PRODUCTION SYSTEM

Rashmi P. Khobragade
 Introduction
 Production is the process of converting resources
into products or services.
 It is usually measured in terms of output per time
period (e.g. boxes per hour, tones per day, bookings
per month) or cost per unit of output (e.g. $10 per
box, $20 per ton, etc).
 The objective of production operations is to meet the
forecasted needs of the market in which they perform
at the lowest possible cost.
 Meaning of production
 Production can be explained as an act of either
manufacturing or mining or growing of goods
(commodities) generally in bulk for trade.

 Production is a method employed for making or

providing essential goods and services for consumers.
It is a process that puts intangible inputs like ideas,
creativity, research, knowledge, wisdom, etc. in use or
action. It is a way that transforms (convert) tangible
inputs like raw-materials, semi-finished goods and
unassembled goods into finished goods or
commodities.
 Meaning of system
 System is an arrangement or assembly of inter-
dependent processes (activities) that are based on
some logic and function. It operates as a whole and
is designed (build) with an intension to achieve
(fulfill) some objective or do some work. Huge
systems are often a collection (assembly) of smaller
sub-systems.
 Definition of production system
 Production system may be defined as,
"The methods, procedure or arrangement
which includes all functions required to
accumulate (gather) the inputs, process or
reprocess the inputs, and deliver the
marketable output (goods)."

 Production system utilizes materials, funds,

infrastructure, and labour to produce the required output
in form of goods.
 Meaning of production system
 Production system consists of three main
components viz., Inputs, Conversion Process and
Output.

 Inputs include raw-materials, machines, man-hours,

components or parts, drawing, instructions and other
paper works.
 Conversion process includes operations (actual
production process). Operations may be either
manual or mechanical or chemical. Operations
convert inputs into output. Conversion process also
includes supporting activities, which help the process
of conversion. The supporting activities
include; Production planning and control, purchase
of raw-materials, receipt, storage and issue of
materials, inspection of parts and work-in-progress,
testing of products, quality control, warehousing of
finished products, etc.
 Output includes finished products, finished goods
(parts), and services.
The three components of a production system
are depicted in this diagram.
 Examples
 Tangible goods : Consider an example of a
manufacturing industry like a Sugar Industry. Here,
sugarcane is first used as an input, then the juice of
sugarcane is processed through a conversion process,
finally to get an output known as a refined sugar (used for
mass consumption).
 Intangible goods : Consider an example from a service
industry that of a software-development firm or company.
Here, initially, written program codes are used as an inputs.
These codes are then integrated in some database and are
provided with a user-friendly interface through a
conversion process. Finally, an output is made available in
form of an executable application program.
 Productivity
 Productivity describes various measures of the efficiency
of production.

 A productivity measure is expressed as the ratio of

output to inputs used in a production process, i.e. output
per unit of input.

 Productivity is an index that measures output (goods and

services) relative to the input (capital, labor, materials,
energy, and other resources) used to produce them.
 PRODUCTIVITY
=
OUTPUTS / INPUTS
 Productivity
 Productivity is simply a measure of the ratio between the
output of a process and the input of resources needed for it. It
is usually expressed as output divided by input.
 Output can be expressed in terms of units or volume (e.g.
tones, liters, boxes, etc) and these units have usually been
already determined for production planning purposes. In
cases where outputs cannot be individually defined a
monetary total can be used (e.g. $s of production, $s of sales,
etc).
 Inputs are usually separated into Manpower, Machinery and
Materials. In cases where inputs cannot be segregated a
monetary value can be substituted (e.g. £s of material).
 Why Productivity Matters
 High productivity is linked to higher standards of
living
 As an economy replaces manufacturing jobs with lower
productivity service jobs, it is more difficult to maintain high
standards of living.

 Higher productivity relative to the competition

leads to competitive advantage in the marketplace
 Pricing and profit effects
 For an industry, high relative productivity makes it less likely
it will be supplanted by foreign industry
Measures of Productivity
Examples of Partial Productivity
Measures
Units of output per labor hour
Labor Productivity Units of output per shift
Value-added per labor hour

Machine Productivity Units of output per machine hour

machine hour

Capital Productivity Units of output per dollar input

Dollar value of output per dollar
input

Energy Productivity Units of output per kilowatt-hour

Dollar value of output per kilowatt-
hour
 Productivity Growth

 Productivity Growth is a key factor

in a country’s rate of inflation and
the standard of living of its people
 Productivity improves when
firms:
 Become more efficient
 Downsize
 Expand
 Retrench
 Achieve breakthroughs
 Ways to Increase Productivity
 Increase output by using the same or a lesser amount of
(input) resource.
 Reduce amount of (input) resource used while keeping output
constant or increasing it.
 Use more resource as long as output increases at a greater
rate.
 Decrease output as long as resource use decreases at a greater
rate.
 Production is concerned with the activity of producing goods
and services.
 Productivity is concerned with the efficiency and
effectiveness with which these goods and services are
produced.
THANK YOU