Productivity and People Management


Productivity—real output per working hour—is not rising quickly as it did previously. This does not necessarily mean that workers are becoming lazier. What it does mean is that in an uncertain economy, businesses are not investing enough in the machinery needed to help workers accomplish more. For example, the steel plants are so obsolete that Japan and Germany are taking over the international steel markets. Too, as the economy become more service-oriented, productivity tends to slow down. The reason is that services—such as family counseling—tend to be able to increase productivity only by reducing their quality.

Managing people and resources on all levels of organizations will continue to be a major managerial challenge. Future managers have to be more sensitive to people’s needs and more flexible in resolving problems. Early retirement and part-time work programs are likely to become common in the near future.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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Fixed and Variabl Costs


The study of cost behavior in physical distribution is quite similar to that in manufacturing because most of the activities are repetitive in nature. Under such conditions physical measurements such as man-hours, units handled, and orders processed can be used to measure the activity. Changes in the level of cost incurred usually are caused by changes in the level of activity experienced.

The first step in understanding the cost behavior of physical distribution activities is to establish the relationship between the amount of each cost and an appropriate measurement of the level of activity. Variable costs are those costs that change in proportion to changes in volume and fixed costs. Examples of variable costs include the handling charges in a public warehouse and the cost of packing material used in a shipping department. Fixed costs include depreciation, security costs and taxes on company-owned warehouses, and the salary of transportation manager.

Some costs are mixed, that is, they contain both a fixed and a variable component. An example might be a warehouse labor. A basic crew of three may be required to cover the normal range of activity. However, if the volume of activity exceeds a certain amount, overtime or part-time employees may be necessary.

In some cases costs may be fixed over a relevant range but may increase in steps. These costs may be referred to as step variable cost or step fixed costs. The major distinction is the size of the steps. For example, in an order-processing department of twenty people labor may be considered a variable cost without making a serious error. This is because a relatively small percentage change in the number of orders could result in a change in the number of employees. However, in a department of three people the cost should be considered a fixed cost since a large percentage change in the number of orders processed usually would be required in order to eliminate an employee. Other examples of step fixed costs include the costs of management salaries, depreciation, and taxes associated with each warehouse that the company owns and operate.

Effective planning and control require that the total costs be separated into the fixed and variable components.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight