Sunteți pe pagina 1din 117

# UNIT-I INTRODUCTION

Productivity concepts Productivity benefit model Productivity cycle Macro and micro factor of productivity

1.1. PRODUCTIVITY
Productivity quotient is obtained by dividing output by one of the factors of production in this way it is possible to speak of the productivity of capital investment or raw materials according to whether output is being considered in relation to capital, investment or raw material etc.

1.1.1.

## COMMON MISUSE OF THE TERM

The term productivity is often confused with the term production. Many people think that the greater the production, the greater the productivity. This is not necessarily true. We shall show this by an example, but before doing so, let us clarify the meanings of the terms production and productivity. Production is concerned with the activity of producing goods and/or services. Productivity is concerned with the efficient utilization of resources (inputs) in producing goods and/or services (output). If viewed in quantitative terms, production is the quantity of output produced, while productivity is the ratio of the output produced to the inputs. Example: Suppose that a company manufacturing electronic calculators produced 10,000 calculators by employing 50 people at 8 hours/day for 25 days. Then, in this case, Production=10,000 calculators Productivity (of labor) = 10,000 calculators/50*8*25man-hours. = 1 calculator/man-hour Suppose this company increased its production to 12,000calculators by hiring 10 additional workers at 8hours/day for 25 days. Then, The production = 12,000 calculators Productivity (of labor) = 12,000 calculators/60*8*25 man-hours = 1 calculator man-hours

Clearly, the production of calculators has gone up 20 percent (from 10,000 to 12,000), but the labor productivity has not gone up at all. We can easily show, by similar computations, that there could have been other extreme cases wherein the labor productivity went down even though production went up: or, the labor productivity went up along with the production. The point we are making is that an increased production does not necessarily mean increased productivity. Efficiency is the ratio of actual output attained to standard output expected. For example: if the output of an operator is 120 pieces per hour while the standard rate is 180 pieces per hour, the operators efficiency is said to be 120/180=0.6667 or 66.67 percent. Effectiveness is the degree of accomplishment of objectives. Whereas how well the resources are utilized to accomplish the results refers to the efficiency. Productivity is a combination of both effectiveness and efficiency, since effectiveness is related to performance while efficiency is related to resources utilization. The terms of productivity, effectiveness and efficiency in the following manner. Productivity index = output obtained/input expended

= performance achieved/resources consumed = effectiveness/efficiency The first two identities of the above expression are clearly consistent with the usual definition of productivity; the last one is somewhat confusing for two reasons: 1. Productivity index is a numerical value, but effectiveness is not. 2. Mali does not also define efficiency Ina technical sense, that is, as the ratio of actual output to expected output tot expected or standard output. Further, his definition implies that productivity can be increased by reducing by efficiently-something that does not seem logical at all.

Perhaps the confusion could have been accorded by expression the productivity index as follow Productivity index = f (effectiveness)/F (efficiency)

1.1.2.

## BASIC DEFINITIONS OF PRODUCTIVITY

Three basic types of productivity appear to be emerging; we shall refer to these basic forms as follows.

1.1.3.

PARTIAL PRODUCTIVITY:

Partial productivity is the ratio of output to one class of input. For example labor productivity (the ratio of output to labor input) is a partial productivity measure. Similarly, capital productivity (the ratio of output to capital input) and material productivity (the ratio of output to material input) are example of partial productivities.

1.1.4.

## TOTAL FACTOR PRODUCTIVITY:

Total factor productivity is the ratio of the output to the sum of associated labor and capital (factor) input. By net output, we mean total output menus intermediate goods and services purchased. N0tice that the denominator of this ratio is made up of only the labor and capital input factors.

1.1.5.

TOTAL PRODUCTIVITY:

Total productivity is the ratio of total output to the sum of all input factors. Thus a total productivity measure reflects the joint impact of all the inputs in producing the output, In all of the above definition both the output and input(s) are expressed in real or physical terms. By being reduced to constant dollars (or any other monetary currency) of a reference period. This reduction to base period is accomplished by dividing the values of output and input by deflators or inflators, depending upon whether the prices of outputs and inputs have gone up of down, respectively, In other words the effect of reducing the output and input to a base period is to eliminate the effects of price variations, so that only the physical changes in output and input are considered in any of the productivity ratios.

We shall take a simple the ABC Company. The data for output produced and inputs consumed for a particular time period are given below. Output Human input Material input Capital input Energy input Other expense input = Rs1000 = 300 = 200 = 300 = 100 = 50

It is assumed that these values are in constant dollars with respect to a base period. Then the partial, total factor and total productivity values are computed as follows. Partial productivities: Human productivity = output/human input = 1000/300=Rs/Rs3.33 Material productivity = output/material input = 1000/200=Rs/Rs5.00 Capital productivity = output/capital input = 1000/300=Rs/Rs3.33 Energy productivity = output/energy input = 1000/100=Rs/Rs10.00 Other expense productivity = output/other expense input

= 1000/50= Rs/Rs 20.00 Total factor productivity = net output/ (labor+capital) input

## = total output-materials and services purchased/ (labor+capital) input.

Assume that the company purchased all its materials and services, including the energy, machinery and equipment and other services, such as marketing advertising information procession consulting etc. Net output = 1000-(200+300+100+50) = 1000-650 = Rs350 Total factor productivity = 350/300+300

= Rs/Rs 0.583 Total productivity = total output/total input = total output/ (human+material+capital+energy+other expense) input =1000/300+200+300+100+50 =1000/950= Rs/Rs 1.053 Unless otherwise stated, we shall use these three basic definitions of productivity in the rest of the book. Notice that when we refer to partial productivity, we are implying more than one type of partial productivity. Labor productivity which is one of the most commonly used measures, is clearly a partial productivity measure since it relates output to only labor input.

