What is Productivity?

Definition
According to Peter Drucker,
Productivity means the balance between all factors of production that will give the greatest output for the
smallest effort.
The meaning of productivity is shown in the following diagram.

Meaning of Productivity
Productivity is the relationship between output and input. It is expressed or measured as a ratio of output and
input.
Productivity equals output divided by input.
Two simple examples of productivity measurement:

Productivity of a manufacturing unit can be measured in terms of the number of goodsproduced in some fixed amount of time (usually in hours).

Generally, in service industry, productivity is measured in terms of income generated by an

employee for his or her's organization.

Nowadays, organizations give more importance to productivity and less importance to efficiency.
Higher productivity indicates the following:

Best utilization of the available human and material resources.

Minimum wastage and losses of materials.

Quantitative and qualitative production of goods at lower cost.

Relationship Between Production Planning and Control

Production planning and control are closely related to one another. They go hand in hand and are supplementary
in character.
Ten points explain the relationship between production planning and control:

Let's discuss How production planning and control are related?

1. Meaning
According to Ray Wild, Production planning is concerned with the determination, acquisition and
arrangement of all facilities necessary for future operations.
Fixing goals of production and estimating resources required to achieve this goal is called production planning.
It forecasts individual step in the production process. It helps to achieve production goals effectively, promptly
and economically.
According to James Lundy, The production control function involves the co-ordination and integration of the
factors of production for optimum efficiency.
Production control is done after production planning. It implements the production plan. It directs, co-ordinates
and controls the production. It helps to achieve the production goals. It helps to have maximum production at
minimum cost. It also helps to have timely delivery of goods.
2. Goals
Production planning fixes the goals for production. Production control achieves these goals.
3. Course of action
Production-planning fixes the plans, strategies, etc. Production control puts these plans, strategies, so on; into
action, i.e. it implements the plans, strategies, etc.

4. Work performed
Production planning decides who should do the work and when.
Production control ensures that each department completes its work on schedule.
5. Operations
Production planning decides the operations which are required for production.
Production control regulates and supervises the operations required for production.
6. Resources
Production planning estimates the resources that are required for production.
Production control makes available resources that are required for production.
7. Directions
Production planning shows the directions.
Production control follows these directions.
8. Weaknesses
Production-planning makes modifications (changes) in the production plans to remove the weakness in the
production process.
Production control collects information about the production process. It finds out the weaknesses in the
production process and informs the production planners about it.
Conclusion
The process of production planning and control is a continuous one. Since, control starts where planning ends
and planning starts where control ends.
Functions of Production Planning and Control

The importance or functions of production planning and control: Now let's discuss above listed functions of
production planning and control.
1. Utilizes resources effectively
Production planning and control result in effective utilization of plant capacity, equipment and resources.
It results in low-cost and high-returns for the organization.
2. Makes flow of production steady
Production planning and control ensure a regular and steady flow of production.
All machines are put to their optimum use.
This helps in achieving a continuous production of goods.
This also helps to provide a regular supply of goods to consumers.
3. Estimates production resources
Production planning and control help to estimate the resources like men, materials, machines, etc.
The estimate is made based on sales forecast. So, production is planned to meet sales requirements.
4. Maintains necessary stock levels
Production planning and control prevent over-stocking and under-stocking of materials.
Necessary stocks are maintained.
Stock of raw-material is maintained at a proper level in order to meet production demands.
Stock of finished goods is also maintained to meet regular demands from customers.
5. Coordinates departmental activities

Production planning and control helps to co-ordinate the activities of different departments.
Consider, for an example, the marketing department co-ordinates with production department to sell the
goods.
This results in profit to the organization.
6. Minimizes wastage of resources
Production planning and control ensure proper inventory of raw-materials and effective handling of
materials.
This helps to minimize the wastage of raw materials.
It also ensures production of quality goods. This results in minimal rejects.
So, it results in minimum wastage.
7. Improves labor efficiency
There is maximum utilization of manpower.
Training is provided to the workers.
The profits are shared with the workers in form of increased wages and other incentives.
Workers are motivated to perform their best. This results in improved labor efficiency.
8. Helps to face competition
Production planning and control help to give delivery of goods to customers in time.
This is because of regular flow of quality production.
So, the company can face competition effectively, and it can capture the market.
9. Provides better work environment
Production planning and control provide a better work environment to workers.
They get better work facilities, proper working hours, leave and holidays, increased wages and other
incentives.
10. Facilitates quality improvement
Production planning and control facilitate quality improvement because the production is checked
regularly.
Quality consciousness is developed among the employees through training, suggestion schemes, quality
circles, etc.
11. Customer satisfaction
Production planning and control help to give a regular supply of goods and services to consumers at
competitive market price.
This results in customer satisfaction.
12. Reduces production costs
Production planning and control make optimum utilization of resources, and it minimizes wastage.
It also maintains an optimal level of inventories. Overall, this reduces the production costs.

