IMPROVING THE PRODUCTIVITY - thedti.gov.za · such as labour, material and capital, ... It is important to measure wastage in order to ... • While absenteeism is still a factor,

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PRESENTATION

OUTLINE

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• Productivity Definition

• Industrialisation Definition

• The Role of Productivity in Manufacturing

• Workplace Challenge Case studies

• Global Production Patterns

• Conclusion: can producitivity alter the patterns?

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PRODUCTIVITY DEFINITION

PRODUCTIVITY DEFINITION

• According to Krugman (1994), productivity is commonly defined as a ratio between the output volume and the volume of inputs.

• Productivity measures how efficiently production inputs, such as labour, material and capital, are being used in an enterprise, industry, sector and/or economy to produce a given level of output.

• Productivity is considered a key source of economic

growth and competitiveness and, as such, is basic statistical information for many international comparisons and country performance assessments.

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PRODUCTIVITY DEFINITION

• Productivity is commonly defined as a ratio between the output volume and the volume of inputs

• Productivity growth constitutes an important element for modelling the productive capacity of economies.

• Productivity data are used to investigate the impact of product, industrial policy, and labour market regulations on economic performance.

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PRODUCTIVITY DEFINITION

• One of the most widely used measures of productivity is Gross Domestic Product (GDP) per hour worked.

• This measure captures the use of labour inputs better than just output per employee. Generally, the default source for total hours worked is the OECD Annual National Accounts database, though for a number of countries other sources have to be used.

• In principle, the measurement of labour inputs should also take into account differences in workers’ educational attainment, skills and experience.

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INDUSTRIALISATION DEFINITION

INDUSTRIALISATION DEFINITION

• Industrialisation is the process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods.

• Characteristics of industrialisation include economic growth, more efficient division of labour, and the use of technological innovation to solve problems as opposed to dependency on conditions outside human control.

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INDUSTRIALISATION DEFINITION

• Industrialisation is the period of:

• social and economic change that transforms a human group from an agrarian society into an industrial one,

• involving the extensive re-organisation of an economy for the purpose of manufacturing.

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INDUSTRIALISATION DEFINITION

• Industrialisation is a process by which traditionally nonindustrial sectors (such as agriculture, education, health) of an economy become increasingly similar to the manufacturing sector of the economy.

• The process of Industrialisation is characterised by sustained economic development based on factory production, division of labour, concentration of industries and population in certain geographical areas, and urbanisation.

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THE ROLE OF PRODUCTIVITY IN MANUFACTURING

PRODUCTIVITY IN INDUSTRIALISATION

• The role of Productivity in Industrialisation has to do with provision of competitive advantage in relation to speed and accuracy.

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•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION

IMPROVING THE PRODUCTIVITY RATIO

THE PRODUCTIVITY PROCESS

INPUTS OUTPUTS Process Conversion

Between output and input there is a blood sweat and tears process called “Conversion” During “Conversion” ALL input factors are put together Labour is only one of the factors

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION PRODUCTIVITY OR NOT ??

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION EFFICIENCY

The measure of the speed and accuracy with which work is completed/done (efficiency).

Other ways to express how to monitor and drive efficiency upwards such as: • A measure of how well resources are transformed into

output • Working well with little waste • Getting the most out of what you put in • The production of the maximum results from the minimum

effort • The best use of resources to achieve production of

products or services.

COLLABORATION

What is speed of doing work? The required pace at which the work is completed Why is the speed of doing work important? Speed is important because the faster the pace of the work can be completed the greater the performance of manpower and machinery resulting in lower operational costs.

EFFICIENCY: IMPROVING OPERATIONAL SPEED

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION

What is accuracy with which work is completed? The required compliance of a product or service with quality specifications.

Why is accuracy important? • If the work is not done accurately it will be rejected,

scrapped, discarded, reprocessed or redone and performance will suffer.

• This will result in higher operational costs, low profits or no profits or a loss situation. It is therefore necessary to maintain balance of speed and accuracy.

EFFICIENCY: IMPROVING OPERATIONAL ACCURACY

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION

These are inputs in which efficiency (speed and accuracy) apply: • Manpower/Labour • Machinery

EFFECIENCY

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION

Relevant ways of achieving efficiency at work or our various businesses?

• Developing existing resources

• Reducing the amount or costs of resources

• Utilising the best resources in the best possible way

• Finding the best resources than the ones we have

• Minimising waste

• Develop Standard Operating Procedure (SOP)

WAYS OF ACHIEVING EFFICIENCY

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION

Increased efficiency in a business will results in:

• Reduced operational costs

• Greater competitiveness

• Improved quality

• More sales

• Higher profits

• Scope for greater investment

• Improved methods.

