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Smart manufacturing workshop.
Introduction to productivity definition,
measurement and explanation
Christopher Moir WMG
Productivity: definition
Output/input
Output: value added; or turnover( £,$,€)
Input: total cost of labour, total cost of
capital, cost of bought in goods and
services ( £,$,€)
Applies to a firm, a sector, an economy
Productivity: measurement (1)
Labour productivity;
Average value added/worker.
Average value added per worker hour.
Productivity: measurement (2)
Total Factor Productivity (TFP)
Amount by which the value of output
exceeds the value of inputs.
Productivity measurement (3)
International comparisons: Levels or
growth rates.
Levels in national currency converted
into a common currency e.g US$
Growth rates in national currency
alone
Relative labour productivity 2014.
whole economy. (GDP/worker hour.)UK =100
United States 133
France 129
Germany 128
Italy 101
Japan 85
EU 27 100
The Conference Board Total Economy Database™, May 2015,
http://www.conference-board.org/data/economydatabase/
Growth in labour Productivity (Value
added/worker hour). Whole economy
1999-2006 2007-2012 2014 2015 proj.
UK 2.4 0.1 0.1 0.3
US 2.4 1.3 0.5 0.4
Germany 1.6 0.7 0.1 1.0
France 1.9 0.3 0.2 -0.1
Italy 0.5 -0.1 -0.6 0.2
Eurozone 1.5 0.6 0.2 0.5
Source: The Conference Board Total Economy Database™, May 2015,
http://www.conference-board.org/data/economydatabase/
Growth in Total Factor Productivity
whole economy
1999-2006 2007-2012 2013 2014
US 1.0 0.2 0.6 0.1
UK 0.7 -0.8 -0.4 -0.1
Germany 1.0 0.1 -0.5 -0.3
France 0.6 -0.5 -0.4 -0.6
Italy -0.3 -0.7 -0.4 -0.6
Source; Conference Board. http://www.conference-
board.org/data/economydatabase/
Productivity Growth:Explanations
Growth of output is a function of
Increased investment in:
• capital equipment.
• Skills and management competence
• Software, R and D , new knowledge
Contributions to economic growth
UK Germany US
2006 2014 2006 2014 2006 2014
GDP growth 3.0 2.8 3.6 1.6 2.6 2.4
labour 0.4 1.9 1.1 1.0 1.1 1.1
skills 0.1 0.1 0.1 0.1 0.1 0.1
Cap invest IT 0.3 0.3 0.4 0.6 0.5 0.6
Cap invest non IT 0.7 0.6 0.2 0.2 0.8 0.6
TFP 1.4 -0.1 1.8 -0.3 0.2 0.1
https://www.conference-board.org/data/economydatabase/index.cfm?id=27762
Productivity in Manufacturing
Levels
Growth rates
Manufacturing productivity levels
UK =100
Value added/worker
hour
Capital
intensity(cap/worker hr.)
Capital share
in VA %
UK 100 100 20
Germany 132 222 34
France 110 162 30
US 108 226 42
Source: http://www.euklems.net/ note. Latest data are for 2007
Growth in labour productivity:
manufacturing. (Value added/worker hour)
1999-2006 2007-2012 2013 2014
UK 5.0 1.5 -1.0 2.1
US 6.3 2.3 0.7 1.4
Germany 4.1 1.0 -0.3 0.6
France 4.6 2.0 0.6 1.8
Italy 1.5 1.1 1.0 -1.5
Japan 3.8 3.3 3.2 1.9
Source: Conference Board
So what?
Productivity growth matters
Main source of increasing living
standards. Wages for workers, profits
for businesses.
Recent growth rates well below long
run trends.
Productivity of individual firms
Aim; good profits, contented and
efficient workforce, little shouting
How? Superior product, avoid the
competition, specific firm attribute
not easily copied.
Decision making and culture
Decision making
Efficiency of knowledge acquisition,
exploitation and sharing within the business.
Speed and process of decision making
Resources needed for successful
implementation.
Relationships with suppliers and customers
Culture
Firm values and beliefs
Inward or Outward looking
Promotes learning or stifles it
Harmonious in firm interaction or conflict
removes barriers to knowledge sharing or
creates them.
Two examples
Toyota/ GM JV at Nummi plant
Caterpillar investment in Laser
welding
Concluding observations
Increasing firm productivity is a big
challenge
It almost certainly requires investment in
all its forms
A lot can be learnt from others the trick
as Dickens said was to look about you.