Steps in Production Planning and Control

According to the British Standards Institute, there are four stages, steps, techniques or essentials in the process
of production planning and control.

The four stages or steps in production planning and control are:

1. Routing,

3. Dispatching, and

2. Scheduling,

4. Follow-up.

Initial two steps i.e. Routing and Scheduling, relate to production planning. Last two steps i.e. Dispatching and
Follow-up, relate to production control. Now let's continue our discussion further to understand each step in
detail.
1. Routing
Routing is the first step in production planning and control.
Routing can be defined as the process of deciding the path (route) of work and the sequence of operations.
Routing fixes in advance:
The quantity and quality of the product.
The men, machines, materials, etc. to be used.
The type, number and sequence of manufacturing operations, and
The place of production.
In short, routing determines What, How much, With which, How and Where to produce.
Routing may be either very simple or complex. This depends upon the nature of production. In a continuous
production, it is automatic, i.e. it is very simple. However, in a job order, it is very complex.
Routing is affected by the human factor. Therefore, it should recognize human needs, desires and expectations.
It is also affected by plant-layout, characteristics of the equipment, etc.

The main objective of routing is to determine (fix) the best and cheapest sequence of operations and to ensure
that this sequence is followed in the factory.
Routing gives a very systematic method of converting raw-materials into finished goods. It leads to smooth and
efficient work. It leads to optimum utilization of resources; namely, men, machines, materials, etc. It leads to
division of labor. It ensures a continuous flow of materials without any backtracking. It saves time and space. It
makes the work easy for the production engineers and foremen. It has a great influence on design of factory's
building and installed machines.
So, routing is an important step in production planning and control. Production planning starts with it.
Read article on procedure of routing in production.
2. Scheduling
Scheduling is the second step in production planning and control. It comes after routing. Scheduling means to:
Fix the amount of work to do.
Arrange the different manufacturing operations in order of priority.
Fix the starting and completing, date and time, for each operation.
Scheduling is also done for materials, parts, machines, etc. So, it is like a time-table of production. It is similar
to the time-table, prepared by the railways. Time element is given special importance in scheduling. There are
different types of schedules; namely, Master schedule, Operation schedule and Daily schedule.
Scheduling helps to make optimum use of time. It sees that each piece of work is started and completed at a
certain predetermined time. It helps to complete the job systematically and in time. It brings timecoordination in
production planning. All this helps to deliver the goods to the customers in time. It also eliminates the idle
capacity. It keeps labor continuously employed.
So, scheduling is an important step in production planning and control. It is essential in a factory, where many
products are produced at the same time.
3. Dispatching
Dispatching is the third step in production planning and control. It is the action, doing or implementation stage.
It comes after routing and scheduling. Dispatching means starting the process of production. It provides the
necessary authority to start the work. It is based on route-sheets and schedule sheets. Dispatching includes the
following:
Issue of materials, tools, fixtures, etc., which are necessary for actual production.
Issue of orders, instructions, drawings, etc. for starting the work.
Maintaining proper records of the starting and completing each job on time.
Moving the work from one process to another as per the schedule.
Starting the control procedure.
Recording the idle time of machines.
Dispatching may be either centralized or decentralized:

Under centralized dispatching, orders are issued directly by a centralized authority.

Under decentralized dispatching, orders are issued by the concerned department.
4. Follow-up
Follow-up or Expediting is the last step in production planning and control. It is a controlling device. It is
concerned with evaluation of the results.
Follow-up finds out and removes the defects, delays, limitations, bottlenecks, loopholes, etc. in the production
process. It measures the actual performance and compares it to the expected performance. It maintains proper
records of work, delays and bottlenecks. Such records are used in future to control production.
Follow-up is performed by Expediters or Stock Chasers.
Follow-up is necessary when production decreases even when there is proper routing and scheduling.
Production may be disturbed due to break-downs of machinery, failure of power, shortage of materials, strikes,
absenteeism, etc. Follow-up removes these difficulties and allows a smooth production.
Steps or Procedure of Routing in Production
Following image depicts main steps or procedure of routing in production.

