Productivity Management

1. 5-1 Capacity Planning
Productivity
Dr. Md Shamimul Islam
McGraw-Hill/Irwin
Operations Management, Eighth Edition, by William J. Stevenson
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 5-2 Capacity Planning
Productivity
 A measure of the effective use of resources, usually
expressed as the ratio of output to input
 Productivity = Output/Input
 It is difficult to measure productivity in service
industries.

3. 5-3 Capacity Planning
Productivity
 Productivity measures can be based on a single input (partial
Productivity), on more than one input (multifactor productivity), or on
all inputs (total productivity).
 Partial Productivity = Output/Labor (Labor productivity: Units of output
per labor, Units of output per shift, Value added per labor hour, Dollar value
of output per labor hour)
Partial Productivity = Output/Machine,
Output/Capital,
Output/Energy
 Multifactor Productivity = Output/ (Labor + Machine),
Output/ (Labor + Capital + Energy)
 Multifactor Productivity = Quantity of Production at standard price/
(Labor cost + Materials cost + Overhead)
 Total Productivity = Goods or Services Produced/ All inputs used to
produce them

4. 5-4 Capacity Planning
Productivity

5. 5-5 Capacity Planning
Labor Productivity

6. 5-6 Capacity Planning
Multifactor Productivity

7. 5-7 Capacity Planning
Multifactor Productivity
 A wrapping paper company produced 2000 rolls of paper
one day. Standard price is $1/roll. Labor cost was $160,
material cost was $50, and overhead was $320. Determine
the multifactor productivity.
 Multifactor productivity = (Quantity produced @ standard price)/
(Labor cost + Material Cost + Overhead)
= 2,000 rolls x $1/roll
$160 + $50 + $320
= 3.77 dollar value per dollar input

8. 5-8 Capacity Planning
Factors that Affect Productivity
 Numerous factors affect productivity include
 Methods
 Capital
 Quality
 Technology and
 Management
 Other factors that affect productivity include
 Standardizing
 Quality differences
 Use of the internet
 Computer viruses
 Scrap rates
 New workers
 Safety

9. 5-9 Capacity Planning
Factors that Affect Productivity
 Other factors that affect productivity include
 Shortage of information technology workers and other
technical workers
 Layoffs
 Labor turnover (negative effect on productivity; replacements
need time to get up to speed)
 Design on workspace
 Incentive plans

10. 5-10 Capacity Planning
Improving Productivity
 Develop productivity measures for all operations is the first
step in managing and controlling an operation.
 Look at the system as a whole in deciding which operations
are most critical (avoid the bottleneck operation)
 Develop methods for achieving productivity improvements,
such as soliciting ideas from workers, engineers, managers
 Establish reasonable goals for improvement
 Make it clear that management supports and encourages
productivity improvement
 Measure improvements and publish them.