RESULTS OF INCREASED EFFICIENCY

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION

Measuring speed and accuracy of machines or manpower (efficiency) Efficiency = Time Allowed x 100 Actual Time 1 When products/services are being produced (or any particular job is being done) the worker or machine is expected to produce and deliver the right quantity of products/services of the right quality in a specific allowed time. • If the time taken to perform task is equal to the time allowed to do

the task, then the efficiency is 100% • If the time taken to perform the task is more than the time allowed

for the task, then the efficiency is less than 100% • If the time taken to perform the task is less than the time allowed to

do the task, then the efficiency is more than 100%.

MEASURING EFFECIENCY

When measuring productivity, a definition that is useful

is: Productivity is equal to output divided by input. This

ratio measures how well resources or inputs are utilised

to create the desired output.

One measure of output is value added (VA). Using data

from a company’s financial statements (i.e., profit and

loss statement, balance sheet), VA is computed as

sales less purchases from outside (e.g., materials,

energy, outsourced services) plus change in inventory

of work-in-process and finished goods. This method of

computation is called the subtraction method (or the

VA creation method).

CONCEPT OF VALUE ADDED

CONCEPT OF VALUE ADDED

VALUE ANALYSIS

A value-adding activity is any activity or operation that changes,

converts or transforms material into a product /service that is

valued by the customer, or any activity or operation that provides a

service that is valued by the customer

A non value-adding activity or operation is any activity or

operation that takes time and consumes resources but does not

add value to the product sold or the service provided to the

customer

Value analysis is therefore about understanding and

acknowledging that there are wastes (in different forms) in all

activities and operations, and creating a culture where these

wastes are continuously challenged and eliminated by all

employees

VALUE / NON-VALUE ADDING ACTIVITIES

All activities in the workplace can be divided into three groups, as shown in the following diagram:

Non-value adding, but necessary: Minimize

Value-adding: Increase

Waste: Eliminate

TYPICAL AREAS OF WASTE

THE IMPORTANCE OF MEASURING WASTE

It is important to measure wastage in order to determine: • The current wastage levels • The causes thereof, • Ways to reducing or eliminating it.

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WORKPLACE CHALLENGE CASE STUDIES

WORKPLACE CHALLENGE: PROCESS

• Improvement of the Productivity and Competitiveness of Enterprises

• The new focus is to increase the competitiveness and therefore employment in the previously underdeveloped regions of the country

WPC Concept

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Improved Productivity & Competitiveness

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Key Steps

•Understand the current state of the organisation •Understand where you want to be •Build the guiding team •Get the vision right •Align the initiative to the overall strategic direction of the organisation •Effective Communication for buy-in •Devise an effective education, training and or skills upgrading scheme •Create short term wins •Don’t let up – highlight achieved and future milestones •Make change stick – weave change into culture

WPC CASE STUDIES: Centurion Systems (Pty) Ltd

• Previously, sent middle to Senior Management on various business efficiency programmes.

• In May 2007, decided to introduce the Workplace Challenge (WPC) programme in their organisation.

• The WPC programme made it clear to Management

from the very beginning that their role is to support the new culture of management – employee co-operation by their actions and communication.

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WPC CASE STUDIES: Centurion Systems (Pty) Ltd

• Management at Centurion Systems believes that if the company had not implemented the WPC programme, the results of the economic downturn would have been far more severely than.

• While absenteeism is still a factor, the attendance rate is now between 95 and 97%. Previously, the staff would take time off without bothering to let anyone know.

• Through the lessons learned in the WPC, the people on

the shop floor discovered that it actually cost the company money when they were absent.

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WPC CASE STUDIES: Centurion Systems (Pty) Ltd

• Management attitude improved and culture shift completed, contributing to an increased level of employee motivation

• Innovations introduced: Over the last year, staff members came up with 1290 suggestions, of which 609 have been implemented

• Better intra-company communications

• Through the lessons learned in the WPC, the people on the shop floor discovered that it actually cost the company money when they were absent.

