LESSON 9 QUALITY AND PRODUCTIVITY

Abha Kumar

STRUCTURE
9.0 9.1 9.2 Introduction Objectives Quality Control 9.2.1 Significance 9.2.2 Methods of Quality Control Productivity 9.3.1 Significance 9.3.2 Measurement of productivity 9.3.3 Factors influencing productivity Summary Glossary Self Assessment Questions Further Readings

9.3

9.4 9.5 9.6 9.7

9.0 INTRODUCTION
In the previous lesson, you have studied the various important aspects of production management including production planning and control if done systematically the small entrepreneur can gain immensely as it would help him in making changes, taking necessary steps to remove the bottlenecks breakdowns etc. and would also ensure the smooth production of quality products in right time which would increase the productivity. In this unit, you would study about the quality and productivity at length.

9.1 OBJECTIVES
After studying this lesson you should be able to: Explain the concepts of Quality Control and Productivity Examine the possibilities for small scale industries to have quality control measures Distinguish between productivity and production List out the benefits associated with higher productivity Demonstrate the various methods of measuring productivity Discuss the various factors influencing the productivity

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9.2 QUALITY CONTROL

Quality has different connotations- in health and hospitality it may mean hygiene; in electricals and electronics, it may mean, safety; in services it may mean speed and reliability and so on. In the present context even price is a quality measure! Operationally, however, quality refers to conformance to established standards. Quality control consists of all those activities, which are designed to define, maintain and control specific quality of products within reasonable limits. It is the systematic regulation of all variables affecting the goodness of the end product. In other words, quality control involves determination of quality standards and measurement and control necessary to ensure that the established standards are practiced and maintained. It does not attempt to achieve the perfect quality but to secure satisfactory or reasonable quality at a reasonable and competitive level of cost through a systematic control over the variables in the manufacturing process, variations in the quality of the product can be kept reasonably stable.

9.2.1 SIGNIFICANCE OF QUALITY CONTROL

In today's competitive environment the mere success and survival of any enterprise whether it is a small scale unit or large scale enterprise depends upon the achievement and maintenance of a satisfactory level of quality. Quality control offers several advantages. (a) It helps to improve the brand image of the enterprise. (b) It facilitates standardization. (c) It helps to reduce costs by cutting down wastes caused by the production of defective products. (d) It helps to increase sales turnover. (e) It enables the entrepreneur to face competition more effectively in domestic as well as international markets. (f) It helps the entrepreneur to determine costs and prices at competition levels in advance of production. (g) It enables the manufacturer to comply with quality standards prescribed by the government. Quality standards are set only after considering consumer's demands and cost of the product. The variation in quality are caused by variations in the materials used, in men, machines, tools, and equipment and in methods and procedures of production and inspection these variables need to be controlled if quality products are to be produced.

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9.2.2 METHODS OF QUALITY CONTROL

Traditionally, there are two methods of quality control:1. 2. 1. (a) (b) (c) Inspection Statistical quality control Inspection: - There are three important aspects of inspection. Process inspection: - It is designed to check raw material, machines etc. It saves time and wastage of material and prevents process bottlenecks. Product Inspection: - It is to ensure that goods sent into the market for sale are free from defects and conform to the set standards of quality. Inspection Analysis: - A thoughtful and careful analysis of inspection results would help the entrepreneur in locating the critical points in the manufacturing process at which control is breaking down. Statistical Quality control (S.Q.C.):- Under this method a sample of items to be controlled is selected and statistically checked to ensure that the established standards of quality are maintained. It involves making things right rather than discovering and rejecting those made wrong. Control charts and acceptance sampling are used for this purpose. Quality Control Charts: A quality control chart is a graph on which the characteristics of samples are plotted. The chart given in Fig. below is an example. Upper Quality Level (UQL)

2.

(i)

Lower Quality Level (LQL) (ii) Acceptance Sampling: In this method a sample of products is checked. Full lot is rejected if the percentage of defective items is more than the predetermined limit otherwise the whole lot is accepted. The percentage of defective items that is acceptable is called Acceptable Quality Level (AQL). This level involves a risk (called producer's risk) that an unsatisfactory lot might be accepted. To minimize these risks, lot tolerance percentage defective (LTPD) is determined. This is the highest level of defects beyond which a lot will not be accepted for sale.

