ENGINEERING MANAGEMENT
Prof. Dr. Mete Gündoğan
SECTION 2 PRODUCTIVITY MANAGEMENT Lesson Content: Productivity Concept Relationship Of Productivity And Quality Measures Affecting Productivity Efficiency Effectiveness Quality, Innovation
What is Productivity ? Productivity is a measure of ratio of production to cost of
production. Productivity is production of an industry as a result of the production process and economical use of financial investment, Manpower, Technology, Land, Machinery and Equipments. Productivity is an attitude and a mental activity. The efforts of continuous improvement at reduced cost can result into improved productivity. Productivity is integral part of our lives. Productivity is not limited only to industries.
What is Productivity ? One of the primary responsibilities of a manager is to achieve
productive use of an organization’s resources. Productivity is sometimes used to measure improvement. Productivity is not about working hard but working smart. Productivity is balance of all factors that will give greatest return for least efforts.
What is Productivity ? Productivity is the amount of output relative to amount of
input
For survival of any organization, productivity ratio must be at
least 1. If it is more than 1, the organization is in a comfortable position. The ratio of output produced to the input resources utilized in the production
What is Productivity ?
Why We Need Productivity? Population growth Scarce resourcesve increasing cost Developing Technology Speed globalisation Increasing competition Growth opportunity at production and trade Everchanging market attitude
Importance of Produvtivity It helps to cut down cost per unit and thereby improve the
profits. Gains from productivity can be transferred to the consumers in form of lower priced Products or better quality products. These gains can also be shared with workers or employees by paying them at higher rate. A more productive entrepreneur can have better chances to exploit expert opportunities. It would generate more employment opportunity.
Importance of Produvtivity Overall productivity reflects the efficiency of production
system. More output is produced with same or less input. The same output is produced with lesser input. More output is produced with more input. The proportional increase in output being more than the proportional increase in input.
How to improve the productivity? Develop productivity measures Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Get management support Measure and publicize improvements Don’t confuse productivity with efficiency
How to improve the productivity? Identify and cut out wastage ( Muda )
How to improve the productivity? Productivity improvement is a three step process; Eliminate wasteful activities Simplify the activities. Improve the Process. Combine two or more activities
How to improve the productivity? There are essentially five factors of production represented
as 5 M’s (a)Machine (b)Material (c)Method (d)Man days (e)Money If you can reduce usage of any of these factors for per unit of your business, productivity will increase.
Causes Of Wastage Of Manpower Absence of work. Non availability of Raw materials. Delay in getting tools and tackles. Machines being out of order. Entrusting low grade work to a competent workmen. Lack of education of appropriate topic. Incomplete or improper instructions of boss.
Reasons Of Wastage Of Machine Efficiency Selection of wrong or useless machinery/equipments. Inappropriate Machine Tools. Lack of proper maintenance of Machines/equipments. Lack of balancing of work on machines/equipments.
Reasons Of Wastages Of Raw Material Wrong design of product / parts. Negligence in handling raw materials. Wrong method of using components or raw material. Lack of maintenance of quality of raw materials. Theft of components/raw materials. Lack of using materials/components at appropriate time.
Reasons Of Improper Use Of Space Lack of careful use of space. Modern Machinery, Tools & tackles not used. Lack of systematic storage. Haphazard use of space. Lack of proper facilities.
Causes Of Unhealthy Mutual Relationship Lack of Healthy reliable interpersonal relationship. Lack of understanding about reliable relationship. Need of education and development not addressed. No systems of motivating and encouraging employees. Lack of using basic modern quality concepts like, Five-S, Kaizen
and Quality Circle. Laziness, avoidance of work and negligence.
Reasons For Wastage Of Time Lack of awareness and consciousness. Work study and measurement not done. Lack of loss time analysis and not taking corrective actions. Inefficient working of workmen not reviewed for improvement. Lack of efficient management and maintenance. Lazy, irresponsible and untrained workmen.
Productivity and Performance Performance is not same as Productivity. Pperformance
takes into account only the output, unmindful of resources consumed Productivity focuses on consumption of resources in relation of output.