## 1.2. PRODUCTIVITY BENEFIT MODEL

Traditionally, employees and unions have been suspicious of managements intentions to improve productivity because of the consequence often associated with such improvement. In many companies in the United States. Labor productivity improvements often resulted n layoffs, which are certainly unwelcome, particularly when the workers are given short notice. On the other hand many other companies have reaped the benefits of labor productivity gains by not hiring new employees when workloads increased, or by letting attrition take care of the excess labor force. While in many case labor productivity improvement is what is focused upon by management, including industrial engineers, there may have been many opportunities to improve material, capital, energy, and other expense productivities that were ignored. Even though labor productivity
6

improvement might occur in an organization, if the total cost per unit of the product or service is not reduced and if the quality of the product or service is not improved it does not appear that this is a true productivity improvement while trying to reduce the number of workers, a company may bring in so much automation, robotics etc., that the savings in labor might be far exceeded by the excessive capital costs, thus causing and actual increase, in the unit cost of manufacturing of the product or service since. Price /unit = cost/unit profit margin/unit If the cost/unit increases, management if forced to either reduces the profit margin per unit to stay even. Of face a reduction in market share by holding the previous profit margin, in either case, the company management in question has a difficult choice. However, the opposite the favorable-is true when the total cost per unit is decreased and the quality of the product or service is improved. The improvement of total productivity of a product or service results in the reduction of the total cost per unit. Therefore improving the total productivity results in two favorable management strategies: 1. The consumers will benefits through savings by purchasing the product or service at lower prices for the same quality or even better quality in some cases. 2. The organization will most likely benefit through a gain in market share, and this might, in turn, create greater revenue-generating opportunities and take advantage of the economies of scale. 3. The employees of the organization will benefits through increased in real wages or salaries. 4. The share holders or owners of the organization will benefits through larger dividends on their share. Also, the organization will have a better chance of reinvesting the profits in new products, services, processes and ventures.

## 1.3. THE PRODUCTIVITY CYCLE

The productivity cycle schematically. At any given time, an organization that is in midst of an on-going productivity program may be involved in one of the four stages or phases. Productivity program. Productivity evaluation, productivity planning and productivity improvement.

We abbreviate these four phases MEPi, where, m,e,p,I stand, respectivily, for measurement, evaluation planning and improvement. An organization that begins a formal productivity program for the first time can begin with productivity measurement once the productivity levels are measured, they have to be evaluated or compared against planned values, Based on this evaluation, target levels of productivity are planned on both short-and/or long term bases, to achieve the planned targets, productivity improvement takes places in a formal manner, in order to assess the degree to which the improvement will take place next period, productivity levels must be measured again. This cycle thus continues for as long a she productivity programs operate in the organization. The productivity cycle concept shows us that productivity improvement must be preceded by measurement evaluation, and planning. All four phases are important not just productivity measurement or just productivity improvement. Also, this cycle emphasizes the process nature of the productivity issue. A productivity program is not a onetime project, but rather a continuous. Ongoing process. EXAMPLE: For an illustration of the concept of the productivity cycle, let us consider the xyz company, which has had a formal productivity program for several years. Last year, the company total productivity was measured to b3e \$/\$1.250(that is, every dollar of total input used, the company produced 1.25 dollars worth of output), based on the historical record of achievement in total productivity, the target level of total productivity for last year was \$/\$. 300. The productivity manager of the company makes an evaluation of the total productivity change in two ways : first, by comparing the actual achievement against the target set, and second, by comparing the actual total productivity levels between two consecutive years. In the first case, the achievement was short by[(1.3001.250)/1.250]*100 percent , that is ,a percent while in the second case, the improvement of total productivity from the year before last to last year was [(1.250-1.250)/1.250]*100 percent, that is , 2.46 percent . These two types of evaluations helped the productivity manager set a realistic target for total productivity for this year of 1.310. In order to go from 1.250 last year to 1.310, this year (an expected improvement of 4.8 percent). The productivity manager had to institute some additional productivity improvement techniques, such as quality circles and statistical quality control. At the end of the year. He or she will measure the total productivity again to see

whether, in fact, the target of 1.310 was achieved, then begin the evaluation phase again.

## 1.4. MACRO AND MICRO FACTOR OF PRODUCTIVITY:

1.4.1. Micro level productivity:
Micro level productivity is an important role in information policy particularly in providing evidence on how and where key driver of productivity improvement can be seen. Micro level data work has proved particularly power full in assessing five drivers of productivity work in practice and perhaps where potential productivity gains are not being achieved. Five drivers of productivity are 1. competition 2. innovation 3. investment 4. skill 5. enterprise Competition: The effect of competition on productivity in enabling more production\vity firm to grow at expense of other and in giving firm a clear incentive to improve performance can be seen in firm level data. One study shows that these processes and the entry and exit of business associated with them. Innovation: The competition is positively associated with innovation by firm innovation can boost productivity in two ways, Firms investing in R&D them selfs and reaping the benefits from new or improved products and process or spillovers from creator of knowledge to others firm to compel. Studies have shown that both these process R&D investment and use of external knowledge influence the ability of firm to innovate international sales and innovation have been shown to be associated with superior productivity. Innovation includes not only technical development but also design and this too has been shown to generate positive returns.

Investment: Investments improve the labor productivity by increasing the stock of capital available to workers. A number of studies has estimated the effects and recent works has been shown the specific productivity impact associated with investing in hardware (it).investing software and the use of employee have also been shown to be associated with higher level of firm productivity. These effects are particularly large when supported by modem broadband communication network. Skill The quality and quantity of skill in an economy or a firm affect its productivity capability. Linking of skill variables to ABI information has produced a series of analysis showing that both qualification and occupations are associated with productivity effect. Enterprise: The creation of new firm to exploit new ideas is essential to the competitive process studies into the demography of enterprises and effect of entry of new firm on productivity have been carried out in a number of countries. Micro data analysis: It is possible to analysis relationship between economic variable more closely. The presences of linked demographic information in many data sets allow more complex tabulation and regression result to be exacted than by simply using aggregates. It is possible to isolate the effects of factors such as region, firm size and foreign ownership on the productivity of individual businesses.

