PRODUCTIVITY

Productivity is one of the most commonly used buzz words in industrial engineering. It is a measure of how well resources are utilized to produce output.

 The term productivity, symbolizes the following:

* It relates output to input in any system, where some value addition is performed on the input resources. *It is a quantitative measure of performance.

 According to Organization of Europe Economic Co-operation (OEEC)

productivity is the quotient (ratio) obtained by dividing output by one of the factors of production .Thus, it is possible to speak about productivity of capital ,investment or raw materials according to whether output is being considered in relation to capital, investment or raw material etc.

Productivity = output input Output = quantity of production Input = quantity of resources

Example: A company is manufacturing 24000 components per month by employing 100 workers in 8 hours shift. so what will be the productivity level? Productivity = output input = 24000 100x8 hrx30 days of a month = 24000 24000 = 1 component /man hour

PRODUCTION & PRODUCTIVITY

Production is related to the activity of producing goods & services .It is a process (or system) of converting input into some useful value added output. Productivity is related to the efficient utilization of input resources into produced output in the form of value added goods or services .It puts emphasis on the ratio of output produced to the input used .Its focus is on how well the input resources is used for conversion into output.

PRODUCTIVITY INDEX
The combined effect of efficiency and effectiveness is used in defining a term called productivity index. It is an integration of both efficiency and effectiveness. It indicates a combined effect of utilization (i.e.. efficiency)& performance (ie.effectiveness)

 Efficiency: it indicates a measure of how well a set of targets or results are accomplished. Effectiveness : it indicates a measure of how well the resources are utilized to accomplish a target or results.

 Productivity index = performance achieved input resources consumed or effectiveness efficiency

TYPES OF PRODUCTIVITY INDEX

1.Labour productivity 2.Capital productivity 3.Direct cost productivity 4.Energy productivity 5.Raw material productivity

Labour productivity
Labour productivity is concerned with the amount (volume) of output that is obtained from each employee. It is a key measure of business efficiency, particularly for firms in which the production process is labouroriented.

Why does labour productivity matter?

Labour costs are usually a significant part of total costs. Business efficiency and profitability closely linked to productive use of labour. In order to remain competitive, a business needs to keep its unit costs down. So labour productivity has a significant role in industries.

Factors affecting productivity :

Achieving high (or higher) labour productivity is not a simple task. Several factors influence how productive the workforce is: e.g. Extent and quality of fixed assets (e.g. equipment, IT systems) Skills, ability and motivation of the workforce. Methods of production organisation. External factors (e.g. reliability of suppliers)

Capital productivity
Capital productivity measures the effectiveness and efficiency of capital in the generation of output. Capital productivity results from improvements in the machinery and equipment used, as well as the skills of the labour using the capital, processes, etc.

 To calculate capital productivity, divide annual sales by total working capital. It may be useful to also calculate average working capital, in case the ending working capital for the reporting period is unusually high or low. The formula is as: Annual Sales Working Capital

Direct cost productivity

In this formulation ,all items of direct cost associated with resources used are aggregated on a monetary value basis.

Energy productivity
In this formulation the only resources considered is the amount of energy consumed.

Raw material productivity

In this formulation, the numerators are usually weight (units) of finished products, the denominators are the weight of raw material consumed.

APPROACHES TO MEASURE PRODUCTIVITY

It is important to measure it quantitatively. These are some important approaches to measure it: 1.partial productivity approach. 2.total factor productivity. 3.total productivity.

1.Partial productivity It is defined on the basis of the class of the input being considered.

Partial productivity Labour /human productivity

formula Output/Human input

Some uses To understand the effect of increase /decrease in hiring of labour and to see how they perform.

Material productivity

Output/material input

in material management.

Capital productivity

Output/capital input

In financial assessment.

Partial productivity

formula

Some uses

Energy productivity

Output/energy input

In the consideration of energy required by the system

Advertising & media planning productivity

Output/advertising & media planning input.

In marketing management.

Other expenses productivity

Output/other expenses input.

In the analysis of system.

Advantages of partial productivity measure

It is a good diagnostic measure to identify areas where improvements may be done. Easy to calculate as an independent of other inputs. Easy to understand. Easy to compare with other industries. Data may be easily generated from this.

Limitations of partial productivity measure

It does not contain the overall effect of the system of performance. Focused areas of improvement are difficult to identify.

Total factor productivity

It is the ratio of output to the sum of labour & capital inputs. Thus, Total factor productivity = net output labour + capital input
= total labour - intermediate goods/services purchased labour + capital input

Advantages of total factor productivity

It is relatively easy to compile data from company records. Simple and easy technique.

Disadvantages of total factor productivity

Many important inputs, such as material energy etc. are ignored. The net output does not reflect the efficiency of production system in a proper way.

