Production Management and Marketing

First paper
Nazmun Nahar
Lecturer
Department of Marketing
First chapter
Production
 We will learn from this chapter:
1. What is production
2. Different forms of production
3. Scope of production
4. Importance of production
5. What is productivity
6. Scope of productivity
7. Importance of productivity
8. Measures/ types of productivity
9. Factors affecting productivity/ Measures of increasing productivity
10. Difference between production and productivity
•
 What is production
• Creating new utilities by utilizing the natural resources through
technical/human process is called production

• capital
• Matetial
• Transfor
producti Facilities
mation Output
on • Labor System
• knowledg
e
 So we can say…
• Production is a process
• New utility is created through production
• Production changes the form utility of natural resources
• By this way the finished goods are made
Utility : the inherent ability and virtue by which different
material and non-material elements can fulfill human
needs
 Types of utility
• 1. form utility
• 2. place utility
• 3. time utility
• 4. possession utility
• 5. service utility
 Scope of production
• 1. factory location: When a large factory or corporation is constructed, certain components
are necessary for the success of the company and the amount of profit it will receive. Raw
materials, markets, availability of natural resources, labor, transportation, government,
circumstances are the location factors.
• 2. layout: In product layout, equipment or departments are dedicated to a particular product
line, duplicate equipment is employed to avoid backtracking, and a straight-line flow of
material movement is achievable. Adopting a product layout makes sense when the batch
size of a given product or part is large relative to the number of different products or parts
produced.
• 3. product design: If you actually compare Laptops and Desktops, they are just two types
of product design of the same product – Personal computers. However, in the last several years,
we have seen that the market share of Desktops has rapidly dropped and that of laptops has
increased. This is all because of a simple change in Product design.
• 4. distribution of elements: In economics, distribution is the way total output, income, or
wealth is distributed among individuals or among the factors of production (such as labour,
land, and capital). In general theory and the national income and product accounts, each unit of
output corresponds to a unit of income.
• 5. scheduling: Scheduling can be defined as “prescribing of when and where each operation
necessary to manufacture the product is to be performed.” It is also defined as “establishing of
times at which to begin and complete each event or operation comprising a procedure”. The
principle aim of scheduling is to plan the sequence of work so that production can be
systematically arranged towards the end of completion of all products by due date.
• 6. Production planning and control: Functions
of planning and control in production management are closely related with
each other. Planning concerns with the formulation on production strategies
and targets for the enterprise whereas control is vested with actual
implementation and execution of planned objectives.
• 7. procurement of element: the procurement department is in constant
contact with the company’s other departments. Each of its actions has a direct
influence on the flow and quality of the production. Its members are able to
make the best decisions for the company thanks to their in-depth knowledge of
the market, its actors and inner workings. This makes them a precious ally for
the continuous improvement of the production process and, ultimately, a driver
of growth.
• 8. inventory control: Essentially inventory control is concerned with production planning. It
determines inventory of a finished product or inventory of materials used in making such
products. Inventory control is affected by changes in customer demand, holding costs, ordering costs
and back order costs.

• 9. quality control: Quality control is a process through which a business seeks to ensure that product
quality is maintained or improved and manufacturing errors are reduced or eliminated. It requires the
business to create an environment in which both management and employees strive for perfection.
• 10. method selection
• 11. equipment selection and maintainance
• 12. factory environment
• 13. production capability
• 14. training
Importance of production

Economic
significance
Social significance
 Economic significance of Productivity

Fulfillment Achieving Survival of Competitive Customer

of demand goal busines advantage satisfaction

Saving
Creating Increasing Increasing
foreign
utilitiesr income export
currency
Social significance of Productivity

Improving
Economic
Employment standard of
development
living

Possibility of
innovation
 Productivity
• Modern production management gives more importance on
productivity than production.
• The ratio of total elements used in production and total goods
manufactured is productivity.

• Productivity
 Productivity
• Productivity, therefore,
• means the efficiency in production
• expresses output-input ratio
• indicates the effectiveness of inputs
used in production
 Increasing Productivity – 2 Ways
• By using equal amount of inputs and producing higher amount
of output;
• By using fewer amount of inputs and producing the same
amount of output.
 Increasing Productivity
Case-1: Google
• Google improves its productivity by motivating employees-
• Fringe benefits
• Medical insurance
• Body care services
• Entertainment services
• Household services
 Increasing Productivity
Case-2: Walmart
• Walmart improves its productivity by increasing efficiency-
• Use of electronic data interchange
 Scope of Productivity

Agriculture Industrial
Service sector Creating utility
sector sector

Research and
Natural Communicatio
development
resources sector n sector
sector
 Importance of Productivity

Fulfillment of Achieving Expansion of Competitive Attracting

production goal business advantages customers

Foreign
Customer Increasing Increasing Use of
currency
satisfaction income export resources
reserve

Improve
Employee
Employment standard of
welfare
living
 Measures/Types of Productivity
• Overall productivity
• Labor productivity
• Machine productivity
• Material productivity
 Illustration
• Suppose, in one factory, the total production is 10,000 units. Price of
every unit is Tk.10 and total sales price is Tk.100,000. In this factory, the
material and other elements cost is Tk.40,000. Labour hours is 2,000
hours that cost Tk.10,000. Machine is used 500 hours value of Tk.10,000.
Other expenses is Tk.20,000.
• Determine different types of productivity for this factory.
 Solution
• Overall productivity = = 1.25
• Labor productivity = = 5
• Machine productivity = = 20
• Material productivity = = 2.5
 Factors Affecting the Increase of
Productivity/Measures of increasing productivity