10

## PRODUCTIVITY MESUREMENT INTERNATIONAL LEVEL, NATIONAL LEVEL, ORGANATIONAL LEVEL.

TOTAL PRODUCTIVITY MODEL. PRODUCTIVITY MANAGEMENT IN MANUFACTURING AND SERVICE SECTOR. PRODUCTIVITY EVALUVATION MODEL. PRODUCTIVITY IMPROVEMENT MODEL AND TECHNIQUES.
2.1. PRODUCTIVITY MEASUREMENT AT THE INTERNATIONAL LEVEL
Productivity comparisons based on some systematic measurement

approaches at the international level are valuable tools for understanding and evaluating the impact of productivity on the domestic and international markets of competing countries.

11

2.1.1. 2.1.1.1.

## MEASUREMENT APPROACHES Rostass Measures

Comparison of the value of the gross output per unit of labor Comparison of the value of the net output per unit of labor Comparison of the physical output (gross as well as net) per unit of labor Comparison of the physical input of materials.

2.1.1.2.

## Shelton and Chandlers Measures

Hourly labor cost = E/L Output per man-hour = Q/L Unit labor cost = (E/L) (Q/L) = E/Q E = aggregate labor cost 9cor expenditure) L = man-hours of labor Q = quantity of output Methods of measuring unit labor costs This method considers a typical product and

Where,

1. Measurement by product.

compares labor costs (and possibly production costs) from plant-to-plant in different countries by using actual cost records. 2. Measurement by industry: This approach consists of aggregating the output of all the different products of individual companies or of an industry into a combine figure. Although this method is easier to implement because of the availability of data for basic industries in industrialized countries, there are some difficulties, the most serious ones being quality differences and product diversity. 3. Measurement by all manufacturing industries: combined manufacturing industry basis. productivities of various countries. Unit labor cost estimates: Labor expenditure (cost) Output (production) Measurement is done on a This method to comparing the

12

## 2.2. PRODUCTIVITY MEASUREMENT AT THE NATIONAL LEVEL

The measurement intricacies of a national economy, because organizations form the basic units of an economy. The productivity measures used by countries appear to be partial productivity indicators, particularly labor productivity. Whether it is to report a growth or decline, this measure has been employed by national governments around the world.

2.2.1.

Index approach
Labor productivity indexes Capital productivity indexes Labor and capital productivity indexes

Labor productivity indexes: among the partial productivity measures, labor productivity appears to be the most commonly used. The three types of labor productivity indexes commonly employed are as follows: 1. BLS indexes: These are the indexes published by the Bureau of Labor Statistics (BLS) every quarter. Labor productivity = 2. NBER indexes: Labor productivity = 3. Brooking Institute indexes: Capital productivity indexes. By definition Capital productivity =

13

2.3.

## PRODUCTIVITY MEASUREMENT IN ORGANIZATIONS LEVEL

Economics, engineers, managers, and accountants have taken different approaches in measuring productivity at the firm level.

Economists: Index approach; production function approach; input-output approach. Engineers: Index approach; utility approach; servo-system approach Managers: Array approach; financial rations approach
Accountants: Capital budgeting approach; unit cost approach

2.3.1.

Index Approach:

An index number is a quantity which shows by its variations the changes over time or space of a magnitude which is not acceptable of direct measurement in it or of direct observation in practice.

2.3.1.1.

## Kendrick Creamer Model:

Their indices are basically of three types: Total productivity, Total factor productivity, and Partial productivity. Total productivity index for a given period

## Net output Total factor input

= output intermediate goods and services = (man-hour input of the measured period weighted by base-base period average hourly earnings, preferably including fringe benefits)

14

+ (total capital of the measured period expressed in baseperiod prices and weighted by the base-period rate of return, with depreciation treated as intermediate service) Net output Productivity gain input = total factor input, in the base period = difference between net output and total factor

Partial

productivity

of

material

2.3.1.2.

## Craig Harris Model.2

Pt =

Total quantity

Where, Pt L C R Q
Ot

= total productivity = labor input factor = capital input factor = raw material and purchased parts input factor = other miscellaneous goods and services input factor
= total output

15

2.3.1.3.

APC Model.4

The American Productivity Center (APC) has been advocating a productivity measure that relates profitability with productivity and price recovery factor

Profitability =

= (productivity)

## (price recovery factor)

2.3.1.4.

Mundels Model.
Mundel present two alternatives form of productivity

PI =

PI =

Where

## ,PI OMP OBP IMP

IBP

= productivity index = aggregated outputs, measured period = aggregated outputs, base period = inputs, measured period
= inputs, base period

16

2.3.2.

## Production Function Approach

Economics have used the products function approach in the past four decades. Their approach has been to develop some general mathematical expression for output as a function of input factors, Pure theory of production functions. Production functions are the development of three kinds of functions.

2.3.2.1.

## The Cobb-Douglas function

Q=

Where Q = output L = labor input K = capital input u = random measurement error component
a, d, and f and constants to be estimated

2.3.2.2.

## The constant elasticity of substitution (CSE) function

Q=

Where

Q = value-added output L = labor input = total man-hours K = gross book value of capital adjusted by capacity utilization coefficient a = arbitrary constant of proportionality b = distribution parameter r = substitution parameter v = degree of returns to scale e = base of the natural logarithm
u = random measurement error with mean zero and variance

The term u represents uncontrollable and unpredictable variations in output that occur after an input factor is employed in production.

17

2.3.2.3.

Q=

2.3.3.

## Input Output Approach

Input Output (I-O) analysis was originally applied to the study of flows in the national economy. Although, much work has been reported using the I-O approach at the national and industrial levels of productivity measurement, very little has been done on applying this technique at the firm level.

2.3.4.

