5-1 Capacity Planning

Productivity

Dr. Ziaul Haq Adnan

Operations Management, Eighth Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
 5-2 Capacity Planning

Productivity
·A measure of the effective use of resources, usually
expressed as the ratio of output to input
· Productivity = Output/Input
· It is difficult to measure productivity in service
industries.
 5-3 Capacity Planning

Productivity
· Productivity measures can be based on a single input (partial
Productivity), on more than one input (multifactor productivity), or on
all inputs (total productivity).
· Partial Productivity = Output/Labor (Labor productivity: Units of output
per labor, Units of output per shift, Value added per labor hour, Dollar value
of output per labor hour)
Partial Productivity = Output/Machine,
Output/Capital,
Output/Energy
· Multifactor Productivity = Output/ (Labor + Machine),
Output/ (Labor + Capital + Energy)
· Multifactor Productivity = Quantity of Production at standard price/

(Labor cost + Materials cost + Overhead)

· Total Productivity = Goods or Services Produced/ All inputs used to
5-4 Capacity Planning

Productivity
5-5 Capacity Planning

Labor Productivity
5-6 Capacity Planning

Multifactor Productivity
 5-7 Capacity Planning

Multifactor Productivity
· A wrapping paper company produced 2000 rolls of paper
one day. Standard price is $1/roll. Labor cost was $160,
material cost was $50, and overhead was $320. Determine
the multifactor productivity.

· Multifactor productivity = (Quantity produced @ standard price)/

(Labor cost + Material Cost + Overhead)
= 2,000 rolls x $1/roll
$160 + $50 + $320
= 3.77 dollar value per dollar input
5-8 Capacity Planning

Factors that Affect Productivity

· Numerous factors affect productivity include
· Methods
· Capital
· Quality
· Technology and
· Management
· Other factors that affect productivity include
· Standardizing
· Quality differences
· Use of the internet
· Computer viruses
· Scrap rates
· New workers
· Safety
5-9 Capacity Planning

Factors that Affect Productivity

· Other factors that affect productivity include
· Shortage of information technology workers and other
technical workers
· Layoffs

· Labor turnover (negative effect on productivity; replacements

need time to get up to speed)
· Design on workspace

· Incentive plans
5-10 Capacity Planning

Improving Productivity
· Develop productivity measures for all operations is the first
step in managing and controlling an operation.
· Look at the system as a whole in deciding which operations
are most critical (avoid the bottleneck operation)
· Develop methods for achieving productivity improvements,
such as soliciting ideas from workers, engineers, managers
· Establish reasonable goals for improvement

· Make it clear that management supports and encourages

productivity improvement
· Measure improvements and publish them.
5-11 Capacity Planning

Competitiveness

Fl
Price ex
ibi
lity

Quality
Di
ffe
ren
tia Time
tio
n