Techniques for measurement of productivity

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TECHNIQUES FOR MEASUREMENT OF PRODUCTIVITY: ANSHUL AHUJA (MM-662-2K15) Er. SAHIL SHARMA (MM-670-2K15)

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Techniques for Measurement of Productivity:

Techniques for Measurement of Productivity:ANSHUL AHUJA(MM-662-2K15)Er. SAHIL SHARMA(MM-670-2K15)

ProductivityProductivity is the ratio between output and input. It is quantitative relationship between what we produce and what we have spent to produce.Hence, Productivity is , above all, a state of mind-set. It is an attitude that seeks the continuous improvement of what exist. It is a conviction that one can do better today than yesterday, and that tomorrow will be better than today.It is the driving force or dynamism behind developing and upgrading the quality of industrial activities.

Definition

Productivity increases output.High productivity results in lower cost per unit of output resulting in higher levels of profit for a business.Higher profits for the firm will mean more funds available for its expansion, new business ventures and community support.It may also wish to pass on the benefits of lower costs to consumers in the form of lower prices.

Importance of Productivity

Diff. between Production and ProductivityProductionProductivityDefinitionIt is defined as the act of manufacturing goods for their use or sale.it is defined as the rate at which goods are produced.UseIt is the actual process of conversion.It is the utilization of resources to form goods.Work doneIt is the amount of work done or manufactured that is the output.It is the amount of work one gets for a certain spending cost.MeasurementIt is the measure of produced goods.It is the measure of efficiency.

Important Note!Production is a measure of output only and not a measure of efficiency

Measurement in Productivity and why ????

Techniques for Measurement of Productivity:

Aggregate BasisOn aggregate basis, output is compared with all inputs taken (added) together. This is called as Total Productivity. Hence,

Where Total Output=Total production of goods and services and Total Input= Labor + Material + Capital + Energy.This index measures the productivity of the entire organization with use of all resources. It is a way of evaluating efficiency of entire plant or firm.

910,000 Units Produced

Sold for $10/unit

500 labor hours

Labor rate: $9/hr

Cost of raw material: $30,000

Overhead: $15,500

Example

10 OutputLabor + Materials + Overhead (10,000 units) * ($10)(500)*($9) + ($30,000) + ($15,500)

TP = 2.0

Example : Total ProductivityTP =TP =

Individual BasisOn individual basis, output is compared with any one of the input factor and this is called as Partial Productivity or Factor Productivity.Factor productivity or partial productivity indices are of following types:Labor productivityMaterial productivityMachine ProductivityCapital productivity

Labor Productivity

Labor productivity is simply defined as the ratio of Total output to the Labour input i.e.

Labor productivity depends upon how labors are utilized.Labor productivity can be higher or lower depending on factors like availability of work load, material, working tools, availability of power, work efficiency, level of motivation, level of training, level of working condition (comfortable or poor) etc.

Example10,000 Units Produced

Sold for $10/unit

500 labor hours

Labor rate: $9/hr

What is the labor productivity?

10,000 units / 500hrs = 20 units/hr

(10,000 units * $10/unit) / 500hrs = $200/hr

10,000 units / (500hrs * $9/hr) = 2.2 unit/$

(10,000 units * $10/unit) / (500hrs * $9/hr) = 22.22

The last one is unit-less

14Example: Labor Productivity

Material productivity

Machine Productivity

Capital Productivity

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TrainingMethodsTechnologyManagement

What are the factors that affect productivity?

Employ Based TechniqueFinancial incentivesFringe benefitsEmploy promotionJob rotationEducationZero defectsQuality circleCommunicationWorking environmentPunishment Zero defect

Method Of Productivity Improvement

Material Based TechniqueInventory controlMaterial handling systemQuality controlMRPMaterial management

Task BasedMethod engineeringJob evolutionHuman factor engineeringJob designWork measurement

Method Of Productivity Improvement(contd.)

Product Based TechniqueProduct diversificationProduct simplificationProductValue analysisResearch and development

Technology BasedComputer engineeringCADCAMElectronics data processingRoboticsGroup technology

Method Of Productivity Improvement (contd.)

2011 Pearson Education, Inc. publishing as Prentice HallImproving Productivity at StarbucksA team of 10 analysts continually look for ways to shave time. Some improvements:Stop requiring signatures on credit card purchases under $25Saved 8 seconds per transactionChange the size of the ice scoopSaved 14 seconds per drinkNew espresso machinesSaved 12 seconds per shot

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2011 Pearson Education, Inc. publishing as Prentice HallImproving Productivity at StarbucksA team of 10 analysts continually look for ways to shave time. Some improvements:Stop requiring signatures on credit card purchases under $25Saved 8 seconds per transactionChange the size of the ice scoopSaved 14 seconds per drinkNew espresso machinesSaved 12 seconds per shot

Operations improvements have helped Starbucks increase yearly revenue per outlet by $200,000 to $940,000 in six years.Productivity has improved by 27%, or about 4.5% per year.

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To procure raw material at low cost.

To maintain consistent quality.

To ensure continuous supply of raw material.

To minimize the carrying costs and ordering costs.

To maintain good relationship with supplier.

Efficient record-keeping and prompt reporting.

To develop new sources and new materials.

Training and development of personnel.

Role Of Material Management

It emphasizes the efficient utilization of all the factors of production which are scarce universally.It attempts to eliminate wastage.It facilitates the comparison of the performance of a company to its competitors or related firms, in terms of aggregate results and of major components of performance.It enables the management to control the performance of the company by identifying the comparative benefits rising out of the use of different inputs.

Advantages of Productivity :

ReferencesImad Alsyouf, The role of maintenance in improving companies Productivity & profitability, international journal of production economics 2007; 105; 70-78. Flynn B.B., sakakibara, relationship between JIT & TQM: practices and performance. Academy of management journal 1995;38(5) 1325-1360.TH Willis, CR Huston, F Pohlkamp, (1993), Evaluation measure of just-in time supplier performance, Production and Inventory Management Journal, Vol. 34, No. 2, pp. 15.Harekrushna Dalai, Case Studies On Productivity Improvement And Supplier Selection, B.Tech Thesis, NIT ROURKELA