Problems in Measuring Productivity - Difficulties

The difficulties or problems in measuring productivity are listed below

Image Credits © Prof. Mudit Katyani.

1. Difficulty in barometer achievement : The achievement of an industry may be abstinent in agreement of aggregate (units) or amount (dollars). It is actual difficult to amalgamate both these factors.
   1. If the achievement is constant (similar), again the abundance can be abstinent in agreement of volume.
   2. If the achievement is not homogeneous, again the abundance can be abstinent in agreement of value.
   3. However, if some units are constant and added non-homogeneous, again the industry will face difficulties in barometer productivity.
   Similarly, it is actual difficult to acquisition out whether the by-products and work-in-progress should be included in achievement or not. If it is included, again it is actual harder to acquisition its value.
2. Difficulty in barometer inputs : Most industries do not accept able annal of the inputs of land, labor, basic and machines. Even if such annal are available, it is actual difficult to account the exact amount of man hours formed i.e. the ascribe of labor.
3. Factorial abundance :
   • Factorial Abundance agency to account the abundance of altered factors of assembly separately.
   • Some administration experts say that a individual agency of assembly cannot aftermath annihilation by itself. Therefore, it has no productivity. A individual agency of assembly has abundance alone if it is accumulated with added factors of production.
   • Therefore, according to these administration experts, the abstraction of factorial abundance is meaningless.
4. Changing altitude : There is a connected change in the amount of inputs and outputs, superior of raw-materials, machines and tools, superior of labor, etc. All this creates difficulties in barometer productivity.
5. Account area : It is actual difficult to admeasurement the abundance of account sectors like Banking, Insurance, Education, etc. This is because the achievement of the account area is intangible.
6. Altered periods : It is actual difficult to analyze the abundance of two altered periods. For example, allegory of abundance during a war aeon with a accord aeon is meaningless.
7. Difficulty in barometer man-hours : It is difficult to acquisition out the exact amount of advantageous man-hours. This is because accomplishment paid to the advisers aswell includes the amount of abandoned time.
8. Technological change : Changes in technology will could cause a change in the attributes and superior of output. Therefore, altitude of abundance will become difficult.
   

Nine Main Benefits of Higher Productivity

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.

Steps Procedure of Routing in Production

Steps or Procedure of Routing in Production

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

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.

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.

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:

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.

Conclusion

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

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What is Productivity? Definition ↓

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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.

Image credits © Prof. Mudit Katyani.

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Meaning of Productivity ↓

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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.

Guidelines for Determining Performance Dimensions

Guidelines for determining performance dimensions

Guidelines for determining performance dimensions are depicted below.

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.

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:

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:

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.