Tuesday, February 26, 2013

Steps Procedure of Routing in Production

Steps or Procedure of Routing in Production

Following image depicts main steps or procedure of routing in production.

procedure of routing

Following important steps are involved in the procedure of routing:

  1. Product analysis determines what to manufacture and purchase.
  2. Product-analysis is done again to determine materials required for production.
  3. Fix the manufacturing operations and their sequences.
  4. Decide the number of units to be manufactured in a batch (lot).
  5. Estimate the margin of scarp in each lot of production.
  6. Analyze the production cost.
  7. Prepare production control forms for effective routing.
  8. Prepare a separate route-sheet for each order.

Now let's discuss above steps in routing.

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.

Stages Steps in Production Planning and Control

Steps in Production Planning and Control

According to the British Standards Institute, there are four stages, steps, techniques or essentials in the process of production planning and control.

steps in production planning and control

The four stages or steps in production planning and control are:

  1. Routing,
  2. Scheduling,
  3. Dispatching, and
  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:

  1. The quantity and quality of the product.
  2. The men, machines, materials, etc. to be used.
  3. The type, number and sequence of manufacturing operations, and
  4. 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:

  1. Fix the amount of work to do.
  2. Arrange the different manufacturing operations in order of priority.
  3. 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 time coordination 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:

  1. Issue of materials, tools, fixtures, etc., which are necessary for actual production.
  2. Issue of orders, instructions, drawings, etc. for starting the work.
  3. Maintaining proper records of the starting and completing each job on time.
  4. Moving the work from one process to another as per the schedule.
  5. Starting the control procedure.
  6. Recording the idle time of machines.

Dispatching may be either centralized or decentralized:

  1. Under centralized dispatching, orders are issued directly by a centralized authority.
  2. Under decentralized dispatching, orders are issued by the concerned department.

4. Follow-up

Follow-up or Expediting is the last step in production planning and control. It is a controlling device. It is concerned with evaluation of the results.

Follow-up finds out and removes the defects, delays, limitations, bottlenecks, loopholes, etc. in the production process. It measures the actual performance and compares it to the expected performance. It maintains proper records of work, delays and bottlenecks. Such records are used in future to control production.

Follow-up is performed by ‘Expediters’ or ‘Stock Chasers’.

Follow-up is necessary when production decreases even when there is proper routing and scheduling. Production may be disturbed due to break-downs of machinery, failure of power, shortage of materials, strikes, absenteeism, etc.

Follow-up removes these difficulties and allows a smooth production.

Functions of Production Planning and Control - Importance

Functions of Production Planning and Control

Functions of production planning and control are listed and explained below.

functions of production planning and control

The importance or functions of production planning and control:

  1. Utilizes resources effectively.
  2. Makes flow of production steady.
  3. Estimates production resources.
  4. Maintains necessary stock levels.
  5. Coordinates departmental activities.
  6. Minimizes wastage of resources.
  7. Improves labor efficiency.
  8. Helps to face competition.
  9. Provides better work environment.
  10. Facilitates quality improvement.
  11. Customer satisfaction.
  12. Reduces production costs.

Now let's discuss above listed functions of production planning and control.

1. Utilizes resources effectively

  1. Production planning and control result in effective utilization of plant capacity, equipment and resources.
  2. It results in low-cost and high-returns for the organization.

2. Makes flow of production steady

  1. Production planning and control ensure a regular and steady flow of production.
  2. All machines are put to their optimum use.
  3. This helps in achieving a continuous production of goods.
  4. This also helps to provide a regular supply of goods to consumers.

3. Estimates production resources

  1. roduction planning and control help to estimate the resources like men, materials, machines, etc.
  2. The estimate is made based on sales forecast.
  3. So, production is planned to meet sales requirements.

4. Maintains necessary stock levels

  1. Production planning and control prevent over-stocking and under-stocking of materials.
  2. Necessary stocks are maintained.
  3. Stock of raw-material is maintained at a proper level in order to meet production demands.
  4. Stock of finished goods is also maintained to meet regular demands from customers.

5. Coordinates departmental activities

  1. Production planning and control helps to co-ordinate the activities of different departments.
  2. Consider, for an example, the marketing department co-ordinates with production department to sell the goods.
  3. This results in profit to the organization.

6. Minimizes wastage of resources

  1. Production planning and control ensure proper inventory of raw-materials and effective handling of materials.
  2. This helps to minimize the wastage of raw materials.
  3. It also ensures production of quality goods. This results in minimal rejects.
  4. So, it results in minimum wastage.

7. Improves labor efficiency

  1. There is maximum utilization of manpower.
  2. Training is provided to the workers.
  3. The profits are shared with the workers in form of increased wages and other incentives.
  4. Workers are motivated to perform their best. This results in improved labor efficiency.

8. Helps to face competition

  1. Production planning and control help to give delivery of goods to customers in time.
  2. This is because of regular flow of quality production.
  3. So, the company can face competition effectively, and it can capture the market.

9. Provides better work environment

  1. Production planning and control provide a better work environment to workers.
  2. They get better work facilities, proper working hours, leave and holidays, increased wages and other incentives.

10. Facilitates quality improvement

  1. Production planning and control facilitate quality improvement because the production is checked regularly.
  2. Quality consciousness is developed among the employees through training, suggestion schemes, quality circles, etc.

11. Customer satisfaction

  1. Production planning and control help to give a regular supply of goods and services to consumers at competitive market price.
  2. This results in customer satisfaction.

12. Reduces production costs

  1. Production planning and control make optimum utilization of resources, and it minimizes wastage.
  2. It also maintains an optimal level of inventories.
  3. Overall, this reduces the production costs.

Relationship Between Production Planning and Control

Relationship Between Production Planning and Control

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:

relationship between production planning and control

Image credits © Prof. Mudit Katyani.

  1. Meaning.
  2. Goals.
  3. Course of action.
  4. Work performance.
  5. Operations.
  6. Resources.
  7. Directions.
  8. Weaknesses.

Let's discuss “How production planning and control are related?

1. Meaning

According to Ray Wild,

“Production planning is concerned with the determination, acquisition and arrangement of all facilities necessary for future operations.”

Fixing goals of production and estimating resources required to achieve this goal is called production planning. It forecasts individual step in the production process. It helps to achieve production goals effectively, promptly and economically.

According to James Lundy,

“The production control function involves the co-ordination and integration of the factors of production for optimum efficiency.”

Production control is done after production planning. It implements the production plan. It directs, co-ordinates and controls the production. It helps to achieve the production goals. It helps to have maximum production at minimum cost. It also helps to have timely delivery of goods.

2. Goals

  1. Production planning fixes the goals for production.
  2. Production control achieves these goals.

3. Course of action

  1. Production-planning fixes the plans, strategies, etc.
  2. Production control puts these plans, strategies, so on; into action, i.e. it implements the plans, strategies, etc.

4. Work performed

  1. Production planning decides who should do the work and when.
  2. Production control ensures that each department complete its work on schedule.

5. Operations

  1. Production planning decides the operations which are required for production.
  2. Production control regulates and supervises the operations required for production.

6. Resources

  1. Production planning estimates the resources that are required for production.
  2. Production control makes available resources that are required for production.

7. Directions

  1. Production planning shows the directions.
  2. Production control follows these directions.

8. Weaknesses

  1. Production-planning makes modifications (changes) in the production plans to remove the weakness in the production process.
  2. Production control collects information about the production process. It finds out the weaknesses in the production process and informs the production planners about it.


The process of production planning and control is a continuous one. Since, control starts where planning ends and planning starts where control ends.

What is Productivity? Definition Meaning

red square What is Productivity? 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.

what is productivity definition meaning

Image credits © Prof. Mudit Katyani.

red square 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:-

  1. Productivity of a manufacturing unit can be measured in terms of the number of goods-produced in some fixed amount of time (usually in hours).
  2. Generally, in service industry, productivity is measured in terms of income generated by an employee for his or her's organization.

Nowadays, organizations give more importance to productivity and less importance to efficiency.

Higher productivity indicates the following:-

  1. Best utilization of the available human and material resources.
  2. Minimum wastage and losses of materials.
  3. Quantitative and qualitative production of goods at lower cost.

