Productivity
Productivity =
Units produced
Input used
▶ Measure of process improvement
▶ Represents output relative to input
▶ Only through productivity increases
can our standard of living improve
Measuring Productivity
• Productivity is a measure of how efficiently inputs are
converted to outputs
Productivity = output/input
• Total Productivity Measure
Productivity relative to all inputs
• Partial Productivity Measure
Productivity relative to a single input (e.g., labor hours)
• Multifactor Productivity Measure
Productivity relative to a subgroup of inputs (e.g.,
materials)
© Wiley 2005
labor and
2
Productivity Calculations
Labor Productivity
Units produced
Productivity =
Labor-hours used
=
1,000
250
= 4 units/labor-hour
One resource input  single-factor productivity
Labor Productivity
Example:
– Assume two workers paint twenty-four tables in eight
hours:
– Inputs: 16 hours of labor (2 workers x 8 hours)
– Outputs: 24 painted tables
Outputs 24 tables

 1.5 tables / hour
Inputs 16 hours
Multi-Factor Productivity
Productivity =
Output
Labor + Material + Energy +
Capital + Miscellaneous
►
Also known as total factor productivity
►
Output and inputs are often expressed in
dollars
Multiple resource inputs  multi-factor productivity
Example
• Example: Collins title company has a staff of 4,
each working 8 hrs per day (for a payroll cost of
$640/day) and overhead expenses of $400
perday. Collins processes and closes on 8 titles
perday. The company recently purchased a
computerized title-search system that will allow
processing of 14 titles per day. Although the
staff, their work hours, and pay are the same,
the overhead expenses are now $800 per day
Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Old labor
=
productivity
32 labor-hrs
8 titles/day
Overhead = $400/day
Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
8 titles/day
Old labor
=
= .25 titles/labor-hr
productivity
32 labor-hrs
Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor
=
= .25 titles/labor-hr
productivity
32 labor-hrs
14 titles/day
New labor
=
productivity
32 labor-hrs
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor
=
= .25 titles/labor-hr
productivity
32 labor-hrs
14 titles/day
New labor
=
= .4375 titles/labor-hr
productivity
32 labor-hrs
Multi Factor Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
productivity
$640 + 400
Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
14 titles/day
New multifactor
=
productivity
$640 + 800
Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
14 titles/day
New multifactor
=
= .0097 titles/dollar
productivity
$640 + 800
Example 2. SINGLE FACTOR PRODUCTIVITY
MULTIFACTOR PRODUCTIVITY