Companies that deliver top-quality products created through industrial manufacturing base their success on the efficiency of the production process. Decisions made in just one aspect of the process can affect the entire picture and ultimately the customer’s satisfaction with the product. In large-scale production, mistakes are costly, which is why it’s essential to plan the process thoroughly and anticipate potential issues before they arise. Smart production management is a necessary investment that leads to increased productivity, reduced costs, and higher revenue.
For this reason, this article provides information that will be useful in setting up a production process – what it includes, how to plan and calculate it, how to reduce production costs, and how to make the production process in your company as efficient and profitable as possible.
What is a production process?
The production process is the foundation of successful industrial manufacturing and the most important part of a company’s entire production system. It includes all the steps necessary to convert input values (such as materials, energy, and information) into new output values (such as products, services, or information).
Between the inputs and outputs are the production resources that execute or are used in the production process. These primarily include key aspects of operational efficiency: staff, financial resources, facilities, equipment, documentation, and production methods and techniques.
The production process does not only occur in companies focused on creating physical products—it is also vital in areas such as healthcare, transportation, food, and advertising, which are primarily service-oriented. The type of production process required depends on whether the end user receives a product or a service.
Today, companies that want to stay ahead of the competition and remain successful must pay attention to every aspect of their production process and find ways to improve its quality and efficiency. Ongoing improvements and a customer-focused approach lead to resource savings without compromising end-user satisfaction.
Various losses can reduce production efficiency, such as overproduction, transport (logistics), waiting and downtime, unnecessary movements, excessive and often unnecessary processing, defective products, and inventory. Each of these increases the time required for production, ultimately reducing revenue.
To avoid such outcomes, quality production planning is essential.
Production Planning – A Strategy for Success
Production planning is the process of creating a strategy for producing certain goods or services to ensure that once production starts, it runs smoothly. It’s a set of instructions and guidelines for everyone involved, helping save material, energy, money, and time. A well-defined plan outlines who does what, when, where, and how, and it serves as a roadmap with defined resources, processes, activity order, and all other elements needed to achieve production goals.
To create a successful production plan or improve an existing one, you can follow a proven framework and adapt it to your needs:
As mentioned earlier, one common loss in production is inaccurate demand forecasting, leading to overproduction. To avoid this, estimate how much of a certain product is needed within a given timeframe. Existing order confirmations help, but market trends, customer economic status, marketing campaigns, customer behavior, pricing, and demand structure should also be considered.
From raw materials to the final product, there are many options. Choose the processes and resources that provide maximum efficiency. Ensure you have the right equipment, materials, and staff. Prepare for potential issues like equipment failure or supplier delays.
Once the best production strategy is selected, share the plan with all departments involved (HR, finance, marketing, etc.). Awareness reduces the risk of future issues.
Even after production begins, monitoring ensures everything works as planned. A control system allows prompt action and corrections before major losses occur.
After gaining experience, use feedback to refine your plan. Regular updates make the plan flexible and resilient to new challenges.
Although it is nearly impossible to predict and prepare for every potential scenario in the production process, creating a solid production plan can significantly reduce resource losses. It is important to keep plans flexible and regularly update them with current insights to allow for easier adjustments when necessary.
Production Accounting – The Foundation of a Production Plan
Production accounting stands out as the foundation of a high-quality and sustainable production plan. Understanding production accounting is essential for correctly determining product pricing and interpreting production data—without it, managing production is nearly impossible. Budgeting is inherently tied to production as it aligns the production process with financial outcomes and/or product quality, given that production typically requires substantial investment long before the first finished product is sold.
Production accounting helps with better production planning by determining accurate inventory values, identifying unit costs of each product, and ultimately generating precise, reliable, and actionable information that can be used for future planning and cost control.
Cost calculation is a critical part of the production process, crucial for accurate external reporting and efficient internal management. Manufacturing companies not only have production areas like factories but also administrative units that organize and lead the business. Business costs are therefore split between those incurred in production and those arising in administration and management.
If cost-tracking is not properly set up, production accounting can become inaccurate, leading to incorrect valuation of finished goods and work-in-progress, and thus incorrect margin calculations.
Due to its complexity and dependence on various production variables, production accounting is a demanding process. Yet, it also simplifies future production steps, ultimately enabling maximum profitability.
PAUK – The Production Software for the Next Level of Business
Production planning, accounting, costs, materials, staff... Managing a production process is a complex task that involves overseeing numerous interconnected activities. Fortunately, there are ready-made software solutions like PAUK, created by experts who understand production processes and work to optimize every component to meet your goals. Technological advancements have led to powerful production management systems that address key aspects of operational efficiency in manufacturing.
One such system is PAUK – software carefully designed to support manufacturing companies of all sizes. PAUK enables smart management, planning, and real-time tracking of production, fully integrated with raw material and inventory systems. It can connect with your existing software and helps ensure your production process is more efficient than the competition.
