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Definition
According to Peter Drucker,
Productivity means the balance between all factors of production that will give the greatest output for the
smallest effort.
The meaning of productivity is shown in the following diagram.
Meaning of Productivity
Productivity is the relationship between output and input. It is expressed or measured as a ratio of output and
input.
Productivity equals output divided by input.
Two simple examples of productivity measurement:
Productivity of a manufacturing unit can be measured in terms of the number of goodsproduced in some fixed amount of time (usually in hours).
Nowadays, organizations give more importance to productivity and less importance to efficiency.
Higher productivity indicates the following:
Production planning and control are closely related to one another. They go hand in hand and are supplementary
in character.
Ten points explain the relationship between production planning and control:
4. Work performed
Production planning decides who should do the work and when.
Production control ensures that each department completes its work on schedule.
5. Operations
Production planning decides the operations which are required for production.
Production control regulates and supervises the operations required for production.
6. Resources
Production planning estimates the resources that are required for production.
Production control makes available resources that are required for production.
7. Directions
Production planning shows the directions.
Production control follows these directions.
8. Weaknesses
Production-planning makes modifications (changes) in the production plans to remove the weakness in the
production process.
Production control collects information about the production process. It finds out the weaknesses in the
production process and informs the production planners about it.
Conclusion
The process of production planning and control is a continuous one. Since, control starts where planning ends
and planning starts where control ends.
Functions of Production Planning and Control
The importance or functions of production planning and control: Now let's discuss above listed functions of
production planning and control.
1. Utilizes resources effectively
Production planning and control result in effective utilization of plant capacity, equipment and resources.
It results in low-cost and high-returns for the organization.
2. Makes flow of production steady
Production planning and control ensure a regular and steady flow of production.
All machines are put to their optimum use.
This helps in achieving a continuous production of goods.
This also helps to provide a regular supply of goods to consumers.
3. Estimates production resources
Production planning and control help to estimate the resources like men, materials, machines, etc.
The estimate is made based on sales forecast. So, production is planned to meet sales requirements.
4. Maintains necessary stock levels
Production planning and control prevent over-stocking and under-stocking of materials.
Necessary stocks are maintained.
Stock of raw-material is maintained at a proper level in order to meet production demands.
Stock of finished goods is also maintained to meet regular demands from customers.
5. Coordinates departmental activities
Production planning and control helps to co-ordinate the activities of different departments.
Consider, for an example, the marketing department co-ordinates with production department to sell the
goods.
This results in profit to the organization.
6. Minimizes wastage of resources
Production planning and control ensure proper inventory of raw-materials and effective handling of
materials.
This helps to minimize the wastage of raw materials.
It also ensures production of quality goods. This results in minimal rejects.
So, it results in minimum wastage.
7. Improves labor efficiency
There is maximum utilization of manpower.
Training is provided to the workers.
The profits are shared with the workers in form of increased wages and other incentives.
Workers are motivated to perform their best. This results in improved labor efficiency.
8. Helps to face competition
Production planning and control help to give delivery of goods to customers in time.
This is because of regular flow of quality production.
So, the company can face competition effectively, and it can capture the market.
9. Provides better work environment
Production planning and control provide a better work environment to workers.
They get better work facilities, proper working hours, leave and holidays, increased wages and other
incentives.
10. Facilitates quality improvement
Production planning and control facilitate quality improvement because the production is checked
regularly.
Quality consciousness is developed among the employees through training, suggestion schemes, quality
circles, etc.
11. Customer satisfaction
Production planning and control help to give a regular supply of goods and services to consumers at
competitive market price.
This results in customer satisfaction.
12. Reduces production costs
Production planning and control make optimum utilization of resources, and it minimizes wastage.
It also maintains an optimal level of inventories. Overall, this reduces the production costs.
3. Dispatching, and
2. Scheduling,
4. Follow-up.
Initial two steps i.e. Routing and Scheduling, relate to production planning. Last two steps i.e. Dispatching and
Follow-up, relate to production control. Now let's continue our discussion further to understand each step in
detail.
