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What is Product Quality? Definition Meaning Importance

2013-05-21T19:48:00.002+05:30

Definition of Product Quality

Before we proceed to understand, “what is product quality?” First, let's focus on the definition of quality.

It is not easy to define the word ‘Quality’ since it is perceived differently by the different set of individuals. If experts are asked to quote the definition of quality, they may give varied responses depending on their individual preferences. These may be similar to following listed phrases.

According to Experts, the word quality can be defined either as;

Fitness for use or purpose.
To do a right thing at first time.
To do a right thing at the right-time.
Find and know, what consumer wants?
Features that meet consumer needs and give customer satisfaction.
Freedom from deficiencies or defects.
Conformance to standards.
Value or worthiness for money, etc.

Dr. Joseph Juran coined a short definition of quality as;

“Product's fitness for use.”

Juran's definition of quality is quite simple and popular one. However, it doesn't directly convey an in depth meaning of quality needed by managers who are faced to decide on selecting a right course of action.

To understand Juran's concept of quality, managers must study distinctions made in the following figure.

Image credit and reference © “Juran's Quality Handbook,” 5^th Edition.

Hence, based on the above discussion, definition of product quality can be stated as follows:

So, what is product quality?

“Product quality means to incorporate features that have a capacity to meet consumer needs (wants) and gives customer satisfaction by improving products (goods) and making them free from any deficiencies or defects.”

Meaning of Product Quality

Product quality mainly depends on important factors like:

The type of raw materials used for making a product.
How well are various production-technologies implemented?
Skill and experience of manpower that is involved in the production process.
Availability of production-related overheads like power and water supply, transport, etc.

Product quality has two main characteristics viz; measured and attributes.

Measured characteristics includes features like shape, size, color, strength, appearance, height, weight, thickness, diameter, volume, fuel consumption, etc. of a product.
Attributes characteristics checks and controls defective-pieces per batch, defects per item, number of mistakes per page, cracks in crockery, double-threading in textile material, discoloring in garments, etc.

Based on this classification, we can divide products into good and bad.

So, product quality refers to the total of the goodness of a product.

The five main aspects of product quality are depicted and listed below:

Image credits © Prof. Mudit Katyani.

Quality of design : The product must be designed as per the consumers' needs and high-quality standards.
Quality conformance : The finished products must conform (match) to the product design specifications.
Reliability : The products must be reliable or dependable. They must not easily breakdown or become non-functional. They must also not require frequent repairs. They must remain operational for a satisfactory longer-time to be called as a reliable one.
Safety : The finished product must be safe for use and/or handling. It must not harm consumers in any way.
Proper storage : The product must be packed and stored properly. Its quality must be maintained until its expiry date.

Company must focus on product quality, before, during and after production:

Image credits © Prof. Mudit Katyani.

Before production, company must find out the needs of the consumers. These needs must be included in the product design specifications. So, the company must design its product as per the needs of the consumers.
During production, company must have quality control at all stages of the production process. There must have quality control for raw materials, plant and machinery, selection and training of manpower, finished products, packaging of products, etc.
After production, the finished-product must conform (match) to the product-design specifications in all aspects, especially quality. The company must fix a high-quality standard for its product and see that the product is manufactured exactly as per this quality standard. It must try to make zero defect products.

Importance of Product Quality

Image depicts importance of product quality for company and consumers.

Image credits © Prof. Mudit Katyani.

For company : Product quality is very important for the company. This is because, bad quality products will affect the consumer's confidence, image and sales of the company. It may even affect the survival of the company. So, it is very important for every company to make better quality products.
For consumers : Product quality is also very important for consumers. They are ready to pay high prices, but in return, they expect best-quality products. If they are not satisfied with the quality of product of company, they will purchase from the competitors. Nowadays, very good quality international products are available in the local market. So, if the domestic companies don't improve their products' quality, they will struggle to survive in the market.

Ten Main Factors Affecting Plant Location

2013-05-21T15:33:00.001+05:30

Factors Affecting Plant Location

Plant location must be selected properly by entrepreneurs while planning to set up their business units. While taking such a decision, they must consider some important factors.

