Top Banner
Productivity – Concept, Measurement & Improvement Presentation by: Prof. P. N. Parameshwaran
30

1-Productivity – Concept, Measurement & Improvement

Dec 02, 2015

Download

Documents

Shriya Gupta

Productivity improvement method
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: 1-Productivity – Concept, Measurement & Improvement

Productivity – Concept, Measurement & Improvement

Presentation by: Prof. P. N. Parameshwaran

Page 2: 1-Productivity – Concept, Measurement & Improvement

Productivity: Definition

International Labour Organisation (ILO) defines PRODUCTIVITY as:

The ratio of “Output of Work” and “Input of Resources” used in the process of creating wealth.

Page 3: 1-Productivity – Concept, Measurement & Improvement

Productivity: Schematic Diagram & Formula

Page 4: 1-Productivity – Concept, Measurement & Improvement

Scope of the Definition

The definition of Productivity is applicable to An Enterprise An Industry An Economy as a whole The input resources and their units of measurement can be:1. Land (Hectares)2. Material (Metric Tonnes)3. Plant & Machinery (Machine Hours)4. People (Man Hours)5. Capital (Rupees)

Page 5: 1-Productivity – Concept, Measurement & Improvement

Other Definitions of PRODUCTIVITY

OECC (1950): “Productivity” is the quotient obtained by dividing output by one of the factors of production. It gives productivity of capital, investment or raw material according to whether output is being considered in relation to above factors.

Davis (1955): Change in product obtained for the resources expanded.

Fabricant (1962): Always a ratio of output to input.

Page 6: 1-Productivity – Concept, Measurement & Improvement

Other Definitions of PRODUCTIVITY

Kendrick and Creamer (1965): Functional definition for Partial, Total factor and Total productivity.

Siegal (1976): Family of ratios of output to input. Sumanth (1979): Total Productivity model Goldratt and Smith (1987): Productivity is

minimizing the use of resources required to produce an output desired by the customer.

Page 7: 1-Productivity – Concept, Measurement & Improvement

Difference between PRODUCTIVITY & PERFORMANCE

PRODUCTIVITY considers output in relation to input.

PERFORMANCE considers only output and not input.

In general, index is the ratio of same parameters under different conditions. Therefore,

Page 8: 1-Productivity – Concept, Measurement & Improvement

Partial Productivity

Definition: Ratio of output to one class of input. At a given time, it considers only one input and ignores all

other inputs. Importance: It focuses on utilization of one resource. Advantages:

Easy to understand Easy to obtain data Diagnostic tool to pinpoint areas of improvement

Disadvantages: Misleading, if used alone Cannot explain overall cost increase Profit control is not precise.

Page 9: 1-Productivity – Concept, Measurement & Improvement

Total Factor Productivity

Definition: Ratio of output to sum of labour and capital inputs.

Advantages: Easy to obtain data Appealing from the view point of the corporate and the

National economist.

Disadvantage: Does not consider impact of material and energy inputs,

though material typically forms 60% of the product cost.

Page 10: 1-Productivity – Concept, Measurement & Improvement

Multi-Factor Model of Productivity

Scott D. Sink further developed Total Factor Productivity Model and proposed the Multi-Factor Model of Productivity.

Capital is not considered in this model, since it is most difficult to estimate how much capital is being consumed in a unit of time. The concept of depreciation used in accountancy makes it more difficult to estimate the actual capital being consumed.

Page 11: 1-Productivity – Concept, Measurement & Improvement

Total Productivity Model

Developed by David J. Sumanth in 1979. 5 inputs are considered

Total tangible output = Value of finished units produced + partial units produced + dividends from securities + interests from bonds + other incomes

Total tangible input = Value of human inputs (employees) + capital inputs + materials purchased + energy inputs + other expenses (taxes, transport, office etc.)

Page 12: 1-Productivity – Concept, Measurement & Improvement

Cobb-Douglas Function

Recognized LABOUR and CAPITAL as two major resources determining the output.

Used to understand trade-off between Labour and Capital. Mathematical Expression:

Q = a Ld Kf

where, Q = Output, L = Labour input, K = Capital input,

a, d, f are constants to be estimated.

d = (δQ / δL) = partial productivity of labour

f = (δQ / δK) = partial productivity of capital

Page 13: 1-Productivity – Concept, Measurement & Improvement

American Productivity Center (APC) Model

Relates PROFITABILITY with PRODUCTIVITY. Derivation:

PRICE RECOVERY FACTOR: This factor considers the effect of inflation. Inclusion of this factor will show whether gains or losses of a firm are due to changes in productivity or it merely indicates the fluctuations in the prices of the material consumed and sold.

Page 14: 1-Productivity – Concept, Measurement & Improvement

Productivity Improvement

Sumanth’s Five Pronged Model: (pl. refer to next slide)

In 1982, Sumanth & Omachanu proposed Five Pronged Approach, classifying 54 different techniques based on 5 basic types: Technology Employee Product Task (Process) Material

Page 15: 1-Productivity – Concept, Measurement & Improvement

Technology Based Employee Based Product Based Task Based Material Based

CADFinancial Incentives

Value Engineering

Method Engineering

Inventory Control

CAM Group IncentivesProduct Diversification

Works Management

Material Requirement Planning

Integrated CAM Fringe BenefitsProduct Simplification

Job DesignMaterials Management

Robotics Promotions R & D Job Evaluation Quality Control

Laser Beam Technology Job EnrichmentProduct Standardization

Job Safety Design

Material Handling

Energy Technology Job EnlargementsReliability Improvement

ErgonomicsMaterial Recycling

Group Technology Job RotationAdvertising & Promotion

Production Scheduling

Computer GraphicsWorker Participation

Computer Aided Data Processing

Emulation MBOMaintenance Management

Skill Enhancement

Rebuilding Old Machinery

Learning Curve

Energy ConservationWorking Condition ImprovementCommunicationZero DefectsPunishmentsRecognitionQuality CirclesTrainingEducationRole PerceptionSupervision Quality

Page 16: 1-Productivity – Concept, Measurement & Improvement

Productivity Improvement

ILO Approach to Productivity Improvement (pl. refer to next slide) :

The classical ILO approach was Task based.

