Chapter -1 Production and Productivity

Home , Mass Production, Production (economics)

LEARNING OUTCOMES :

At the end of this course, students will be able to:

 Apply the principles of costing in product costing  Prepare budgets based on the level of activity and to use concept for production cost control  Apply the principle and techniques in production planning and control of a production system  Control quality by using different levels of inspection techniques of various stages of production

1. Definition of Production

The processes and methods used to transform tangible inputs (raw materials, semi-finished goods, subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services. Resources are used in this process to create an output that is suitable for use or has exchange value. Or

Production can be defined as the systematic activity of gradually transforming one form of material into another while maintaining the requisite quality and are capable of satisfying human wants. It tends to combine, tangible inputs, i.e. raw materials, and intangible inputs, i.e. ideas, information, etc. to turn it into finished products for sale, through a mechanical or chemical process.

1. Definition of Productivity

Productivity is a measure that gauges the efficiency of the production process, i.e. in transforming inputs such as raw material, labour, capital, etc. into the output of finished goods. It can be expressed in terms of the ratio of outputs produced to inputs consumed, in the given period.

Productivity tends to determine the overall production performance of the firms by ascertaining how efficiently the firm utilized its resources in the production of goods and services, with minimum wastage. It can be enhanced by controlling factors of production, improving process and technology.

2. Key Differences Between Production and Productivity

The difference between production and productivity can be drawn clearly on the following premises:

1 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

1. Production is an organized activity, wherein step by step conversion of raw materials into useful output takes place. On the contrary, Productivity is an indicator of efficiency in the production in terms of optimum utilization of firm’s resources in the creation of desired output. 2. Production is a process of value addition, wherein at each level, some value is added to the product. Conversely, productivity is a measure of efficiency. 3. Production exhibits the number of units produced by the firm in a given period. As against, productivity highlights the ratio of output to input consumed. 4. Production is always expressed in absolute terms, i.e. the volume of output produced. On the other hand, productivity is denoted in relative terms, meaning that it determines the quantitative relationship between output generated and resources consumed. 5. While production ascertains the value of output generated, productivity determines the how well the resources are utilized by the firm in the generation of output.

Conclusion

By and large, production and productivity are not contradicting terms, but these are closely connected one. Production is a conversion process, in which the firm is engaged, whereas productivity is all about how efficiently the company allocates its factors to produce the output, with least amount of wastage and essential quality. In short, the efficiency in production is the firm’s productivity.

3. Comparison of Production and Productivity

Basis for Comparison Production Productivity

2 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

Meaning Productivity is a measure of Production is a function of an how efficiently resources are organization which is combined and utilized in the associated with the conversion firm, for achieving the desired of range of inputs into desired outcome. output. Measure What is it? Process Ratio of output to input Numbers of units actually Represents produced. Relative terms Expression Absolute terms

5. Factors Affecting Productivity in an Organization

5.1 Selection i.e. selection of right man for a specific job Applying well known saying division of labour. Training i.e. consideration of training requirements whether to be imparted training in the plant itself or to be sent for training outside the unit to other plants within the country or abroad or training institutes. Number of personnel required i.e. man power requirement planning in each of the departments of required skill.

5.2. Equipment and Machines:

The number of machine tools, their capacity and accessories required, replacement policy of the organization and maintenance schedules etc.

5.3. Input Materials: i. Appropriate quality of materials ii. Material requirement planning (M.R.P.) iii. Substitute of materials being used iv. Inspection of input materials at various points

3 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY v. Cost of materials procurement and handling up to stores.

5.4. Time:

Time is significant for the following reasons: i. Inspection of input materials i.e. raw material and semi finished or finished items required for assembly. ii. Time for inspection of finished products. iii. Production time (total time of manufacturing). iv. Time for repair and maintenance of machines and equipment.

5.5. Floor Area or Space: i. Total area covered by the administrative block, production shop and inspection & quality control departments etc. ii. Location of different departments and shops etc. iii. Other space covered by plant layout.

5.6. Power or Energy: i. Maintenance of equipment for saving energy ii. Use of renewable energy devices iii. Use of biogas, photovoltaic cells, solar energy and other non conventional techniques.

5.7. Finance:

Finance is required to maintain all the above requirements. The management should be for minimum rather optimum finance.

5.8. Movement of Man and Materials: i. The required motion of manpower within the plant ii. The motion of raw material semi finished and finished products/items within the plant.

4 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

6 Measurements of productivity

Strategy 1: The Simple Productivity Output Formula Strategy

Strategy 2: The 360 Degree Feedback Strategy

Strategy 3: Time Tracking & Project Management Software

Strategy 4: The Monitor Social Media Strategy

Strategy 5: The Profit = Productivity Strategy

Strategy 6: The Daily Check-In Strategy

7 Causes of decrease in productivity

 Lack of skill: If employees are not skilled they can’t produce more.  Lack of cooperation among employees: If one employee cooperates with other, productivity may be increased. On the other hand, if one doesn’t cooperate with others, productivity decreased.  Lack of technology: If technology is not modern productivity may be affected.  Lack of employee training: Training helps an employee to increase his productivity. Lack of training is one of the causes of poor productivity  A relationship between employee & employer: If relationships between employee and employer are good productivity of the employee may be increased.

