Production and Operations
Management
Production and Productivity
Lecture Session 01
Eng. K.C Wickramasinghe
BSc(Hons), AMIESL
Dept. of Mechanical & Manufacturing
Engineering,
Faculty of Engineering,
University of Ruhuna.
01
What is productivity?
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
02
Measure of Productivity
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 manhour, Kilo-watts, Metric ton, etc..
03
Measure of Productivity
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
04
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
05
Example:
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
06
Productivity Definition
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
07
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
08
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
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..
10
Example for Productivity (Cont..)
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. 9,0008,000)
Monthly expenditure is Rs. 1,000
No gain in monetary term
11
Example for Investment
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?
12
Example for Investment
13
Interpreting Productive Measures in
Automobile Example
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?
14
Interpreting Productive Measures in Automobile
Example
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
15
Why productivity improvement is important?
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
16
Achieving Productivity
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
17
Key Elements for productivity (contd.)
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
18
Factors Affecting Productivity
19
Increasing Productivity of Resources
20
Technology Vs. Productivity
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
21
P&O Managers & Industrial Engineers
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
22
P&O Managers & Industrial Engineers
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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