Tag: Objectives

  • Trial Balance: Meaning, Objectives, Advantages, and Limitations

    Trial Balance: Meaning, Objectives, Advantages, and Limitations

    Understand the concept of Trial Balance [In Hindi]. Learn about its meaning, definition, objectives, advantages, methods, and limitations. It is a listing of all the accounts and their respective balances. It is a statement of debit balance and credit balance extracted from ledger accounts on a particular date. This article explains Trial Balance with the topic of Introduction, Meaning, Definition, Objectives, Advantages, Methods, and Limitations. It is a two-column schedule listing the titles and balances of all the accounts in the order in which they appear in the ledger. The debit balances lists in the left-hand column and the credit balances in the right-hand column. In the case of General Ledger, the totals of the two columns should agree.

    Here is the article explaining Trial Balance with the topic of Introduction, Meaning, Definition, Objectives, Advantages, Methods, and Limitations in accounting.

    We, now, know the fundamental principle of the double-entry system of accounting where for every debit, there must be a corresponding credit. Therefore, for every debit or a series of debits given to one or several accounts, there is a corresponding credit or a series of credits of an equal amount given to some other account or accounts and vice-versa. Hence, according to this principle, the total of debit amounts must equal the credit amounts of the ledger at any date. If the various accounts in the ledger are balanced, then the total of all debit balances must be equal to the total of all credit balances.

    If the same is not true then the books of accounts are arithmetically inaccurate. It is, therefore, at the end of the financial year or at any other time, the balances of all the ledger account extract and record in a statement known as Trial Balance and finally totaled up to see whether the total of debit balances is equal to the total of credit balances.

    Meaning of Trial Balance:

    They may thus define as a statement of debit and credit totals or balances extracted from the various accounts in the ledger books to test the arithmetical accuracy of the books. The agreement of the Trial Balance reveals that both the aspects of each transaction have been recorded and that the books are arithmetically accurate. If both sides of Trial Balance do not agree with each other, it shows that there are some errors, which must detect and rectify if the correct final accounts are to prepare.

    Thus, Trial Balance forms a connecting link between the ledger accounts and the final accounts. It is a statement of debit and credit balances taken out from all ledger accounts including cash books. The golden rules that “Accounting equation remains balanced all the time” and “For every business transaction there is an equal debit and credit” shall always prevail in the whole accounting theory. Therefore, the total of all debit balances must be equal to the total of all credit balances. To verify this, a schedule known as they prepare.

    Balances of debits and credits are to extract from all ledger accounts, including cash books, and shown in this schedule. This schedule prepares to assure the management of the arithmetical accuracy of books of accounts. This schedule facilitates the preparation of final accounts. Generally, it prepares at the end of each accounting year; however, it can prepare at the end of each month, quarter, or the end of any chosen period.

    Definition of Trial Balance:

    It is a list of debit and credit balances of all the ledger accounts extracted on a given date. Following are the main definitions of the trial balance;

    Accounting in the first definition is as,

    “Trail balance is the list of debit and credit balances, taken out from the ledger, it also includes the balances of cash and bank taken from the cash book.”

    Accounting in the second definition is as,

    “The statement prepared with the help of ledger balances at the end of the financial year (or at any other date) to find out whether debt total agrees with credit total is called a trial balance.”

    When one account debit, another account credit with an equal amount. Therefore, it is quite evident that the total of debit balances of the ledger accounts of given transactions will be equal to the total of the credit balances. It must state here that the total of the debit balance column must be equal to the total of the credit balance column. This is so because under the double-entry system, for each item of debit there is a corresponding credit, and secondly all the transactions recorded in the books of original entry transfer to the ledger.

    Objectives of Trial Balance:

    The following are the main objectives of preparing the trial balance:

    1] To check the arithmetical accuracy of books of accounts:

    According to the principle of the double-entry system of book-keeping, every business transaction has two aspects, debit and credit. They base on the double-entry principle of debit equals credit or credit equals debt. As a result, the debit and credit columns of they must always be equal. If they do, it assumes that the recordings of financial transactions are accurate.

    Conversely, if they do not, it assumes that they are not arithmetically accurate. Therefore, one important purpose of preparing trial balance is to provide a check on the arithmetical accuracy of the recordings of the financial transactions. So, the agreement of the trial balance is proof of the arithmetical accuracy of the books of accounts. However, it is not conclusive evidence of their accuracy as there may be certain errors. Which they may not be able to disclose.

    2] Helpful in preparing final accounts:

    They record the balances of all the ledger accounts at one place which helps in the preparation of final accounts, i.e. Trading and Profit and Loss Account and Balance Sheet [Hindi]. But, unless they agree, the final accounts cannot prepare. Final accounts prepare to show profit and loss and the financial position of the business at the end of an accounting period.

    These accounts prepare by using the debit and credit of all ledger accounts. Therefore, since the trial balance is a statement of the debit and credit balances of the ledger accounts, it provides the basis for the preparation of the final accounts. So, if the trial balance does not agree, errors locate and necessary corrections are made at the earliest. So, that there may not be unnecessary delay in the preparation of the final accounts.

    3] To serve as an aid to the management:

    By comparing the trial balances of different years changes in figures of certain important items such as purchases, sales, debtors, etc. ascertain and their analysis make for taking managerial decisions. So, it serves as an aid to the management.

    4] To Summarize the financial transactions:

    A business performs several numbers of financial transactions during a certain period. The transactions themselves can not portray any picture of the financial affairs of the business. For that purpose, a summary of the transactions has to draw. They prepare to intend to summarize all the financial transactions of the business.

    5] To Help to detect accounting errors:

    Since the trial balance indicates if there is any error committed in the journal and the ledger. It helps the accountant to locate the error because the starting point of locating errors is trial balance itself. It has been pointed out in an earlier paragraph that if they not agree, the accountant must locate such errors.

    The accountant must give equal emphasis or weight-age to both small and wide differences found in a Trial Balance. Because there may be several errors that have practically compensated the effect of one another producing a small difference.

    Advantages of Trial Balance:

    The important advantages of a trial balance are;

    • To help of summarizes all the financial transactions of the business. Also, presents to the businessman a consolidated list of all ledger balances.
    • It is the shortest method of verifying the arithmetical accuracy of entries made in the ledger.
    • If the total of the debit side/column is equal to the total of the credit side/column, the trial balance says to agree. Otherwise, it implies that some errors have been committed in the preparation of accounts.
    • It helps in the preparation of the final accounts i.e., Trading a/c. Profit and loss a/c and Balance Sheet.
    • To help in locating or detecting errors in accounting balances. As well as, helps the accountant to locate the error. Because, the starting point of locating errors is trial balance itself.
    • They serve as a summary of all the ledger accounts and provides a complete summary report of each account in the ledger.

    Methods of Trial Balance:

    A trial balance can prepare by the following three methods;

    1] Total method:

    In this method, the debit and credit totals of each account are shown in the two amount columns (one for the debit total and the other for the credit total). Under these methods, the trial balance prepares by taking up the total of debits and credit of all ledger accounts.

    2] Balance Method:

    In this method, the difference of each amount extracts. If the debit side of an account is bigger in amount than the credit side. Also, the difference is put in the debit column of the Trial Balance and if the credit side is bigger. The difference writes in the credit column of the Trial Balance. Under these methods, only the balances of all the ledger accounts take up to prepare the trial balance.

    3] Compound Method:

    The compound method is the combination of both the methods, total method, and balance method. Thus, the compound method also knows as a total cum balance method.