Saturday, February 9, 2013

Guidelines for Determining Performance Dimensions

Guidelines for determining performance dimensions

Guidelines for determining performance dimensions are depicted below.

guidelines for determining performance dimensions

The dimensions of performance must be as follows:

  1. Performance dimensions (Quantity & Quality) must be fixed in advance.
  2. Dimensions must be clearly defined and easily understood by employees.
  3. They must be consistent with the image or goodwill of the company.
  4. Quality standards must be laid down even for inputs.
  5. Workers must be properly trained about performance dimensions of company.
  6. Mission statement and philosophy of an organization must include it.

Now let's discuss guidelines for determining performance dimensions.

1. Fixed in advance

Performance dimensions about quality and quantity must be specified or fixed in advance. This will guide the employees because they know exactly how much quality and quantity of output they have to produce individually and collectively, before they start making the goods.

2. Clear and easy to understand

The shape, size, quality, weight, etc. must be clearly defined. It must be simple and easy to understand for the employees who will implement it. Implementation will be effective only if the employees understand the performance dimension.

3. Consistent with image

Performance dimensions, whether quantity or quality depends on the image or goodwill of the company.

For example, a mineral water company focuses on quality by highlighting the seal of the cap nf the bottle to remove doubts that the bottle may be refilled.

4. Quality standards for inputs

If the performance dimensions for output have to be achieved it is necessary to fix standards for inputs. The suppliers must be informed about the quality standard for raw material.

5. Training of performance dimensions

It is necessary to train the workers about performance dimensions of the company. This will help them to work effectively towards achieving organizational and individual goals.

6. Must be in mission statement

Performance dimensions must be included in the mission statement and philosophy of the organization.

For example, a mission statement of a college can focus on providing good quality of education. This must be shown in the policies, programs, courses, etc. of the college.

Classification of Performance Dimensions - Quantity Quality

Classification of Performance Dimensions

A dimension is a measurable extent of any kind. It is usually measured in terms of various extends like shape, size, quality and quantity.

The performance dimensions can be classified into following:

  1. Quantity - which is the primary dimension of performance.
  2. Quality - which is the secondary dimension of performance.

Image below depicts this classification of performance dimensions.

classification of performance dimensions

Image credits © Prof. Mudit Katyani.

1. Quantity is Primary Dimension of Performance

Quantity of output is the primary dimension of performance.

Examples of “How primary dimension (Quantity) is measured?”:

  1. Manufacturing unit : A primary dimension for a manufacturing unit is the quantity of output produced within a given time period. Higher the output more is the efficiency of workers.
  2. Company : A primary dimension of quantity can also be applied to a measure company’s efficiency. For example, a car manufacturing company may fix the performance dimension of producing at least 10 cars in a day. If the output is more than 10 cars, then the company is considered to be operating efficiently.
  3. Service sector : In a service sector, it is difficult to fix such a standard because here it is hard to measure performance in terms of quantity. However, it can be expressed as the number of customers served. For example, a hotel can measure its performance by finding out how many customers it serves daily.

2. Quality is Secondary Dimension of Performance

Quality of output is the secondary dimension of performance.

If most of the output is made as per the quality standards, then the quality of output is good.

Quality standards are expressed as a percentage of units that are allowed as defective.

Companies that want a Six Sigma standard must see that not even three units in a million are defective.

With competition increasing day by day, companies are giving a lot of importance to the quality of the product. By giving warranty/guarantee for their products, companies are using quality as a sales promotion tool.

Companies must use modern techniques to improve their product quality. They must provide better value for the consumer's money by focusing on the quality of their products.

Advantages and Disadvantages of Work Sampling Method

Advantages of Work Sampling

The benefits or advantages of work sampling method are as follows:

advantages of work sampling method

Image credits © Prof. Mudit Katyani.

  1. Work sampling gives an unbiased result since workmen are not under close observation.
  2. A work sampling study may be interrupted at any time without affecting the results.
  3. Work sampling can be conducted by anyone with limited training. There is no need to have experts.
  4. Team work can be studied by work sampling and not by the time-study.
  5. Work sampling is economical and less time-consuming than time study. This is because more than one worker can be studied at the same time. Secondly, observer needs not to be present himself for a long time.

