PRODUCTION SYSTEM

The objective of an enterprise is to provide goods or services, and to earn some profit. These
days, many firms are focusing on continuous improvement and customer delight. A continuous
search for areas of improvement in the production system is needed. For this, a clear
understanding of recent developments in production system, industrial engineering and
management is necessary. To achieve these objective, the firm needs to convert some inputs like
men, material, money, energy, information, etc., into useful outputs like finished products and
services in required quantity and quality. The transformation of the inputs into pre-specified
outputs is achieved through production process (Figure 2.1).
The outlook of the management towards production system has changed during recent years. in
addition to profit as corporate goal, the focus now is on good quality, customer satisfaction and
improvement in the product and production system. For example, Philips (a multinational
electronics goods company) has been putting advertisements in which the line, which catches our
attention is, "Let's make the thing better“. The important aspect regarding a production process is
the value addition on the raw material before a customer uses it. Examples of such a system are:
automobile manufacturing unit, book publishing, plastic injection, moulding unit, toy-making
firms, etc.

2.2 LIFE CYCLE APPROACH TO A PRODUCTION SYSTEM

It is important to understand the various phases in the life cycle of a production system. Life
cycle of a production system has different phases, which are same as that of human beings. We
can identify eight distinct phases (Figure 2.2).
1. Birth of the production system
2. Product design and process selection
3. Design of the system
4. Manning of the system
5. Start-up of the system
6. System in the steady state
7. Revision of the system
8. Termination of the system. Some typical products at various levels of product life-cycle are
shown in Figure 2.3.
Every stage in the production system is concerned with different level of managerial
decisions. It is shown below:
PRODUCTIVITY (Page 23 / Ravishankar)

3.1 INTRODUCTION
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 followings:
 It relates output Ito input in any system, where some value addition is performed on the input
resource.
 It is a quantitative measure of performance
 It integrates performance aspects of quality ,efficiency and effectiveness.

3.2 DEFINITION OF PRODUCTIVITY

Productivity is formally defined by Organization of European Economic Cooperation (OEEC)
as:
Productivity is the quotient (ratio) obtained by dividing output by one of the factors of
production. Thus, it is possible to speak productivity of capital, investment or raw materials
according to whether output is being considered in relation to capital, investment or raw
materials, etc. Before we explain further, it is important to note that productivity is a widely
misunderstood term. Any particular value of productivity carries relevant meaning only when it
is known how the productivity has been calculated. For example, the productivity of labour and
productivity of capital should not be directly compared.
Secondly, productivity and production, though related in many ways, are different. Thirdly,
quite often the terms, efficiency, effectiveness and productivity are confused with each other. To
avoid indiscriminate use of these terms, some clarifications are provided.
3.3 DIFFERENCE BETWEEN PRODUCTIVITY AND PRODUCTION

Production and productivity are -different terms and carry different meaning. It is
wrong to assume that high reproduction will always lead to higher productivity or
vice-versa.
Production is -related 'to the activity of producing goods or service. 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
Production is a measure of output produced. The emphasis is NOT on how well the
input-resources are utilized. Productivity, on the other hand, puts emphasis on the
ratio of output produced to the input used. Its focus is on how well the input resource
is used for conversion into output.

Example 3.1 A company is manufacturing 24,000 components per month by

employing 100 workers in 8 hour shft The company gets additional order from
government to supply additional 6,000 components. The management decides to
employ additional workers. What will be production and productivity level when the
number of additional workers employed are: (i) 30 (ii) 25 (iii) 20.
In case of productivity, the labour productivity falls below the initial level of l
component per man hour if more than 25 workers are hired. This level of additional
man-power may be termed as break-even level from the labour productivity point of
view. Therefore other things remaining constant, no more than 25 workers should be
hired for this increased production.
We have understood three things from the above example:,.
1. Production and productivity are two different things.
2. Increase in production does not necessarily mean increase in productivity.
3. Productivity is always associated with the context in which it is calculated. For
example, in above case, we have calculated and interpreted labour productivity. In
another case, some one may like to know about material productivity or energy
productivity. If labour productivity has decreased due to some reason, it may not
always mean that other forms of productivity, say material productivity will also fall
.

