Production is where you can take batch recipes and turn them into production items. For example, a sandwich shop sells every sandwich with a side of freshly made 2 ounces of potato salad. If the shop sells 25 sandwiches a day, it most certainly is not going to make every 2 ounces cup of potato salad fresh each time. They are going to make 50 ounces of potato salad and turn it into a production item. This means that with every sandwich made, they include 2 ounces of potato salad in the overall recipe. Creating production items also enables you to inventory the product as one item, as opposed to mathematically factoring how much of each ingredient is included in the amount of potato salad at inventory time.
Once you book a production, you cannot unbook it. The stock on hand changes from the ingredients to the production item immediately after you book the production.