Improved Improved
Use of modern Improved raw-
working production Proper layout
technology materials
environment process

Good relations
between Efficient Using skilled Research &
Incentive system
management and management employee Development
employee
 Difference Between Production and
Productivity
Subject of Production Productivity
Difference
Definition Production is the manufacture or construction Productivity is the ratio of production (output) to
of something. the factors of production (input).
Nature Production indicates an amount or a quantity. Productivity refers to a relative measurement.
Calculation Easy to calculate. Difficult to calculate.
Growth Growth of production does not have an Growth of productivity ensures a growth in
impact on growth of productivity. production.
Financial Growth of production does not ensure a Productivity growth confirms a positive change
condition better financial condition. in financial condition.
 Cont. …
Subject of Production Productivity
Difference
Profitability Growth of production may not lead to the Growth in productivity leads to an increase in
profit of an organization. the profit of an organization.
Reduction Growth of production does not necessarily Growth in productivity reduces expense.
of Expenses reduce the expenses.
Inventory Inventory control is related with production. Inventory control is not related to the
control productivity.
Innovative Related to production. Not related to the productivity.
product/serv
ice
Efficient Growth in production does not indicate an Growth in productivity indicates an increase in
operation enhanced efficiency in operation. overall efficiency of an organization.
 Advantages of Productivity

Increasing
Production Reduction in Producing quality
Sales growth efficiency of
growth production cost products/services
employees

Increased used of
Survival in
Growth in profits Customer loyalty modern Economic growth
competition
technology
 Disadvantages of Productivity

Reduction in
Increase in cost
the Reduction in Increase per
of raw-
effectiveness of labor efficiency unit cost
materials
machine

Negative Reduction in
Increase Create pressure
impact on per unit selling
storage cost on the capital
quality control price
 Sample Board Question
• Mr. Nayan is the owner of a renowned beverage factory. According to production
capacity of the factory, it is possible to produce 15,000 liters of beverage daily. But due
to lack of skilled and trained workers, he cannot produce beverage according to target.
His beverage is very popular in the market. But as he cannot supply beverage to
consumers according to their need, he is gradually losing the market. Mr. Nayan is very
worried about this.
a. What is total output?
b. What is optimum scale of production?
c. What kind of utility is created in the organization of the stem? Explain.
d. Suggest what Mr. Nayan should do to utilize his production capacity.
 Sample Answer
What is total output?
Ans. Normally, the actual amount of goods or services produced by a
production system in a particular time- is called actual output.
What is optimum scale of production?
Ans. The process by which an organization utilizes maximum of its
production capacity and brings production cost to such a level where
average cost per unit is lowest – is termed as optimum scale of
production. In order to determine optimum scale of production, short and
long term costs have to be considered. In this case, optimum production
can be achieved reducing average cost per unit by ensuring proper
utilization of production inputs, management efficiency and resources.
 Sample Answer
• What kind of utility is created in the organization of the stem?
Explain.
Ans. Form utility is created in the organization of the stem. Resources
obtained from the nature are made usable by changing their form or shape
through form utility. Form utility is created through production. In the stem,
Mr. Nayan is the owner of a renowned beverage factory. According to
production capacity of the factory, it is possible to produce 15,000 liters of
beverage daily. Water, sugar, carbohydrate, sodium, fat etc. are needed to
produce beverage. These components cannot be consumed directly. And if
can be, it does not create the right utility. That is why these elements are
combined and transformed into a coherent form. So, we can say that form
utility is created in Mr. Nayan’s organization.
 Sample Answer
• Suggest what Mr. Nayan should do to utilize his production capacity.
Ans. The maximum amount of products that can be produced through a
production process in a particular time- is production capacity. Peak capacity
of an organization is measured through production capacity.
In the stem, Mr. Nayan is the owner of a renowned beverage factory. His
production capacity is 15,000 liters per day. But due to lack of skilled and
trained workers, he cannot reach target production. As a result, though his
beverage has great demand in market, he is gradually losing the market.
 Cont. …
Here, Mr. Nayan’s production capacity is high, but due to the lack of skilled
workers, he is unable to reach target production. So he should employ skilled and
experienced workers. For example, skilled workers can produce quality products
in less time. Besides, as they can utilize other elements of production properly,
waste is reduced. In this case, Mr. Nayan can also training existing workers. This
will improve their skill and thus will be easy to manufacture product according to
production capacity. As a result, it will be possible to supply beverage to
consumers according to their need.
Therefore, I would like to suggest, Mr. Nayan to appoint skilled workers or arrange
training for existing workers to utilize his production capacity.
 Do it Yourself!
• In 2013, the annual value of products produced by RMS Bread Ltd. Was
Tk.25,00,000. At that time, the value of the elements used by the company
was: Raw materials Tk.6,00,000; workers’ salary and wages Tk.1,75,000 and
other Tk.2,25,000. The annual value of the products produced in 2014 was
Tk.35,00,000 and the value of the elements used was: Raw materials
Tk.9,00,000; workers’ salary and wages Tk.3,00,000 and other Tk.2,80,000.
a. What is production?
b. Why it is required to determine productivity of an organization?
c. Determine overall productivity of RMS Bread Ltd. for 2013.
d. In the light of productivity, make a comparative analysis of the overall condition of 2013
and 2014 of RMS Bread Ltd.