    Limitations of Trial Balance:

    The following are the main limitations of the Trial Balance;

    • They can prepare only in those concerns where the double-entry system of accounting adopts.
    • Though trial balance gives arithmetic accuracy of the books of accounts but there are certain errors. Which not discloses by the trial balance. That is why it says that trial balance is not conclusive proof of the accuracy of the books of accounts.
    • If the trial balance does not prepare correctly then the final accounts prepared will not reflect the true and fair view of the state of affairs of the business. Whatever conclusions and decisions are made by the various groups of persons will not be correct and will mislead such persons.
    • When the accountant makes an excess debit; or, excess credit entry although the same being neutralized by excess credit; or, excess debit respectively in the same or another account, such error recognizes as an error of compensation.
    • When if the wrong amount writes at the initial stage then also the error can not disclose through the totals of trial balance are agreed upon.
  • Minimum Wages: Definition, Arguments, and Objectives

    Minimum Wages: Definition, Arguments, and Objectives

    Minimum wages can stand set by statute, the decision of a competent authority, a wage board, a wage council, or by industrial or labor courts or tribunals. Minimum wages can also exist set by giving the force of law to provisions of collective agreements. It commonly accepts that workers should give at least minimum wages to enable them to lead a minimum standard of living. Then a question arises – What is a minimum wage? It is, however, difficult to define “minimum wage’’. However, it may define as a wage that is just sufficient for the worker to keep his body and soul together.

    Introduction to Minimum Wages: Meaning, Definition, Arguments, and Objectives.

    First, do you know “What does mean the Wages?” Now learn, that the Minimum wage has stood defined as the minimum amount of remuneration; that an employer requires to pay wage earners for the work performed during a given period; which cannot reduce by collective agreement or an individual contract. The purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress to all; and, a minimum living wage for all who stand employed and in need of such protection.

    Definition of Minimum Wages:

    They can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women. Minimum wage systems should define and design in a way to supplement and reinforce other social and employment policies, including collective bargaining; which uses to set terms of employment and working conditions.

    The committee on fair wages defines the minimum wage as an irreducible (minimum) amount considered necessary for the sustenance of the worker and his family; and, the preservation of his efficiency at work. The Fair Wages Committee considered that “a minimum wage must provide not merely for the bare subsistence of life but the preservation of efficiency of the worker. For this purpose, the minimum wage must also provide for some measure of education, medical requirements and amenities”.

    As well as:

    Such a minimum wage may fix by an agreement between the employer and the workers but it is generally determined by legislation. The workers generally demand that the minimum wage should base on the standard of living but the employers argue; that it should base on the productivity of labor and the capacity of the industry to pay.

    Minimum wages defines as,

    “The minimum amount of remuneration that an employer requires to pay wage earners for the work performed during a given period; which cannot reduce by collective agreement or an individual contract.”

    But it should note that while fixing the minimum wage, the worker’s family should also take into account. The wage should sufficient not only to maintain himself but also his family in a reasonable standard of living. Then a question arises – What is the size of the worker’s family? It now generally accepts that a worker’s family consists of five-person – the worker and his wife and three children.

    Minimum Wages Definition Arguments and Objectives Image
    Minimum Wages: Definition, Arguments, and Objectives; Image credit by thedailybeast.

    The minimum wage must fix in such a way that it is sufficient to provide a reasonable standard of living to the worker and his family. Thus, while fixing the minimum wage, three principles should take into account – the living wage, the fair wage, and the capacity of the industry to pay. While fixing the minimum wage, the capacity of the industry should take into account. If a particular industry is not able to pay the minimum wages to its workers; then it has no right to exist in the business.

    Background:

    A minimum wage was introduced by the Labour government on 1 April 1999 at a rate of £3.60 per hour for workers over 21 years of age, and £3 per hour for 18–21-year-olds; this was raised by 10p per hour in 2000. At the time, the Low Pay Unit estimated that 2 million people (8.3 percent of the workforce) would gain from this, the main beneficiaries being women, especially in social care (e.g. child care) and cleaning jobs. Other areas where there is traditionally low pay, and which would benefit, were young people (200 000); hospitality (295 000); and retail (300 000).

    Arguments for introducing a Minimum wage and also Against:

    The following are;

    For introducing:
    Arguments for introducing a Minimum wage
    Arguments for introducing a Minimum wage.
    For Against:
    Arguments against introducing a Minimum wage
    Arguments against introducing a Minimum wage.

    Objectives of Minimum wages:

    The objectives of minimum wages are as follows:

    • To prevent the sweating of workers in organizing or unorganized industries.
    • Prevent the exploitation of workers and enable them to obtain wages according to their productive capacity, and.
    • Maintain industrial peace.

    In organized industries where the trade unions are powerful; the employers generally yield to the demands of the workers for fixing a proper wage. But in the unorganized industries where the trade unions are not found, government interference and legislation become essential to ensure that the laborers do not exploit and pay at least the minimum wage.

  • Production Planning Control Objectives Importance Limitations

    Production Planning Control Objectives Importance Limitations

    Production Planning and Control are interrelating and interdependent. Planning is meaningless unless control action takes to ensure the success of the plan. Control also provides information feedback which helps modify the existing plans and in making new plans.

    Production Planning and Control: Objectives, Importance, and Limitations.

    Similarly, control is dependent on planning as the standards of performance are laid down under planning. Therefore, they should consider an integrated function of planning to ensure the most efficient production and regulation of operations to execute the plans successfully.

    They may define as the direction and coordination of the firm’s material and physical facilities towards the attainment of pre-specified production goals in the most efficient available way.

    It is the process of planning production in advance of operations, establishing the exact route of each item, part, or assembly, setting starting and finishing dates for each important item or assembly and finished products, and releasing the necessary orders as well as initiating the required follow up to effectuate the smooth functioning of the enterprise.

    Thus, they involve planning, routing, scheduling, dispatching, and expediting to coordinate the movements of materials, machines, and manpower as to the quantity, quality, time, and place. It is based upon the adage of “first plan your work and then work your plan”.

    Objectives of Production Planning and Control:

    The main objective of production planning and control is to ensure the coordinated flow of work so that the required number of products are manufactured in the required quantity and of the required quality at the required time at optimum efficiency.

    In other words, production planning and control aimed at the following purposes:

    Continuous Flow of Production:

    It tries to achieve a smooth and continuous production by eliminating successfully all sorts of bottlenecks in the process of production through well-planned routing and scheduling requirements relating to production work.

    Planned Requirements of Resources:

    It seeks to ensure the availability of all the inputs i.e. materials, machines, tools, equipment, and manpower in the required quantity, of the required quality, and at the required time so that desired targets of production may achieve.

    Coordinated work Schedules:

    The production activities plan and carries out in a manufacturing organization as per the master schedule. They try to ensure that the schedules to issue to the various departments/ units/supervisors are in coordination with the master schedule.

    Optimum Inventory:

    It aims at minimum investment in inventories consistent with the continuous flow of production.

    Increased Productivity:

    It aims at increased productivity by increasing efficiency and being economical. This achieves by optimizing the use of productive resources and eliminating wastage and spoilage.

    Customer Satisfaction:

    It also aims at satisfying customers’ requirements by producing the items as per the specifications or desires of the customers. It seeks to ensure the delivery of products on time by coordinating the production operations with customers’ orders.

    Production and Employment Stabilization:

    They aim at ensuring production and employment levels that are relatively stable and consistent with the number of sales.

    Evaluation of Performance:

    The process of production planning and control expects to keep a constant check on operations by judging the performance of various individuals and workshops and taking suitable corrective measures if there is any deviation between planned and actual operations.