Following important steps are involved in the procedure of routing:

Now let's discuss above steps in routing.

1. Product analysis
Product analysis is the first step in the routing procedure. This is done to find out what parts (goods) should be
manufactured and what parts should be purchased. This depends mainly on the relative cost. It also depends on
other factors such as technical consideration, purchase policies, availability of personnel, availability of
equipment, etc. Generally, during less-busy periods; most of the parts are manufactured in the factory. However,
during the busy period, many parts are purchased from outside.
2. Determine required materials
Product-analysis is done again to find out what materials are required for production and their quantity and
quality.
3. Fix manufacturing operations
The next step in the routing procedure is to fix (decide) the manufacturing operations and their sequences. The
detailed production procedure is then scheduled (planned). Information required for this is derived from
technical experience and by analyzing the machine capacity.
4. Determine size of batch
The number of units to be manufactured in any one lot (group or batch) should be decided. This is done
concerning customers' orders. Necessary provision should also be made for rejections during the production
process.
5. Estimate margin of scrap
The amount of scrap in each lot, should be estimated. Generally, a scrap margin is between 2% to 5% of
production.
6. Analyze the production cost
Estimating the cost of manufactured goods is actually the function of costing department. However, the routing
section provides necessary data to the costing department that enables it to analyze the production cost.
7. Prepare production control forms
Production Control forms such as Job Cards, Inspection Cards, Tool Tickets, etc. should be prepared. These
forms should contain complete information for effective routing.
8. Prepare route sheet
Route sheet is prepared on a production control form. It shows the part number, description of the part and the
materials required. It is prepared by a route clerk. Separate route-sheet is required for each part of a customer's
order.

Factors that Affect Productivity

The factors that affect productivity are depicted and listed below.

The main factors that affect productivity are:1.

TECHNICAL FACTORS: Technical factors are the most important ones. These include proper
location, layout and size of the plant and machinery, correct design of machines and equipment,
research and development, automation and computerization, etc. If the organization uses the latest
technology, then its productivity will be high.

2.

PRODUCTION FACTORS: The production of all departments should be properly planned,

coordinated and controlled. The right quality of raw-materials should be used for production. The
production process should be simplified and standardized. All this will increase the productivity.

3.

ORGANIZATIONAL FACTOR: A simple type of organization should be used. Authority and

Responsibility of every individual and department should be defined properly. The line and staff
relationships should also be clearly defined. So, conflicts between line and staff should be avoided.
There should be a division of labor and specialization as far as possible. All this will increase the
productivity.

4.

PERSONNEL FACTORS: The right individual should be selected for suitable posts. After selection,
they should be given proper training and development. They should be given better working
conditions and work-environment. They should be properly motivated; financially, non-financially
and with positive incentives. Incentive wage policies should be introduced. Job security should also
be given. Opinion or suggestions of workers should be given importance. There should be proper
transfer, promotion and other personnel policies. All this will increase the productivity of the
organization.

5.

FINANCE FACTORS: Finance is the life-blood of modem business. There should be a better
control over both fixed capital and working capital. There should be proper Financial Planning.
Capital expenditure should be properly controlled. Both over and under utilization of capital should

be avoided. The management should see that they get proper returns on the capital which is invested
in the business. If the finance is managed properly the productivity of the organization will increase.
6.

MANAGEMENT FACTORS: The management of organization should be scientific, professional,

future-oriented, sincere and competent. Managers should possess imagination, judgement skills and
willingness to take risks. They should make optimum use of the available resources to get maximum
output at the lowest cost. They should use the recent techniques of production. They should develop
better relations with employees and trade unions. They should encourage the employees to give
suggestions. They should provide a good working environment, and should motivate employees to
increase their productivity. Efficient management is the most significant factor for increasing
productivity and decreasing cost.

7.

GOVERNMENT FACTORS: The management should have a proper knowledge about the
government rules and regulations. They should also maintain good relations with the government.

8.