Disadvantages of Work Sampling

The limitations or disadvantages of work sampling method are as follows:

disadvantages of work sampling method

Image credits © Prof. Mudit Katyani.

  1. Work sampling is not economical for short cycle jobs. It is also uneconomical to study a single worker or even small group of workers.
  2. Unlike time study, it does not allow a small breakdown of activities and delays.
  3. Working men may change their normal method of working when they see an observer. Therefore, the results from the work study may not be accurate.
  4. In work sampling method, the observations are limited or insufficient. So, the results may not be accurate.
  5. This method normally does not record the workers' speed of working.

Work Measurement Techniques Methods Types

Work Measurement Techniques

Image depicts different work measurement techniques, methods or types.

work measurement techniques

Work measurement techniques are listed below:

  1. Historical data method - It uses the past performance data to set performance standards.
  2. Time study - It uses stop watch and is best suited for short-cycle repetitive jobs.
  3. Work sampling - Here, workers are observed many times at random.
  4. Synthesis method - Here, the full job is divided into element or parts.
  5. Predetermined motion time system (PMTS) - Here, normally, three times are fixed for one job namely; normal, fast, and very-fast.
  6. Analytical estimating - It is used for fixing the standard time for jobs, which are very long and repetitive.

Now let’s discuss more above techniques of work measurement.

1. Historical data method

Historical data method uses the past-performance data. Here, past performance is used as a guideline for setting work performance standards. The main advantage of this technique is that it is simple to understand, quicker to estimate and easier to implement. However, past performance is not the best basis for fixing performance standards. This is because there may be many changes in technology, employees’ behavior, abilities, etc.

2. Time study

Time study with the help of a stop watch is the most commonly used work measurement method. This technique was developed by Frederick Winslow Taylor (1856-1915).

Time study is best suited for short-cycle repetitive jobs. Most of the production jobs can be easily timed by a time-study.

Time study procedure consists of the following steps:

  1. Select the job to be timed.
  2. Standardize the method of doing the job.
  3. Select the worker to be studied.
  4. Record the necessary details of the job and conditions of work.
  5. Divide the job into elements. Here, ’element’ is a part of the job.
  6. Find out the time taken to do every single element.
  7. Keep provisions for relaxation, etc.
  8. Fix the standard time for doing the job.

3. Work sampling

Work sampling method was original developed by Leonard Henry Caleb Tippett (1902-1985) in Britain in 1934. In this technique, the workers are observed many times at random. It is done to find out for how much time the worker is actually on the job. It checks how long he is working and how much time he is not working (idle time).

Work sampling method does not involve stop watch measurement. The purpose of work sampling technique is to estimate what proportion of a worker’s time is devoted to work-related activities.

Work sampling method involves following three main steps:

  1. Deciding what activities are defined as ’working’. Non-working are those activities which are not defined as working.
  2. Observe the worker at selected intervals and record (write down) whether he is working or not.
  3. Calculate the portion of time (P), a worker is working.

A portion of time (P) a worker is working equals to ’Number of observations during which working occurred’ divided by ’Total Number of observations.’

The above calculation is used as a performance standard.

To know more, read advantages and disadvantages of work sampling.

4. Synthesis method

In synthesis method, the full job is first divided into elements (parts). Then the time taken to do each element of the job is found out and synthesized (totaled). This gives the total time taken for doing the full job. In this technique, the time taken to do each element of the job is found out from previous time studies. So, this technique gives importance to past-time studies of similar jobs. It also uses standard data.

Standard-data is the normal time taken for doing routine jobs. Standard data is easily available for routine-jobs like fitting screws, drilling holes, etc. So there is no need of calculating these times repeatedly. Most companies use Standard-data. They do not waste time doing studies for all elements of the job. This is because standard time is already available for most elements of a job.

For example, a job of publishing a book contains four elements viz; typing, editing, printing and binding. The time taken for doing each element is first found out. Suppose, typing takes 40 days, editing takes 30 days; printing takes 20 days and binding takes 10 days. Then the time taken to do all the elements are totaled. That is, it takes 40 + 30 + 20 + 10 = 100 days to publish a book. This information is taken from previous time studies of other printing jobs or from the standard data.