    Importance of Production Planning and Control:

    The system of production planning and control serves as the nervous system of a plant. It is a coordinating agency to coordinate the activities of engineering, purchasing, production, selling, and stock control departments. An efficient system of production planning and control helps in providing better and more economic goods to customers at a lower investment. It is essential in all plants irrespective of their nature and size.

    The principal advantages or importance of production planning and control summarize below:

    Better Service to Customers:

    They, through proper scheduling and expediting of work, help in providing better services to customers in terms of a better quality of goods at reasonable prices as per promised delivery dates. Delivery in time and proper quality, both help in winning the confidence of customers, improving relations with customers, and promoting profitable repeat orders.

    Fewer Rush Orders:

    In an organization, where there is an effective system, production operations move smoothly as per original planning and matching with the promised delivery dates. Consequently, there will be fewer rush orders in the plant and less overtime than, in the same industry, without adequate.

    Better Control of Inventory:

    A sound system helps in maintaining inventory at proper levels and, thereby, minimizing investment in inventory. It requires a lower inventory of work-in-progress and less finished stock to give efficient service to customers. It also helps in exercising better control over raw-material inventory, which contributes to more effective purchasing.

    More Effective Use of Equipment:

    An efficient system makes for the most effective use of equipment. It provides information to the management regularly about the present position of all orders in process, equipment, and personnel requirements for the next few weeks. The workers can communicate well in advance if any retrenchment, lay-offs, transfer, etc. are likely to come about. Also, unnecessary purchases of equipment and materials can avoid. Thus, it is possible to ensure proper utilization of equipment and other resources.

    Reduced Idle Time:

    They help in reducing idle time i.e. loss of time by workers waiting for materials and other facilities; because it ensures that materials and other facilities are available to the workers in time as per the production schedule. Consequently, fewer man-hours are lost, which has a positive impact on the cost of production.

    Improved Plant Morale:

    An effective system coordinates the activities of all the departments involved in the production activity. It ensures an even flow of work and avoids rush orders. It avoids “speeding up” of workers and maintains healthy working conditions in the plant. Thus, there improve plant morale as a by-product.

    Good Public Image:

    A proper system helps keep systematized operations in an organization. Such an organization is in a position to meet its orders in time to the satisfaction of its customers. Customers’ satisfaction leads to increased sales, increased profits, industrial harmony, and, ultimately, the good public image of the enterprise.

    Lower Capital Requirements:

    Under a sound system, everything relating to the production plan is well in advance of operations. Where, when, and what requires in the form of input knows before the actual production process starts. Inputs make available as per schedule which ensures an even flow of production without any bottlenecks. Facilities use more effectively and inventory levels keep as per schedule neither more nor less. Thus, helps, in minimizing capital investment in equipment and inventories.

    Limitations of Production Planning and Control:

    Undoubtedly, their system is a must for efficient production management; but in, practice, sometimes, it fails to achieve the expected results because of the following limitations.

    The principal disadvantages or limitations of production planning and control summarize below:

    Lack of Sound Basis:

    They are based on certain assumptions or forecasts about the availability of inputs like materials, power, equipment, etc., and customers’ orders. In case these assumptions and forecasts do not go right, their system will become ineffective.

    Rigidity in Plant’s Working:

    They may be responsible for creating rigidity in the working of the plant. Once the production planning has been completed, any subsequent change may resist by the employees.

    Time-consuming Process:

    Production planning is a time-consuming process. Therefore, under emergencies, it may not be possible to go through the process of production planning.

    Costly Device or machine:

    It is not only a time-consuming process but is a costly process also. Its effective implementation requires the services of specialists for performing functions of routing, scheduling, loading, dispatching, and expediting. Small firms cannot afford to employ specialists for the efficient performance of these functions.

    External Limitations:

    Their effectiveness is sometimes limited because of external factors which are beyond the control of the production manager, Sudden break-out of war, government control, natural calamities, change in fashion, change in technology, etc. are factors that harm the implementation of them.

    Production Planning and Control Objectives Importance and Limitations
    Production Planning and Control: Objectives, Importance, and Limitations, #Pixabay.
  • Production Control: Meaning, Levels, Factors, and Objectives

    Production Control: Meaning, Levels, Factors, and Objectives

    Production Control: Meaning, Levels, Factors, and Objectives…All organizations irrespective of size, use production control to some degree. In small organizations, the production control may be performed by one person; but in large complex industries, the production control department is normally well-organized and highly specialized.

    Production control presupposes the existence of production plans, and it involves the use of various control techniques to ensure product performance as per plans. Coordinating men and materials and machines are the task of production control.

    Meaning and Definition of Production Control:

    Production control may define as;

    “The process of planning production in advance of operations; establishing the exact route of each individual item, part of assembly; setting, starting and finishing dates for each important item, assembly, and the finished products, and releasing the necessary orders as well as initiating the required follow-up to effective the smooth functioning of the enterprise.”

    According to Henry Fayol as;

    “Production control is the art and science of ensuring that all which occurs is following the rules established and the instructions issued.”

    Thus, production control regulates the orderly flow of materials in the manufacturing process from the raw material stage to the finished product.

    Production control aims at achieving production targets, optimum use of available resources, increased profits through productivity, better and more economic goods and services, etc. An effective production control system requires reliable information, sound organization structure, a high degree of standardization and trained personnel for its successful operation.

    A sound production control system contributes to the efficient operation of a plant. In terms of manufacturing customer’s orders, production control assures a more positive and accurate completion and delivery date. Delivering an order on time is important to the customer and the development of customer goodwill. Production control also brings the plan and order to chaotic and haphazard manufacturing procedures.

    This not only increases plant efficiency but also makes it a more pleasant place in which to work. Most people recognize that employees prefer to work and do better work under conditions of obvious control and plan. Morale may be considerably improved.

    Effective production control also maintains working inventories at a minimum, making possible a real saving in both labor and material investment. Thus, good production control helps a company operate and produce more efficiently and achieve the lowest possible costs.

    Levels of Production Control:

    Production control starts with some particular goal and formulation of some general strategy for the accomplishment of desired objectives.

    There are three levels of production control namely programming, ordering, and dispatching. They are;

    • Programming plans the output of products for the factory as a whole.
    • Ordering plans the output of components from the suppliers and processing departments.
    • Dispatching considers each processing department in turn and plans the output from the machine, tools and other work centers to complete the orders by the due date.

    Factors that determine production control operations:

    The kinds of production control operations vary from organization to organization.

    The following factors affect the kinds and magnitude of production control methods in an organization:

    Kinds of production:

    In job-oriented manufacturing, products and operations are designed for some particular order which mayor may not be repeated in the future. Here production usually requires more time, whereas in a continuous manufacturing system inventory problems are more complex but control operations are rather simple due to fixed process. In mixed stock and custom manufacturing systems, the problem of control is further complicated due to the simultaneous scheduling of the combined process.

    Kinds of operations/activities:

    In intermittent manufacturing system, the operations are markedly varied in terms of their nature, sequence, and duration. Due to this the control procedure requires continuous modifications and adjustments to suit the requirements of each order.

    The magnitude of operations:

    Centralized control secures the most effective coordination but as an organization grows in size, decentralization of some production control function becomes necessary. The degree to which the performance of an activity should be decentralized depends upon the scope of operations and convenience of their locations.

    Objectives of Production Control:

    The success of an enterprise greatly depends on the performance of its production control department. The major objective of production control is to gain maximum output from minimum input of resources. Production control regulates the orderly flow of material from the raw stage to finish the stage. It highlights the control mechanism based on the flow of material throughout the organization.