1. Routing
Routing is the first step in production planning and control.
Routing can be defined as the process of deciding the path (route) of work and the sequence of operations.
Routing fixes in advance:
The quantity and quality of the product.
The men, machines, materials, etc. to be used.
The type, number and sequence of manufacturing operations, and
The place of production.
In short, routing determines What, How much, With which, How and Where to produce.
Routing may be either very simple or complex. This depends upon the nature of production. In a continuous
production, it is automatic, i.e. it is very simple. However, in a job order, it is very complex.
Routing is affected by the human factor. Therefore, it should recognize human needs, desires and expectations.
It is also affected by plant-layout, characteristics of the equipment, etc.
The main objective of routing is to determine (fix) the best and cheapest sequence of operations and to ensure
that this sequence is followed in the factory.
Routing gives a very systematic method of converting raw-materials into finished goods. It leads to smooth and
efficient work. It leads to optimum utilization of resources; namely, men, machines, materials, etc. It leads to
division of labor. It ensures a continuous flow of materials without any backtracking. It saves time and space. It
makes the work easy for the production engineers and foremen. It has a great influence on design of factory's
building and installed machines.
So, routing is an important step in production planning and control. Production planning starts with it.
Read article on procedure of routing in production.
2. Scheduling
Scheduling is the second step in production planning and control. It comes after routing. Scheduling means to:
Fix the amount of work to do.
Arrange the different manufacturing operations in order of priority.
Fix the starting and completing, date and time, for each operation.
Scheduling is also done for materials, parts, machines, etc. So, it is like a time-table of production. It is similar
to the time-table, prepared by the railways. Time element is given special importance in scheduling. There are
different types of schedules; namely, Master schedule, Operation schedule and Daily schedule.
Scheduling helps to make optimum use of time. It sees that each piece of work is started and completed at a
certain predetermined time. It helps to complete the job systematically and in time. It brings timecoordination in
production planning. All this helps to deliver the goods to the customers in time. It also eliminates the idle
capacity. It keeps labor continuously employed.
So, scheduling is an important step in production planning and control. It is essential in a factory, where many
products are produced at the same time.
3. Dispatching
Dispatching is the third step in production planning and control. It is the action, doing or implementation stage.
It comes after routing and scheduling. Dispatching means starting the process of production. It provides the
necessary authority to start the work. It is based on route-sheets and schedule sheets. Dispatching includes the
following:
Issue of materials, tools, fixtures, etc., which are necessary for actual production.
Issue of orders, instructions, drawings, etc. for starting the work.
Maintaining proper records of the starting and completing each job on time.
Moving the work from one process to another as per the schedule.
Starting the control procedure.
Recording the idle time of machines.
Dispatching may be either centralized or decentralized:
1. Product analysis
Product analysis is the first step in the routing procedure. This is done to find out what parts (goods) should be
manufactured and what parts should be purchased. This depends mainly on the relative cost. It also depends on
other factors such as technical consideration, purchase policies, availability of personnel, availability of
equipment, etc. Generally, during less-busy periods; most of the parts are manufactured in the factory. However,
during the busy period, many parts are purchased from outside.
2. Determine required materials
Product-analysis is done again to find out what materials are required for production and their quantity and
quality.
3. Fix manufacturing operations
The next step in the routing procedure is to fix (decide) the manufacturing operations and their sequences. The
detailed production procedure is then scheduled (planned). Information required for this is derived from
technical experience and by analyzing the machine capacity.
4. Determine size of batch
The number of units to be manufactured in any one lot (group or batch) should be decided. This is done
concerning customers' orders. Necessary provision should also be made for rejections during the production
process.
5. Estimate margin of scrap
The amount of scrap in each lot, should be estimated. Generally, a scrap margin is between 2% to 5% of
production.
6. Analyze the production cost
Estimating the cost of manufactured goods is actually the function of costing department. However, the routing
section provides necessary data to the costing department that enables it to analyze the production cost.
7. Prepare production control forms
Production Control forms such as Job Cards, Inspection Cards, Tool Tickets, etc. should be prepared. These
forms should contain complete information for effective routing.
