Productivity Techniques

Production & ProductivityWhat is Production?

What is Productivity?

Co-Relation of Production to Productivity

Evolution of LabourYear Contribution Contributor

1776 Specialisation of Labor

Adam Smith

1799 Cost Accounting Eli Whitney

1832 Division of Labor by Skill

Charles Babbage

1900 Time & Work Study, Motion of Study

Frederick Taylor

1915 Economic Lot Sizes F. Harris

1931 Quality Control Charts

W. Shewart

1940 OR Applications P. Blacker

1947 Linear Programming G. Dantzig, Williams

1960 OB L. Cummings, Porter

1970 Integration, MRP I & II

Skinner, Orlicky, Wright

1980 Quality & Productivity

Deming, Juran

Production CycleInputs:

MenMaterial

MachinesInformation

Capital

Process:Product Design

Process PlanningProduction Control

Maintenance

Outputs:ProductsServices

Ongoing:InventoryQualityCost

Productivity ConceptsILO defines it as ratio of Output to Input so

Productivity = Output Input

Productivity of Land: Farmer used fertiliser for his farm due to which the crop yield increased from 200 quintals/hectare to 300 quintals/hectare

Productivity of Materials: One ton of hot rolled steel would yield 800 kg of cold rolled steel. After changing the process parameters the yield increased to 900 kg of cold rolled steel.

Evolution of Productivity1950 OECC – Dividing O/P with one of the

factors of production1955 Davis – Change in product for the

resources expanded1962 Fabricant – Always a ratio of O/p to I/p1965 Kendrick, Creamer – Partial, Total

Factor and Total Productivity1976 Siegal – Family of Ratios1979 Sumanth – Total Productivity Model

Productivity Vs PerformanceProductivity = Output = Performance Achieved Input Resources ConsumedPerformance Index = Actual Work Done

Ideal or standard expected work

It takes 3 meters of cloth to make a coat. In a day a tailor is expected to make 50 coats. He makes 40 coats using 111 mtrs. of cloth. Find the PI, Cloth productivity index and productivity of cloth.

Is Production same as Productivity?HLL had the following production and machine

hour consumption report for the past 3 months.Month Input(machine hours) Output(No. of Units)

March 90,000 99,000April 1,00,000 1,00,000May 1,50,000 1,35,000

Report clearly shows there has been an increase in production with simultaneous increase in machine hour consumption. Does this increase in production mean an increase in productivity as well?

Partial ProductivityDefined as the ratio of output to one class of input As a part of a new assignment Ravi of Conagra Foods was asked

to identify areas of productivity improvements. He collected all data on inputs and outputs of previous year transforming them into equivalent money units. Following table gives the report:

Parameters Rs. In lakhs Output1000 Inputs:

Human 300 Material 200 Capital 300 Energy 100 Other Expenses 50

Calculate Partial Productivity for all parameters in consideration

Total Factor ProductivityPartial productivity fails to capture other

parameters that affect productivityIn an effort to increase labor productivity,

organization may install more machinery thus increasing the capacity to produce

This leads to increase in labor productivity but impacts capital productivity adversely

Total Productivity ModelDeveloped by David Sumanth in 1979, includes 5

parameters Human, Capital, Energy, Material and Other Expenses.

Total Productivity = Total Tangible Output Total Tangible Input

Total Tangible Output = Value of Finished Goods +partial units produced + dividends from securities+ Interest from bonds+ Other incomes

Total Tangible Inputs = Value of human inputs + capital inputs+ materials purchased+ energy inputs+ other expenses

Total Productivity ModelP &G manufactures soaps, face wash, liquid soaps

and gels . The money value for each input for each product is given below:Product Amount of Input Total Output

H C M E XSoap 2 4 14 5 650Face Wash 3 6 10 5 8 55Liquid Sp 2 3 10 4 10 45

Gel 3 8 13 5 5 40Calculate the productivity of the firm, product

productivity and productivity of each factor.

Cobb Douglas FunctionCobb- Douglas recognized the importance of capital

and labor as major resources that impact productivity and developed a function which is a co-relation:

P = a Lα Kβ

where P = Production Output L = Labor Input K = Capital Input

a, α and β are constants to be estimated, where α+β = 1α = ∂Q/∂L and β = ∂Q/∂K which means d is partial productivity of labor and f is partial productivity of capital

Cobb-Douglas…1979 1980 1981 1982… 1995 1996

1997 1998P 120 115 132 144 240 275 280

295L 108 100 120 135 198 210 225

230K 130 125 140 150 375 400 410

350

Using Cobb-Douglas theory predict the production outputs for the year 1982 and 1998. α = 0.75, a = 1.01.

APC ModelAmerican Productivity Center advocates a

model that co relates profitability with productivity and price recovery factor

Profitability = Total Sales Total Costs = O/p Qty * Prices I/p Qty * Unit costs = Productivity x Price Recovery

Factor

APC ModelFor the year 2007 HLL had total sales of Rs. 350

crores. The costs of production was Rs. 150 crores, cost of manpower was Rs. 50 crores and other costs was Rs. 74 crores. Calculate the productivity for HLL.

For 2008-09 the output was 3000 units at a cost price of Rs. 350 per unit. The units were sold at Rs. 575 per unit and the inputs used were 1750 units. Calculate the productivity for 2008-09.

For 2009-10, P&G sold 2570 units at a market price of Rs. 350. Calculate the price recovery factor. The selling price in 2008-09 for the same product was Rs. 300. Calculate the revenue effect on price recovery.

Sumanth’s 5 Pronged ModelSumanth & Omanchu proposed a model

which gave 54 techniques to evaluate based on 5 basic inputs: Technology, Employee, Product, Process and Material

Technology gave rise to CAD/CAM, EMS systems

Product gave rise to Value Analysis and EnggEmployee gave rise to incentives, job

enrichmentMaterial gave rise to MRP, Inventory ControlProcess gave rise to Job Design, Job Safety

ILO Approach to ProductivityILO had a task based approach to productivityILO broke manufacturing time into work content,

added work content and ineffective timeWork content was defined as amount of work put

in during a process measured in man-hours or machine hours

Added work content was defined as that which came into play due to defects, or ineffective production methods

Ineffective time was defined as that which was caused due to interruptions that ceased production

Performance Measurement using OMAXProductivity ratios are formed as various

goods/services are manufactured from different and diverse resources

Need a comprehensive matrix that appropriates basic work units like crew, departments and staff

OMAX enables measuring knowledge based activities as well as skill based activities

Six genetic classes were defined as part of OMAX viz. quantitative, quality, timeliness, yield, utilization and group traits