    The production control department generally has to perform the following functions:

    • Provision of raw material, equipment, machines, and labor.
    • The resources are used in the best possible manner in such a way that the cost of production is minimized and the delivery date is maintained.
    • To organize production schedules in conformity with the demand forecasts.
    • Determination of economic production runs to reduce setup costs.
    • Proper coordination of the operations of various sections/ departments responsible for production.
    • It is also responsible for product design and development.
    • To ensure regular and timely supply of raw material at the desired place and of prescribed quality and quantity to avoid delays in production.
    • To perform an inspection of semi-finished and finished goods and use quality control techniques to ascertain that the produced items are of required specifications.

    Thus the fundamental objective of production control is to regulate and control the various operations of the production process in such a way that orderly flow of material is ensured at different stages of the production and the items are produced of the right quality in the right quantity at the right time with minimum efforts and cost.

    Extra things:

    Another objective of Production control is proper tooling and plant layout. A sequential arrangement of plant and machinery leads to minimizing delays and less wastage due to the transfer of material from one place to another. It has an objective of routing a work within the factory. Production control also regulates inventory management and organizes production schedules.

    Major functions of production control are to offer assemblies and products of needed quality and quantity at the precise time and harmonize, scrutinize and feedback to manufacturing management, offer maximum uses of resources and accomplish major objective to cut down cost and trustworthy consumer services.

  • Production Planning: Meaning, Definition, Levels, and Objectives

    Production Planning: Meaning, Definition, Levels, and Objectives

    Production Planning: Meaning, Definition, Levels, and Objectives…Production planning is concerned with deciding in advance what is to be produced when to be produced, where to be produced and how to be produced. It involves foreseeing every step in the process of production to avoid all difficulties and inefficiency in the operation of the plant.

    Production planning has been defined as the technique of forecasting or picturing ahead every step in a long series of separate operations, each step to be taken in the right place, of the right degree, and at the right time, and each operation to be done at maximum efficiency.

    In other words, production planning involves looking ahead, anticipating bottlenecks and identifying the steps necessary to ensure the smooth and uninterrupted flow of production. It determines the requirements for materials, machinery, and man-power; establishes the exact sequence of operations for each item and lays down the schedule for its completion.

    Definition of Production Planning:

    Production planning involves how a manufacturing plan is determined, information issued for its execution, data collected and recorded, which will enable the plant to be controlled through all its stages. A few definitions are given here to have a clear understanding of the term “Production Planning”.

    According to Kim bait and Kimball Jr. as;

    “The planning of industrial operations involves four considerations, namely, what work shall be done, how the work shall be done and lastly when the work shall be done.”

    According to Alford and Beatty as;

    “The technique of forecasting or picturing ahead every step in a long series of separate operations, each step to be taken in the right place of the right degree and at the right time and each operation to be done at maximum efficiency.”

    According to Bethel, At Water. Smith as;

    “Production planning is a series of related and co-ordinated activities performed by not one but several different departmental groups, each activity being to systematize in advance the manufacturing efforts in its area.”

    By studying the above mentioned definitions it can be said that production planning is concerned with thinking in advance what is to be produced, how it is to be produced and by what time should it be produced?

    Levels of Production Planning:

    Production planning can be done at three levels namely Factory Planning, Process Planning and Operation Planning which are as follows:

    Factory Planning:

    At this level of planning, the sequence of work tasks is planned in terms of building machines and equipment required for manufacturing the desired goods and services. The relationship of workplaces in terms of departments is also planned at this stage took into consideration the space available for the purpose. This stage deals with plant location and layout.

    Process Planning:

    There are many operations involved in factory planning for transforming the inputs into some desired end product. In process planning these operations are located and the sequence of these operations in the production process is determined, Plans are also made for the layout of work centers in each process.

    Operation Planning:

    It is concerned with planning the details of the methods required to perform each operation viz. selection of work centers, designing of tools required for various operations. Then the sequences of work elements involved in each operation are planned. Specifications about each transfer, work centers, nature of tools required and the time necessary for the completion of each operation are prescribed.

    Objectives of Production Planning:

    The basic objectives of production planning are as under:

    • Based on the sales forecast and its engineering analysis, to estimate the kind of resources like men, materials, machines, methods, etc. in proper quantities and qualities. It also estimates when and where these resources will be required so that the production of the desired goods is made most economically.
    • It also aims to make all necessary arrangement so that the production targets as set in the production budget and master schedules are reached. While attaining these targets, adjustments are made for the fluctuations in the demand.
    • To make adequate arrangement of men, money, materials, machines tools, implements, and equipment relating to production.
    • To decide about the production targets to be achieved by keeping in view the sales forecast.

    H.A. Harding has nicely summed up objectives of production planning. In his words, the objective of production planning is to make sure that customers will be supplied their orders, on their delivery dates and also at the minimum overall cost by planning the sequence of activities.

    For effective planning of production activities:

    The executives concerned must have complete information regarding the following:

    • Engineering data including a complete analysis of the product to be manufactured, the operations, processes and methods through which each component or class of a product must pass the nature of inspection required, and the method of assembly.
    • Machine analysis giving full information regarding speeds of all available machines and their maximum capacity to perform certain operations, and the rate of output per day, week or month, and the maximum plant capacity per day for each process or operation.
    • The various types and classes of tools and equipment required for production.
    • Material analysis giving full information as to the type, quality, and quantity of the raw material to be used in each process or operation. Also, information as to raw materials in stores, how much are on order, and how much is located or reserved for current orders.
    • The characteristics of each job and the degree of skill and personnel if qualifications required for the effective performance of each such job.
    • Information relating to power production and consumption, internal transport and material handling service.
    • Job analysis giving information as to what methods of operation would yield uniformity of output, ease in production and reduction in costs.
    • Information as to the customers’ orders on hand and the delivery for customers, and what for stock purposes.
    Explanation:

    It is the job of the production planning department to arrange for the order in which the work will be run, the routing and scheduling of work, and determine what machines, tools, workplaces materials, and operatives should do the work.

    A balanced production planning would tend to increase operating efficiency by stabilizing productive activities, facilitate selling and customer service, and help reduce production cost by providing a reliable basis for investment in raw materials and tools.

    It would promote fuller utilization of plant, equipment, and labor by controlling all time and efforts essential in manufacturing.

  • Plant Layout: Meaning, Definition, Objectives, and Principles

    Plant Layout: Meaning, Definition, Objectives, and Principles

    Plant layout means the disposition of the various facilities (equipment, materials, manpower, etc.) within the area of the site selected. This article explains the Plant layout – with their concepts – meaning, definition, objectives, and principles. Plant layout begins with the design of the factory building and goes up to the location and movement of work. All the facilities like equipment, raw materials, machinery, tools, fixtures, workers, etc. are given a proper place.

    Here is the article explains – Plant Layout: Meaning, Definition, Objectives, and Principles.

    Plant layout is the plan for arranging the physical facilities and manpower requires to manufacture a product to utilize them effectively. It is a plan for effective utilization of facilities for the manufacture of products – involving a most efficient and economical arrangement of machines, materials, personnel, storage space, and all supporting services, within available floor space.

    Meaning of Plant layout:

    They also know as facilities design. Plant layout constitutes planning of the amount of space required for all kinds of activities in an industry, i.e., equipment, machinery, furniture and fittings, offices, restrooms, warehouses, etc. It is a “Technique of locating different machines and plant services within the factory so that the greatest possible output of high quality at the lowest possible total cost can be available”. Also, The primary objective of plant layout is to minimize the movement of men and materials in the plant.

