Dr. Mohammed Al-dujaili
Department of Non-Metallic Materials Engineering
Faculty of Materials Engineering
University of Babylon
2013-2014
Lecture 3
Department of Non-metallic Materials Engineering
Stage: forth
Subject: Industrial Engineering
Productivity Engineering
Overview
Manufacturers can generate new value, minimize costs, and increase
operational stability by focusing on four broad areas: production, product
design, value recovery, and supply-circle processes.
For that, most of the productivity measures used in industry are partial
productivity ratios. Despite the fact that a number of total productivity
measurement methods for industry unit level have been presented in the
literature. These models are not widely used. In recent years the pressure of
global competition has compelled firms to focus on strategies for productivity
improvements. This emphasizes the need to find appropriate measures for
total productivity. Partial productivity ratios are widely used in industry but
as such they are too narrow to give a comprehensive picture of the
productivity improvements at the industry unit level. The main reason why
total productivity measurement methods with acceptable validity are not used
at the industry unit level seems to be that they are too complicated to serve
companies encountering turbulence of today's industry world. So, in order to
the organizations can be able to choose the appropriate way to measure
productivity, must take into account some important aspects which include;
 Productivity is not an absolute value, but it relative concept, and this means
that an index of the high and the low procure is the comparison result by of
some criteria.
 Measuring productivity is instrumentality or a tool, not an objective or end.
And there is benefits can get it the organization when measuring productivity
are;
- The strategic purposes:
Organization can be determining her policy in the light of their future
performance in comparison with competitors in the industry, and this is
compare (spatial), or between its departments productive and this an time
comparison.
B – Tactical purposes:
The comparison between productive units, or between the arch functions
within the organization, enabling her of control on the performance of its
units in the short term.
C – Purposes of the planning
During the processes of measurement and comparison, the organization
enable to reach a set of conclusions, that may be related to differences in the
volume of shares of inputs in the short and long periods, and find out reasons
to put the different options to regulate operation the use to time in the future.
So Productivity is an important success factor for all organizations and,
thus, it should also be managed. Thereby, Productivity measurement is a
traditional tool for managing productivity. So the measurement of
productivity can be quite direct. Such as the case when productivity can be
measured as labor- hours per ton of specific type of steel or as the energy
necessary to generate a kilowatt of electricity. commonly, there are several
different
methods
for
productivity
measurement.
Concept of Productivity
the productivity, as the relation between output and input, has been available
for over two centuries and applied in many different circumstances on
various levels of aggregation in the economic system. It is argued that
productivity is one of the basic variables governing economic production
activities, perhaps the most important one.
Or
Productivity as “relationship (usually a ratio or an index) between output
(goods and/or services) produced by a given organizational system and
quantities of input (resources) utilized by the system to produce that output”.
Any it is process of transforming inputs to outputs in effective and efficient
way. As presented in Fig.16 below, where is transformation processes
proceed by fixed operating processes that take places in different departments
from the corporation .
Productivity Measurement Methods
Measuring productivity it is process a study and analysis of the used factors
in the production with are production process output (the product), that is
for purpose of determining the success of the project in the use of productive
resources, and available that from through it can be judged on the efficiency
of processes and their ability to exploit these resources, and measure of
productivity consider the cornerstone to study and analysis of productivity.
Where is consider the base in assessment, planning and productivity
improvement on level of corporates.
Consequently Productivity is an important success factor for all organizations
and, thus, it should also be managed. Thereby, Productivity measurement is a
traditional tool for managing productivity. As a result, the measurement of
productivity can be quite direct. Such as the case when productivity can be
measured as labor- hours per ton of specific type of steel or as the energy
necessary to generate a kilowatt of electricity. commonly, there are several
different methods for productivity measurement. And these as follows
1.Total productivity
There is many different approaches to measuring productivity have been
adopted by industry for different purposes. One of these methods of
measuring productivity it is total measurement method. However, the
measurement of total productivity is very difficult in practice. Due to that
different outputs (products and services) and inputs (e.g. labour, material, and
energy) cannot be summed up. The basic equation for total productivity is as
follows:
O
TP =
L+M+C+E+Q
Where TP = Total Productivity.
