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INTRODUCTION
Productivity and Quality Management is an extension of the subject of Production Management. We understand that the production consists of three basic elements viz. Inputs Conversion Output Inputs are basic to any production system; they can be raw materials and consumables in a manufacturing system, or infrastructure for providing services in service sector. Conversion is considered being achieved only if the process brings in value addition; i.e. when output is worthier than the sum total of all inputs. Finally Output of a production system is considered being achieved only if the conversion results into delivering effectiveness, efficiency and customer satisfaction.
The resultant output of any production system for whatever reason, when fails to deliver the effectiveness, efficiency and customer satisfaction, it is treated as Value Subtraction. Under such circumstances the process of conversion has resulted in to Waste of Production rather than the Production. Specifying it more empathetically, an output of a production system must deliver effectiveness, efficiency and customer satisfaction. This can only be achieved if the inputs are appropriate and the conversion process is carried out with Value Addition.
Subject of Productivity and Quality Management focuses on the factor of conversion, as to how economically, efficiently, effectively and qualitatively the inputs to a production system are converted / transformed so as to maximize the output without loosing focus on the quality. During the study of this subject, we will learn several management techniques and principles empowering us to achieve these objectives.
CONCEPT OF PRODUCTIVITY
Productivity is the ratio of out put to input in any organization. Here output may be utility or goods or services. Inputs are all the resources used, including basic inputs to a production system which are used and/or consumed for the transformation or conversion function. Thus output may be in the form of product (utility or services) quantity/quality and price. The inputs may be in the form of raw materials quality/quantity price and/or physical assets such as land, infrastructure, men and machineries. Arithmetically: Productivity = Output/Input In short productivity takes in account output in relation to input. Before dwelling further about the productivity let us understand the role of quality in the field of production and operations management.
QUALITY
Quality is an important dimension of Production and Operations Management, and is an integral and important parameter for the productivity. Joseph Juran, 20th centurys one of the most valued and respected management guru in the field of quality, suggested that the past century will be defined by historians as the century of productivity, while the current century has to be the century of quality. Therefore to talk of the productivity without integrating the importance of quality is to talk about heart without inclusion of soul. The emphasis of Quality is not new to the business. Back in 1887, Mr. William C. Procter, the grand son of founder of Proctor and Gamble, impressed upon his employees by saying that The first job we have is to turn out quality merchandise that consumers will buy and keep on buying. If we produce it efficiently and economically, we will earn profit, in which you will share
Take the illustration of an advertisement of marine ply shown on television. It sarcastically and to the viewers delight displays frequent hammering by a high court judge, uttering orderorderin a courtroom on a table top made of the marine ply manufactured by the advertisers company. The wooden table top is, hammered again and again by the judge for innumerable times and for several years, representing an unending law suit. The suit was initiated in the court when the prosecutor, accused, their lawyers and the judge were seen to be young. All of them became old during the course of the case. Manufacturer of the marine ply sarcastically says quality of our marine ply on the table top of the judge will lasts forever (chalta hi rahe) as the unending case in the court. The add shows in the end that in the courtroom, the prosecution and judge became so old, that they can barely speak and present their arguments but the marine ply used as table top remains in tact even after so many brutal strokes of the judges hammer during the course of unending court drama.
Another similar advertisement is from a popular refrigerator manufacturer, it displays story of a young boy who purchases a refrigerator of the advertisers company. After a quantum jump on the time scale of several years, the same young man is shown as a grandfather. Now his grandson comes in the scene and opens the door of the same refrigerator purchased by his grandfather, when young. A representative of the manufacturer peeps out on the screen and says our product lasts from generations to generations.
Illustrations of these advertisements explain the asset quality of the products advertised.
When a customer spends money on valuable product, they want its quality to be an asset and not an expense.
QUALITY CONTROL
Having understood about quality, let us now understand Quality Control. Quality control is one of the most important aspects of the production planning and control. It is basically concerned with the quality production through regular inspection techniques for Input Raw Materials, Production Process, in Process Products and Final Output Products. According to Alford and Beatty Quality Control is that technique of industrial management by means of which products of uniform acceptable quality are manufactured According to Broom Quality Control is a systematic control by management of the variables in the manufacturing process that affect goodness of the end product
QUALITY ASSURANCE
Quality Assurance means an assurance given to a customer that the products, parts, components, tools, etc. contained specified characteristics and are fit for the intended use.
