Production and materials management

PRODUCTION AND MATERIALS MANAGEMENT

PAPER 3.1 : PRODUCTION AND MATERIALS MANAGEMENT

SYLLABUS
Unit 1
Introduction: Production function – Design of production – Systems – Types of
process – Productivity – Ergonomics

Unit – 2
Production Planning and Control: Planning – Routing – Scheduling -
Despatching – Inspection – Gnatt Charts – Make or Buy Decisions

Unit – 3
Plant Location and Layout : Factors influencing plant location – Relocation –
Types of layouts – Process and product layout.

Unit – 4
Materials Management: Concept - Purchasing – Vendor rating – Material
Handling: Importance – Selection of material handling equipments.

Unit – 5
Stores Management : Functions – Stores location – Stores layout – Essentials of
good layout – Stock verification.

Unit – 6
Inventory Management : Concept – Importance – Techniques.

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Lesson – 1
PRODUCTION FUNCTION
PRODUCTION MANAGEMENT
Production management is the process of effectively planning, organizing,
directing the controlling the production function or production system i.e. the
operations of that part of an enterprise which is responsible for the actual
transformation of materials into finished products. It deals with man – machine
organisation to accomplish both productivity and satisfaction – the desirable
end results.

Scope of Production Management
Major activities included under the production management are:
(1) Product planning and development, i.e. evolution of new products and
designing of those products on the basis of specific demands received
from marketing or sales department.
(2) Production administration which deals with three specialized parts of
production activity, namely,
production engineering
production planning, and
production control
(3) Execution of plans, policies and decisions, i.e. implementation function
(4) Department services and departments, e.g. standardization,
simplification, specialization, inspection and quality control, inventory
control, research and development, diversification, employee amenities
etc.

Major Decisions of Production Management
The are two major areas of responsibilities of production, management
requiring management decisions.

1. Strategic Decisions:
The design of the production system involves decision on many problems
such as selection of product, equipment and process, location and layout
plant etc. They may need large capital investments.

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These decisions are called strategic decision. They are also long-run
decision. Such major decisions of production management are taken by
the top management and not by production or manufacturing managers.

2. Tactical Decisions:
The tactical or short-run or recurring decision relating to the operations
and control of the production system are usually taken by production
manages. These tactical decision are on the problems such as forecasting,
production planning, production control, inventory control, quality cost
control and productivity.
When competitive, economic, social and technological changes occur in
the environment of the enterprise new approaches and adoptions are
required in both the areas to justify its existence and to ensure steady
growth.
The production function of a business is concerned with the creation of a
product or service required to satisfy customer needs, wants and desires.
In any business that supplies a needed product or service, it is quite
obvious that activities of product system must be closely related to the
customer demand as reflected in the continuous flow of order.

PRODUCT FUNCTION
Production function involves an organized activity for converting materials into
a finished product desired by customers.
Production function will be considered most effective when it serves a dual
purpose.

1) It must operate primarily to satisfy customer demand particularly relating
to quality, quantity, price and above all timing of delivery as scheduled in
the order.
2) It must permit production activities to operate in an economical and
efficient manner because cost of production is a vital factor is facing the
market competition and in ensuring normal profit or return on the
investment. Higher costs may wipe off normal profit and sooner or later
enterprise will be wiped out of the market.

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SCOPE OF PRODUCTION FUNCTION
The scope of production function is very wide in the present era of intense
competition and sophisticated technology. The production function in an
enterprise is not only concerned with the proper and full use of production
facilities, utilization of latest techniques of production, and production of
quality goods satisfying the varied segments of customers, but also with the
human factor. The scope of production function is not fixed. It depends upon a
multiplicity of factors. The scope of production function is not fixed. It depends
upon a multiplicity of factors, two more important ones being nature of
business and activity and size of business operations. However, in a large
manufacturing concern, the various activities that generally from part of
production function include the following:
1. Production Planning:
Production planning deals with the preparation of production
programmes, that is, about number and types of product to be
manufactured, the technique of production to be employed, the quality
specification to be met, the delivery schedules to be adhered to, and
utilizing all production facilities with optimum results. Thus, production
planning is a comprehensive function which decides in advances about
the production objectives and the methods to realize those objectives.

2. Plant (or works) Engineering:
This function is concerned with installation of plant and equipment, and
provision of plant services (like power, steam, compressed air, water etc.,
plant and building maintenance; safety precautions; and the like.

3. Purchasing:
After production planning and plant engineering, the function of
purchasing becomes relevant. Purchasing activity is aimed at meeting the
requirements of production department for raw materials, intermediate
products, and consumables. In order to be useful, the purchasing activity
must pay due attention to such aspects of quantity, quality, source, price,
delivery time, planning and control etc.

4. Production (or manufacturing) Engineering:

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This is a specialized function of process design, plant layout design,
materials handling, method engineering, design of tooling and
equipment, work measurement etc.

5. Manufacturing:
This is the function of actual conversion of physical inputs into outputs of
product and services. There could be various operations, depending on
the nature of products and production for example, matting, grinding,
pressing, cutting, heat treating, welding, finishing etc. or fabrication and
assembling. It may be pointed out that the functions of production
planning, plant engineering, purchasing and production engineering are
undertaken with the object of facilitating manufacturing. They all set
stage for the actual manufacturing operations by providing production
programmes, routes, schedules and work orders, by installing plant and
equipment and making available plant services, by buying raw materials,
intermediate products, and consumables, and specifying methods,
processes and standards of operations.

6. Production Control:
The final activity that forms part of production function relates to
production control. Production control mainly deals with bringing actual
performance at par with planned performance in terms of quantity and
quality requirements, time schedules and cost standards. As such,
production control is closely related to production planning.

Organizing production function

To understand how production function is organized in a business enterprise, it
is pertinent to know (a) who is responsible for performing production function
in a business enterprise, and (b) what organizational set-up is followed to
perform production function in a business enterprise. These aspects are briefly
described below.

Responsibility of Product Function

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The responsibility of performing production function varies in different types of
business enterprises. In sole-proprietary organization, for instance, the owner
(i.e. sole proprietor) looks after this responsibility. In partnership firm, the
responsibility of production department can be entrusted to one of the active
partners. In a company, which is generally organized on a large scale, the
responsibility of production function is given a formal shape. A separate
department (generally known as Production Department) is created and put
under the charge of an individual (generally known as Production Manager),
who functions under the overall guidance, superintendence, and control of the
Chief Executive (Manager or Managing Directors), or Board of Directors. It is
this organ of company management (i.e. top management) that is responsible
for taking broad policy decision about production activities.

Relationship of production with other functions of business
Production functions, in a typical manufacturing organisation, operates in a
network of inter-dependencies and interactions with other major functions
such as marketing, finance and accounting, personnel, office, and research and
development (R&D). the nature of relationships between production and other
functions of business is briefly given below.

Production in Relation to Marketing Function

In the nature of things, two functions are more closely interrelated than other
functions. At every stage, right from conceiving the product idea down to
after-sales service, production and marketing departments have to work in
unison. Several decisions in marketing the production have common premises
and inputs. Production designs, sizes and quality ranges have to be determined
keeping in view the preferences of the various customer groups, as studied by
the marketing people. Decision on introduction of new products, improvement
of existing product and elimination of slow-moving and obsolete products have
to be taken in consultation with the manufacturing department. There are
several areas in which both the departments can cooperate and integrate their
activities. For instance, new product ideas that may emanate from research
laboratories attached to production department may be taken up by the
marketing department to build up potential customers. Similarly, production
department can furnish details of the distinct technical features of products to
add grist to the sales promotional campaigns. Sometimes even marginal

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changes in product design can contribute greatly to the attractiveness and
utility of the products.

Production in Relation to Finance and Accounting Function

Production function is closely interlinked with finance and accounting function
in a business enterprise. Long range and short range financial planning has to
take into consideration production costs which are a sizeable component of
total costs of products. In evaluation of production performance, aspects of
cost minimization get the attention of finance manager. In the task of product
on planning, the production people have to depend on costing and other
accounting units to provide the needed estimates and computations of costs of
alternative product designs, process and plant engineering, methods, processes,
standards, and production programmes. Further, any proposal for capital
expenditure for acquisition and replacement of assets, balancing equipment etc.
emanating from production department should be cleared by the finance
department. Thus, both departments should work in close cooperation with
each other and appreciate the complexities and compulsions of each other’s job
responsibilities.

