Production Standards Meaning Definition Advantages Demerits

Meaning of Production Standards

Production standard is a criterion or yardstick or benchmark. It is used for measuring the production of the company.

Production standards are fixed for raw materials, production process, tools and equipment, workers, conditions of work, speed of work, quantity of output, quality of output, etc.

Production standards are mostly expressed in quantitative terms. That is, it is expressed in terms of units of output, units of time, kilograms, plant capacity, so on.

Production standards give direction and guidance to the production department. It is also used for controlling the production activities. That is, the actual production can be compared with the production standards, and the difference can be found out and corrected. It is a point of reference. It helps to find out whether the work was done as per plan.

Image credits © Prof. Mudit Katyani.

Definition of Production Standards

According to Adam and Elbert, production standard is defined as follows:

"Production standard is a quantitative criterion established as a basis for comparison in measuring or judging output."

Advantages of Production Standards

The merits, benefits, or advantages of production standards are as follows:

1. Optimum use of labour.
2. Fixing wages.
3. Basis for promotion and training.
4. Customer satisfaction.
5. Less wastage.
6. Budgeting possible.
7. Effective planning.

Now let's discuss each advantage of production standards one by one.

1. Optimum use of labour

If production standards are fixed beforehand, then all the work will be planned in advance So, everyone will know exactly what to do, how much to do, how to do it, etc. The performance of the workers can be evaluated. Their mistakes, if any, can be corrected in time. There will be no wastage of labour. So, production planning helps to make optimum use of labour.

2. Fixing wages

Production standards help to fix the wages, salaries, bonus, perks, etc. of the workers and managers. The performance of each person can be evaluated with the help of production standards. So, each person will be paid according to his performance.

3. Basis for promotion and training

Production standards can be used as a basis for giving promotion, transfers, training, etc., to the employees and managers. This is because it helps to evaluate their performance. The employees having the best performance can be given promotions. The employees whose performance is bad can be sent for training to improve their performance.

4. Customer satisfaction

Production standards help to give satisfaction to the consumers. This is because production standards are fixed for quantity, quality, time, cost, etc. So, the consumers will get a regular supply of good-quality products at low prices. This will give satisfaction to the customers and profits to the company.

5. Less wastage

Production standards help to reduce the wastage of human, material and financial resources in the company. This is because standards are fixed for almost everything in the production department. There are standards for raw materials, workers, speed of work, quantity of work, quality of work, production process, etc. These standards guide the workers. It helps them to avoid mistakes. After they complete their work, it is compared with the standards. The mistakes, if any, are found out and corrected in time. Production standards help to avoid wastage of investment in unwanted machines and raw materials. It also helps to avoid having more employees than necessary. All this helps to reduce wastage in the company.

6. Budgeting possible

Production standard makes budgeting possible. That is, the production manager can prepare a budget for all the production expenses. He can prepare a budget for the materials' costs, labour costs, machine costs, repair and maintenance costs, etc. This will help to avoid wastage and to reduce the production cost. It will also reduce financial problems in the organization.

7. Effective planning

Production standards are the base of production planning. It helps to have effective production planning. Production planning helps the production to run smoothly. It sees that all the machines are utilized fully. It helps over and under stocking of materials and finished goods. It helps to deal with emergencies like the breakdown of machines.

Demerits of Production Standards

The limitations, disadvantages, or demerits of production standards are:

1. Limiting factor.
2. No improvement.
3. Individual difference not considered.
4. Difference in job methods.
5. Rigidity.

Now let's discuss each demerit of production standards one by one.

1. Limiting factor

Some experts feel that a standard is a limiting factor. A standard is a quantitative goal. Once the employee achieves this goal he will be satisfied. He will not try to work more than the standard. He will not try to increase the standard. After some time, he will become lazy.

2. No improvement

Standard are fixed for quantity, time, costs, etc. These standards are not changed for a long period of time. So, during this time the quantity of output, quality of output, speed of work, cost of production, etc., will remain the same. There will be no improvement. This is against Kaizan. Kaizan is a Japanese concept. According to this concept, there must be continuous improvements in the organisation.

3. Individual difference not considered

Standards do not consider individual difference in doing work. The same standard is made for all the employees. However, all the employees are not equally efficient in their work. So, if the standard is made too high, then the less-efficient employees will not be able to complete their work in time. Similarly, if the standards are low, efficient employees will complete their work before time.

