Title: Production and Operation Management.

Course Code: AIS:5105

Chapter: One (Introduction)

Md.Nazmul Huda

Lecturer, Department of AIS

Email:[email protected]

Mobile:01734209836
 Chapter One
Topics to be covered:
 History and Development of Production Management,
 Production Systems,
 Types of Production,
 Production Function and its Environment,
 Operation Management and Other Business Specialties,
 Scope & Function of Production Management,
 Role of Production Management in Economic Development.

 Product
 Generally products means tangible goods which is
purchased and sold in exchange of money.
 A product is anything that can be offered to a market for
attention , acquisition, use or consumption that might
satisfy a want or need . Its includes objects, services
persons, places, organizations and ideas”- Philip Kotler
 A product is a set of tangible and intangible attributes
including packaging, colour, price, manufacture’s prestige,
retailer’s prestige and manufacture’s and retailer’s
services which the buyer may accept as offering want-
satisfaction.-W. J. Station
 Service
 Service is an act which is intangible in nature. It has no
physical existence . We can just feel it.
 Services are the non-physical, intangible parts of our
economy, Services, such as banking, education, medical
treatment, and transportation make up the majority of the
economies of the rich nations. They also represent most of
the emerging nations’ economies.
 When a company provides a service, and the customer has
paid for it, there is no transfer of ownership. We cannot
transport or store a service.
 Production
Production is 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.

Production means application of processes. (Technology) to the raw

material to add the use and economic values to arrive at desired
product by the best method, with out sacrificing the desired quality.
We have three ways of Production, they are:
 Production by Disintegration:
By separating the contents of Crude oil or a mixture the desired products are
produced. For example the crude oil is disintegrated into various fuel oils. Similarly
salt production is also an example for product produced by disintegrated. We can
use Mechanical or Chemical or both technologies to get the desired product, so that
it will have desired use value.
 Production by Integration:
In this type of Production various Components of the products are assembled
together to get the desired product. In this process, Physical and Chemical
Properties of the materials used may change. The examples are: Assembly of Two
wheelers, Four wheelers and so on.
 Production by Service:
Here the Chemical and Mechanical Properties of materials are improved without any
physical change. The example for this is Heat Treatment of metals. In real world, a
combination of above methods is used . In general production is the use of any
process or procedure designed to transform a set of input elements into a set of
output elements, which have use value and economic value.
 CONCEPT OF PRODUCTION
Production function is that part of an organization, which is concerned with the
transformation of a range of inputs into the required outputs (products) having the
requisite quality level.

Production is defined as “the step-by-step conversion of one form of material into

another form through chemical or mechanical process to create or enhance the
utility of the product to the user.” Thus production is a value addition process. At
each stage of processing, there will be value addition.

Edwood Buffa defines production as ‘a process by which goods and services are
created’. Some examples of production are: manufacturing custom-made products
like, boilers with a specific capacity, constructing flats, some structural fabrication
works for selected customers, etc., and manufacturing standardized products like,
car, bus, motor cycle, radio, television, etc.
 Production Management
In any manufacturing system, the job of a Production
Manager is to manage the process of converting inputs
into the desired outputs.
Inputs Outputs
• Men Transformation  Desirable
Process  Undesirable
• Material
• Machine
• Money
• Information Feedback
 It is concerned with the production of goods and services,
and involves the responsibility of ensuring that business
operations are efficient and effective.
It is also the management of resources, the distribution of
goods and services to customers.

Production Management can be defined as the management

of the conversion process, which converts land, labor,
capital, and management inputs into desired outputs of
goods and services. It is also concerned with the design and
the operation of systems for manufacture, transport, supply
or service.
Classification of Production System
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:
 High variety of products and low volume.
 Use of general purpose machines and facilities.
 Highly skilled operators who can take up each job as a challenge because of uniqueness.
 Large inventory of materials, tools, parts.
 Detailed planning is essential for sequencing the requirements of each product,
capacities for each work centre and order priorities.
Advantages

General purpose machines and facilities variety of products can be

produced.
Operators will become more skilled and competent, as each job gives
them learning opportunities.
Full potential of operators can be utilized.
Opportunity exists for creative methods and innovative ideas.
Limitations
Following are the limitations of job shop production:
 Higher cost due to frequent set up changes.
 Higher level of inventory at all levels and hence higher inventory cost.
 Production planning is complicated.
 Larger space requirements.
 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 characterised 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:
 When there is shorter production runs.
 When plant and machinery are flexible.
 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.
 When manufacturing lead time and cost are lower as compared to job order
production.
Advantages
 Following are the advantages of batch production:
 Better utilisation of plant and machinery.
 Promotes functional specialisation.
 Cost per unit is lower as compared to job order production.
 Lower investment in plant and machinery.
 Flexibility to accommodate and process number of products.
 Job satisfaction exists for operators.
Limitations
 Following are the limitations of batch production:
 Material handling is complex because of irregular and longer flows.
 Production planning and control is complex.

