8/2/2019 Productivity Mgt
1/41
4/9/2012 1
MANAGEMENT OF PRODUCTIVITY
What is productivity?- a measure for effective utilization ofresources inan organization.
8/2/2019 Productivity Mgt
2/41
4/9/2012 2
Concept ofProduction & Operation
Types ofProducts
Tangible/IntangibleConsumer /Industrial
Consumer durable & Non-durable
Discrete/Continuous
Standard/Customized
Production Management
8/2/2019 Productivity Mgt
3/41
4/9/2012 3
8/2/2019 Productivity Mgt
4/41
4/9/2012 4
When does someone buy a product?
Need Experience and Satisfaction
Choice of aparticular product from variety?Concept of value
How can we [add] improve value [function/cost]?
Can we define production now?Production Activities
- alter physical state, alter form, alter chemical
composition, alter metallurgical condition,
transport, preserve, store, impart knowledge,
information, give advicemedical advice, legal
opinion, give medical treatment
8/2/2019 Productivity Mgt
5/41
4/9/2012 5
What is management?
Important features of management
Efficiency & EffectivenessVisualize & Plan
Resource allocation
ReviewPDCA
Accountability for resource utilization
Production management
Coordinating production resources to meet
organizational objectives
Production resources: men, machines, equip.,
material, methods
8/2/2019 Productivity Mgt
6/41
4/9/2012 6
C/P
Ia
Ib
Ic
O/P
INFOFEEDBACK, ORDERS
??
8/2/2019 Productivity Mgt
7/41
4/9/2012 7
Organizational objectives
P,Q,C,D,E,F,S,H,E QCD
Production ManagementObjectives
Performance Objectives
Efficiency & Effectiveness
Quality
Lead times
Capacity utilization
Flexibility
8/2/2019 Productivity Mgt
8/41
4/9/2012 8
Cost Objectives
Explicit[visible]costs: material, labor, scrap,
rework, maintenance
Implicit [invisible]costs: inventory, stock-outs,
shortages, delayed deliveries, mat.handling,inspection, grievances, dissatisfaction, down time,
opportunity
Productivity
8/2/2019 Productivity Mgt
9/41
4/9/2012 9
RESOURCE UTILIZATION
8/2/2019 Productivity Mgt
10/41
4/9/2012 10
MATERIAL
OUTPUT
WASTE
(MUDA)
LABOR
CAPAITL
ENERGY
OTHERS
INPUT
8/2/2019 Productivity Mgt
11/41
4/9/2012 11
Comparison of Indian & Global industries
Comparison factors Japanesecompanies
US/European co.
General Indianco.
1.Cycle time fromproduction todevelopment
0.5 to 2years
1 to 2 years 3 to 6 years
2. inventory level A few days
of sales
One month
of sales
9 t0 12 months
of sales
3. output peremployee
Rs. 32 Lacs Rs. 12 Lacs Rs. 2.5 Lacs
4. rejection rate 3 to 4 PPM 30 to 40 PPM 8 to 20 RPH
5. quality cost withrespect to sale
3% to 5% 5% to 10% 35% to 45%
8/2/2019 Productivity Mgt
12/41
4/9/2012 12
wastes in factories
1.defects ( scrap and rework)
2. inventory3.waiting4. searching for5.over production6.down time7. poor vendor quality
8.manpower idle or misused9.excessive material handling10.setup time11. waiting time , delays12. customer complaints13. accidents
14. absenteeism15. waste of power [ electricappliances left on ], air [leakage],water [ leaking taps, overflowingtanks],
8/2/2019 Productivity Mgt
13/41
4/9/2012 13
wastes in offices
1. High document retrieval time
2. Visitors waiting time - high3. Customer waiting time is high4. Payment to suppliers delays4. Absenteeism, late coming5. Long telephone talks
6. Long memos7. Forgotten messages8. Concerned person notavailable9. Waste of paper/water/power
10. Mail addressed to wrongaddressee
11. Long processing time
8/2/2019 Productivity Mgt
14/41
4/9/2012 14
What does low productivity mean?
Costly conversion process, as moreinputs[resources] are required for same outputs
due to ineffective utilization of resources, costs
go up, costly products, high prices Shortages
No place for the company in Competitive
Environment
8/2/2019 Productivity Mgt
15/41
4/9/2012 15
Company will shortly close down
When so many such companies close down what
happens?
Unemployment, poverty, black marketing due to
shortages and an
unhealthy economy, law and orderproblems, deterioration of standard of living, a
weak economy, a poor country open to exploitation
What are the causes of low productivity?
Lack of delegation Poor contract review with customer
8/2/2019 Productivity Mgt
16/41
4/9/2012 16
Poor attitude Ignorance
Lack of training Poor PDCA on management decisions Poor overall management
What areproductivity improvement
initiatives?