3.4 PRODUCTIVITY, EFFICIENCY AND EFFECTIVENESS (FIGURE 32)

Productivity is very often confused with the terms efficiency and effectiveness
Though related, all three terms carry different meanings.
Efficiency : It is the ratio of actual output attained to the standard expected output.
Therefore, efficiency indicates a measure of how well the resources are utilized to
accomplish a target or result.
Effectiveness: It is the degree of accomplishing the objectives.
Therefore effectiveness indicates a measure of how well a set of targets or results are
accomplished. Productivity is an integration of both efficiency and effectiveness It
indicates a combined effect resource utilization (i.e., efficiency) and performance
(i.e., effectiveness).
productivity index: The combined effect of efficiency and effectiveness is used in
defining a term called
 ORGNISATION PAGE NO. 601 –RS
INTRODUCTION: Let us first define the organisation.
Definitions
1. Organization is a rational coordination of the activities of a number of people to achieve
some common, explicit goal through division of labour and function and through hierarchy
of authority and responsibility.
2. It is the grouping of activities necessary to attain enterprise--objectives and assignment of
each grouping to a manager with authority necessary to supervise it. - —Koonlz. and
O'Donnell
3. Organization is the process of identifying and grouping work to be performed, defining
and delegating responsibility and authority, and establishing relationships for the purpose of
enabling people to work most effectively together in accomplishing objectives - Allen
4. Organization is a system, having an established structure and conscious planning in
which people work and deal with one another in a coordinated and cooperative manner for
the accomplishment of recognized goals.
Organization is thus:
(i) a system
(ii) established structure
(iii) people work and deal with each other in coordinated and cooperative way.
(iv) grouping of work
(v) established relationship for authority and delegation
(vi)attainment of common goal of the enterprise
(vi) internal structure for performance
(viii) definition of functional role of each personnel and outline of his responsibility
for business performance
(ix) a constituent of:
(a) division of labour,
(b) identification of the source of authority and
(c) establishment of enterprise relationship

PRINCIPLES OF SOUND ORGANISATION

There are some general guiding principles, including their influence, which help to
form (Figure38.1) a good organization. These principles are:

1. Principle of Organizational Objective : It should be same consistent, defined

and clear. It should aim at achieving high production with customer focus, growth
and survival. At the core, there should be unity of objective
2. Principle of Division of Work and Specialization: Every unit or
person of an organization is assigned to a specific task and
accomplishment . For this, there is a need to focus our specialization and
assignment of specific work to individuals.

3.Principle of Parity of Responsibility and Authority : Responsibility

is the obligation on the part of a person towards the boss for completing
the assigned task. It is also called as accountability . A person at a higher
position in the organization exercises authority or power over his
subordinates for getting the task done. Authority is vested in the superior
of the organization so as to extract work from subordinates. Therefore,
authority is always associated with responsibility to get things done.
There should be a balance between authority and responsibility.

4. Principle of Functional Definition: Each employee must be assigned

specific task, role, relationship and job-related activities. What is
expected of him, must be defined in the organisation.
5. Principle of Scalar Chain: Scalar chain, chain of command or line of authority, means that
there should be a continuous line of authority (or scalar chain) from top of the organizational
pyramid to the lower levels. The chain provides a superior-subordinate relationship. Levels
above in the chain are superiors while lower levels in the scalar chain are subordinates. Scalar
chain is useful in the delegation of authority down the chain. It is also useful in maintaining
effective communication between different layers of the organization.

6. Principle of Unity of Command: Unity of command means that there should be only one
source of authority for each subordinate. This also means: one subordinate-one boss.
The principle of unity of command is important for maintaining discipline and for fixing
responsibility for the result.

7. Principle of Balance: All the techniques and values of the organization must be effectively
balanced. Many issues have divergent focus in organization. These are: line vs. staff;
centralization vs. decentralization, unity of command vs. specialization, vertical hierarchy vs.
span of control, etc. Proper balance between these issues must be maintained.

8. Principle of Flexibility: Flexibility means adaptability to change. This is needed due to

uncertainty, scope for diversification and growth, new opportunity, and competitive forces in
the environment. Organization-design should have some in-built flexibility to withstand the red-
tapism, excessive control, complicated procedure, etc.
9. Principle of Delegation: Authority need to be delegated in the organisation. Delegation is
for empowering the subordinates to achieve results.

10. Principle of Efficiency: Organization structure should be useful in achieving the optimum
utilization of resources at least cost and least effort. Considering system view of the
organization (which is input-processing-output framework), the maximization of output and
minimization of inputs will improve the efficiency.

11. Principle of Continuity: Continuity means survival and existence despite turbulence in
market forces. Therefore, the organization must look at long-term goals rather than mere profit-
making and short-terms goals.

12. Principle of Cooperation: Cooperation means involvement as a team and solving the
functional goal of the organization as one unit. This can be achieved by evolving a proper
code of conduct, rule of business, conflict resolution mechanism and cooperation.