Partial Productivity Consumption of only one resource is taken to calculate the
productivity. It is viewing the productivity with respect to only one variable at a time and therefore it could be some times fallacious.
Partial Productivity
Partial Productivity
Total (Factor) Productivity Total productivity is calculated by considering total output and
total input simultaneously.
Example -1: 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr
What is the labor productivity?
Cost of raw material: $5,000 Cost of purchased material: $25,000
Example -1: Labor Productivity ď€ 10,000 units/500hrs = 20 units/hour
Or we can arrive at a unitless figure ; ď€ (10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22
Example -1: Multifactor Productivity Â
Example – 2: For month of Feb 07, following were the factory statistics of Rajesh
Internationa; Total Production : 1,00,000 units Raw Materials Consumed : Rs 50,000 Labour Cost : Rs 25,000 Labour Hrs Consumed : 1000
For the month of Mar 07, following were the statistics Total Production : 1,20,000 units Materials Consumed : Rs 55,000 Labour Cost : Rs 35,000 Labour Hrs Consumed :1100
Example – 2:
Example – 2: Total Factor Productivity
Example: Analyse Partial productivity of Raw Materials has increased from2 to
2.18 But partial productivity of labour cost has decreased in the same period from 4 to 3.43. And even though labour cost productivity has gone down, labour hrs productivity has gone up from 10 to 10.91 (It is indicative of the fact that labour were given financial incentives to improve their productivity. Therefore, cost has gone up due to incentives but actual hrs of labour at work have not increased proportionately) Total factor productivity has increased from 1.33 to 1.41.
Total Productivity Model Total Productivity Model developed by Sumanth It is extension of earlier models. He considers five items as inputs;
Human, Material, Energy, Capital and other expenses.
Total Productivity Model Total Tangible Output = Value of finished goods produced
+ Partial units produced (WIP) + Dividend from securities + Interest from bonds + Other income Total Tangible Inputs = Value of Human Inputs (employees) + Capital inputs + Materials Consumed + Energy inputs + Other expenses (taxes, transport, office, etc)
Factors Affecting Productivity Two basic productivity factor Extrinsic factors (uncontrollable) Internal factors (controllable)
Factors Affecting Productivity External Factors
Factors Affecting Productivity Internal Factors
Factors Affecting Productivity – Immediate Surroundings Factors
Other Measures Affecting Productivity Efficiency Effectiveness Quality Quality of Work Life Innovation
Other Measures Affecting Productivity Efficiency Measures the resources expected to be consumed to the
resources actually consumed. Hence, it focuses on the input side of the system.
(To what degree did the system utilize the “right” things.)
Other Measures Affecting Productivity Effectiveness Measures what the system sets out to accomplish (objective)
with what was actually accomplished; plan vs. actual Hence, effectiveness is an output measure. (Is the output “right” - right quality, right quantity, on time,
etc.)
Other Measures Affecting Productivity Quality Degree to which the outputs (products and services) from
the system conform to requirements or meet customer expectations. The focus is on quality attributes (e.g., conformance,
performance, convenience, responsiveness, perceived quality.)
Other Measures Affecting Productivity ď‚— Quality of Work Life ď€ Measures the way that employees in a system
respond to the sociotechnical aspects of that system.
Other Measures Affecting Productivity Innovation Measures the applied creativity of the system. Relates to the design and development of improved
products, services, and processes.
Basic Concepts
Productivity Chain You must manage to increas productivity You must control for effective management You must measure to continuous control You must identify for correct measurement You must specify quantity to identify exactly
Productivity Slowdown Productivity slowdown in production Capital stock will decrease
Capatity utilization will decrease.
Unit cost will increase Prices will rise (national and international).
Competition will drop Profit will decreas. There will be recession on natioanal and international sales
Productivity Growth Productivity growth in production Capital stock will increase
Capacity utilization will increase
Investments will increase
Unit costs will decrease
Savings will increase
Competitive capacity will increase per capita income will increase
Benefits Of Productivity
Job simplification Minimization of working accident High production capacity and high quality Time, manpower and energy savings Shorten the process and transportation time Material flow at correct speed and correct quantity Utilization creativeness of employee Better decision making procedure, quick information flow, quick
decisions Cost reduction