Production and Productivity

Eng. K.C Wickramasinghe

BSc(Hon’s), AMIESL

Dept. of Mechanical & Manufacturing

Engineering,

Faculty of Engineering,

University of Ruhuna.

Lecture Session 01

01

Production and Operations

Management

Common/Simple Term: Relationship between output and input

(Output/Input)

Multiple Input: Measure of productivity become more complex due to

different inputs

– Measured in different units: man hours kilowatt hours, tons of

products, etc..

– Base unit is required to bring them into common level

– Often requiring weighing of individual input

What is productivity?

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Total Productivity: Broadest measure of total output to total input

= {Total Output}/{Labor + Materials + Energy + Capital +...}

– Not only consider how many units are produced, but also concerns all aspects of producing goods/services (e.g. cost)

Partial Productivity: Ratio of total output to one or more input categories

= {Total Output/Total Labor} OR

{Total Output/Total Material}, etc..

– Expressed in quantity terms such as units produced per man-hour, Kilo-watts, Metric ton, etc..

Measure of Productivity

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Measure of Productivity

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Multi-factor Productivity:

Ratio of total sales to total cost = {Total Sales}/{Total Cost}

Productivity Models: (rather than companywide)

1. Functional and departmental measures:

E.g.: Total production to production schedules in Production Control

2. Individual Measures:

Individual measures for workers, supervisors, etc.

Yardstick to measure performance

3. Industry and Competitiveness Measures:

Benchmarking with other industries

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Output Complexity

Effective production or increase of production simply does not

mean productive

Produce what the market needs, when it needs it, and at

competitive price

I.e., anything produced can not be considered as productivity

Leads to more complication to measure productivity due to

output complexity

Example:

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Labor Productivity: Input is quantity of labor hours (this is typical focus of Industrial Engineers) Output typically be parts produced But, output may never be sold, may be inventory or may sold at discount price (not the requirement of company) Detail definition for productivity is required No perfect definition, but definition should reflect measure of success of the organization

Productivity Definition

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No perfect definition for productivity measures to suit each

situation

•Any definition should reflect the purpose of making productivity

measurement

• In many cases, the purpose of making measurement is to

benchmark the improvement

•Generally, it reflects measure of success of the organization

Productivity Definition (cont.…)

Example: If delivery of products to the customer in a timely

manner at a competitive price with acceptable profit is

considered as success of the organization

Then the productivity definition should reflect each aspects of the

above statement.

Then Definition is constructed and measured

And the measure is used to benchmark for improvement and

to analyze deficiencies

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Definition for Productivity

Productivity is an attitude of mind. It is the mentality of progress, of the constant improvements of that which exists.

It is the certainty of being able to do better today than yesterday and continuously.

It is the constant adaptation of economic and social life to changing conditions.

It is the continual effort to apply new techniques and methods.

It is the faith in human progress.

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Example for Productivity

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A potter managed to increase the production of pots from 400 to 500 per month

by changing method of production with no cost, and no changing other

parameters such no. of hours worked per day (i.e. 8 hours per day).Assume that

the potter was unable to sell pots and thus lowered the price from Rs. 20 to

Rs. 18 a pot

Calculate the productivity gain in terms of unit and monetary…..

Example for Productivity (Cont..)

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Replace the wood-fired kiln by and oil-fired kiln for the purpose of increasing the

productivity

Monthly Monetary value gain is Rs. 1,000 (i.e. 9,000–8,000)

Monthly expenditure is Rs. 1,000

No gain in monetary term

Example for Investment

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An automobile manufacturer has

presented the following data for

the past three years in its annual

report. As a potential investor,

you are interested in calculating

yearly productivity and year to

year productivity gains as one of

several factors in your

investment analysis

Which is the best measurement…..?

Are you going to invest……?

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Example for Investment

Interpreting Productive Measures in

Automobile Example

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Productivity measures must be compared to something, i.e. another year, a different company Raw productivity calculations do not tell the complete story

In automobile example: Obvious that some major changes were taking place to yield

15.8% and 13.7% year-to-year cars/employee productivity improvements

What changes could improve car sales per employee?

Automation? Out sourcing? Major re-design?

Interpreting Productive Measures in Automobile

Example

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Other productivity measure questions

Is partial productivity measurement enough to make an

investment decision?

Is the Total Cost Productivity measure a better reflection of

year to year productivity at 4.2% and 1.6%.

Should you also look at productivity measures for the two

major competitors for comparison?

Productivity measure provides information on how the firm is doing relative to what is critical to the firm

Why productivity improvement is important?

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Improvement to productivity has significant impact on:

National Level

Increasing country prosperity

Experience growth in the country: leads to improved products and resources, increased consumptions, more leisure times

Industry or Company Level

Closely related to success and survival

Stay in the competition

Personal Level

Driven by the search of fulfillment, ambitions to success

Productive people has more opportunities, career advancement

Individual productivity leads to higher productivity in both industrial and national level

But, one should not loss the focus on industry/national

Achieving Productivity

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Different ways, depending on the specific situation

Key Elements that impact on productivity:

Inventions

• Creation of basic technologies

• E.g.: invention of electricity, telephone, electric motor

• Inventions often introduce a much better way of doing something

• Though relatively a few invention, huge impact is obvious

Innovations

• Apply existing technologies to create new products or services

• Often building or improving new ideas

• E.g.: invention electrical motor may not have meaningful purpose, if the motor is not used innovatively in so many applications

• Innovations are much more prevalent (common) than inventions

Key Elements for productivity (contd.)

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Investments • Made acquiring something – resources (lands, facilities, technology, people,

etc.) • Resources are essential as input to create output • Making the right investment is critical for productivity • Selection of an appropriate investment at right time for right purpose is

difficult task, but have significant impact

Integrations • Effective use of resources through the use of processes, work methods,

systems, etc. • No organization can exists with single resource • Effective integration is a must for productivity improvement

Information

• Knowledge and data available to make decisions • Includes education, communication, databases, etc. • E.g.: information regarding the customer requirement and taking right decision

to satisfy them

Factors Affecting Productivity

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Increasing Productivity of Resources

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Technology Vs. Productivity

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• Technology includes methods, procedures and techniques

• Includes methods that improve processes to improve the output/input ratio

• Improvements in hardware (simply automation) does not guarantee to improvement in both quality and productivity

• Improve the system – the process – before introducing technology

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P&O Manager’s & Industrial Engineer’s

Perspective

Industrial Engineer Productivity Engineer

Increase of Labor productivity Increase in company productivity

Role and Responsibilities for Investments, Integrations and Information

Major focus is to use of investments, by understating that they

are interdependent, for improving processes or operations for

productivity enhancement

P&O Manager’s & Industrial Engineer’s

Perspective

Knowledge and skills gained in concepts, tools and techniques

are essential ingredients

• Quality Management (E.g. TQM)

• Maintenance Management (E.g. TPM)

• Workplace Improvement (E.g.: Work study)

• Labor Improvement (E.g.: Work Measurement)

• Layout Design (E.g.: Lean)

• Whatever you will learn contributes to productivity

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