LOCATION FACTORS: Productivity also depends on location factors such as Law and order
situation, infrastructure facilities, nearness to market, nearness to sources of raw-materials, skilled
workforce, etc.

Importance of Location Planning

Location planning decisions are very important for all types of business units. This is because it affects the cost,
selling price, and demand of the product. It is a non-recurring heavy expenditure. Large companies take the help
of different professionals like lawyers, accountants, environmentalist, etc. for selecting the proper location of
plant.
The need or importance of location planning is depicted and listed below.

Following points discuss the importance of location planning:

EXPANSION: If the company wants to expand and diversify its activities, it will have to search for a
new-location for setting up its new business unit. In this case, it will need a location planning.
COST ADVANTAGES: If an existing plant is not near a market place, it will increase the transport
cost. This will also increase the cost of the product. So, to avoid this, the company will search for a new
plant location which is near the market. Such location of plant must be convenient to the employees and
must have a regular supply of water and electricity. Overall, this will result in reduction of the cost of
production.
DISCOVERY OF RAW-MATERIAL: Generally, a plant must be located at a place where rawmaterial is available. For example, if oil and gas are found at some place, then a new petrochemical
plant has to be set up there for processing purpose.
Additional facilities : Plant location-related decisions will have to be taken if the organization wants
additional facilities. New facilities may be necessary to improve the quality of work, to meet rising
demands, etc.
MERGERS: Mergers, joint-ventures, and Amalgamations may lead to start a new unit at a newlocation. It may even require closure of an existing plant unit. In mergers, production is mostly started at
a new place as per the new-agreement.
POLITICAL AND SOCIAL CHANGES: Each political party has its own philosophy. Political
changes can lead to changes in economic policies of the government. This may make the existing

location unattractive for doing business. Social changes may require production of eco-friendly goods.
This may require a change in location.
INCREASING PRODUCT DEMAND: Demand for the company's product may increase at other
places, especially in abroad countries. So, the company will have to start a branch in another state or in
foreign countries. This would lead to a search for new location of plant.
AVAIL TAX BENEFITS: Government may announce some tax benefits for starting a business in rural
areas. This may motivate entrepreneurs to start their business units in remote areas.
Benefits of higher productivity
The following image depicts a list of nine benefits of higher productivity.
Image credits Prof. Mudit Katyani.
The nine main benefits of higher productivity are:
1. Higher profit,
2. Employees welfare,
3. Better return
4. Nice relations,
5. Customer satisfaction,
6. Good credit rating,
7. Goodwill,
8. Better credit terms, and
9. Low turnover.
Now let's discuss briefly these important benefits of higher productivity.
1) HIGHER PROFIT: Higher productivity enables the company to produce more output. This results in
more profit to it. This profit can be used for expansion and other activities.
2) EMPLOYEES WELFARE: Higher productivity brings more profit to the company. This profit can be
used to provide better facilities and working conditions to the employees. So, it results in welfare of the
employees.
3) BETTER RETURN: The company gets better return on investment due to higher productivity. So, they
pay a better dividend (share of profit) to the shareholders. The market price of the share will also
increase.
4) NICE RELATIONS: Higher productivity results in nice relations between the management and the
employees. Good working conditions, facilities and incentives motivates employees to give their best to
the organization.
5) CUSTOMER SATISFACTION: Higher productivity results in better customer satisfaction. This is
because customers are provided with good-quality products at low prices. Satisfaction of customers will
result in their loyalty towards the company.

6) GOOD CREDIT RATING: Higher productivity results in a good credit rating by financial institutions.
This will enable the company to get cheap funds from the market to meet working and fixed capital
requirements.
7) GOODWILL: Due to higher productivity, the company will have a good corporate image (goodwill) in
the minds of social entities. This includes: The shareholders, government, suppliers, financial
institutions, customers, etc.
8) BETTER CREDIT TERMS: Higher productivity helps the company to get better terms from the
suppliers. The suppliers may give better credit terms due to its goodwill.
9) LOW TURNOVER: Higher productivity enables the company to provide better facilities and working
conditions to the employees. This will make the employees loyal. Hence, employee turnover and
absenteeism will reduce.
Problems in Measuring Productivity
DIFFICULTY IN MEASURING OUTPUT: The output of an industry may be measured in terms of volume
(units) or value (dollars). It is very difficult to combine both these factors.
a.

If the output is homogeneous (similar), then the productivity can be measured in terms of
volume.

b.