It breaks manufacturing time into :

(A) Basic work content of the product or operation

(B) Added work content

(C) Ineffective time

Page 17: 1-Productivity – Concept, Measurement & Improvement
Page 18: 1-Productivity – Concept, Measurement & Improvement

Added work content & inefficient time can be reduced by reducing….

1. Poor design & frequent design changes2. Waste of materials3. Incorrect quality standards4. Poor layout & poor utilization of space5. Inadequate material handling6. Frequent stoppage in production7. Inefficient method of work8. Poor planning of work9. Frequent breakdowns10. Absenteeism & lateness11. Poor workmanship12. Accidents & occupational hazards.

Page 19: 1-Productivity – Concept, Measurement & Improvement

Role of Computers & IT in Productivity Improvement

Case of Indian Railways: Large network of computerized ticket booking office Person can book a ticket from any location for a train from any

boarding station to any destination station.

Case of Levi-Strauss (U.S. based largest Denim manufacturer): Many retail outlets, connected to each other & to factories via computer

network. Data of sales at every retail outlet updated in the system. Scheduling done accordingly in factories, same item produced &

shipped to the concerned retail outlet. Only 3-days inventory at retail outlets. Reduced operating costs & improved bottomline.

Page 20: 1-Productivity – Concept, Measurement & Improvement

Performance Measurement using Objective Matrix (OMAX)

Principle: Productivity is a function of several performance factors, each with distinct dimensions that vary among work units & the most practical way to assess unit productivity is to measure the most influential factors.

In OMAX method, various forms of productivity ratio are used.

OMAX method is particularly appropriate to basic work units such as crews, departments and staffs, although it can also represent complete organization.

Conveniently applicable to knowledge-based activities that are difficult to measure.

Page 21: 1-Productivity – Concept, Measurement & Improvement

Genetic Classes of Productivity Criteria

1. Quantitative: Number of items produced or measure of service provided (output)

2. Quality: Precise or inferential indicators of quality of production (customer satisfaction)

3. Timeliness: Extent to which activities or functions are completed on schedule (Elimination of delays)

4. Yield: Degree of efficiency of transformation process (input minimization & waste avoidance)

5. Utilization: Effectiveness with which critical resources are utilized (availability of key people & machines)

6. Group Traits: Individual & organizational properties that contribute to productive performance (safety, turnover, absenteeism etc.)

Page 22: 1-Productivity – Concept, Measurement & Improvement

Performance Scores

Performance scales in the body of the Objectives Matrix run from 0 to 10.

Scale is anchored by designated numbers at three levels: Level 0 (clearly defined benchmark) : Lowest level recorded for the

criterion ratio over a recent period of time, say, the last year, in which normal operating conditions existed; normally the worst ratio reading that might be expected.

Level 3 (clearly defined benchmark) : Operating results indicative of performance proficiency at the time the rating scale was established; current ratio reading at the time measuring is initiated.

Level 10 (challenge): A realistic estimate of results that can be attained in the foreseeable future, say 2 years, with essentially the same resources that are now available; a stimulating productivity objective.

Page 23: 1-Productivity – Concept, Measurement & Improvement

Examples of Performance Ratios frequently encountered in Manufacturing Industry

Page 24: 1-Productivity – Concept, Measurement & Improvement

Examples of Performance Ratios frequently encountered in Service Industry

Page 25: 1-Productivity – Concept, Measurement & Improvement

Examples of Performance Ratios frequently encountered in Work Groups

Page 26: 1-Productivity – Concept, Measurement & Improvement

Hard & Soft Factors of the organization

Hard factors: Physical & quantifiable factors.

Eg.: Costs, quality, availability of power, availability of water, waste disposal, transportation and land

Soft factors: Unquantifiable factors. Eg.: Political and social issues (anti-growth movement, environmental restrictions, labor laws) and economic factors (site recruitment incentives; national, state and local tax regimens), HR factors (Job satisfaction, Incentives, recognition, Job morale, Enthusiasm, Sympathy, Sincerity & Honesty, Safety etc.)

Recently, more attention is being focused on Soft Factors.

Page 27: 1-Productivity – Concept, Measurement & Improvement

Steps to improve Hard Factors

Proper plant utilization Conditions under which workshop is concerned Ergonomics Transportation & canteen facilities Elimination of hazard etc.

Page 28: 1-Productivity – Concept, Measurement & Improvement

Steps to improve soft factors

Job satisfaction Incentives Recognition Job morale Enthusiasm Sympathy Sincerity & honesty Safety, etc.

Page 29: 1-Productivity – Concept, Measurement & Improvement

Steps to improve Soft Factors (cont…)

Work Manager can be open and frank for the purpose of his study.

Involving workers in developmental activities in plant.

Satisfy workers’ need for recognition by asking for suggestions and ideas.

Understanding employees through Maslow’s Hierarchy of Needs.

Page 30: 1-Productivity – Concept, Measurement & Improvement

Thank You…!