Standards Required at Various Levels of Production
Standards are fixed at various levels of production. This is done to ensure some minimum expected output in the production process. Standards are established to maintain a production efficiency. These help to optimally utilizing various factors of production and achieve some fixed amount of output in terms of both; quality and quantity.
Important standards required at various levels of production are listed below.
- Individual Standards.
- Departmental Standards.
- Plant Standards.
Following points discuss these standards in detail.
1. Individual Standards
Individual standard is the output expected from an average-worker under average working conditions for a given period of time.
Generally, individual standards are fixed for all employees in the organization, especially at the lowest level.
The individual standard of a worker is the output which he must produce in a fixed period of time. In other words, it is the time given to him for producing one unit of output.
For example, a performance standard may be four units per hour or 15 minutes per unit. Both are the same. So, a worker who is doing packing-work may be asked to pack four products per hour. In other words, he is given 15 minutes to pack a single product.
Therefore, an individual standard is a fixed number of products, which must be generated by a worker in a fixed-period. That is, it is the fixed-output of the worker per unit of time.
Individual standard also has other names like labor standard, employee standard, employee time standard, or time standard.
The concept of individual standards in terms of production is depicted below.
Image credits © Prof. Mudit Katyani.
2. Departmental Standards
The company is divided into different departments. Each department is given a specific function or work to do. Standards are fixed for each department. Here, standards are fixed for quantity of output, quality of output, costs of output, etc.
A department consists of some individuals. Departmental standards are fixed by adding individual standards of each member of the department. A department's performance is judged based on these fixed standards.
For example: Assume, the standard output of the production department is 1000 units per day. If the production department produces exactly 1000 units per day, then it is 100% efficient. If it produces more than 1000 units, its efficiency is greater than 100%. If it produces less than 1000 units, then its efficiency is below 100%.
The manager of the department is responsible for getting the work done from his workers. He must see that all the work is done in accordance with departmental standards. He must see that all his department's objectives are achieved. He must try his level best to improve the team spirit in his department. He must also improve the co-ordination and co-operation in his department.
Concept of departmental standards in production terms is depicted below.
Image credits © Prof. Mudit Katyani.
3. Plant Standards
Plant standards are fixed for an entire plant or a factory. A plant is a place or location where goods are produced and/or assembled. It consists of that place where machines, equipments, materials and workers interact with each other, directly or indirectly, with an intention to produce goods.
Plant standards are fixed for:
- Total output in quantitative and qualitative terms.
- Various cost in the production process.
The output depends on the level of technology, the type of employees and the estimated demand for the product.
Plant standards mean to fix the output to be produced for a given period. Here, both quantitative and qualitative output is fixed. The pant standard must be realistic. In other words, it must not be very high or too low. Generally, it is based on the output produced in the past. However, necessary adjustments are made for future demand of the product.
Various costs are involved in the production of goods, namely;
- Labor costs.
- Material costs.
- Overhead costs.
Plant-standards also mean to fix the standard labor, material and overhead costs. After manufacturing a product, the actual labor, material and overhead-costs are compared with the standard-costs. After comparison, the difference found is noted down. Further, the reasons why this difference occurred are also looked upon. After this, the difference is corrected to minimize the cost in the future. Every organization wants to reduce its costs. However, costs reduction must never be done by compromising the quality of the produced goods.
The concept of plant standards in terms of production is depicted below.
Image credits © Prof. Mudit Katyani.