Advantages of total productivity

It considers all the output & input factors. therefore, it is more accurate representation of real economic performance of the organization. It is easy for the top management to understand the company performance. Easy for cost accountants to compare.

Limitations of total productivity

Difficult to generate company wise and sector wise data. Many indirect measures of input/outputs are ignored.

Ways to improve productivity

1. Machine manual labour be replaced by machines. reliable machines. automation. 2. Management motivated work force better planning & co-ordination effective control of process

3. Processes computerization of system use of management information system(MIS) improvement in scheduling better material flow. 4. Work design improve job design better work method on job training

5. work environment better lighting & illumination. proper ventilation safe work place Total quality management (TQM) 6. Program suggestion scheme incentive schemes revise pay/policy

7. Technology acquire new technology 8.Manufacturing strategy adopt stock less production strategy. Keep work place clean & environment friendly. Go for total change in the process /product/strategy if the system is not working properly.

9. External environment better political stability purchasing capacity of buyers Globalization & market economy.

Factors affecting productivity

(a) Factors affecting national productivity human factors technology & capital investments. Government regulation

(b)Factors affecting productivity in manufacturing & services Product or service design Machinery & equipment The skill & effectiveness of the workers.

Production system
It is a part of larger system and it can be viewed as a framework of activities within which the creation of value can occur. but in production system ,production of components and production of services included. It is the framework with in which the conversion of input into output occurs.

Types of production system

1. Continuous production (a) mass production/line production (b) flow production/process production 2. Intermittent production/batch production. 3. Job order production/project type production.

Continuous production
Continuous production is the specialized manufacture of idential articles.The machinery & equipments are fully engaged. The products which are in high demand are produced in large quantities. The continuous production can be classified into two types:-

(a) Mass Production

In mass production, identical particles are produced in very large quantities, using automatic machines & equipments, e.g. manufacture of bolts, nuts, automobile parts, gears, households articles like pressure cookers, electrical appliances like bulbs etc.

(b) Flow Production

In flow production, the plant, equipment , machinery & layouts are designed to produce for the required product. The arrangement is not flexible. Industries using flow production are known as process industries. ( eg:- Paper mills, chemical industry, fertilizer factory, cement factory etc .)

2. Batch Production/ Intermittent Production

In this type of production ,identical products are produced in batches of small quantity. After one batch of a particular products is produced, another batch of similar product is produced. The same machine and equipment are used. eg: machines tools , furniture ,clothes , shoes etc.

3. Job Order Production/ Project Type Production

Job order production is the manufacture of products to meet specific customer requirements of special orders. This type of production is mainly concerned with special projects , models , special machinery or equipment to perform specialized tasks . In this type of production , the products are made when orders are received from the customers

 Example: large engines , material handling system , ship-building etc.

INDUSTRIAL OWNERSHIP
A firm is an ownership organization which combines the factors of production(men , material & machines)in a plant for the purpose of producing goods or services & selling them at profit The ownership of an industry may be individual or collective .

Types of ownership
The different types of ownership are: 1.Single ownership . 2.partnership. 3.Joint stock companies. 4.co-operative organization. 5.State & central government owned.

1.SINGLE OWNERSHIP
A business owned by one man is called single ownership. single ownership works well for those enterprises which require little capital & lend themselves readily to control by one person. Example : agriculture ,small scale industries , cottage industries , retail trade , handicrafts etc.

Suitability/applications
It is suitable : 1. For retail traders, service concern and small engineering firms which require relatively small capital to start with & to turn. 2. For those businesses which don't involve high risks of failure. 3. When the business can be take care by one person.

Advantages of single ownership

easy to establish as it does not require to complete any legal formality. Owner is free to make all decisions This type of ownership is simple, easy to operate & extremely flexible. owner enjoys all the profits. Owner can keep secrecy as regards the raw materials used, method of manufacturing etc.

Disadvantages of single ownership

The owner is liable for all obligations and debt of the business. The business may not be successful if the owner has limited money, lacks ability & not necessary experience to run the business. Generally, single ownership firm has limited life.

STATE & CENTRAL GOVERNMENT

State government or central government owned enterprises are created in order to overcome some of the disadvantages of jointstock companies. State or central government owned concerns have the advantages that raw materials , power , fuel ,transport are easily made & available to them.

The aim of such enterprises are:

1. 2. 3. 4. 5.

Increase employment opportunities Look after well-being & welfare of public Minimize exploitation of workers & consumers Improve economic balance of the country. Have national progress & development. etc.

 Examples of some government owned enterprises: (i) Fertilizer corporation (ii) Ship building concerns (iii) Steel making concerns (iv) Post & telegraph

 Government owned enterprises may not meet much success if: (i) Public does not realize its duties & responsibilities (ii) Incompetent persons occupy high levels (iii) High level management is dishonest & shows favoritism etc.

