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Q1. What is productivity? Write a brief note on capital
A.1 Productivity is a measure of the efficiency of production.
Productivity is a ratio of production output to what is required to
produce it (inputs). The measure of productivity is defined as a
total output per one unit of a total input.
A production model is a numerical expression of the production
process that is based on production data, i.e. measured data in
the form of prices and quantities of inputs and outputs.
Productivity is necessary to identify the entity it belongs to.
Such an entity is defined as production process. It goes without
saying that productivity is a critical factor of production process
in one way or another. To define the way is the object of this
The benefits of high productivity are manifold. At the national
level, productivity growth raises living standards because
more real income improves people's ability to purchase goods
and services, enjoy leisure, improve housing and education and
contribute to social and environmental programs. Productivity
growth is important to the firm because more real income means
that the firm can meet its (perhaps growing) obligations to
customers, suppliers, workers, shareholders, and governments
(taxes and regulation), and still remain competitive or even
improve its competitiveness in the market place.
Capital productivity characterizes the efficiency with which
fixed capital stock is used. It is commonly employed in
economic analysis and in the formulation of production plans
and plans for capital expenditures, both for the national
economy as a whole and for individual sectors, production
associations, and enterprises.
Data on the gross social product and on national income (from
productive activities) are used in calculating capital productivity
for the national economy as a whole; for calculating the
productivity of individual sectors, data on gross (commodity) or
net output are used. In sectors where the output is homogeneous
(petroleum, coal, cement), physical units are sometimes used in
the calculations. Capital productivity is calculated on the basis
of the balance valuation of the fixed production assets
(depreciation costs included), using either the average value
over the year or the value as of the end of the year. Capital
productivity is the reciprocal of the capital-output ratio.
Capital productivity differs from one branch of material
production to another. Thus, the national income produced in
current prices per ruble of fixed production assets in the USSR
in 1975 amounted to 45 kopeks in the national economy as a
whole, 50 kopeks in industry, 36 kopeks in agriculture, 13.4
kopeks in transport and communications, and 1.18 rubles in
construction. Productivity is influenced by a number of factors.
Its growth depends primarily on the level of technology, the
organizational and technical measures employed in managing
production capacities, and the proportion of capital investment
earmarked for reconstruction and retooling.
Many factors act to lower productivity. For example, the
accelerated development of industrial branches with relatively
low capital productivities may lower productivity for industry as
a whole. The expansion of production in the country’s eastern
and northern regions has the same effect because the cost of
fixed capital stock is between 30 and 50 percent higher there
than in the European part of the USSR. Various purification
facilities included in industrial projects which do not directly
influence the volume of production nevertheless raise the total
cost of the fixed capital stock, thereby lowering capital
productivity. The working of mineral deposits at greater depths
requires additional expenditures in fixed capital, again leading to
lower productivity. The level of capital productivity and the
pattern of changes in productivity depend in large measure on
technical and economic indicators describing the utilization of
machinery and equipment and especially on increases in the
equipment shift index.
Capital productivity has fluctuated over the years because it is
simultaneously influenced by a variety of factors. Thus, capital
productivity in industry in the USSR rose through the 1950’s
and declined between 1961 and 1965. During the eighth five-
year plan (1966–70), productivity showed no change with regard
to gross output but increased with regard to net output. During
the ninth five-year plan, there was a slight decline (by 3
percent), caused primarily by construction programs launched in
the country’s eastern and northern regions, by the deterioration
of geological and mining conditions in the existing mineral
deposits, and by difficulties encountered in supplying light
industry and the food processing industry with agricultural raw
materials because of extremely adverse weather conditions over
a number of years. Improved use of fixed capital stock is
reflected not only in higher capital productivity but also in
higher labor productivity, lower production costs, and improved
product quality. Thus, if outlays for additional fixed capital
stock can be recouped in the period prescribed by norms, the
investment is economically warranted even if capital
productivity is slightly lowered. The raising of capital
productivity leads to increased efficiency of production. Five-
year plans make provision for better use of fixed capital stock
and for the development and implementation of programs to
raise capital productivity in various sectors of the national
economy, at enterprises, and in organizations
Q2. Describe briefly the automated flow lines.