Servo-System Approach

Hershauer and Ruch present a servo-system model of worker productivity. Their servo-system approach: Productivity related to output through a conversion process. This model is called the servo-system model because it is a dynamic feedback system, in which the output of an action taken by one person or group eventually has an effect on that person or group.

2.3.5.

## Capital Budgeting Approach

Mao [1965] demonstrated capital technique in measuring the productivity of public investment. Maos basic approach is (1) to compute a rate of return for each of the projects and then rank the projects according to their rates of return, and (2) to determine the cost of social capital and use it as the cutoff rate for the projects. The criterion for accepting or rejecting a project thus depends on whether its rate of return is higher or lower than the social cost of capital.

2.3.6.

## Unit Cost Approach

Indirect ways of measuring productivity has been to determine and a analyze the unit costs, where unit is the division, plant, department, or product. The unit

18

costs are composed of direct labor, direct material, and fixed and variable overheads. The measure they use is what they call QPR (Quality Productivity Ratio), which is defined as

QPR1 =

QPR2=

QPR3 =

For Example, Suppose, a company manufactures 100 items in time period 1, and that out of these, 10 are rejected. The processing costs are Rs100 / 1000 items, and the error (reject) correction costs are Rs1000 / 1000 items. Then

QPR1 =

## 2.4. TOTAL PRODUCTIVITY MODEL (TPM)

The total productivity model (TPM) is a basic model from which several versions are derived. It is based on a total productivity measure and a set of five partial productivity measures. The model can applied in any manufacturing company or any service organization.

19

Total productivity =

Where,

Total tangible output = value of finished units produced + value of partial units produced + Dividends from securities + Interest from bonds + Other income and

Total tangible input = value of (human + material + capital) + Energy + other expense) inputs used Outputs (tangible)

Other income

## Human For sale Workers

Capital

Energy

For Raw For sale For Oil internal internal materials Managers Gas use use Purchase Professional Coal Figure.2.1 output element considered in the total productivity d parts Fixed Working s Water Bureaucrats Land Inventory Electricit Clerical staff Plant y etc Cash (buildings Accounts and receivable structures) Notes Machinery receivable Tools and equipment Others (amortized R & D, etc.) 20

Other Expense Travel Taxes, (local, city, state, federal) Professionals fees Marketing Information processing Office supplies R&D General administratio n expense,

2.4.1.

=

TP1

## PPij {j } H M materials and C fixed and E

= partial productivity of product i with respect to input factor = { H, M, C, E, X} = = human input (includes all employees) material and purchased parts input (includes raw purchased parts used in manufacturing and assembly) = capital input (includes the uniform annual cost of both working capital) = energy input (includes oil, gas, coal, electricity, etc.)

21

## X = information expense, etc.) i N Oi =

other expense input (includes taxes, professional fees, processing expense, office supplies expense, travel 1, 2, . N

= total number of products manufactured in the period under consideration (current period) = current-period output of product i in value terms (expressed in constant rupee, or any other monetary unit, of base period, using selling price as the weight) = current-period output of the firm in value terms (expressed in Constant dollars, or any other monetary unit, of base period, using selling price as the weight) = Oi current-period total input for product i in value terms constant dollars, or any other monetary unit, of base

OF

OF

## Ii = (expressed in period) Iij Iij terms = =

IiH + IiM + IiC + IiE + IiX current-period total input of type j for product i in value (expressed in constant rupee, or any other monetary unit,

of base period) IF = total current-period input used by the firm in value terms

## (expressed in constant dollars, or any other monetary unit, of base period)

Ii = Iij

If 0 and t represent subscripts corresponding to base period and current period, respectively,

22

TPFt

TPF0

We define the total productivity index for the firm in period t, (TPIF)t

(TPIF)t =

(TPI)it =

Product i

## Tangible output in period t Oit

productivity = TPit = in period t Figure2.3 total productivity for a product i as a ratio of total tangible output to total tangible input Where,

TPit =

23

TPio =

2.4.2.

## Tangible Output Elements

Finished units produced. These units can be expressed either in physical or in value terms. Thus, for example, we may that the output of a product in a certain period is 1000 tons

Firm

## Tangible output in period t OFt

productivity = TFPit = in period t Figure2.4 total productivity for a firm as a ratio of total tangible output to total tangible input

Base period, any normal period in which the production was not much different from the average. Partial units produced partially completed units should also be considered when counting the total tangible output produced during the period. The work in process inventory form the partial units

24

2.4.3.

## Tangible Input Elements:

Human input: The direct labor has traditionally been consider, we have consider all the human resources employed in producing the output. Material input: The material input consists of raw material and purchased parts.

When one or more products manufactured in the current period were not produced in the base period, the calculation for each raw material corresponding to a product is as follows

Capital: TPM, we consider both the fixed capital and the working capital. The fixed capital comprises land, plant (buildings and structures), machinery, tools and equipment, and amortized research and development costs. The working capital, on the other hand, includes money needed to support inventory, cash, accounts receivable and notes receivable.

25

Energy: The energy input is the cost of energy incurred by using up one or more of the fuel resources, such as oil, gas, coal electricity, and water. If solar energy is consumed, the cost of solar panels is considered under fixed capital items.

## 2.4.4. STEPS IN IMPREMENTING THE TOAL PRODUCTIVITY MODEL

A step-by-step procedure is essential to achieve successful productivitymeasurement efforts in an organization. The following 12 steps are a guide. 1. Sales, profit and cost analysis 2. Familiarization with products, processes, and personnel 3. Allocation of total output and input (when necessary) to a particular operational unit 4. Data collection design 5. Base-period selection 6. Obtaining deflator information 7. Data collection and recording areas for improvement 8. Data synthesis 9. Productivity computations 10.Charting productivity indices Sales records for the products trend for the past 11.Productivity analysis 3 years or more Income statements for the past 3 years or more

2.5.