 Work in process inventory is higher compared to continuous production.

 Higher set up costs due to frequent changes in set up.
 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 standardisation exists and all outputs follow the
same path.
Characteristics
Mass production is used under the following circumstances:
 Standardization of product and process sequence.
 Dedicated special purpose machines having higher production capacities and output
rates.
 Large volume of products.
 Shorter cycle time of production.
 Lower in process inventory.
 Perfectly balanced production lines.
 Flow of materials, components and parts is continuous and without any back tracking.
 Production planning and control is easy.
 Material handling can be completely automatic.
Advantages
Following are the advantages of mass production:
 Higher rate of production with reduced cycle time.
 Higher capacity utilization due to line balancing.
 Less skilled operators are required.
 Low process inventory.
 Manufacturing cost per unit is low.
Limitations
Following are the limitations of mass production:
 Breakdown of one machine will stop an entire production line.
 Line layout needs major change with the changes in the product design.
 High investment in production facilities.
 The cycle time is determined by the slowest operation.
 CONTINUOUS PRODUCTION
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:
 Dedicated plant and equipment with zero flexibility.
 Material handling is fully automated.
 Process follows a predetermined sequence of operations.
 Component materials cannot be readily identified with final product.
 Planning and scheduling is a routine action.
Advantages
Following are the advantages of continuous production:
 Standardization of product and process sequence.
 Higher rate of production with reduced cycle time.
 Higher capacity utilization due to line balancing.
 Manpower is not required for material handling as it is completely automatic.
 Person with limited skills can be used on the production line.
 Unit cost is lower due to high volume of production.
Limitations
Following are the limitations of continuous production:
 Flexibility to accommodate and process number of products does not exist.
 Very high investment for setting flow lines.
 Product differentiation is limited.
 HISTORICAL EVOLUTION OF PRODUCTION AND OPERATIONS MANAGEMENT

For over two centuries operations and production management has been
recognized as an important factor in a country’s economic growth.
The traditional view of manufacturing management began in eighteenth century
when Adam Smith recognized the economic benefits of specialization of labour.
He recommended breaking of jobs down into subtasks and recognizes workers to
specialized tasks in which they would become highly skilled and efficient. In the
early twentieth century, F.W. Taylor implemented Smith’s theories and developed
scientific management. From then till 1930, many techniques were developed
prevailing the traditional view.
Date Contribution Contributor
1776 Specialization of labour in manufacturing Adam Smith
1799 Interchangeable parts, cost accounting Eli Whitney and others
1832 Division of labour by skill; assignment of jobs by skill; basics of time study Charles Babbage
Scientific management time study and work study developed; dividing
1900 planning and doing of work Frederick W. Taylor
1900 Motion of study of jobs Frank B. Gilbreth
1901 Scheduling techniques for employees, machines jobs in manufacturing Henry L. Gantt
1915 Economic lot sizes for inventory control F.W. Harris
1927 Human relations; the Hawthorne studies Elton Mayo
1931 Statistical inference applied to product quality: quality control charts W.A. Shewart
1935 Statistical sampling applied to quality control: inspection sampling plans H.F. Dodge & H.G. Roming
1940 Operations research applications in World War II P.M. Blacker and others.
1946 Digital computer John Mauchlly and J.P. Eckert
1947 Linear programming G.B. Dantzig, Williams &
1950 Mathematical programming, on-linear and stochastic processes A. Charnes, W.W. Cooper
1951 Commercial digital computer: large-scale computations available. Sperry Univac
1960 Organizational behaviour: continued study of people at work L. Cummings, L. Porter
Integrating operations into overall strategy and policy, Computer W. Skinner J. Orlicky and G.
1970 applications to manufacturing Wright
, Scheduling and control, Material requirement planning (MRP)
1980 Quality and productivity applications from Japan: robotics, CAD-CAM W.E. Deming and J. Juran.
1990 Internet, supply chain management.
Production management becomes the acceptable term from 1930s to 1950s. As F.W.
Taylor’s works become more widely known, managers developed techniques that
focused on economic efficiency in manufacturing. Workers were studied in great
detail to eliminate wasteful efforts and achieve greater efficiency. At the same time,
psychologists, socialists an and other social scientists began to study people and
human behaviour in the working environment. In addition, economists,
mathematicians, and computer socialists contributed newer, more sophisticated
analytical approaches.