    Definition of Plant layout:

    More definition of plant layout as follows:

    “Plant layout is a plan of optimum arrangement of facilities including personnel, equipment’s, storage space, material handling equipment and all other supporting services along with the decision of best structure to contain all these facilities.”

    In the words of James Lundy,

    “It identically involves the allocation of space and the arrangement of equipment in such a manner that overall costs are minimized.”

    According to Mo Naughton Waynel,

    “A good layout results in comforts, convenience, appearance, safety, and profits. A poor layout results in congestion, waste, frustration, and inefficiency.”

    It is very complex as it involves concepts relating to such fields as engineering, architecture, economics, and business administration. Since a plant layout, when properly designed, encompasses all production’ and service facilities and provides for the most effective utilization of men, with materials and machines constituting the process, is a master blueprint for coordinating all operations.

    The objective of a Good Plant Layout:

    The principal objective of a proper plant layout is to maximize production at the minimum of the costs. Also, This objective should keep in mind while designing a layout for a new plant as well as while making the necessary changes in the existing layout in response to changes in management policies and processes, and techniques of production. Besides, it must satisfy the needs of all people associated with the production system, i.e. workers, supervisors, and managers.

    If a layout is to fulfill this goal, it should plan with the following clear objectives in mind:

    • There is the proper utilization of cubic space (Le. length, width, and height). Maximum use of volume available should make. For example, conveyors can be run above head height and used as moving work in progress, or tools and equipment can suspend from the ceiling. Also, The principle is particularly true in stores where goods can store at considerable heights without inconvenience.
    • Also, the Waiting time of the semi-finish products minimize.
    • Working conditions are safer, better (well-ventilated rooms, etc.) and improve.
    • Material handling and transportation minimize and efficiently control. For this, one has to consider the movement distances between different work areas – as well as the number of times such movements occur per unit period.
    • The movements made by the workers are minimizing, and.
    • Also, Suitable spaces are allocating to production centres.
    More Objectives:
    • Plant maintenance is simpler.
    • There increases flexibility for changes in product design and future expansion. It must be capable of incorporating, without major changes, new equipment to meet technological requirements or to eliminate waste.
    • A good layout permits materials to move through the plant at the desired speed with the lowest cost.
    • There are increasing productivity and better product quality with reduced capital cost.
    • Boosting up employee morale by providing employee comforts and satisfaction.
    • The workers should so arrange that there is no difficulty in supervision, coordination, and control. There should be no “hiding-places” into which goods can mislay. Goods – raw materials and ready stocks – must be readily observable at all times. Also, They will reduce the pilferage of material and labor.

    It should note here that the above-stated objectives of plant layout are laudable in themselves. It is often difficult to reconcile all of them in a practical situation. And as such, the highest level of skill and judgment are requiring to exercise. For this, the close association between the entrepreneurs and experienced engineers is a must.

    Plant Layout Meaning Definition Objectives and Principles
    Plant Layout: Meaning, Definition, Objectives, and Principles.

    Principles of Plant layout:

    While designing the plant layout – the following principles must keep in view:

    • Movement: Materials and labor should move over minimum distances – saving cost and time of transportation and material handling.
    • Space Utilization: All available cubic space should effectively utilize – both horizontally and vertically.
    • Flexibility: Layout should be flexible enough to be adaptable to changes required by expansion or technological development.
    • Interdependence: Interdependent operations and processes should locate near each other; to minimize product travel.
    • Overall Integration: All the plant facilities and services should fully integrate into a single operating unit – to minimize the cost of production.
    • Safety: There should be an in-built provision in the design of the layout – to provide for the comfort and safety of workers.
    • Smooth Flow: The layout should so design to reduce work bottlenecks and facilitate the uninterrupted flow of work throughout the plant.
    • Economy: The layout should aim at affecting the economy in terms of investment in fixed assets.
    • Supervision: A good layout should facilitate the effective supervision of workers.
    • Satisfaction: A good layout should boost up employee morale – by providing them with maximum work satisfaction.
  • Process Costing: Meaning, Characteristics, and Objectives

    Process Costing: Meaning, Characteristics, and Objectives

    Process Costing is a method of costing used to ascertain the cost of a product at each process or stage of manufacture. You will be able to understand the Process Costing based on the points given to them; 1) introduction, 2) meaning of process costing, 3) definition of process costing, 4) characteristics of process costing, 5) objectives of process costing, and 6) principles of process costing. In this method, the costs of materials, wages and overheads are accumulated for each process separately, for a gives period, and then carrying forward cumulatively from one process to the next process till the last process complete.

    This article explains the topic of Process Costing: Introduction, Meaning, Definition, Characteristics, Objectives, and Principles.

    Process costing is probably the most widely used method of cost ascertainment. Records are also maintaining to account for process losses. These losses may be normal or abnormal. Separate accounting is done for normal and abnormal losses, opening and closing work-in-progress and inter-process profits, if any. This method of costing used in those industries where mass production of identical units undertakes continuously and finish products are subject to several production stages call processes before completion.

    The system of process costing is suitable for industries involving continuous production of the same product or products through the same process or set of processes. It is in use in the plant producing paper, rubber products, medicines, chemical products. It is also very much common in flour mill, bottling companies, canning plants, breweries, etc.

    Meaning of Process Costing:

    They refer to a method of accumulating the cost of production by the process. It uses in mass production industries producing standard products like steel, sugar, chemicals, oil, etc. In all such industries, goods produced are identical and all factory processes are standardizing. Output in such industries consists of like units and every unit of the product undergoes a similar operation in the process.

    So it implies that the same cost of material, labor and overhead charges to each unit of the production process. Under this method, costing an individual unit is impossible. It so-calls because under process costing cost of the product ascertain process-wise.

    They also know as “Continuous Costing” because industries that adopt process costing undertake the production of goods continuously. They also know as “Average Costing” because the cost per unit of each process ascertains by averaging the expenditure incurred on that process during a period by the number of units produced in that process during the period.

    Definition of Process Costing:

    After their meaning, Process Costing defines by different scholars as under:

    According to Wheldon,

    “Process costing is a method of costing used to ascertain the cost of the product at each process, operation or stage of manufacture.”

    According to the Institute of Cost and Management Accountants, London,

    “Process costing is that form of operation costing which applies where standardized goods are produced.”

    Characteristics or Features of Process Costing:

    It is that aspect of operation costing which uses to ascertain the cost of the product at each process or stage of manufacture. Where processes are carrying on having one or more of the following characteristics of Process costing:

    • Production over having a continuous flow of identical products except. Where plant and machinery are shut-down for repairs, etc.
    • Clearly defined process cost centers and the accumulation of all costs (materials, labor, and overheads) by the cost centers.
    • The maintenance of accurate records of units and part units produced and cost incurred by each process.
    • The finished product of one process becomes the raw materials of the next process or operation and so on until the final product obtains.
    • Avoidable and unavoidable losses usually arise at different stages of manufacture for various reasons. Treatment of normal and abnormal losses or gains is to study in this method of costing.
    Extra characteristics:
    • Sometimes goods are transferring from one process to another process, not at cost price but transfer price just to compare this with the market price and to have a check on the inefficiency and losses occurring in a particular process. The elimination of the profit elements from stock is to learn in this method of costing.
    • To obtain accurate average costs, it is necessary to measure the production at various stages of manufacture. As all the input units may not convert into finish goods; some may be in progress. The calculation of effective units is to learn in this method of costing.
    • Different products with or without by-products are simultaneously producing at one or more stages or processes of manufacture. The valuation of by-products and apportionment of the joint cost before the point of separation is an important aspect of this method of costing. In certain industries, by-products may require further processing before they can sell.
    • The main product of one firm may be a by-product of another firm and in certain circumstances. It may be available in the market at prices which are lower than the cost to the first-mentioned firm. It is essential, therefore, that this cost knows so that advantages can take of these market conditions.
    • The output is uniform and all units are identical during one or more processes. So the cost per unit of production can ascertain only by averaging the expenditure incurred during a particular period.