4. Difference in job methods

Methods of doing the job are not always standardized. Most companies change their methods according to change in machines. It is difficult to fix standards if the job methods go on changing. Even if standards are fixed, comparisons become hard due to change of methods.

5. Rigidity

Standards are not changed regularly. This results in rigidity. However, flexibility is required to face competition. The product must be changed regularly as per the varying needs and wants of the consumers.

What is Marketing Audit? Definition Meaning

Definition of Marketing Audit

The definition of marketing audit as stated by Abe Schuchman is as follows:

“Marketing audit is a systematic, critical and impartial review and appraisal of the total marketing operation: of the basic objectives and polices and the assumptions which underlie them as well as the methods, procedures, personnel and organization employed to implement the policies and achieve the objectives.”

Abe Schuchman gave this definition of marketing audit in his writings on its first extended discussions. He wrote this discussion for the American Marketing Association (AMA) in 1951.

Meaning of Marketing Audit

The meaning of marketing audit is depicted in the following chart.

Marketing audit is an analysis, examination, review or evaluation of marketing activities of a company. It evaluates marketing environment, objectives, plans, policies and strategies of a company. After evaluation, it identifies various defects, vulnerabilities, deficiencies, problems, and other weaknesses encountered in the company's marketing activities. It suggests measures and/or recommendations to overcome, solve or remove these limitations. It also seeks out new marketing opportunities for a company. Overall, it tries to enhance (improve) the marketing performance of a company.

Marketing audit is an extensive, systematic, independent and regular examination process of a company's marketing activities.

1. It is an extensive or comprehensive process because it covers all (entire) marketing activities of a company.
2. It is a systematic or methodical process since it strictly follows all involved steps or procedures properly.
3. It is an independent or autonomous process conducted by an external person. This person is not from the marketing department of a company.
4. It is a periodic process because it is conducted continuously after some fixed interval of time.

Marketing audit is very beneficial for the success of a company. It examines, “How well the marketing department of a company works or functions.” It compares the marketing plans of a company with its actual marketing performance. It finds out the strengths and weaknesses of a company's product. It suggests measures to remove the product's weaknesses. It guides a company to adapt its marketing strategies with the changing marketing environment. It helps a company to update its marketing strategies and control its marketing expenses. In short, a company cannot survive without conducting a proper marketing audit.

Additional topics on marketing audit are continued in the following articles:

1. Characteristics of marketing audit.
2. Types of marketing audit.
3. Methods of conducting a marketing audit.

Marketing audit evaluates the following three main (key) responsible areas:

1. External marketing environment : Here, the marketing audit mainly focuses on customers and competition in the business.
2. Internal marketing environment : Here, the marketing audit studies the structure of company's marketing team and its effectiveness.
3. Evaluation of current marketing strategy : Here, the marketing audit continuously reviews current marketing strategy of a company. It also takes help of lessons learned from its past marketing plans.

Distinguish Between MIS and Marketing Research (MR)

Distinguish Between MIS and Marketing Research (MR)

Following image depicts the ten main points which are used to make a comparison or distinction between MIS and Marketing Research (MR).

Image credits © Prof. Mudit Katyani.

Difference between MIS vs MR is based on the following ten points:

1. Meaning of MIS and MR.
2. Their basic or main purpose.
3. Wide or narrow scope.
4. General or specific nature.
5. Number of reports provided.
6. Future or past orientation.
7. Frequency of data collection.
8. Number of problems to solve.
9. Continuous or non-continuous operational method.
10. Based on use of computers or not.

Now let's distinguish MIS and Marketing Research (MR) on above points.

