Em week 5 productivity management (4)

ENGINEERING MANAGEMENT

Prof. Dr. Mete Gündoğan

SECTION 2 PRODUCTIVITY MANAGEMENT Lesson Content:  Productivity Concept  Relationship Of Productivity And Quality  Measures Affecting Productivity  Efficiency  Effectiveness  Quality,  Innovation

What is Productivity ?  Productivity is a measure of ratio of production to cost of 

   

production.

Productivity is production of an industry as a result of the production process and economical use of financial investment, Manpower, Technology, Land, Machinery and Equipments.

Productivity is an attitude and a mental activity.

The efforts of continuous improvement at reduced cost can result into improved productivity.

Productivity is integral part of our lives.

Productivity is not limited only to industries.

What is Productivity ?  One of the primary responsibilities of a manager is to achieve

productive use of an organization’s resources.  Productivity is sometimes used to measure improvement.  Productivity is not about working hard but working smart.  Productivity is balance of all factors that will give greatest return for least efforts.

What is Productivity ?  Productivity is the amount of output relative to amount of

input

 For survival of any organization, productivity ratio must be at

least 1.  If it is more than 1, the organization is in a comfortable position.  The ratio of output produced to the input resources utilized in the production

What is Productivity ?

Why We Need Productivity?  Population growth  Scarce resourcesve increasing cost  Developing Technology  Speed globalisation  Increasing competition  Growth opportunity at production and trade  Everchanging market attitude

Importance of Produvtivity  It helps to cut down cost per unit and thereby improve the    

profits.

Gains from productivity can be transferred to the consumers in form of lower priced Products or better quality products.

These gains can also be shared with workers or employees by paying them at higher rate.

A more productive entrepreneur can have better chances to exploit expert opportunities.

It would generate more employment opportunity.

Importance of Produvtivity  Overall productivity reflects the efficiency of production    

system.

More output is produced with same or less input.

The same output is produced with lesser input.

More output is produced with more input.

The proportional increase in output being more than the proportional increase in input.

How to improve the productivity?  Develop productivity measures  Determine critical (bottleneck) operations  Develop methods for productivity improvements  Establish reasonable goals  Get management support  Measure and publicize improvements  Don’t confuse productivity with efficiency

How to improve the productivity?  Identify and cut out wastage ( Muda )

How to improve the productivity?  Productivity improvement is a three step process;  Eliminate wasteful activities  Simplify the activities.  Improve the Process. Combine two or more activities

How to improve the productivity?  There are essentially five factors of production represented

as 5 M’s  (a)Machine  (b)Material  (c)Method  (d)Man days  (e)Money  If you can reduce usage of any of these factors for per unit of your business, productivity will increase.

Causes Of Wastage Of Manpower  Absence of work.  Non availability of Raw materials.  Delay in getting tools and tackles.  Machines being out of order.  Entrusting low grade work to a competent workmen.  Lack of education of appropriate topic.  Incomplete or improper instructions of boss.

Reasons Of Wastage Of Machine Efficiency  Selection of wrong or useless machinery/equipments.  Inappropriate Machine Tools.  Lack of proper maintenance of Machines/equipments.  Lack of balancing of work on machines/equipments.

Reasons Of Wastages Of Raw Material  Wrong design of product / parts.  Negligence in handling raw materials.  Wrong method of using components or raw material.  Lack of maintenance of quality of raw materials.  Theft of components/raw materials.  Lack of using materials/components at appropriate time.

Reasons Of Improper Use Of Space  Lack of careful use of space.  Modern Machinery, Tools & tackles not used.  Lack of systematic storage.  Haphazard use of space.  Lack of proper facilities.

Causes Of Unhealthy Mutual Relationship  Lack of Healthy reliable interpersonal relationship.  Lack of understanding about reliable relationship.  Need of education and development not addressed.  No systems of motivating and encouraging employees.  Lack of using basic modern quality concepts like, Five-S, Kaizen

and Quality Circle.  Laziness, avoidance of work and negligence.

Reasons For Wastage Of Time  Lack of awareness and consciousness.  Work study and measurement not done.  Lack of loss time analysis and not taking corrective actions.  Inefficient working of workmen not reviewed for improvement.  Lack of efficient management and maintenance.  Lazy, irresponsible and untrained workmen.

Productivity and Performance  Performance is not same as Productivity.  Pperformance

takes into account only the output, unmindful of resources consumed  Productivity focuses on consumption of resources in relation of output.