Work study5S
Kaizen Management TQM JIT, kanban, pokayoke
6 - sigma
8/2/2019 Productivity Mgt
17/41
4/9/2012 17
Elimination of 3Ms (Muda - waste, Mura -
strain, Muri - discrepancy) OJT as a result of all or any of the aboveinitiatives and awareness training
Mathematical tools & models like Dr. Sumanths
model
ILO approachDr. Sumanths five pronged approach of material
based techniques, Technology based techniques,Task based techniques, Employee based
techniques, Product based techniques
8/2/2019 Productivity Mgt
18/41
4/9/2012 18
What are the gains of productivityimprovement?
Lean Organizations [NVAs & NPAs reduced,organizations are effective and efficient]
High morale
Products are popular, expanding business [QCDimproved]
Overall Prosperity, Better Standard of Living
To be an economic power National pride, happiness and prosperity forgenerations
8/2/2019 Productivity Mgt
19/41
4/9/2012 19
How do we instituteProductivityImprovement Measures?
No Termination As A Result Of ProductivityImprovement Measures
Train Your Own People in Specialized Areas &enable them to seek better employment
Multi skilling Stop recruitment when some one retires
redeploy people Compensate Voluntary Retirement
8/2/2019 Productivity Mgt
20/41
4/9/2012 20
Productivity Improvement And Unemployment
Growing economy, more opportunities forrewarding work Prosperity
8/2/2019 Productivity Mgt
21/41
4/9/2012 21
Why should we measure productivity?
For assessing efficiency of conversion ofconversion process
For practical resource allocation one should knowhow much is needed
For making objectives realistic For strategising productivity improvement, one
should know the current situation
For stimulating bench marking
For realistic profit planning For stimulating competitive action For using as base for rational collective
bargaining
8/2/2019 Productivity Mgt
22/41
4/9/2012 22
For facilitating direction of organizational effortstowards productivity objectives [measuremonitor
controldirect ]We must remember that productivity is not
Volume of production
Measure of profitabilityprofit under unusualdemand conditions A technique to make worker work harder but to
make work easier
8/2/2019 Productivity Mgt
23/41
4/9/2012 23
What is productivity so that we can measure?
Productivity= Out put / input
[ expressed in common units][Total production of goods and services /
labor+materials+capital+energy]
Total factor productivity
= net out put / labor + capital
[Net out put = total out putintermediate
materials and services purchased]
Partial productivity or factorial productivity1. Labor productivity[1] = total out put / labor hours used
8/2/2019 Productivity Mgt
24/41
4/9/2012 24
[2] = total out put / gross labor hours
2. Machine productivity
[1] = total out put / machine hours used[2] = total out put / gross machine hours
3. Material productivity
= Total out put / material used4. Land productivity
= total out put / area of land used
Index approach to productivity measurementProductivity indices enable comparison of
productivity levels at a base period and current
period
8/2/2019 Productivity Mgt
25/41
4/9/2012 25
Calculate Total productivity, total factor productivity and partial[factorial] productivity measures for the following data. Please notethat this company purchases the materials, energy & services. Plant &equipment is on lease.
Out put Rs.1000/-
Human input Rs.300/-
Material input Rs.200/-
Capital input Rs.300/-
Energy Rs.100/-
Other expense inputs Rs.50/-
8/2/2019 Productivity Mgt
26/41
4/9/2012 26
Productivity Index
output x price[current period] / input x cost [current
period]------------------------------------------
output x price [base period] / input x cost [base
period]
National Productivity council
Organization promoted by Government of Indiain 1958, headquarters at New Delhi
to promote productivity culture in the country andpromote productivity improvement in industry,
agriculture service infrastructure and other sectors
of economy
8/2/2019 Productivity Mgt
27/41
4/9/2012 27
non profit & tripartite in nature, govt., industry &labor
provides training and consultancy in productivityimprovement alsoundertakes promotional programs for Tokyo based
Asian productivity Council [APC]. India is a
founder member of APC
to make India a competitive economy improve quality of service by interacting as a
change agent between central & state governments a favorite project of the then prime minister of
India, Pt.Nehru
8/2/2019 Productivity Mgt
28/41
4/9/2012 28
Job Evaluation
What is Job Evaluation?
a procedure designed to rank jobs on a formalbasis to measure the worth of a job for compensation
purposes in relation to other jobs
Why Job Evaluation?
Establishes relative importance of the jobs Ensures rates for similar skills are at par in the
industry Limits leapfrogging
New jobs will be brought into the wage structure
at a proper level
8/2/2019 Productivity Mgt
29/41
4/9/2012 29
Gives clear cut picture of the person needed forthe job
Rational selection policies
Eliminates wage inequalitiesequity pay Basis for wage negotiations Who DoesJob Evaluation?