With the 1970s emerges two distinct changes in our views. The most obvious of
these, reflected in the new name operations management was a shift in the service
and manufacturing sectors of the economy. As service sector became more
prominent, the change from ‘production’ to ‘operations’ emphasized the broadening
of our field to service organizations. The second, more suitable change was the
beginning of an emphasis on synthesis, rather than just analysis, in management
practices
 Objectives of Production Management
The objective of the production management is ‘to produce goods services of right
quality and quantity at the right time and right manufacturing cost’.
1. RIGHT QUALITY : The quality of product is established based upon the customers
needs. The right quality is not necessarily best quality. It is determined by the cost of
the product and the technical characteristics as suited to the specific requirements.
2. RIGHT QUANTITY : The manufacturing organization should produce the products in
right number. If they are produced in excess of demand the capital will block up in the
form of inventory and if the quantity is produced in short of demand, leads to shortage
of products.
3. RIGHT TIME : Timeliness of delivery is one of the important parameter to judge the
effectiveness of production department. So, the production department has to make
the optimal utilization of input resources to achieve its objective.
4. RIGHT MANUFACTURING COST : Manufacturing costs are established before the
product is actually manufactured. Hence, all attempts should be made to produce the
products at pre-established cost, so as to reduce the variation between actual and the
standard (pre-established) cost.
SCOPE OF PRODUCTION AND OPERATIONS MANAGEMENT
Production and operations management concern with the conversion of
inputs into outputs, using physical resources, so as to provide the desired
utilities to the customer while meeting the other organizational objectives
of effectiveness, efficiency and adoptability.
 QUALITY CONTROL
Quality Control (QC) may be defined as a system that is used to maintain a desired level
of quality in a product or service. It is a systematic control of various factors that affect the
quality of the product.
Quality control aims at prevention of defects at the source, relies on effective feed back
system and corrective action procedure. Quality control can also be defined as that industrial
management technique by means of which product of uniform acceptable quality is
manufactured. It is the entire collection of activities which ensures that the operation will
produce the optimum quality products at minimum cost.
The main objectives of quality control are:
 To improve the companies income by making the production more acceptable to the
customers i.e., by providing long life, greater usefulness, maintainability, etc.
 To reduce companies cost through reduction of losses due to defects.
 To achieve interchangeability of manufacture in large scale production.
 To produce optimal quality at reduced price.
 To ensure satisfaction of customers with productions or services or high quality level, to
build customer goodwill, confidence and reputation of manufacturer.
 To make inspection prompt to ensure quality control.
 To check the variation during manufacturing.
 Distinction between Manufacturing Operations and Service Operations

Subject Manufacturing Operations Servicing Operations

Definition Goods Oriented Services oriented
Degree of customer contact Manufacturing allows a separation between Higher degree of consumer and
production and consumption service must be performed at the
point of consumption
Uniformity of input Manufacturing operations have low variability Greater variability of inputs on the
of inputs and have the ability to control basis of problems.

Labor content of Job Lower Labor content Higher labor content

Uniformity of Outputs Low variability High variability
Measurement of Productivity Straightforward due to high degree of Productivity measurement is difficult
uniformity .
Production and Delivery Production and delivery are not same time Production and delivery are same
time
Quality Assurance Quality may be assured where errors can be QA is more challenge because
corrected production and consumption in same
time
Amount of Inventory More inventory Low inventory
Considerable area of the Production and operation management with area

5 Ps
 The Product
 The Plant
 The Processes
 The Programs
 The People
 The Product
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.