1. Meaning :
   1. MIS means to collect, analyze and supply relevant marketing information to the marketing managers. The marketing managers use this information for taking effective marketing decisions. It is a permanent and continuous process.
   2. Marketing Research (MR) is a systematic process of collecting and analyzing information to solve a specific marketing problem.
2. Purpose :
   1. The main purpose of MIS is to provide relevant information to marketing managers and enable them to make effective marketing decisions.
   2. However, the main purpose of Marketing Research (MR) is to solve a specific marketing problem.
3. Scope :
   1. The scope of MIS is wide. Marketing Research (MR) is one of its component. It is not only used to solve problems but also helps to prevent problems in the future.
   2. The scope of Marketing Research (MR) is narrow. It is one small part of MIS. It solves a specific present marketing problem.
4. Nature :
   1. MIS is more nonspecific or general in nature. It can solve many types of marketing problems.
   2. Marketing Research (MR) is more specific or particular in nature. At one time, it can only solve a single type of marketing problem.
5. Reports :
   1. MIS gives four types of reports namely, plan-reports, periodic-reports, triggered-reports and demand reports.
   2. Marketing Research (MR) provides only one report called as ‘MR Report.’
6. Orientation :
   1. Orientation of MIS is more future-oriented when compared to MR.
   2. However, the orientation of Marketing Research (MR) is more past and present one when compared to MIS. It concentrates more on earlier and latest information. It uses this information to solve a current marketing problem.
7. Problems :
   1. MIS deals with and attempts to solve many different marketing problems at one time. For this, it collects, stores, analyze and supply relevant market information to the marketing managers.
   2. Marketing Research (MR) only deals with a single marketing problem at one time. It doesn't solve multiple marketing problems simultaneously.
8. Data :
   1. In MIS, the data is collected more frequently, usually almost daily. This is a must for every company.
   2. In Marketing Research (MR), the data is not collected as frequently as MIS. It is collected on a required basis.
9. Operation :
   1. MIS is a permanent and continuous system. Here, the inflow of market information never stops. Data is constantly collected and stored for further analysis. It is properly analyzed, studied and well-organized before supplying to the marketing managers. MIS has a starting but no ending point.
   2. Marketing Research (MR) is not a continuous system. Here, data is collected only when a company faces a specific marketing problem. It has a starting and ending point.
10. Computers :
    1. MIS is heavily based on the use of computers. Here, computing technologies are widely used to ease and facilitate data collection, its storage, analysis, retrieval and supply of relevant information to marketing managers of the company.
    2. Unlike MIS, Marketing Research (MR) hardly makes use of computers. It uses computers only for analyzing some information and is not entirely based on computing technologies.

Essential Requisites of a Good MIS

Essential Requisites of a Good MIS

The following image depicts the eight essential requisites of a good MIS.

Image credits © Prof. Mudit Katyani.

The essentials of a good Marketing Information System (MIS) is listed below:

1. MIS must be unified and centralized.
2. It must facilitate decision making.
3. It must provide quick and accurate information.
4. It must be economical.
5. It must be selective.
6. It must be future oriented.
7. It must supply information regularly.
8. It must use new techniques.

Now let's discuss and find out, “How a good MIS must be?”

1. Unified and centralized : MIS must be unified and centralized. It collects and stores different types of market information. All of this information must be unified and centralized. That is, all the marketing information must be brought together (unified) and kept at one central place (centralized). So, it must be at the central-office. This will result in easy access and quick reference. The managers will be able to find all the required information at one place.
2. Facilitate decision making : MIS must facilitate decision making. That is, it must guide the marketing managers in decision making. It must provide required information to the managers to help in taking decisions. This information must be of a good quality. That is, it must be relevant, reliable, and up-to-date. This will result in an accurate decision-making process. So, it must not only be a data bank. It must play a positive role in the decision-making process.
3. Quick and accurate information : MIS must provide quick and accurate information. Today, managers have to take quick-decisions because the marketing is moving very fast. If they don't take quickest decisions, then they will lose many marketing opportunities. Therefore, it must provide quick information to the managers. This information must also be accurate, regular and continuous. It must be a user-oriented one. It must collect, classify, verify, store and supply information quickly and accurately.
4. Economical : MIS must be economical. That is, it must not be very costly. The expenditure on it must be minimum. It must not exceed its value. It must give maximum benefits to the company at a minimum cost. It will be economical only if it is selective. It must be particular in collecting, analyzing, storing and supplying information. It must use a minimum number of employees in its operation. It must be economical because it is not directly productive. It is a service and support function.
5. Selective : MIS must be selective. That is, it must not collect all the market information. It must only collect relevant information. It must collect information, which is very essential and useful for decision making. If it is not selective there will be a waste of time, energy, storage space and money.
6. Future oriented : MIS must be forward looking i.e. future-oriented. It must not be a past-oriented one. It must give more importance to future-oriented information. It must provide information for solving problems, which may come up in the future. The company will be successful if their marketing managers are future-oriented. The marketing managers can be so only if the MIS is also future oriented.
7. Supply information regularly : MIS must supply information regularly. The business environment is changing constantly. So, the marketing managers have to take marketing decisions continuously. Therefore, they require a regular and continuous flow of market information. This information must be provided by MIS. So, it must supply information regularly to the marketing managers.
8. Use new techniques : MIS must use new techniques for collecting, analyzing, storing and supplying information. It must use computers and micro-films. It must use new communication techniques. It must also make the use of the Internet and latest software programs. These newer techniques will increase the efficiency and accuracy of MIS. MIS will also become more economical by using new techniques.