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Introduction to Productivity

  • 1. Smart manufacturing workshop. Introduction to productivity definition, measurement and explanation Christopher Moir WMG
  • 2. Productivity: definition Output/input Output: value added; or turnover( £,$,€) Input: total cost of labour, total cost of capital, cost of bought in goods and services ( £,$,€) Applies to a firm, a sector, an economy
  • 3. Productivity: measurement (1) Labour productivity; Average value added/worker. Average value added per worker hour.
  • 4. Productivity: measurement (2) Total Factor Productivity (TFP) Amount by which the value of output exceeds the value of inputs.
  • 5. Productivity measurement (3) International comparisons: Levels or growth rates. Levels in national currency converted into a common currency e.g US$ Growth rates in national currency alone
  • 6. Relative labour productivity 2014. whole economy. (GDP/worker hour.)UK =100 United States 133 France 129 Germany 128 Italy 101 Japan 85 EU 27 100 The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/
  • 7. Growth in labour Productivity (Value added/worker hour). Whole economy 1999-2006 2007-2012 2014 2015 proj. UK 2.4 0.1 0.1 0.3 US 2.4 1.3 0.5 0.4 Germany 1.6 0.7 0.1 1.0 France 1.9 0.3 0.2 -0.1 Italy 0.5 -0.1 -0.6 0.2 Eurozone 1.5 0.6 0.2 0.5 Source: The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/
  • 8. Growth in Total Factor Productivity whole economy 1999-2006 2007-2012 2013 2014 US 1.0 0.2 0.6 0.1 UK 0.7 -0.8 -0.4 -0.1 Germany 1.0 0.1 -0.5 -0.3 France 0.6 -0.5 -0.4 -0.6 Italy -0.3 -0.7 -0.4 -0.6 Source; Conference Board. http://www.conference- board.org/data/economydatabase/
  • 9. Productivity Growth:Explanations Growth of output is a function of Increased investment in: • capital equipment. • Skills and management competence • Software, R and D , new knowledge
  • 10. Contributions to economic growth UK Germany US 2006 2014 2006 2014 2006 2014 GDP growth 3.0 2.8 3.6 1.6 2.6 2.4 labour 0.4 1.9 1.1 1.0 1.1 1.1 skills 0.1 0.1 0.1 0.1 0.1 0.1 Cap invest IT 0.3 0.3 0.4 0.6 0.5 0.6 Cap invest non IT 0.7 0.6 0.2 0.2 0.8 0.6 TFP 1.4 -0.1 1.8 -0.3 0.2 0.1 https://www.conference-board.org/data/economydatabase/index.cfm?id=27762
  • 12. Manufacturing productivity levels UK =100 Value added/worker hour Capital intensity(cap/worker hr.) Capital share in VA % UK 100 100 20 Germany 132 222 34 France 110 162 30 US 108 226 42 Source: http://www.euklems.net/ note. Latest data are for 2007
  • 13. Growth in labour productivity: manufacturing. (Value added/worker hour) 1999-2006 2007-2012 2013 2014 UK 5.0 1.5 -1.0 2.1 US 6.3 2.3 0.7 1.4 Germany 4.1 1.0 -0.3 0.6 France 4.6 2.0 0.6 1.8 Italy 1.5 1.1 1.0 -1.5 Japan 3.8 3.3 3.2 1.9 Source: Conference Board
  • 14. So what? Productivity growth matters Main source of increasing living standards. Wages for workers, profits for businesses. Recent growth rates well below long run trends.
  • 15. Productivity of individual firms Aim; good profits, contented and efficient workforce, little shouting How? Superior product, avoid the competition, specific firm attribute not easily copied. Decision making and culture
  • 16. Decision making Efficiency of knowledge acquisition, exploitation and sharing within the business. Speed and process of decision making Resources needed for successful implementation. Relationships with suppliers and customers
  • 17. Culture Firm values and beliefs Inward or Outward looking Promotes learning or stifles it Harmonious in firm interaction or conflict removes barriers to knowledge sharing or creates them.
  • 18. Two examples Toyota/ GM JV at Nummi plant Caterpillar investment in Laser welding
  • 19. Concluding observations Increasing firm productivity is a big challenge It almost certainly requires investment in all its forms A lot can be learnt from others the trick as Dickens said was to look about you.