If the output is not homogeneous, then the productivity can be measured in terms of
value.

c.

However, if some units are homogeneous and other non-homogeneous, then the industry
will face difficulties in measuring productivity.

Similarly, it is very difficult to find out whether the by-products and work-in-progress should be included in
output or not. If it is included, then it is very hard to find its value.
DIFFICULTY IN MEASURING INPUTS: Most industries do not have proper records of the inputs of land,
labor, capital and machines. Even if such records are available, it is very difficult to calculate the exact number
of man hours worked i.e. the input of labor.
Factorial productivity:

Factorial Productivity means to calculate the productivity of different factors of

production separately.

Some management experts say that a single factor of production cannot produce anything
by itself. Therefore, it has no productivity. A single factor of production has productivity only if it is
combined with other factors of production.

Therefore, according to these management experts, the concept of factorial productivity

is meaningless.
Changing conditions: There is a continuous change in the price of inputs and outputs, quality of raw-materials,
machines and tools, quality of labor, etc. All this creates difficulties in measuring productivity.

Service sector: It is very difficult to measure the productivity of service sectors like Banking, Insurance,
Education, etc. This is because the output of the service sector is intangible.
Different periods: It is very difficult to compare the productivity of two different periods. For example,
comparison of productivity during a war period with a peace period is meaningless.
Difficulty in Measuring Man-Hours: It is difficult to find out the exact number of productive man-hours. This
is because wages paid to the employees also includes the cost of idle time.
Technological change: Changes in technology will cause a change in the nature and quality of output.
Therefore, measurement of productivity will become difficult.
Factors Affecting Scheduling
The following chart depicts various factors affecting scheduling.
The factors that affect scheduling are grouped into two categories viz;
1.
Internal factors : Affect an entity (e.g. a company) from within.
2.
External factors : Influence an entity (e.g. an organisation) from outside.
Factors affecting scheduling internally are:
3.
Stock of finished goods kept by company.
4.
Process intervals of each product.
5.
Type of machines available.
6.
Availability of personnel.
7.
Availability of materials.
8.
Manufacturing facilities available in the company.
9.
Economic production runs (EPR) or optimum lot size.
Factors that affect scheduling externally are:
10. Consumer demand.
11. Consumer delivery dates.
12. Inventories (stock of goods) with dealers and retailers.
Now let's discuss internal and external factors influencing scheduling.
Internal Factors Affecting Scheduling
Followings are the internal factors affecting scheduling:
Finished Goods Inventories: Scheduling depends on how much stock of finished goods is kept by the
company. Most companies keep, one month's supply of each product, as stock. If the company's product is fast
moving or slow moving, then scheduling will have to be changed.
Process Intervals: It depends on the process intervals of each product. Process interval is the time required to
produce a product. Different products have different process intervals. For example, the process interval of a car
is more than that of a soap. Scheduling will be different for each process interval.
Types of Machines Available: It also affected by the type of machines available. If the company has old and
outdated machines, the schedule must keep provisions for the breakdown of machines. Modern and
computerized machines makes scheduling very easy.

Availability of Personnel: Scheduling also depends on the availability of personnel. If the company has
untrained and inexperienced employees, then they will take more time to produce a product. So, the schedule
must keep provisions for this. A faster schedule will be required for trained and experienced employees.
Availability of Materials: It is also affected by the availability of materials. If a regular supply of materials is
available, then the company can do normal-scheduling. However, if the supply of materials is irregular, the
schedule must be made flexible. That is, when the supply is good then the schedule will be fast and vice versa.
Manufacturing Facilities: Scheduling depends on the manufacturing facilities available in the company. This
includes space for new machines, employees, etc. It also includes the availability and supply of electricity and
water, which may be required for production. If all the required infrastructure is available, then the production
schedule can be fast and vice versa.
Economic Production Run (EPR): It also depends on the economic production runs. Economic production
runs (EPR) means the optimum lot size. That is, how many items must be produced in one lot in order to
minimize the cost of production. If the company produces more or less than the optimum lot size, then the cost
of production will increase. There are many formulas for calculating optimum lot size. Scheduling must be done
only after calculating the optimum lot size.
External Factors Affecting Scheduling
The external factors affecting scheduling are as follows:
Consumer Demand: Scheduling also depends on the consumer demand. Consumer demand can be
found out by sales forecast. So, the production schedule is prepared according to the sales forecast.
However, it has to be adjusted (changed) when the actual demand is different from the sales forecast.
Consumer Delivery Dates: The production schedule also depends on the consumer delivery dates. The
consumer is the most important person in a business. So, this factor must be given more importance than
other factors. The production schedule must be made in such a way that it will guarantee timely delivery
to the consumers. In case of seasonal goods, production must be spread out throughout the year; so,
there will not be too much pressure in demand season.
Dealers and Retailers Inventories: It also depends on the stock of goods (inventories) with dealers and
retailers. The production manager must find out how much stocks is held by dealers and retailers. He
must also know why they are keeping this stock. Are they keeping this stock to meet current demand? If
yes, then normal-scheduling can be done. However, if they are keeping stock in anticipation of future
demand, the scheduling will have to be slowed down because there will be fewer orders in the future.