Production in Relation to Personnel Function
The personnel manager in a manufacturing organisation helps the production
department in several matters such as man-power planning, recruitments and
selections, training, design or wage incentive systems, discipline and grievance
settlement process, welfare and safety programmes, and relations with labour
unions. Apart from these aspects, personnel manager also assists the
production department in motivating employees and works, in establishing
communication with them, and in injecting humanism in work units.

Production in Relations to Office Function
Like other functions, production stands in interdependent and interactional
position with office function. The production function can not be satisfactorily
performed if an efficient office does not exist in the organisation. It is the office
that will inform the production department, through relevant records, about the
time schedules of production, the quantities of production, and the quality
specifications of production. it is the office that makes arrangement for the

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procurement of raw material and other production inputs at reasonable rates. It
is from the office that raw materials and other supplies are issued to the
production department, on requisition. It is the office that keeps a periodic
check on the inventories and ensures their proper management. Thus,
production department and office are closely related.

Production in Relation to R & D Function
In a large sized manufacturing organization there is an organic link between the
production department and R & D unit. R & D is a melting pot of ideas with
regard to products, processes and techniques employed in production. it feeds
the production department with new, improved and innovative product idea and
production methods. All technical aspects, specifications and designs of
products are generally cleared in R & D unit. Likewise, R & D unit has to depend
on production department for understanding the environmental setting in
which production people work, availability and acquisition of plant and
equipment, skills of personnel and so on. Manufacturing, industrial and quality
control engineers are also associated with R & D with respect to several aspects
of product engineering. This close inter-relationship between production and R
& D needs continuous communication and coordination among them.

PRODUCTION SYSTEM
A business enterprise may be a manufacturing or service organisation. It may
produce a product or a service, i.e. provide advice, information, help or any
assistance. In either case it is producing something which did not exist before.

Such a business organisation can b e regarded as a system, whose elements are
production, marketing, finance and personnel relations. A system is a complex
unity formed of many and often diverse parts which are interconnected and are
also interrelated. All the parts making a system are subject to common plan for
serving a common purpose. A business is a system because the four functions
mentioned above are interrelated and they can be coordinated and integrated to
achieve common organisation objectives namely, profit and satisfaction.
Production function is regarded as a subsystem of the business firm – a system
within a system. It represents a regularly interacting or interdependent group of
items forming a unified whole.

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Production Manager
Production manager must concern himself with a number of interrelated areas.
These areas are:

production planning
production control
quality control
methods analysis
material handling
plant layout
inventory control
work measurement
wage incentives, and
working conditions
He is also involved in other areas incidentally, e.g. plant location, building
design, product development. Similarly under systems approach he is
interested in the decisions made in other functional areas of the business, e.g.
marketing, finance and personnel as his department always interacts with these
departments. Of course these other areas are not his primary responsibilities.

TYPES OF PRODUCTION
There are three basic types of productions which can be easily identified and
which affect the complexity of the required production control system.

1. Flow Production
It is called on-line or mass production. all the work done on a series of
machines (or manual work) flows through those machines in the same
sequence. There is no waiting period between the two successive
processes. Time taken for each operation must be equalized in order to
maintain steady flow of operations. This is done by increasing the
number of machines performing larger operations or by altering the
content of the operation. The famous example of flow production is the

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motor car assembly line production. flow production can be controlled
more easily and cheaply than batch production. of course, failure in
material supply, machines, or quality standards can stop the line and
maximum attention is necessary to maintain the flow of materials,
machine operations and we must have statistical quality control devices.
Flow production is adopted invariably to meet high demand as we can
have large output.

C

A B D

E
Line (Product) form of
Product Organisation
Car Assembly Line

2. Batch Production
If the same sequence of operations on all the work produced in
manufacturing section is not there, then the flow production cannot be
adopted. In that case, the batch production on a small or a large scale will
be preferred. Batch producers may arrange their machine shops so that
their similar machines are grouped together. Machines are grouped
according to type, e.g. the presses in one area, automatics in another,
lathes in another, milling machines in another and so on. This is also
called functional layout.

Start

A A B

B B

En
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3. Unit Production
It means a type of production where only one article is produced and it is
not repeated, except after a long interval. The article is made as per
customer’s specific needs. It may have standard elements but those are
combined in a unique manner. In practice a factory specializing in unit
production may produce more than one of a particular article. As long as
the number is small, the organisation for unit production may also serve
small – batch production. unit production and batch production have
difference only in degree. Unit or jobbing production differs from batch
production only in one respect. In unit production, batch qualities are
much smaller (only a few articles – custom made) and the variety of
components manufactures is much greater than that of batch production.
in unit production, the product is costly and the customer wants it
designed to suit his special requirements.

Benefits of good production management

1. The Consumers: The consumer benefits from higher productivity,
better and reliable quality, reasonable price, satisfactory services, and
timely as well as speedy delivery of goods.

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2. The Employees: The employees including the managers get higher
remuneration, stable employment, security of jobs, better working
conditions, and above all enhanced personal satisfaction through
sense of achievement.
3. The Investors: When the enterprise has good production management,
it is prosperous. The investors get higher return of income and their
investments obtain capital appreciation also.
4. The Suppliers: The good production management helps bring
enduring positive relationship between companies and their suppliers
through effective cooperation, better communication and mutual
confidence.
5. The Community: Due to better production management, all types of
business operating in the community become prosperous.
6. The Nation: When all industries in the national economic, system
demonstrate good production management, the entire national
economy will accomplish around security and prosperity.

REVIEW QUESTIONS
1. What is production function? What is its scope?
2. Bring out the relationship between production and other functions of
business
3. What are the different types of production?
4. What are the benefits of good production management?

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LESSON – 2
PRODUCTIVITY
CONCEPT OF PRODUCTIVITY

Productivity is the talk of the day and increase in productivity is looked upon as
the key to prosperity at all levels. It refers to the relationship between the result
and the means employed, or, to be more specific, between the product and the
factors used for obtaining it. It seeks to measure the economic soundness of
the use of the means. Consequently, productivity can be considered to be
higher if the same product is obtained with more limited means; it will be lower
is the same product can be obtained by a larger quantity of the means./ it will
be maximum when the highest output is obtained with the minimum expense
of resources; it will be the lowest when the resources are not used in the most
economical manner with the result that the smallest amount of output required
the maximum expense of the resources required for the purpose.

Productivity, in simple works, is a tool which aims at measuring relationship
between the results achieved (output) and the means employed (input) to
achieve the results, in financial and or physical terms, in relation to given time
and conditions.

A few definitions of productivity are given below:

According to I.L.O. “Productivity is the ratio between the ‘output’ of wealth
produced and ‘input’ of resources used up in the process of production”

Peter Drucker, defines productivity as “that balance between all factors of
production that will give the greatest output for the smallest effort.”

Shri V.K.R. Menon defines productivity as “development of an attitude of mind
and a constant urge to find better, cheaper, quicker, easier and safer ways of
doing a job, manufacturing an article, and providing a service. It aims at the
optimum utilization of the available resources for yielding as many goods as
possible at the lowest possible costs.”

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According to J.M.S. Risk, “Productivity is a physical ratio, it relates to the
quantity of goods produced or services given in comparison with the quantity
of resources consumed.”

To reduce the above description of productivity to precise technical terms,
productivity may be described as a relationship between output and input. It is
the ratio of the output (of product) to the input (of factors required for
producing the products) Symbolically.

O
P = ----------------
I
Where P = productivity, O = output, and I - input

The output may be measured in terms of the units of goods produced or the
value of the goods and services produced. The input, on the other hand, refers
to the combination of the raw materials, machinery, worker’s time, power,
efforts and imagination of the entrepreneur and the managers. A unit of input
can, therefore be expressed as one worker, or one hour labour time, or one
tone of raw material, or one kilowatt of electricity, and so on and so on and so
forth. It follows from above that it is possible to calculate and measure the
productivity of each one of the factor comprising the input or of all the factors
combined together. The productivity of capital can, for example, be found out
by ascertaining the ratio between the value of the output produced and the
amount invested in the production of such output.