Synthesis technique also considers the level of performance. Level of performance refers to the speed of performance, which is either, normal, fast, or very-fast.

The benefits or advantages of synthesis method:

  1. It provides reliable information about standard time for doing different jobs. This is because it is based on many past time studies.
  2. It is economical because there is no need to conduct new time studies.

5. Predetermined motion time system

In ’Predetermined Motion Time System’ method or simply PMTS technique, the normal times are fixed for basic human motions. These time values are used to fix the time required for doing a job. Normally, three times are fixed for one job. That is, one time is fixed for each level of performance. The level of performance may be normal, fast and very-fast.

PTMS is better than motion studies because it gives the detailed analysis of the motion, and it fixes the standard time for doing that motion.

PTMS technique is used mostly for jobs, which are planned for future. However, it can also be used for current jobs as an alternative to time study.

The benefits or advantages of PMTS method:

  1. It is a very accurate method. It avoids subjective judgement or bias of rater.
  2. It is an effective and economical method for repetitive jobs of short duration.
  3. There is no interference in the normal work routine, and so it does not face any resistance from the employees.
  4. It helps to improve the work methods because it gives a detailed analysis of the motions.
  5. It is more economical and fast compared to normal time studies.

6. Analytical estimating

Analytical estimating method or technique is used for fixing the standard time for jobs, which are very long and repetitive. The standard-time is fixed by using standard-data. However, if standard data is not available, then the standard time is fixed based on the experience of the work-study engineer.

The benefits or advantages of analytical estimating technique:

  1. It helps in planning and scheduling the production activities.
  2. It provides a basis for fixing labor rate for non-repetitive jobs.
  3. It is economical because it uses standard data for fixing the standard time of each job.

One disadvantage or limitation of analytical estimating method:

  1. When standard-data is not available for a job, then the standard time is fixed by the work-study engineer. He uses his experience and judgement for estimating the standard-time. This is not accurate compared to a scientific time study.

So, these are different techniques of work measurement.

Work Measurement - Definition Meaning Purpose Objectives

Definition of Work Measurement

According to International Labour Organization

“Work measurement is the application of techniques designed to establish the time taken for a qualified worker to carry out a specified job (task) at a defined level (rate) of performance.”

International Labour Organization (ILO) stated this important definition of work measurement in its publication.

work measurement definition meaning

Now let's proceed to know the meaning of work measurement.

square Meaning of Work Measurement

The meaning of work measurement is mainly based on three key steps.

Work measurement means to:

  1. Find out the different elements (parts) of the production process (job).
  2. Find out the time taken by each element.
  3. Fix the standard time for performing the production process.

For example, publishing a book is a production process. There are many elements, which are involved in the publication of a book. In other words, book publication involves production steps like typing a manuscript, editing the written matter, proof reading it, followed by printing and binding.

Work measurement involves finding out the time taken for doing each element. The time taken for each element is totaled. This is the standard time for publishing the book. Here, provisions are also made for relaxation, breakdown of machines, etc.

square Purpose of Work Measurement

The uses, importance, objectives or purpose of work measurement data:

purpose of work measurement

The main purpose of work measurement:

  1. Manpower planning.
  2. Production planning and scheduling.
  3. Estimating productions costs.
  4. Cost reduction and control.
  5. Rational basis for incentives.
  6. Performance appraisal.
  7. Training of employees.
  8. Comparing alternative methods.
  9. Accepting new orders.
  10. Fixing the selling cost.

Now let's discuss, "What work measurement is used for?"

1. Manpower planning

Work measurement data is used for manpower planning. This is because it gives information about the total hours required to perform the job. This helps to estimate the number and type of employees who are required to do the job. It ensures that there will not be any excess staff.

Work measurement data also helps to estimate the number of machines and equipment that will be required in the future. This helps to find out the number of employees who will be required to handle these machines and equipment.

