Productivity 20-01-2014

Productivity

Class Plan Productivity DefinitionProductivity Growth and how to measurePartial Vs. Multi-factor productivityImportance of Productivity measurement Problems

Productivity and QualityTraditional view:Quality cannot be improved without significant losses in productivity.EM view:Improved quality leads to improved productivity.

ProductivityQ- What is productivity and why it is important?It is an index that measures output (goods and services) relative to input (labor, material, energy and other resources) used to produce them.a measure of the effective use of resources, usually expressed as the ratio of output to input.Productivity= Output Input

For non-profit org. higher productivity means lower costsFor profit org. productivity is important factor in determining how competitive a company is.For a nation rate of productivity is of great importance.

Productivity growth Q-What is productivity growth and how it measures?Productivity growth is the increase in productivity from one period to the next relative to the productivity in the preceding period.Productivity growth = Current period productivity - Previous period productivity X 100 Previous Productivitye.g. if productivity increased from 80 to 84, the growth rate would be

84 - 80 X 100 = 5% 80Productivity is a key factor in a countrys rate of inflation and standard of living of its people.Productivity increase add value to economy while keeping inflation in check.

Computing ProductivityQ -Differentiate partial and multi-factor productivity.Partial measures: based on single input

Partial productivity = Output Output Output Output labor machine Capital EnergyMultifactor measures: based on multiple inputMultifactor productivity : more than one input, multifactor measures

MFP = Output Output labor + machine labor+ capital + energyTotal measures: based on total input and outputTotal productivity: total measure = Goods or services produced All inputs used to produced them

Q- Why productivity measurement is needed? used to track performance over time allows managers to judge performance to decide where improvements are needed judge the performance of the entire industryjudge the productivity of a country as a whole serve as scorecards of the effective use of resources productivity relates to competitivenessNational productivity relates to nations standard of living

Problem -1Compute the multifactor productivity measure for each of the weeks shown. Assume 40 hrs weeks per worker and an hourly wage Tk. 12. Overhead is 1.2 times weekly labor cost. material cost is Tk. 10 per Kg. Standard price is Tk. 140 per unit.WeekOutput (units)WorkersMaterials (kg)130064523387463322746

Problem 1 (Continue)Compute the productivity growth of week 2, 3 over week 1 of the previous problem?

Problem 2A company produces two types of measuring devices. Price of per unit of the 1st and 2nd type of the device is $10 and & $12 respectively. Material cost to produce the devices is 40% of their prices. The company used ten workers, who can produce an average of 30 and 50 devices of 1st and 2nd types per day. Each Worker receive $10 per day and machine and overhead cost is $120 and $100 per day respectively.a.Compute labor, material, machine and overhead productivity.b.Compute the overall productivity. c. If production time of each 2nd type device is 25% more than that of 1st type then compute overall productivity of 1st and 2nd types of the product.

Problem -3XYZ Company assembles a certain type of television. Price of per unit of the television is $550. The company used 120 workers, who can assemble on an average 48 TV per day. Each worker receives $2.00 per hour. To setup the assembling machines 4.8 million dollar has been invested. The life of the machines is 10 years. Overhead cost was $50000 per month. There are 25 working days in a month and 12 working hours in a day.Compute labor, machine and overhead and overall productivity. The company implemented TQM and new management, who has increase the production rate of the TV by reducing assemble time of each TV by 20%. New overhead cost is $55000 per month. Other costs of resources remain same as before. Calculate new overall productivity and comments on the change.

Problem -4Assume 5 days working per week and 8 hours working per day and an hourly wage of $12. In addition to normal working hours each workers work 5 hours extra work (overtime) per week and overtime wage is 1.6 times than normal wage. Overhead is 1.5 times weekly labor cost. Material cost is $60 per bag. Each bag net weight 24 kg. Standard price is $160 per unitWeekOutput (units)WorkersMaterials (lbs)1310745023528460a.Compute labor productivity in each week. b.Compute the productivity measure for each weeks shown. What is productivity growth in week 2?

Problem -5An operation has a 10% scrap rate. As a result, 72 pieces per hour are produced. What is the potential increase in labor productivity that could be achieved by eliminating the scrap?

Problem -6A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor contents of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used five workers, who produced an average of 24000 carts per month. Workers receive $10 per hour and machine cost was $480 per day. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $120 per day while output increased by 3000 carts per month. The company runs 12 hours per day and 25 days in a month.Compute labor and machine productivity under each system. Compute the overall productivity under each system. Comments on the changes in productivity according to the two measures. Which one you believe is the more relevant for this situation.

Problem - 7XYZ Company assembles a certain type of television. Price of per unit of the television is $450. Material cost to assemble the TV is 40% of the price. The company uses sixty workers, who can assemble on an average 40 TV per day. Each worker receives $1.25 per hour. To setup the assembling machines 4.8 million dollar has been invested. The life of the machines is 10 years. Overhead cost is $25000 per month. There are twenty five working days in a month and twelve working hours in a day.Compute labor, material, machine and overhead and overall productivity. The company wants to improve its productivity through cost reduction. Which type of cost reduction would be more effective?