Productivity Measurement Project

BUSN 368

Submitted to: Prof. Muhammad Salman Bilal

Submitted by:

M.Ahmad Zaman 20-10754

Arooj Fazal 20-10754
Introduction
Keeping in view the market trends today, a new better and more efficient product/service has a
better chance of surviving, establishing and with the right penetration, leading the market. We
have seen that Lays has been the market leaders for years in the chips as a snack industry. Many
newbies tried to compete with it but failed drastically. Somehow Lays has maintained its position
on the top but recently a new entrant in the market has not only competed with Lays but has done
a serious damage to it. The brand is none other than Oye Hoye. With the right marketing tools, it
has not only made it difficult for lays to survive but has forced it to find a new competitive
advantage to stay in business.

Critically analysing the shifting paradigm of the industry, we have decided to introduce a chips
brand in the market with the name of Swaggers. The market looks like a good opportunity to
enter and provides a better chance of survival. The idea of introducing was a combined effort.
One of our close friends, also the main supplier of potatoes Shahid Ahmad Sial shared his
experience of how much the demand of potatoes has increased because of the new chips
manufacturers in the industry. This gave us the idea of introducing a new, better flavoured chips
in the market. The design of the product is very similar to its competitors and will be regularly
packed. A small informal research might circulate to gather information and opinions of the
consumer on how they would like the product packed, what flavors would they prefer or what
they expect from the product as a whole. After analyzing the gathered information, we will
finalize the packaging of the product. The resources required for the business are also explained
in detail. In general, a unit will be required to transform the input (potatoes) to output (crisps).

Factors:
Cost structures is the most important part of every business, without making cost structure
anyone will not be run the any type of business. So the major thing of cost structure of our
business who will be produced bulk quantity of chip in different flavors is:
Advance payment of land
Rent of land
Machinery
Plant for packaging
Electricity
Potatoes

Advance payment of land: We need a land for installing the machinery for the production of
chips in different flavors. So, that a reason we lend a land for which we done the advance
payment.
Rent of land: As all we are the student and we start the initiator project that a reason we does not
purchase any land rather than lend the land, so after the advance payment we make the rent
payment monthly and this payment is increased 10% in every year.
Machinery: We buy a machinery for boiling, pilling, cutting and firing. We buy a normal
machinery for these functions. We install this machinery at the rented place.
Plant for packaging: We buy a plant and install on the production place for the packaging of the
chips.
Electricity: The expense of electricity is so high because we run the machinery and the plant for
packaging. For these two things the electricity is much more required.
Potatoes: Potatoes is the most important part of our business, without potatoes our business is
incomplete because we will be make a chip of potatoes and potatoes is the primary product and
necessity for the production of chips. Our business is a start-up and we have no enough resource
of investment that we produced the potatoes by himself on his land. We decided that we will be
out sourcing the potatoes from our friend who has the land on which he produced the healthy
potatoes. So we buy the potatoes from our friend whose name is “Shahid Ahmad Sial”.
Segregation of Fixed and Variable Cost:
Fixed Cost:
The fixed cost are included in the

 Advance payment of land

 Machinery Cost
 Plant for packaging
Variable Cost:
The variable cost are included which have variation after every month or every year is:

 Rent of Land
 Electricity Bills
 Potatoes
 Oil
 Spices
 Salaries
Total Cost:
After the analysis the major and minor cost the budget we forecast that the total cost of our
business
 Diagram of the facility layout and justify

We put great emphasize on productivity and strives to increase our productivity by actively finding
ways for best practices in their manufacturing process. For understanding productivity we have
done some mathematics calculations.

INPUTS

Materials Human Resource Energy Other inputs

Capital

Manager gas
taxes
potatoes Fixed Work in Progress Administrative Electricity
general
oil staff Water administration
spicies works expenses
packing Misc
Land Cash in Hand
plant account receivable
machinery inventories
 OUTPUTS
(tangible)

finnished goods Dividends Interest from bonds Other Income

Example reconstructed from heizer chapter 1 solved example:

Productivity= units produced/input used

As, Units produced are 2000 batches

Labor hour used is 270

So, our productivity will be = 2000/250=7.407 units per labor hour

Note: factors affecting our business are capital, labor, raw materials, and misc.
We will be comparing our productivity with old machines up gradation

Old machinery New machinery installed

Labor productivity with the old system: Labor productivity with the new system:
67 batch per day 32 labor@hours = 2.09 per 80 batch per day 32 labor@hours= 2.5per
labor@hour labour@hour

Multifactor productivity with the old system: Multifactor productivity with the new system:
67 batch per day RS: 780 + 300 = 0.062 batch per 80 batch per day $780 + 600 = .0.057 batch per
rupee rupee

We can clearly analyze that after the new machinery labor productivity has increased from 2.09 to 2.5.
The change is (2.5 - .2)/.5 = 2.5, or a 250% increase in labor productivity. Multifactor productivity has
increased from .062 to 0.057. This change is (0.062-0.057)>.062 = 0.08, or an 8% increase in multifactor
productivity.
Productivity ( Sumanth Model)

Total Tangible Output Total Tangible Input Total Productivity

=Total Tangible Output/
Total Tangible Input
18,00,000 180,000 10

Older Process

Total Tangible Output Total Tangible Input Total Productivity

10,30,000 120,000 8.58
Productivity increases by 10 % from 8.58. Therefore machines have increased our
productivity.