2. Production planning and scheduling

Work measurement data is used for production planning and scheduling. This is because this data is used for making production standards. This data is also used for scheduling. Scheduling means to fix starting and finishing time for each job. This cannot be done without work measurement data.

3. Estimating productions costs

Work measurement data helps to estimate the production cost. This is because it gives management accurate data about production time. This data helps to estimate the labor costs. Secondly, indirect costs such as fuel and power consumption, rent and salaries of staff, etc. also depends on the production time factor.

4. Cost reduction and control

Work measurement data is used to reduce and control costs. It helps to reduce the labor cost. This is because it provides a guideline to the employees to work efficiently and effectively. This helps to make optimum use of the available manpower. So the labor cost will reduce.

Work measurement data helps to reduce material costs. It also helps to increase machine productivity. All these steps help to reduce and control production costs.

5. Rational basis for incentives

Work measurement data is used for making incentive schemes for the employees. Incentive schemes motivate employees to work hard. The efficient employees are rewarded by giving them a higher wage rate.

Work measurement fixes the standard-time for doing the work. Those who complete their work within a standard time or faster than the standard-time are rewarded with higher wages. This encourages all employees to work fast and efficiently.

6. Performance appraisal

Performance appraisals are done to find out whether the employees are efficient or not. It is done to find strengths & weaknesses of employees.

Work measurement helps to do performance appraisals. This is because it fixes the standard-output and standard-time for each employee. The employees who produce the standard-output within the standard-time are efficient and vice versa. Thus, it also helps to find out the strengths and weaknesses of the employees.

7. Training of employees

Work measurement helps to train the employees, especially the new employees. It divides the full job into small elements (parts). It gives complete details about each element of the job. It gives details about; how to do each element, the time taken for each element, the machines and tools involved in each element, etc. These details are used for training the employees.

8. Comparing alternative methods

There are many methods for doing a job. Work measurement data helps to choose the best method for doing a job.

9. Accepting new orders

Work measurement data tells us when will each job be completed. So, it helps the company to decide whether to accept new orders or not. In other words, it helps to find out whether the new-order will be completed within a specific time limit.

10. Fixing the selling cost

Work measurement data also helps to fix the selling cost of product. This is because it estimates the cost of production, especially the labor cost. Selling cost is decided after fixing the estimated production cost.

Standards Required at Various Levels of Production

Standards Required at Various Levels of Production

Standards are fixed at various levels of production. This is done to ensure some minimum expected output in the production process. Standards are established to maintain a production efficiency. These help to optimally utilizing various factors of production and achieve some fixed amount of output in terms of both; quality and quantity.

Important standards required at various levels of production are listed below.

standards required at various levels of production

  1. Individual Standards.
  2. Departmental Standards.
  3. Plant Standards.

Following points discuss these standards in detail.

1. Individual Standards

Individual standard is the output expected from an average-worker under average working conditions for a given period of time.

Generally, individual standards are fixed for all employees in the organization, especially at the lowest level.

The individual standard of a worker is the output which he must produce in a fixed period of time. In other words, it is the time given to him for producing one unit of output.

For example, a performance standard may be four units per hour or 15 minutes per unit. Both are the same. So, a worker who is doing packing-work may be asked to pack four products per hour. In other words, he is given 15 minutes to pack a single product.

Therefore, an individual standard is a fixed number of products, which must be generated by a worker in a fixed-period. That is, it is the fixed-output of the worker per unit of time.

Individual standard also has other names like labor standard, employee standard, employee time standard, or time standard.

The concept of individual standards in terms of production is depicted below.

Individual standards

Image credits © Prof. Mudit Katyani.

2. Departmental Standards

The company is divided into different departments. Each department is given a specific function or work to do. Standards are fixed for each department. Here, standards are fixed for quantity of output, quality of output, costs of output, etc.

A department consists of some individuals. Departmental standards are fixed by adding individual standards of each member of the department. A department's performance is judged based on these fixed standards.

For example: Assume, the standard output of the production department is 1000 units per day. If the production department produces exactly 1000 units per day, then it is 100% efficient. If it produces more than 1000 units, its efficiency is greater than 100%. If it produces less than 1000 units, then its efficiency is below 100%.

