THE CONCEPT OF RESOURCE

UTILIZATION & EFFICIENCY

ENHANCEMENT
Resource Utilization:-
The total time utilized on Value Added
activities in a process divided by the total
available time.

Value Added activities Any part of the

production process that improves the product
for the customer.
Non-Value Added activities Activities that do
not contribute to the product or the process and
should therefore be eliminated. Non-value
added steps are waste.
 Cycle Time
Cycle Value- Non-
Time = Added + Value-Added
Activities Activities

Eliminate or minimize activities that add

the most time and cost and the least value
THE CONCEPT OF PRODUCTIVITY
& ITS IMPLEMENTATION

PRESENTED BY
T.M.JAYASEKERA B.Sc. Eng. MBA,C.Eng.
FIE,FCIWEM,FIM.,FIMGT,
MSLIM, MICE(Lond)
Managing Director -Innovative Skills (Pvt.) Ltd
291/50.Havelock Gardens ,Colombo -6-Tel/Fax594378
 PRODUCTIVITY

• What is it?
• Why do we need it?
• How do we measure it?
• How do we improve it?
• How do we implement it ?
 RESOURCES OF AN
ORGANIZATION
• Whether Public or Private;The resources
that are available to them are:
• Land & Buildings
• Materials
• Plant, Machines & Equipment
• Energy
• People
• Money
 DEFINITION OF
PRODUCTIVITY
• Very simply,
• Productivity = Output
Input
Outputs are the goods and services provided by the industry.
Inputs are the resources required to provide that output.

For any type of organization

The amount of output per unit of input (labor, equipment, and capital). There are many different ways of
measuring productivity. For example, in a factory productivity might be measured based on
the number of hours it takes to produce a good, while in the service sector productivity might be
measured based on the revenue generated by an employee divided by his/her salary .
 EXAMPLES OF OUTPUT
• Whether the organization is public or
private the outputs are ;
• Accomplishment of a task
• Length of an output
• Distance travelled
• Number of pieces produced
• Weight of production
 EXAMPLES OF
OUTPUT(Contd.)

• Volume of output
• Value of output
• No. of documents processed
• Time taken to carry out a job
• No of jobs attended
• No. of customers served
 EXAMPLES OF INPUT
• Labour force or man hours, man days. Etc..
• Labour cost (Rs)
• Area of land(in hectares)
• Kg. Of material or material cost in Rs.
• Volume of material or fluid
• Length of material
• square area of space
• Units of power
• Time etc.
IMPROVING PRODUCTIVITY

• Output =
• Input
• Methods of improving Productivity
• Increase output while input remains same
• Decrease input while output remains same
• Increase input resulting in a very large
increase in output
• Decrease input by a very large amount with
a resultant small reduction in output
IMPROVING PRODUCTIVITY
• There are generally 5 ways to improve
productivity :-

• Process improvement
• Regulate work flow
• Use modern( efficient ) equipment or
machinery
• Trained manpower
• Motivated employees.
IMPROVING PRODUCTIVITY
There are 6 general ways to decrease input:-
• Improve quality
- Increase reliability
- Minimize rework
• Minimize waste
• Minimize absentism, turnover
• Reduce the cost of labour
- No. of man-hours required
- Cost per man-hours
• Reduce the cost of parts and supplies.
• Reduce Overheads
IMPROVING PRODUCTIVITY
There are 5 general constraints to increasing
productivity:-

• Government regulations
• Union rules
• Management limitations
• Employee skills
• Employee atitudes
TYPES OF PRODUCTIVITY
MEASURES

• Single Factor productivity

• Multi Factor Productivity
• Total Factor Productivity
 OTHER THOUGHTS ON
PRODUCTIVITY

• “Productivity is an attitude of mind”

• “Productivity means doing something better
today than yesterday”
• “Productivity means continuous
improvement”
 ACCORDING TO MICHAEL
PORTER
• “…The wealthy nations they are the
productive nations…”

• “…Productivity makes you wealthy, it

allows you to support high wages, it
allows you to support high returns on
capital…”
• Michael Porter
WHY PRODUCTIVITY IS
IMPORTANT
Higher standard of living

Higher GDP
per capita

Higher
Higher
Investment
Productivity
 ARE WE STILL THE
SECOND HIGHEST IN ASIA
IN LITERACY?

NO!

We are not even in the first ten today.

Countries with stronger economies have

beaten us.
THE NEED OF THE HOUR

Massive Investment !
Massive increases in
productivity !
THE BASIC APPROACHES TO
PRODUCTIVITY
IMPROVEMENT
• Investment in high output and modern plant
& equipment and new technology
- capital intensive approach
• Improving the efficiency and effectiveness
of existing resources
- better management approach
 THE TWO ASPECTS OF
PRODUCTIVITY

• The “soft” or qualitative aspects

• - to create an environment conducive to
productivity
• The technical or quantitative aspect
• - to measure productivity
 THE ‘SOFT’ ASPECTS OF
PRODUCTIVITY
• Productivity culture
• Team work
• Quality work
• “Delighting” customers
• Work ethic
• Caring for the work force
 The quantitative aspects of
productivity

• By this is meant the concepts behind

productivity measurement and their
application to performance measurement at
the economy and company level
 PRODUCTIVITY LEVELS

• National Productivity
• Industry Productivity
• Company Productivity
• Divisional Productivity
• Branch Productivity
• Individual Productivity
NATIONAL PRODUCTIVITY
• = GDP
EMPLOYED WORK FORCE
• This is a single factor productivity measure and therefore
wrong inferences may be made by comparing one country
with another
• The gross domestic product (GDP) is one the primary 
indicators used to gauge the health of a country's economy.
It represents the total dollar value of all goods and services
produced over a specific time period 
 ORGANIZATION
PRODUCTIVITY- HOW TO
MEASURE ?