Following image depicts important factors affecting plant location.

Image credits © Prof. Mudit Katyani.

Ten main factors affecting plant location are:

Law and order situation,
Availability of infrastructure facilities,
Good industrial relations,
Availability of skilled workforce,
Social infrastructure,
Investor-friendly attitude,
Nearness to market,
Nearness to source of raw-material,
Supportive industries and services, and
Must meet safety requirements.

Now let's briefly discuss above ten factors affecting plant location.

Law and order situation : Plant location must be at that place where law and order situation is in control. Entrepreneurs give a lot of importance to this factor while locating a business unit in any state or region. If a state has bad law and order situation, then the business must not be located within that state, unless it has other important factors such as availability of heavy or bulky raw materials.
Infrastructure facilities : Plant location which is selected must have proper infrastructure facilities. Without good infrastructure facilities, it will be difficult to do business efficiently. The infrastructure facilities are the backbone of all industries. Without it, business cannot be done. Transport and communications, banking services and regular fuel, power and water supply are some crucial infrastructure facilities that help industries to grow.
Good industrial relations : Plant location must be at those places where good industrial-relations are maintained. Industrial relations become bad, because of militant and selfish trade unions. Entrepreneurs do not want to locate their business at places where anti-social elements are rampant, although there are other favorable factors such as good infrastructure facilities, cheap labor, etc.
Skilled workforce : Plant location must be convenient and easily accessible to skilled workforce. Most businesses require skilled-labor force such as engineers, management experts, computer programmers, etc. The entrepreneurs must consider the availability of competent and skillful-workforce at a particular place to locate their business.
Social infrastructure : Plant location must have good a social infrastructure. There is a need for social-infrastructure not only for employees but also for the development of their families. The availability of social-infrastructure will increase the employees' welfare.

There must be suitable social infrastructure facilities like;
- Education institutions,
- Hospitals and health centers,
- Community centers like worship place, garden, meditation center, etc.
- Recreation facilities like theaters, clubs, communication facilities, etc.
Investor-friendly attitude : Plant location must be in those states whose governments have an investor-friendly attitude. Government must give attractive incentives and concessions to those who start business units in their states. There must not be any bureaucratic control for starting a business. An investor-friendly attitude will not only attract investment, but will also result in the overall development.
Nearness to market : Plant location must be near a market. Every business unit depends on a market for selling its goods and services. The goods and services must reach the market on time, and it must be available to the consumers at a low price. Therefore, this factor is given importance while selecting location of a plant. Locating a plant near the market is preferred, when the product is fragile (easily breakable), perishable, heavy or bulky and when quick service is required.
Nearness to source of raw-material : Plant location must be usually near to the source of raw-material. Raw-materials' costs are about 50% of the total cost. So, it is important in the business to get the raw materials in time and at a reasonable price. Therefore, a business must be located close to the source of raw material, especially in the case of “Gross Materials.” Gross Materials are those which lose weight in the production process. Examples are sugarcane, iron ore, limestone, so on. However, if the raw material is a “Pure Material,” then the business may be located away from the source of raw materials. Pure materials are those which add their weight to the finished product. Examples are cotton textiles, bakeries, silk fabrics, etc.
Supporting industries and services : Plant location must be near its supporting industries and services. If it purchases spare parts from an outside agency, then these agencies must be located very close to the business. If not, the business will have to spend a lot of extra money on transport. It will also be difficult, to control the quality of the spare parts because of the distant location.
Safety requirements : Plant location must meet all essential safety requirements. Due to air, water and sound pollution, some factories have a bad effect on the health of the people. Therefore, these factories must be located away from residential areas. Safety of environment must also be given priority in this regards.
Miscellaneous factors : Plant location is also affected by other miscellaneous factors, which are as follows:
- Availability and cost of land,
- Suitability of land - soil and topography,
- Climatic conditions,
- Location of a similar unit, etc.

Factors Affecting Scheduling - Internal and External

2013-05-20T20:13:00.000+05:30

Factors affecting scheduling

The following chart depicts various factors affecting scheduling.