The manager of the department is responsible for getting the work done from his workers. He must see that all the work is done in accordance with departmental standards. He must see that all his department's objectives are achieved. He must try his level best to improve the team spirit in his department. He must also improve the co-ordination and co-operation in his department.

Concept of departmental standards in production terms is depicted below.

Departmental standards

Image credits © Prof. Mudit Katyani.

3. Plant Standards

Plant standards are fixed for an entire plant or a factory. A plant is a place or location where goods are produced and/or assembled. It consists of that place where machines, equipments, materials and workers interact with each other, directly or indirectly, with an intention to produce goods.

Plant standards are fixed for:

  1. Total output in quantitative and qualitative terms.
  2. Various cost in the production process.

The output depends on the level of technology, the type of employees and the estimated demand for the product.

Plant standards mean to fix the output to be produced for a given period. Here, both quantitative and qualitative output is fixed. The pant standard must be realistic. In other words, it must not be very high or too low. Generally, it is based on the output produced in the past. However, necessary adjustments are made for future demand of the product.

Various costs are involved in the production of goods, namely;

  1. Labor costs.
  2. Material costs.
  3. Overhead costs.

Plant-standards also mean to fix the standard labor, material and overhead costs. After manufacturing a product, the actual labor, material and overhead-costs are compared with the standard-costs. After comparison, the difference found is noted down. Further, the reasons why this difference occurred are also looked upon. After this, the difference is corrected to minimize the cost in the future. Every organization wants to reduce its costs. However, costs reduction must never be done by compromising the quality of the produced goods.

The concept of plant standards in terms of production is depicted below.

Plant standards

Image credits © Prof. Mudit Katyani.

Wednesday, February 6, 2013

Methods of Conducting a Marketing Audit

Methods of Conducting a Marketing Audit

Marketing audit is an examination of the marketing activities of company. It must be conducted by impartial persons.

Auditors must be properly qualified, trained and experienced enough to do the audit. They must have a complete knowledge and exposure of marketing.

Image below depicts the methods of conducting a marketing audit.

conducting a marketing audit

Following methods are used to conduct a marketing audit:

  1. Outside auditor : Company appoints an outside auditor to conduct a marketing audit.
  2. Task force audit : Company selects a team of its own senior executives to conduct a marketing audit.
  3. Self audit : In this method, marketing manager of a company conducts a marketing audit.
  4. Audit from above : Here, a senior executive of company (for example, a Director) is appointed to conduct a marketing audit.

Now let's discuss, “How is marketing audit conducted?

1. Outside auditor

In this method, the company can appoint an outside auditor to conduct a marketing audit. An outside-auditor must be professional, a consultant or an agency.

Outside auditors conduct marketing audits for many companies. They have enough skills and experience. They are also more independent, impartial and objective oriented. They give good suggestions for improvement.

Therefore, it is better to use an outside auditor.

Auditor studies information and submits a report to the company. The company has to pay him fees for his services.

2. Task force audit

In ‘Task Force Audit’ method, the company appoints a team of its own executives for conducting a marketing audit. These executives are highly experienced. They conduct the marketing audit independently. They submit their report to the top level of management.

3. Self audit

In ‘Self Audit’ method, the company appoints the marketing manager to conduct a marketing audit. Here, the marketing manager has to conduct a marketing audit himself. This is called self-audit. He has to critically-examine the marketing performances. He has to find out the plus and minus points. Then he has to submit his report to top level of management.

Self audit must be conducted impartially by the marketing manager.

4. Audit from above

In ‘Audit From Above’ method, the company appoints a senior executive to conduct a marketing audit. This executive is mostly a director or a person who has complete knowledge about marketing. This is a type of internal audit.

It is always better to use an outside auditor for conducting a marketing audit. Internal methods have many limitations and hence must be avoided.

Scope, Areas or Types of Marketing Audit

Scope, Areas or Types of Marketing Audit

There are no fixed guidelines regarding the scope, areas or types of marketing audit. In other words, the scope of marketing audit is not fixed. It changes from company to company. Each company can make its own marketing audit plan. However, the scope of marketing audit must include the following areas or types:

types of marketing audit

The six important types of marketing audit are:

  1. Marketing Environment Audit.
  2. Marketing Strategy Audit.
  3. Marketing Organization Audit.
  4. Marketing Systems Audit.
  5. Marketing Productivity Audit.
  6. Marketing Function Audit.