    Process Costing Meaning Characteristics and Objectives
    Process Costing: Meaning, Characteristics, and Objectives, #Pixabay.

    Objectives of Process Costing:

    How do you know what cost you need? If you know the total cost of production of each process. The following are the main objectives of process costing:

    1. To Ascertain the Cost of Each Process: It is necessary to know the cost at every stage of production and this fulfills by the process costing method. On this basis, management can decide concerning the make or buy the required commodities.
    2. To Ascertain the Cost of Bye-Product: Bye-product is that which obtains with the main product in the course of the production. For example; while producing mustard oil, the cake also obtains. Which terms as bye-product and the cost of which is necessary to know the actual cost of the main product? Cost of bye-product ascertains by preparing bye-product Account, under process costing.
    3. To Know the Wastage in Each Process of Production: During the courage of production, different wastages, such as; loss in weight, normal wastage, and abnormal wastage, etc. may arise. Management of any concern may know about these wastages by Process Costing Account.
    4. To Ascertain the Profit or Loss of Each Process: The output or the part of output at the stage of every process can sell out either at profit or loss. Thus the management can know about the profit or loss at every process by preparing Processes Account.
    5. The base of the Valuation of Opening and Closing Stock of Each Next Process: If the total cost of production of any process divides by the number of units, we get the cost of production per unit of that particular process and on this basis opening and closing stock of next process value.

    Principles of Process Costing:

    The essential stages in principles of process costing are:

    The factory divide into several processes and an account maintains for each process. Each Process Account debit with material cost, labor cost, direct expenses, and overheads allocate or apportion to the process.

    The output of a process transfer to the next process in the sequence. In other words, the finished output of one process becomes input (materials) of the next process. The production records of each process are keeping in such a way as to show. The quantity of production and the wastage and scrap and the cost of production of each process for each period.

    Extra things:
    • In some cases, the whole output of one process not transfers to the next process. A part of the output may transfer to the next process. And, a certain portion of the output may sell in semi-finish form or may keep in stock and transfer to Process Stock Account. If the output of any process sells at a profit in semi-finish form. Then profit on that particular sale will show on the debit side of that concerning profit, as profit on goods sale or transfer.
    • In case there is loss or wastage of units in any process. The loss has to born by the good units produced in that process and as a result. The average cost per unit increases to that extent. It may note that, if there is loss or wastage in any process, the quantity of loss or wastage should enter on the credit side of the concerned Process Account in the quantity column. In case the wastage has some scrap value. It should appear on the credit side of the concerned Process Account in the value column against the entry for wastage. But, if the scrap value of the wastage does not specifically give in the problem. It should take as nil.

    The total cost of production of each process for a particular period divided by the number of units produced in that process during that period. And, the average cost per unit of production for a period obtain. The finished output of the last process transfer to the Finish Goods Account.

  • Single Costing: Meaning, Characteristics, and Objectives

    Single Costing: Meaning, Characteristics, and Objectives

    The single Costing method of the ascertainment of the cost of production is suitable for those industries in which manufacturing is continuous and units of output are identical. You will be able to understand the Single Costing based on the points given to them; introduction, the meaning of single costing, the definition of single costing, characteristics of single costing, and objectives of single costing. One operation costing method of costing by units of production and adopts where production is uniform and a continuous affair, units of output are identical and the cost units are physical and natural.

    This article explains the topic of Single Costing: Introduction, Meaning, Definition, Characteristics, and Objectives.

    The cost per single determines by dividing the total cost during a given period by the number of units produced during that period. This method of costing generally adopt where an undertaking engages in producing only one type of product or two or more products of the same kind but of varying grades or quality. The industries where this method of costing uses are the dairy industry, beverages, collieries, sugar mills, cement works, brick-works, paper mills, etc.

    Meaning of Single Costing:

    Single or Unit or Output costing is the method of costing in which cost is ascertained per unit of a single product in continuous manufacturing activity. Every Single or per unit, the cost calculates by dividing total production cost by several units produced.

    This method knows as “Single costing” as industries adopting this method manufacture, in most cases, a single variety of products. This method also knows as “Unit costing”, as not only the cost of the total output but also the cost per unit of output ascertains under this method. Under this method cost units are identical. This method also calls “Output costing”, as the cost ascertains for the total output of a product.

    Definition of Single Costing:

    The following definitions below are;

    According to J.R. Batliboi,

    “Single or output cost system is used in businesses where a standard product is turned out and it is desired to find out the cost of a basic unit of production.”

    The Institute of Cost and Management Accountants, London,

    “output costing is the basic costing method applicable where goods or services result from a series of continuous or repetitive operations or processes to which costs are charged before being averaged over the units produced during the period.”

    From the above definitions, it is clear that this costing is a method of costing under. Which there is the costing of a single product, which produces by continuous manufacturing activity. Though under this method of costing a single variety of product manufacturers. It may vary concerning size, grade, color, etc. The example of industries that make use of this method of costing is; brick, sugar, cloth, coal, cement, fisheries, food canning, quarries, plantation industries, etc.

    Thus single costing adopts for cost ascertainment in those manufacturing organizations. Which is engaging in producing only one type of product or two or more products of the same kind but of varying grades or qualities? This method uses in industries like mines, quarries, oil drilling; breweries, cement works, brick-works, .sugar mills, steel manufacture and aluminum products, etc.

    In all those industries where single costing uses, there is a standard or natural unit of cost. For example, a tonne of coal in collieries, one thousand bricks in brick-works, a quintal of sugar in the sugar industry, a tonne of cement in the cement industry, etc. In this costing, the cost of production usually ascertains by preparing a cost sheet or a cost statement.

    Single Costing Meaning Characteristics and Objectives
    Single Costing: Meaning, Characteristics, and Objectives, #Pixabay.

    Characteristic or Features of Industries Which Use Single Costing:

    The following are the characteristics or features of the industries where the single costing method uses:

    • The cost per unit of output, determined under a single. Costing enables the management to make a real comparison between different periods and between different firms within the same industry, as the unit of output is a common factor between different periods and between different firms within the same industry.
    • Equality of cost is an important feature of this method. That is, under this method, identical cost units will have identical costs.
    • Production is on a large scale and is continuous.
    • The units of production are identical and homogeneous.
    • One cost is the method of costing adopt in concerns where there is a production of a product. Or, a few grades of the same product differing only in size, shape or quality by the continuous process of manufacture. The units of production or output are identical and the costs of units are physical and natural.
    • The cost units are physical and natural and capable of being expressed in a convenient unit of measurement.
    • This method is the simplest method of all the methods of cost; in the sense that the cost collection and the cost ascertainment are quite simple.
    • In most cases, the unit of measure is also the cost unit, viz., one unit (in the case of T.V., radio, camera), 1,000 units (in the case of bricks), one gross (in the case of pencils, slates, bolts, and nuts), one liter (in the case of paints), one tonne (in the case of coal, cement, and steel), one bale (in the case of cotton), etc.

