Productivity

What is Productivity? The least controversial definition of productivity is that it is a quantitative relationship between output and input

(Iyaniwura and Osoba, 1983, Antle and Capalbo, 1988).

 One, the definition suggests what productivity is thought of to be in the context of an enterprise, an industry or an economy as a whole. Two, regardless of the type of production, economic or political system, this definition of productivity remains the same as long as the basic concept is the relationship between the quantity and quality of goods and services produced and the quantity of resources used to produce them (Prokopenko, 1987).

 Eatwell and Newman (1991) defined productivity as a ratio of some measure of output to some index of input use. Put differently, productivity is nothing more than the arithmetic ratio between the amount produced and the amount of any resources used in the course of production. This conception of productivity goes to imply that it can indeed be perceived as the output per unit input or the efficiency with which resources are utilized (Samuelson and Nordhaus, 1995).

 Olaoye (1985) observed that productivity as a concept can assume two dimensions: namely total factor productivity (TFP) and partial productivity. The former relates to productivity that is defined as the relationship between output produced and an index of composite inputs; meaning the sum of all the inputs of basic resources notably labour, capital goods and natural resources.

Some common misunderstandings exist about productivity. First, productivity is not only labour efficiency or labour productivity even though; labour productivity statistics are essentially useful policy-making data. Productivity is much more than just labour productivity and needs to take into account other inputs involved in the production process. Two, productivity is not the same as increase in output or performance.

 The third misconception about productivity is the confusion between productivity and profitability. Profitability is a function of the extent of price recovery, even when productivity has gone down. High productivity may not always go with high profit if goods and services produced efficiently and effectively are not in demand. Confusing productivity with efficiency or effectiveness can equally cloud the meaning of productivity. Efficiency means producing high-quality goods in the shortest possible time. It is important to ask if goods produced efficiently are actually needed. Also, effectiveness refers more to the production of results.

 The concept of productivity is also increasingly linked with quality. The importance of social side of productivity has increased considerably.

 In a nutshell, productivity is concerned with efficiency and effectiveness simultaneously. Lawlor (l985) sums up productivity as comprehensive measures of how efficient and effective an organization or economy satisfies five aims: objectives, efficiency, effectiveness, comparability and progressive trends. No matter how it is perceived, productivity implies that there is an incremental gain in what is produced as compared with the expenditure on measures utilized.

The Significance of Productivity

The importance of productivity to economic growth and development can hardly be overemphasized. It remains the basic problem of economic progress, as it is required at both the early stages of development as well as in the permanent process of re-equipping the production apparatus of any nation.

 At the level of an individual, it is rational to argue that, the standard of living of any man is the extent to which he is able to provide himself and his family with the things that are necessary for sustaining and enjoying life. The greater the amount of goods and services produced in any economy or imported into such economy, the higher its average standard of living will be.

 At the national level, steady growth in productivity guarantees non-inflationary increases in wages as well as solves pressing problems of unemployment, increased trade deficit and an unstable currency (exchange rate). In business, productivity improvements can lead to more responsive customer service, increased cash flow, and improved return on assets and greater profits.

MODEL FOR A LOWPRODUCTIVITY TRAP

Low productivity Growth

Lagging Capital Formation Lower Utilization of domestic plant capacity Sluggish Sales

Rising Prises

Rising unit(labour and energy cost)

Productivity in industry
Many factors affecting productivity of each organization; also, they are dependent. Depending on the individual environments, decisions are to be made. Industries where labor and capital costs are low compared to the material costs, better use of material and plant gives the greatest scope of cost reduction. In countries where capital and skilled labor are in shortage compared to unskilled labor, one should look to increase the output per machine or per skilled worker. Increasing the number of unskilled workers may be beneficial if by doing so an expensive machine or skilled craftsmen are enabled to increase production.

Governments responsibility

1.

2.

3.

Government can create conditions favorable to raise productivity. It can: Have a balanced programs of economic development Take steps necessary to maintain employment Make opportunities for employment.