A2. When several automated machines are linked by a transfer
system which moves the parts by using handling machines
which are also automated, we have an automated flow line.
After completing an operation on a machine, the semi-finished
parts are moved to the next machine in the sequence determined
bythe process requirements a flow line is established. The parts
at various stages from raw material to ready for fitment or
assembly are processed continuously to attain the required
shapes or acquire special properties to enable them to perform
desired functions. The materials need to be moved, held, rotated,
lifted, positioned etc. for completing different operations.
Sometimes, a few of the operations can be done on a single
machine with a number of attachments. They are moved further
to other machines for performing further operations. Human
intervention may be needed to verify that the operations are
taking place according to standards. When these can be achieved
with the help of automation and the processes are conducted
with self regulation, we will have automated flow lines
established. One important consideration is to balance times that
different machines take to complete the operations assigned to
them. It is necessary to design the machines in such a way that
the operation times are the same throughout the sequence in the
flow of martial.In fixed automation or hard automation, where
one component is manufactured using several operations and
machines it is possible to achieve this condition-or very
nearly.we assume that product life cycles are sufficiently stable
to invest heavily on the automated flow lines to achieve reduced
cost per unit. The global trends are favouring flexibility in the
manufacturing systems. The costs involved in changing the
setup of automated flow linesare high. So,automated flow lines
are considered only when the product is required to be made in
high volumes over a relatively long period. Designers now
incorporate flexibility in the machines which will take care of
small changes in dimensions by making adjustments or minor
changes in the existing machine or layout. The change in
movements needed can be achieved by programming the
machines Provision for extra pallets or tool holders or conveyors
are made in the original design to accommodate anticipated
changes. It is not possible to think of inventories in a flow line.
Bottlenecks cannot be permitted. By necessity, every bottleneck
gets focussed upon and solutions found to ease them. Production
managers see bottleneck as an opportunity to hasten the flow
and reduce inventories. However, it is important to note that
setting up automated flow lines will not be suitable for many
Q3. What are the factors that influence the plant location?
A.3 There a huge number of factors that influence the location
of plant, such as:
1. Local Government Grants to tempt companies to move to
2. Location near Customer or Supplier Bases or Natural
3. Location near local talent and expertise (employees);
4. Local Infrastructure (roads/rail/airports);
5. Location near Cultural Centres (Cities, Museums, Nightlife,
6. Location near areas of natural beauty;
7. Location near good schools (education);
8. In certain instances, locations not near residential areas;
9. The impact/disruption to the locals, by bringing the new
business to the area;
10. The benefits to the employees (e.g. sport centre membership
Q4. Describe the seven basic quality control tools.
A.4 The seven basic quality control tools are as below :
Cause-and-effect diagram (also called Ishikawa or fishbone
chart): Identifies many possible causes for an effect or problem
and sorts ideas into useful categories.
Check sheet: A structured, prepared form for collecting and
analyzing data; a generic tool that can be adapted for a wide
variety of purposes.
Control charts: Graphs used to study how a process changes
Histogram: The most commonly used graph for showing
frequency distributions, or how often each different value in a
set of data occurs.
Pareto chart: Shows on a bar graph which factors are more
Scatter diagram: Graphs pairs of numerical data, one variable
on each axis, to look for a relationship.
Stratification: A technique that separates data gathered from a
variety of sources so that patterns can be seen (some lists replace
“stratification” with “flowchart” or “run chart”).
Q5. Define project management. Describe the five
dimensions of project management.
A.5 Project management is the discipline of planning,
organizing, securing, managing, leading, and controlling
resources to achieve specific goals. A project is a temporary
endeavor with a defined beginning and end (usually time-
constrained, and often constrained by funding or deliverables),
undertaken to meet unique goals and objectives, typically to
bring about beneficial change or added value. The temporary
nature of projects stands in contrast with business as usual (or
operations), which are repetitive, permanent, or semi-permanent
functional activities to produce products or services. In practice,
the management of these two systems is often quite different,
and as such requires the development of distinct technical skills
and management strategies.