## PRODUCTIVITY EVALUATION IN COMPANIES AND ORGANIZATIONS

Evaluate total productivity for any given product i(I) between two periods t-1

and t and (2) within a given period t. We compare the actual total productivities TP it1 and TPit in period t-1 and t, respectively. In the second case, we compare the actual total productivity TP it in period t with two types of budgeted total productivities. TP it and TPii. These two evaluations should provide a fairly powerful tool in planning total productivity for each product.1

2.5.1.

## EXPRESSION FOR TOTAL PRODUCTIVITY CHANGE

actual change of total productivity of product I between two successive periods, t-1 and t actual change of tangible output of product I between two successive Periods, t-1 and t actual change of tangible input of product I between two successive Periods, t-1 and t
TPit - TPit-1 Oit - Oit-1 Iit - Iit-1

TPit = Oit It
TPit Oit Iit

= =
= = =

27

TPit

## = = = Oit-1 - Oit Iit-1 - Iit

TPit-1

TPit-1 =

TPit

for t

I; Oit,

0;

TPit-1, Iit-1 0

Case 1. TPit = 0;

that is, the total productivity has remained constant between t-1and t.

periods Case 2. TPit > 0; that is, the total productivity has increased in period t as compared to Period t-1 Case 3 . TPit compared to Period t-1. < 0; that is, the total productivity has decreased in period t as

28

2.5.2.

## THE PRODUCTIVITY EVALUATION TREE (PET)

Actually feasible paths of the more general set of pats in what we call the Productivity Evaluation Tree (PET). This tree shows the theoretically possible changes in output and input that result in changes in total productivity. Figure2.6 The productivity evaluation tree (PET)

2.6.

## PRODUCTIVITY IMPROVEMENT MODEL

Productivity improvement model approaches are: 1. 2. 3. 4. 5. 6. Goodwins model Sutermeisters model Hershauer and Ruchs model Crandall and Wootons strategies Stewarts strategy Aggarwals approach

2.6.1.
improve?

Goodwins Model

The question he attempted to answer was: How can we improve the way we

29

Improvement Management this approach is not directly related to improving the productivity of an organization, it nevertheless provides a fairly good conceptual framework to view productivity improvement.

## Figure2.7 Goodwins model for improvement management

2.6.2.

Sutermeisters Model

Sutermeisters approach to productivity improvement is characterized by identifying and explaining the interrelationships of factors affecting worker productivity. The relation between need satisfaction, morale, employees; job performance and productivity is much too complex for us to assume that satisfaction of individuals needs will automatically lead to better job performance and increased productivity. He argues that even when individuals needs are well met, they are fairly well satisfied with their jobs and their firm, and have a fairly high level of morale, it is possible that they will fully restrict their output by not working at their best, but work against the firms goal of increased productivity.

30

2.6.3.
productivity.

## Hershauer and Ruchs Model

This model is based on the existing literature and on information

Hershauer and Ruch present what they call a servo system model of worker gathered during the analysis of several productivity conscious organizations. In their model, Hershauer and Ruch consider the individual worker performance a the focal point of the model, where in organizational and individual factors impact this performance either directly or indirectly. They contend that any factor in their model can be traced as an input through the model to worker performance, and many factors can be traced to performance as an output. They consider their model as a servo system because of this feedback effect and the

31

time-delay characteristics. In other words, the output generated as a result of an action taken by a person or group eventually has an effect on this person or group.

2.6.4.

## Crandall and Wootons Strategies

Crandall and Wooton present a model that integrates the role of productivity improvement with the growth of the organization and the role of the executive as a productivity decision maker. They suggest a shift in concern from traditional strategies of efficiencyoriented productivity improvement to strategies focusing on the growth and development of organizations. Their contention is that productivity improvement strategies in an organization must be dependent upon the organizational growth stage. They identify four possible stages of organizational growth.

32

The entrepreneurial the initial development of an organization and involves the exploration of its environment to introduce new products or services. The growth in this stage is external in nature. The bureaucratic stage the organization and codification of administrative and work processes. It is an internal growth to bureaucratize and organize the results of the entrepreneurial stage. Diversification and systemization is basically a segmentation of the enterprise into multiple product line, services, and activities, as well as the establishment of the complex interrelationships necessary to support a diversified organization. This stage involves both internal and external growth. Mega organizational growth represents exceptionally complex environments turbulent change conditions involves both internal and external growth.

2.6.5.

Stewarts Strategy

Stewart proposes a productivity improvement strategy for organizations based on a systems perspective, which requires that one view an organization a complex network of interdependent subunits, all aimed at producing a blend of activities that enhances the overall performance of the organization in the long run. He argues that all opportunities for productivity improvement must compete with each other for common resources, acknowledging the concept of diminishing marginal return, that is, an one given improvement action is pursued, the marginal improvement due to the incremental use of a given technique would likely decrease.

33

Figure 2.10 productivity improvement strategies 1. Using the Nominal Group Technique (NGT), a structured group process, identify the opportunities for productivity improvement. A task force of approximately 12 members of diverse points of view from within the organization is formed for this purpose, and with the help of a trained facilitator, meeting for about two hours, identifies the opportunities for productivity improvement in the form of a prioritized listing. (The NGT involves the silent generation of ideas for productivity improvement, round robin presentation, clarification, voting and ranking, and final decision.

34

2. Compile and distribute the results of step 1 to all participants. 3. Conduct an implementation work session. This involves the task force, under the supervision of the facilitator, generating essential implementation information about the top 10 productivity improvement opportunities identified in step 1. A work sheet is used for this purpose. 4. Compile the information from step 3 and communicate the summaries to top management. 5. Have the top management make a decision as to which productivity improvement opportunities will be explored further. This set of opportunities selected is denoted as the action set. (O 1, O2,,Ox) 6. For each productivity improvement ides in the action set, let the top management form a micro group consisting of from two to five people. Provide the micro group with the results of the implementation work session so that each of the groups can get some idea of what first steps seem appropriate and what obstacles are faced in implementing the idea. 7. In each micro group, develop a problem-solving strategy with the assistance of a process consultant. benefit analysis. 8. Have each of the micro groups produce a recommendation to the top management as to whether the particular ideas should be pursued further or not. 9. Have the top management make the final decision as to which of the recommendations from each of the micro groups should implemented and which should not continued. the potential disruption within the organization. 10.Assign the responsibility for implementing those productivity improvement opportunities that have been approved in step 9. designated {O1, Oj} in the figure. 11.Implement the set {O1, Oj} 12.Follow up or monitor progress. These opportunities are be fully The decision criteria here The strategy might be as simple as obtaining information from a vendor or a complicated as conducting a detailed cost-

include the availability of man power, the extent of capital expenditures, and

35

2.6.6.