Partial Productivity  Consumption of only one resource is taken to calculate the

productivity.  It is viewing the productivity with respect to only one variable at a time and therefore it could be some times fallacious.

Partial Productivity

Partial Productivity

Total (Factor) Productivity  Total productivity is calculated by considering total output and

total input simultaneously.

Example -1:  10,000 Units Produced  Sold for $10/unit  500 labor hours  Labor rate: $9/hr

What is the labor productivity?

 Cost of raw material: $5,000  Cost of purchased material: $25,000

Example -1: Labor Productivity  10,000 units/500hrs = 20 units/hour

Or we can arrive at a unitless figure ;  (10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22

Example -1: Multifactor Productivity Â

Example – 2:  For month of Feb 07, following were the factory statistics of Rajesh

Internationa;  Total Production : 1,00,000 units  Raw Materials Consumed : Rs 50,000  Labour Cost : Rs 25,000  Labour Hrs Consumed : 1000

 For the month of Mar 07, following were the statistics  Total Production : 1,20,000 units  Materials Consumed : Rs 55,000  Labour Cost : Rs 35,000  Labour Hrs Consumed :1100

Example – 2:

Example – 2: Total Factor Productivity

Example: Analyse  Partial productivity of Raw Materials has increased from2 to

2.18  But partial productivity of labour cost has decreased in the same period from 4 to 3.43.  And even though labour cost productivity has gone down, labour hrs productivity has gone up from 10 to 10.91 (It is indicative of the fact that labour were given financial incentives to improve their productivity. Therefore, cost has gone up due to incentives but actual hrs of labour at work have not increased proportionately)  Total factor productivity has increased from 1.33 to 1.41.

Total Productivity Model  Total Productivity Model developed by Sumanth  It is extension of earlier models.  He considers five items as inputs;

Human, Material, Energy, Capital and other expenses.

Total Productivity Model  Total Tangible Output = Value of finished goods produced

+ Partial units produced (WIP) + Dividend from securities + Interest from bonds + Other income  Total Tangible Inputs = Value of Human Inputs (employees) + Capital inputs + Materials Consumed + Energy inputs + Other expenses (taxes, transport, office, etc)

Factors Affecting Productivity  Two basic productivity factor  Extrinsic factors (uncontrollable)  Internal factors (controllable)

Factors Affecting Productivity External Factors

Factors Affecting Productivity Internal Factors

Factors Affecting Productivity – Immediate Surroundings Factors

Other Measures Affecting Productivity  Efficiency  Effectiveness  Quality  Quality of Work Life  Innovation

Other Measures Affecting Productivity  Efficiency  Measures the resources expected to be consumed to the

resources actually consumed.  Hence, it focuses on the input side of the system.

(To what degree did the system utilize the “right” things.)

Other Measures Affecting Productivity  Effectiveness  Measures what the system sets out to accomplish (objective)

with what was actually accomplished; plan vs. actual  Hence, effectiveness is an output measure.  (Is the output “right” - right quality, right quantity, on time,

etc.)

Other Measures Affecting Productivity  Quality  Degree to which the outputs (products and services) from

the system conform to requirements or meet customer expectations.  The focus is on quality attributes (e.g., conformance,

performance, convenience, responsiveness, perceived quality.)

Other Measures Affecting Productivity  Quality of Work Life  Measures the way that employees in a system

respond to the sociotechnical aspects of that system.

Other Measures Affecting Productivity  Innovation  Measures the applied creativity of the system.  Relates to the design and development of improved

products, services, and processes.

Basic Concepts

Productivity Chain  You must manage to increas productivity  You must control for effective management  You must measure to continuous control  You must identify for correct measurement  You must specify quantity to identify exactly

Productivity Slowdown Productivity slowdown in production Capital stock will decrease

Capatity utilization will decrease.

Unit cost will increase Prices will rise (national and international).

Competition will drop Profit will decreas.

There will be recession on natioanal and international sales

Productivity Growth Productivity growth in production Capital stock will increase

Capacity utilization will increase

Investments will increase

Unit costs will decrease

Savings will increase

Competitive capacity will increase per capita income will increase

Benefits Of Productivity

 Job simplification  Minimization of working accident  High production capacity and high quality  Time, manpower and energy savings  Shorten the process and transportation time  Material flow at correct speed and correct quantity  Utilization creativeness of employee  Better decision making procedure, quick information flow, quick

decisions  Cost reduction