Factors Affecting Plant Location

Plant location must be selected properly by entrepreneurs while planning to set up their business units. While
taking such a decision, they must consider some important factors.
The following image depicts important factors affecting a plant location.
The ten main factors that affect a plant location are as follows:
1. Law and order situation,
2. Availability of infrastructure facilities,
3. Good industrial relations,
4. Availability of skilled workforce,
5. Social infrastructure,
6. Investor friendly attitude,
7. Nearness to market,
8. Nearness to raw-materials' source,
9. Nearness to supportive industries and services, and
10. Must meet safety requirements.
Now let's discuss above factors affecting the location of a plant.
1. Law and order situation
Plant location must be at that place where law and order situation is in control. Entrepreneurs give a lot of
importance to this factor while locating a business unit in any state or region. If a state has bad law and order
situation, then the business must not be located within that state, unless it has other important factors such as
availability of heavy or bulky raw materials.
2. Availability of infrastructure facilities
Plant location which is selected must have proper infrastructure facilities. Without good infrastructure facilities,
it will be difficult to do business efficiently. The infrastructure facilities are the backbone of all industries.
Without it, business cannot be done.
Crucial infrastructure facilities that help industries to grow:
Transport and communications,
Banking and insurance services,
Regular fuel supply,
Continuous supply of electricity and water, etc.

3. Good industrial relations

Plant location must be at those places where good industrial-relations are maintained. Industrial relations
become bad, because of militant and selfish trade unions. Entrepreneurs do not want to locate their business at
places where anti-social elements are rampant, although there are other favorable factors such as good
infrastructure facilities, cheap labor, etc.
4. Availability of skilled workforce
Plant location must be convenient and easily accessible to skilled workforce. Most businesses require skilledlabor force such as engineers, management experts, computer programmers, etc. The entrepreneurs must
consider the availability of competent and skillful-workforce at a particular place to locate their business.
5. Social infrastructure
Plant location must have good a social infrastructure. There is a need for social-infrastructure not only for
employees but also for the development of their families. The availability of social-infrastructure will increase
the employees' welfare.
There must be suitable social infrastructure facilities like;
o

Education institutions,

Hospitals and health centers,

Community centers like worship place, garden, meditation center, etc.

Recreation facilities like theaters, clubs, communication facilities, etc.

6. Investor friendly attitude

Plant location must be in those states whose governments have an investor-friendly attitude. Government must
give attractive incentives and concessions to those who start business units in their states. There must not be any
bureaucratic control for starting a business.
An investor-friendly attitude will not only attract investment, but will also result in the overall development.
7. Nearness to market
Plant location must be near a market. Every business unit depends on a market for selling its goods and
services. The goods and services must reach the market on time, and it must be available to the consumers at a
low price. Therefore, this factor is given importance while selecting location of a plant.
Locating a plant near the market is preferred, when the product is fragile (easily breakable), perishable, heavy or
bulky and when quick service is required.