Characteristics of Productivity
1. Productivity establishes relationship between output and input:
Productivity does not study a variable in isolation. It is a measure that
established definable relationships between an output and the relative
production factor.
2. Productivity is applicable to all kinds of activities: Productivity is a
general measure applicable to the various functions of different
organizations such as business enterprise and non-business
organizations like hospitals, military, government etc.

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3. Productivity is applicable to all factors of production: The word
productivity has become almost a synonym of ‘productivity of labour’.
This is obviously not very true. Productivity may be calculated for labour,
capital, power, raw materials and all other factors which exhibit
identifiable relationship between output and input.
4. Productivity reflects a general attitude of eliminating wastage and
inefficiency in business functioning: The term productivity should not
always be taken in its technical sense – i.e. a ratio between output and
input. Rather, it is a philosophy, an attitude that aims at making the most
economical use of scarce resources. It implies development of an attitude
of mind and a constant urge to find better, cheaper, quicker, easier, and
safer ways of doing a job, manufacturing a product and providing a
service.

PRODUCTION AND PRODUCTIVITY
The term production should be clearly distinguished from productivity.
Production refers to the volume, value or quantity of goods and services
produced in a given period by a worker, plant, firm or economy. It is the
sum-total of the results achieved by the various factors used together.
Productivity, on the other hand, is concerned not merely with the total value or
volume of output or production, what is more important it shows the efficiency
of production. In other words, productivity is relative to the resources used in
turning out a certain amount of physical output, while production is used in a
more or less absolute sense. The distinction between the two becomes all the
clearer when we find that all increases in production do not necessarily result in
increased productivity. If increase in total output is brought about with an
increase in the input of the factors of production, production will have
increased, but productivity may actually decline or may remain constant. Thus,
if output is just doubled by doubling the capital investment in machinery, raw
materials, the number of workers etc. production is twice as much as it was in
the beginning, but productivity does not record any rise and is constant.

Labour Productivity
According to the above description of productivity, it should be possible to
measure it by dividing the output by the quantity of raw material used or by the
kilowatts of electric power consumed, or even by the total time devoted by the
workers to production. the productivity of labour is the ratio between the

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output and the number of man-hours worked. Symbolically, it may be
expressed as:
O
PL = ----------
MH
where, PL = productivity of labour
O = Output in terms of units or quantity or value or
standard time for actual output
MH = Number of man-hours spend on production, and
Man-hours = Number of workers employed on production x Number
of hours worked.

To take an example, if a drill operator marked the centres of three holes on an
iron casting and then drilled the three holes on each piece one by one
producing 100 pieces in 4 hours, the productivity of the operator will be 100/4
= 25 per man-hour worked.

Of all the factors of production, labour is usually selected as the unit of input
for the following reasons:

Labour occupies a central position in the industrial order for man is both
the end and an agent of production.

Productivity of labour is the key to higher standard of living

Labour is an element of cost in all branches and sectors of productive
activity through its precise importance varies from industry to industry.

Labour as a factor of production is easily measurable in terms of
man-hours spent on production.

All other factors of production are subject to laws of mechanics, that is to
say, their output increases in a more or less fixed proportion to their
input.

It must be remembered that labour productivity simply indicates the
effectiveness with which labour is being utilized along with other factors of

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production. it does not refer to the contribution made by labour alone to the
product.

IMPORTANCE OF PRODUCTIVITY
Higher productivity is of vital importance for the speedy industrialization and
economic development of a country. The available resources have to be used in
such a manner that both the total output and the productivity per unit are
increased. In this manner, capital will become available for investment in new
plants and projects opening the way to economic advancement.

In short, improvement in productivity brings the following advantages to the
firm and the community at large:
Reduction in the cost of raw materials )through increase in the
productivity of raw materials)
Reduction in labour cost per unit of output.
Reduction in overheads and power costs per unit of output.
Reduction in the price of goods.
Increase in wages and salaries (through schemes for sharing the gains of
productivity)
Increase in reserve fund that can be utilized for expansion and
modernization.
Better standards of living for people through increase in their incomes
and improvement in the quality of goods can be made available at
cheaper rates.

FACTORS AFFECTING PRODUCTIVITY
Industrial productivity is affected by a wide variety of complex and inextricably
interwoven factors. They can be categorized as technological, financial,
managerial, natural, sociological and cultural, and political factors. The impact
of these factors on productivity is studied below.

1. Technological Factors:

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The term ‘technology is very broad and may include inventions, techniques, and
the vast store of organized knowledge of doing a work. There is an ample
empirical evidence to show that technology is the major determinant of
industrial productivity. Specifically stated, technological factors that have
greatly influenced industrial productivity include: the use of specialized and
automatic machines, application of mechanical power, integration of processes,
design of plant and machinery, division of labour, simplification and
standardization of products and techniques, product mix, location and layout of
plant, materials handling, size and capacity of plant, rationalization and
automation of manufacturing process and so on.

2. Financial Factors:
Finance – the backbone of industry – is essential to high productivity. It is so
because finances facilitate conduct of research in innovations and technological
improvements; introduce schemes of modernization, mechanization,
automation and rationalization of production processes, and undertake
programmes of upkeep of plant and machinery.

3. Managerial Factors:
The energetic, enterprising, far-sighted managerial talents coupled with the
spirit of adventure, imagination and vigilance can go a long way in affecting
industrial productivity. All these managerial qualities, can be used for
formulating short and long-term organizational plans; devising sound
organizational structure; introducing efficient staffing policies, evolving
appropriate motivational, leadership and communication systems; introducing
economical and effective systems; and showing bold initiatives in handling
organizational conflicts and crises. These managerial factors have a bearing on
productivity and help in minimizing wastage and idleness of organizational
resources and increasing their contributions in goal accomplishment.

4. Natural Factors:
The natural factors such as physical, geographical and climatic differences
exert significant influence on the productivity of industrial enterprises. In
extractive industries like coal mines, geological and physical conditions directly
affect the productivity of workers.

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5. Sociological and Cultural Factors:
Sociological factors such as class structure, beliefs and customs of people and
cultural factors such as values, norms and accepted behaviour do affect
productivity of industrial organization.

6. Political Factors:
Political factors especially the government’s policies like taxation, financial
tariff are major determinants of industrial productivity. Favourable taxation
policies, granting tax concessions and incentives, may encourage industries to
install latest equipment and machinery. This has a positive impact on the
productivity of such industries. Liberal financial policy, that makes available
sufficient finances at reasonable rates of interest, would enable the industry to
finance their activities to an uninterrupted manner and show better productivity.
Similarly, excessive restrictions on licensing, location, big business, are
responsible for low productivity.

INDUSTRIAL EFFICIENCY
Concept of Efficiency
Apart from productivity, another concept closely related to a production system
is ‘efficiency’. Efficiency is basically an output-cost-input relationship. As
explained earlier, productivity is a ratio only between output and input, without
any regard to cost implications. Efficiency, however, centres around three
variables: output, cost and input. Increased output with reduced cost is an
indication of high efficiency. The task of measuring the efficiency of a business
unit involves setting up standards of output for various inputs and comparing
the achievements with the standards. Deviations from the standards are
measured and suitable corrective actions initiated. The corrective actions would
include the revision of the standards themselves. In general, an enterprise may
be deemed efficient if it is able to satisfy a given demand at the lowest possible
of cost besides stimulating the demand. Yet another simplest method of
evaluating the efficiency of an enterprise is in terms of its rate of profit. Thus,
efficiency can be measured or defined in terms of cost-minimization,
profitability and productivity.

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LABOUR EFFICIENCY
Although efficiency can be calculated for various factors of production, but it
assumes special significance for labour. Increasing and maintaining the
efficiency of labour is vital to produce more goods at less expenditure of time
and energy. Increased labour efficiency means reduced labour cost per unit.
Further, an efficient worker would not wear him out easily through unnecessary
motions and exertions.

