PRODUCTIVITY

Productivity

One of the primary responsibilities of an operations manager is to achieve productive use of organizations resources. Productivity is an index that measures output (goods and services) relative to the input (capital, labor, materials, energy, and other resources) used to produce them. It is usually expressed as the ratio of output to input: Output Productivity = --------------Input
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Purpose to Increase Productivity

For Management 1. To Produce good earnings (profit). 2. To clear the debts or loans acquired from different sources. 3. To sell more, and 4. To stand better in the market. For Customers 1. Reduced Price of articles.

Purpose to Increase Productivity

For Workers 1. Higher wages, 2. Better working conditions, 3. Higher standard of living, and 4. Job security and satisfaction.

Ways to Increase Productivity

Increase output using the same or a lesser amount of (input) resource. Reduce amount of (input) resource used while keeping output constant or increasing it. Use more resource as long as output increases at a greater rate. Decrease output as long as resource use decreases at a greater rate. Production is concerned with the activity of producing goods and services. Productivity is concerned with the efficiency and effectiveness with which these goods and services are produced.
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Efficiency and Effectiveness for productivity improvement.

Efficiency is a necessary but not a sufficient condition for productivity. In fact, both effectiveness and efficiency are necessary in order to be productive. Efficiency is the ratio of actual output generated to the expected (or standard) output prescribed. Effectiveness, on the other hand, is the degree to which the relevant goals or objectives are achieved. Effectiveness involves first determining the relevant (right) goals or objectives and then achieving them. If, for example, nine out of ten relevant goals are achieved, the effectiveness is 90%. One can be very efficient and still not be productive.
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Production improvement does not necessarily mean productivity improvement.

Suppose a bank processed 1,000 checks yesterday, using 20 hours of labor. Lets say that the same bank processed 1,200 checks today, using 24 hours. Production has increased by 20%, from 1,000 to 1,200 checks. However, the labor productivity for this operation is unchanged, because 1,000 / 20 is equal to 50 checks per hour yesterday, and 1,200 / 24 is equal to 50 checks per labor hour today. Therefore, improvement in production does not necessarily generate improvement in labor productivity.
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Efficiency improvement does not guarantee productivity improvement. (continue)

For example, suppose a doctor amputates a patients leg in half the usual time and boasts (show off) the nurses, I have been twice as efficient as in the past. The nurses, who view the situation say something differently, What a disaster the doctor amputated the wrong leg! Here, the doctors effectiveness was zero because he did not achieve the relevant goal, even though his efficiency improved by 200%.

How To Increase Productivity

Government i. Taking steps necessary to maintain employment. ii. Having balanced programmes of economic development. Management i. Motivating workers through the introduction of incentive schemes. ii. Seeking co-operation of workers. iii. Keeping equipment and machinery in good working condition.
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How To Increase Productivity

Workers and Trade Unions i. Workers fear of losing jobs, if productivity increases. ii. Trade unions and workers representative should actively encourage their members to extend their whole hearted cooperation to management in raising productivity .

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Steps To Increase Productivity

Improve basic process by R&D. Provide improved buildings, plants and equipment, etc. Standardize the products produced, and the range of products should be limited to a reasonable minimum. Improve methods of operation so that the same product can be manufactured in lesser time. Improve organization, planning and control. Increase manpower effectiveness at all levels.
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Increasing Productivity of Resources

Material:- Reduce the amount of scrap. Introduce good

material handling and storage facilities and proper packaging.

Labour:-

A little change in the component design can reduce the amount of work required. Productivity can be improved by the usage of improved tools.

Plant, Equipment and Machinery:-

Land and Building:A suitable layout can accommodate more machinery in the same space and there by increase productivity.
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Role of Work Study in Raising Productivity

Method Study i. Cuts down the work content of the job by eliminating and un productive motions. ii. Develops method of doing job which imparts less fatigue to the operators. iii. Results in more effective use of machinery, manpower and material. iv. Improves design of work place layout. v. Gives rise to wholesome working conditions. vi. Modifies tool and equipment design to the advantage of operators. 13

Role of Work Study in Raising Productivity

Work Measurement i. Reduce ineffective time. ii. Suggests rest pauses and other allowances. iii. Provides sound basis for giving incentives to workers to produce more.. iv. Calculates the correct man-power required for doing a job and hence aids in economizing manpower. v. Aids in accurate production planning.
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PRODUCTIVITY MEASUREMENT SYSTEM

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Productivity Index

The average productivity index of a department or a plant would be the total standard times or standard hours produced by all employees divided by the actual hours worked multiplied by 100.

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PRODUCTIVITY MEASURES
I. Partial Productivity Measures (PPM)

PPM = Total Output / Individual Input 1. Labour Productivity = Total Output / Labour Input 2. Capital Productivity = Total Output / Capital Input 3. Material Productivity = Total Output / Material Input 4. Energy Productivity = Total Output / Energy Input PPM over emphasis on one input factor to the extent that other inputs are underestimated.

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PRODUCTIVITY MEASURES
I. Partial Productivity Measures (PPM) Advantages i. Easy to understand and use. ii. A tool to pinpoint improvement. Limitations i. Misleading if used alone. ii. No consideration of overall impact.

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PRODUCTIVITY MEASURES
II. Total Productivity Measure (TPM)
TPM = Total Tangible Output / Total Tangible Input
Total tangible output = value of finished goods + value of partial units produced + Dividends from securities + Interest + Other Incomes value of ( Human + Material + Capital + Energy + Other Input) used

Total tangible output =

Gives both firm level and detailed unit level index. Helps to find out the performance and productivity of the operational unit. Helps to plan, evaluate and control. An important information to strategic planners regarding expansion or phasing out decisions. 19

PRODUCTIVITY MEASURES
II. Total Productivity Measure (TPM)
Advantages i. Easy and more accurate representation of the total picture of the company. ii. Easily related to total costs. iii. Considers all quantifiable outputs and inputs. Limitations i. Difficulty in obtaining the data. ii. Requirement of special data collection system.

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PRODUCTIVITY MEASURES
III. Total Factor Productivity Measure (TFP)
TFP = Net Output / (Labour inputs + Capital Inputs) Net output = Total output Material and services purchased. Advantages i. Data from the company records is relatively easy to obtain. ii. Value added approach Limitations i. No considerations for material and energy input. ii. Difficult to relate value added approach to production efficiency.

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