The best method is to use

Added Value( as output) per single factor of
output
(Added value measures the wealth creation)
 Calculating Added Value
• The subtraction method:
(Wealth Generation Approach)
Added Value = Total output less Bought-in
materials and services
The Addition method
(Wealth Distribution Approach)
Added Value = Labour cost + Depreciation
+ Taxes + Interest + Profit
 EXAMPLES OF ADDED
VALUE

• Added Value per employee

• Added Value per Rs of labour cost
• Added Value per Kg of material
• Added Value per KWH of power
• Added Value per litre of fuel
 MICRO-LEVEL
PRODUCTIVITY
INDICATORS
• Ratios which measure:
• Competitiveness
• Labour productivity
• Capital productivity
• Business Returns & profitability
• Process Efficiency
 COMPARING
PRODUCTIVITY

• Cross sectional comparison

• Time series comparison

 PRODUCTIVITY IS ALSO...

• EFFICIENCY
(Doing things right)
+
• EFFECTIVENESS
(Doing the right things)
“Do the right thing and do it right now”
 MISCONCEPTIONS ABOUT
PRODUCTIVITY
• People fear, hate, feel let down, complain
about productivity, very often because
they have misunderstood it.

• There are several misconceptions

about
Productivity
 MISCONCEPTION - I

• Productivity = Production

• Productivity is merely a more

“sophisticated” word for production
MISCONCEPTION - II

Productivity means
only
Labour Productivity
 MISCONCEPTION - 3
• Productivity can be increased by getting
people to work harder
• TRUE TO SOME EXTENT
• But this is labour intensity NOT real
• productivity. Real productivity means
• working more intelligently
• not harder
 MISCONCEPTION -4

• Higher productivity causes

retrenchment and large scale loss of jobs

• This may happen in the short term but the

long term benefits outweigh this
disadvantage
Misconception -4(Contd.)

If there is low productivity

then in the long term
there will be severe,
large scale loss of jobs.
MISCONCEPTION - 5

Productivity is relevant
only in manufacturing
and
not relevant elsewhere
MISCONCEPTION - 6

Productivity can be
increased by cutting costs
across the board
MISCONCEPTION - 7

Productivity and
Quality are trade offs.
You cannot increase one
without affecting the other
MISCONCEPTION - 8

Productivity is directly
related to profits. In other
words a profitable
organization is always a
productive one
MISCONCEPTION - 9

Productivity is relevant
only in an open economy
MISCONCEPTION - 10

Productivity is only for

commercial enterprises
and not for the
public sector
MISCONCEPTION - 11

Productivity is for
organizations and not for
you and me
SO DO NOT GET MISLED
BY THESE
MISCONCEPTIONS
HOW DO WE IMPROVE
PRODUCTIVITY

First point to remember

is the M I G cycle
 THE M I G CYCLE
GAIN SHARE

MEASURE

IMPROVE
THE PROFIT GOAL

PROFIT = REVENUE - COSTS

 MAJOR STEPS

Analyze the Revenues

Analyze the Costs
And then Prioritize

Find the Vital Few Components of cost

ANALYZE REVENUE
SOURCES
ANALYZE COSTS
 CLOSELY LOOK AT

Labour costs
Material costs
Energy costs
Finance costs
Overhead costs
 IMPROVING LABOUR
PRODUCTIVITY
• Improving working conditions- lighting, ventilation,
noise(music), temperature, work times
• Using appropriate and better tools
• Ergonomics and better work station layout.
• Improving factory, stores & office layout.
• Improving the method/process - use 5Ws & IH
• Improving the nutritional status of the worker
• Improving industrial housekeeping(5s) and safety
• Improving welfare facilities and worker motivation
 USE THE BRAINS OF THE
WORKER
• Quality Circles
• Staff Suggestion Schemes
• Kaizen System(Seiri-sort,Seiton-Set-
order, Seiso-clean-up-Shine Seiketsu-
standardize, Shitsuke-Sustain-Training
& Discipline)
• Self Directed Work Teams
• 3 Mu -Muda(Waste), Muri-
(Strain),Mura(Discrepancy)
 IMPROVING CAPITAL
PRODUCTIVITY

• Implement TQM
• Reduce Working capital
• Reduce floor space
• Utilize machinery & equipment better
etc..
 IMPROVING MATERIAL
PRODUCTIVITY

• Cheaper material
• Alternative material
• Cheaper sources
• Better utilization
 IMPROVING ENERGY
PRODUCTIVITY