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Quality Control in Small Scale Industries It is quite possible that a small-scale entrepreneur, especially of barefoot type, may not be conversant with the techniques described above. But then concern for quality is not technique dependent. The entrepreneur may exercise considerable influence on quality via personal observation and direct intervention. For example, a roadside eating joint or a restaurateur may personally supervise the ingredients that go into the preparation of food and sample check the ultimate dishes before they are served. He may even oversee the waiters or usherers to personally monitor food and beverage services. However, as the organization grows, the cult of quality must spread to the grass root level and the entrepreneur may be well advised to put in place the applicable quality systems. International Organisation for Standards (ISO) has come up with series of quality standards e.g., ISO-9000 in this regard. It may be pointed out that adherence to ISO specifications is an absolute must for the exporting entrepreneurs. Attainment of quality necessitates fostering good management practices. The entrepreneur may be well advised to be aware of such measures as quality circles, kaizen (continuous improvement), benchmarking and so on. Most importantly, the entrepreneur has to come out of the mindset that quality is an expensive proposition; experience suggests that quality improvement practices pay for themselves. In India, Bureau of Indian Standards (BIS) has been doing a great service by prescribing quality standards for a large number of products. It not only prescribes but also persuades small industries to adhere to quality of their products. In the small scale sector quality control is based on four parameters: (a) (b) (c) (d) Indian standards specifications Quality marketing schemes Company standards for ancillary units Standards specified by government purchasing agencies

The following Indian Standards have been published so far for controlling quality of products manufactured by small units (a) (b) (c) Methods of statistical quality control during the production period; Manual on basic principles of lot sampling and Sampling inspection tables

Several State Governments have also been operating quality marketing schemes and standards for various products of small-scale industries. When the small units manufacture their products according to the standards set, the Quality Marketing Centers of the Government stamp the "O" mark on their products. This is an assurance for the customers that the product has been manufactured adhering to certain quality standards.

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Quality Control of Export Products-Implementation of quality control has been very useful in raising exports from an economy also. A product can be sold in foreign markets only when it is not only cheaper but up to a certain quality also. Standardization of these products convinces the foreign customers better than any sales campaign. Realizing this fact, the Government of India has made the inspection of several products manufactured by small-scale industries compulsory before they are consigned abroad. This has proved very beneficial for the Indian exporters to sell their products in highly competitive foreign markets. Regional Testing Centres and Field Testing Stations have been set up under small Industries Development Organization (SIDO) to improve the quality of the products and to provide testing facilities for the small scale sector. Testing Facilities for Small-Scale Industries Small-scale units cannot afford to have all the testing facilities in their own premises. However, such testing facilities as are not within their means have to be obtained by them either from established testing houses, laboratories set up in various regions, including engineering colleges. The Government Test House at Alipore in Calcutta, the Indian Standards Institution's Laboratory at New Delhi and the national laboratories under Central Scientific and Industrial Research Organisations have played a significant role in offering testing facilities to small-scale units. Even though small-scale units have been getting a good deal of assistance for quality control yet more needs to be done like ensuring that these facilities are known and made available to small units. Cost of Quality Control There is certainly a cost of quality control, which is difficult but not impossible. These costs should have a relatively small portion of total cost, which depends on various factors e.g. (a) (b) Type of product, its use and hazards involved in its use. The degree of quality awareness prevailing in the enterprise.

9.3 PRODUCTIVITY
Productivity refers to the physical relation between the quality produced (output) and the quantity of resource used in the course of production (input) Productivity (P) = output (O) input I

Output implies production while input means land, labour, capital, management etc. Productivity measures the efficiency of the production system. Higher productivity means producing more from a given amount of input or producing a given amount with minimum level of inputs. In other words the more the output from one worker or one machine (or a piece of equipment) per day per shift, the higher is the productivity. Higher productivity is not to be taken in sense of 131

higher workloads or faster machines alone but it is always elimination of waste of all type of labour (time and skill) machine time, capital, and material management etc. Productivity = Output per unit of input Productivity and production are two different terms. Productivity is a relative term indicating the ratio between total output and the total inputs used therein on the other hand production is an absolute concept, which refers to the volume of output. The volume of production may increase but productivity may decline due to inefficient use of resource. Efficient use of input may increase productivity but the volume of production may not increase. Production refers to the end result of production system whereas productivity reflects its efficiency.

9.3.1 SIGNIFICANCE
Benefits derived from higher productivity are as follows: 1. 2. 3. 4. 5. It helps to cut down cost per unit and thereby improve the profits. Gains from productivity can be transferred to the consumers in from of lower priced products or better quality products. These gains can also be shared with workers or employees by paying them at higher rate. A more productive entrepreneur can have better chances to exploit export opportunities. It would generate more employment opportunities.

9.3.2 MEASUREMENT OF PRODUCTIVITY

Productivity may be measured either on aggregate bases or on individual basis, which are called total and partial productivity respectively. Total Productivity Index=
total outputs total inputs

total production of goods and services labour + material + capital + Energy + Managed

This index measures the efficiency in the use of all the resources. Partial productivity Indices, depending upon factors used, it measures the efficacy of individual factor of production. Following are productivity indices for individual inputs. Labour Productivity Index =
output in unit man pours worked

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Management Productivity Index =

output unit total cos t of management

Machine Productivity Index =

total output machine hours worked

Land Productivity Index =

total output area of land used

9.3.3 FACTORS INFLUENCING PRODUCTIVITY

Productivity is outcome of several interrelated factors, which may broadly be divided into two categories- human factors and technological factors.

