PRODUCTION AND

OPERATIONS MANAGEMENT
LECTURE 8

LECTURE 8: MODULE 2
PRODUCTIVITY

INTRODUCTION

INTRODUCTION TO PRODUCTIVITY

Principals of scientific management

Published in 1911
Opens with a discussion of Theodore Roosevelts address about improving national
efficiency and making more productive use of limited resources
We can see and feel the waste of material things. Awkward, inefficient, or illdirected movements of men, however, leave nothing visible or tangible behind
Employers derive their knowledge of how much of a given class of work can be
done in a day from either their own experience, which has frequently grown hazy
with age, from casual and unsystematic observation of their men, or at best from
records [..]
This work is so crude and elementary in its nature that the writer firmly believes
that it would be possible to train an intelligent gorilla so as to become a more
efficient pig-iron handler than any man can be
Often, 3x productivity improvements were obtained through waste reduction,

FORMAL DEFINITIONS
Basic definition of productivity
Productivity = Units Output produced / Input used
Example: Labor productivity
Labor productivity = 4 units per labor hour (looks a lot like an processing time)
Multifactor productivity
Productivity = Output / (Capital$ + Labor$ + Materials$ + Services$ + Energy$)
Waste and Inefficiencies
Output: productive time; input: total time
Some measures of productivity have natural limits (e.g. labor time, energy)
What reduces productivity?

THE EFFICIENT FRONTIER

Responsiveness

High

Current frontier
In the industry
Competitor A
Eliminate
inefficiencies
Competitor C
Competitor D

Low

Competitor B
Low labor
productivity

High labor
productivity

Labor Productivity
(e.g. $/call)

There exists a tension between productivity and responsiveness

Efficient frontier

THE SEVEN SOURCES OF WASTE

Overproduction
To
To produce
produce sooner
sooner or
or in
in greater
greater quantities
quantities than
than
what
customers
demand
what customers demand

Examples

Overproduced
Overproduced items
items need
need to
to be
be stored
stored (inventory)
(inventory)
and
create
further
waste
and create further waste
Bad
Bad for
for inventory
inventory turns
turns
Products
Products become
become obsolete
obsolete // get
get stolen
stolen // etc
etc

81.6 kg of food are trashed by the average

German
61% of the trashing happens by households
Large package sizes is the main reason

Match Supply with

Demand

Prof. Christian Terwiesch

Transportation
Unnecessary
Unnecessary movement
movement of
of parts
parts or
or people
people
between
between processes
processes
Example:
Example: Building
Building aa dining
dining room
room and
and kitchen
kitchen at
at
opposite
ends
of
a
house,
then
keeping
it
that
opposite ends of a house, then keeping it that
way
way

Examples

Result
Result of
of aa poor
poor system
system design
design and/or
and/or layout
layout
Can
create
handling
damage
and
cause
Can create handling damage and cause
production
production delays
delays
Crabs fished in the North Sea
Shipped 2,500km South to Morocco
Produced in Morocco
Shipped back to Germany

Relocate processes,
then introduce
standard sequences
for transportation

Prof. Christian Terwiesch

Rework
Repetition
Repetition or
or correction
correction of
of aa process
process
Example:
Example: Returning
Returning aa plate
plate to
to the
the sink
sink after
after itit has
has
been
poorly
washed
been poorly washed

Examples

Rework
Rework is
is failure
failure to
to meet
meet the
the do
do itit right
right the
the first
first
time
time expectation
expectation
Can
Can be
be caused
caused by
by methods,
methods, materials,
materials, machines,
machines, or
or
manpower
manpower
Requires
Requires additional
additional resources
resources so
so that
that normal
normal
production
production is
is not
not disrupted
disrupted
Readmissions to the ICU in a hospital
(also called Bounce backs)
Readmissions to the hospital after
discharge (major component of Affordable
Care Act)
Analyze and solve root
causes of rework
=> More in quality module

Prof. Christian Terwiesch

Over-processing
Processing
Processing beyond
beyond what
what the
the customer
customer requires
requires
Example:
Example: Stirring
Stirring aa fully
fully mixed
mixed cup
cup of
of coffee
coffee

Examples

May
May result
result from
from internal
internal standards
standards that
that do
do not
not reflect
reflect
true
customer
requirements
true customer requirements
May
May be
be an
an undesirable
undesirable effect
effect of
of an
an operators
operators pride
pride
in
in his
his work
work

Keeping a patient in the hospital longer

than what is medically required

Provide clear,
customer-driven
standards for
every process

Prof. Christian Terwiesch

Motion
Unnecessary
Unnecessary movement
movement of
of parts
parts or
or people
people within
within
aa process
process

Examples

Example:
Example: Locating
Locating (and
(and keeping)
keeping) aa refrigerator
refrigerator
outside
outside the
the kitchen
kitchen
Result
Result of
of aa poor
poor work
work station
station design/layout
design/layout
Focus
Focus on
on ergonomics
ergonomics

Ergonomics
Look at great athletes

Arrange people and parts

around stations with work
content that
has been standardized to
minimize motion

Prof. Christian Terwiesch

Inventory
Examples

Number
Number of
of flow
flow units
units in
in the
the system
system
Product
Product has
has to
to flow
flow like
like water
water
For
For physical
physical products,
products, categorized
categorized in:
in: raw
raw material,
material,
WIP,
WIP, or
or finished
finished products
products
Increases
inventory
Increases inventory costs
costs (bad
(bad for
for inventory
inventory turns)
turns)
Increases
wait
time
(see
above)
as
well
as
Increases wait time (see above) as well as
the
the customer
customer flow
flow time
time
Often
Often times,
times, requires
requires substantial
substantial real
real estate
estate
=>
=> the
the BIGGEST
BIGGEST form
form of
of waste
waste

Loan applications at a bank

Improve production
control system and
commit to reduce
unnecessary comfort
stocks

Prof. Christian Terwiesch

Waiting
Underutilizing
Underutilizing people
people or
or parts
parts while
while aa process
process
completes
completes aa work
work cycle
cycle
Example:
Example: Arriving
Arriving an
an hour
hour early
early for
for aa meeting
meeting

Examples

Labor
Labor utilization
utilization
Idle
Idle time
time
Note:
Note:
-- Waiting
Waiting can
can happen
happen at
at the
the resource
resource (idle
(idle time)
time)
-- But
also
at
the
customer
level
(long
flow
time)
But also at the customer level (long flow time)

Often, the time in the waiting room exceeds

the treatment time by more than 5x

Understand the drivers

of waiting; more in
Responsiveness
module

Prof. Christian Terwiesch

14

Wasteful vs Lean
The IMVP Studies

General Motors Framingham Assembly Plant Versus Toyota Takaoka Assembly Plant, 1986
GM Framingham
Gross Assembly Hours per Car
Assembly Defects per 100 Cars
Assembly Space per Car
Inventories of Parts (average)

Toyota Takaoka

40.7
130
8.1
2 weeks

18
45
4.8
2 hours

Gross assembly hours per car are calculated by dividing total hours of effort in the plant by the total number of cars produced
Defects per car were estimated from the JD Power Initial Quality Survey for 1987
Assembly Space per Car is square feet per vehicle per year, corrected for vehicle size
Inventories of Parts are a rough average for major parts

Source: Womack et al
Prof. Christian Terwiesch