13. Principle of Coordination: There are many functions, such as marketing, finance, HRD,
etc., in an organization. Different groups have different priorities and local level objectives.
Proper
coordination is needed to work in one direction and for achieving the overall (global) corporate
goals. Proper communication, meetings, news-letters, etc., are helpful to achieve this.

14. Principle of Span of Control: Any superior can handle only limited numbers of subordines.
Narrow span of control is useful for complex jobs while wider span of control is useful for
routine type of jobs. By span of control, we mean how many subordinates a manager (or,
superior) can handle. The span of control may be determined on the basis of many criteria, such
as:
a) Capacity and the ability of superior
b) Capability and the skill of subordinate
c) Nature and importance of work to be supervised
d) Clarity of plans and responsibility
e) Level of de-centralisation, etc.

Graicunas defined three types of relationships between superior and subordinates:

(i) direct single relationship among all the subordinates
(ii) direct group relationship
(iii) cross-relationship.
These relationships increase dramatically as the number of subordinates increases. With 5
subordinates, it is 100 while with 6 it is 222. With 10 subordinates the total relationships are
5210 which are difficult to handle effectively (Table 38.1). Therefore, not more than six
subordinates are recommended for a common type of organization
ORGANISATION STRUCTURE
Organization structure is the system of job-positioning, role-assignments,
authority-definition and superior-subordinate relationship. It is the network of
jobs roles and organizational relationship for achieving the goals of the
organization. The structure is generally, a pyramid structure in which there are
fewer positions as we move up in the high . In other words, the graphical
representation of the people working in the enterprise showing their lines of
authority responsibility and coordination is known as organization structure.
Organisation structure is so designed that at horizontal
levels, different specializations of tasks are separated.
Vertical hierarchy is due to structure for control and
maintenance of authority. It also facilitates superior-
subordinate relationship. The lateral relationship is for
better coordination among different functional groups
(Figure 38.2).
ORGANISATION DESIGN
The organization's structure has basically two main objectives. First, it facilitates the flow of
information within the organization so as to reduce uncertainty in decision making.
Therefore, the first purpose of the organization design would be to facilitate the collection of
information that managers need for decision making. Second objective of organization design is
to achieve, effective coordination in an integrated way. The structure should integrate
organizational behaviour across the different parts of the organization so that it is effectively
coordinated. Organisational design is, thus, the allocation of resourçes and people to a specified
mission or purpose and the structuring of these resources to achieve the mission. It should fit in
its environment and should provide the information and coordination needed for the management
of resources.

Functional Approach
In this approach, different people are organized in such a way that they Work together in groups
to form departments. The focus is common skill and synchronized wok activities such as
marketing , engineering, maintenance, accounting, etc. This is the most commonly adopted form
of organization structure. In same aspects, it exists in most organisations. A key characteristic
organization is specialization by functional area (Figure 38.3).
TYPES OF ORGANIZATION STRUCTURE
The pattern of an organization structure may differ depending upon the specific requirements of
enterprise but there are -following four classical types of organization structures according to the
size and requirements of enterprise.
(1) Line Organization.
(2) Functional Organization.
(3) Line and Staff Organization.
(4) Line, Staff and committee Organization.
Line Organization
It is the oldest type of organization. It is simple too. It is generally known as the military type of
organization. In this type of organization, authority flows directly from the top may be General
Manager to the various executives (who are subordinate to G.M.) and from them to lower level
charge men or supervisors who in their own turn issue directions to workers. The superior has
full authority over his subordinates for their all activities as per the terms of contract between the
employees and the organization. In such system, immediate superior is the one who gives orders
to his subordinates, assign them jobs, hires and dismisses as well as takes disciplinary action.
The difference between this form and other forms of organization lies in the absence of
specialists -at various levels. A line form of organization structure for a manufacturing enterprise
is shown in Fig.
In the organization, the channel of communication and the line of authority & responsibility
is very clear and there is no problem of interference. In its simple form, it is to be found only in
very small enterprises having eight to ten employees . Basic point to be noted is that while
authority flows from higher to lower level, the line of responsibility moves upwards from a lower
to a high level.
Advantages
1. It is simple and easy to understand by the members of the enterprise.
2. Quick decisions can be taken.
3. It provides a clear cut division of authority and responsibility. -
4. Maintenance of discipline is easy.
5. Direct Flow of authority and responsibility is good feature of this type
organization which in turn eliminates or minimizes confusion.
Limitations
(i) This type of organization is not suitable for complex and large enterprises.
(ii) Executives become overloaded with too many duties.
(iii) Departmental heads are generally biased and independent authority given to them
makes them whimsical and to act according to their sweet desires.
(iv) Specialization cannot be practiced.
(v) Line type of organization cannot enjoy the blessings of the division of labour which
only incidental.
(vi) Undue reliance upon the personnel knowledge and skill of workmen is dangerous
Functional Organization