Image credits © Prof. Mudit Katyani.

The factors that affect scheduling are grouped into two categories viz;

Internal factors affects an entity (e.g. a company) from within.
External factors influence an entity (e.g. a company) from outside.

The internal factors affecting scheduling:

Finished goods inventories : Scheduling depends on how much stock of finished goods is kept by the company. Most companies keep, one month's supply of each product, as stock. If the company's product is fast moving or slow moving, then scheduling will have to be changed.
Process intervals : Scheduling depends on the process intervals of each product. Process interval is the time required to produce a product. Different products have different process intervals. For example, the process interval of a car is more than that of a soap. Scheduling will be different for each process interval.
Type of machines available : Scheduling also depends on the type of machines available. If the company has old and outdated machines, the schedule must keep provisions for the breakdown of machines. Modern and computerised machines makes scheduling very easy.
Availability of personnel : Scheduling also depends on the availability of personnel. If the company has untrained and inexperienced employees, then they will take more time to produce a product. So, the schedule must keep provisions for this. A faster schedule will be required for trained and experienced employees.
Availability of materials : Scheduling also depends on the availability of materials. If a regular supply of materials is available, then the company can do normal scheduling. However, if the supply of materials is irregular, the schedule must be made flexible. That is, when the supply is good then the schedule will be fast and vice versa.
Manufacturing facilities : Scheduling depends on the manufacturing facilities available in the company. This includes space for new machines, employees, etc. It also includes the availability and supply of electricity and water, which may be required for production. If all the required infrastructure is available, then the production schedule can be fast and vice versa.
Economic production run (EPR) : Scheduling also depends on the economic production runs. Economic production runs (EPR) mean the optimum lot size. That is, how many items must be produced in one lot in order to minimize the cost of production. If the company produces more or less than the optimum lot size, then the cost of production will increase. There are many formulas for calculating optimum lot size. Scheduling must be done only after calculating the optimum lot size.

The external factors influencing scheduling:

Consumer demand : Scheduling also depends on the consumer demand. Consumer demand can be found out by sales forecast. So, the production schedule is prepared according to the sales forecast. However, it has to be adjusted (changed) when the actual demand is different from the sales forecast.
Consumer delivery dates : The production schedule also depends on the consumer delivery dates. The consumer is the most important person in a business. So, this factor must be given more importance than other factors. The production schedule must be made in such a way that it will guarantee timely delivery to the consumers. In case of seasonal goods, production must be spread out throughout the year; so, there will not be too much pressure in demand season.
Dealers and retailers inventories : Scheduling also depends on the stock of goods (inventories) with dealers and retailers. The production manager must find out how much stocks is held by dealers and retailers. He must also know why they are keeping this stock. Are they keeping this stock to meet current demand? If yes, then normal scheduling can be done. However, if they are keeping stock in anticipation of future demand, the scheduling will have to be slowed down because there will be fewer orders in the future.

What is Scheduling? Definition Meaning

2013-05-20T20:08:00.001+05:30

What is Scheduling? Definition

Some selected definitions of scheduling given by eminent scholars are quoted below.

According to Richard Lansburgh and William Spriegel,

“Scheduling involves establishing the amount, of work to be done and the time each element of the work will start, or the order of work. This includes allocating the quality and rate of output of the plant or department and also the date or order of starting of each unit of work at each station along the route prescribed.”

Lansburgh and Spriegel gave this definition of scheduling in their book “Industrial Management” published in 1995.

According to James Lundy,

“Work scheduling consists of the assignment of starting and completion times for the various operations to be performed.”

James L. Lundy gave this definition of scheduling in his book “Effective Industrial Management,” first published in 1957.

According to Bethel, Atwater, Smith and Stackman (Jr),

“Scheduling is that phase of production control which rates the work in the order of its priority and then provides for its release to the plant at the proper time and in the correct sequence. Thus, scheduling is concerned with when work shall be performed on a product or part.”

This definition of scheduling is referred from a book titled “Industrial Organization and Management,” first published in 1945. This book is a collective work of Franklin S. Atwater, Lawrence L. Bethel, Harvey A. Stackman (Jr) and George H. E. Smith.