The evaluation committee, comprising ofworkmen,staff and if required an expert, internal
or external How is it
done?Steps in job evaluation are job analysis, jobdescription, job specification, job evaluation
Job analysis iscollection of job facts *
8/2/2019 Productivity Mgt
30/41
4/9/2012 30
* Skills involved, responsibility, job knowledge,mental application, dexterity and accuracy
* Physical demandsphysical activities, workingconditions, hazards* Purpose of the jobjob description : recording of the facts about job- how do we obtain facts?observation, interview,
questionnaire
* Job identificationtitle,dept., no., location ofthe job, date on information was collected* Job summeryoverall picture of the purpose,nature and extent of the job
8/2/2019 Productivity Mgt
31/41
4/9/2012 31
* Job dutiesduties and responsibilitiesJob specification* Written statement giving minimum humanqualities required for successful performance of
the job
like education, training and experience, physicaleffort, mental skill, supervision, responsibility
8/2/2019 Productivity Mgt
32/41
4/9/2012 32
Methods ofJob Evaluation: ranking, job
classification, factor comparison, point rating
method
Ranking method*Using job description arrange the jobs accordingto difficulty in performance. The job most difficult
is first, next in difficulty comes next and so on*Paired comparison method: is used for the above*Advantages: 1. Very simple
2. Adequate for small organizations* Disadvantages 1. Subjectivein nature
8/2/2019 Productivity Mgt
33/41
4/9/2012 33
2. not suitable if no of jobs are many in an
organization
Job classification* certain grades or classifications are fixed in thecompany by identifying certain critical key
characteristics of occupations.
*These key characteristics[setting the machine,carrying out critical maintenance work] represent
the grades
* Various jobs in the occupation are put in thesegrades*Advantages: 1.Very simple
2. new jobs are easily fitted in the grades easily
*
8/2/2019 Productivity Mgt
34/41
4/9/2012 34
*Disadvantages: 1. Subjectivein nature 2. Overlapping of jobs
takes place in grades Factor Comparison Method Identify key jobs which are clearly understood
by everyone in the organization [say, sweeper,
cook, driver, security guard or as in the
organization, welder, setter, tool maker]. Obtain
job specification for these jobs.
Identify key factors of these jobs like mentalability, skill, physical efforts and working
conditions
And evaluate on a scale of 05 these factors
A h j b i di d f h
8/2/2019 Productivity Mgt
35/41
4/9/2012 35
Arrange these jobs in ascending order for each
factor & then fit other jobs factor wise in this order
and allot points to each factor.
Fix monetary value to the factors and thereby to
the jobJobs
Factors
Security
guard
driver cook sweeper
Responsibility 4 4 3 1
Skill 2 4 4 1
Physical efforts 3 2 2 4
Working conditions 3 2 2 3
Total 10 12 11 9
P i t R ti th d
8/2/2019 Productivity Mgt
36/41
4/9/2012 36
Point Rating method Identify key jobs and obtain job specifications Establish clear understanding about worth of these jobs in theevaluation committee
Identify various factors important for performing jobs in the
company say, education, experience, physical requirement, working
conditions, hazards and allot points to them on a 0-100 scale based on
the importance to work. Then divide them into 5 levels. Allot points
to these levels.
8/2/2019 Productivity Mgt
37/41
4/9/2012 37
Fit the key jobs factor wise to the matrix. Find out what each jobweighs Now fit other jobs in the order
Total
points
Level I Level II Level III Level IV Level V
Educn. 50 10 20 30 40 50
Expn. 50 10 20 30 40 50
Phy.
Requ.
100 20 40 60 80 100
Work.
Condn.
50 10 20 30 40 50
Hazard 40 8 16 24 32 40
8/2/2019 Productivity Mgt
38/41
4/9/2012 38
Incentives
Incentive is an award for performance above
standard Such performance results into gain in productivity Management shares such gain with the workmenas per a mutually agreed scheme
Such a reward motivates workmen to performabove standard regularly which further enhances
productivity gains
Types of Incentives-Financial and non financial Financial incentives award monitory rewardaccording to an agreed scheme
8/2/2019 Productivity Mgt
39/41
4/9/2012 39
Non financial incentives recognize theperformer publicly
Why incentives fail?Loose industrial engg. Standards or outdatedstandards
Poorly designed planproduction incentive Vsproductivity incentive,safety, quality, over
production, no safeguards
Complexity in calculations
Inequities in earnings Pressure tactics by trade unions Poor supervisory practices
8/2/2019 Productivity Mgt
40/41
4/9/2012 40
Distrust between management and workmen dueto management failures
*No raw material
*Equipment failuresSalient features of a good incentive scheme
A transparent scheme, simple to understand &easy to calculate reward per person Timely payment Built in safeguards against safety and badquality Compensation is significant Productivity based, rather than quantity based
8/2/2019 Productivity Mgt
41/41
4/9/2012 41
Some financial incentive schemes Individual Incentive Plans
Straight Piece rate plans: example Standard hours plan: example Group Incentive Plans