Question 1.

3: Single and Multifactor Productivity

Introduction

Productivity refers to the ratio of output to input (Lambert and Cooper, 2023:150). They
are different forms of productivity such as materials productivity, labour productivity,
capital productivity, and etcetera. Additionally, they are two types of productivity namely
single factor and multifactor productivity (Lambert and Cooper, 2023:151). In this
question will calculate both single factor productivity and multifactor productivity for Nike
as well as compiling a report highlighting if the organization is maintaining the
manufacturing average of 3% increase in single and multifactor productivity.

Single factor productivity

Single-factor productivity is a synonym for partial productivity measure. It relates output

to one particular type of input (Lambert and Cooper, 2023:152). Thus, single-factor
productivity uses a single component to measure productivity while multiple factors, as
the name says, consider various factors. Under single factor productivity we will
calculate labour productivity, material (resin) productivity, capital productivity, and
energy productivity as follows:

Labour productivity

= Units produced / Labour hours

Last year:

Labour productivity = 2000units / 300 hours = 6.67 units per labour hour

Now:

Labour productivity = 2000units / 275 hours = 7.27 units per labour hour

Change in labour productivity:

= [(Now – Last year) / Last year]*100

= [(7.27 – 6.67) / 6.67]*100

= 8.996% ≈ 9% increase.
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Materials productivity

= Units produced / kilograms of Resin

Last year:

Materials productivity = 2000 units / 50kg of Resin = 40 units per kilogram of

Resin

Now:

Materials productivity = 2000 units / 45kg of Resin = 44.44 units per kilogram of
Resin

Change in material productivity:

= [(Now – Last year) / Last year]*100

= [(44.44 – 40) / 40)]*100

= 11.1% increase

Capital productivity

= Units produced / Amount of money invested

Last year:

Capital productivity = 2000 units / R10000 = 0.2 units are produced per every R1
invested

Now:

Capital productivity = 2000 units / R10000 = 0.2 units are produced per every R1
invested.

Change in productivity:

= 0% since capital productivity remained constant between last year and now.

Energy productivity

= units produced / total watts used

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 Last year:

Energy productivity = 2000 units / 3000 watts = 0.67 units are produced per watt.

Now:

Energy productivity = 2000 units / 2850 watts = 0.70 units are produced per watt.

Change in energy productivity:

= [(Now – Last year) / Last year]*100

= [(0.70 – 0.67) / 0.67]*100

= 4.48% increase

Multifactor productivity

Multifactor productivity (MFP) reflects the overall efficiency with which labour and capital
inputs are used together in the production process (Lambert and Cooper, 2023:155).
Thus, MFP is a measure of economic performance that compares the amount of output
to the amount of combined inputs used to produce that output. For our question, the
combination of inputs include labour, materials (resin), capital, and energy. MFP is
calculated as follows:

MFP = Units produced / (Total cost of materials + total cost of labour + total capital
invested + Total cost of energy used)

Note: All inputs are converted to their monetary values to get a meaningful MFP value.

Last year:

Units produced = 2000

Total cost of labour = 300 hours * R10 per hour = R3000

Total cost of materials = 50kg * R5 per kg = R250

Total capital invested = R10000*(1+ 0.01) = R10100 (including interest for 12

months)

Total cost of energy = 3000 watts * R0.50 per watt = R1500

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Therefore,

Multifactor productivity = 2000 / (R3000 + R250 + R10100 + R1500) = 0.135

units per R1 of inputs.

Now:

Units produced = 2000

Total cost of labour = 275 hours * R10 per hour = R2750

Total cost of materials = 45kg * R5 per kg = R225

Total capital invested = R10000*(1+ 0.01) = R11200

Total cost of energy = 2850 watts * R0.50 per watt = R1425

Therefore,

Multifactor productivity = 2000 / (R2750 + R225 + R10100 + R1425) = 0.138

units per R1 of inputs.