8. Prepare route sheet
Route sheet is prepared on a production control form. It shows the part number, description of the part and the
materials required. It is prepared by a route clerk. Separate route-sheet is required for each part of a customer's
order.
TECHNICAL FACTORS: Technical factors are the most important ones. These include proper
location, layout and size of the plant and machinery, correct design of machines and equipment,
research and development, automation and computerization, etc. If the organization uses the latest
technology, then its productivity will be high.
2.
3.
4.
PERSONNEL FACTORS: The right individual should be selected for suitable posts. After selection,
they should be given proper training and development. They should be given better working
conditions and work-environment. They should be properly motivated; financially, non-financially
and with positive incentives. Incentive wage policies should be introduced. Job security should also
be given. Opinion or suggestions of workers should be given importance. There should be proper
transfer, promotion and other personnel policies. All this will increase the productivity of the
organization.
5.
FINANCE FACTORS: Finance is the life-blood of modem business. There should be a better
control over both fixed capital and working capital. There should be proper Financial Planning.
Capital expenditure should be properly controlled. Both over and under utilization of capital should
be avoided. The management should see that they get proper returns on the capital which is invested
in the business. If the finance is managed properly the productivity of the organization will increase.
6.
7.
GOVERNMENT FACTORS: The management should have a proper knowledge about the
government rules and regulations. They should also maintain good relations with the government.
8.
LOCATION FACTORS: Productivity also depends on location factors such as Law and order
situation, infrastructure facilities, nearness to market, nearness to sources of raw-materials, skilled
workforce, etc.
location unattractive for doing business. Social changes may require production of eco-friendly goods.
This may require a change in location.
INCREASING PRODUCT DEMAND: Demand for the company's product may increase at other
places, especially in abroad countries. So, the company will have to start a branch in another state or in
foreign countries. This would lead to a search for new location of plant.
AVAIL TAX BENEFITS: Government may announce some tax benefits for starting a business in rural
areas. This may motivate entrepreneurs to start their business units in remote areas.
Benefits of higher productivity
The following image depicts a list of nine benefits of higher productivity.
Image credits Prof. Mudit Katyani.
The nine main benefits of higher productivity are:
1. Higher profit,
2. Employees welfare,
3. Better return
4. Nice relations,
5. Customer satisfaction,
6. Good credit rating,
7. Goodwill,
8. Better credit terms, and
9. Low turnover.
Now let's discuss briefly these important benefits of higher productivity.
1) HIGHER PROFIT: Higher productivity enables the company to produce more output. This results in
more profit to it. This profit can be used for expansion and other activities.
2) EMPLOYEES WELFARE: Higher productivity brings more profit to the company. This profit can be
used to provide better facilities and working conditions to the employees. So, it results in welfare of the
employees.
3) BETTER RETURN: The company gets better return on investment due to higher productivity. So, they
pay a better dividend (share of profit) to the shareholders. The market price of the share will also
increase.
4) NICE RELATIONS: Higher productivity results in nice relations between the management and the
employees. Good working conditions, facilities and incentives motivates employees to give their best to
the organization.
5) CUSTOMER SATISFACTION: Higher productivity results in better customer satisfaction. This is
because customers are provided with good-quality products at low prices. Satisfaction of customers will
result in their loyalty towards the company.
6) GOOD CREDIT RATING: Higher productivity results in a good credit rating by financial institutions.
This will enable the company to get cheap funds from the market to meet working and fixed capital
requirements.
7) GOODWILL: Due to higher productivity, the company will have a good corporate image (goodwill) in
the minds of social entities. This includes: The shareholders, government, suppliers, financial
institutions, customers, etc.
8) BETTER CREDIT TERMS: Higher productivity helps the company to get better terms from the
suppliers. The suppliers may give better credit terms due to its goodwill.
9) LOW TURNOVER: Higher productivity enables the company to provide better facilities and working
conditions to the employees. This will make the employees loyal. Hence, employee turnover and
absenteeism will reduce.
