SE 201 Chapter 5 Productivity and Work Measurement

8/12/2019 SE 201 Chapter 5 Productivity and Work Measurement

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Productivity

One of the most important responsibilities of an operationsmanager is to achieve productive use of organization’s resources.

Productivity is an index that measures output (goods andservices) relative to the input (capital, labor, materials, energy,and other resources) used to produce them.

It is usually expressed as the ratio of output to input:

Output

Productivity = ---------------

Input



Ways to Increase Productivity

Increase output by using the same or a lesser amount of (input)

resource.

Reduce amount of (input) resource used while keeping output

constant or increasing it.

Use more resource as long as output increases at a greater rate.

Decrease output as long as resource use decreases at a greater rate.

Production is concerned with the activity of producing goods and

services.

Productivity is concerned with the efficiency and effectiveness withwhich these goods and services are produced.



Efficiency and Effectiveness

for productivity improvement.

Efficiency is a necessary but not a satisfactory condition forproductivity. In fact, both effectiveness and efficiency are necessaryin order to be productive.

Efficiency is the ratio of actual output generated to the expected (orstandard) output prescribed.

Effectiveness, on the other hand, is the degree to which the relevantgoals or objectives are achieved.

Effectiveness involves first determining the relevant (right) goals orobjectives and then achieving them.

If, for example, nine out of ten relevant goals are achieved, theeffectiveness is 90%. One can be very efficient and still not beproductive.



Production improvement does not necessarily mean

productivity improvement.

Suppose a bank processed 1,000 checks yesterday, using 20 hours of

labor.

Let’s say that the same bank processed 1,200 checks today, using 24

hours.

Production has increased by 20%, from 1,000 to 1,200 checks.

However, the labor productivity for this operation is unchanged,

because 1,000 / 20 is equal to 50 checks per hour yesterday, and 1,200

/ 24 is equal to 50 checks per labor hour today.

Therefore, improvement in production does not necessarily generate

improvement in labor productivity.



Efficiency improvement does not guarantee

productivity improvement. (continue…….)

For example, suppose a doctor amputates (cuts) a patient’s leg in

half the usual time and boasts (show off) the nurses,”

I have been twice as efficient as in the past.”

The nurses, who view the situation say something differently, “

What a disaster – the doctor amputated the wrong leg!”

Here, the doctor’s effectiveness was zero because he did not

achieve the relevant goal, even though his efficiency improved by

200%.



Single Factor Approach to Measuring Productivity Capital - Number of products produced divided by asset

value

Materials - Number of products produced divided bydollars spent on materials

Direct Labor - Number of products produced divided by

direct labor-hours

Overhead - Number of products produced divided by

dollars spent on operating cost



Variables Affecting Labor Productivity Physical work environment

Technology, equipment, materials, lighting, layout

Product quality

Defects, scrap, rework

Employee job performance

Employee ability, motivation



Employee Job Performance

Behavioral scientists believe that individuals are motivated toact in a certain way by a desire to satisfy certain needs.

Maslow ‘s hierarchy of needs

Fulfillment

Recognition

AffiliationSecurity

Physiological



Maslow ‘s hierarchy of needs

At the bottom of the hierarchy are physiological needs. These are the basicneeds that must be met to sustain life itself. Satisfying ones physiologicalneeds will be the primary concern of any person and until one has done soone will not be concerned with any other issues.

However, once workers feel reasonably sure of fulfilling their physiological

needs, they will seek to satisfy the next need in the hierarchy, that ofsecurity.

Security is taken to mean a feeling of protection against physical andpsychological harm, as well as security of employment.

For workers who have already satisfied their physiological and their security

needs, the next motivating factor is that of affiliation, that is wanting tobelong to a group or an organization and to associate with others.

Next on the hierarchical scale is the need to be recognized, and this isfollowed by the need for fulfillment (also called “self -actualization”).

This last need expresses the desire of people or workers to be given anopportunity to show their particular talents.



Modifying Jobs to Provide

Broader Range of Needs Satisfaction

Cross – training – workers perform multiple jobs

Job enlargement is a “horizontal” expansion of job tasks; that is, theworker is assigned more tasks at the same general skill level.

In a manufacturing setting, job enlargement might mean having a workerdo several tasks at a work station rather than only one or two.

In a bank, it might mean training a person to write car loans, andinstallment loans rather than only one of these.