 Lack of commitment: If employees are not committed to their organization and his work then productivity may not be up to the mark.  The physical condition of the employee: Generally employees’ physical condition has a positive relationship with productivity. Otherwise, it may be hampered.  Lack of concentration: If the concentration of the employee is not good for his work then productivity decreases.  Lack of cooperation between employee & employer: If employer cooperates with an employee they are willing to do better. On the other hand, if the employer doesn’t cooperate with the employee’s productivity decreases.  Lack of favorable environmental condition: If the environmental condition of the organization is not good, then the productivity level may be less.

5 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

8. TYPES of Production System

Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems.

Types of Production

 Job-Shop Production : A production process, in which few products are created according to the demand of the customer, in the stipulated time and cost. In job-shop production, product volume is low, and variety is high.  Batch Production : Batch production is one wherein product passes through various stages over a series of functional departments, and a number of batches are produced.  Mass Production : It is a manufacturing technique in which discrete parts are produced with the help of continuous process.  Continuous Production : The process of production in which the production facilities are sequenced as per the production operations chronologically.

Classification of production systems

6 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

8.1 JOB SHOP PRODUCTION

Job shop production are characterized by manufacturing of one or few quantity of products designed and produced as per the specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of products.

A job shop comprises of general purpose machines arranged into different departments. Each job demands unique technological requirements, demands processing on machines in a certain sequence.

Characteristics The Job-shop production system is followed when there is:

1. High variety of products and low volume. 2. Use of general purpose machines and facilities. 3. Highly skilled operators who can take up each job as a challenge because of uniqueness. 4. Large inventory of materials, tools, parts. 5. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities.

Advantages Following are the advantages of job shop production:

7 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

1. Because of general purpose machines and facilities variety of products can be produced. 2. Operators will become more skilled and competent, as each job gives them learning opportunities. 3. Full potential of operators can be utilized. 4. Opportunity exists for creative methods and innovative ideas.

Limitations Following are the limitations of job shop production:

1. Higher cost due to frequent set up changes. 2. Higher level of inventory at all levels and hence higher inventory cost. 3. Production planning is complicated. 4. Larger space requirements.

8.2 BATCH PRODUCTION

Batch production is defined by American Production and Inventory Control Society (APICS) “as a form of manufacturing in which the job passes through the functional departments in lots or batches and each lot may have a different routing.” It is characterized by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales.

Characteristics Batch production system is used under the following circumstances:

1. When there is shorter production runs. 2. When plant and machinery are flexible. 3. When plant and machinery set up is used for the production of item in a batch and change of set up is required for processing the next batch. 4. When manufacturing lead time and cost are lower as compared to job order production.

Advantages Following are the advantages of batch production:

1. Better utilization of plant and machinery. 2. Promotes functional specialization. 3. Cost per unit is lower as compared to job order production. 4. Lower investment in plant and machinery. 5. Flexibility to accommodate and process number of products. 6. Job satisfaction exists for operators.

Limitations Following are the limitations of batch production:

8 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

1. Material handling is complex because of irregular and longer flows. 2. Production planning and control is complex. 3. Work in process inventory is higher compared to continuous production. 4. Higher set up costs due to frequent changes in set up.

8.3 MASS PRODUCTION

Manufacture of discrete parts or assemblies using a continuous process are called mass production. This production system is justified by very large volume of production. The machines are arranged in a line or product layout. Product and process standardization exists and all outputs follow the same path.

Characteristics Mass production is used under the following circumstances:

1. Standardization of product and process sequence. 2. Dedicated special purpose machines having higher production capacities and output rates. 3. Large volume of products. 4. Shorter cycle time of production. 5. Lower in process inventory. 6. Perfectly balanced production lines. 7. Flow of materials, components and parts is continuous and without any back tracking. 8. Production planning and control is easy. 9. Material handling can be completely automatic.

Advantages Following are the advantages of mass production:

1. Higher rate of production with reduced cycle time. 2. Higher capacity utilization due to line balancing. 3. Less skilled operators are required. 4. Low process inventory. 5. Manufacturing cost per unit is low.

Limitations Following are the limitations of mass production:

1. Breakdown of one machine will stop an entire production line. 2. Line layout needs major change with the changes in the product design. 3. High investment in production facilities. 4. The cycle time is determined by the slowest operation.

8.4 CONTINUOUS PRODUCTION

9 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

Production facilities are arranged as per the sequence of production operations from the first operations to the finished product. The items are made to flow through the sequence of operations through material handling devices such as conveyors, transfer devices, etc.

Characteristics Continuous production is used under the following circumstances:

1. Dedicated plant and equipment with zero flexibility. 2. Material handling is fully automated. 3. Process follows a predetermined sequence of operations. 4. Component materials cannot be readily identified with final product. 5. Planning and scheduling is a routine action.

Advantages Following are the advantages of continuous production:

1. Standardization of product and process sequence. 2. Higher rate of production with reduced cycle time. 3. Higher capacity utilization due to line balancing. 4. Manpower is not required for material handling as it is completely automatic. 5. Person with limited skills can be used on the production line. 6. Unit cost is lower due to high volume of production.

Limitations Following are the limitations of continuous production:

1. Flexibility to accommodate and process number of products does not exist. 2. Very high investment for setting flow lines. 3. Product differentiation is limited.

10 PRODUCTION ENGINEERING CHAPTER -1 PRODUCTION AND PRODUCTIVITY

1.1 Types of Production – Job, Batch and Mass production, Assembly Production, 1.2 Definition of productivity, 1.3 Difference between production and productivity 1.4 Importance of productivity 1.5 Factors affecting productivity, 1.6 Measurement of productivity 1.7

11 PRODUCTION ENGINEERING