operational analysis of a select spinning mill - International ...

Douglas Production Function assess the effects of various inputs like raw material, labour store
cost, power, interest, depreciation and other costs involved in the production of yarn. The log
linear form of production function used is based on the following equation.
LnY =α+β1LnX1+ β2LnX2 + β3LnX3+ β4LnX4 + β5LnX5 + β6LnX6 + β7 LnX7 +uµ
Where,
Ln Y = Dependent Variable –Spinning production per Spindle shift.
X1= Xn are independent variables;
X1 = Raw Material cost /Spindle shift; X2 = Salaries and Wages/spindle shift
X3= Stores cost / Spindle shift; X4 = Power cost / Spindle shift
X5 = Other costs/ spindle shift; X6 = Interest cost/ spindle shift
X7 = Depreciation cost/ spindle shift
α = constant /Intercept.
β = co-efficient;
u =Random disturbance term;
Ln = Natural Logarithms.
To predict the production, first of all the dependent and independent variables are to be
fixed in the production function equation and processed to get constants and co efficient. To
arrive this following steps are carried out.
In the first step data related to the production function as given in the following tables
have been applied in the multiple regression models after converting the same in its log form to
arrive the constants and coefficients. In the second step the resultant constants and coefficients
are applied in the Cobb Douglas production function to estimate the production. In the third step
the ten year averages of independent variables of all the four companies have been calculated. In
the fourth step such average cost is applied in the production function along with the constants
and co-efficient to predict the production of each company to evaluate the production
achievement of the companies. The following table shows the unit wise constants and
coefficients variables related to the production function.
Table 8.
Constants and Coefficients –SSM Ltd Unit-1 and Unit-2
COMPANY SSM-UNIT-1 SSM-UNIT-2
CONSTANTS 3.66 3.92
CO-EFFICIENTS
Mat. cost /sple sft 0.21 0.72
S& Wages/sple sft -0.06 0.29
Stores/Sple Sft -0.08 0.36
Power/Sple Sft 0.77 -0.83
Other costs/Sple Sft -0.51 1.77
Interest/Sple Sft -0.29 -0.5
Dep/Sple Sft 0.01 0.93
The regression equation for SSM LTD UNIT-1 is given below:
Ssm-1.pdnpersplesft = 3.6585 + 0.206866*ssm-1.rawpersft - 0.0619988*ssm-
1.swpersplesft - 0.0816154*ssm-1.storpersplesft + 0.773897*ssm-1.powerpersplesft -
0.510007*ssm-1.otherpersplesft - 0.287602*ssm-1.intpersplesft + 0.0112882*ssm-
1.deppersplesft.
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