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    Productivity

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    getahun2001
    1. Productivity is a measure of output per unit of input. It can be measured as a single-factor ratio (output to one input like labor hours) or an all-factors ratio (output to total inputs). 2. Single-factor measures include output per labor hour, machine hour, unit of capital or energy. All-factors measures total output value divided by total input costs. 3. Factors that affect productivity include training, technology, management methods, and work techniques like reducing excess time from design defects or inefficient processes. Improving any of these factors can increase overall productivity.

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    Productivity

    Uploaded by

    getahun2001
    192 views17 pages
    1. Productivity is a measure of output per unit of input. It can be measured as a single-factor ratio (output to one input like labor hours) or an all-factors ratio (output to total inputs). 2. Single-factor measures include output per labor hour, machine hour, unit of capital or energy. All-factors measures total output value divided by total input costs. 3. Factors that affect productivity include training, technology, management methods, and work techniques like reducing excess time from design defects or inefficient processes. Improving any of these factors can increase overall productivity.

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    1. Productivity is a measure of output per unit of input. It can be measured as a single-factor ratio (output to one input like labor hours) or an all-factors ratio (output to total inputs). 2. Single-factor measures include output per labor hour, machine hour, unit of capital or energy. All-factors measures total output value divided by total input costs. 3. Factors that affect productivity include training, technology, management methods, and work techniques like reducing excess time from design defects or inefficient processes. Improving any of these factors can increase overall productivity.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    192 views17 pages

    Productivity

    Uploaded by

    getahun2001
    1. Productivity is a measure of output per unit of input. It can be measured as a single-factor ratio (output to one input like labor hours) or an all-factors ratio (output to total inputs). 2. Single-factor measures include output per labor hour, machine hour, unit of capital or energy. All-factors measures total output value divided by total input costs. 3. Factors that affect productivity include training, technology, management methods, and work techniques like reducing excess time from design defects or inefficient processes. Improving any of these factors can increase overall productivity.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 17

    1

    Productivity

    Outputs
    Productivity =
    Inputs

    • Single-factor measures
    – Output / (Single Input)
    • All-factors measure
    – Output / (Total Inputs)

    2
    Measures of Productivity

    Single-factor Output Output Output Output


    measures Labor Machine Capital Energy

    All-factors Output
    measure All inputs

    3
    Single Factor

    Single-factor Output Output Output Output


    measures Labor Machine Capital Energy

    If we produce only one product, the numerator can be either


    the total units of the product or the total $ value of the
    product. If we produce several products, the numerator is
    the total $ value of all products.

    The denominator can be the units of input or the total $


    value of input.

    4
    Example: Single Factor Productivity

    10,000 Units Produced

    Sold for $10/unit

    500 labor hours


    What is the
    labor productivity?
    Labor rate: $9/hr

    5
    Example: Labor Productivity

    • 10,000 units / 500hrs = 20 units/hr

    • (10,000 units * $10/unit) / 500hrs = $200/hr

    • 10,000 units / (500hrs * $9/hr) = 2.2 unit/$

    • (10,000 units * $10/unit) / (500hrs * $9/hr) = 22.22

    •The last one is unit-less


    6
    Some Single Factor Measurements

    • Labor Productivity
    – Quantity (or value) of output / labor hrs
    – Quantity (or value) of output / shift
    • Machine Productivity
    – Quantity (or value) of output / machine hrs
    • Energy Productivity
    – Quantity (or value of output) / kwh
    • Capital Productivity
    – Quantity (or value) of output / value of input 7
    All Factors

    All-factors Goods or Services produced


    measure All inputs used to produce them

    If we produce only one product, the numerator can be either


    the total units of product or total $ value of the product.
    If we produce several products, the numerator is the total
    $ value of all products.

    Usually, the numerator is the total $ value of all outputs.

    The denominator is total $ value of all inputs.

    8
    Example

    10,000 Units Produced

    Sold for $10/unit

    500 labor hours

    Labor rate: $9/hr

    Cost of raw material: $30,000

    Overhead: $15,500
    9
    Example : All-Factor Productivity

    Output
    AFP = Labor + Materials + Overhead

    (10,000 units) * ($10)


    AFP =
    (500)*($9) + ($30,000) + ($15,500)

    AFP = 2.0

    10
    What are the factors that affect productivity?

    Training Methods

    Technology Management

    11
    Assignment 1.1…………….. Due at the beginning of the next class

    1. A company that makes shopping carts for supermarkets recently purchased


    new equipment, which reduced the labor content needed to produce the
    carts. Information concerning the old system (before adding the new
    equipment) and the new system (after adding the new machines) includes:

    Old System New System


    Output/hr 80 84
    Workers 5 4
    Wage $/hr 10 10
    Machine $/hr 40 50

    a) Compute labor productivity for both the Old System and the New System.
    b) Compute AFP productivity for both the Old System and the New System.
    c) Suppose production with old equipment was 30 units of cart A at a price of
    $100 per cart, and 50 units of cart B at a price of $120. Also suppose that
    production with new equipment is 50 units of cart A, at a price of $100 per
    cart, and 30 units of cart B at a price of $120. Compare all-factor productivity
    for the old and the new systems.
    12
    Assignment 1.2…………….. Due at the beginning of the next class
    2. A company has introduced a process improvement that reduces the
    processing time for each unit and increases output by 25% with less
    material but one additional worker.
    Under the old process, five workers could produce 60 units per hour.
    Labor costs are $12/hour, and material input was $16/unit.
    For the new process, material input is now $10/unit and overhead is
    charged at 1.6 times direct labor cost. Finished units sell for $31 each.
    a) Compute single factor productivity of labor in the old system.
    (Compute it in four possible ways.)
    b) Compute all factor productivity for both old and new systems.
    Factor Old System New System
    Output 60 60(1.25) = 75
    # of workers 5 6
    Worker cost $12/hr $12/hr
    Material $16/unit $10/unit
    Overhead 1.6(labor cost) 1.6(labor cost)
    Price 31 31
    13
    Assignment 1.3……… For your own practice
    3. A milk factory seeks advice from an external consulting company concerning its
    business and production processes. The final consulting report describes
    several steps to increase productivity including implementation of cutting-edge
    processing techniques through more powerful filtering systems.

    Existing System Proposed System


    Workers 12 9
    Milk Output/hour 1,000 gallons 1,400 gallons
    Wage Rate/hour $12 $12
    Filtration Cost/hour $120 $170

    a) Calculate the labor productivity for the existing as well as the proposed system.
    b) Find the All-Factor Productivity for both systems.
    c) Assume that current processing includes 700 gallons of Grade-A milk sold at
    $2.40/gallon and 300 gallons of Grade-B milk at $1.90/gallon. Furthermore,
    assume that under the proposed system, processing will include 600 gallons of
    Grade-A milk at $2.40/gallon and 400 gallons of Grade-B milk at $1.90/gallon.
    Compare all-factor productivity for both the existing and the new system.
    14
    Techniques for Productivity Improvement

    • Work Content : amount of work


    contained in a given product or process
    measured in man-hour or machine-hour.

    • Basic work content: time the product


    would take to manufacture or the
    operation to perform, if the design or
    specification was perfect.

    15
    Techniques for Productivity improvement

    • Total Work Content = BWC + Excess time

    Excess time due to


    time due to defect in design or specification of
    product
    time due to inefficient methods of manufacture or
    operation
    Ineffective time: time for which the worker or machine or
    both are idle due to the short commings of the
    management or workers.

    16
    17

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