Factors Affecting Labour Efficiency

1. System of Wage and bonus Payment: The various systems of wage and
bonus payment (such as Halsey Plan, Rowan Plan, and the like) are
introduced to increase the efficiency of the workers. Satisfactory wages
enable the workers to have a decent standard of living and turns out a
good work as well.
2. Working Conditions: In additions to good wages and systems of bonus
payment, the conditions of work also should be satisfactory. The working
conditions within the factory must be safe and healthy. These relate to
cleanliness, adequate ventilation and lighting, elimination of dust and
fumes, sanitary conveniences, drinking water facilities, prevention of
over-crowding, fencing of dangerous machinery, reduction of noise,
emergency measures in case of the fire accidents etc.
3. Machinery and Equipment: Since the efficiency of workers in a modern
factory largely depends upon the machinery, equipment, and tools which
they use there, the management should provide them the best possible
machinery etc.
4. Internal Organisation: Internal organisation outlines the authority –
responsibility relationships of organizational positions. Management
should take the responsibility to provide an efficient internal organisation
to ensure the smooth flow or work inside the factory.
5. Humane Treatment of Workers: The efficiency of the workers also
depends upon the treatment method out to them.
6. Provision of Education and Training: Provision of facilities and
incentives to workers to get theoretical and practical education is also

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vital. The management must also take upon itself the responsibilities of
full training of the workers after their recruitment for a given job.
7. Responsible Trade Union Leadership: A strong workers’ association and
a competent trade union leadership will go a long way in securing more
welfare facilities for the workers, which in turn will increase the efficiency
of the workers.

SOME INDICES OF EFFICIENCY

Labour Efficiency
The efficiency of labour is measured through:
ratio of actual output to a work standard,
the ratio of indirect labour cost to the total pay-roll,
the ratio of set-up time required for each direct labour hour; and
the ratio of maintenance and repair time for each direct labour hour.

Enterprise’s Efficiency
For measuring the efficiency of a business enterprise as a whole, the use
of financial ratio analysis, technique can be made. These ratios include:
percentage of profits before tax to sales,
percentage of profits before tax to gross fixed assets,
percentage of profits before tax to capital employed,
percentage of profits after tax to net worth
percentage of value of production to net worth,
stock of raw-materials and supplies in month’s consumption for
production requirements, and
debtors in month’s turnover.

SOME DISTINCTIONS

EFFICIENCY AND EFFECTIVENESS

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The term ‘efficiency’ should be differentiated from ‘effectiveness’. Efficiency
establishes relationship between output and costs. as the cost of a factor
declines, its efficiency increases. A business enterprise is said to be efficient
when it is able to achieve its objectives with lowest costs. efficiency is largely
influenced by internal factors such as improvement of standardized procedures,
reducing waste and raising quality levels. Effectiveness refers to the ability of a
factor or variable to achieve its objective. An organisation is said to be effective
when it is able to achieve its goals.

PRODUCTION, PRODUCTIVITY AND MATERIALS MANAGEMENT-
THE BASIC RELATIONSHIP
The production function has some basic characteristics which involve identical
activities in almost all companies. Information must flow authorizing
production of specific quantities within a specific period in time. Authorization
must state, in clear terms, the product specification, quality and performance
characteristics to be built into the product, either to meet pre-establish sales
forecasts or as a routine procedure of replacement of finished goods. Once this
is done, the routing procedure for Materials Management involves a series of
steps like whether to make or buy, establishing materials requirement,
scheduling, placing of orders, follow-up etc.

It is difficult to grasp the full implications of materials management without
production and operations, which have pronounced sensitiveness to it. All the
management systems are designed to raise production and improve
productivity. Productivity has been defined as the ability to produce goods and
services efficiently and economically. But productivity, as defined by ‘output
obtained for a given resources expended’, must not only take into account
diverse resources employed in the productive process which are fairly
measurable (both quantitatively and qualitatively) and brought into being
through the common medium of ‘money costs’, but must also take into account
such intangible factors as management, supervision and control.

Cost can furnish, if only with some difficulty, a dependable index of comparison
through the common medium of ‘money value’ for bringing together such
diverse resources like, men, materials, machines as well as capital. reduction in
cost, therefore, has long been recognized as an effective measure of
productivity analysis for both inter- firm and intra-firm comparisons.

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However, productivity is affected not only by the management’s attitude and
resourcefulness, but also by the day-to-day operation of the productive
organisation as well its supervision and control. Management must not only
keep itself abreast of the latest developments and new improvements in the
productive processes but also consistently strive to improve skills, methods and
procedures in relation to materials in order to increase overall productivity.

Recent shift of emphasis on materials cost-control has again made it
incumbent on management to use materials management as an important tool
to reach the basic objectives of economic control of product cost and better
customer service. Therefore, the need arises to organize and plan, coordinate
and control various activities concerned with materials, which then becomes the
basis for improvement in productivity. This has a far-reaching effect on
corporate goal of profit through elimination of waste and reduction in costs.
therefore, it has to be realized that technological changes for improving
productivity are not confined to technical innovations, plant size and
installation of modern types of machinery and capital equipment necessary for
production. It also lies in the inherent nature and quality of materials used in
the production process and the methods employed to handle them, which is
reflected in the final output cost via lower cost of production. And here, in
order to optimize production and reduce cost, Materials Management pl.ays the
key role. There may be some dispute over its boundary, but there is no dispute
about its role and contribution to productivity and profit.

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Review Questions:
1. explain the concept of productivity. Bring out its importance.
2. What are the factors affecting productivity?
3. Distinguish between production and productivity.
4. What do you understood by the term efficiency? What are the factors
affecting labour efficiency?

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LESSON – 3
ERGONOMICS
Ergonomics has been defined as fitting the job or the machine to the worker.
The word is derived from the Greek Ergon (work) and nomos (law). Ergonomics
analyses and designs work equipment and environments to fit human physical
and cognitive capabilities. It implies recognition of human relations and
individual differences. Ergonomics views management and organisation of work
or job primarily from the worker or employee convenience and case. It uses
knowledge of anatomy, physiology, psychology and social psychology to reduce
the stress and strain on the workers in their work area.

It covers three areas:
1. The Work Places: The workers pass major part of their daily life at the
work. These areas include layout of equipment and machinery, display of
information and controls.
2. General Environment: This refers to work environment and working
conditions, such as lighting, noise, vibration, air circulation, industrial
hygiene and safety measure etc.
3. Other Factors: These cover industrial fatigue, degree of vigilance and
control, typical problems of women, old persons, disabled workers etc.

When a worker operates a machines, uses a tool or an equipment, it is
absolutely necessary to ensure that man and machine form a good partnership
(on equal terms) so that they have unity and work as a single unit. Hence, in
designing a machine, tool or instrument, in evolving a process of control, in
establishing a flow of information, human element and individual human
differences must be recognized.

Management is naturally interested in discovering more effective and cheaper
ways to perform work. If cost of production goes down, the organisation can
have rising earning power placing the business in a more favourable situation
to face increasing competition. The sole objective of management of work in is
to optimize returns on all resources including the human resources with due
consideration to human valued.

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Work Design
Work design or methods improvement is one of the techniques used often by
management to control labour costs. work design eliminates unnecessary,
pain-giving movements and in reality it reduces (not increases) human efforts.
A worker can get more work done – without his working any harder.

Work design or methods improvement is also called time and motion study or
methods analysis, or work simplification or simply work study.

We will deal in detail the following branches of man-machine organization:
(1) Work Study
(2) Motion Study
(3) Time Study and
(4) Fatigue Study
(5) Methods Study or Analysis

1. Work Study
Work study covers both time study as well as motion or method study to assess
human effectiveness and to improve methods of production. Motion study
provides evolution of ideal methods of doing the work. Time study provides the
evolution of work measurement device etc. to establish time standards.

Objectives of Work Study:
The most effective use of plant and equipment
The most effective use of human effort
The evaluation of human work

Work study provides the means to achieve higher productivity under prevailing
circumstances. Work study is associated with two distinct techniques which are
interdependent.

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(1) Method – the way in which work is done
(2) Value – work content of the task itself.

Uses of Work Study:
It is the best means of raising productivity.
It is a universal tool of work reorganization involving minimum capital
investment in plant.
It can reveal organizational inefficiency due to job structure or job
contents.
It can eliminate waste of resources.
It can help management in planning, controlling and motivating
It facilitates production planning and control by providing best means for
setting standards of performance.
It can evolve humanized man-machine system.

2. Motion Study (A Device of Work Improvement)

It is the study of movements, whether of a machine or an operator, in
performing an operation for the purpose of eliminating useless motions and of
arranging the sequence of useful motions in the most efficient order indicating
there by ‘one best way of doing the work’ according to Gilbreth, the pioneer of
motion study. “Motion Study is the science of eliminating ineffective, unwanted
and wasteful motions. It has to do with the selection, invention and substitution
of effective for non-productive, and wasteful motions. Its end objective is to
find a simpler, easier and better way of performing a job.
Management is interested not only in increasing the worker’s efficiency but also
in reducing or eliminating fatigue due to unnecessary months. The better work
methods aim at reducing fatigue and making the worker more efficient. The
better way is usually a faster and simpler way involving fewer motions and
inducing less fatigue.