O = Total output L = Labour input M = materials input
C = Capital input E = Energy input
Q = other input
In other words, Basic total productivity relationships as follows:
Output
Labour input
Man – year
Total Productivity =
*
*
Man - year
Total input
Labour input
This is:
Total productivity =
Labour
productivity
*
Fractional
Labour cost
*
Inverse of unit
Labour cost
By and large, in productivity measurement, base year unit prices and costs
can be used to commensurate dissimilar inputs and dissimilar outputs .In
other words, deflated currency units can be used in productivity
measurement to represent the amount of input or output. Now, the relative
change in total productivity can now be expressed as a function of the
relative changes in the partial productivity ratios and the cost structure of a
firm in the base period as follows:
Δ pT
Σ (Iibase )
-------------------------Σ (Iibase / (Δ p i + 1))
PT - PT base
= ------------------------------ =
PT base
ITbase
=
--------------------------------------------------
Σ (Iibase * 1 / (Δ p i + 1))
-1
-1
1
= ------------------------------------------------Σ (Iibase * 1 / (Δ p i + 1))
1
= -------------------------------------------------Σ (Cibase / Cibase * 1 / (Δ p i + 1))
-1
-1
Where;
Δ pT is the relative change in total productivity, CTbase total costs in base
period , Cibase costs of the input i in the base period, and Δ p i relative
change in the partial productivity of input i.
Or
Units produced
Total productivity =
Input used
2. Partial Productivity Measurement
The partial productivity it is the ratio of gross or net output to single factor
input . This expression can be further classified by the type of input: Labour
productivity, Capital productivity, Material productivity, Energy
productivity...so on. But the problem in implementation of partial
productivity measures is that the output over single input ratio does not
address the problem of factor trade-offs. Because many of the productivity
improvement efforts of a typical production organization involve trade-offs
between the factors of production rather than manipulation of a single factor.
On the other hand, partial productivity ratios are much simpler than total
productivity measures, and they are widely used in industry.
And
so on there is several methods to measure the Partial productivity. As in the
following equation;
Output
The Work Productivity =
The number of workers
The Capital Productivity =
Output
The amount of a capital that used in
the production
The Machine Productivity =
Output
The number of tons of production
The materials productivity =
Output
The Materials amount that used
in the production
In
other words, Partial productivity is the ratio of total output and a certain kind
of input used to produce output: As in the following equation
O
Pi =
Ii
Ii =
O
Pi
Where Pi is the partial productivity of input i, o the output, Ii the input I.
3. Multifactor’s Productivity
Multifactor productivity (MFP) it is the proportion of the total production
of the parts that involved in the production process, any (MFP) measures
the changes in output per unit of combined inputs in production process.
Where Multifactor productivity measures reflect output per unit of some
combined set of inputs. Furthermore, the change in multifactor
productivity reflects the change in output that cannot be accounted for by
the change in combined inputs. As a result, multifactor productivity
measures reflect the joint effects of many factors including new
technologies, economies of scale, managerial skill, and changes in the
organization of production. While labor productivity measures the output
per unit of labor input, multifactor productivity looks at a combination of
production inputs (or factors): labor, materials, and capital. In theory, it’s
a more comprehensive measure than labor productivity, but it’s also more
difficult to calculate, and it is measured as follows:
Output
Multifactor Productivity =
Multifactor Productivity =
Work+ capital +machine +capacity
+materials
Or
Output
KLEMS
The final equation explains that there are many standards for Partial
productivity. But the labor productivity measure is the most common and
acceptable one, due to the importance of this element in the production
process .This is because its elements are of rare and particularly the skilled
manpower are efficient. In addition, for being able to create the new
productivity and which it multiplies as a result of the knowledge which is
possessed in the production process with the passage of time, and is retrieved
from memory to devote subsequently for the production process. Similarly,
this can keep pace with the rapid technological developments, also the work
productivity measure easy of a comparison with the other elements.