    Objectives of Single Costing:

    Single costing is a very simple method of costing. Its principal objectives are as follows;

    • To ascertain the per-unit cost of production by dividing the total cost of production by the number of units produced.
    • To estimate per unit cost of production for the future and facilitate production planning.
    • Help in the preparation of tenders and fixation of selling prices.
    • To facilitate a comparison of the cost of production of two accounting periods.
    • To control the cost of the product through the comparative study of the costs of any two periods. Or, the comparison of the actual costs with the Pre-determined standard cost.
    • The analyze the expenditure by nature, classify them into the element of cost and know. The extent to which each element of cost contributes to the total cost.
    • To ascertain the profit or loss of production.
  • What does Materials? Meaning, Control and Objectives

    What does Materials? Meaning, Control and Objectives

    Introduction; The term “Materials” refers to the raw materials used for production, subassemblies and fabricated parts. Also, define as “anything that can store stock or stockpiled”. The terms “materials” and “stores” are sometimes used interchangeably. However, both terms differ. The term “stores” has a wider meaning and includes not only the raw materials used in production but also other items held in stock in the storeroom, such as components, tools, patterns, maintenance material, consumable stores, etc.

    Here are explain; What does Materials? Introduction, Meaning, Control and Objectives.

    It also includes stock of finished goods and partly finished goods. “Consumable” stores are items used in, production but do not become a part of the finished product, such as oil, grease, sandpaper, soap, and other cleaning materials, etc. Material is a chemical substance or mixture of substances that constitute an object. The material can be pure or impure, living or non-living matter. They can classify based on their physical and chemical properties, or their geological origin or biological function.

    Materials science is the study of materials and their applications. Raw material can process in different ways to influence their properties, by purification, shaping or the introduction of other materials. New material can produce from raw material by synthesis.

    Dressmaker making the dress by Materials
    Dressmaker making the dress by Materials. #Pixabay.

    Meaning of Materials:

    The term “Material” refers to the raw material used for production, subassemblies and fabricated parts. Material control is the main component of the process of material management. Control over material is of utmost importance for the smooth and uninterrupted functioning of an organization.

    A few definitions of the term is given as under:

    “Material control is a systematic control over purchasing, storing and consumption of materials, to maintain a regular and timely supply of materials, at the same time, avoiding overstocking.”

    Another definition;

    “Material control refers to the management function concerned with the acquisition, storage, handling and use of materials to minimize wastage and losses, derive maximum economy and establish responsibility for various operations through physical checks, record keeping, accounting, and other devices.”

    In simple words, material control refers to the various measures adopted to reduce the amount of loss of material at the time of receiving, storing and issuing the raw material. Material control in practice is exercised through periodical records and reports relating to purchase, receipt, inspection, storage and issuing direct and indirect material. Proper control over material can contribute substantially to the efficiency of a business.

    What does Materials Introduction Meaning Control and Objectives
    What does Materials? Introduction, Meaning, Control and Objectives. Wool Materials #Pixabay.

    Concept and Objectives of Materials Control:

    Material form an important part of the cost of a product and, therefore, proper control over material is necessary. No cost accounting system can become effective without proper and efficient control of the material. As well as, Materials control aims at efficient purchasing of material, efficient storing and efficient use or consumption.

    Material or inventory control may define as,

    “Systematic control and regulation of the purchase, storage and usage of materials in such a way that maintains a smooth flow of production and at the same time avoids excessive investments in inventories. Efficient material control cuts out losses and wastes of materials that otherwise pass unnoticed”.

    The broad objectives of material control are below:

    • It eliminates the problem of understocking and, therefore, the material of the desired quality will available when the need for efficient and interrupt production.
    • The material will purchase only when the need exists. Hence, it avoids the chances of over-stocking.
    • By purchasing material at the most favorable prices, the purchase can make a valuable contribution to the reduction in cost.
    • Material is protecting against loss by fire, theft; handling with the help of proper physical controls.
    • Issues of material are properly authorizing and accounting for.
    • Vouchers will approve for payment only if the material has been receiving and is available for the issue.
    • Material is, at all times, charge as the responsibility of some individual.

    Knitting product makes by Dressmaker
    Knitting product makes by Dressmaker. #Pixabay.

    Objectives of Materials Control:

    The following are the main objectives of materials control:

    To the availability of Materials:

    There should be a continuous availability of all types of materials in the factory so that the production may not be held up for want of any material. Also, the minimum quantity of each material is fixing to permit production to move on schedule.

    To reasonable Price:

    While purchasing materials, it is seen that it is purchasing at a reasonably low price. Quality is not to sacrifice at the cost of the lower price. The material purchase should be of that quality alone which is a need.

    To enable uninterrupted production:

    The main object of material control is to ensure smooth and unrestricted production. Production stoppages and production delays cause substantial loss to a concern.

    To ensure the requisite quality of materials:

    The quality of finished products depends mainly on the quality of the raw material used. If the quality of the raw material is not up to desired standards, the end product will not be of the quality of the desires which affects the sale of the product in the market resulting in loss of profits as well as the goodwill of the concern. It is of vital importance to exercise strict control and supervision over the purchases, storage, and handling of material.

    To minimize wastage:

    The loss of material may occur on account of rust, dust, dirt or moisture, bad and careless handling of material, poor packing and many other reasons. The causes responsible for such losses must be brought to light and utmost efforts should make to minimize the wastage of raw material. This is possible only by introducing an efficient materials control system. There should be minimum possible wastage of materials while these are being stored in the go-downs by storekeepers or used in the factory by the workers.

    Wastage should allow up to a certain level known as the normal level of wastage and it should not exceed that level. Leakage or theft of material must avoid keeping the cost of production under control. Storekeepers and workers should train to handle the material in a scientific way to avoid wastage. Also, the storekeeper is to keep the stores neat and tidy to avoid the wastage due to rust, dust or dirt.

    To fix responsibility:

    A proper system of materials control also aims at fixing the responsibility of operating units; and, also individuals connected with the purchase, storage, and handling of material.

    To provide information:

    Another objective of materials control is to provide accurate information regarding material cost; and, inventory whenever needed by management.

  • Need and Benefits of Competitive Intelligence with Objectives and difference

    Need and Benefits of Competitive Intelligence with Objectives and difference

    What does Competitive Intelligence (CI) mean? Benefits of Competitive Intelligence; Competitive intelligence (CI) is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors, and any aspect of the environment needed to support executives and managers in strategic decision making for an organization. Need and Benefits of Competitive Intelligence with Objectives and difference. The growing competition in the business industry has made it necessary for any company to stay in competition or have a competitive advantage over its competitors, adequate and relevant information about the competitors need to receive or know at the right time in other to make a good strategic business decision.

    Know and Understand the Explanation of Competitive Intelligence.

    Definition by business Jargon’s: In business parlance, competitive intelligence can understand as the process of identifying, gathering, evaluating and disseminating, information concerning competitor’s strengths and weaknesses, products, and customers, which a firm requires for strategic decision making. In other words, it is a legal and ethical practice that helps in improving the firm’s competitive ability and capacity.

    Discussion of the topic “Competitive Intelligence” first Meaning of Competitive Intelligence, Definition, Why need be Competitive Intelligence? then Benefits. We can also discuss the Objectives with the Difference between Competitive Intelligence and Market Intelligence.

    Competitive intelligence or otherwise called as early signal analysis encompasses information relating to competitor’s plans, products, next moves, and actions. Such intelligence influences the organization’s plans and strategies. Add to that, it helps in prior ascertainment of opportunities and threats in the marketplace, before they are apparent.