Aggarwals Approach
In a

## 1. Identify and priotize the objectives of the company or organization.

meeting of the department, managers must agree on the three to five most important goals to be achieved through productivity improvement efforts. These goals must be prioritized, and the meeting should focus on the problems and conflicts that might be expected. 2. Delineate criteria for outputs within organizational limitations. In this step, the management must quantify each of the goals and study all the limitations impinging on the goals. technology, or markets. 3. Prepare action plans. After working out the details of action plans, Capacity bottlenecks, wasteful responsibilities must be assigned to individuals on a tentative basis. 4. Eliminate known barriers to productivity. repetitive work elements, wasteful repetitive cost expenditure, and such other aspects must be considered by the managers. 5. Develop productivity measuring method and calculate the base-period productivity. Based on the goal priorities established in step 1, choose a productivity measure or measures for that set of goals. Calculate the baseperiod productivity for these measures. 6. Execute action plans and start ongoing measurement and reporting. Focus attention on priority action items that yield quick returns. Concentrate on short, visible, urgent, and easily achievable activities with the effort level being in proportion to the anticipated returns. In other words, work with the Pareto principle distinguish vital few from trivial many. periodic measurement and reporting must be started. 7. Motivate workers and supervisors to achieve higher productivity. Hundreds of companies located in a host of countries around the world report that workers participation in more than 80 percent of the cases has helped to increase the productivity of their respective companies or department. Advance planning, special retraining or education, and recognition are important to improve productivity. Side-by-side, The limitations may relate to capital, personnel,

36

8. Maintain the momentum of productivity efforts. The company should start new productivity projects one after the other in order to keep the momentum. Each project reinforces the other and regenerates motivation. 9. Keep auditing the organizational climate. Without the continued interest and support of operating managers and staff specialists, productivity efforts will have little success. Attempting to accomplish several major productivity projects simultaneously, or starting to ignore the perpetual need for training the workers and the supervisors, may spoil the organizational climate for productivity efforts.

## 2.7. TECHNOLOGIES BASED PRODUCTIVITY IMPROVEMENT TECHNIQUES

The productivity improvement techniques heavily dependent upon new technologies are numerous. 1. Computer-aided design (CAD) 2. Computer aided manufacturing (CAM) 3. Computer-integrated manufacturing (CIM) 4. Robotics 5. Laser technology 6. Energy technology 7. Group technology 8. Computer graphics 9. Maintenance management 10.Rebuilding old machinery

2.7.1.

## COMPUTER - AIDED DESIGN (CAD)

Computer-aided design (CAD) refers to the design of products, processes, or systems with the help of a computer. It was found to be particularly useful in dealing with complex geometry and three-dimensional internal parts. The aircraft industry was one of the first to apply CAD as a productivity improvement tool. Examples are:

37

Design of automobile chassis, engine parts, and suspension parts Design of circuit configuration in printed circuit boards for electronic products Design of facilities to minimize the unnecessary movements of materials, people, and products Design of the human form three-dimensionally, and the use of it to evaluate the physical interaction between man and workplace or task (for example, in aircraft cockpits, trucj cabs passenger vehicles, cranes, forklifts) CAD replaces the manual design on drafting boards with interactive design at the CRT (cathode-ray tube) terminal of a computer, where a special mechanism is used to change the design on the terminal. This special mechanism is usually a pen.

2.7.2.

## COMPUTER AIDED MANUFACTURING (CAM)

Computer-aided manufacturing (CAM) involves the use of a computer to design and control the manufacturing process. Some typical areas covered by CAM include:

software used.

Assembly-line balancing Machine sequencing and loading Parts scheduling Inventory control Capacity planning Operator scheduling Automated inspection

The effectiveness of CAM will depend upon the efficiency and flexibility of the IITRI (Illinois Institute of Technology Research Institute, 35 West Federal Street, Chicago, IL 60616 has been offering CALB (Computer-aided line balancing), GALS (generalized assembly-line simulator), CAMEL (Computer-aided machine loading), CBS(computer-aided batch scheduling), MS (manufacturing simulator)

38

2.7.3.

## COMPUTER INTEGRATED MANUFACTURING (CIM)

Computer-integrated manufacturing (CIM) is a fully integrated CAD/CAM system that provides computer assistance from marketing to product shipment. It encompasses several functions, including order entry, bill of material processing, inventory control, and materials requirements planning; design automation, including drafting, design and simulation, manufacturing planning, including process planning, routing and rating, tool design, and parts programming, and shop floor control, such as numerical control, assembly automation, testing and process automation.

2.7.4.

ROBOTICS

An industrial robot is a reprogrammable multifunctional manipulator designed to move material, parts, tools, or specialized devices through variable programmed motions to accomplish a variety of tasks. An industrial robot consists of three basic components: manipulator, power supply, and control system. The manipulator which has several axes of motion incorporated in it, performs the actual work of the robot in reaching, grasping, moving, placing, and or doing a task of an operation on a part. The power supply provides and controls the power for the actuators of the manipulators (for example, hydraulic or pneumatic cylinders, electric or hydraulic motor, etc). the motions of the various axes of the robot. linkage with external devices and machines. the control system is the brains of the robot. It provides the sequencing and coordination of It also provides a communication

2.7.5.