Job Enrichment involves “vertical” expansion of a job’s responsibilities and skills.

It may mean that a production worker is involved in the design of the

product or production process is responsible for his own quality testing,handles customer complaints, or deals directly with suppliers.

Team production -- organizing workers into teams; assigningmanagement responsibility to teams



METHODS ANALYSIS AND IMPROVEMENT

Specifying the tasks and responsibilities of a job is only the first step

in the job design process.

The next step is to determine how to perform the tasks, that is,

determine the best work methods.

Best work methods are

the most efficient physical movements of the worker,

the best sequence in which to perform movements or tasks,

and the best way to coordinate the workers actions with those of

machines and other workers.

This information must be conveyed to the workers through training

and appropriate supervision and feedback.



METHODS ANALYSIS

A logical approach to deciding what tasks should be done and how

they should be done is called methods analysis.

Methods analysis utilizes

structured data collection,

visual aids and charts, and

logical procedures to help understand and improve work methods.

Methods analysis relies on obtaining good observational and

experimental data.

Methods analysis focuses primarily on the activities of individual

workers or groups of related workers.



Work Measurement

Work measurement is the process of establishing the time that agiven task would take when performed by a qualified workerworking at a defined level of performance.

A qualified worker is one who has acquired the

skill, knowledgeand other attributes to carry out the work in hand to satisfactorystandards of quantity, quality and safety

Work measurement also refers to the process of estimating the

amount of worker time required to produce one unit of output.

A goal of work measurement is to develop labor standards that canbe used for planning and controlling operations.



Labor Standards

A labor standard is the number of worker-minutes required to

complete an element, operation, or product under ordinary

operating conditions.

Labor standards are used in:

Cost estimation

Pricing of products and services

Incentive pay systems

Capacity planning

Production scheduling

A labor standard can be determined using one or more of the

following approaches:

Time study

Work sampling

Predetermined time standards



Time Study

Job is performed by a single worker in a fixed location Job involves repetitive short cycles

Job is expected to continue unchanged for a long period

Job produces large quantities of output

Resulting time standard must be very accurate

Analysts use stopwatches to time the operation being performed by

workers

These observed times are then converted into labor standards

The labor standards are expressed in minutes per unit of output forthe operation



Determining Labor Standards

from Time Studies

Observed

Time

Normal

Time

Standard

Time

Performance

Rating

Allowance

Fraction



Example: Time Study Approach

In a time study of a manufacturing operation, the average

time observed to complete a product was 8.6 minutes. The

performance rating applied to the observed worker was 0.95

and the allowance during an 8-hour shift was 12.5% or 60minutes.

Compute the labor standard.



Example: Time Study Approach

Observed time = 8.6 minutes

Performance rating = 0.95

Allowance fraction = 0.125Normal time = Observed time x Performance rating

= 8.6 x 0.95

= 8.17 minutes

Standard Time = Normal time / (1 - Allowance)

= 8.17 / (1 - 0.125)

= 8.17 / (0.875)

= 9.337 minutes



Work Sampling

The work of one or more employees is randomly

sampled at periodic intervals

The results of these studies are used to:

Set allowances used in labor standards

Set labor standards



Work Sampling

Job performed by a single worker in a fixed location

Job involves repetitive short cycles

Job expected to be changed periodically as customer

orders change

Job produces relatively small quantities of output

Resulting time standard used for accounting coststandard, pricing analysis, and production planning



Example: Work Sampling

A work sampling study was performed on an electronicassembly operation at OK Instruments. The study coveredan 8-hour shift with a single worker. The results of thestudy were:

Activity % of Worker’s Time

Assemble Units 80

Allowances 20

If the worker received a performance rating of 1.20 on theAssemble Units activity and 400 units were assembledduring the study, what is the labor standard for thisoperation?



Example: Work Sampling

1) Compute the average time per assemble:Total Minutes of Assembly Work

Number of Units Assembled

= 0.80(480)/400 = 0.960 minutes per unit

2) Compute the normal time per unit:

= (Average Time per Unit) (Performance Rating)

= 0.960 (1.20) = 1.152 minutes per unit

3) Compute the labor standard:= Normal Time / (1 – Allowance Fraction)

= 1.152 / (1 - 0.20) = 1.44 minutes per unit

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SE 201 Chapter 5 Productivity and Work Measurement

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