The product is mainly concerned for:

 Performance
 Quality
 Reliability
 Quantity
 Production cost
 The Plant
Plant is an industrial site, usually consisting of buildings and machinery,
or more commonly a complex having several buildings, where workers
manufacture goods or operate machines processing one product into
another.
While considering plant in production the following concern are there
 Future possible demand
 Design and layout of office and buildings
 Social responsibility
 Safety of installation and operation
 Maintenance of performance
 Performance and reliability of equipments
 The Processes
Mechanical or chemical steps used to create an object, usually repeated
to create multiple units of the same item. Generally involves the use of
raw materials, machinery and manpower to create a product.
The factor affecting the processes are:
 1)Available skill
 2)Type of production
 3)Safety
 4)Lay out of plants and equipment
 5)Available capacity
 6)Maintenance requirements
 The Programs
A plan of action to accomplish a specified end.
It includes-
 Purchasing
 Transforming
 Maintenance
 Cash
 Transport
 Storage
 The People
Our responsibilities extend to not only our own people, but those impacted by our
operations. We are committed to our goal of ensuring zero harm to our employees,
our contractors and the communities in which we operate. We recognize that our
people are the primary source of our competitiveness”.

For retransition and welfare of employee, some factors should be discuss with the
employees. Such as-
 Wages/salaries
 Safety
 Condition of work
 Motivation
 Trade union
 Education and training
Factors of Production
 Land
Land refers to all natural resources. All natural resources either
on the surface of the earth or below the surface of the earth or
above the surface of the earth is Land. It is the primary and
natural factor of production. All gifts of nature such as rivers,
oceans, land, climate, mountains, mines, forests etc. are land.

 Characteristics of Land as a Factor of Production

1. The land is a free gift of nature.
2. The land has no cost of production.
3. It is immobile.
4. The land is fixed and limited in supply.
 Labor

All human effort that assists in production is labor. This effort can
be mental or physical. It is a human factor of production. It is the
worker who applies their efforts, abilities, and skills to produce.
 The payment for labor is the wage.

 Characteristic
1. It is a human factor.
2. One cannot store labor.
3. No two types of labor are the same.
 Capital
Capital refers to all manmade resources used in the production
process. It is a produced factor of production. It includes
factories, machinery, tools, equipment, raw materials, wealth
etc.
 The payment for capital is interest.
 Characteristics
1. Capital is a manmade factor of production.
2. It is mobile.
3. It is a passive factor of production.
 Entrepreneur
An entrepreneur is a person who brings other factors of production in one
place. He uses them for the production process. He is the person who decides
 What to produce
 Where to produce
 How to produce
A person who takes these decisions along with the associated risk is an
entrepreneur.
 The payment for land is profit.

 Characteristics
1. He has imagination.
2. He has great administrative power.
3. An entrepreneur must be a man of action.
4. An entrepreneur must have the ability to organize.
5. He should be a knowledgeable person.
6. He must have a professional approach.
 Meaning of Production Function:
In simple words, production function refers to the functional relationship
between the quantity of a good produced (output) and factors of production
(inputs).
 Prof. Koutsoyiannis “The production function is purely a technical relation
which connects factor inputs and output.”
 Prof. Watson defined production function as “the relation between a
firm’s physical production (output) and the material factors of production
(inputs).”
In this way, production function reflects how much output we can expect if
we have so much of labour and so much of capital as well as of labour etc.
In other words, we can say that production function is an indicator of the
physical relationship between the inputs and output of a firm.
 Mathematically, such a basic relationship between inputs and outputs
may be expressed as:
Q = f( L, C, N )
Where Q = Quantity of output
L = Labour
C = Capital
N = Land.
 Hence, the level of output (Q), depends on the quantities of different
inputs (L, C, N) available to the firm. In the simplest case, where there
are only two inputs, labour (L) and capital (C) and one output (Q), the
production function becomes.
Q =f (L, C)
The long-run production function (Q) is usually expressed as
follows:
Q= f (LB, L, K, M, T, t)