• Improve power factor

• Reduce wastage
• Change processes for less heating
• Study working procedures
etc.
 QUALITY OF WORK
FORCE
Use
• A system of comparison
based on
Work force performance
Work force characteristics
Work force organization & practices
 PRODUCTIVITY STARTS
WITH YOU
• Think of productivity every minute
• Be organized - do 5s
• Implement “1 is best campaign”
» One hour meetings
» One page memos
» One copy documents
» One minute telephone calls
 IMPLEMENT
• A Kaizen culture
• Staff suggestion scheme
• Small group activities
• 5s
• An environment which appreciates
productivity
• Convince the work force of benefits
 THIS IS THE NATIONAL
PRODUCTIVITY DECADE
Remember!
I996-2005
My effort is only to create awareness
and to prepare a climate
conductive to productivity
improvement
 MAKE PRODUCTIVITY A
WAY OF LIFE

• Think Productivity
• Talk Productivity
• Demonstrate Productivity
• Be Productive at Home, on the Road, and
in Office
 REMEMBER!

Productivity
starts with
You !
-Essence of Productivity
Improvement
WHAT IS IT ALL ABOUT
!
COMPETITIVE LEVEL OF
PRODUCTIVITY
 NO ORGANIZATION CAN
CONTINUE TO EXIST
UNLESS IT MAINTAINS A
COMPETITIVE LEVEL OF
PRODUCTIVITY

 ORGANIZATIONS WHICH
DO NOT SUCCEED IN THIS
ARE DOOMED TO FAIL
THROUGH STAGNATION
FOLLOWED BY
BANKRUPTCY OR
CLOSURE
WHAT IS PRODUCTIVITY
IMPROVEMENT?
IMPROVEMENT
• Productivity
improvement is not just
doing things better
• More importantly, it is
doing right things
better
• It is a process of change
• To improve
Productivity it is
therefore necessary to
manage change
 PRODUCTIVITY AS A
MEASURE OF SUCCESS
• Productivity is the most
important long term
resource
• Not only for the success
of the organizations &
individuals but also for
national economic &
social development
• It is also a measure of
the efficiency of the
Managers
 IN A PERIOD OF
EXPECTED ECONOMIC
GROWTH ACHIEVING
PRODUCTIVITY GAINS
HAS ACQUIRED NEW
SENSE OF URGENCY
THIS IS TRUE FOR OUR
COUNTRY TOO
 IMPACT OF
PRODUCTIVITY
IMPROVEMENT
• IMPROVING
PRODUCTIVITY CAN
OFFSET THE IMPACT
OF SOME OF THE
PROBLEMS OF
DEVELOPING
COUNTRIES WHERE
RAPID POPULATION
GROWTH, GROWING
INDEBTEDNESS &
INFLATION ARE VERY
COMMON .
IN FACT CREATING CONDITIONS
FOR HIGHER PERFORMANCE
IS THE ESSENCE
OF
PRODUCTIVITY
IMPROVEMENT
 THE ROLE OF
PRODUCTIVITY
• The role of Productivity in
increasing national welfare is
now universally recognized
• In every country the main
source of economic growth is
an increase in Productivity &
slackening of
growth,stagnation & decline
entail or are accompanied by a
slowdown in Productivity
improvement
 TO MANY PEOPLE EFFECTIVE
USE OF RESOURCES CAN MEAN
DEVELOPMENTOF TECHNOLOGY
& ORGANIZATION,
But it is often more important
for total productivity
improvement
to contribute to human
development in its broadest
sense
 THE PLACE WHERE
PRODUCTIVITY IMPROVEMENT
IS ACTUALLY CREATED
• ..Is the organization
• This is the context where
the whole range of
available resources come
together in order to
produce goods & services
to satisfy the needs & wants
of those who use this solar
system for their existence
as well as those of the
generations to come
 SO LET US
FOCUS OUR BUSINESSES
STRATEGICALLY
TO
IMPROVE PRODUCTIVITY
FOR THE
BETTERMENT OF THE
MANKIND !
Isn’t this improving
productivity?

OF COURSE IT IS !
 STRATEGIC MANAGEMENT
WILL ANSWER TWO IMPORTANT
QUESTIONS
• OF WHAT THE ENTERPRISE IS TO
BECOME
• If properly done
• IT HIGHLIGHTS WHICH BAGGAGE TO
DISCARD IN ORDER TO FREE UP KEY
PEOPLE
• &KEY RUPEES FOR RE-INVESTMENT
• As the other side of the river is deadly!!!
 What is strategic
Management?
Management
• It is
• “Making things Happen
• Watch what is happening &
• Wonder what happened.”
-Prof. W Digman-
• It is Pro-active,outward looking,&
Externally oriented
 Challenges of the next
Millenium
• GLOBAL COMPETITION
• DEREGULATION
• INFORMATION REVOLUTION
&
• ACCELERATING TECHNOLOGICAL
CHANGE
Management must increasingly be
both effective & Efficient.

• FOCUS IS REQUIRED TO DO JUST

THE RIGHT THINGS

• STRATEGIC PLANNING WILL GET

THOSE THINGS DONE RIGHT