Procedure for a Motion Study:
Develop a normal and maximum working area.

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Use fewest basic motions from the simplest to the most complex.
Eliminate delay
Achieve rhythm and automaticity in motions
Improve the work place and
Improve the working conditions

As a result of motion analysis and adherence to the principles of motion
economy, management can set the standard of ‘how’ to do the job. This
standard method forms the backbone of the training programme for new
workers. The new worker can be given detailed instructions as to how he is to
use machines, tools, his body etc. The standard method (through motion study)
is usually established concurrently with the standard time (through time study)
for performance of the job.

3. Time Study (A Device of Work Measurement)
Time study, on the other hand, is the are of systematically recording,
analyzing and synthesizing the time required to perform a motion or a
series of motions. It is the art of observing and recording the time
required to do each detailed element of an assigned job or work. Time
study’s purpose is to determine how much time is required to perform
the job. Taylor, the father of scientific management, introduced for the
first time, the concepts of time and motion study for systematic
establishment of work standards.

Use of Time Study:
To establish a fair incentive wage plan
To estimate the time and cost involved in new production orders
To achieve a uniform flow of work in improving plant layout
To help the analysis of work methods during a motion study of
jobs.
Standard time is the basis for labour cost control

Steps in Time Study:

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1) Establishing the method, equipment and workplace condition under
which the job is to be done.
2) Selecting the average worker who is to be studied as he performs the task
and securing his cooperation.
3) Breakdown of the job into elements suitable for timing purposes
4) Recording time with the help of stopwatch
5) Grading the study
6) Applying relaxation allowances, e.g. personal allowance (3 to 5 pc.),
fatigue allowance (3 p.c.), delay allowance (3 p.c.)
7) Determining the time standard

The object of time study and motion study is to establish standardized
performances. When used together, motion and time study concerns itself with
the analysis of work and the time required to perform it. In current usage it
embraces two facts –

(1) Determining the most economical and effective method of performing a
task.
(2) Determining the time required by trained employees working at a normal
pace to perform the job.

Taylor advocated and emphasized time study of the various components of job
by means of a stopwatch so that it would be possible to determine a fair day’s
work scientifically. Gilbreth placed more emphasis on motion study than on
time study and financial incentives. He was conceived that there was one best
way to perform each physical motion necessary in completing a job. Gilbreths
identified seventeen basic elements in on-the-job motions, which they
christened ‘thebliges’.

4. Fatigue Study
Meaning of Industrial Fatigue:
Industrial fatigue is reduced capacity for further work as a consequence
of previous continuous activity, where a worker was trying almost as hard as he

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could. It is the natural outcome of continuous work – reaction on body, mind
and nerves. It indicates negative appetite for work.

Causes of Industrial Fatigue:
1. Unreasonably long working week and/or working hours.
2. Bad plant layout, faulty machine design – leading to unwanted and
inconvenient and painful movements.
3. Inconvenient, awkward or bad posture at the work bench – standing,
bending position (continuous) for a prolonged period
4. Unfavourable work environment, e.g. defective or glaring light; bad
ventilation, noise and vibration.
5. Acute division of labour making the work or the job meaningless,
monotonous, tedious.
6. Unpleasant jobs, e.g. repetitive or routine work.
7. Unfavourable personal factors, i.e. bad nutrition, bad health, poor family
life, absence of interest etc.

Consequence of Fatigue:
The following are the consequences of continued activity or excessive fatigue.

1. A tired person is accident-porne. It leads to increased number of
accidents which may cause partial or total disability or even loss of
human life.
2. It leads to a low rate of output – diminishing returns
3. When a worker is tired, he cannot give proper attention and concentration
to his job. He becomes careless. This may increase wastage or spoilage.
4. Fatigue also can reduce quality of output.
5. As it induces mental and physical sickness, the worker may have low
morale due to lack of case at work. Low morale is reflected in the form of
frustration, disappointment, non-cooperative and grudging temperament.
6. Fatigue leads to physical, mental and nervous debility resulting in higher
rate of absenteeism and/or labour turnover.

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7. A tired worker may be unwittingly responsible for damages of machinery
and equipment or machine breakdown creating further loss in production.

In short, non-stop excessive work without suitable rest pauses will be
prejudicial to both the parties, employer as well as employees. Above all, it
leads to wastage of humand and material resources.

Remedies:
The management must adopt concrete measures to eliminate or minimize
the adverse effects of industrial fatigue on the business enterprise.
(1) Ideal working week is five days or 40 hours week. Two weekend holidays
will enable employees to start the routine work with new vigour.
(2) Ideal length of working day is 8 hours work per day. This is now universal
(3) Rest pauses within the working day. The rest pauses can maintain
warming-up effect, interest and enthusiasm in the work throughout the
working day.
(4) Favourable work environment and working conditions also can prevent to
a great extent industrial fatigue.
(5) Work study, particularly motion study, can also help the management to
reduce undue stress and strain in the performance of a job.
(6) Proper plan layout, material handling, designing of machines and
equipment to suit the human needs also can reduce industrial fatigue.
(7) Job enlargement and job rotation also can reduce boredom.

In short, any measure to provide case of work – physical and mental – can
ensure reduction or elimination of fatigue and boredom.

5. Methods Study or Analysis

Methods analysis aims to evolve the most effective method of accomplishing a
given task or job. Methods analysis attempts to improve existing methods as
well as develop efficient methods for new tasks to be performed for the first
time. However, it concentrates more on the improvement of existing methods

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or methods for performing the tasks which are already existing. Methods
analysis is made with the help of both motion study and time study.

Review Questions:
1. What do you understand by ‘Ergonomics”
2. What is work study? What are its objectives?
3. What do you understand by motion and time study? What are its
objectives?
4. What is fatigue? Explain the causes and consequences. What are the
remedies to minimize fatigue?

*********************

BABASAB PATIL


LESSON – 4
PRODUCTION PLANNING AND CONTROL

Production planning and control is one of the most important phases of
production management, it is, as a matter of fact, the nervous system of a
manufacturing organisation. In manufacturing organisation, it is essential that
production is carried on in the best manner at the lowest cost, and the goods
are of right quality and are produced at the proper time. This can be ensured
only through proper planning of production. but mere planning of production
will not solve the problem because production plans are not capable of
self-actuating and do not lead to automatic accomplishement. For that the
production manager has to take certain steps like, he has to regulate work
assignment, review the work progress, and devise methods to bring conformity
between the actual performance and planned performance – so that plans
chalked out are adhered to and the standards set at the planning stage are
properly attained and improved. This is the function of ‘production control’.
Production control, therefore, is a directive function which involves the
coordination and integration of operations and activities of different factors of
production with a view to optimizing efficiency. Optimum efficiency is
attainable by proper planning of work, laying down of exact routes which
operations shall follow, correct fixing of time-table within which productive
operations shall start and come to a close, uninterrupted releasing of orders
and work facilities, and timely initiation of appropriate follow-up steps to
ensure smooth functioning of the enterprise. In other words, production control
involves planning, routing, scheduling, dispatching and follow-up.

Definition
The concept of production planning and control can be better understood with
reference to a few definitions:

According to Spriegel and Lansburgh. “Production planning and control is the
process of planning production in advance of operations: establishing the exact
route of individual item, part, or assembly; setting, starting, and finishing dates
for each important item, assembly, or the finished product; and releasing the
necessary order as well as initiating the required follow up to effectuate the
smooth function of the enterprise.”

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In the words of Alford and Beatty, “Production planning and control comprise
the planning, routing, scheduling, dispatching and follow-up functions in the
productive process, so organized that the movements of material, performance
of machines, and operations of labour, however subdivided, are directed and
coordinated as to quantity, quality, time and place.

Prof. Koepke production planning and control “as the coordination of a series of
functions according to a plan which will economically utilize the plant facilities
and regulate the orderly movement of goods through their entire
manufacturing cycle, form the procurement of all materials to the shipping of
goods at a predetermined rate”.