1. Human Factors: Human nature and human behaviour are the most significant determinants of productivity. Human factors include both their ability as well as their willingness:
(a) Ability to work: Productivity of an organization depends upon the competence and caliber of its people-both workers and managers Ability to work is governed by education, training, experience, aptitude, etc. of the employees. (b) Willingness to work: Motivation and morale of people are very important factors that determine productivity. These are affected by wage incentive schemes, labour participation in management, communication systems, informal group relations, promotion policy, union management relations, quality of leadership, working hours, sanitation, ventilation, subsidized canteen, company transport, etc.

2. Technological Factors: Technological factors exert significant influence on the level of productivity. These include the following: (a) Size and capacity of plant (b) Product design and standardization (c) Timely supply of materials and fuel (d) Rationalization and automation measures (e) Repairs and maintenance (f) Production planning and control (g) Plant layout and location (h) Materials handling system (i) Inspection and quality control (j) Machinery and equipment used (k) Research and development (l) Inventory control 3. Managerial factors: The competence and attitudes of managers have an important bearing on productivity. In many organizations, productivity is low despite latest technology and trained manpower. This is due to inefficient and indifferent management. Competent and dedicated managers can obtain extraordinary results from ordinary people. Job performance of employees 133

depends on their ability and willingness to work. Management is the catalyst to create both. Advanced technology requires knowledgeable workers who in turn work productively under professionally qualified managers. No ideology can win a greater output with less effort. It is only through sound management that optimum utilization of human and technical resources can be secured.

4. Natural Factors: 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. 5. Sociological Factors: 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. 6. Political Factors: 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. Tariff policies influence competition. Elimination of sick and inefficient units also helps to improve productivity. 7. Economic Factors: Size of the market, banking and credit facilities, transport and communication systems, etc. is important factors influencing productivity.

CHECK YOUR PROGRESS

Activity 1 Circle the key words which do not appear in this lesson

Vertical integration, SIDBI, Productivity indices, Quality Control charts, location, SQC, Inspection, Production cycle, Sales promotion Activity 2 1. 2. 3. State True or False

4. 5.

Production and Productivity are synonyms Productivity measures the efficiency of the production system The formulae for measuring labour productivity index is Output in units Machine hrs. Worked Inspection and Statistical Quality control are two methods of Quality Control Quality standards are set before considering consumers demand and cost of the product.

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9.4 SUMMARY
The small scale industries occupy a very important position in any economy. Traditionally, they used to produce certain specialized item over which they developed expertise and monopoly over the years. Many small enterprises do act as feeder to large scale industries as their output is used as input. In controlled economy the small scale units are protected from competition from large scale sector by means of subsidies, grants, monetary incentives from the government reservation of certain items of production in the small sector and so on. However, in free economy, the small scale industrial sector is not insulated from competition from large scale sector for their survival and growth. They have to face competition not only from local large scale sector but also from foreign products. In recent years Chinese toys have been a great threat for Indian toy industry. Therefore the products of small scale sector can compete with these of large sector only if high quality is maintained. In this competitive environment, small scale industry will have to select such technology, which generates cost efficient and high quality optimal output. This necessitates the introduction of quality control measures.

9.5 GLOSSARY
Monopoly: Right reserved by one person Optimal output: Ideal output

9.6 SELF ASSESSMENT QUESTIONS

1. 2. 3. 4. 5. Define Productivity. What is the significance of productivity analysis? How can labour productivity be calculated? What are the factors that affect the level of productivity? What is productivity? How is it measured? Explain. What do you understand by quality control? Discuss its importance for small scale enterprise? What are the objectives of quality control? 6. Write notes on Quality control charts Acceptance sampling

9.7 FURTHER READINGS

1. Allen, D.H.W, SQC, An Introduction to Management, New York: Reinhold, 1979. Juran, J.M., Quality Control Handbook, New York: McGraw Hill, 1981 2. Desai, Vasant Dr. (2004) Management of small scale enterprises New Delhi: Himalaya Publishing House, 3. Gupta, CB Modern Business Organization: Mayur Paper Backs

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4. Kendrick, John W. and D. Creamer, New Dimensions in Productivity Measurement and Analysis, New York : NBER, 1980 5. Lawrence S., Productivity Measurement and Improvement, Virginia : Reston, 1983 6. Mundel, Marvin E., Improving Productivity and Effectiveness, New Jersey : Prentice Hall, 1983 7. Sutermeister, Robert A., People and Productivity, New York : McGraw Hill, 1984 8. Taneja, Gupta, Entrepreneur Development New Venture Creation,: 2nd ed. Galgotia Publishing Company

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