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WPC CASE STUDIES: Centurion Systems (Pty) Ltd

• Since joining the programme from 2007, all these translated in the company increasing the profitability from 12% to 46%, as well as increasing their employment from 300-400. According to management own account, the company competitiveness highlight is that it is even exporting its products to China

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WPC CASE STUDIES: Fabchem(Pty) Ltd

• Fabchem specialises in roof and sidewall support technology that is at the core of making under- ground mining safer, especially at the great depths of South African gold mines

• The company is a Black Empowered company (51.4%

black owned & 10% black female owned) and qualifies as a Level 4 B-BBEE contributor.

• The reason for joining WPC in November 2015, is that in 2015 the Fabchem Group formulated a Five-year Strategy .

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WPC CASE STUDIES: Fabchem(Pty) Ltd

• One of the first steps facilitated by Productivity SA’s Work Place Challenge Facilitator, was to establish 13 Mini-business Units with the help of the team leaders.

• The Fabchem Group of Companies impresses in more than one

regard: • Their Quality, Cost, Delivery, Safety and Morale performance

charts already show a positive trend, even after a very short period of six months since starting on the Workplace Challenge Programme.

• They are putting into practice a good number of innovative procedures towards implementing the spirit and the letter of the disciplines of Continuous improvement;

• They have a rigorous and effective system for getting employees to generate and implement many innovative ideas which are starting to deliver valuable innovations to the whole organisation and its customers.

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WPC CASE STUDIES: Fabchem(Pty) Ltd

• Since joining the programme in November 2015, Febchem has increased their employment from 100 to 126 and went on to increase their profitability from a mere 15% to 53%. In addition, Fabchem Group of Companies is continuing to grow its export market footprint.

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WPC CASE STUDIES: Duys Components Manufacturing (DCM) (Pty) Ltd

• Duys Components Manufacturing (DCM) is involved in heavy, structural, mechanical and automotive engineering

• Was established in 1960, and joined WPC in October

2015, and will be continuing until 24 months from the commencement date.

• sought and, (in the form of the Workplace Challenge

Program (WPC) of Productivity SA), found a vehicle that could assist them to achieve the above rigorous targets.

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WPC CASE STUDIES: Duys Components Manufacturing (DCM) (Pty) Ltd • Given the strict quality, cost, and

delivery standards on the industries that Duys operates in; as well as the stringent standards that are expected by the various Customers and the competitive market in which they operate, Duys saw it necessary to fully engage the minds of all employees from the Shop Floor upward

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WPC CASE STUDIES: Duys Components Manufacturing (DCM) (Pty) Ltd • All of the customer’s demand very high

standards on: • Quality, • On Time In Full (OTIF) Delivery, • Cost-Saving, and Safety.

• Duys realised that in order to consistently meet these demands, Duys needed a catalyst, who would partner with them in setting up an infrastructure that would facilitate Continuous and Never-Ending Improvement (CANI).

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GLOBAL PRODUCTION PATTERNS

GLOBAL PRODUCTION PATTERNS

• Since 2000, the shift in production from North to South in the global economy has occurred.

• There has been an acceleration and an expansion in the number of high-growth economies which are playing prominent roles in a wide variety of industries as exporters and also new markets.

• China became the world’s dominant supplier of apparel,

footwear and consumer electronics products, especially after the termination of the Multi-Fibre Arrangement.

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GLOBAL PRODUCTION PATTERNS

• The international competitiveness of advanced industrial economies has gradually been eroded, at least in terms of traditional measures of export performance.

• Emerging economies now play a more

prominent role in international trade, and they have expanded their export market shares of high technology and medium technology products, with China playing a particularly prominent role

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GLOBAL PRODUCTION PATTERNS

• As world trade bounces back from the 2008–09 economic crises, emerging economies are becoming a main engine of world economic recovery.

• Over the period, 2005–10, the merchandise imports of

the European Union and the US increased by 27 per cent and 14 per cent, respectively.

• At the same time, emerging economies expanded their

merchandise imports much faster.

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Source: G Gereffi (2014)- Review of International Political Economy

GLOBAL PRODUCTION PATTERNS

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147% 129%

111%

51%

Merchandise Imports

Brazil

India

China

South Africa

Source: G Gereffi (2014)- Review of International Political Economy

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CONCLUSION CAN PRODUCTIVITY ALTER THE

PATTERNS?

•Doing the right things (effectiveness)

•Doing things right (efficiency)

COLLABORATION

CONTINUOUSLY IMPROVING THE PRODUCTIVITY RATIO

PERFECT THE PRODUCTIVITY PROCESS

INPUTS OUTPUTS Process Conversion

Between output and input there is a blood sweat and tears process called “Conversion” During “Conversion” ALL input factors are put together Labour is only one of the factors

THANK YOU

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