LASER TECHNOLOGY

Laser technology involves the use of a laser (Light Amplification by Stimulated Emission of Radiation) beam to generate heat energy that may be used in diverse ways. One of the firs applications of laser technology was in cutting metals, or drilling, but soon the application areas extended to welding, hardening, alloying, and cladding. Laser-assisted inspection is now a reality. At present, research is being done on lasers in machining. Laser technology is now being applied in conjunction with fiber optics for communications purposes. There is a tremendous savings potential with lasers,

39

This technology

## makes flexible manufacturing systems even more of a present reality.

2.7.6.

ENERGY TECHNOLOGY

Energy technology, as we use the term here, implies the use of new sources of energy. For example, the use of chemise energy , solar energy ,geothermal energy, and hydrogen energy would fall in this category. Economies of production and distribution of the energy effect on the environmental, ecological, and social aspects of the system in which the new energy technology will be used.

2.7.7.

GROUP TECHNOLOGY

Group technology involves organizing and planning production parts into batches that have some similarity in geometry and processing sequence. Small batch production has the inherent disadvantage of lost production time due to too many machine setups and the consequent loss of time due to setting up. yet 75 percent of all machined parts are produced in small batches. Therefore, it becomes increasingly important to find ways of minimizing the machine setup times in small batch manufacture,

2.7.8.

MAINTENANCE MANAGEMENT

Maintenance management is a formalized approach to maintaining the currently available machinery and equipment to help them function according to the maintainability and reliability characteristics. Yet it can be a very effective means of cutting down maintenance costs and increasing human productivity, fixed capital productivity.

2.7.9.

## REBUILDING OLD MACHINERY

Many large corporations have their own machine building department where the remodeling is under taken very methodically. This can certainly pay off. Of course the remodeling effort can be made easier if the shop floor employees are encouraged to suggest the modification themselves. This effective technique can have a positive effective the long run on productivity.

40

2.8.
2.8.1.

## MATERIALS - BASED PRODCUTIVITY IMPROVEMENT TECHNIQUES

INVENTORY CONTROL

Inventory control is concerned with two basic questions: when to order and how much to order. An effective inventory control system will accomplish the following: Six areas: 1. Development of demand forecasts, the treatment of forecast errors. 2. Selection of inventory models. 3. Measurement of inventory costs (carrying shortage, order) 4. Methods to record and account for items. 5. Methods for receipt, handling , storage, and issue items. 6. Information procedures to reports exceptions.

2.8.2.
1.2 3.4 5

## TYPES OF INVENTORY CONTROL SYSTEMS:

Fixed order size systems (quantity- based). Fixed order quantity, variable review period. Fixed order interval systems (timebased) Fixed review period, variable order quantity) Derived order quantity system (production- based)
Order quantity is variable.

Perpetual inventory system. Under this system, whenever the stock drops to the reorder level or below, an order is triggered for a quantity to the equal to the economic order quantity (EOQ). Periodic inventory system. The inventory position is checked only at specified time interval

41

Figure 2.11 Periodic inventory systems. Optional replenishment inventory system . In this system, stock levels are reviewed at regular intervals. But orders are not placed until the inventory position has fallen to a predetermined recorder point. Materials requirements planning (MRP) inventory system. This system functions by working back ward from the scheduled completion dates of end products or major assemblies to determine the dates and quantities of the various component parts and materials that are tope ordered. The system works well when (a) a specific demand for an end item is known in advance, and (b) the demand for an item is tied in a predictable fashion to the demand for other items.

42

2.8.3.

## THE ABC ANALYSIS:

The ABC Analysis helps classify the items into three categories A,B, and C, where An equals high value items, B equals medium value items, and C equals low value items. This way, tight inventory control can be exercised on the A items, moderate control on the B items, and lose control on the C items. Thus, the ABC analysis separates the vital few from the trivial many.

Figure 2.13 Typical ABC inventory analysis A= high value items B= medium value items C= low value items

2.8.4.

## MATERIAL REQUIREMENT PLANNING (MRP):

MRP is a management planning and control techniques. Its initial processing function is to work backward from planned quantities and completion dates for end items on a master production schedule to determine what and when individual parts showed be ordered. MRP is sometimes referred to as time phased requirements planning because time phasing involves working the material requirements backward based on the lead time for each item. The MRP works with the following three data inputs: 1. The demand for end items is scheduled over a number of time periods and recorded on a master production schedule (MPS). The MPS tells us how many

43

of and when each items is wanted. It is developed from the end item forecasts and customer order. It must project a realistic plan of production so as to accommodate the available capacity. 2. The bill of materials (BOM) records, also known as the product structure records.: contain the bills of materials for the end items in levels representing the way they are actually manufactured: from raw materials to subassemblies to assemblies to end items. The BOM is shored conveniently in a data file a computer. 3. The inventory status records are the third source of data input for the MRP. They contain on-hand balances of items inventory. Open orders, lot sizes, lead times, and safety stocks.

2.8.5.

MATERIALS MANAGEMENT:

Materials management is composed all material related functions, such as purchasing, transportation, logistics, production control inventory, and sometimes even quantity. The materials management process in a company depends upon the type of product, the quantity and reliability levels demanded, the percentage of the product manufactured within the company and the percentage of the product produced from suppliers, the storage capabilities for purchased and manufactured parts, subassemblies and finished products, the materials handling systems available, the manufacturing and distribution process, the level of knowledge of the users of the materials management system and so on.

2.8.6.

QUANTITY CONTROL:
controls is an effectives system for the growing quantity

Quantity

development, quantity maintenance, and quantity improvement efforts of the various groups in an organization so as enable production and service at the most economical levels which allow for full customer satisfaction. Three aspects of quantity are important: 1. Quantity of design.