Where, LB= land and building

L = labour
K = capital
M = raw material
T = technology
t = time
 KPI(Key Performances Indicator)
 KPI is a set of measures that help managers evaluate a company’s
economic performance and spot the for changes in operations. KPIs
include financial measures such as days cash on hand and operating
income by unit or division, as well as nonfinancial metrics such as
average time to respond to service calls, lead time, or percentage of
sales from new product.
 A Key Performance Indicator is a measurable value that demonstrates
how effectively a company is achieving key business objectives.
Organizations use KPIs at multiple levels to evaluate their success at
reaching targets. High-level KPIs may focus on the overall
performance of the business, while low-level KPIs may focus on
processes in departments such as sales, marketing, HR, support and
others.
 Features of Production Function:
Following are the main features of production function:
1. Substitutability:
The factors of production or inputs are substitutes of one another which make it possible to
vary the total output by changing the quantity of one or a few inputs, while the quantities of
all other inputs are held constant. It is the substitutability of the factors of production that
gives rise to the laws of variable proportions.
2. Complementarity:
The factors of production are also complementary to one another, that is, the two or more
inputs are to be used together as nothing will be produced if the quantity of either of the
inputs used in the production process is zero.
The principles of returns to scale is another manifestation of complementarity of inputs as it
reveals that the quantity of all inputs are to be increased simultaneously in order to attain a
higher scale of total output.
3. Specificity:
It reveals that the inputs are specific to the production of a particular product. Machines and
equipment’s, specialized workers and raw materials are a few examples of the specificity of
factors of production. The specificity may not be complete as factors may be used for
production of other commodities too. This reveals that in the production process none of the
factors can be ignored and in some cases ignorance to even slightest extent is not possible if
the factors are perfectly specific.
 Assumptions of Production Function
1. Production function is related to a specific time period.

2. The state of technology is fixed during this period of time.

3. The factors of production are divisible into the most viable

units.
4. There are only two factors of production, labour and capital.
5. Inelastic supply of factors in the short-run period
5W’s in production and operation management
1. What: What resources will be needed, and in what amounts?
How the resources will be allocated?
2. When: When will each resources be needed? When should the
work be scheduled? When should materials and other supplies
be ordered? When is corrective action needed?
3. Where: Where will the work be done?
4. How:How will the product or service be designed? How will
the work be done (Organization, methods, equipment)?
5. Who: Who will do the work?
 Ethical issues in operation management
1. Financial Statements: Accurately represent financial conditions
2. Worker safety: Providing adequate training, maintaining equipment in good
working condition, maintaining a safe working environment.
3. Product safety: Providing products that minimize the risk of injury to users or
damage to property or the environment.
4. Quality: Honoring warranties, avoiding hidden defects.
5. The environment: Not doing things that will harm the environment.
6. The community: Being a good neighbor.
7. Hiring and firing workers: Don’t hire under false pretense.
8. Closing facilities: Honoring commitment that have been made
9. Worker’s right: Respecting worker’s right , dealing with worker problems
quickly and fairly.
 Productivity
 Productivity is a measure of the effective use-of resources,
usually expressed as the ratio of output to input.
 Productivity is an index that measures output(goods and
services) relative to the input(labur, material, energy, and
other resources) used to produce them.
 Measured productivity is the ratio of a measure of total
outputs to a measure of inputs used in the production of
goods and services.
Output

Productivity =
Input
 Computation of Productivity

Inputs in any production process comprises capital, labor, material and energy.
Productivity of each resource can be measured separately. Such measurement
gives single factor productivity. The method of calculating productivity
considering more than one resource is called multi-factor productivity approach
to measuring productivity. Total productivity (total productivity index) refers to
the productivity of all resources put together. So productivity of all resources
put together gives total productivity.
 There are broadly three types of productivity measurements and these are
explained below:
 1. Single-Factor Productivity Measurement.
 2. Multi-Factor Productivity Measurement.
 3. Total (Composite) Factor Productivity Measures.
 4. Total Productivity Model.
1. Single-Factor Productivity Measurement:
 Single-Factor Productivity is a measure of output against
specific input. Partial productivity is concerned with
efficiency of one class of input.
 2. Multi-Factor Productivity Measurement:
 The concept of multi-factor productivity was developed by Scott D.
Sink, multi-factor productivity measurement model considered labour,
material and energy as major inputs. Capital was deliberately left out
as it is most difficult to estimate how much capital is being consumed
per unit/ time.
 3. Total (Composite) Factor Productivity Measures:
The Total Factor Productivity model developed by John W.
Kendrick in 1951, he has taken only labour and capital as only two
input factors.
 4. Total Productivity Model:
Total Productivity Model was developed by David J. Sumanth in 1979 considered
five items as inputs. These are human, material, capital, energy and other
expenses. This model can be applied in any manufacturing or service organization.

