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    Enhancing Productivity: Key To Organizational Success

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    Fouzan Soniwala
    This document discusses productivity and ways to enhance it. It defines productivity as the ratio of outputs to inputs. Higher productivity leads to lower costs, higher profits, and a higher standard of living. There are different ways to measure productivity, including partial measures looking at a single input/output, multifactor measures, and total measures. Productivity can be improved through better use of capital, materials, energy, and labor. Methods include analyzing operations, improving technology and equipment, and establishing clear productivity goals.

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    Enhancing Productivity: Key To Organizational Success

    Uploaded by

    Fouzan Soniwala
    412 views46 pages
    This document discusses productivity and ways to enhance it. It defines productivity as the ratio of outputs to inputs. Higher productivity leads to lower costs, higher profits, and a higher standard of living. There are different ways to measure productivity, including partial measures looking at a single input/output, multifactor measures, and total measures. Productivity can be improved through better use of capital, materials, energy, and labor. Methods include analyzing operations, improving technology and equipment, and establishing clear productivity goals.

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    This document discusses productivity and ways to enhance it. It defines productivity as the ratio of outputs to inputs. Higher productivity leads to lower costs, higher profits, and a higher standard of living. There are different ways to measure productivity, including partial measures looking at a single input/output, multifactor measures, and total measures. Productivity can be improved through better use of capital, materials, energy, and labor. Methods include analyzing operations, improving technology and equipment, and establishing clear productivity goals.

    Copyright:

    © All Rights Reserved
    Download as PPS, PDF, TXT or read online from Scribd
    Download as pps, pdf, or txt
    412 views46 pages

    Enhancing Productivity: Key To Organizational Success

    Uploaded by

    Fouzan Soniwala
    This document discusses productivity and ways to enhance it. It defines productivity as the ratio of outputs to inputs. Higher productivity leads to lower costs, higher profits, and a higher standard of living. There are different ways to measure productivity, including partial measures looking at a single input/output, multifactor measures, and total measures. Productivity can be improved through better use of capital, materials, energy, and labor. Methods include analyzing operations, improving technology and equipment, and establishing clear productivity goals.

    Copyright:

    © All Rights Reserved
    Download as PPS, PDF, TXT or read online from Scribd
    Download as pps, pdf, or txt
    of 46

    Enhancing Productivity: Key to Organizational Success

    Productivity
    Why Productivity Matters

    Kinds of Productivity

    Why Productivity Matters


    Higher Productivity Lower Costs Lower Prices

    Higher Standard of Living

    Higher Profits

    Higher Market Share

    Objectives
    1. Define productivity. 2. Describe how productivity is the key to an increase in standard of living. 3. Discuss how the relationship between productivity and the nature of work has changed over time.

    4. Explain labor, capital, and material productivity.


    5. Calculate productivity in single and multiple factor cases. 6. Discuss important trade-offs among the factors of productivity. 7. Explain the relationship between wage rate and productivity. 8. Discuss ways to enhance productivity.

    What is Productivity? Defined


    Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio: Outputs Inputs

    In other words Early Definition of Productivity was


    output Productivity = input

    Productivity and Related Issues


    Understanding Productivity Assessing Productivity The inputs of Productivity Enhancing Productivity Technology and Productivity Improvements

    Understanding Productivity :
    Different Types of Productivities Is Money More Important than Productivity? Productivity and the Nature of Work Productivity in Manufacturing versus Service Firms The Quality Condition

    Different Types of Productivity Measurements


    Partial Measure Productivity Multifactor Measure Productivity Total Measure Productivity

    Partial Measure Productivity


    Partial measures of productivity =
    Output Labor or Output Capital or Output Materials or Output Energy

    Multifactor Measure Productivity


    Multifactor measures of productivity =
    Labor +

    Output
    Capital or +

    .
    Energy

    Labor +

    Output
    Capital +

    .
    Materials

    Total Measure Productivity


    Total Measure Productivity = Outputs Inputs or
    = Goods and services produced All resources used