Productivity Example Problems with Solutions
1. Arvia company Branch employs three maintenance officers, each working
eight hours per day. Each officer processes an average of five processes per
day. The payroll cost for the officers is $820 per day, and there is a daily
overhead expense of $500.
a. Compute the labor productivity.
b. Compute the multifactor productivity, using breakdowns per dollar cost as
the measure.
The company is considering the purchase of new computer software for the
maintenance operation. The software will enable each maintenance officer to
process eight breakdowns per day, although the overhead expense will
increase to $550.
c. Compute the new labor productivity.
d. Compute the new multifactor productivity.
e. Should the company proceed with the purchase of the new software?
Explain.
Solution
a. Labor productivity is simply the ratio of breakdowns to labor-hours:
output(breakdowns) 3 officers×5 breakdowns/day
------------------------ = ------------------------- = 0.625 breakdowns /labor-hr.
input(breakdown-hrs.) 3 officers × 8 hrs./day
b. Multifactor productivity accounts for both labor cost and overhead:
output (breakdowns)
3 officers × 5 breakdowns /day
------------------------------=----------------------------- =0.0113 breakdowns/$.
Input (labor cost overhead) $820 + $500
The new software increases the number of loans processed per day, but it also
increases the overhead.
c. New labor productivity:
output (breakdowns) 3 officers×8 breakdowns/day
------------------------=--------------------------------=1.0 breakdowns /labor-hr.
input (labor-hrs.)
3 officers × 8 hrs./day
d. New multifactor productivity:
output (breakdowns)
3 officers×8 breakdowns/day
----------------------------------- = --------------------------------- = 0.0175 breakdowns /$.
input (labor cost + overhead)
$820 + $550
e. Purchasing the new software would increase the labor productivity by 60
percent (= [1.0−0.625]/0.625) and would increase the multifactor
productivity by 55 percent (= [0.0175 − 0.0113]/0.0113), so it is certainly
worth the added overhead.
2. A Modern industrial company (MIC) produces plastic crates, which it
sells to industrial companies . With the current equipment, MIC produces 240
crates per 100 logs. It currently purchases 100 logs per day, and each log
requires three labor hours to process. MIC is considering the hire of a
professional buyer who can buy better quality logs at the same cost. If this is
the case, MIC can increase production to 260 crates per 100 logs, and the
labor hours required will increase by eight hours per day (for the buyer ).
a. Compute the labor productivity for the current method (i.e., no buyer).
b. What will the labor productivity be if MIC hires the professional buyer?
Suppose that MIC spends $12 per hour for each worker who constructs the
crates. The buyer, however, is paid $24 per hour. The material cost is $10 per
log (regardless of who purchases them).
c. Compute the multifactor productivity for the current method, using crates
per dollar cost (labor + materials) as the measure.
d. How does the multifactor productivity change if the professional buyer is
hired?
Solution
a. Labor productivity for the current method:
240 crates
-------------------------- = 0.8 crates/labor-hr.
100 logs × 3 hrs./log
b. Adding the labor of the buyer increases both the inputs and the outputs; the
labor productivity would be:
260 crates
----------------------------------- = 0.844 crates/labor-hr.
(100 logs × 3 hrs./log) + 8 hrs.
This means that the labor productivity would increase by 5.5 percent (=
[0.844 − 0.8]/0.8).
To combine different factors, we need a common unit of measure: in this
case, dollars. The multifactor productivity measures how much output
(crates) is produced per unit of input (dollars)
c. For the current method, the multifactor productivity is:
240 crates
240
-------------------------------------------------------- = ------------------- = 0.0522 crates/$.
(100logs×3hrs./log×$12/hr.)+(100logs×$10/log)
3600 + 1000
260 crates
260
-------------------------------------------------------------------------------------- = ----------------------(100 logs ×3 hrs./log × $12/hr.)+ (8 hrs.×$24/hr.) +(100 logs×$10/log) 3600 + 192 + 1000
= 0.0543 crates/$.
This represents an increase of 4.0 percent (= [0.0543 − 0.0522]/0.0522).