PRODUCTIVITY ENGINEERING AND MANAGEMENT Productivity Measurement, Evaluation, Planning, and Improvement in Manufacturing and Service Organizations David J. Sumanth, PH.D. Associate Professor and Director, Productivity Research Group Department of Industrial Engineering University of Miami McGraw-Hill Book Company New York St. Louis San Francisco Auckland Bogota Hamburg Johannesburg London Madrid Mexico Montreal New Delhi Panama Paris Sao Paulo Singapore Sydney Tokyo Toronto
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PRODUCTIVITY ENGINEERING
AND MANAGEMENT
Productivity Measurement, Evaluation, Planning, and Improvement in
Manufacturing and Service Organizations
David J. Sumanth, PH.D. Associate Professor and
Director, Productivity Research Group Department of Industrial Engineering
University of Miami
McGraw-Hill Book Company New York St. Louis San Francisco Auckland Bogota Hamburg
Johannesburg London Madrid Mexico Montreal New Delhi Panama Paris Sao Paulo Singapore Sydney Tokyo Toronto
CONTENTS
Preface xv
Part 1 Definitions and Basic Concepts of Productivity
1 Introduction 3 1.1 Origin of the Word "Productivity** 3 1.2 Common Misuse of the Term 4 1.3 Basic Definitions of Productivity 7
Questions 10 References 11
2 Importance of and Factors Affecting Productivity 12 2.1 Productivity vs. Inflation '3 2.2 Productivity vs. the Standard of Living and Employment 16 2.3 Productivity vs. Political Power 22 2.4 Productivity vs. Economic Power 23 2.5 Factors Affecting Productivity 25 2.6 Productivity Awareness in the United States 37 2.7 Productivity Efforts: Private and Government 38 2.8 Productivity Benefit Model ^ '
Questions ^^ References ^^
• • VII
vfi rn
3 Productivity Engineering and Management 47 3J The Productivity Cycle 47 3.2 Dcfifutions and Scope of Productivity Engineering and
Management 49 3.3 Educational Efforts in Productivity Engineering and Management 52
Questions 53 References 53
Part 2 Productivity Measurement at International, National, and Industrial Levels
M Productivity Measurement at the International Level 5?
4 I Measurement Approaches 5g 4.2 International Comparisons 61 4.3 Problems of Productivity Measurement at the International Level 61
Questions 52 References 62
5 Productivity Measurement at the National Level 63
5.1 Benefits of Productivity Measurement at the National Level 63 5.2 Definition*; nf National Output 64 5.3 Productivity-Measurement Approaches at the National Level 65 5 4 Problems in Productivity Measurement at the National Level 70 5.5 Sectoral Comparisons 72
Questions 74 References 74
*6 Productivity Measurement at the Industrial Level 76 6.1 Benefits of Productivity Measurement at the Industrial Level 76 6.2 Productivity-Measurement Approaches at the Industrial Level 77 6.3 Problems m Productivity Measurement at the Industrial Level 88 6.4 I imitations of Present Labor-Productivity Measures for Industry 88 6.5 iniermdustry Comparisons 91
Questions 91 References 92
Part 3 Productivity Measurement in Companies/ Organizations
7 The Need for Productivity Measurement in Companies/Organizations 97
"̂ ? Benefits of Higher Productivity in Organizations 97 7.2 Benefits of Productivity Measurement in Organizations 98
(ONTFNrs ix
•T ^ Productivity^Measurcment Approaches at the Company Level 98 7.4 Diversity of Productivity Concepts at the
Company Organization Level 121 7 5 Survey Results from United States Companies j22
Questions j^- . References I^Q
8 The Total Productivity Model i5i 8.1 Limitations of Partial Measures of Productivity 151 8.2 The (Basic) Total Productivity Model (TPM) 152
•8.3 Versions of the Basic Total Productivity Model 163 •8.4 Relationships between Total and Partial Productivities 164 •8.5 Profit vs. Total Productivity: The Break-Even Point Concept 179 8.6 Computations m the Application of the Total Productivity Model 190 8.7 Computer Program and User's Manual for the Total Productivity