    Sinks model of productivity based on Unit cost


    L+C+M+Q Total unit cost = O

    where L / O = Labour unit cost C / O = Capital unit cost M / O = Material unit cost Q / O = Other input unit cost

    Sumanths total productivity model, based on Product oriented indices


    It is based on total productivity of the firm TPF = OF/IF where OF = Total tangible output of the firm and I F = Total tangible input of the firm

    Sumanths total productivity model based on Product oriented indices cont

    TPF = OF/IF =
    i N N

    Oi
    i

    Ii

    where OF = Total tangible output of the firm Oi = Total tangible output corresponding to product i of the firm and IF = Total tangible input of the firm Ii = Total tangible input corresponding to Product i=Sigma j of Iij

    Sumanths total productivity model based on Product oriented indices cont


    ( j ) = ( H, M, C, E, X ) where H = Human input M = material input C = Capital input E = Energy input X = Other expenses input N = Total number of products produced

    Is Money More Important than Productivity?


    In improving the standard of living, productivity is more important than money because productivity determines the output while money measures the value of the output.

    Productivity and the Nature of Work


    Worker
    University faculty

    Activity
    Educate students and/or educate them better

    Measure
    Student credit hours taught. Problems with this measure are that it does not take into account what students have learned or other duties of faculty, including curriculum design, research, and service.

    Method of Improvement

    Increasing class size leads to more student credit hours Assigning more sections per faculty leads to more student credit hours Distance learning provides access to education that might not otherwise be available Innovative teaching methods can improve the quality and/or the quantity of what is learned
    Equipment improvements that speed up the sorting process Job training

    Postal worker

    Oversee the operation of an automatic sorting machine Manages the care of children in foster homes

    Number of pieces of mail sorted in an hour

    Case worker for children services

    Number of cases under management. Problems with this measure are not consider the degree of difficulty of the cases or the quality of the service provided.

    Information systems, Communication technology that gives access to foster parents, service providers, and support services

    Productivity in Manufacturing versus Service Firms


    The reasons that productivity gains in the service sector have lagged behind the manufacturing sector :
    Fear of job loss by manufacturing workers, pressurises them to work harder and smarter. Macroeconomic factors, such as the low savings rate.

    The Quality Condition


    If an organization produces more output with the same level of resources, but the quality of the output is lower, productivity may not increase. If firms find ways to make a product with higher quality using the same or fewer resources, productivity may increase.

    Assessing Productivity
    If the automatic machine can make 200,000 roofing nails in 40 hours, then 200,000 roofing nails Machine Productivity = 40 machine hours
    = 5,000 roofing nails per machine hour

    Assessing Productivity--Continued
    Now, the machine is able to produce 210,000 nails in the same 40-hour period. Productivity has increased from 5,000 nails per hour to 5,250.
    Change in Productivity

    Percent Increase in Productivity = (100)


    Productivity Prior to Change

    5,250 - 5,000 Percent Increase in Productivity = (100) 5,000 = 5 percent

    The Inputs of Productivity


    In an economic sense, the inputs are:

    Managers Workers Externally purchased services,

    Productivity measurement should also include:


    (1) Multiple inputs with different economic values. (2) Multiple outputs with different economic values

    The Key Factors of Productivity


    Capital Productivity Material Productivity Important Trade-Offs Trading Capital for Labor Trading Capital for Material or Energy Substituting Materials for Labor

    Examples of productivity measurement

    Labour productivity Multifactor productivity

    Labor Productivity

    units produced

    Labor Productivity =
    labor hours (or labor cost)

    Example -1 of Labour Productivity Measurement


    Determine that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms. Which productivity measure should be used? Answer: Could be classified as a Total Measure or Partial Measure. ( Labour productivity Measurement) Is productivity increasing or decreasing? Answer: Last weeks productivity = 480/2000 = 0.24, and this weeks productivity is = 560/2400 = 0.23. So, productivity has decreased slightly.

    Example-2
    A travel agency processed 240 customers on Day 1 with a staff of 12, and 360 customers on Day 2 with a staff of 15. What can be said about the productivity shift from Day 1 to Day 2? An increase in productivity from Day 1 to Day 2 A decrease in productivity from Day 1 to Day 2 The same productivity from Day 1 to Day 2 Can not be computed from data above None of the above

    a. b. c. d. e.

    Answer: a. An increase in productivity from Day 1 to Day 2 (Day 1 productivity = 240/12=20 Day 2 productivity = 360/15=24)

    Multiple Factor Productivity

    Multiple Factor Productivity=

    output (units produced or the value of those units) labor + capital + materials + energy + other

    Performance Measures
    Productivity : Outputs/Inputs Capacity:
    Utilized capacity/Available capacity

    Speed of Delivery
    Lead time. Variability of due date

    Performance MeasuresCont..
    Flexibility
    Set up costs for a switchover. Volume Flexibility Set up time Product Mix Flexibility

    Summary of productivity
    Productivity=Outputs/Inputs Partial Measures
    Output/Single Input

    Multi Factor Measure


    Output/(Multiple inputs)

    Total Measure
    Output/(Total Inputs)

    Some Partial Measures


    Restaurant Retail Store Power Plant Customers/labour hours Sales/Square foot Kilowatts/ton of coal

    A Numerical Example
    Output Finished Goods : 10,000 Dividends : 2500 Bonds : 1000 Total Output : 13500 Input 1.Human 2.Capital 3.Energy 4.Misc. Expenses Total Input

    : 3000 : 10000 : 693 : 1500 : 15193

    Total Measure=13500/15193 =.89 Some Multi-Factor Measures: Total w.r.t Human and Energy=13500/693 =19.48 Some Partial Measures: Finished goods w.r.t Capital= 10000/10000=1.00

    Capacity Measures
    Fast Food Restaurant Brewery Ford Call Centers Customers/Hour Barrels/Year Cars/Hour Number of calls/Hour

    Examples
    Multiple Factor Productivity = 600 applications (6 employees)(40 hrs./wk.)($18/hr) + 1,200

    Multiple Factor Productivity = 600 applications/$5,520 = 0.109 applications/dollar of input

    example Example
    Multiple Factor Productivity = 650 applications (5 employees)(40 hrs./wk.)($18/hr) + 1,800 = 650 applications/$5,400 = 0.120 applications/dollar of input

    example Example-Continued
    Percent Increase in Productivity = Change in Productivity (100) Productivity Prior to Change = 0.120 0.109 (100) 0.109 = 10.1 percent

    Impact of Productivity Improvements on the Workforce


    Productivity improvements are essential for designing and building more goods and services at a lower cost. Jobs are created to sell and service the equipment.

    Enhancing Productivity
    Productivity is affected by: Issues related to the structure of operations. The equipment and methods used in the activities. The detailed analysis of the individual jobs and activities.

    Ways for Improving Productivity


    Develop productivity measure for all opns Determine Critical operations (bottlenecks) Develop Methods for productivity improvements Establish reasonable productivity Goals Get management Support and employee Involvement Measure and Publicize improvements

    Some Reasons For Poor Productivity


    Underestimating foreign competition Viewing labor as cost not as an investment Too much focus on short-term financial results, lack of operations strategy Lack of coordination between organizations and between different departments (e.g. marketing and production)

    Service Productivity
    Typically labor intensive Frequently individually processed Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality

    Several approaches used to increase productivity:


    Technology Innovation Automation Economies of Scale Business Process Redesign Learning and Experience Human Resources Job Design and Work Measurement

    Technology and Productivity Improvements:


    Organizations can reduce time in the system, expand options, and reduce costs. Decision making need gather, organize, analyze, and present data effectively. Makes it possible for suppliers and manufacturers to share data and coordinate design and operating decisions. Allows retail customers to place orders quickly and to verify that suppliers have the product on hand.

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