Objectives of Production Planning and Control
Basically production control function involves the coordination and integration
of the factors of production or production facilities to produce a product at an
optimum efficiency. An elaborate definition of production control is given below:

“Production control is the function of directing and regulating the orderly
movement of goods through the entire production cycle form the requisitioning
of raw materials to the delivery of finished products to meet the objectives of (i)
customer service, (ii) minimum inventory investment and (iii) maximum
production efficiency”.

In this sense production control includes planning of production as well as
production control proper and also inventory control. Production planning
covers setting the requirements of production. Production control covers
keeping production within the planned requirement.

Importance of Production Planning and Control
1. Plant’s Nervous Systems: Production planning and control coordinates
and regulates all plant operations just as our nervous system regulates
and coordinates the breathing and muscular movement. In a large plant
involving numerous parts and components to manufacture a final product
such as motor car, production planning and control assumes importance.

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2. Intermittent Process Industry: In intermittent process industry, under
batch production, goods are made as per order. in such industries
production planning and control become absolutely necessary to assure
deliveries as planned and as demanded by customers.
3. Cost Control: Good production planning and control help optimize the
utilization of men, machinery, materials and money through effective
planning, organizing motivating and controlling multifarious operations
in the plant. The net result is reflected in reducing all costs to the
minimum.
4. Developing Economy: In a developing economy, production planning and
control is a boon for optimum use of scarce economic resources
particularly capital, machinery and equipment. Proper planning and
adequate control can accelerate industrial productivity and consequently
helps develop economy.
5. Rationalization of Plant Operations: Production planning and control
helps rationalization of plant operations and helps optimum utilization of
plant and machinery.

STEPS IN PRODUCTION PLANNING AND CONTROL
1. Planning
2. Routing
3. Scheduling
4. Dispatching
5. Expediting

1. Planning
The first important step in production planning and control is concerned
with the careful preparation of production plans. Production plans
determine what will be produced and where, at what type, by whom, and
how. For detailed planning of operations, the relevant information may be
obtained from several sources in the enterprise. Information about
quantity and quality of products to be manufactured may be obtained
from customers’ orders and the sales budget, and information about
production facilities may be obtained from the management and the
engineering department. Thus, the planning function formulates

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production plans, and translates them into requirements for men,
machinery and materials.

Whatever be the planning period, production planning helps in avoiding
randomness in production, providing regular and steady flow of
production activities, utilizing production facilities to its maximum for
minimizing operating costs and meeting delivery schedules; coordinating
various departments of the enterprise for maintaining proper balance of
activities, and above all, providing the basis for control in the enterprise.

2. Routing
The next important function of production planning and control is routing
which involves the determination of the path (i.e. route) of movement of raw
materials through various machines and operations in the factory. “Routing”,
to quote Spriegel and Lansburgh, “includes the planning of where and by
whom work shall be done, the determination of the path that work shall
follow, and the necessary sequence of operations”. To find this path,
emphasis is placed on determining operating data, which usually includes
planning of ‘where’ and ‘by whom’ work should be done, the determinations
of the path that work shall follow, and the necessary sequence of operations.
These operating data are contained in the standard process sheet which
helps in making out a routing in the standard process sheet which helps in
making out a routing chart showing the sequence of operations and the
machines to be used. If the machine loan chart indicates the non-availability
of certain machines, alternate routings may also be included on the routing
chart. The most efficient routing may have to be compromised with the
availability of the machines at a particular time. In other words, “routing
establishes the operations, their path and sequence, and the proper class of
machines and personnel required for these operations.”

From the above, it can be inferred that routing is one of the highly essential
elements and prime considerations of production control because many
production control functions are closely related processes and are
dependent on routing functions. Thus, it is essential to solve the different
problems concerning: appropriate personnel; full utilization of machines;
and determining with precise degree the time required in the production
process.

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3. Scheduling
Scheduling is planning the time element of production – i.e. prior
determination of “when work is to be done”. It consists of the starting and
completion times for the various operations to be performed. In other words,
scheduling function determines when an operation is to be performed, or
when work is to be completed, the difference lies in the details of the
scheduling procedure. To work out effectively, the scheduling, as a part of
production control function, determines the time when each operation called
for on the route sheet is to be done on the specified machine in order to
meet the desired delivery dates. Good control function directs not only the
time that each particular operation should start but also indicates the
progress of each manufacturing part, the amount of work ahead of each
machine, and the availability of each machine for the assignment of new
work.

Schedules are of two types: Master schedule and Detailed schedule.
Activities, if recorded on plant-wise basis, would be preparing master
schedule, while mere detailed schedules are employed to plan the
manufacturing and assembly operations required for each product.

4. Dispatching
Dispatching is the part of production control that translates the paper – work
into actual production. It is the group that coordinates and translates
planning into actual production. dispatching function proceeds in
accordance with the details worked out under routing and scheduling
functions. As such, dispatching sees to it that the material is moved to
the correct work place, that tools are ready at the correct place for the
particular operations, that the work is moving according to routing
instructions. Dispatching carries out the physical work as suggested by
scheduling. Thus, dispatching implies the issuance or work orders. These
work orders represent authority to produce. These orders contain the
following information:

The name of the product;
The name of the part to be produced, sub-assembly or final assembly;

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The order number;
The quantity to be produced;
Descriptions and numbers of the operations required and their sequence,
The departments involved in each operation
The tools required for particular operation; and
Machines involved in each operation and starting dates for the operations.

5. Expediting
Expedition or follow-up is the last stage in the process of production control.
This function is designed to keep track of the work effort. The aim is to
ensure that what is intended and planned is being implemented.
“Expediting consists in reporting production data and investigating
variances from predetermined time schedules. The main idea behind
expedition is to see that promise is backed up by performance”. It
includes the following functions:

(i) Check-up to ensure that all materials, tools, component parts, and
accessories are available at all work centres in specified quantities
for starting and carrying out manufacturing operations.
(ii) Check-up on the status of work-in-progress and completed work
at various work stations. This includes collecting information
relating to the starting and completion time and date of work
completed, status of work-in-progress relative to scheduled
completion dates, position of movements of materials, component
parts, and sub-assemblies within the plant, and inspection results.
(iii) Preparation of progress records and keeping the control boards
up-to-date.
(iv) Reporting to manufacturing management on all significant
deviations so that corrective action may be taken. It also includes
reporting to production planning department so that future plans
may be adjusted.

Thus production planning and control by completing the above discussed
phases ensures the manufacturing of goods of right quality, quantity and at

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competitive market rates. One thing must be borne in mind that production
planning and control is a never-ending process, and its various functions are
inter-dependent.

REQUIREMENTS OF AN EFFICIENT SYSTEM OF PRODUCTION PLANNING AND
CONTROL
The scheme of production planning and control system will require reliable
information about productive capacities and production standards, a sound
organizational structure, and trained and competent personnel, for it successful
operations. These requirements are enumerated below:

1. Reliable information about productive capacity and production standards:
a. Complete knowledge of products be manufactured
b. Detailed information about the number and types of each machine
and processing unit together with the complete data on power,
speeds, and feeds of all machines.
c. Full information relating to production materials which are to be
used.
d. Accurate knowledge of job analysis – particulars as to the work to
be performed, and the type of skill required.
e. Information relating to completion times of all previous operations
and their actual cost.
f. Accurate knowledge of operation method, machine layout, and the
best way of handling a task.
g. Knowledge of the work-in-progress
h. Work performances expected from workers, machines etc.
i. Information regarding the orders on hand, their quality
specifications, and their delivery schedules.
2. Sound organizational structure:
(a) A clear delineation of the authority – responsibility relationships in the
production planning and control department
(b) Full and active support from the top management
3. Trained and competent personnel:

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(a) Possession of requisite qualities to understand and perform various
operations.
(b) Well trained to assume newer and higher responsibilities.
(c) Scientifically remunerated.