To rectify the weaknesses of line type of organization, F W Taylor

suggested a functional organization at the level of foreman.
Functional organization as conceived by Taylor is a line type of
organization with a difference that foreman and the immediate
supervisors are replaced by eight categories of functional foreman,
four of them are to be located in the shop floors and four of them
in the office but all having direct authority over the workers. Each
of these foreman have to be in charge of function i.e. an activity or
a group of relaled activities.
This set up permitted the individual foreman, incharge of each function to specialize in
it or the enterprise could employ specialists. The functional organization as
advocated by Taylor is shown in Fig.
Functional Foreman Duties are as follows:
(1) In the Office:
(a) Work & Route Clerk: In-charge of routing and issuing work orders.
(b) Instruction Card Clerk: Responsible for issuing job specifications and related
instructions to workers.
(c) Shop Disciplinarian: Responsible for keeping personnel records and handling the cases
of indiscipline.
(d) Time and Cost Clerk: In charge of keeping time and cost records of worker's activities.
(2) At the Shop floors:
(a) Gang Boss Foreman: In-charge of preparatory work till the job is loaded on the machine.
(b) Speed Boss Foreman: Ensures the supply of proper cutting tools and sees that optimum
cutting speeds, depth of cut and feed rates are used at right time.
(c) Repair Boss Foreman: Responsible for .repair and maintenance of equipment and m/C.
(d) Inspection Boss Foreman: Responsible for inspection and quality control of the products.
Advantages
Following are the advantages of functional organization
(1) Functional organization works on the basis of expert knowledge.
(2) It relieves the line executives of specialized decisions
(3) Quality of work is better.
(4) Expertise at various levels reduces the number of accidents and
wastage of materials, man and machine hours.
Limitations of Functional Organization
(1) There will the much expenditure in coordinating the efforts of
various functional foreman.
(2) The inability to locate and fix responsibility may lead to
indiscipline.
(3) Overlapping authority may create friction between various
executives.
(4) Workers do not get change to utilize ingenuity, initiative and drive.
Line and Staff Organization
The line organization and functional organization gave evolution to third one as line
and staff organization, which has got good features of both these. With the growth of
industry in size and complexity, the line executives could not perform properly other
functions such as advertising, planning and marketing etc. This necessiated the use of
functional executives to assist the line executives. So basically, it is a form of line
organization where some functional experts are recruited at different levels.
In this way the advantages of specialization are utilized without inherent limitations of
functional organization. Thus line executives retain supreme authority and control
over the work of their subordinates where as the functional executives relieve them of
certain specialized work.
In this type of organization inspite of the presence of functional executives at various
levels, the line executives directly execute the work which may be related to
production, sales and finance whereas the staff executives advise and recommend.
Thus the final decision whether to accept or reject and then implement the
recommendations of the functional executive remain in hands of the line executives.
Fig 8.3 shows line and staff type of organization.
Advantages of Line and Staff Organization
(1) it makes the provision for specialists at various levels.
(2) Load on already overloaded line executives is reduced.
(3) The authority of the executives over their subordinates practically
remain same though the activities of the line executives decrease.
(4) The confusion of functional or staff organization is avoided.
Limitation of Line and Staff Organization
(1) To some extent the prestige of the line executives suffers since their
work is already planned and many decisions are already made for them.
(2) Original initiative of line executives in thought and action is lost due
to their dependence on staff experts.
(3) The functional executives may be ineffective for the lack of authority
to see its recommendations being carried out.
(4) Product cost may increase because of high salaries of functional
executives
Line Staff and Committee Organization
'The line staff and committee type of organization is generally seen in
complex and large size industrial enterprises. The theory behind the use
of committees to supplement the line is that pooling the thoughts of
several experts on problems involving several functions shall give better
plans and policies for operation and result in better co-operation in their
execution than if they were determined by line executives alone.
Committees are supplementary to the line or line and staff type of
organizational . Committee is purely an advisory group setup to
investigate operating difficulties which occur from time to time and make
required recommendations. In large scale enterprises or cooperative
organizations where multifaceted problems are too big for one individual
to cope with, the use of committee is highly desirable. Committees may
be formal or informal in nature, they may be temporary or permanent,
advisory or managerial.