Problems in Measuring Productivity
DIFFICULTY IN MEASURING OUTPUT: The output of an industry may be measured in terms of volume
(units) or value (dollars). It is very difficult to combine both these factors.
a.
If the output is homogeneous (similar), then the productivity can be measured in terms of
volume.
b.
If the output is not homogeneous, then the productivity can be measured in terms of
value.
c.
However, if some units are homogeneous and other non-homogeneous, then the industry
will face difficulties in measuring productivity.
Similarly, it is very difficult to find out whether the by-products and work-in-progress should be included in
output or not. If it is included, then it is very hard to find its value.
DIFFICULTY IN MEASURING INPUTS: Most industries do not have proper records of the inputs of land,
labor, capital and machines. Even if such records are available, it is very difficult to calculate the exact number
of man hours worked i.e. the input of labor.
Factorial productivity:
Some management experts say that a single factor of production cannot produce anything
by itself. Therefore, it has no productivity. A single factor of production has productivity only if it is
combined with other factors of production.
Service sector: It is very difficult to measure the productivity of service sectors like Banking, Insurance,
Education, etc. This is because the output of the service sector is intangible.
Different periods: It is very difficult to compare the productivity of two different periods. For example,
comparison of productivity during a war period with a peace period is meaningless.
Difficulty in Measuring Man-Hours: It is difficult to find out the exact number of productive man-hours. This
is because wages paid to the employees also includes the cost of idle time.
Technological change: Changes in technology will cause a change in the nature and quality of output.
Therefore, measurement of productivity will become difficult.
Factors Affecting Scheduling
The following chart depicts various factors affecting scheduling.
The factors that affect scheduling are grouped into two categories viz;
1.
Internal factors : Affect an entity (e.g. a company) from within.
2.
External factors : Influence an entity (e.g. an organisation) from outside.
Factors affecting scheduling internally are:
3.
Stock of finished goods kept by company.
4.
Process intervals of each product.
5.
Type of machines available.
6.
Availability of personnel.
7.
Availability of materials.
8.
Manufacturing facilities available in the company.
9.
Economic production runs (EPR) or optimum lot size.
Factors that affect scheduling externally are:
10. Consumer demand.
11. Consumer delivery dates.
12. Inventories (stock of goods) with dealers and retailers.
Now let's discuss internal and external factors influencing scheduling.
Internal Factors Affecting Scheduling
Followings are the internal factors affecting scheduling:
Finished Goods Inventories: Scheduling depends on how much stock of finished goods is kept by the
company. Most companies keep, one month's supply of each product, as stock. If the company's product is fast
moving or slow moving, then scheduling will have to be changed.
Process Intervals: It depends on the process intervals of each product. Process interval is the time required to
produce a product. Different products have different process intervals. For example, the process interval of a car
is more than that of a soap. Scheduling will be different for each process interval.
Types of Machines Available: It also affected by the type of machines available. If the company has old and
outdated machines, the schedule must keep provisions for the breakdown of machines. Modern and
computerized machines makes scheduling very easy.
Availability of Personnel: Scheduling also depends on the availability of personnel. If the company has
untrained and inexperienced employees, then they will take more time to produce a product. So, the schedule
must keep provisions for this. A faster schedule will be required for trained and experienced employees.
Availability of Materials: It is also affected by the availability of materials. If a regular supply of materials is
available, then the company can do normal-scheduling. However, if the supply of materials is irregular, the
schedule must be made flexible. That is, when the supply is good then the schedule will be fast and vice versa.
Manufacturing Facilities: Scheduling depends on the manufacturing facilities available in the company. This
includes space for new machines, employees, etc. It also includes the availability and supply of electricity and
water, which may be required for production. If all the required infrastructure is available, then the production
schedule can be fast and vice versa.
Economic Production Run (EPR): It also depends on the economic production runs. Economic production
runs (EPR) means the optimum lot size. That is, how many items must be produced in one lot in order to
minimize the cost of production. If the company produces more or less than the optimum lot size, then the cost
of production will increase. There are many formulas for calculating optimum lot size. Scheduling must be done
only after calculating the optimum lot size.
