This document discusses productivity, including: 1) Productivity is measured as the ratio of output to input and can be partial, multifactor, or total. 2) Multifactor productivity measures output against multiple inputs like labor, materials, and overhead. 3) Many factors can affect productivity, both positively and negatively, such as methods, technology, management, workforce issues, and the work environment.

1. 5-1 Capacity Planning
Productivity
Dr. Ziaul Haq Adnan
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) which
stages/operations of our production is hold on.
 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.

11. 5-11 Capacity Planning
Competitiveness
Quality
Price
Time