According to Leon Alford and Henry Beatty,

“Fitting specific jobs into a general time-table so that orders may be manufactured in accordance with contracted liability, or in mass production, so that each component may arrive at and enter into assembly in the order and at the time required.”

Alford and Beatty quoted above definition of scheduling in their work titled “Principles of Industrial Management” published in 1951.

Image credits © Prof. Mudit Katyani.

Meaning of Scheduling

Scheduling is the last step in production planning alone. However, it is the second step in production planning and control.

Scheduling comes after routing. It is a time-table of production. It gives the starting and completion date and time for each operation of job (task or work). It is just like a railway time-table.

The production process is divided into many different jobs. Scheduling arranges all these jobs in the order of priority. That is, it tells which job must be done first, which job must be done second and so on. Then it fixes starting and completion date and time for each job.

Scheduling gives a lot of importance to the time element in the production process.

Scheduling is also done for materials, parts, machines, etc.

The following image depicts the meaning of scheduling.

Image credits © Prof. Mudit Katyani.

The main purpose or objective of scheduling is to see that all production operations are completed in a given time.

If the production is completed in a given time, only, then, the delivery of goods can be made on time. If this happens, it will increase the goodwill of the company.

The functions or procedure of scheduling is as follows:

Make the list of all the production activities.
Fix the starting time for each activity.
Fix the finishing time for each activity.
Prepare the time-table.

Factors affecting scheduling are classified as internal and external factors.

The kinds of scheduling are listed below:

Master scheduling : The date of completion of production is assigned or fixed along with stage wise operation schedule.
Operation scheduling : The time required to do some amount of work (task or job) with a given machine or process is fixed.
Detail operation scheduling : First, all details necessary to do some amount of work with a given machine or process are identified. Later, time required to complete each detail operation of work is fixed.

Difficulties or Problems in Measuring Productivity

2013-03-06T07:47:00.001+05:30

Problems in measuring productivity

Following image lists main difficulties or problems in measuring productivity.

Image credits © Prof. Mudit Katyani.

Important challenges or difficulties in measuring productivity:

Difficulty in measuring output,
Difficulty in measuring inputs,
Factorial productivity,
Changing prices of inputs and outputs,
Intangible output of service sector,
Comparison of productivity of different periods,
Difficulty in measuring man-hours, and
Changes in technology.

Now let's discuss these constraints in measuring productivity.

Difficulty in measuring output : The output of an industry may be measured in terms of volume (units) or value (dollars). It is very difficult to combine both these factors.
1. If the output is homogeneous (similar), then the productivity can be measured in terms of volume.
2. If the output is not homogeneous, then the productivity can be measured in terms of value.
3. However, if some units are homogeneous and other non-homogeneous, then the industry will face difficulties in measuring productivity.
Similarly, it is very difficult to find out whether the by-products and work-in-progress should be included in output or not. If it is included, then it is very hard to find its value.
Difficulty in measuring inputs : Most industries do not have proper records of the inputs of land, labor, capital and machines. Even if such records are available, it is very difficult to calculate the exact number of man hours worked i.e. the input of labor.
Factorial productivity :
- Factorial Productivity means to calculate the productivity of different factors of production separately.
- Some management experts say that a single factor of production cannot produce anything by itself. Therefore, it has no productivity. A single factor of production has productivity only if it is combined with other factors of production.
- Therefore, according to these management experts, the concept of factorial productivity is meaningless.
Changing conditions : There is a continuous change in the price of inputs and outputs, quality of raw-materials, machines and tools, quality of labor, etc. All this creates difficulties in measuring productivity.
Service sector : It is very difficult to measure the productivity of service sectors like Banking, Insurance, Education, etc. This is because the output of the service sector is intangible.
Different periods : It is very difficult to compare the productivity of two different periods. For example, comparison of productivity during a war period with a peace period is meaningless.
Difficulty in measuring man-hours : It is difficult to find out the exact number of productive man-hours. This is because wages paid to the employees also includes the cost of idle time.
Technological change : Changes in technology will cause a change in the nature and quality of output. Therefore, measurement of productivity will become difficult.

Nine Main Benefits of Higher Productivity

2013-03-06T07:07:00.000+05:30

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:

Higher profit,
Employees welfare,
Better return
Nice relations,
Customer satisfaction,
Good credit rating,
Goodwill,
Better credit terms, and
Low turnover.

Now let's discuss briefly these important benefits of higher productivity.

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.
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.
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.
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.
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.
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.
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.
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.
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.

Explain Need or Importance of Location Planning

2013-03-06T06:11:00.001+05:30

Importance of location planning

Location planning decisions are very important for all types of business units. This is because it affects the cost, selling price, and demand of the product. It is a non-recurring heavy expenditure. Large companies take the help of different professionals like lawyers, accountants, environmentalist, etc. for selecting the proper location of plant.

Following image lists 8 points that bring out importance of location planning.

Image credits © Prof. Mudit Katyani.

There is a need or importance of location planning because it aids in:

Expansion,
Cost advantages,
Discovery of raw-material,
Additional facilities,
Mergers,
Political and social changes,
Increasing product demand, and
Avail tax benefits.

Now let's discuss above points highlighting importance of location planning.

Expansion : If the company wants to expand and diversify its activities, it will have to search for a new-location for setting up its new business unit. In this case, it will need a location planning.
Cost advantages : If an existing plant is not near a market place, it will increase the transport cost. This will also increase the cost of the product. So, to avoid this, the company will search for a new plant location which is near the market. Such location of plant must be convenient to the employees and must have a regular supply of water and electricity. Overall, this will result in reduction of the cost of production.
Discovery of raw-material : Generally, a plant must be located at a place where raw-material is available. For example, if oil and gas are found at some place, then a new petrochemical plant has to be set up there for processing purpose.
Additional facilities : Plant location-related decisions will have to be taken if the organization wants additional facilities. New facilities may be necessary to improve the quality of work, to meet rising demands, etc.
Mergers : Mergers, joint-ventures, and Amalgamations may lead to start a new unit at a new-location. It may even require closure of an existing plant unit. In mergers, production is mostly started at a new place as per the new-agreement.
Political and social changes : Each political party has its own philosophy. Political changes can lead to changes in economic policies of the government. This may make the existing location unattractive for doing business. Social changes may require production of eco-friendly goods. This may require a change in location.
Increasing product demand : Demand for the company's product may increase at other places, especially in abroad countries. So, the company will have to start a branch in another state or in foreign countries. This would lead to a search for new location of plant.
Avail tax benefits : Government may announce some tax benefits for starting a business in rural areas. This may motivate entrepreneurs to start their business units in remote areas.

Eight Important Factors that Affect Productivity

2013-03-06T05:20:00.000+05:30

Factors that affect productivity

The following chart shows eight factors that affect productivity.

Image credits © Prof. Mudit Katyani.

The eight main factors that affect productivity are:

Technical factors,
Production factors,
Organizational factor,
Personnel factors,
Finance factors,
Management factors,
Government factors, and
Location factors.

Now let's discuss briefly above listed important factors that affect productivity.

Technical factors : Productivity largely depends on technology. Technical factors are the most important ones. These include proper location, layout and size of the plant and machinery, correct design of machines and equipment, research and development, automation and computerization, etc. If the organization uses the latest technology, then its productiveness will be high.
Production factors : Productivity is related to the production-factors. The production of all departments should be properly planned, coordinated and controlled. The right quality of raw-materials should be used for production. The production process should be simplified and standardized. If everything is well it will increase the productiveness.
Organizational factor : Productivity is directly proportional to the organizational factors. A simple type of organization should be used. Authority and Responsibility of every individual and department should be defined properly. The line and staff relationships should also be clearly defined. So, conflicts between line and staff should be avoided. There should be a division of labor and specialization as far as possible. This will increase organization's productiveness.
Personnel factors : Productivity of organization is directly related to personnel factors. The right individual should be selected for suitable posts. After selection, they should be given proper training and development. They should be given better working conditions and work-environment. They should be properly motivated; financially, non-financially and with positive incentives. Incentive wage policies should be introduced. Job security should also be given. Opinion or suggestions of workers should be given importance. There should be proper transfer, promotion and other personnel policies. All this will increase the productiveness of the organization.
Finance factors : Productivity relies on the finance factors. Finance is the life-blood of modem business. There should be a better control over both fixed capital and working capital. There should be proper Financial Planning. Capital expenditure should be properly controlled. Both over and under utilization of capital should be avoided. The management should see that they get proper returns on the capital which is invested in the business. If the finance is managed properly the productiveness of the organization will increase.
Management factors : Productivity of organization rests on the management factors. The management of organization should be scientific, professional, future-oriented, sincere and competent. Managers should possess imagination, judgement skills and willingness to take risks. They should make optimum use of the available resources to get maximum output at the lowest cost. They should use the recent techniques of production. They should develop better relations with employees and trade unions. They should encourage the employees to give suggestions. They should provide a good working environment, and should motivate employees to increase their output. Efficient management is the most significant factor for increasing productiveness and decreasing cost.
Government factors : Productivity depends on government factors. The management should have a proper knowledge about the government rules and regulations. They should also maintain good relations with the government.
Location factors : Productivity also depends on location factors such as Law and order situation, infrastructure facilities, nearness to market, nearness to sources of raw-materials, skilled workforce, etc.

Difference Between Intermittent & Continuous Production System

2013-02-27T03:05:00.000+05:30

Difference between Intermittent and Continuous Production System

Difference between intermittent and continuous production system; based on 10 points.

Image credits © Prof. Mudit Katyani.

Nature of product.
Flexibility of process.
Scale of production.
Per unit cost.
Range of products.
Instructions.
Staff.
Storage of final products.
Location change.
Capital invested.

Now let's distinguish intermittent and continuous production system.

Nature of product :
1. In intermittent production system, goods are produced based on customer orders and not for stocking.
2. In continuous production system, goods are produced based on demand forecast and for stocking.
Flexibility of process :
1. In intermittent production system, production process is flexible. The product design goes on changing.
2. In continuous production system, production process is not flexible. It is standardized. The same product is manufactured continuously.
Scale of production :
1. In intermittent production system, goods are produced on a small scale, so there is no economies of scale.
2. In continuous Production System, goods are produced on a large scale, so there are economies of large-scale production.
Per unit cost :
1. In intermittent production system, cost per unit may be higher because production is done on a small-scale.
2. In continuous production system, cost per unit may be lower because production is done on large-scale.
Range of products :
1. In intermittent production system, wide ranges of products are manufactured.
2. In continuous production system, normally one particular type of product is manufactured.
Instructions :
1. In an intermittent production system, many detailed instructions must be provided depending upon the customer's specification.
2. In continuous production system, single set of instructions is sufficient for operation. Here, there is no need to repeat the instructions.
Staff :
1. Intermittent production system requires staff with high technical skills and abilities.
2. Continuous production system requires more managerial skills and less technical skills.
Storage of final products :
1. In an intermittent production system, there is no need to store and stock the final products, because items are produced as per customer's orders.
2. In a continuous production system, there is a need to store and stock the final products until they are demanded in the market.
Location change :
1. In an intermittent production system, change in location is easy.
2. In a continuous production system, change in location is difficult.
Capital invested :
1. In an Intermittent production system, capital invested is small.
2. In a continuous production system, capital invested is very huge.

Steps Procedure of Routing in Production

2013-02-27T01:33:00.001+05:30

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:

Product analysis determines what to manufacture and purchase.
Product-analysis is done again to determine materials required for production.
Fix the manufacturing operations and their sequences.
Decide the number of units to be manufactured in a batch (lot).
Estimate the margin of scarp in each lot of production.
Analyze the production cost.
Prepare production control forms for effective routing.
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

2013-02-27T01:00:00.001+05:30

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:

Routing,
Scheduling,
Dispatching, and
Follow-up.

