Download - Techniques for measurement of productivity
TECHNIQUES FOR MEASUREMENT OF PRODUCTIVITY:
ANSHUL AHUJA(MM-662-2K15)Er. SAHIL SHARMA(MM-670-2K15)
Productivity Productivity is the ratio between output and input. It is
quantitative relationship between what we produce and what we have spent to produce.
• Hence, Productivity is , above all, a state of mind-set. It is an
attitude that seeks the continuous improvement of what exist. It is a conviction that one can do better today than yesterday, and that tomorrow will be better than today.
It is the driving force or dynamism behind developing and upgrading the quality of industrial activities.
Productivity=
Productivity
A relation between output generated and input used
A critical determinant of cost efficiency
A method to determine the capacity utilization
A key source of economic growth and
competiveness
Definition
• Productivity increases output.• High productivity results in lower cost per unit of output
resulting in higher levels of profit for a business.• Higher profits for the firm will mean more funds available
for its expansion, new business ventures and community support.
• It may also wish to pass on the benefits of lower costs to consumers in the form of lower prices.
Importance of Productivity
Diff. between Production and ProductivityProduction Productivity
Definition It is defined as the act of manufacturing goods for their use or sale.
it is defined as the rate at which goods are produced.
Use It is the actual process of conversion.
It is the utilization of resources to form goods.
Work done It is the amount of work done or manufactured that is the output.
It is the amount of work one gets for a certain spending cost.
Measurement It is the measure of produced goods.
It is the measure of efficiency.
Important Note!Production is a measure of output only and not a
measure of efficiency
Measurement in Productivity and why ????
•Set overall productivity goals for organization•Raise awareness among employees
Establish productivity management function
•Access your company current performance•Identify the gaps and areas of improvementDiagnose•Set targets and formulate strategy•Implement specificationDevelop road map
Implement measurement system
Implement performance management system
Techniques for Measurement of Productivity:
PRODUCTIVITY
AGGREGATE BASIS
TOTAL PRODUCTIVITY
INDIVIDUAL BASIS
PARTIAL PRODUCTIVITY
OR FACTOR PRODUCTIVITY
Aggregate Basis• On aggregate basis, output is compared with all inputs taken
(added) together. This is called as Total Productivity. Hence,
• Where Total Output=Total production of goods and services and Total Input= Labor + Material + Capital + Energy.
• This index measures the productivity of the entire organization with use of all resources. It is a way of evaluating efficiency of entire plant or firm.
Total Productivity Index =
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10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $30,000
Overhead: $15,500
Example
10
OutputLabor + Materials + Overhead
(10,000 units) * ($10)(500)*($9) + ($30,000) + ($15,500)
TP = 2.0
Example : Total Productivity
TP =
TP =
Individual Basis• On individual basis, output is compared with any one of
the input factor and this is called as Partial Productivity or Factor Productivity.
• Factor productivity or partial productivity indices are of following types:
I. Labor productivityII. Material productivityIII. Machine ProductivityIV. Capital productivity
Labor Productivity
• Labor productivity is simply defined as the ratio of Total output to the Labour input i.e.
• Labor productivity depends upon how labors are utilized.• Labor productivity can be higher or lower depending on factors
like availability of work load, material, working tools, availability of power, work efficiency, level of motivation, level of training, level of working condition (comfortable or poor) etc.
Labor Productivity =
Example• 10,000 Units Produced
• Sold for $10/unit
• 500 labor hours
• Labor rate: $9/hr
What is the labor productivity?
• 10,000 units / 500hrs = 20 units/hr
• (10,000 units * $10/unit) / 500hrs = $200/hr
• 10,000 units / (500hrs * $9/hr) = 2.2 unit/$
• (10,000 units * $10/unit) / (500hrs * $9/hr) = 22.22
•The last one is unit-less
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Example: Labor Productivity
Material productivity
Machine Productivity• Production system converts raw material into finished
product through mechanical or chemical process with the help of machines and equipment's.
• Machine productivity= or • M.P= • Machine productivity depends upon availability of raw
material, power, skill of workers, machine layout etc.
Capital Productivity• For any production set-up, facilities of machines, tools, land
etc. are required which are assets of organization. Capital is needed for such assets.
• Capital productivity= or• Capital productivity= • Capital productivity depends on how effectively assets are
utilized.
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Training Methods
Technology Management
What are the factors that affect productivity?
Employ Based Technique1. Financial incentives2. Fringe benefits3. Employ promotion4. Job rotation5. Education6. Zero defects7. Quality circle8. Communication9. Working environment10. Punishment 11. Zero defect
Method Of Productivity Improvement
Material Based Technique1. Inventory control2. Material handling system3. Quality control4. MRP5. Material management
Task Based1. Method engineering2. Job evolution3. Human factor engineering4. Job design5. Work measurement
Method Of Productivity Improvement (contd.)
Product Based Technique1. Product diversification2. Product simplification3. Product4. Value analysis5. Research and development
Technology Based1. Computer engineering2. CAD3. CAM4. Electronics data processing5. Robotics6. Group technology
Method Of Productivity Improvement (contd.)
© 2011 Pearson Education, Inc. publishing as Prentice Hall
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines Saved 12 seconds per shot
© 2011 Pearson Education, Inc. publishing as Prentice Hall
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines Saved 12 seconds per shot
Operations improvements have helped Starbucks increase yearly revenue per outlet by $200,000 to $940,000 in six years.Productivity has improved by 27%, or about 4.5% per year.
• To procure raw material at low cost.
• To maintain consistent quality.
• To ensure continuous supply of raw material.
• To minimize the carrying costs and ordering costs.
• To maintain good relationship with supplier.
• Efficient record-keeping and prompt reporting.
• To develop new sources and new materials.
• Training and development of personnel.
Role Of Material Management
• It emphasizes the efficient utilization of all the factors of production which are scarce universally.
• It attempts to eliminate wastage.• It facilitates the comparison of the performance of a company to
its competitors or related firms, in terms of aggregate results and of major components of performance.
• It enables the management to control the performance of the company by identifying the comparative benefits rising out of the use of different inputs.
Advantages of Productivity :
References• Imad Alsyouf, The role of maintenance in improving companies
Productivity & profitability, international journal of production economics 2007; 105; 70-78.
• Flynn B.B., sakakibara, relationship between JIT & TQM: practices and performance. Academy of management journal 1995;38(5) 1325-1360.
• TH Willis, CR Huston, F Pohlkamp, (1993), “Evaluation measure of just-in time supplier performance,” Production and Inventory Management Journal, Vol. 34, No. 2, pp. 1–5.
• Harekrushna Dalai, “Case Studies On Productivity Improvement And Supplier Selection”, B.Tech Thesis, NIT ROURKELA