ADVANTAGES OF PRODUCTION PLANNING AND CONTROL
1. Efficient Service to Customers: The greatest advantage of a proper
system of production planning and control is that it renders prompt and
economical service to customers. This is possible by proper scheduling
and expediting of manufacturing operations which enables a business
enterprise to meet delivery dates. Not only that customers are served on
time, but they also get quality products.
2. Lower Investment: Proper production planning and control holds
investment to the minimum necessary level by avoiding unnecessary
stock inventories and machines.
3. Reduced Costs: Good production planning and control means minimum
waste of materials and labour efforts, avoidance of idle machine time,
and fewer production interruptions. All these reduce production cost.
4. Higher Morale of Workers: Good production planning and control system
avoids rush orders, maintaining an even flow of work, and providing
congenial working conditions. All this means avoidance of ‘speeding up’
of workers, maintenance of efficiency and productivity and healthy
attitude of workers towards work and work organization. These elements
determine the morale of the workers.
5. Better Public Relations: A well-planned and well-controlled production
system not only reduces investment and costs for the enterprise, but also
improves its image with the outside public. A company that provides
better quality products on announced time schedule is looked favorably
upon by the general public.

Thus, a good and efficient system of production planning and control is
beneficial to the manufacturer, workers, customers and the society.

GANTT CHART

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This scheduling technique, developed by Henri Lawrence Gantt (1861 – 1919),
is one of the most practical and efficient methods which shows at a glance the
work planned and work completed.

Gantt schedules show how much time was planned for each activity in a project
and how much of each has been completed upto the present date. Their
popularity can be attributed to their simplicity and case of use. Like any good
schedule, they show, at a glance, how the project is progressing. They also
show the sequence of events or activities.

Two basic types of Gantt charts are used extensively in production control
work, namely, order control chart and machine load chart. Both contain a
horizontal time axis. In the order control chart which shows both planned and
actual progress for various orders, the orders being charted are listed on the
vertical axis. In the machine load chart, the various machines or work centres
are listed on the vertical axis. This pair of simplified matching Gantt charts is
illustrate below:

Order Control Chart
Order January February March
No. 1 A – 007 C – 009
No. 2 B – 008 A – 007
No. 3 A – 009 A – 007 C - 009

Machine Load Chart
Machine January February March
No. 1 A – 007 C – 009
No. 2 B – 008 A – 007
No. 3 A – 009 A – 007 C - 009

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There job orders to be processed on three machines are shown. In the order
control chart, the dotted line shows that work is progressing according to the
schedule (in the month of January) which is indicated by the solid line.
Apparently order B-008 was started about one week prior to the regularly
scheduled starting date, and it is about two-thirds, rather than just one half,
completed, as was originally planned. Order C-009 was processed on machine
No. 3 according to schedule, but there ahs been some delay in getting it started
on machine No. 1. This situation probably would lead to expediting to see what
was causing the delay. The machine load chart portrays the information in a
slightly different manner. For instance, the first time shows that order A-007
was completed satisfactorily on machine No. 1 but scheduled work in order
C-009 has not been started.

The Gantt chars shown in the figure may be used individually or in pair. Their
usefulness lies in the fact that they portray plans and progress in such as
manner as to facilitate comparison of the two. These charts may also be used to
keep track of which machines are down for any reason. This chart is dynamic
and must be constantly updated with current information. In order to make
Gantt chart more useful, use of computers can be made in which software
package generate Gantt charts.

INSPECTION
Production control is introduced not merely to ensure that the goods will be
produced on time, but is also meant to see that the goods produced are of the
right quality. This is done through inspection of the products manufactured.
Since the purpose of inspection is to compare the products with the standards
of quality set earlier, it too, can be regarded as an effective agency of
production control. One way of inspection is to examine the quality of finished
products at the end of the process of production. But this may involve too much
of wastage in the form of rejected products. To minimize the rejection of
defective products, inspection may be conducted at every stage of production.
similarly, materials, machines and tools may be inspected against certain
established standards to find out their performance and accuracy. Inspections
may be made either in respect of samples selected at random or of each
particular product (i.e. cent percent inspection). The inspectors may inspect
materials, semi-finished and finished products either at the work bench or in
special laboratories on testing rooms.

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Inspections vs Quality Control
Inspection shall be differentiated form quality control. Inspection involves
checking to see if a product meets or does not meet a stated standards. The
result of the inspection process is acceptance or rejection of production. quality
control, as distinguished from inspection, is directed towards future production
rather than the past production. also, inspection methods only enable one ‘to
be wise after the event’. Quality control serves to make one ‘get wise before the
event’. Truly speaking, quality control is a basic function, while inspection is
one technique of executing it. “Quality control sets burglar alarm which
prevents law from being broken. Inspection, on the other hand, is simply the
police dragnet that catches the burglar after the law has been broken. Quality
control enlarges the production pile, inspection only enlarges the scrap pile”.

MAKE OR BUY DECISIONS
When needs arise in a manufacturing concern for a material, part or a product
these have to be satisfied either by purchaser form an outside source or the
firm may seek the atternative course of satisfying the need by undertaking
producoitn within the firm’s own plant for reasons of cost, convenience and
control, which outside supply source do nto always provide. For
non-manufacturing organisatoins, such as hospitals, research and educational
institutions, government agencies and commercial establishments, it is service
rather than the product that mattes. Even in manufacturing organisatoins, the
possibility of becoming one’s own supplier receives scant attention, yet it is
vital strategy for efficient materials management. Probably because most
concerns do nto have a clear-cut policy on ‘make or buy’, they prefer to decide
each case on cost, volume, sevice and other considerations. There are, however,
some companies which tend towards their manufacturing operation. There are,
however, some companies which companies which tend towards their
manufacturing operation. On the other hand, there are companies which believe
in specializing in a limited production line, even if an opportunity exists for the
manufacture of the part or component.

Theoretically at least, any manufacturing concern has three basic alternatives in
sourcing a part or a product that it needs.
(1) Buy the part/product completely from an outside source.
(2) Buy some components/ parts or materials and manufacture and assemble
others.

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(3) Manufacture the part or product completely
An organization cannot manage its operations on the basis of the third
alternative alone, even thought it may have a large base of an integrated
operation starting from extraction of basic raw materials down to final
production of marketable finished goods. And some companies prefer to
stick to the first alternative because they are either a merchandising firm or
an engineering organisatoin and the part or product is not suited to their
manufacturing facilities, or may be due to the patent or specialization of the
vendor or the supplier. As a general rule, therefore, a manufacturing
company will make some of its parts or components and buy others from
outside sources, either in a semi-finished or finished state. Even when
procurement of an item by purchasing looks bright, the question of
‘make-or-buy’ must be settled first in the form of an economic analysis of
cost, if no definite company policy exists. Such decisions have obviously to
be made before making the purchase requisition and placing supply order.
often it is outside the scope and responsibility of the materials department
to find an answer. Cost considerations and conditions in the supply market
may suggest a change even when the part or product was formerly
purchased. On the other hand, it may work in a quite opposite direction,
although the significance and justification of the propositions
‘make-or-buy’ largely depends on the volume and cost involve ed. For this
reason, cost comparison is one of the first considerations that confronts the
decision-maker, but it may not always be the most important one. The
estimated total cost of production must be compared with the cost of
purchase to know the pay-off. It is apparent, therefore, that when a
‘make-or-buy’ decision has to be made, what matters is not purchasing
policy or source of supply but the consultation and cooperation of
production, cost, quality another technical departments. Even marketing
executive may have to be consulted. A simple ‘make-or-buy decision may
have such economic implications as that may effect the total organisation
interest on a much wider scale which can even overthrow a product or
threaten product stability in a highly competitive market.

Formally, ‘make-or-buy’ decision of such vital importance are made by
top-management and the materials manager here plays the key role in
collecting, analyzing and interpreting data. He also acts as a coordinator
between other departments so as to assists top management in
decision-making. A decision based on minimum cost-point has to be
located for an optimum decision and if, two or more alternatives posses the

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same characteristics, the minimum cost-point for each must be determined
for a final choice.

REVIEW QUESTIONS
1. Define production planning and control. What are its objectives?
2. Discuss the various steps involved in production planning and control.
3. Write a note on Gantt’s Chart
4. Distinguish between inspection and quality control.
5. As a production manager, how would you take ‘make –or – buy’ decisions?