4 Main Components of Marketing Information System (MIS)

Components of Marketing Information System MIS

Marketing Information System (MIS) collects, analyses, and supplies a lot of relevant information to the marketing managers. It is a valuable tool for planning, implementing and controlling the marketing activities.

The role of MIS is to identify (find out) what sort of information is required by the marketing managers. It then collects and analyzes the information. It supplies this information to the marketing manager at the right time. MIS collects the information through its subsystems. These subsystems are called components.

The four main components of Marketing Information System (MIS) are:

1. Internal Records,
2. Marketing Intelligence,
3. Marketing Research (MR), and
4. Marketing Decision Support System.

The basic components of MIS are depicted and explained below.

Image credits © Prof. Mudit Katyani.

1. Internal records : The first component of MIS is ‘Internal Record’. Marketing managers get lots of information from the internal-records of the company. These records provide current information about sales, costs, inventories, cash flows and account receivable and payable. Many companies maintain their computerized internal records. Inside records help marketing managers to gain faster access to reliable information.
2. Marketing intelligence :
   1. The second component of MIS is ‘Marketing Intelligence’. It collects information from external sources. It provides information about current marketing-environment and changing conditions in the market. This information can be easily gathered from external sources like; magazines, trade journals, commercial press, so on. This information cannot be collected from the Annual Reports of the Trade Association and Chambers of Commerce, Annual Report of Companies, etc. The salesmen’s report also contains information about market trends.
   2. The information which is collected from the external sources cannot be used directly. It must be first evaluated and arranged in a proper order. It can be then used by the marketing manager for taking decisions and making policies about marketing.
   3. So, marketing intelligence is an important component of MIS.
3. Marketing research : The third important component of MIS is ‘Marketing Research’. MR is conducted to solve specific marketing problems of the company. It collects data about the problem. This data is tabulated, analyzed and conclusions are drawn. Then the recommendations are given for solving the problem. Marketing research also provides information to the marketing managers. However, this information is specific information. It can be used only for a particular purpose. MIS and MR are not substitutes of each other. The scope of MIS is very wide. It includes ‘MR’. However, the scope of MR is very narrow.
4. Marketing decision support system : The fourth component of MIS is ‘Marketing Decision Support System’. These are the tools which help the marketing managers to analyze data and to take better marketing decisions. They include hardware, i.e. computer and software programs. Computer helps the marketing manager to analyze the marketing information. It also helps them to take better decisions. In fact, today marketing managers cannot work without computers. There are many software programs, which help the marketing manager to do market segmentation, price fixing, advertising budgets, etc.

Features of Marketing Information System MIS

Features of Marketing Information System MIS

The main characteristics or features of Marketing Information System (MIS):

Image credits © Prof. Mudit Katyani.

1. Continuous system : MIS is a permanent and continuous system of collecting information. It collects information continuously.
2. Basic objective : The basic objective of MIS is to provide the right-information at the right-time to the right-people to help them take right decisions.
3. Computer based system : MIS is a computer-based system. It uses computers for storing, analyzing and supplying information. It also uses micro-films for storing information. Therefore, it is very quick and accurate.
4. Future-oriented : MIS is future-oriented. It provides information for solving future problems. It is not past-oriented.
5. Used by all levels : MIS is used by all three levels of management, i.e. top, middle and lower. It is used for making marketing plans, policies and strategies. This is used to solve marketing problems and to take advantage of business opportunities.
6. Sources : MIS collects information from both, internal and external sources. For example, information is collected from company records, publications, etc.
7. Collects marketing information : MIS collects all types of marketing information. It collects information about the consumer competition, marketing environment, government policies, etc. It supplies this information to the marketing managers.
8. Helps in decision making : MIS supplies up-to-date and accurate information. It helps marketing managers to take quick and right decisions.