Model and the Operational Total Producuvity Model 211 8.8 Productivity Measurement Strategy Using the
Total ProductiMty Model 211 8.9 Steps in Implementing the Total Productivity Model 215
Questions 228 Problems 228 References 230
Part 4 Productivity Evaluation and Planning in Companies and Organizations
*9 Productivity Evaluation in Companies and Organizations 233
9.1 Expression for Total Productivity Change 234 9.2 The Productivity Evaluation Tree (PET) 237 9.3 Evaluation of Total Productivity between Successive Time Periods 239 9.4 Evaluation of Total Productivity within a Given Time Period 243 9.5 Evaluation Methodology 247
Questions ^̂ ^ Problems ^̂ ^ Reference* ^̂ ^
*10 Productivity Planning in Companies and Organizations 253
10.1 Importance of Productivity Planning 254 10.2 Short-Term versus Long-Term Productivity Planning 255 10.3 Responsibility for Productivity Planning
Questions References
257 259 259
•11 Short-Term Productivity Planning Models 111 Weighted Partial Productivity Model 112 Productivity Evaluation Tree (PET) Model
260
260
I COWTENfTS
11.3 Linear Trend Model Using Exponential Smoothing (DES) 265 11.4 Comparative Productivity Evaluation Tree Model 266 11.5 Seasonal Variation Model Using Winters* Method 269
Questions 272 Problems 273 References 274
•12 Long-Term Productivity Planning Models 275 12.1 Total Productivity-Maximization Model 276 12.2 Total Productivity-Profit Model 290
Questions 297 Problems 297 References 299
Part 5 Productivity Improvement in Companies and Organizations
*13 Productivity Improvement Concepts 303 13.1 Causes of Productivity Decline in Companies 303 13.2 Productivity Improvement Surveys 304 13.3 Some Existing Approaches to Productivity Improvement 306 13.4 A New Perspective on Productivity Improvement 318 13.5 Analytical Productivity Improvement Model (APIM) 320 13.6 Principles of Productivity Improvement 329
Product Simplification Product Standardization Research and Development Reliability Improvement Emulation Advertising and Promotion Questions Problems References
437 438 439 441 446 447 448 448 449
18 Task-Based Productivity Improvement Techniques 450 18.1 Methods Engineering Work Simplification 18.2 Work Measurement 18.3 Job Design 18.4 Job Evaluation 18.5 Job Safety Design 18.6 Human Factors Engineering (Ergonomics) 18.7 Production Scheduling
Questions Problems References
451 456 464 464 470 472 473 475 475 476
19 Setting Up a Formal Productivity Improvement Program
19.1 Formal Productivity Improvement 19.2 Organizational Structures for Productivity Program 19.3 Planning Aspects 19.4 Human Aspects 19.5 Implementation Schedule 19.6 Evaluation of the Effectiveness of a Formal Productivity Program 19.7 Common Problems Encountered and Ways to Counter Them
Questions •Case Study Questions
References
477
477
479
479
481
482
483
483
486
487
488
•"20 Productivity Improvement in Selected Manufacturing Companies
20.1 Aircraft Company 20.2 Pharmaceutical Company 20.3 Television and Microwave Oven Company 20.4 Textile Company 20.5 Machine Tool Company
Questions References
489
489 490 491 493 493 494 495
CONTENTS Xili
•21 Productivity Improvement in Selected Service Organizations
21.1 Airline Organization 21.2 Utilities Firms 21.3 Insurance Company
Questions References
2̂2 Productivity Improvement Strategies around the World
22.1 Productivity Strategies in Australia 22.2 Productivity Strategies in Asia 22.3 Productivity Strategies in Europe 22.4 Productivity Strategies in Africa 22.5 Productivity Strategies in North America 22.6 Productivity Strategies in South and Central America
Questions References
Appendixes A Selected Productivity and Innovation Centers in the United
States and Overseas B Paasche and Laspeyres Forms of Indices C Glossary of Terms