Productivity Techniques

Production & Productivity

What is Production?

What is Productivity?

Co-Relation of Production to Productivity

Evolution of Labour
Year Contribution Contributor
1776 Specialisation of Labor Adam Smith
1799 Cost Accounting Eli Whitney
1832 Division of Labor by Skill Charles Babbage
1900 Time & Work Study, Frederick Taylor
Motion of Study
1915 Economic Lot Sizes F. Harris
1931 Quality Control Charts W. Shewart
1940 OR Applications P. Blacker
1947 Linear Programming G. Dantzig, Williams
1960 OB L. Cummings, Porter
1970 Integration, MRP I & II Skinner, Orlicky, Wright
1980 Quality & Productivity Deming, Juran
Production Cycle
Inputs: Process:
Men Outputs:
Product Design
Material
Process Planning Products
Machines
Production Control Services
Information
Maintenance
Capital

Ongoing:
Inventory
Quality
Cost
Productivity Concepts
ILO defines it as ratio of Output to Input so
Productivity = Output
Input
Productivity of Land: Farmer used fertiliser for his farm due to which
the crop yield increased from 200 quintals/hectare to 300
quintals/hectare
Productivity of Materials: One ton of hot rolled steel would yield 800
kg of cold rolled steel. After changing the process parameters the yield
increased to 900 kg of cold rolled steel.
Evolution of Productivity
1950 OECC – Dividing O/P with one of the factors of
production
1955 Davis – Change in product for the resources
expanded
1962 Fabricant – Always a ratio of O/p to I/p
1965 Kendrick, Creamer – Partial, Total Factor and
Total Productivity
1976 Siegal – Family of Ratios
1979 Sumanth – Total Productivity Model
Productivity Vs Performance
Productivity = Output = Performance Achieved
Input Resources Consumed

Performance Index = Actual Work Done

Ideal or standard expected work

It takes 3 meters of cloth to make a coat. In a day a tailor is expected to

make 50 coats. He makes 40 coats using 111 mtrs. of cloth. Find the PI,
Cloth productivity index and productivity of cloth.
Is Production same as Productivity?
HLL had the following production and machine hour
consumption report for the past 3 months.
Month Input(machine hours) Output(No. of Units)
March 90,000 99,000
April 1,00,000 1,00,000
May 1,50,000 1,35,000
Report clearly shows there has been an increase in
production with simultaneous increase in machine
hour consumption. Does this increase in production
mean an increase in productivity as well?
Partial Productivity
Defined as the ratio of output to one class of input
 As a part of a new assignment Ravi of Conagra Foods was asked to identify
areas of productivity improvements. He collected all data on inputs and
outputs of previous year transforming them into equivalent money units.
Following table gives the report:
 Parameters Rs. In lakhs
 Output 1000
 Inputs:
 Human 300
 Material 200
 Capital 300
 Energy 100
 Other Expenses 50
 Calculate Partial Productivity for all parameters in consideration
Total Factor Productivity
Partial productivity fails to capture other parameters
that affect productivity
In an effort to increase labor productivity,
organization may install more machinery thus
increasing the capacity to produce
This leads to increase in labor productivity but
impacts capital productivity adversely
Total Productivity Model
Developed by David Sumanth in 1979, includes 5
parameters Human, Capital, Energy, Material and Other
Expenses.
Total Productivity = Total Tangible Output
Total Tangible Input
Total Tangible Output = Value of Finished Goods +partial
units produced + dividends from securities+ Interest from
bonds+ Other incomes
Total Tangible Inputs = Value of human inputs + capital
inputs+ materials purchased+ energy inputs+ other
expenses
Total Productivity Model
P &G manufactures soaps, face wash, liquid soaps and gels .
The money value for each input for each product is given
below:
Product Amount of Input Total Output
H C M E X
Soap 2 4 14 5 6 50
Face Wash 3 6 10 5 8 55
Liquid Sp2 3 10 4 1045
Gel 3 8 13 5 5 40
Calculate the productivity of the firm, product productivity and
productivity of each factor.
Cobb Douglas Function
Cobb- Douglas recognized the importance of capital and
labor as major resources that impact productivity and
developed a function which is a co-relation:
P = a Lα Kβ
where P = Production Output
L = Labor Input
K = Capital Input
a, α and β are constants to be estimated, where α+β = 1
α = ∂Q/∂L and β = ∂Q/∂K which means d is partial
productivity of labor and f is partial productivity of capital
Cobb-Douglas…
1979 1980 1981 1982… 1995 1996 1997 1998
P 120115 132 144240 275 280 295
L 108 100 120135 198 210225 230
K 130125 140 150375 400 410 350

Using Cobb-Douglas theory predict the production

outputs for the year 1982 and 1998. α = 0.75, a = 1.01.
APC Model
American Productivity Center advocates a model that
co relates profitability with productivity and price
recovery factor
Profitability = Total Sales
Total Costs
= O/p Qty * Prices
I/p Qty * Unit costs
= Productivity x Price Recovery Factor
APC Model
For the year 2007 HLL had total sales of Rs. 350 crores. The
costs of production was Rs. 150 crores, cost of manpower was
Rs. 50 crores and other costs was Rs. 74 crores. Calculate the
productivity for HLL.
For 2008-09 the output was 3000 units at a cost price of Rs. 350
per unit. The units were sold at Rs. 575 per unit and the inputs
used were 1750 units. Calculate the productivity for 2008-09.
For 2009-10, P&G sold 2570 units at a market price of Rs. 350.
Calculate the price recovery factor. The selling price in 2008-09
for the same product was Rs. 300. Calculate the revenue effect
on price recovery.
Sumanth’s 5 Pronged Model
Sumanth & Omanchu proposed a model which gave
54 techniques to evaluate based on 5 basic inputs:
Technology, Employee, Product, Process and Material
Technology gave rise to CAD/CAM, EMS systems
Product gave rise to Value Analysis and Engg
Employee gave rise to incentives, job enrichment
Material gave rise to MRP, Inventory Control
Process gave rise to Job Design, Job Safety
ILO Approach to Productivity
ILO had a task based approach to productivity
ILO broke manufacturing time into work content, added
work content and ineffective time
Work content was defined as amount of work put in
during a process measured in man-hours or machine
hours
Added work content was defined as that which came into
play due to defects, or ineffective production methods
Ineffective time was defined as that which was caused
due to interruptions that ceased production
Performance Measurement using OMAX
Productivity ratios are formed as various
goods/services are manufactured from different and
diverse resources
Need a comprehensive matrix that appropriates basic
work units like crew, departments and staff
OMAX enables measuring knowledge based activities
as well as skill based activities
Six genetic classes were defined as part of OMAX viz.
quantitative, quality, timeliness, yield, utilization and
group traits