The primary challenge of project management is to achieve all
of the project goals and objectives while honoring the
preconceived constraints. Typical constraints are scope, time,
and budget. The secondary—and more ambitious—challenge
is to optimize the allocation of necessary inputs and integrate
them to meet pre-defined objectives.
Project management can be considered to have five dimensions
which are necessary to be managed. The dimensions are
Features, Quality, Cost, Schedule, and Staff.
The five dimensions of project management are dependent of
one another. For example, if you add staff, the schedule may
shorten and the cost might increase. The trade-offs among the
five dimensions of project management are not linear. For each
project, you need to decide which dimensions are critical and
how to balance the others so as to achieve the key project
Each of the five dimensions can take one of three roles on any
1. Drive: A driver is a key objective of the project. It has low
flexibility towards the project team.
2. Constraint: A constraint is the limiting factor beyond the
control of project team. It gives the project team virtually no
3. Degree of Freedom (DoF): Any project dimension that is
neither a driver nor a constraint becomes a degree of freedom. A
degree of freedom provides wider latitude towards the project
team for balancing that dimension against the other four.
Q6. Write a brief note on Just-In-Time (JIT).Answer:
A.6 Just-In-Time (JIT) manufacturing is a process by which
companies don't keep lots of excess inventory; instead,
theymanufacture a product as an order comes in. It is a
management philosophy of continuous and forced problem
solving.The objective of JIT manufacturing system is to:
Eliminate waste that is, minimise the amount of equipment,
materials, parts, space,
and worker’s time, which adds a
great value to the product
Increase productivityJIT means making what the
market demands when it is in need. It is the most popular
systems that incorporate the genericelements of lean systems.
Lean production supplies customers with exactly what the
customer wants, when the customerwants, without waste,
through continuous improvement.Deploying JIT results in
decrease of inventories and increases the overall efficiencies.
Decreasing inventory allows reducingwastes which in turn
results in saving lots of money. There are many advantages of
Increases the work productivity
Reduces operating costs
Improves performance and throughput
Increases flexibility and innovativeness
For industrial organisations to remain competitive, cost
efficiencies have become compulsory. JIT helps in this
process. It isextended to the shop floor and also the inventory
systems of the vendors. JIT has been extended to mean
continuousimprovement. These principles are being applied to
the fields of Engineering, Purchasing, Accounting, and Data
processing.However, for organizations to completely implement
JIT manufacturing system, they need to have a proper
commitmentalong with the following basic facilities - proper
material, quality, equipment, and people involvement.
Q6. What is value engineering? Explain its significance.Answer:
A.6 Value Engineering (VE) or Value Analysis is a
methodology by which we try to find substitutes for a product or
anoperation.The concept of value engineering originated
during the Second World War. It was developed by the General
ElectricCorporations (GEC). Value Engineering has gained
popularity due to its potential for gaining high Returns on
Investment (ROI).This methodology is widely used in
business re-engineering, government projects, automakers,
transportation anddistribution, industrial equipment,
construction, assembling and machining processes, health
care and environmentalengineering, and many others. Value
engineering process calls for a deep study of a product and the
purpose for which it isused, such as, the raw materials used; the
processes of transformation; the equipment needed, and many
others. It alsoquestions whether what is being used is the most
appropriate and economical. This applies to all aspects of
Value Engineering helps your organization in:
Lowering O & M costs
Improving quality management
Improving resource efficiency
Lowering staff costs
Increasing procedural efficiency
Optimizing construction expenditures
Developing value attitudes in staff
Competing more successfully in marketplace
Value Engineering helps you to learn how to:
Improve your career skills
Separate "Symptoms" from "problems"
Solve "root cause" problems and capture opportunities
Become more competitive by improving "benchmarking"
Take command of a powerful problem
solving methodology to use in any situation.
Master of Business Administration- MBA Semester 2
MB0044 – Production and Operations Management
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