
  7. Standardization and Quality Management Procedures
  8. Receiving and Returns (return to stock, return to vendor)
  9. Health and Safety
  10. Environment
  11. Performance management and measurement, and
  12. Repairs and Customer support, etc.

Developing production policies and procedures can best be done by the use of a methodology and a questionnaire.

Production policies and procedures should be based on a set of national laws and regulations, and international (U.N., E.U., OECD, etc.) guidelines and specific-industry codes and standards, such as: Industrial Engineering and Manufacturing Standards, Quality Standards, Financial Accounting Standards, Audit Standards, Commerce Acts, Industrial Standards, Civil Code, Tax and Customs Code, Electronic Fund Transfer Act, Health, Fire and Safety Regulations, etc.

The most important, as a minimum, production policies relate to health, safety, environment protection, fire safety, business continuity and quality.

Also another most crucial procedure for production pertains to purchasing.

3.3 Purchasing Procedure

This also another crucial policy in establishing and running your production operation as it concerns getting inputs and resources necessary for your production. It belongs to both Input and Resources components of your company’s Production System . This procedure is crucial as it mitigates if not minimizes altogether the occurrence of any potential cases of purchasing fraud in your business enterprise.

The steps of this procedure are described next.

Step 1: Purchasing Forms Design

Step 2: Purchase Requisition

Step 3: Market Research

Step 4: Proposal Evaluation

Step 5: Expenditure Approval

Step 6: Placement of Purchase Order

Step 7: Final Delivery

In conclusion, when you think of the production policies and procedures outlined in this lesson (Health and Safety Policy, Fire Safety and Evacuation plan, Purchasing Procedure, etc.) and what they may mean to you and your business organization, consider the following quotation by the IKEA Founder, Ingvar Kamprad:

‘Only those who are asleep make no mistakes’.

Recommendation 3: Design and implement effective production policies and procedures considering the following: Assign one person to be responsible for each production policy and associated procedures. Your production manager should ensure that all these are well coordinated. Train all people to apply them correctly. Monitor their use and update them, at least, once per year. Have them available online to make communication, training and application easier.