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Productivity

The document discusses the concepts of productivity and production. Productivity is defined as the ratio of output to input and is a measure of efficiency. It can be measured on an aggregate basis by comparing total output to total inputs, or on an individual basis by comparing output to a single input factor like labor, materials, machines, or capital. Improving productivity through techniques like training, technology upgrades, management changes, and process improvements can increase profits and competitive advantage for businesses. Starbucks is provided as an example where operations improvements increased annual revenue per store by $200,000 to $940,000 and productivity by 27% over six years.

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Pardhasaradhi Mathi
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103 views21 pages

Productivity

The document discusses the concepts of productivity and production. Productivity is defined as the ratio of output to input and is a measure of efficiency. It can be measured on an aggregate basis by comparing total output to total inputs, or on an individual basis by comparing output to a single input factor like labor, materials, machines, or capital. Improving productivity through techniques like training, technology upgrades, management changes, and process improvements can increase profits and competitive advantage for businesses. Starbucks is provided as an example where operations improvements increased annual revenue per store by $200,000 to $940,000 and productivity by 27% over six years.

Uploaded by

Pardhasaradhi Mathi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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PRODUCTIVITY

M.P.saradhi
Productivity
 Productivity is the ratio between output and input. It is
quantitative relationship between what we produce and
what we have spent to produce.
• Hence, Productivity=𝑜𝑢𝑡𝑝𝑢𝑡
𝑖𝑛𝑝𝑢𝑡

 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.
Importance of Productivity
• 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.
Diff. between Production andProductivity
Production Productivity

Definition It is defined as the act of it is defined as the rate at


manufacturing goods for which goods are produced.
their use or sale. Absolute
output
Use It is the actual process of It is the utilization of
conversion. resources to form goods.

Work done It is the amount of work It is the amount of work one


done or manufactured that gets for a certain spending
is the output. cost.
Measurement It is the measure of It is the measure of
produced goods. efficiency.

Important Note!
Production is a measure of output only and not a
measure of efficiency
Measurement in Productivity
and why ????
Establish productivity • Set overall productivity goals for organization
management function • Raise awareness among employees

• Access your company current performance


Diagnose
• Identify the gaps and areas of improvement

• Set targets and formulate strategy


Develop road map
• Implement specification

Implement
measurement system

Implement performance • Link effort and reward to employees


management system • Monitor the review parts
Techniques for Measurement of
Productivity:

PRODUCTIVITY

INDIVIDUAL
AGGREGATE BASIS
BASIS

PARTIAL
TOTAL PRODUCTIVITY
PRODUCTIVITY OR FACTOR
PRODUCTIVITY
Aggregate Basis
• On aggregate basis, output is compared with all inputs taken
(added) together. This is called as Total Productivity.
Hence, Total output
Total Productivity Index =
Total input

• 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.
Example : Total Productivity
10,000 Units Produced
Sold for $10/unit 500 labor hours Labor rate:
$9/hr
Cost of raw material: $30,000 Overhead: $15,500
Output
TP = Labor + Materials + Overhead
(10,000 units) * ($10)
TP = (500)*($9) + ($30,000) + ($15,500)
TP = 2.0
Individual Basis
• On 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:
I. Labor productivity
II.Material productivity
III.Machine Productivity
IV.Capital productivity
Labor Productivity

• Labor productivity is simply defined as the ratio of Total output to the


Labour input i.e.

𝑻𝑶𝑻𝑨𝑳 𝑶𝑼𝑻𝑷𝑼𝑻
Labor Productivity =
𝑳𝑨𝑩𝑶𝑼𝑹 𝑰𝑵𝑷𝑼𝑻

• 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.
Example: Labor
Productivity
• 10,000 Units Produced
• Sold for $10/unit

• 500 labor hours


• Labor rate: $9/hr

• 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
Material productivity
Machine Productivity
• Production system converts raw material into finished
product through mechanical or chemical process with the
help of machines and equipment's.
Total output
• Machine productivity= or
Machine input
• M.P= Output in standard hours
Actual machine hours
• Machine productivity depends upon availability of raw material,
power, skill of workers, machine layout etc.
Capital Productivity
• For any production set-up, facilities of machines, tools, land etc.
are required which are assets of organization. Capital is needed
for such assets.
Total output
• Capital productivity= or
Capital input
Total output
• Capital productivity=
Capital employed
•Capital productivity depends on how effectively assets
are utilized.
What are the factors that affect
productivity?
Training Methods

Technology Management
Method Of ProductivityImprovement
 Employ Based Technique
1. Financial incentives
2. Fringe benefits
3. Employ promotion
4. Job rotation
5. Education
6. Zero defects
7. Quality circle
8. Communication
9. Working environment
10. Punishment
11. Zero defect
Method Of ProductivityImprovement
(contd.)
 Material Based Technique
1. Inventory control
2. Material handling system
3. Quality control
4. MRP
5. Material management

 Task Based
1. Method engineering
2. Job evolution
3. Human factor engineering
4. Job design
5. Work measurement
Method Of ProductivityImprovement
 Product Based Technique
1. Product diversification
2. Product simplification
3. Product
4. Value analysis
5. Research and development

 Technology Based
1. Computer engineering
2. CAD
3. CAM
4. Electronics data processing
5. Robotics
6. Group technology
Improving Productivity at Starbucks

A team of 10 analysts
continually look for ways
to save time. Some
improvements:
Stop requiring signatures on Saved 8 seconds
credit card purchases under per transaction
$25
Change the size of the ice Saved 14 seconds
scoop per drink

New espresso machines Saved 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.
Advantages of Productivity:
• 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.

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