8. Nearness to raw-materials' source

Plant location must be usually near to the source of raw-material. Raw-materials' costs are about 50% of the
total cost. So, it is important in the business to get the raw materials in time and at a reasonable price. Therefore,
a business must be located close to the source of raw material, especially in the case of Gross Materials.
Gross Materials are those which lose weight in the production process. Examples of Gross Materials are
sugarcane, iron ore, limestone, so on.
However, if the raw material is a Pure Material, then the business may be located away from the source of
raw materials.
Pure Materials are those which add their weight to the finished product. Examples of Pure materials are cotton
textiles, bakeries, silk fabrics, etc.
9. Nearness to supporting industries
Plant location must be near its supporting industries and services. If it purchases spare parts from an outside
agency, then these agencies must be located very close to the business. If not, the business will have to spend a
lot of extra money on transport. It will also be difficult, to control the quality of the spare parts because of the
distant location.
10. Must meet safety requirements
Plant location must meet all essential safety requirements. Due to air, water and sound pollution, some factories
have a bad effect on the health of the people. Therefore, these factories must be located away from residential
areas. Safety of environment must also be given priority in this regards.
11. Miscellaneous factors
Following miscellaneous factors also affect a plant location:
o

Availability and cost of land,

Suitability of land - soil and topography,

Climatic conditions,

Location of a similar unit, etc.

Definition of Product Quality

Before we proceed to understand, what is product quality? First, let's focus on the definition of quality.
It is not easy to define the word Quality since it is perceived differently by the different set of individuals. If
experts are asked to define quality, they may give varied responses depending on their individual preferences.
These may be similar to following listed phrases.
According to experts, the word quality can be defined either as;
Fitness for use or purpose.
To do a right thing at first time.
To do a right thing at the right-time.
Find and know, what consumer wants?
Features that meet consumer needs and give customer satisfaction.
Freedom from deficiencies or defects.
Conformance to standards.
Value or worthiness for money, etc.

Dr. Joseph Juran coined a short definition of quality as; Product's fitness for use. Juran's definition of quality
is quite simple and popular one. However, it doesn't directly convey an in depth meaning of quality needed by
managers who are faced to decide on selecting a right course of action. To understand Juran's concept of quality,
managers must study distinctions made in the following figure.
Product quality means to incorporate features that have a capacity to meet consumer needs (wants) and gives
customer satisfaction by improving products (goods) and making them free from any deficiencies or defects.
Meaning of Product Quality
Product quality mainly depends on important factors like:
The type of raw materials used for making a product.
How well are various production-technologies implemented?
Skill and experience of manpower that is involved in the production process.
Availability of production-related overheads like power and water supply, transport, etc.
Product quality has two main characteristics viz; measured and attributes.
Measured characteristics includes features like shape, size, color, strength, appearance, height, weight,
thickness, diameter, volume, fuel consumption, etc. of a product.
Attributes characteristics checks and controls defective-pieces per batch, defects per item, number of
mistakes per page, cracks in crockery, double-threading in textile material, discoloring in garments, etc.

Based on this classification, we can divide products into good and bad. So, product quality refers to the total of
the goodness of a product. The five main aspects of product quality are depicted and listed below:
QUALITY OF DESIGN:
The product must be designed as per the consumers' needs and high-quality standards.
QUALITY CONFORMANCE:
The finished products must conform (match) to the product design specifications.
RELIABILITY:
The products must be reliable or dependable. They must not easily breakdown or become non-functional. They
must also not require frequent repairs. They must remain operational for a satisfactory longer-time to be called
as a reliable one.
SAFETY:
The finished product must be safe for use and/or handling. It must not harm consumers in any way. Proper
storage: The product must be packed and stored properly. Its quality must be maintained until its expiry date.
Company must focus on product quality, before, during and after production:
Before production, company must find out the needs of the consumers. These needs must be included in the
product design specifications. So, the company must design its product as per the needs of the consumers.
During production, company must have quality control at all stages of the production process. There must have
quality control for raw materials, plant and machinery, selection and training of manpower, finished products,
packaging of products, etc.
After production, the finished-product must conform (match) to the product-design specifications in all aspects,
especially quality. The company must fix a high-quality standard for its product and see that the product is
manufactured exactly as per this quality standard. It must try to make zero defect products.
Importance of Product Quality
Image depicts importance of product quality for company and consumers.
For Company: Product quality is very important for the company. This is because, bad quality products will
affect the consumer's confidence, image and sales of the company. It may even affect the survival of the
company. So, it is very important for every company to make better quality products.
For Consumers: Product quality is also very important for consumers. They are ready to pay high prices, but in
return, they expect best-quality products. If they are not satisfied with the quality of product of company, they
will purchase from the competitors. Nowadays, very good quality international products are available in the
local market. So, if the domestic companies don't improve their products' quality, they will struggle to survive in
the market.