External Factors Affecting Scheduling
The external factors affecting scheduling are as follows:
Consumer Demand: Scheduling also depends on the consumer demand. Consumer demand can be
found out by sales forecast. So, the production schedule is prepared according to the sales forecast.
However, it has to be adjusted (changed) when the actual demand is different from the sales forecast.
Consumer Delivery Dates: The production schedule also depends on the consumer delivery dates. The
consumer is the most important person in a business. So, this factor must be given more importance than
other factors. The production schedule must be made in such a way that it will guarantee timely delivery
to the consumers. In case of seasonal goods, production must be spread out throughout the year; so,
there will not be too much pressure in demand season.
Dealers and Retailers Inventories: It also depends on the stock of goods (inventories) with dealers and
retailers. The production manager must find out how much stocks is held by dealers and retailers. He
must also know why they are keeping this stock. Are they keeping this stock to meet current demand? If
yes, then normal-scheduling can be done. However, if they are keeping stock in anticipation of future
demand, the scheduling will have to be slowed down because there will be fewer orders in the future.
Education institutions,
Climatic conditions,
Dr. Joseph Juran coined a short definition of quality as; Product's fitness for use. Juran's definition of quality
is quite simple and popular one. However, it doesn't directly convey an in depth meaning of quality needed by
managers who are faced to decide on selecting a right course of action. To understand Juran's concept of quality,
managers must study distinctions made in the following figure.
Product quality means to incorporate features that have a capacity to meet consumer needs (wants) and gives
customer satisfaction by improving products (goods) and making them free from any deficiencies or defects.
Meaning of Product Quality
Product quality mainly depends on important factors like:
The type of raw materials used for making a product.
How well are various production-technologies implemented?
Skill and experience of manpower that is involved in the production process.
Availability of production-related overheads like power and water supply, transport, etc.
Product quality has two main characteristics viz; measured and attributes.
Measured characteristics includes features like shape, size, color, strength, appearance, height, weight,
thickness, diameter, volume, fuel consumption, etc. of a product.
Attributes characteristics checks and controls defective-pieces per batch, defects per item, number of
mistakes per page, cracks in crockery, double-threading in textile material, discoloring in garments, etc.
Based on this classification, we can divide products into good and bad. So, product quality refers to the total of
the goodness of a product. The five main aspects of product quality are depicted and listed below:
QUALITY OF DESIGN:
The product must be designed as per the consumers' needs and high-quality standards.
QUALITY CONFORMANCE:
The finished products must conform (match) to the product design specifications.
RELIABILITY:
The products must be reliable or dependable. They must not easily breakdown or become non-functional. They
must also not require frequent repairs. They must remain operational for a satisfactory longer-time to be called
as a reliable one.
SAFETY:
The finished product must be safe for use and/or handling. It must not harm consumers in any way. Proper
storage: The product must be packed and stored properly. Its quality must be maintained until its expiry date.
Company must focus on product quality, before, during and after production:
Before production, company must find out the needs of the consumers. These needs must be included in the
product design specifications. So, the company must design its product as per the needs of the consumers.
During production, company must have quality control at all stages of the production process. There must have
quality control for raw materials, plant and machinery, selection and training of manpower, finished products,
packaging of products, etc.
After production, the finished-product must conform (match) to the product-design specifications in all aspects,
especially quality. The company must fix a high-quality standard for its product and see that the product is
manufactured exactly as per this quality standard. It must try to make zero defect products.
Importance of Product Quality
Image depicts importance of product quality for company and consumers.
For Company: Product quality is very important for the company. This is because, bad quality products will
affect the consumer's confidence, image and sales of the company. It may even affect the survival of the
company. So, it is very important for every company to make better quality products.
For Consumers: Product quality is also very important for consumers. They are ready to pay high prices, but in
return, they expect best-quality products. If they are not satisfied with the quality of product of company, they
will purchase from the competitors. Nowadays, very good quality international products are available in the
local market. So, if the domestic companies don't improve their products' quality, they will struggle to survive in
the market.