PARTNERSHIP
Section 4 of the Indian Partnership Act,1932,defines partnership as follows: partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all.

The persons who have entered into a partnership with one another are individually called partners & collectively a firm . The name under which business is carried on is called firm name.

Features of partnership
Association of two or more persons. Agreement Carrying on a business Lawful business Profit sharing.

Rights of partner
1.Every partner has a right to take part in management of the business. 2.Every partner has a right to be consulted about the affairs of the partnership 3.Every partner has a right to inspect the books of account & have a copy of the same. 4.Every partner has a right to share the profit or loss with others in the agreed ratio.

5.In case of an emergency, a partner has the right to act according to his best judgment & be indemnified for the expenses incurred by him. 6.A person has the right not to allow the admission of a new partner. 7. On giving a proper notice, a partner has the right to retire from the firm.

Types of partner
1. Actual partner a person who becomes a partner by an agreement and is actively engaged in the conduct of the business of partnership is known as an actual partner.

2.Sleeping /dominant partner A sleeping partner is one who does not take an active part in the conduct of the business of the firm .He, like other partners , invests capital & shares in the profit of the business But a sleeping partner need not give a public notice of his retirement from the firm. He is not liable for any act of the firm done after his retirement .He is, however liable for the debts of the firm.

3.Nominal partner A nominal partner is known to the world as a partner in the firm, but he does not share in the profits of the firm .

4.Partner in profit only

Sometimes partners may agree that a partner shall get a share of the profits only & that he shall not be liable to contribute towards the losses. Such a partner is known as a partner in profit only.

5. Partner by estoppels /holding out

Some times a person who is not a partner in a firm may, under certain circumstances ,liable for its debts as if he were a partner .such a partner is called a partner is called a partner by estoppels or holding out.

6.Minor partner With the consent of all partners for the time being , a minor may be admitted to the benefits of partnership .A minor partner has a right to such share of the property and of the profits of the firms as may have been agreed upon.

JOINT STOCK COMPANY

A joint stock company is an association of individuals called shareholders , who join together for profit and agree to supply capital divided into shares that are transferable for carrying on a specific business Death , insolvency,disablement of the shareholders does not affect the joint stock company.

 A joint stock company consists of more than twenty persons for carrying any business other than the banking business. These persons give a name to the company ,mention the purpose for which it is formed & state the nature & the amount of capital (shares) to be issued etc.& submit the proposal to the registrar issues a certificate in this connection ,the company starts operating.

 The managing body of a joint stock company is the board of directors elected by the share holders . The board of directors : 1) makes policies 2) takes decision 3) run the company efficiently.

 There are two types of joint stock company : (a) private limited company /sector (b) public limited company / sector

(a) Private company

A private company is normally what the Americans call a close corporation .it means a company restricts the right to transfer shares and the number of members limit is between 2 to 50.

(b)Public Company
A public company means a company which by its articles: i) Does not restrict the right to transfer its shares. ii) No limit of members. iii) Does not prohibit any invitation to the public to subscribe for any share / debenture of the company.

Differences between public & private company

1. Minimum number of members (a) the minimum number of members /persons required to form a public company is 7. (b) It is 2 in case of private company.

2. Maximum number of members (a) there is no restriction of maximum number of members in a public company (b) where as the maximum number cannot exceed 50 in a private company.

3.Number of directors (a) a public company must have at least 3 directors. (b) Where as in a private company, at least 2 directors.

4.Prospectus (a)There is a need to issue a prospectus in a public company (b)No need to issue a prospectus in a private company

5.Transferability of shares (a) in a public company shares are freely transferable. (b)There is a restriction of share transferability.

CO-OPERATIVE UNDERTAKINGS/ORGANIZATION
Co-operative is a form of business organization formed by individuals to improve their economic conditions through collective efforts .such an association is registered under co-operative societies . These organization has been instituted in various fields such as production ,distribution , banking ,marketing etc.

 It is a voluntary association of economically weak persons who work for achievement of their common economic objectives on the basis of equality & mutual services.

Features of co-operative undertakings

Individual having common interest and willingness to work together to improve their financial positions from a voluntary association as co-operative. The members can leave the co-operative with due notice . There is no compulsion to continue.

 All the members of a co-operative society enjoys equal status. Each member is entitled to one vote only irrespective of the number of shares held by him

Forms of co-operative enterprise/organization/society

1.Consumers cooperatives ,in retail trade & services. 2. Producers cooperatives , for group buying & selling such items as dairy products , grains , fruits etc. 3.Cooperative farming for more & good quality yield from the farms

4.cooperative housing for constructing & providing houses to the members of the association at relatively lesser rates. 5.cooperative credit society , to provide loans to the needy individuals.