Now let's discuss each main area or type of marketing audit.

1. Marketing Environment Audit

Marketing Environment Audit consists of the external environment of company. It includes natural environment, economic environment, political environment, demographic environment, etc. The marketing audit analyses the marketing consumer, competitors, suppliers, so on. This audit helps the company to make marketing strategies.

2. Marketing Strategy Audit

Marketing Strategy Audit is a critical analysis of marketing objectives and strategies. It finds out whether the company's marketing objectives are clear and proper. It also examines the marketing strategies of the company. This audit is done to find out the utility of the marketing strategies.

3. Marketing Organization Audit

Marketing Organization Audit is a systematic study of the company's organizational resources like manpower, organization, structure, employee training and development, Research and Development facilities, motivation, communication and working relations.

4. Marketing Systems Audit

Marketing Systems Audit finds out the company's ability of collecting and analyzing data. It looks for the company's ability to plan and control the marketing activities. It also studies the company's marketing information system, planning and control system, etc.

5. Marketing Productivity Audit

Marketing Productivity Audit finds out the profitability of the company's products. It examines the markets. It also examines the measure to improve cost-effectiveness.

6. Marketing Function Audit

Marketing Function Audit is a complete study of marketing functions in relation to the product, price, promotion and place of distribution. So, it is an audit of the marketing mix (4 P's) of the company.

Tuesday, February 5, 2013

Explain the Characteristics of Marketing Audit

Explain the Characteristics of Marketing Audit

The eight important characteristics of marketing audit are depicted below.

characteristics of marketing audit

The salient features or characteristics of marketing audit are as follows:

  1. Marketing audit is a comprehensive study of all marketing activities.
  2. It is a systematic-process that follows a step-by-step procedure.
  3. It is a periodic activity and must be conducted regularly.
  4. It is conducted by an independent person who is not from company.
  5. It is a critical review of marketing activities of company.
  6. It is an evaluation of marketing activities of company.
  7. It finds out marketing opportunities and weaknesses of company.
  8. It is a preventative and curative marketing medicine.

Now let's briefly discuss or explain each characteristic of marketing audit.

1. Comprehensive study

Marketing audit is a comprehensive or complete study of all the marketing activities of company. It studies the marketing environment, marketing objective, marketing plans, policies and strategies, etc.

2. Systematic process

Marketing audit is a systematic process. It follows a step-by-step procedure.

  1. It studies marketing environment.
  2. It studies the internal marketing system.
  3. It examines the marketing activities.
  4. It finds out the problems.
  5. It makes an action plan to remove the problems.

The main aim of marketing audit is to improve the effectiveness of marketing.

3. Periodic activity

A company must conduct a marketing audit regularly or periodically. It must conduct the marketing audit even if it has no problems. This is because it helps the company to analyze the post performance and to make future marketing strategies.

A company must not conduct a marketing audit only if it has problems or when it suffers a loss. It must be a compulsory and not an optional activity.

Marketing audit is like a postmortem of failure.

4. Independently conducted

Marketing audit is independent. That is, it is conducted by an autonomous person. It is not conducted by a person who is working in the marketing department. Mostly, it is conducted by an outside agency.

5. Critical review of marketing activities

Marketing audit is a critical review of marketing activities of the company. It finds out the defects, deficiencies, problems and weakness in company's marketing activities. It also gives suggestions about how to remove these defects or deficiencies.

6. Evaluates marketing activities

Marketing audit is an explanation or evaluation of marketing activities of company. It evaluates company's objective, plans, policies, programs, etc.

7. Finds out opportunities and weaknesses

Marketing audit finds out the marketing opportunities and weakness of the company. It helps the company to take advantage of the marketing objectives. It also helps the company to remove all its weakness.

8. Preventative and curative marketing medicine

Marketing audit is a preventative and curative marketing medicine. It prevents marketing problems. It also cures (solves) marketing problems.