Change in multifactor productivity:

= [(Now – Last year) / Last year]*100

= [(0.138 – 0.135) / 0.135]*100

= 2.22% increase.

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Report

Type of Last Year Now Change Comment Target

productivity (%) achieved
Labour 6.67 7.27 9.00% Increase 
Materials (Resin) 40.00 44.44 11.1% Increase 
Capital 0.20 0.20 0.00% No change x
Energy 0.67 0.70 4.48% Increase 
Multifactor 0.135 0.138 2.22% Increase x

From the above table we can notice that operations manager Cedric Masuku’s
organization has maintained above the targeted manufacturing average of 3% increase
in labour, materials (resin), and energy productivity. The organization fell slightly below
the targeted manufacturing average of 3% increase in multifactor productivity with
2.22% recorded as the increase in multifactor productivity between last year and now.
On the other side of the story, the organization’s capital was neither efficiently nor
inefficiently utilized between last year and now as there was no movement in capital
productivity (Kumar et al, 2022:128).

Conclusion

The preceding essay have calculated both the single factor productivity and multifactor
productivity for Nike as well as compiling a report highlighting if the organization is
maintaining the manufacturing average of 3% increase in single and multifactor
productivity. Overall, Mr Cedric’s organization has been performing well between last
year and now. However, there is need to improve on how the organization uses its
capital.

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Question 1.4: Forecasting Demand
1.4.1 Demand for the week of Oct 12 using a 3-week moving average
= (381 + 368 + 374) / 3
= 374.3 pints

1.4.2 Demand for the week of Oct 12 using a weighted 3-week moving average
= [(381*0.1) + (368*0.3) + (374*0.6)] / (0.1 + 0.3 + 0.6)
= (38.1 + 110.4 + 224.4) / 1
= 372.9 pints

1.4.3 Demand for the week of Oct 12 using exponential smoothing

F(t) = F(t-1) + α*[A(t-1) – F(t-1)]
Where,
F(t) = new forecast
F(t-1) = previous forecast
α = smoothing constant (0 ≤ α ≤ 1)
A(t-1) = previous period’s actual demand

Week of Pints used (Actual) Forecast (using α=0.2)

Aug 31 360 360
Aug 7 389 360 + 0.2*(360 – 360) = 360.0
Sept 14 410 360 + 0.2*(389 – 360) = 365.8
Sept 21 381 365.8 + 0.2*(410 – 365.8) = 374.64
Sept 28 368 374.64 + 0.2*(381 – 374.64) = 375.912
Oct 5 374 375.912 + 0.2*(368 – 375.912) = 373.5296
Oct 12 373.5296 + 0.2*(374 – 373.5296) = 373.62368

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Therefore, demand for week of October 12 using exponential smoothing is
approximately 374 units.

1.4.4 Forecasting demand for 2010 using simple linear regression

Time (X) Demand (Y) X^2 XY

1 74 1 74

2 79 4 158

3 80 9 240

4 90 16 360

5 105 25 525

6 142 36 852

7 122 49 854

∑ ¿ 28 ∑ ¿692 ∑ ¿140 ∑ ¿3063

160

140

f(x) = 10.5357142857143 x + 56.7142857142857

120
R² = 0.80086321136715

100
Demand

80
Demand
60 Linear (Demand)

40

20

0
0 1 2 3 4 5 6 7 8

Time

Simple linear regression using least squares is given by: y=a+bx

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 ( n ∑ xy−∑ x ∑ y ) 7 ( 3063 )−28 (692 )
b= 2
= 2
=10.53571 ≈ 10.536
n ∑ x −( ∑ x ) 7 (140 )−28
2

1 1
a=
n
( ∑ y−b ∑ x ) = ( 692−10.53571 ( 28 ) )=56.71430 ≈ 56.714
7

Therefore,

y=56.714 +10.536 x

Demand for 2010:

56.714 + 10.536(8) = 141.002 ≈141 megawatts.

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