It begins by analyzing your current workflow to identify inefficiencies and areas for improvement. From there, a realistic implementation strategy is developed, and the software is customized to your production needs. After launching the first online version, training and testing are carried out, followed by continuous improvements based on your feedback. Measurable results and ease of use make PAUK suitable even for small companies with just a handful of employees.
This approach guarantees that the production process will be aligned with your business objectives, increasing productivity by allowing immediate reaction to what is happening on the factory floor. Email and SMS alerts notify staff about production status, work order progress, and alarms such as breakdowns or abnormal energy consumption in machines, lines, or plants.
PAUK comes in various modules, making it highly adaptable to your company’s needs and compatible with your current software ecosystem.
PAUK OS
PAUK OS is the core module that covers the company’s entire operations and can be implemented remotely. It includes essential functions like item databases, codebooks, catalogs, business analysis, minimum quantities, user roles, reports for posting, customer inquiries, offers and orders, work orders, procurement, and inventory/material functionalities such as goods receipts, inter-warehouse transfers, subcontracting, warehousing, inventory, dispatch notes, and invoices.
PAUK ERP
PAUK ERP manages your company's accounting and financial operations. Implementation and training are done on-site with all employees. It includes input and output invoice processing, tax books, e-invoices, asset tracking, banking (statements, invoice matching, posting, unposted/posted links, and orders), payroll and compensations (salary calculation, decisions/add-ons/stoppages, tax-free income, contracts, JOPPD, employees, travel orders, local mileage, and work hour tracking), posting (automatic, journal entries, cards, open items), cash operations, and production tracking.
PAUK MES
PAUK MES helps you monitor the entire production process in real-time, connect with workstations and inventory, and includes functionalities such as calculations, workstations, work orders (basic, laser, saw, coating, external services), technological procedures/machines, production planning, maintenance, performance analysis, daily reports, procurement planning, workforce planning, and production accounting sheets. It also includes commercial operations (inquiries, offers, customer orders), procurement (supplier inquiries/orders, internal requests), inventory management (goods receipts, transfers, subcontracting, storage, inventory, dispatch notes, invoices), core data (item base, codebooks, partners, catalogs, business analytics, user roles), and extras like real-time machine monitoring, PDM/SolidWorks integration, server migration, and ERP connections.
PAUK NRG
PAUK NRG is designed to track energy and water consumption in real-time. It includes daily, weekly, and monthly reports, an alert system that sends notifications if limits are exceeded, and additional options such as monitoring devices, system integration, and local server support.
How to reduce production costs?
Production plants are where all critical manufacturing activities take place—this is where profits are generated and company goals are achieved. However, they are also places where money can easily be lost if the production process is not properly monitored and if issues are not addressed quickly. Small leaks can sink big ships, so special attention should be given to minor costs and errors within the production process.
This is why software solutions like PAUK are incredibly valuable—real-time data flow enables proactive management and problem-solving before issues arise. With PAUK, companies can detect areas where money is being lost, improve productivity, reduce costs, and increase competitiveness.
By closely monitoring the production process, it is possible to reduce costs without compromising product quality or customer satisfaction. As previously mentioned, key areas where unnecessary production costs occur include overproduction, logistics, delays and downtime, unnecessary movements, excessive processing, defects, and surplus inventory.
To address these challenges and improve performance, PAUK allows you to track the following production segments:
Time is the most valuable resource in business, so it's essential to analyze where production time is being wasted and how delays can be minimized. PAUK defines machine downtime longer than a specified duration as a stoppage and allows selection of the reason for the delay.
Defects increase production costs, as faulty products require additional resources to fix or remake. PAUK enables you to measure defects by comparing the number of units that passed through the process with those delivered to finished goods inventory.
By comparing actual deliveries with order dates and quantities, you can calculate the delivery accuracy rate and identify where transport-related losses occur.
Lack of communication and collaboration between departments and employees can negatively impact production, leading to delays, lost market opportunities, lower quality, safety issues, and higher costs. The solution lies in digital connectivity and tracking productivity-related components. For example, worker productivity can be tracked through workstation logins, activity logs, downtime, breakdowns, materials used, etc. Machine productivity can be monitored via PLC or sensor connections to track operation time and output count.
Every loss contributes to increased production time, so it’s important to reduce time-related costs across all process segments. These can include obvious ones like unnecessary movements during tasks, which increase production time per unit, or less obvious ones like excessive (and often unnecessary) processing. Excessive processing not only reduces product quality but also wastes time as the product undergoes too many production steps.
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The specific structure of the production process will vary for every industry and even for each individual company. As engineers specializing in mechanical and computer science and experts in economics, our mission is to help you overcome the challenges of industrial production and support you in reaching your business goals.
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