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What is Productivity by Operational Excellence Consulting

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Concept, principles and approaches for productivity improvement

Concept, principles and approaches for productivity improvement

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  • 1. © Operational Excellence Consulting. All rights reserved. Productivity Concept & Principles
  • 2. © Operational Excellence Consulting. All rights reserved. 2 Five Concepts of Productivity • Technical concept • Social concept • Economic concept • Management concept • Integrated concept Credit: ezinearticles.com
  • 3. © Operational Excellence Consulting. All rights reserved. 3 What is Productivity (Technical Concept)? • The term productivity is a broad concept which involves two major aspects. • Output refers to the product of an operation, or result of special interest. • Input refers to the resources consumed in the production or delivery of output. Output Input PRODUCTIVITY =
  • 4. © Operational Excellence Consulting. All rights reserved. 4 What is Productivity (Technical Concept)? • Problems with the technical concept:  Increase in productivity with poor quality of output.  Increase labor productivity due to labor reduction may lead to labor-management conflict. • To overcome this problem, the concept of productivity as a broad social concept has been introduced.
  • 5. © Operational Excellence Consulting. All rights reserved. 5 What is Productivity (Social Concept)? “Productivity is, above all, an attitude of mind. It seeks to continually improve what already exists. It is based on the belief that one can do things better today than yesterday and better tomorrow than today.” - Asian Productivity Organization • An innate wish of everyone to make tomorrow better than today. • Aims to achieve a better quality of life for all.
  • 6. © Operational Excellence Consulting. All rights reserved. 6 What is Productivity (Economic Concept)? • Refers to one’s ability to create more value for customers. • For most business organizations, the economic goal and basis for existence is value creation. • Economic gains is measured in terms of value added - increases in inputs or improvements in productivity.
  • 7. © Operational Excellence Consulting. All rights reserved. 7 What is Productivity (Economic Concept)? • In most cases, increases in value added are attained through expansion in capital and labor. • However, a productivity driven growth model focuses on resource efficiency and output superiority to create higher value to customers. • Hence, a long-term sustainable growth in the economy cannot depend on expansion strategy alone.
  • 8. © Operational Excellence Consulting. All rights reserved. 8 What is Productivity (Management Concept)? • Productivity is doing the right things right • This concept of productivity provides a working definition to manage and improve productivity at micro or organization levels. Efficiency + Effectiveness PRODUCTIVITY =
  • 9. © Operational Excellence Consulting. All rights reserved. 9 What is Productivity? As an integrated concept: • As an objective  Social concept • As a means  Technical concept • Need to adopt a long term strategy of productivity-driven economic growth  Improve the quality of labor and capital Output Input PRODUCTIVITY =
  • 10. © Operational Excellence Consulting. All rights reserved. 10 Productivity Principles • Principle of Increase in Employment  Improved productivity increases employment • Principle of Labor-Management Cooperation  In improving productivity, labor and management must cooperate in discussing the measures • Principle of Fair Distribution  The fruits of productivity improvement must be distributed fairly among key stakeholders
  • 11. © Operational Excellence Consulting. All rights reserved. 11 Multi-Factor Productivity (MFP) Output No. of Employees (No. of hours worked) Labor productivity = Output (value or unit or value added) Raw materials used Raw materials productivity =
  • 12. © Operational Excellence Consulting. All rights reserved. 12 Approaches to Improving Productivity 1. Reducing the 3 MU’s – Muda (waste), Mura (variability) and Muri (overburden) 2. Implementing the 5M + Quality + Safety 3. Improving the flow of goods and services 4. Reducing system inflexibility (bottlenecks) 5. Eliminating the eight types of waste
  • 13. © Operational Excellence Consulting. All rights reserved. 13 Activities that do not add value Workload that is uneven Work that creates burden for the team members or processes Reducing the Three MUs Approaches to Improving Productivity
  • 14. © Operational Excellence Consulting. All rights reserved. 14 Implementing 5M + Q + S Man The waste of: • Walking • Waiting • Searching • Unnecessary movement • Not easily recognizable waste Machine The waste of: • Large machines • General purpose machines • Conveyors • Machines with wasteful movements • Breakdowns • Machine handling Material The waste of: • Parts • Bolts • Welds • Functions • Storage and handling Management The waste of: • Materials • Meetings • Management Control • communications Safety The waste of: • Disaster prevention methods • Fixing defects (“Safety first” really requires removing all waste that can lead to accidents and/or injuries Quality The waste of: • Making defective goods • Fixing defects • Errors • Inspection • Quality control Method The waste of: • Large lot production • Inventory • transportation • Retention • Non-standardization • Picking up and setting down work pieces Approaches to Improving Productivity
  • 15. © Operational Excellence Consulting. All rights reserved. 15 Improving the Flow of Goods 1. Materials are procured • Materials are retained in the warehouse • Materials are conveyed to processes on the production line • Materials are retained at the process equipment (WIP) • Materials are picked up for processing 2. Materials are processed • Processed goods are set down and retained on the other side of the processing machine (WIP) • Goods are conveyed to an inspection point • Goods are retained until inspected • Goods are set down and retained on the other side of of the inspection process • Inspected goods are conveyed to the finished goods warehouse • Finished goods are retained until prior to shipment 3. Finished goods are delivered to customer Four key activities can be observed from the flow of goods: 1. Retention (Non-value-add) 2. transportation (Non-value-add) 3. Processing (Value-add) 4. Inspection (Non-value-add) Approaches to Improving Productivity
  • 16. © Operational Excellence Consulting. All rights reserved. 16 Reducing System Inflexibility Custom and practice Capability Configuration Capacity Changeover • Inability of people and the organization to adapt to customer needs • Inability of product, process, or IT systems to meet customer demand • Inability to provide the product or service the customer needs • Inability of product, process, or network to meet customer demand • Inability to change processes to meet customer demand Inflexibility adds cost, but does not increase the value added Approaches to Improving Productivity
  • 17. © Operational Excellence Consulting. All rights reserved. 17 Eliminating the Eight Types of Waste Overproduction Producing more than what the customer needs Inventory Building and storing extra services/products the customer has not ordered Transportation Moving from one place to another Defects Reprocessing, or correcting work Over-processing Adding excess value when the customer does not require it Motion Extra physical/mental motion that doesn’t add value Intellect Not using employees full intellectual contribution Waiting Employees waiting for another process or information Waste Approaches to Improving Productivity
  • 18. © Operational Excellence Consulting. All rights reserved. 18 To learn more about how to discover and eliminate waste, please view our presentation below (click the image)
  • 19. © Operational Excellence Consulting. All rights reserved. END OF PRESENTATION For find out more about productivity improvement, please visit: www.oeconsulting.com.sg