This section covers the following major heads. Click on the links below to directly go to the related topic or simply scroll down to read all of them
- Capacity Enhancement
- Cost Leadership
- Quality Control
- Tips Of Logistics
- Product Of Life Cycle
Capacity enhancement refers to enhancing an individual’s, group’s or organisation’s ability to work towards its mission which may be made possible by providing training and development sessions, providing coaching, supporting collaboration with others and the like.
The UN Development Program defines “capacity” as “the ability of individuals, institutions and societies to perform functions, solve problems, and set and achieve objectives in a sustainable manner”. The terms “capacity building” or “capacity development” describe the task of establishing human and institutional capacity.
Salient Features of Capacity Enhancement:
- Capacity Enhancement develops better skilled and oriented individuals, more responsive and effective organizations, and a better policy environment for pursuing development goals.
- It enhances the skills of the individuals in the community and renders them quality living by having more ways to generate income and other skills that helps them enhance their current economic status.
- It denotes the development of formal and informal institutions and organizations.
- At the institutional or policy level, it has three main ingredients:
- The country’s resources and capabilities
- An enabling institutional environment
- Motivations and incentives/pressures that promote and help to sustain behavioral change.
Ways of Capacity Enhancement for rural artisan groups
- Individuals can make their Self Help Groups.
- An existing Self Help Group can be turned into an organisation.
- Focus on the reasons why your production level is low. Select the major bottlenecks and work on eliminating the same.
- Add more artisans to your group for enhanced production. Forming a co-operative may also solve problems.
- A technology change or technological advancement may also help increase production capacity.
- Consider the possibilities of diversification or adding new product lines. But first be sure of the quality that you can produce and market opportunities.
- Take feedback from customers regarding products, variations that may help, functionality and latest trends.
- Take up new projects where possible.
- Try for advance payment from your customers. This should be used with proper planning for purchasing raw materials, assembling input material, quantity assessment at any production step till finished product is produced, packaging & transportation etc.
- Artisans should not only focus on improving their skills but also be aware of basic procedures of taxation, accountancy, & billing to work effectively.
As per Wikipedia, Cost leadership is a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry. The cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve). A cost leadership strategy aims to exploit scale of production, well defined scope and other economies (e.g. a good purchasing approach), producing highly standardized products, using high technology, reducing waste & optimizing use of resources. In the last years, more and more companies choose a strategic mix to achieve market leadership. These patterns consist in simultaneous cost leadership, superior customer service and product leadership.
Cost leadership is different from price leadership. A company could be the lowest cost producer, yet not offer the lowest-priced products or services. If so, that company would have a higher than average profitability. However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management.
How cost leadership can be achieved
- Artisans should carefully understand the exact form of demand from the market.
- Compare competitors’ prices from the market for reference.
- Look for easily available raw material at bottom cost without quality compromise. Quality raw material reduces chances of rejection.
- Recycle whatever possible.
- Reduce rejections by controlling quality during production stages.
- Look for cost effective methods of production.
- Increase rate of production by reviewing processes involved, technologies being used, stages of production etc.
- Go for bulk quantity purchase of raw materials if that helps to reduce the purchase cost. But be sure that you will be able to consume that quantity in short term and that you have finances available without paying heavy interest.
- Similarly, go for bulk quantity production to minimise fixed costs.
- Review the various cost components and find the largest contributors. One by one, review the same. Review the fixed & variable costs.
- Calculate precisely final product cost, study competitive costs carefully & then add your appreciation value of creative difference & project. This helps you in establishing cost leadership by optimising the costing too.
Quality control is a process employed to ensure a certain level of quality in a product or service. It may include whatever actions a business deems necessary to provide for the control and verification of certain characteristics of a product or service. The basic goal of quality control is to ensure that the products, services, or processes provided meet specific requirements and are dependable, satisfactory, and fiscally sound.
Essentially, quality control involves the examination of a product, service, or process for certain minimum levels of quality.
Quality control is concerned with checking and reviewing work that has been done or is under process. Under quality control, inspection of products and services (checking to make sure that what’s being produced is meeting the required standard) takes place during and at the end of the operation process.
There are three main points during the production process when inspection is performed:
- When raw materials are received prior to entering production
- Whilst products are going through the production process
- When products are finished – inspection or testing takes place before products are dispatched to customers.
