haptor Production, Productivity and
Business Organization
raw materials
into finiished goods
Production is an organised activity of converting
utilization of resourcesjor producing go0ds
Productivity is related with the optimal utilization of resources
services. Urganisaton concerted effort related with
implies the market.
in order to earn profit, consumer satisfaction and impact in
INSIDE THIS CHAPTER
2.1 Definitions 2.10 Kinds of Productivity Measurement
2.2 Types of Production 2.11 Causes of Low Productivity and Techniques of
cept of Productivity their Elimination
2.3
2.4 Importance of Productivity 2.12 Factors Affecting Productivity
Difference between Production 2.13 Technical Methods to Improve Productivity
2.5
and Productivity 2.14 Main Contributors to Productivity Improvement
2.6 Tools of Productivity 2.15 Advantages from Increased Productivity
2.7 Reasons for Low Productivity 2.16 Forms of Business Organisation
of
2.8 Factors that Help Increase Productivity 2.17 Types of Business Organisations or Types
2.9 Productivity Index Ownership
2.1 DEFINITIONS
2.1.1 Production
The objective of an industrial unit/plant is to provide goods or services and to earn profit. These
days many units/firms are focussing on continuous improvement and consumer delight. Thus a continuous
search for areas of improvement in the production system is required. For this purpose a thorough
understanding of the recent developments in production system industrial engineering and management
is essential. To achieve these goals, the enterprises need to transform some inputs like men, materials.
capital information and energy into a specified set of output, elements like finished products and
services in
proper quantity and quality. The transformation of the input materials into pre-specified
output products is achieved through production process. Production in every day life can be noticed
in factories, hospitals and offices etc.
In the recent years, the outlook of the management towards production system has changed. In
addition to earning profits, the focus now is on good quality of products, consumer satisfaction and
improvement in the product and production system.
20
PRODUCTION, PRODUCTIVITY AND BUSINESS 21
ORGANIZATION
Quantitatively production may be defined as a transformation process in which a set or li ke
nen,machines, money and materials shed
get converted into a specified set of output elements iun
products or services of required quality.
In short We can define
production "as organised activity of converting raw materials into
ud
products".
PToducuon can also be defined "producing goods or services which satisfy human needs or wants.
2.1.2 Productivity
Productivity of a production system is analogous to the efficiency of a machine. "Productivity 1s
nothing but the reduction in wastage of resources it is connected with
resources) may be men, machines, materials,
or
optimal utilization or
inpuis
energy, space time and building etc. for producing
goods or services.
Productivity of a production system may be defined as ratio betwcen output and input. Output
means the number of items
produced or amount produced and the input means the resources used.
Quantitative productivity = Output
Input
Production can be increased by increasing the input but productivity may not increase
2.1.3 Organisation
In order to achieve the
objectives of a production system of a business unit, all the activities required
for it, must be carried out effectively and efficiently, which needs an organized unit. Generally a
business is established by combination of four M's. Men, Machines, Materials and Method
(may be required
for acquiring information and other resourees). Organization implies concerted efforts for optimal utilization
of these factors in order to earn profit, consumer satisfaction and impact in the market.
The term "Organization" has been defined by various authors in different ways. A few of them are
as follows:
According to Allen, "Organization is the process of (i) identification, grouping and organizating
of the work to be performed (i) defining and delegating the responsibility and authority and (ii)
establishing the relationship for the purpose of enabling people to work most effeetively together in
accomplishing objectives".
According to Spriegel, Factory organization concerns primarily with the internal relationships
within the factory such as responsibilities of personnel, arrangement and grouping of machines and
material control. From the stand point of view of the enterprise as a whole, organization is the structural
relationship between various factors in an enterprise.
In the light of above discussions, it can be concluded that organization is the mechanism of management
by virtue of which a group of individuals of an enterprise, shall pool its efforts for achieving the
objectives through clear, demarcation of authority, responsibility, duty, division of labour or activities,
providing the channels of communication and coordination.
2.2 TYPES OF PRODUCTION
Many methods of manufacturing are used for production purposes. The manufacturing system varies
rom factory to factory and from product to product. However, of the most important issues
one
production volume proposed to be produced. The most common type of production systems are:
1. Job Order Production
2. Batch Order Production
3. Continuous Production
PRO ORGANIZATION
2.10.4 Machine Productivity
Machine uuctivity
Output
Actual machine hours used
Machine productivity can be increased by following:
(i)Preventivemantenance cl.
ol Cue
i proper machining parameters like speed, feed and
Utilzation ot depth
i Use ot requisite skilled and properly trained labour
v) Method study
2.10.5 Energy Productivity
Energy Producivu Output
Energy input
2.10.6 Productivity-General View
A general measure of productivity can be attained by following formula.
Output
tueu Labour input +capital input + energy input + other inpuis
As is clear from above relations each kind of measure needs some specific kind of information.
The appropriate measure can be the basis of the information available and the main target of the
investigation. Generally the measure of productivity indicates the performance of inputs namely.
labour. capital. energy or other investment required in an enterprise. So it is not the increase 1n
output which is indication of productivity improvement. Thus production is an absolute measure and
productivity is a relative measure.
2.11 CAUSES OF LOW PRODUCTIVITY AND TECHNIQUES OF THEIR ELIMINATIONN
As discussed earlier, productivity is a combination of effectiveness or performance and efficiency.
Eftectiveness is affected by wastage of time while efficiency is affected by wastage of input resources.
Therefore for improving productivity both these wastages should be minimized. The factors responsible
for decreasing productivity can be discussed under four categories as mentioned below:
2.11.1 Due to Defects in Design or Specifications of Product
(a) Bad design of product prevents use of most economic production technique
(b) Lack of product standardization prevents utilization of efficient production process
(c) Incorrect quality standards cause unnecessary work
(d) Due to faculty design excess material removal requirement is involved.
2.11.2 Due to Inefficient Methods of Manufacture
(a) Wrong machine used
(6) Process not operated correctly or in bad condition
(c) Improper or bad layout causing excessive movement
(d) Working methods used wrong.
2.11.3 Mismanagement of Time on Account of Management
(a) Excessive product variety (adds idle time due to
short runs).
b) Lack of standardisation (adds idle time due to short
runs).
(c) Bad planning of work and orders adds idle
time and men and machines.
(a) Lack of raw materials due to
poor inventory control due to which sometimes men and macncs
are idle.
MANAGE
ORGANIZATION
ENGINEERING AND
INDUSTRIAL
production.
in
30 break down
cause
interruptions
scrap
and
rework.
plant time due to
(e) Frequent adds
ineffective
more
rest.
condition workers for
)Plant in bad the plant
force the
productivity.
condition in decrease of and equipne
Bad working results in personnel
(g) low morale
m o t i v a t i o n and on dispensable
(h) Lack of expenditure
in distributionof capital leads to
(i) Bad planning
Mismanagement on Account of Workers effective time.
2.11.4 adds in
deliberate slow working
idleness and quality.
a) Late coming, rework and poor product
causes lot of scrap,
Careless workmanship
(b)
careless workers. avoided o r minimized
Accidents due to eliminated or
(c) four heads should be
discussed under the above productivity.
The factors will result in higher
and maximum output. This time,
to achieve
effective utilization resources
of e x c e s s work
contents,
ineffective
the elements of
above discussion are
The factors indicated in under four headings.
c a u s e s discussed
can be taken to eliminate these
appropriate steps
PRODUCTIVITY
2.12 FACTORS AFFECTING of production
factors related input and output components
to
In any manufacturing setup or unit, ali the in improving
immense importance as they help
process, affects productivity. These factors are of
productivity. They are broadly classified into following categories
1. Manpower.
2. Equipment and machines.
Input Materials.
4. Methods used.
5. Time.
6. Floor area or space.
7. Power or Energy.
8. Finance.
9. Movement of nmen and machines.
Many decisions has to be taken for the effective utilization of these factors. The
ofthese factors. help improve productivity toa considerable amount. On the other effective utilization.
or poor utilization of these factors
hand mismanagement,
deteriorate the productivity. The
the factors are mentioned below. various decisions with to respect
2.12.1 Man Power
Selection i.e.
selection of right man for a specific
training i.e. consideration of training job. ApPplying well known
requirements whether saying division of labour
to be sent for
training outside the unit to other plants Within be imparted training in the plant itself
to
or
Number of personnel required i.e. man the
country or abroad
required skill. power or
requirement planning in each oftraining institutes.
the
2.12.2 Equipment and Machines departments o
The number of
machine tools. their
organization and capacity
maintenance schedules
and
accessories
etc. required, replacement
2.12.3 Input Materials policy of tne
Appropriate quality of materials.
Material requirement planning
(M.R.P.).
PRODUCTION, PRODUCTIVITY AND BUSINESs 31
Substitute of materials
ORGANIZATION
being used.
Inspection of input materials at various
Cost of materials points.
procurement and handling upto stores.
2.12.4 Methods
These are very significant as far as the productivity improvement is
2.12.5 Time
concene
Time is signif+cant for the following
reasons:
Inspection of input materials i.e. raw material and semi finished or finished items required
for assembly
Time for inspection of finished
products.
Production time (total time of
Time for repair
manufacturing).
and maintenance of machines and
equipment.
2.12.6 Floor Area or Space
Total area covered by the administrative block. production shop and inspection & qual1ty
control departments etc.
Location of different
departments and shops etc.
Other space covered by plant
layout.
2.12.7 Power or Energy
Maintenance of equipment for saving energy.
Use of renewable energy devices.
Use of biogas, photovoltaic cells, solar energy and other non conventional techniques.
2.12.8 Finance
Finance is required to maintain all the above requirements. The management should be for minimum
rather optimum finance.
2.12.9Movement of Man and Materials
The required motion of manpower within the plant.
The motion of raw material. semi finished and finished
products/items within the plant.
2.13 TECHNICAL METHODS TO IMPROVE PRODUCTIvITY
The various techniques to improve the productivity of a system or
organization could be categorised
in the following ways:
. Task based techniques.
2. Product based Techniques.
3. Technology based methods.
4. Material based techniques.
5. Employee based methods.
6. Management based.
2.13.1 Task Based Techniques
These could be based on following method:
. Work measurement (Time study).
2. Motion study/work simplification (Method study).
32 INDUSTRIAL ENGINEERING
-
AND ORGANIZATION MANAGEMENIT
3. Job analysis.
4. Job evaluation and merit rating.
5. Ergonomics (related with human factors).
6. Production scheduling.
2.13.2 Product
- Based Technique
This may include the following:
Product classification and coding.
Research and development.
Reliability and improvement in product design.
Product standardization.
Product simplification.
Product diversification.
Product specialization.
2.13.3 Technology Based Methods
These may include the following:
Computer aided design.
Computer aided process planning.
Computer aided manufacturing.
Computer integrated manufacturing (CIM).
Computer aided engineering analysis.
Computer aided inspection.
Group technology.
Robotics & Just in time (JIT).
Maintenance management.
Reconditioning & life predicting of equipment technology.
2.13.4 Material Based
Techniques
These may include the
following:
Material requirement
planning (MRP).
Inventory control.
Just in Time
concept of inventory management.
Material management and
Material handling systems.quality
control.
2.13.5 Employee Based Methods
Employees may be encouraged to improve
Incentive schemes productivity by adopting following
for individual
employees. techniques:
Incentive schemes for group of
Management by objectives. employees.
Fringe benefits for employees and
Recognition and punishment of job enlargement.
Total quality management (TQM). employees.
Zero defect benefits for
employees.
PRODUCTmON, PRODUCTIVITY AND BUSINESS 33
ORGANIZATION
2.13.6 Management Based
Management style
Communication in the organ1zaton
Work culturc
Motivation and promoting group activity
2.14 MAIN CONTRIBUTORS TO PRODUCTIVITY
IMPROVEMENT
Following are the main contributors towards productivity improvement
2.14.1 Human Relations
Good human relation result in cooperative attitude of workers which increases productivity of the
sy'stem. Human relations can be improved by means of labour participation regarding good setting
minimization of conflicts, simplification of communication techniques. providing encouragement to
workers for their creative talents
by awarding awards and giving letters of appreciation
2.14.2 ImprovementinExisting Methods of Production and Adoptionof Latest Technology
In order to fight market competition industrialists must regularly adopt latest techniques in the field
of marketing. material handling, inventory control and store management. Method study and work
measurement may be utilized to improve the existing method to select a process and machine toois
etc. Information may be gathered about all operations, facilities, transportation facilities used. distance
moved. inspection time, storage facilities, time spent in storage. all drawing and design specifications
This information will form a flow process chart.
A questionnaire may be prepared for critical examination of all these activities and find out best
possible answer. Accordingly change may be incorporated to improve productivity.
2.14.3 Proper Design of the Product
The product designs are not permanent, they can be changed if improvement is possible. The consideration
of following points may help in cost reduction.
I. Reduction in number of parts leading to the product simplification.
2. Utilization of better and economical materials
3. Installation of efficient system of quality control
4. Standardization of materials. processes, sequenee of operations and tools used
These may reduce wastages in the form of seraps, improve the durability and look of the produce
2.14.4 Cost Control
Productivity can be improved by reducing the production cost. It can be achieved by keeping a close
watchover expenditure, by minimization of material wastages. reduction in niachines break down
periods or idleness of machines reduction in waiting time for men, power..d materials. avoiding
excessive material handling and minization of overtime expenditure.
2.14.5 Product Simplification and Standardization
If the application of product simplification and standardization is possible in the product under consideration
and thus tihe enterprise, it would improve the productivity of the enterprise.
2.14.6 Proper Planning Loading and Scheduling
These industrial engineering techniques help in proper utilization of 4 M'si.e. Men, Machines. Materials
and Methods. Thus improvement in these techniques will lead to improve
productivity,
