Date post: | 12-Feb-2016 |
Category: |
Documents |
Upload: | mohiuddin-muhin |
View: | 4 times |
Download: | 0 times |
2-1
PRODUCTIVITYPRODUCTIVITY
2-2
The Economic System Transforms The Economic System Transforms Inputs to OutputsInputs to Outputs
The economic system transforms inputs to outputs at about an annual 2.5% increase in productivity (capital 38% of 2.5%), labor (10% of 2.5%), management (52% of 2.5%)
Land, Labor, Capital, Management
Goods and Services
Feedback loop
Inputs Process Outputs
2-3
Measures of CompetitivenessMeasures of Competitiveness
Productivity GDP (Gross domestic product) growth Market capitalization Technological infrastructure Quality of education Efficiency of government
2-4
What is Productivity?What is Productivity?
Productivity is a common measure of how well resources are being used or a measure of the effective use of resources usually expressed as the ratio of output to input
Productivity =Productivity = OutputOutputInputInput
2-5
Productivity measures are useful for Productivity measures are useful for • Tracking an operating unit’s performance over time
• Judging the performance of an entire industry or country
2-6
Why Productivity MattersWhy Productivity Matters
High productivity is linked to higher standards of livingAs an economy replaces manufacturing jobs with lower productivity
service jobs, it is more difficult to maintain high standards of livingHigher productivity relative to the competition leads to
competitive advantage in the marketplacePricing and profit effects
For an industry, high relative productivity makes it less likely it will be supplanted by foreign industry
2-7
Typical ImpactTypical Impactss of of Productivity Productivity ImprovementImprovement
Parts per man hour
95
100
105
110
115
Year A Year B Year C
Cost per unit decreased
$1.50
$1.75
$2.00
$2.25
Year A Year B Year C
Average worker's annual cash compensation increased
24000
25000
26000
27000
Year A Year B Year C
As productivity improved Costs were As productivity improved Costs were decreaseddecreased Wages increased Wages increased
2-8
Measures of ProductivityMeasures of Productivity
Partial Output Output Output Outputmeasures Labor Machine Capital Energy
Multifactor Output Outputmeasures Labor + Machine Labor + Capital + Energy
Total Goods or Services Producedmeasure All inputs used to produce them
2-9
Units of output per kilowatt-hourDollar value of output per kilowatt-hour
Energy Productivity
Units of output per dollar inputDollar value of output per dollar input
Capital Productivity
Units of output per machine hourValue-added per machine hour
Machine Productivity
Units of output per labor hourUnits of output per shiftValue-added per labor hour
Labor Productivity
Examples of Partial Productivity MeasuresExamples of Partial Productivity Measures
2-10
Typical Measures of Productivity in Different Typical Measures of Productivity in Different OrganizationsOrganizations
Restaurant Customers (meals) per labor hour
Retail store Sales per square foot
Chicken farm Lbs of meat per lb. of feed
Utility plant Kilowatts per ton of coal
Paper mill Tons of paper per cord of wood
2-11
Example Example 11
7040 Units Produced
Sold for $1.10/unit
Cost of labor : $1,000
Cost of materials: $520
Cost of overhead: $2000
Which productivity measures can becalculated?
What is the multifactorproductivity?
2-12
SSolutionolution 1 1
MFP = OutputLabor + Materials + Overhead
MFP = (7040 units)*($1.10) $1000 + $520 + $2000
MFP = 2.20
2-13
Example Example 22 5,500 Units Produced
Sold for $35/unit
500 labor hours are used
Cost of labor: $25/hr
Cost of raw material: $5,000
Cost of overhead: 2 x labor cost
What is the labor productivity?
What is the multifactor productivity?
2-14
Solution 2: Labor ProductivitySolution 2: Labor Productivity
5,500 units/500 hours = 11 units/hour
Or we can arrive at a unitless figure:
(5,500 units*$35/unit)/(500 hours * $25/hr) =15.4
2-15
SolutionSolution 2: Multifactor Productivity 2: Multifactor Productivity
MFP = OutputLabor + Materials + Overhead
MFP = 4.52
MFP = (5,500 units)*($35) (500hrs.)*$25/hr. + ($5000) + 2*(500hrs.)*$25/hr.
2-16
Example Example 33 You have just determined that your service employees
have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.
Which productivity measure should be used? Answer: Could be classified as a Partial Measure.
Is productivity increasing or decreasing? Answer: Last week’s productivity = 480/2000 = 0.24,
and this week’s productivity is = 560/2400 = 0.23. So, productivity has decreased slightly.
2-17
U.S. Multifactor ProductivityU.S. Multifactor Productivity
U.S. Multifactor Productivity(1975 - 2007)
80859095
100105110115
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Year
MFP
(Ind
ex, 2
000
= 10
0)
2-18
Productivity GrowthProductivity Growth
%100typroductivi Previous
typroductivi Previous-typroductiviCurrent =Growth ty Productivi
Productivity Growth is a key factor in a contry’s rate of inflation and the standard of living of its people
2-19
Example 4Example 4
Labor productivity on the ABC assembly line was 25 units per hour in 2006. In 2007, labor productivity was 23 units per hour. What was the productivity growth from 2006 to 2007?
%8%10025
25-23 =Growth ty Productivi
2-20
MFP Growth - Non-FarmMFP Growth - Non-FarmMFP Growth in the Private Non-Farm Business Sector
1,9
0,4 0,61,1 1,3
0
1
2
3
4
5
1948-1973 1973-1990 1990-1995 1995-2000 2000-2007
Ave
rage
Ann
ual P
erce
nt C
hang
e
2-21
MFP Growth - ManufacturingMFP Growth - Manufacturing
2-22
Measurement ProblemsMeasurement Problems
Quality differences may distort productivity measurements
External elements may cause an increase or decrease in productivity
Precise units of measure may be lacking Technological differences may lead to
misleading results.
2-23
Become more efficient Downsize Expand Retrench Achieve breakthroughs
Productivity improves when firms:Productivity improves when firms:
2-24
Standardization Technology Use of Internet, fax machines, e-mail, computerized
billing, software Searching for lost or misplaced items Scrap rates Labor turnover, layoffs, new workers Safety Bottlenecks
Factors Affecting ProductivityFactors Affecting Productivity (1 of 3) (1 of 3)
2-25
MethodsDesign of the workspaceIncentive plans that reward productivityCapacity utilizationLocationLayoutInventory Scheduling
Factors Affecting ProductivityFactors Affecting Productivity (2 of 3)(2 of 3)
Methods Quality
Technology Management
2-26
Factors Affecting ProductivityFactors Affecting Productivity (3 of 3)(3 of 3)
Shortage of IT workers and other technical workers
Equipment breakdownsPart and material shortages Inadequate investment in training & education
of the employees
2-27
Key Steps for Key Steps for ImprovImprovinging Productivity Productivity Develop productivity measures for all operations Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Get management support (make it clear that management supports
and encourages productivity improvements.) Measure and publicize improvements Invest on labor force by training and education
(Don’t confuse productivity with efficiency)
2-28
Bottleneck OperationBottleneck Operation
Machine #2 BottleneckOperation
Machine #1
Machine #3
Machine #4
10/hr
10/hr
10/hr
10/hr
30/hr
2-29
Service ProductivityService Productivity
Typically labor-intensive as in teachingFrequently individually processed (doctors)Often an intellectual task is performed by
professionals (medical diagnosis)Often difficult to mechanize or automate
(haircut)
2-30
Service sector productivity is difficult to measure and manage because
It involves intellectual activities It has a high degree of variability
A useful measure related to productivity is process yield
Service Sector ProductivityService Sector Productivity
2-31
Productivity in the ‘90sProductivity in the ‘90s
| | | | | | | | | | | |‘‘9090 ‘91‘91 ‘92‘92 ‘93‘93 ‘94‘94 ‘95‘95 ‘96‘96 ‘97‘97 ‘98‘98 ‘99‘99 ‘00‘00 20012001
–7 7 –6 6 –5 5 –4 4 –3 3 –2 2 –1 1 –0 0 –
-1 -1 –-2 -2 –-3 -3 –
UUSS
GermanyGermanyJapanJapan