Managements responsibility
The main responsibility for raising productivity in an individual organization lies with the management. It can implement productivity programs. It can create a positive environment and obtain cooperation of the employees. Trade unions should encourage its members to provide such co-operation when the productivity program is beneficial to workers, as well as the organization on the whole.

Productivity of material
At the design stage: Ensure least consumption of material, Purchase equipments and plants such that consumption of material is economical.
At the operation stage: Use of correct process Right use of the process Operator training Proper handling and storage of products at all stages Proper packaging to reduce damage in transit

Productivity of land, machines and manpower

Effective utilization and maximum productivity is an important source of cost reduction. Reduction in the original specification, before the land is purchased saves capital outlay (as well as interest expenses) A savings in material which has to be imported saves import duty and excise. Productivity of manpower and machines is typically measured in terms of time (man-hours; machine-hours).

Factors tending to reduce productivity

Work content added due to the product for a manufacturing firm: The product or its components are designed such that it is impossible to use most economical manufacturing processes. Excessive variety or lack of standardization. Incorrect quality standards. Excessive amount of material removal required.

Factors tending to reduce productivity

Work content added due to process Incorrect production process (and/or machine) used Process not operated properly Non-optimal layout with wasted movements. Working methods of operation causing wasted movements, time and efforts.

Factors tending to reduce productivity

Ineffective time due to management Marketing policy which demands unnecessarily large number of products. No standardization of components between as well as within products. Failing to meet customers requirement from the beginning. No plan for flow of work. Improper supply of material, equipment. Improper maintenance of plant and machines. Insufficient safety measures. Improper working conditions resulting in interrupted work.

Factors tending to reduce productivity

Ineffective time within the control of worker Taking time off without good cause: by lateness, by idling at work etc. Careless workmanship causing scrap or rework. Failing to observe safety standards.

Productivity Improvement Factors

Productivity improvement is not just doing things better : more importantly ,it is doing the right things better.

Productivity Factor Groups

Job-related Resource related Environment-related

Categories of Productivity Factor

External (Non controllable) Internal(Controllable)

Internal Factors of Enterprise Productivity

Hard Factors(not easily changed) Soft Factors(easily changed)

Hard Factors
Product
Product factor productivity means the extent to which the product meets output requirements.
Use value Place value Time value Price value

Hard Factors
Plant and equipment
Good Maintenance Operating the plant and equipment in optimum process condition Increasing plant capacity by eliminating bottlenecks and by corrective measures Reducing idle time and making more effective use of available machines and plant capacities.

Hard Factors
Technology Materials and Energy
Material Yield Use and control of wastage and scrapping Upgrading of materials by initial processing to improve utilization in the main process Use of Lower grade and cheaper materials Import Substitution Improving inventory turnover ratio Inventory management Developing sources of supply

Soft Factors
People
Each role has two factors
Application
Application is the degree to which people apply themselves to their work.

Effectiveness
Effectiveness is the extent to which the application of human effort brings the desired results in output and quality.

Soft factors
Organisation and Systems
Rigidity Compartementation

Work Methods
Management Styles

External factors affecting Enterprise Productivity

Structural Adjustments
Economic Changes
Employment shifts from agiruclture to manufacturing Move from manufacturing to service Variations in the composition of capital Impact of R&D and technology Economies of Scale

External factors affecting Enterprise Productivity

Manpower Land Energy Raw Materials Government and Infrastructure
Practices of government agencies, regulations, transport and communications, power, fiscal measure and incentives

Productivity Analysis

Approach to Productivity Appraisal

Total productivity = Total Output Total Input
Partial Productivity = Total Output Partial Input

Total Productivity
Pt = Ot L+ C+ R+ Q

Pt = Total productivity Ot= Total output L= Labour input factor C= Capital input factor R= Raw material and purchased parts input Q=Other Miscellaneous goods and services input factor

Labour Time Methods

Sales Output
Total No of Employees+ Capital+External Expenses Average Earnings per annum Net output per Employee = Added value per annum Total number of Employees =VA Ly VA = S-X