 Total Tangible Output = Value of finished units produced + Partial units

produced + Dividends from securities + Interests from bonds + other incomes.
 Total Tangible Inputs = Value of human inputs + Capital inputs + Materials
purchased + Energy inputs + other expenses (taxes, transport & office expenses
etc.).
 Measuring productivity growth
Productivity growth is estimated by subtracting the growth in inputs from the
growth in output — it is the residual.
There are a number of ways to measure productivity. In Australia, the most
common productivity measures used are:
 multifactor productivity (MFP), which measures the growth in value added
output (real gross output less intermediate inputs) per unit of labour and
capital input used; and
 labour productivity (LP), which measures the growth in value added output
per unit of labour used
 The factors influencing productivity
The factors influencing productivity can be classified broadly into two categories:
 (A) Controllable Factors.
 (B) Uncontrollable Factor.
(A) Controllable Factors:
Controllable Factors are considered as internal factors. These are the factors which are in
control of industrial organization. Controllable factors are:
1. Material and Power:
Improved quality of raw materials and increased use of power have a favorable effect on
productivity. An effort to reduce materials and energy consumption brings about considerable
improvement in productivity.
2. Machinery and Plant Layout:
The size of the plant and the capacity utilization has direct bearing on productivity.
Production below or above the optimum level will be uneconomical and will tend towards
lower level of productivity. The arrangement of machines and position in the plant and the
setup of the wore-bench of an individual worked will determine how economically and
efficiently production will be ferried out.
3. Human Factors:
Human nature and human behavior are the most significant determinants of
productivity. Human factors include both their ability as well as their willingness.
i. Ability to Work:
ii. Willingness to Work:
iii. Motivation and morale of people

4. Organization and Managerial Factors:

Organization factor include various steps taken by the organization towards
maintaining better industrial relations such as delegation and decentralization of
authority. These factors also influence motivation likewise the existence of group,
with higher productivity as their goal is likely to contribute to the organization
objectives.
5. Technological Factors:
Technological factors exert significant influence on the level of productivity.

These include the following:

 i. Size and capacity of plant
 ii. Product design and standardization
 iii. Production planning and control
 iv. Plant layout and location
 v. Materials handling system
 vi. Inspection and quality control
 vii. Machinery and equipment used
 viii. Research and development
(B) Uncontrollable Factors:
Uncontrollable factors are known as external factors and these factors are beyond
the control of the individual industrial organization. Uncontrollable factors are:
1. Economic, Political and Social Changes:
There are economic, social and political factor that affects the productivity.
i. Economic Factors like Size of the market, banking and credit facilities, transport
and communication systems, etc. is important factors influencing productivity.
ii. Political Factors like Law and order, stability of government, harmony between
states etc. are essential for high productivity in industries Taxation policies of the
government influence willingness to work, capital formation, modernization and
expansion of plants etc. Industrial policy affects the size, and capacity of plants.
Elimination of sick and inefficient units also helps to improve productivity.
 iii. Social Factors like Social customs, traditions and institutions influence
attitudes towards work and job. For instance, bias on the basis of caste, religion,
etc., inhibited the growth of modern industry in some countries. The joint family
system affected incentive to work hard in India. Close ties with land and native
place hampered stability and discipline among industrial labour.
2. Natural Resources:
Natural factors such as physical, geographical and climate conditions exert
considerable influence on productivity, particularly in extreme climates (too
cold or too hot) tends to be comparatively low. Natural resources like water,
fuel and minerals influence productivity.

3. Government Factor:
Government policies and programs are significant to productivity practices of
government agencies, transport and communication power, and fiscal
policies (interest rates, taxes) influence productivity to the greater extent
 Ways to Improve Productivity and Quality of Products
It is vital to develop a high rate of productivity because it is the foundation of the business’s
future growth.
There are many ways by which productivity can be increased:
 i. Adoption of up to date technology in machines and equipment.
 ii. Implementing a proper system of managerial planning and control.
 iii. Effective time management.
 iv. Maintenance of work facilities in factories.
 v. Standardization and automation for mass production.
 vi. Empower employees by providing training and an environment conducive for personal is
well as organizational growth.
 vii. Let workers participate in management.
 viii. Provide a flexible work schedule instead of rigid working hours.
 ix. Clear communication should be there between management and workers.
 Assignment is to be submitted after Vocation
 As an MBA student why should you study production and operations
management?
 Discuss the relationship between production function, other organization
function and the environment.
 Explain Pareto phenomena or 80/20 rule.
 Short notes:
1. Agility
2. Mass production
3. Craft production
4. Lean production
5. Division of labor.
 Next Class

Chapter 2. Product and Service Design