MME40001 Engineering Management 2 Topic: Operations Management

Tutorial 7: Operations, Productivity Chapter-01

Problem 1: At Modern Lumber, Inc., Art Binley, president and producer of apply crates sold to growers,
has been able, with his current equipment, to produce 240 crates per 100 logs. He currently purchases 100
logs per day, and each log requires 3 labor-hours to process. He believes that he can hire a professional
buyer who can buy a better-quality log at the same cost. If this is the case, he can increase his production to
260 crates per 100 logs. His labor-hours will increase by 8 hours per day.
What will be the impact on productivity (measured in crates per labor-hour) if the buyer is hired?

Problem 2: Art Binley has decided to look at his productivity from a multifactor (total factor productivity)
perspective (refer previous problem). To do so, he has determined his labor, capital energy, and material
usage and decided to use dollars as the common denominator. His total labor-hours are now 300 per day and
will increase to 308 per day. His capital and energy costs will remain constant at $350 and $150 per day,
respectively. Material costs for the 100 logs per day are $1,000 and will remain the same. Binley pays an
average of $10 per hour (with fringes).
What will be the increase in productivity?

Problem 3: Joanna French is currently working a total of 12 hours per day to produce 240 dolls. She thinks
that by changing the paint used for the facial features and fingernails that she can increase her rate to 360
dolls per day. Total material cost for each doll is approximately $3.50; she has to invest $20 in the necessary
supplies (expendables) per day; energy costs are assumed to be only $4.00 per day; and she thinks she
should be making $10 per hour for her time. Viewing this from a total (multifactor) productivity perspective,
a. what is her productivity at present and with the new paint?
b. How would total (multifactor) productivity change if using the new paint raised Ms. French’s
material costs by $0.50 per doll?
c. If she uses the new paint, by what amount could Ms. French’s material costs increase without
reducing total (multifactor) productivity?

Problem 4: The Swinburne Spring plant produces wooden packing boxes to be used in the local seafood
industry. In order to increase the productivity, the company has introduced some moderate changes in
equipment, and conducted appropriate job training. The daily production data before and after the changes
are shown as follows:-
Subject Before changes After changes
Production volume per shift 250 boxes 300 boxes
Number of shift per day 2 shifts 2 shifts
Working hour per shift 8 hours 8 hours
Labor cost per hour $10 $10
Number of workers per shift 5 workers 5 workers
Equipment expenses per day $3000 $3200
Energy cost per day $400 $400

a. What is the firm's multifactor productivity before and after the changes?
b. What is the company’s productivity improvement after the changes?
Abstracted from Heizer, J., and Render, B,. Operations Management, 8e, 2006. Pearson. 1
Problem 5: Eric Johnson makes billiard balls in his New England plant. With recent increases in his costs,
he has newfound interest in efficiency. Eric is interested in determining the productivity of his organisation.
He would like to know if his organisation is maintaining the manufacturing average of 3% increase in
productivity. He has the following data representing a month from last year and an equivalent month this
year.
Last Year New
Units produced 1000 1000
Labor (hours) 300 275
Resin (pounds) 50 45
Capital invested ($) 10,000 11,000
Energy (BTU) 3,000 2,850

a. Show the productivity percentage change for each category and then determine the improvement for
labor-hours, the typical standard for comparison.
b. Eric Johnson determines his costs to be as follows: Labor @ $10 per hour, Resin $5 per pound,
Capital expense 1% per month of investment and Energy $0.50 per BTU. With this information,
Show the percent change in productivity for one month last year versus one month this year, on a
multifactor basis with dollars as the common denominator.

Problem 6: A car detailing shop tracks their workers' labor, water bills, and consumables on a weekly basis.
The data abstracted from a particular week are shown in the table.
Number of
Week Labor (hr) Water (gal) Consumables (oz)
cars serviced
XX 150 1,250 42 100

a. Calculate the labor productivity.

b. Calculate the multifactor productivity for that particular week if workers average $25 per hour, water
costs $1.50 per thousand gallons, and consumables are $4 per ounce.
c. The business owner wishes to introduce a semi-automated system which will increase the number of
cars serviced to 125 units without increasing worker’s labor, water bills and consumables. What will
be the improvement on productivity (measured in cars / dollar)?

Problem 7: Gibson Products produces cast bronze valves for use in offshore oil platforms. Currently,
Gibson produces 1600 valves per day. The 20 workers at Gibson work from 7 a.m. until 4 p.m., with 30
minutes off for lunch and a 15 minute break during the morning work session and another 15 minute break
at the afternoon work session. This gives an effective work time of 8 hours per day. Gibson is in a
competitive industry, and needs to increase productivity to stay competitive. They feel that a 20 percent
increase is needed.
Gibson's management believes that the 20 percent increase will not be possible without a change in working
conditions, so they change work hours. The new schedule calls on workers to work from 7:30 a.m. until
4:30 p.m., during which workers can take one hour off at any time of their choosing. Obviously, the number
of paid hours is the same at 8 hours per day, but production increases, perhaps because workers are given a
bit more control over their workday. After this change, valve production increased to 1800 units per day.

a) Calculate labor productivity

i. for the initial situation
ii. for the hypothetical 20 percent increase and also calculate the total output
iii. for the new situation after the change in work rules
iv. express the actual increase in productivity (%)

Abstracted from Heizer, J., and Render, B,. Operations Management, 8e, 2006. Pearson. 2