****************

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LESSON – 5
PLANT LOCATION
An important decision which has a bearing on efficiency of production
management relates to the suitable location of plant. The chief object of an
industrial concern is to maximize profit through the minimization of cost of
production. this is possible when the firm is of the right (i.e. optimum) size and
is located at a place which provides economies of all kinds in production. In
other words, optimum size has to be combined with optimum location if profit
is to be maximized. It must be clearly understood at this stage that optimum
location does not necessarily imply the most favourable location where labour
costs are lowest, transportation cost are minimum, and the water is the best,
“but rather where the entire group of considerations is the optimum size. Just
as the optimum size is determined through a reconsiderations is the optimum
size. Just as the optimum size is determined through a reconciliation of the
various relevant forces, the optimum location is also the outcome of proper
reconciliation of various considerations relevant to the question.

It is responsibility of the promoter or entrepreneur to search for a location
which yields maximum advantage to the business enterprise in terms of raw
materials, labour, market, transportation and communication, power and fuel,
storage, climate, security, and the like. It is important for the entrepreneur to
choose a location which meets not only the present requirements of an
enterprise, but also the changes likely to occur in the foreseeable future.
Consideration of this factor is important for an enterprise which proposes to
undertake expansion and growth programmes without the botheration of
searching for alternative locations.

The problem of location has several technical, economic, managerial, social and
strategic implications. These various aspects vary in their importance and
direction at various places. So that al the relevant consideration are fully take
into account, it is imperative for the promoter or entrepreneur to be extra
careful in choosing a location. In medium and large-sized enterprises, the
location study is usually conducted by a special committee consisting of
members having a through understanding of the technical, managerial, social,
and political aspects of location. When the location problem is very complex, it
is expedient to use an outside consulting firm that specializes in location
studies.

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IMPORTANCE OF PLANT LOCATION
1. Influence on the Cost of Production and Effectiveness of Marketing:
The location chosen for a business enterprise has a direct influence on
the cost of production as well as on the effectiveness of marketing. It is
one location that the ability of a business at a minimum cost, to maintain
a sufficient labour force, and to serve satisfactorily its customers.
2. Effect on the Life of the Business: The factor of location assumes
greater importance because once a plant location is chosen, the
enterprise is compelled to remain in that location for may years. Any
decision to change the location later on may mean a substantial loss in
the value of the assets and additional cost in resetting the business. Thus,
errors in decision-making in the realm of plant location often lead to
long-term problem which are very difficult to overcome.

OBJECTIVES ACHIEVED THROUGH LOCATION
1. Holding Capital Investment and Operating Costs to Minimum: The
foremost objective in selecting an ideal location should be to ensure a
minimum amount of investment in capital assets and also lowest possible
operating costs.
2. Ensuring Smooth Operation of the Business: Another objective that an
entrepreneur can hope to achieve through ideal location is the smooth
running of the business enterprise. For smooth operation, a business
enterprise needs the efficient services of transportation, communication,
banking, repairs and maintenance and regular supply of raw materials,
labour, power and fuel, and the like. An ideal location by making these
services and facilities available with regularity and in sufficient quantities
helps a business enterprise in conducting its operations smoothly and
economically.
3. Promoting Employee Welfare and Public Needs: an ideal location, by
making available various facilities and resources, helps achieving
employees’ welfare and public needs. For instance, if the enterprise is
located where educational, recreational, medical, religious and security
needs of employees are met, they will certainly feel attached to the
enterprise and would develop their loyalty and commitment for it.
4. Coordinating with Government Policies: Another objective that may
guide an entrepreneur’s decision to select a particular location may be

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that of coordination with government policies. The government’s policy
on location veers around one important consideration, that is, a balanced
regional development. This policy is sought to be accomplished through
various positive and negative measures. While selecting a location for
enterprise, the entrepreneur must ensure that his decision does not
conflict with the government’s policy.

WEBER’S DEDUCTIVE THEORY
Alferd Weber’s (a German Economist) analysis was one of the first attempts to
base location decisions on some sort or analysis. Weber’s theory is based on
the study of general factors which determine the framework of industrial
orientation. In his ‘pure theory’, Weber classified the causes influencing location
into two categories:

(i) primary causes of regional distribution of industry – regional factors; and
(ii) secondary causes responsible for redistribution of industry –
agglomerative and deglomerative factors.

Regional Factors
Weber maintains that the distribution of an industry between regions is largely
the result of two factors, transportation costs and labour costs. Transportation
costs have to be incurred by an industry in respect of raw materials, fuels, and
markets and since these are not available at the same place the industry has to
choose its location in such a way that its total transportation costs will be the
minimum. The relative influence of materials and markets on the development
of industries depends upon the nature of the materials as well as the nature of
their transformation into products. In this connection Weber distinguishes
between ubiquitous and localized raw materials. The former type of materials
are available almost everywhere such as brick-clay and water, localized
materials, on the other hand, are available in specific location such as wood,
coal, iron are cotton, jute etc. he further classified localized raw materials into
two classes: weight losing and non-weight losing. Weight losing (or impure)
raw material are those which lose a high proportion of their weight in the
process of manufacture and contribute only a small fraction weight to the
finished goods. Others like cotton, wool, etc, add the whole or bulk of their
weight to the finished product and hence are called “pure” materials. Weber
holds that in case of industries using impure raw materials, the centres of

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minimum transportation cost are near the raw materials and not in the market.
Iron and steel, aluminium, copper, and all other metal smelting industries,
sugar and heavy chemicals industries etc. are best located near the centres of
raw materials. Textiles, automobiles, oil refining industries, on the contrary,
use pure raw materials and are best located near the market. Moreover, quite a
large number of such industries is also localized near the centre of raw
materials where better regulative in the supply of raw materials is assured.
Weber explains this position by what he calls the ‘material index’, which is
calculated as follows:

Weight of the Localized Materials
Materials Index =
--------------------------------------------------
Weight of the Finished Product

If this production is high, i.e. equal to or more than unity, location tends to be
attracted to the places of materials deposit, and if low, then to the market place

Weber proceeds to examine the causes of deviation from the poient of
minimum transportation costs and according to him this is mainly in order to
take advantage of favourable labour location. In thickly populated areas,
differences inlabour costs are more marked, and therefore, industries in such
areas are mainly attracted to labour locations. The attracting power of labour
location depends upon two main factors, labour costs index and locational
weight. The ratio of labour costs of the manufacturing industry to the weight of
product has been termed by Weber as the Labour Cost Index and the weight to
be transported during the whole process of production as the Locational Weight.
The extent of variation caused by the varying labour costs can be determined
by its “Labour Coefficient”, that is, the rates of the labour costs to the locational
weight. Weber forms the laws of labour orientation. An industry deviates from
transport locations in proportion to the size of its labour coefficients, when
labour costs vary.

Agglomerative and Deglomerative Factors
According to Weber, an industry also deviates from the point of minimum costs,
in order to take advantage of agglomerating and deglomerating factors, which

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are indirect factors and are not capable of the same deductive analysis as the
regional factors discussed above. Simply stated, “An agglomerative factor is an
advantage in the form of reducing production or marketing costs which result
from the fact that production is carried on at one place, while a deglomerative
factor is a cheapening of production which results from the decentralization of
production”. facilities of banking, credit, insurance, better communications etc.
are such agglomerative factors which encourage concentration of industries at
certain places. Industries having a high proportion of manufacturing expenses
in their total costs of production, have a tendency to agglomerate and further if
the manufacturing expenses contain a high proportion of labour costs, the
tendency to agglomerate is even stronger. The concentration of industries
usually causes a rise in local taxes and land value, and this causes the industry
to decentralize. This decentralization would not reduce the cost of production
and distribution. This tendency to decentralize with a view to cheapening cost
of production and distribution is called deglomeration.

Split Location
Weber has also considered the question of split location, that is, the location of
an industry at more than one place. Locational advantage may bring together
several industries as well as split up different processes of the same industry
between different localities. Split locations become favourable when an industry
uses several materials in independent stages of production and when a
considerable loss of weight take place after the first stage of production.
naturally, in such cases, the weight – losing (i.e. the gross) materials are used in
the plant located near the source of such materials. While, the plant using
weight – adding (i.e. pure) materials is located near the place of consumption.
Paper industry offers a suitable example of such splitting up of location. The
manufacture of pulp may be undertaken near the raw materials supplied and
that of paper near the market.

Criticism of Weber’s Theory
(1) The theory is over-simplified and departs so widely from the reality that
it can hardly serve as the basis for a scientific analysis of the factors of
industrial location.
(2) The selection of factors made by Weber is rather arbitrary. He has
omitted many important factors affecting localization of an industry like

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Production and materials management

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