QUALITY ORGANIZATION
Quality is everyones business it is not just the concern of only manufacturing department. Each department has to contribute for quality. Quality is built into the product at the product concept stage and it is ubiquitous all through out its life. Poor quality can occur because of organizational problems anywhere, or even outside the organization. A right beginning to build a Quality Organization is commitment for quality by the top management of the organization. Quality improvement should be viewed by every one in the organization as a positive effort. Continuous training of all concerned is one of the key to build a quality organization. With due training several alternative methods can be implemented in order to achieve quality function in an organization.
Illustration: INPUT (Men Hours) 40000 50000 60000 OUT PUT PRODUCTIVITY Production Output (Nos. of articles = ------------Produced) Input 80000 95000 108000 2 1.9 1.8 Increase Increase Decrease Decrease REMARKS
MONTH
Production
Productivity
Let us understand as to why (as illustrated above), when the production is increasing, the productivity is decreasing?
WHY PRODUCTIVITY REDUCES WHEN PRODUCTION INCREASES? This happens mostly because to increase the production, usual practice is to increase the work hours close to the month/quarter/year end, of the same number of workmen, keeping them overtime and asking them to produce and comply with the additional orders or unfulfilled targets etc. Naturally, having worked for the entire day, their efficiency during the overtime is low and they can not give same output. Lots of men hours wasted. As seen from the above illustration that when markets are rising; employing additional resources and incurring heavy expenditure does boost production, but decreases productivity. Objectivity of PQM is to arrest this trend of decreasing productivity Vs increasing Production. Various techniques such as Kaizen (Japanese word - Kai means Change and Zen means Betterment), TQM- Total Quality Management, JIT Just In Time, QC Quality Circles - etc are employed in present day management to achieve this objective. We will be learning many of such techniques during course of this subject.
IMPORTANCE OF PRODUCTIVITY - 1
1. Profit Margins: - The profit margins in the buyer markets are diminishing and there is ever looming threat to survival. 2. Globalizations of Markets: - They have increased multi fold competitions from National and International players. 3. Cost of Failure: - The challenges and cost of failure are greater than ever before. 4. Resources are becoming scarce: Fundamentally it is necessary to improve the productivity because resources are becoming scarce and costly, and hence main aim of the productivity is to optimize the utilization of the same.
IMPORTANCE OF PRODUCTIVITY - 2
Customers:- Are more educated, informed, demanding and efficient, posing greater challenges to the business. 6. Comparison of products and price: Internet and expanding media exposures have brought world before the consumer and with a touch of finger they are able to compare the products and price across the globe. 7. Economy of the Nation: - To increase National Productivity, Prosperity and Economy of the Nation, which is directly, proportionate to the productivity of the business houses and entrepreneurs in the country hence it is pertinent for every entrepreneur to increase the productivity.
5.
IMPROVEMENT IN PRODUCTIVITY - 1 It is obvious that in any organization, efforts have to be taken to improve the productivity at all levels. The motivated atmosphere to optimize the utilization of all the resources like men, material time, machine, place etc needs to be done constantly to prevail in a progressive and advanced company. Major cost savings can be generated by the product and process improvements.
IMPROVEMENT IN PRODUCTIVITY - 2
Reduction in time span of a new products development is considered as one of the most important requirement for improvement in present day economy. To avoid manual efforts and fatigue a low cost automation is used along with number of advanced management techniques to supplant the labour force. Such techniques reduce non-value added activities and costs thereof.
IMPROVEMENT IN PRODUCTIVITY - 3
Productivity is viewed as improving health or profitability of the enterprise. Many advanced countries, have started employing more and more electronics and computer controlled processes to avoid loss and waste due to human errors and inefficiency.
IMPROVEMENT IN PRODUCTIVITY - 4 New Technologies New technologies such as: CAD (Computer Aided Designs), CAM (Computer Aided Machines), FMS (Flexible Manufacturing Systems), Unmanned Production Lines, etc are replacing old technologies.
IMPROVEMENT IN PRODUCTIVITY 5
It is observed that at any given point of time every business either grows up or sinks down. The overall health of the company will certainly deteriorate when organization does not strive and improve the productivity and growth. Obviously to cover the losses incurred due to lost productivity, people will be compelled to sell the company, or to shut down or face natural (financial) death. Hence for organizations to survive it is necessary to grow, expand and improve productivity.
PRODUCTIVITY AND PROFITABILITY - 1 Profitability is the most important objective for any company. The Profitability depends on integration and control of various factors. It is necessary to determine the Break Even Point (BEP) for each production unit. BEP is that point (or numbers) of production, at which the company neither makes profit nor loss. BEP is the level of production volume beyond which the product starts yielding profit to the company.