Initial two steps i.e. Routing and Scheduling, relate to production planning.

Last two steps i.e. Dispatching and Follow-up, relate to production control.

Now let's continue our discussion further to understand each step in detail.

1. Routing

Routing is the first step in production planning and control.

Routing can be defined as the process of deciding the path (route) of work and the sequence of operations.

Routing fixes in advance:

The quantity and quality of the product.
The men, machines, materials, etc. to be used.
The type, number and sequence of manufacturing operations, and
The place of production.

In short, routing determines ‘What’, ‘How much’, ‘With which’, ‘How’ and ‘Where’ to produce.

Routing may be either very simple or complex. This depends upon the nature of production. In a continuous production, it is automatic, i.e. it is very simple. However, in a job order, it is very complex.

Routing is affected by the human factor. Therefore, it should recognize human needs, desires and expectations. It is also affected by plant-layout, characteristics of the equipment, etc.

The main objective of routing is to determine (fix) the best and cheapest sequence of operations and to ensure that this sequence is followed in the factory.

Routing gives a very systematic method of converting raw-materials into finished goods. It leads to smooth and efficient work. It leads to optimum utilization of resources; namely, men, machines, materials, etc. It leads to division of labor. It ensures a continuous flow of materials without any backtracking. It saves time and space. It makes the work easy for the production engineers and foremen. It has a great influence on design of factory's building and installed machines.

So, routing is an important step in production planning and control. Production planning starts with it.

Read article on procedure of routing in production.

2. Scheduling

Scheduling is the second step in production planning and control. It comes after routing.

Scheduling means to:

Fix the amount of work to do.
Arrange the different manufacturing operations in order of priority.
Fix the starting and completing, date and time, for each operation.

Scheduling is also done for materials, parts, machines, etc. So, it is like a time-table of production. It is similar to the time-table, prepared by the railways.

Time element is given special importance in scheduling. There are different types of schedules; namely, Master schedule, Operation schedule and Daily schedule.

Scheduling helps to make optimum use of time. It sees that each piece of work is started and completed at a certain predetermined time. It helps to complete the job systematically and in time. It brings 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:

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

Dispatching may be either centralized or decentralized:

Under centralized dispatching, orders are issued directly by a centralized authority.
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

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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:

Utilizes resources effectively.
Makes flow of production steady.
Estimates production resources.
Maintains necessary stock levels.
Coordinates departmental activities.
Minimizes wastage of resources.
Improves labor efficiency.
Helps to face competition.
Provides better work environment.
Facilitates quality improvement.
Customer satisfaction.
Reduces production costs.

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

1. Utilizes resources effectively

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

2. Makes flow of production steady

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

3. Estimates production resources

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

4. Maintains necessary stock levels

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

5. Coordinates departmental activities

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

6. Minimizes wastage of resources

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

7. Improves labor efficiency

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

8. Helps to face competition

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

9. Provides better work environment

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

10. Facilitates quality improvement

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

11. Customer satisfaction

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

12. Reduces production costs

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

Relationship Between Production Planning and Control

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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.

Meaning.
Goals.
Course of action.
Work performance.
Operations.
Resources.
Directions.
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

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

3. Course of action

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

4. Work performed

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

5. Operations

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

6. Resources

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

7. Directions

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

8. Weaknesses

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

Conclusion

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

What is Productivity? Definition Meaning

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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.

Image credits © Prof. Mudit Katyani.

Meaning of Productivity ↓

Productivity is the relationship between output and input. It is expressed or measured as a ratio of output and input.

Productivity equals output divided by input.

Two simple examples of productivity measurement:-

Productivity of a manufacturing unit can be measured in terms of the number of goods-produced in some fixed amount of time (usually in hours).
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:-

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

Guidelines for Determining Performance Dimensions

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Guidelines for determining performance dimensions

Guidelines for determining performance dimensions are depicted below.

