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Productivity

CHAPTER 19. Productivity. Definition of Productivity. Output Input. For the same product/service, output could be defined in different ways. The inputs could be several Hence, productivity could be measured from different perspectives or even indirectly. Productivity =.

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Productivity

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  1. CHAPTER 19 Productivity

  2. Definition of Productivity Output Input • For the same product/service, output could be defined in different ways. • The inputs could be several • Hence, productivity could be measured from different perspectives or even indirectly. Productivity =

  3. Production Output (Value in Rs) • (Raw materials + Packaging materials + Supplies) Production Output at Standard Price Amount of Wages Paid Examples of Productivity Measures Materials Productivity = Labour Productivity =

  4. Standard Material Usage Actual Material Usage Standard Labour Hours Actual Labour Hours Sales (in Rupees) Inventory (in Rupees) More Examples of Productivity Measures • A production manager’s productivity can be assessed through ratios such as: Materials Efficiency = Labour Efficiency = Inventory Turnover =

  5. Total Factor Productivity (TFP) • TFP = Production at Standard Price Labour + Materials + Overhead + k (capital invested) TFP gives a multifactor view of productivity.

  6. Efficiency and Effectiveness • All that is ‘put out’ is not output. • A product is truly an output only if it is marketable. • Output is not in mere numbers; it has to be customer oriented.

  7. Efficiency and Effectiveness (contd.) • Good productivity needs effectiveness and efficiency – both, and in that order. • Emphasis merely on efficiency may result in anomalies like: • Large inventory of finished goods that cannot be sold and of Work-in-process. • Improved process but missing out on a new product line.

  8. Business Process Reengineering (BPR) • BPR involves fundamental rethinking on the ways the organization goes about doing its tasks. • It is about overhauling the business ‘process’ i.e. all tasks that create outputs of value to the customer.

  9. Business Process Reengineering (BPR) • ‘Processes’ concern with organizational objectives, whereas operations are function/job oriented. • Processes flow horizontally across the organization's vertical hierarchy.

  10. Benchmarking • Best practices in the industry and/or outside the industry are called benchmarks. Benchmarks provide higher goals. • Benchmarking could be: Internal :within own company Competitive : competitors for the product Functional : similar functions with industry leaders Generic : dissimilar industries suggesting higher attainments

  11. Measures to Enhance Productivity • Be clear about your organization’s mission • Understand customer’s needs • Be proactive • Get employees’ and organization’s goals aligned • Make use of relevant productivity improvement techniques such as BPR and Benchmarking • Make the organization as much a ‘learning organization’ as possible

  12. Productivity as Pursuit of Excellence • Pursuit of excellence is a ‘state of mind.’ • Organization and the individuals should constantly strive for producing the best possible results. • “The purpose of an organization is to enable ordinary human beings to do extraordinary things.” – Peter Drucker

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