Higher productivity in an organization means higher production of goods and services. With reduction in costs, it gives a high turnover, more profits and dividends, more revenues to the Government, cheaper goods to the customers, greater stability and incentive to expand, vide spread markets and over all prosperity.
Higher productivity means increase in supply of quality goods and services at lower cost, even higher surplus money and purchasing power, greater satisfaction and improved standard of living.
BENEFITS OF INCREASED PRODUCTIVITY TO THE NATION Higher productivity means high employment opportunities for its citizens, increased GNP (Gross National Produce), higher per capita income, better standards of living, improved utilization of resources, and expansion in international markets.
VARIOUS WAYS /MODELS OF CALCULATING PRODUCTIVITY There are various measures of calculating the productivity such as: Productivity Partial Productivity, Multi Factor Productivity Model & Total Factor Productivity Models
PRODUCTIVITY
Simple definition of productivity is ratio of output to input. Output Productivity = ----------Input Example: In an appliance manufacturing company, Unit A produces 1000 articles at the gross cost of Rs.1, 00,000 and Unit B manufactures 900 articles at the same gross cost of Rs 1, 00,000. Both are of the same quality and design. Then we can state that Productivity of Unit A is 1000/100000 nos. per rupee and Productivity of Unit B is 900/100000 nos. per rupee thus Productivity of Unit A is higher than the Productivity of Unit B. The above comparison can also be made for Month A, and Month B of the same unit.
PARTIAL PRODUCTIVITY
Partial productivity is a ratio of output to only a particular class of input. Output Partial Productivity = -------------------------------A particular class of Input
In any production system there is generally more than one input factor and only one output factor involved. The ratio of output to one of these input factors is productivity related and is called partial productivity. Often we find that a certain particular factor plays an important role and is an appropriate factor for comparison, this is called an apple to apple comparison. This is good only for a comparison of different cases, and as such may not be meaningful if used only for a case. Such productivity ratios are used for selection of a particular area of improvement. Organizations can use this formula to determine the performance of labour, machines, energy, capital, a department, an organization or even a country.
PRODUCTIVITY OF LAND:
POL = Yield of Maize (In quintals) ----------------------------------Area of plot (Hectors)
Lets compare the farms of two farmers A and B .Farmer A to cultivate maize uses advance techniques for agriculture production whereas Farmer B uses traditional techniques. Farmer A achieves higher production of maize per hector of land compared to. Farmer B This is where Farmer B can learn for improving the use of his land.
Now if maize is replaced and some other high value crop of the same weight is being produced from the same area of plot, then the partial productivity comparison will give us an idea that the turnover from the same piece of land can be increased by changing the product for the same farm. However it should also be seen in terms of other inputs. Similarly we can find out productivity of floor space of a factory/or of an office/or of a petrol pump.
TOTAL PRODUCTIVITY Total Productivity is the ratio of Total Output and Total Input
Total Output (Value of Produce)
EXAMPLE
= 80 / (12 + 48) As per John W. Kendrik = 80 / 60 = 4 / 3 = 1.33 The Advantages of working out Total Factor Productivity in this manner are as follows: Data is easy to obtain, Appealing from the viewpoint of the Corporate and the National Economist. A Disadvantage of working out Total Factor Productivity It does not consider the impact of Material and Energy inputs, even though material typically forms 60% of the product cost. Total Factor Productivity
(David J Sumanth)
In 1979 David J Sumanth suggested a further extension of the earlier models. He considered 5 items as inputs; which were Human, Material, Capital, Energy and an item called Other Expenses.
According to Sumanth Total Productivity is a relationship between outputs and sacrificed different input items to create these outputs. This model can be applied both, in any manufacturing or service organization.
AMERICAN PRODUCTIVITY CENTER (APC) MODEL American Productivity Center has been advocating a productivity measure that relates profitability with productivity and price recovery factor. Price Recovery Factor is a factor that takes care of a result of inflation. Over a period of time the changes in this factor indicate whether the firm has been able to absorb the changes in the costs of inputs, or has passed on, or has over compensated the same price of the companys output.
Thus Productivity as per APC Model is calculated as follows: Sales Quantities of Output x Price Profitability = -------- = ----------------------------------Costs Quantities of Inputs x Price = Productivity X Price Recovery Factor.
PERFORMANCE INDEX
Performance is associated to personal, where as production and productivity is related with the quantity produced and the quantity of input. A performance index is the ratio of a same parameter i.e. the ratio of actual production of work done to the standard expected production of work done. A perfect example of performance index is of the marks obtained by a student in an examination Actual Quantum of Output Performance Index = ----------------------------------- X 100 (Percent) Standard Quantum of Output