Meaning of Production Standards
Production standard is a criterion or yardstick or benchmark. It is used for measuring the production of the company.
Production standards are fixed for raw materials, production process, tools and equipment, workers, conditions of work, speed of work, quantity of output, quality of output, etc.
Production standards are mostly expressed in quantitative terms. That is, it is expressed in terms of units of output, units of time, kilograms, plant capacity, so on.
Production standards give direction and guidance to the production department. It is also used for controlling the production activities. That is, the actual production can be compared with the production standards, and the difference can be found out and corrected. It is a point of reference. It helps to find out whether the work was done as per plan.
Image credits © Prof. Mudit Katyani.
Definition of Production Standards
According to Adam and Elbert, production standard is defined as follows:
"Production standard is a quantitative criterion established as a basis for comparison in measuring or judging output."
Advantages of Production Standards
The merits, benefits, or advantages of production standards are as follows:
- Optimum use of labour.
- Fixing wages.
- Basis for promotion and training.
- Customer satisfaction.
- Less wastage.
- Budgeting possible.
- Effective planning.
Now let's discuss each advantage of production standards one by one.
1. Optimum use of labour
If production standards are fixed beforehand, then all the work will be planned in advance So, everyone will know exactly what to do, how much to do, how to do it, etc. The performance of the workers can be evaluated. Their mistakes, if any, can be corrected in time. There will be no wastage of labour. So, production planning helps to make optimum use of labour.
2. Fixing wages
Production standards help to fix the wages, salaries, bonus, perks, etc. of the workers and managers. The performance of each person can be evaluated with the help of production standards. So, each person will be paid according to his performance.
3. Basis for promotion and training
Production standards can be used as a basis for giving promotion, transfers, training, etc., to the employees and managers. This is because it helps to evaluate their performance. The employees having the best performance can be given promotions. The employees whose performance is bad can be sent for training to improve their performance.
4. Customer satisfaction
Production standards help to give satisfaction to the consumers. This is because production standards are fixed for quantity, quality, time, cost, etc. So, the consumers will get a regular supply of good-quality products at low prices. This will give satisfaction to the customers and profits to the company.
5. Less wastage
Production standards help to reduce the wastage of human, material and financial resources in the company. This is because standards are fixed for almost everything in the production department. There are standards for raw materials, workers, speed of work, quantity of work, quality of work, production process, etc. These standards guide the workers. It helps them to avoid mistakes. After they complete their work, it is compared with the standards. The mistakes, if any, are found out and corrected in time. Production standards help to avoid wastage of investment in unwanted machines and raw materials. It also helps to avoid having more employees than necessary. All this helps to reduce wastage in the company.
6. Budgeting possible
Production standard makes budgeting possible. That is, the production manager can prepare a budget for all the production expenses. He can prepare a budget for the materials' costs, labour costs, machine costs, repair and maintenance costs, etc. This will help to avoid wastage and to reduce the production cost. It will also reduce financial problems in the organization.
7. Effective planning
Production standards are the base of production planning. It helps to have effective production planning. Production planning helps the production to run smoothly. It sees that all the machines are utilized fully. It helps over and under stocking of materials and finished goods. It helps to deal with emergencies like the breakdown of machines.
Demerits of Production Standards
The limitations, disadvantages, or demerits of production standards are:
- Limiting factor.
- No improvement.
- Individual difference not considered.
- Difference in job methods.
Now let's discuss each demerit of production standards one by one.
1. Limiting factor
Some experts feel that a standard is a limiting factor. A standard is a quantitative goal. Once the employee achieves this goal he will be satisfied. He will not try to work more than the standard. He will not try to increase the standard. After some time, he will become lazy.
2. No improvement
Standard are fixed for quantity, time, costs, etc. These standards are not changed for a long period of time. So, during this time the quantity of output, quality of output, speed of work, cost of production, etc., will remain the same. There will be no improvement. This is against Kaizan. Kaizan is a Japanese concept. According to this concept, there must be continuous improvements in the organisation.
3. Individual difference not considered
Standards do not consider individual difference in doing work. The same standard is made for all the employees. However, all the employees are not equally efficient in their work. So, if the standard is made too high, then the less-efficient employees will not be able to complete their work in time. Similarly, if the standards are low, efficient employees will complete their work before time.
4. Difference in job methods
Methods of doing the job are not always standardized. Most companies change their methods according to change in machines. It is difficult to fix standards if the job methods go on changing. Even if standards are fixed, comparisons become hard due to change of methods.
Standards are not changed regularly. This results in rigidity. However, flexibility is required to face competition. The product must be changed regularly as per the varying needs and wants of the consumers.