Steps in a Quality Control Process:
Importance of Quality Control:
- The quality of the product that is being made is very important to a company regardless of the product. The higher the quality the more the company can charge for that product. It also helps in branding the Company’s image.
- The reputation of a business deteriorates as a result of poor quality work.
- If a company makes a low quality product, people may not buy it. If people can find a similar product at a lower or similar price and higher quality they will definitely buy it. Quality products give a company competitive edge.
- Businesses that do not focus on quality have to bear heavy costs. Examples of these costs include waste due to products being badly made and therefore not being able to sell them. These include rejections at their own end or returned by the customers.
While making a product, following points should be considered:
- The lowest level of quality that is acceptable for the product
- What is the desired level of quality for that product
- who is responsible for quality control of the product
- a method of quality control to be used.
- For a customized product, make sure that you have all the specifications from customer
- Convert all requirements to measurable elements and take care of fittings / alignments/ aesthetics etc.
- Prepare a quality cum design plan before commencing production and make sure to follow the plan at all stages.
- If possible, get a sample approved by the customer before commencing full scale production.
In case, some non-conformity is observed in the product design or quality, inform and consult your customer (prior to dispatching the goods). Sometimes the customer can still accept the lot. Sometimes, offering a reasonable discount for small defects can also help. But remember these are remote possibilities and these may or may not materialize. Also, such conditions should not be made a practice but only once in a while.
Tips on logistics:
- Keep track of the available transport companies, courier agents, postal services, and railway agents etc. to find the best available links from your production place to buyers place. Keep a list of their freight charges, delivery times, terms & conditions etc. Be aware of the cheapest mode of transport, fastest mode etc.
- Different modes may be cheaper for different destinations. So choose accordingly.
- Be aware of the credibility of the logistic mode that you have chosen.
- Keep economic mode in your planning to sustain buyer regularly.
- You may like to use different modes for sending samples and for sending bulk lots.
- Ensure i.e. take commitment from the logistics company about assured delivery date.
- Inquire about consignment insurance policies in details before opting for them.
- Inform & consult the customer about the logistics mode that you are using or have used. Provide them the docket nos., LR nos etc. immediately after despatch. Keep a follow-up regarding actual delivery after dispatch.
Product life cycle
As per Wikipedia, like human beings, products also have their own life-cycle. From birth to death, human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. The product life cycle goes through multiple phases, involves many professional disciplines, and requires many skills, tools and processes. In simple words, the stages through which individual products develop over time is commonly known as the “Product Life Cycle”.Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert four things:
- that products have a limited life,
- product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller,
- profits rise and fall at different stages of product life cycle, and
- products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.
We define a product as “anything that is capable of satisfying customer needs”. This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, banking, private health care).
Businesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning.
The classic product life cycle has four stages (illustrated in the diagram below): introduction; growth; maturity and decline
At the Introduction (or development) stage, market size and growth is slight. It is possible that substantial research and development costs have been incurred in getting the product to this stage. In addition, marketing costs may be high in order to test the market, undergo launch promotion and set up distribution channels. It is highly unlikely that companies will make profits on products at the Introduction Stage. Products at this stage have to be carefully monitored to ensure that they start to grow. Otherwise, the best option may be to withdraw or end the product.
The Growth Stage is characterised by rapid growth in sales and profits. Profits arise due to an increase in output (economies of scale) and possibly better prices. At this stage, it is cheaper for businesses to invest in increasing their market share as well as enjoying the overall growth of the market. Accordingly, significant promotional resources are traditionally invested in products that are firmly in the Growth Stage.
The Maturity Stage is, perhaps, the most common stage for all markets. It is in this stage that competition is most intense as companies fight to maintain their market share. Here, both marketing and finance become key activities. Marketing spend has to be monitored carefully, since any significant moves are likely to be copied by competitors. The Maturity Stage is the time when most profit is earned by the market as a whole. Any expenditure on research and development is likely to be restricted to product modification and improvement and perhaps to improve production efficiency and quality.
In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can be shared amongst the remaining competitors. At this stage, great care has to be taken to manage the product carefully. It may be possible to take out some production cost, to transfer production to a cheaper facility, sell the product into other, cheaper markets. Care should be taken to control the amount of stocks of the product. Ultimately, depending on whether the product remains profitable, a company may decide to end the product.
References and additional resources: