POMG 3721

Productivity
Measurement &
Improvement

Introduction
 Production Logistics Service Knowledge
Basic functions Make products Move materials, Provide service Create Knowledge
product or people Apply information Solve problems
and knowledge Manage and
Communicate coordinate
Type of work Mostly physical Mostly physical Mostly cognitive Cognitive

Worker discretion Limited Limited to moderate Moderate to broad Broad

Equipment Machinery systems Machinery systems Computer systems Computer systems

(production tools (transportation and Communication Information resources
and machines) material handling) systems
Examples Manufacturing, Transportation, Banking, Health Education, Legal,
Agriculture, Distribution, Storage care, Retail Designing,
Construction Management
Representative Laborer, machine Truck driver, Bank teller, Police, Manager, Doctor,
positions operator, Assembly airplane pilot, Nurse, Salesperson Designer, Researcher,
line worker, Quality material handler, Lawyer, Teacher
inspector order picker
Low discretion jobs High discretion jobs
Work is performed at one location Workers determine where they will do their jobs
Any able-bodied person can perform the Work depends heavily on technical knowledge
work with basic training and prior experience
Work is dominated by machinery Workers manage their own schedules and the
operations, routine procedures, or processes used to perform their jobs
predetermined activities

Methods, techniques and materials are Workers determine the methods, techniques and
specified materials they use in their jobs
Work requires interaction with same people Workers must deal with different types of
every day people in their daily work activities
Work performance is measured primarily in Work performance is measured primarily in
quantitative terms qualitative terms
A task performed by a worker generally consists of:

1. The basic productive work content

Theoretical minimum amount of time required to finish the task
(cannot be reduced).

 Excess nonproductive activities

Extra physical and mental actions performed by the worker that do not
add any value to the task.
1. Poor design of the product or service
2. Poor work layout, inefficient methods, and interruptions
3. Human factor
A high productivity results in:

 Reduced labor costs

 Lower production costs
 Better salaries and wages
 Lower lead times for products and services
 Increased profit
 Competitive advantage
 Productivity may be improved by:

 Increasing the output for a given (constant) input.

 E.g. Using 20 kg of meat to make 88 shawarma sandwiches
each weighing 200 grams is less productive than using the
same amount of meat to make 93 sandwiches.

 Reducing the input for a given (constant) output.

e.g producing 300 shawarma sandwiches per hour using two
employees results in a higher productivity than having the
same number of sandwiches produced by three employees.
◦
When resources are not fully used in producing a given
output, then there is a waste of resources: To increase
productivity, waste has to be eliminated as much as possible.

Examples of waste that can be avoided are:

Delay due to waiting

Idle time
Excessive transportation and movement
Defective parts and rejects
Excessive inventory
Unused space
Unnecessary parts or activities
There are many factors that influence productivity, such
as:
Working conditions
Levels of skill and training
Technology

Equipment

Procedures used (standardization)

Product design
Workplace layout
Quality

Labor turnover
Why should organizations measure the productivity
of their resources?
To know the efficiency of their performance.

To compare performance with competitors

To identify areas that require improvement

To evaluate workers

 Productivity
Business Input Productivity
measured
Customer
Restaurant Labor (hour) Labor productivity
(meal)/labor hour

Retail store Square meter Sales/square meter Space productivity

Feed or material
Chicken farm Feed (material) Kg of feed
productivity
Power
Fuel Kw/tons of fuel Fuel productivity
station
Bakery Labor (hour) Loaves/labor hour Labor productivity

Steel mill Labor (hour) Tons/labor hour Labor productivity

Productivity measures can be based on a single input, such
as:
Labor productivity (units of output per labor hour)
(units of output per shift)
(monetary value of output per labor
hour)

Machine productivity (units of output per machine hour)

(monetary value of output per machine hour)

Energy productivity (units of output per kilowatt-hour)

Capital productivity (units of output per dollar input)

A company is able to produce 300 boxes of canned
mango fruit in one-half hour using three workers.
What is the labor productivity?

300
Labor Productivity 
3 0.5 labor hours

200 boxes / labor hour

 A productivity measure can also be based on
more than one input. For example, we could
have labor hour and material cost as input. All
input types should however be expressed in the
same units, such as:
number of units produced
Multi - Factor productivity 
labor cost  material cost  energy cost

The choice of productivity measure depends on

the purpose of the measurement.
◦
An orange juice production plant produced 800
bottles of juice on September 17th using two
workers and 200 kg of oranges. The workers
work 8 hours per day, and they are paid OMR 7
per hour. The oranges cost OMR 0.3 per
kilogram.
800
Multi - Factor productivity 
2 8 7  0.3x200
This is the ratio of two productivity values such as
the productivity in two different years, or
productivity of two factories. The productivity
index is used for comparison purposes.

Productivity 1
Productivity Index 
Productivity 2
A group of 10 workers produced 7500 units of
output working 8 hours per day for 22 days in a
certain month.
a)What is the labor productivity ratio using units of
output per worker-hour.
b)What is the labor productivity ratio using units of
output per worker-month.

Suppose in the next month the work group

produced 6800 units but there were only 20 working
days in the month.
c)For each productivity measure in a) and b) above,
determine the productivity index using the first
month as a base.
The average number of customers processed by
several bank service units each day is given below.
The hourly wage rate is OMR 7, the overhead rate is
1.0 times labor cost, and material cost is OMR 2 per
customer. There are 8 working hours per day.

Unit Employees Customers processed per

day
A 5 40
B 8 60
C 3 20
Compute the labor productivity and the multi-factor
productivity for each unit.
Some difficulties in measuring productivity are due to:
 Unavailable or incomplete data.
 Converting different inputs into a common unit for
multi-factor productivity.
 Price and cost changes can affect productivity if the
input contains cost measures.
 Non-homogenous output (output may contain different
sizes).
 Conflicting measurements. For example, a productivity
index based on labor hours could show an increase
whereas a productivity index based on output per
worker could show a decrease for the same situation.