The dimensions of performance must be as follows:

Performance dimensions (Quantity & Quality) must be fixed in advance.
Dimensions must be clearly defined and easily understood by employees.
They must be consistent with the image or goodwill of the company.
Quality standards must be laid down even for inputs.
Workers must be properly trained about performance dimensions of company.
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

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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:

Quantity - which is the primary dimension of performance.
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?”:

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.
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.
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

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Advantages of Work Sampling

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

Image credits © Prof. Mudit Katyani.

Work sampling gives an unbiased result since workmen are not under close observation.
A work sampling study may be interrupted at any time without affecting the results.
Work sampling can be conducted by anyone with limited training. There is no need to have experts.
Team work can be studied by work sampling and not by the time-study.
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.

Work sampling is not economical for short cycle jobs. It is also uneconomical to study a single worker or even small group of workers.
Unlike time study, it does not allow a small breakdown of activities and delays.
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.
In work sampling method, the observations are limited or insufficient. So, the results may not be accurate.
This method normally does not record the workers' speed of working.

Work Measurement Techniques Methods Types

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Work Measurement Techniques

Image depicts different work measurement techniques, methods or types.

Work measurement techniques are listed below:

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

Select the job to be timed.
Standardize the method of doing the job.
Select the worker to be studied.
Record the necessary details of the job and conditions of work.
Divide the job into elements. Here, ’element’ is a part of the job.
Find out the time taken to do every single element.
Keep provisions for relaxation, etc.
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:

Deciding what activities are defined as ’working’. Non-working are those activities which are not defined as working.
Observe the worker at selected intervals and record (write down) whether he is working or not.
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:

It provides reliable information about standard time for doing different jobs. This is because it is based on many past time studies.
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:

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

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

One disadvantage or limitation of analytical estimating method:

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

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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.

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

Meaning of Work Measurement

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

Work measurement means to:

Find out the different elements (parts) of the production process (job).
Find out the time taken by each element.
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.

Purpose of Work Measurement

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

The main purpose of work measurement:

Manpower planning.
Production planning and scheduling.
Estimating productions costs.
Cost reduction and control.
Rational basis for incentives.
Performance appraisal.
Training of employees.
Comparing alternative methods.
Accepting new orders.
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

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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.

Individual Standards.
Departmental Standards.
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.

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.

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:

Total output in quantitative and qualitative terms.
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;

Labor costs.
Material costs.
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.

Methods of Conducting a Marketing Audit

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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.

Following methods are used to conduct a marketing audit:

Outside auditor : Company appoints an outside auditor to conduct a marketing audit.
Task force audit : Company selects a team of its own senior executives to conduct a marketing audit.
Self audit : In this method, marketing manager of a company conducts a marketing audit.
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

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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:

The six important types of marketing audit are:

Marketing Environment Audit.
Marketing Strategy Audit.
Marketing Organization Audit.
Marketing Systems Audit.
Marketing Productivity Audit.
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.

Explain the Characteristics of Marketing Audit

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Explain the Characteristics of Marketing Audit

The eight important characteristics of marketing audit are depicted below.

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

Marketing audit is a comprehensive study of all marketing activities.
It is a systematic-process that follows a step-by-step procedure.
It is a periodic activity and must be conducted regularly.
It is conducted by an independent person who is not from company.
It is a critical review of marketing activities of company.
It is an evaluation of marketing activities of company.
It finds out marketing opportunities and weaknesses of company.
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.

It studies marketing environment.
It studies the internal marketing system.
It examines the marketing activities.
It finds out the problems.
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.

Production Standards Meaning Definition Advantages Demerits

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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.

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:

Optimum use of labour.
Fixing wages.
Basis for promotion and training.
Customer satisfaction.
Less wastage.
Budgeting possible.
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:

Limiting factor.
No improvement.
Individual difference not considered.
Difference in job methods.
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

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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.

It is an extensive or comprehensive process because it covers all (entire) marketing activities of a company.
It is a systematic or methodical process since it strictly follows all involved steps or procedures properly.
It is an independent or autonomous process conducted by an external person. This person is not from the marketing department of a company.
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:

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

External marketing environment : Here, the marketing audit mainly focuses on customers and competition in the business.
Internal marketing environment : Here, the marketing audit studies the structure of company's marketing team and its effectiveness.
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.