    Competitive intelligence [Hindi] defines as a systematic process that transforms random bits and pieces of data into strategic knowledge. This information comprises about competitors, customers, technological, environmental, product, and market in. others to make a good strategic decision.

    Competitive intelligence is described as those activities a company undertake in determining; and, understanding its industry as well as identifying and understanding the competitors, also determine and understand their weaknesses and strength and anticipate their next moves.

    This definition of competitive intelligence tends to identify/determine, understand, and anticipate industry and competitors. Furthermore, competitive intelligence is a process of monitoring the competitive environment, to provide actionable intelligence that will enhance a company’s competitive advantage over its competitors.

    Why need be Competitive Intelligence?

    In today’s changing business environment, organizations need to implement competitive intelligence because:

    Business activity is increasing rapidly:

    If customers expect businesses to deliver goods as quickly as possible as well as communicate with them with a faster means of communication. To meet these requirements organizations need efficient management and CI.

    Needed Business Information overload:

    Organizations are privileged to collect a lot of information, but organizations do not have the idea of which information is relevant. Competitive intelligence will assist in analyzing the collected information, filter it, learn what is relevant, and use it to benefit various business decisions and strategies.

    Global competition Increase by new competitors:

    Companies are now moving across their original borders into another country. For example, financial firms like HSBC can be found in several countries in which they constitute a threat and complete with the home companies.

    The existing competitor is becoming more aggressive:

    Competitive intelligence will help organizations forecast competitor’s actions and allow organizations to be proactive because all companies want to acquire more market share and customers.

    Political changes affect anybody quickly and forcefully:

    Deregulation of business such as retail, insurance, and aviation industry create more threat to organizations in other sectors because their sector can also be deregulated; but implementing CI the organizations will keep informed about the proposed political change that might affect the business.

    Technology is going to change by Rapidly:

    As organizations can all observe that technology is changing rapidly to the extent that something new happens in the computer industry like breakthroughs which tend to create new opportunities.

    For example, the iPhone held the highest market share as well as the highest customers but when the Samsung Android and Redmi came into the picture and video, iPhone’s market share and customer base starts to decline. However, if organizations implement competitive intelligence, it will keep track of technological changes in the industry and other industry that is important to an organizations survival.

    Important Benefits of Competitive Intelligence:

    A formal Benefits of competitive intelligence program can do the following;

    Change in the marketplace:

    Companies that observe the marketplace tend not to caught unawares, but companies that fail to observe the market place tend to pay a high price for their mistake.

    The action of competitors:

    Competitive intelligence activity will create an opportunity to understand what competitors are trying to do in other to outsmart their competitors.

    Discover new or potential competitors from Business:

    Competitive intelligence activity will provide an insight into the new segment or market a competitor is entering.

    Learn from the success and failure of other Competitors:

    Competitive intelligence activity will investigate if the customer is happy with competitors and use their findings as a yardstick for development.

    Know how to Increase the range and quality of acquisition target?

    Competitive intelligence activity will create insight on target company for acquisition because not all company that posses as a threat are worth acquiring. After all, some companies create deception.

    Know about new technology, products, and processes that affect business:

    Competitive intelligence activity tends to reveal if the project being embarked upon by their company is worth investing in or needs additional resources or the project needs to be shut down because some projects don’t worth any extra expense or resource.

    Know about political, legislative, or regulatory changes that can affect business:

    The competitive intelligence activity will help analyze the impact of a law or regulation proposed by the government because this government law affects everybody and forces all to change.

    Startup new business:

    Competitive intelligence activity will help organizations decide if they should enter a new business by observing the success and failure of the market competitor.

    Look at own business practice with an open mind:

    Competitive intelligence activity will expose organizations to new ideas and concepts because their method of business might be stale and outmoded. Also, it will help organizations to be externally focused.

    CI management tool is Help for implements:

    Competitive intelligence activity will provide organizations with relevant information that will assist organizations in re-engineering as well as enhancing customer satisfaction.

    Need and Benefits of Competitive Intelligence with Objectives and difference
    Need and Benefits of Competitive Intelligence with Objectives and difference, #Pixabay.

    Objectives of Competitive Intelligence:

    The following objectives below are;

    • To provide an advanced warning of risks and opportunities, such as mergers, takeovers, alliances, new products, and services.
    • To make sure that strategic planning decisions rely on relevant and up-to-date competitive intelligence.
    • Competitive Intelligence intends to make the firm more competitive concerning the environment in which the firm operates, i.e. competitors, customers, distributors, and other stakeholders.
    • To ensure that an organization can adapt and respond to the changing business environment.
    • To provide a periodic and systematic audit of the firm’s competitiveness; which provides an unbiased evaluation of the firm’s actual position, concerning the environment.

    Difference between Competitive Intelligence and Market Intelligence:

    These differences from infinite research; Often, we come across several terms in business that sound more or less the same; but they turn out to be completely different. Before getting into the differences, let us cut to the chase and get to the basic point of similarity between competitive intelligence and market intelligence. Both these types of intelligence help companies to gain a better foothold in the market and require a considerable amount of accurate research to succeed.

    So, what is the key difference between the two? Here goes – Competitive intelligence is the strategic study used by companies to understand their industry and track the moves of their rivals. On the other hand, market intelligence is a broader concept; which includes the research conducted by a company on the external market it wishes to enter, its competitors, and customers. By differences, you’ll understand the Benefits of Competitive Intelligence.

    What does Competitive Intelligence (CI) mean Introduction Meaning and Definition
    What does Competitive Intelligence (CI) mean? Introduction, Meaning, and Definition with PPT. #Pixabay.

    What meant by Competitive intelligence?

    DescriptionCompetitive intelligence is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors, and any aspect of the environment needed to support executives and managers in strategic decision making for an organization.

    What meant by Market intelligence?

    Description Market intelligence is the information relevant to a company’s markets, gathered and analyzed specifically for accurate; and, confident decision-making in determining strategy in areas such as market opportunity, market penetration strategy, and market development.

    But that’s not all; there are other factors as well that differentiates the two, curious to know what they are?

    The focus of the Data Collected:

    As discussed, market intelligence gives a larger picture to companies about the market and customers. This means that it is more client-focused, which helps companies to understand their customers and the general consumer behavior better. Competitive intelligence is more business-focused as it comprises data about a company’s competitors and their business strategies.

    Digging Deeper into the Data:

    Customers are in the spotlight in case of market intelligence; therefore, the data gathered in this type of business intelligence involves economic; and, social statistics of people such as demographics, population, consumption, and demand. On the other hand, competitive intelligence helps companies identify competitor’s strategies, their strengths, and weaknesses; the chunk of the market share they own; how their tactics are impacting your business, etc.

    The Game Plan:

    While the ultimate aim of both these strategies is to reduce business risk and up the game in the business; the data focus of both these techniques is very different. Therefore, their application in a formal business plan of a company also differs. Market intelligence employee by businesses to improve their existing product offerings and develop new and innovative products; which will ultimately result in improved customer loyalty.

    Competitive intelligence use by companies to plan specific strategies to overcome the competition from various competitors in the market. Each competitor will have different business strategies and tactics and with the help of competitor intelligence, companies can plan different counter-tactics for each of them.

    References:

    • Need and Benefits of Competitive Intelligence – www.mbaknol.com/modern-management-concepts/competitive-intelligence-ci/
    • Definition and Objectives of Competitive Intelligence – businessjargons.com/competitive-intelligence.html
    • Difference between Competitive Intelligence and Market Intelligence – www.infinitiresearch.com/thoughts/competitive-intelligence-vs-market-intelligence