44

2. Quantity of conformance. 3. Quantity of performance. The quantity of design for a product or service established by the specification of quantity level, grade, or standard. It is dependent upon the intended use of the product or service. All products or services are not designed at a high quality level because of the cost value trade off involved. Quantity conformance refers to the degree to which the specified quality of design is satisfied in producing a product or in delivering a service. Quality of performance, or reliability, is controlled by using tests on a sample of production. Defense equipment, such as missiles, rockets, and space vehicles are the most commonly known items that are subjected to intensive life tests. Automotive and aircraft engines are further. Examples: in fact, whether it is desired that performance be consistently high with the greatest possible probability of successful functioning, the quality of performance becomes important. To access the quality of conformance, measurement of quality is necessary. This is accomplished by inspection. Inspection is of two basic forms; 100 percent inspection and sampling inspection. When every item is inspected, it constitutes 100 percent inspection. Sampling inspection involves the checking of sample(s) from lots or batches. A formal m\name for sampling inspection is acceptance sampling. Acceptance sampling is done by attributes by variables. Acceptance sampling by attributes involves a decision such as go or no go, good or bad, yes or no, defective or not defective. 1. Single sampling plan, where in a sample of size n is taken at random from a lot. The number of defectives x in this sample is compared with the number of defectives c. If x c, the lot is accepted; if x >c, the lot is rejected. 2. Double sampling plan, where in a sample of size n is taken from a given lot. If it contains c1 or less defective, it is accepted; if it contains more than c 2 defectives, it is rejected; if the defectives are greater than c 1, but not more

45

than c2, a second sample of size n2 is taken. If in the combined samples the defectives are c3 or less, the lot is accepted. If not, the lot is rejected. The double sampling plan may reduce the total amount of inspection, when compared to single sampling plan. 3. Multiple sampling plans, which are an extension of the double sampling, where in many samples may be taken. 4. Sequential sampling plans require the observation of items from a lot one at a time. The sequence of samples is such that the number of samples is determined entirely by the outcome of the sampling process. Several sequential plans are available to the practitioner. 5. Continuous sampling plans differ from the above in that they are applied to a stream of items rather than to lots.

2.8.7.

## MATERIAL HANDLING SYSTEMS IMPROVEMENT:

The three Ms of material handling are: material, move, and method. Material handling involves the movement of material by some method. Material handling and plant layout are closely interrelated. Therefore, whenever productivity improvement is sought by improving the present material handling system, care must be taken to evaluate the expected changes in the facilitys layout configuration that might in turn affect one or more of the five basic input factors in the total productivity expression. The effect of material handling systems improvement on total productivity may not always be positive, particularly when the capital investments in sophisticated material handling-systems are proportionately larger than the human, material, working capital, energy, and other expense input factors.

2.8.8.

## MATERIAL REUSE AND RECYCLING:

Depending upon the product or service, material input typically ranges from 5 to 60 percent. It becomes more challenging to reduce the material input when there is already a good quality control system for incoming parts, raw materials, and subassemblies. Most of the direct materials cost may be squeezed out through

46

the value engineering technique. Opportunity To reduce the material input: the reuse or recycling of raw materials. One of the most common examples of recycling is the melting of aluminum cans, while one of the common cases of material reuse is the mixing of aluminum metal trimmings from die casting with virgin metal to reduce the direct cost of the material.

2.9.
2.9.1.

## EMPLOYEE - BASED PRODUCTIVITY IMPROVEMENT TECHNIQUES

FINANCIAL INCENTIVES (INDIVIDUAL)

Several individual financial incentive plans have been used in companies, businesses, and other organisms to increase labor productivity.

2.9.2.

## PLACE WORK PLAN (PWP)

This plan is characterized by two main features. Pay is directly proportional to the number of units produced. Minimum daily rate is guaranteed. The earnings generated in the PWP is given by E Where, Ni = number of pieces of type i produced. piecework rate for type i item
pw

(Ni) (PWRi)

## PWRi = Let, SPR, WRi Then, = =

standard production rate for type i item (pieces per hour) wage rate for type i item

PWRi =

47

2.9.3.

## STANDARD HOUR PLAN (SHP)

The standard hour plan overcomes the problems with the piecework plan by using standard hours per piece instead of rupees per piece. The earning in this plan are given by ESH Where, SHE
I

(SHEi) X (WRi)

SHEi =

2.9.4.

## MEASURED DAYWORK (MDW) PLAN:

The MDW plan was introduced in the united stated during the early 1930s when organized labor tried getting away from time studies and piecework rates. They are similar to the day work (DW) plan, Let t = any time period and BRt = base rate in period t. then, in the MDW plan. BR
t+1

= (BRt) (

std i

std I

2.9.5.

## FINANCIAL INCENTIVES (GROUPS)

Scanlon plan
This plan works as follow: Set up a target ratio (or norm),

48

TR

Where, SVOP = = stock 1. Each month, compute the sales value of production (SVOP) at the selling price. 2. Compute allowable labor cost: (TR) (SVOP). 3. Compile actual labor cost. 4. Compute savings in labor cost: Allowable labor cost actual labor cost. 5. Share the labor cost savings in an agreed proportion. (A common proportion) 6. At the end of a year, if the reserve balance is positive, pay it employees; if not, wipe out the deficiency by using the reserve fund. for the sales value of production value of receipts for goods sold + value of goods in

Rucker plan:
The plan establishes a relationship between the total earnings of hourly rated employees and the net production values created in the plant. That is, employee earnings are related to the value added output. 1. Compute the standard (target) percentage of labor cost from historical records. The target ratio is given by

2.

49

## 3. Pay the bonus on the savings.

Kaiser plan:
The Kaiser plan was presented in 1962. It provides employees with a 32.5 percent share of the savings from increased productivity over base- year costs of labor plus material. This share is guaranteed even if the company does not make a profit. It guarantees against loss of job and income when improvements in methods or technology are introduced.

tonnage plan:
The plan bases its standard on the tons of material produced per man hour. The norm is a base period that is established by historical data, and the entire workforces in the percent increase in succeeding periods.

## Profit sharing plan:

Profit sharing encourages everyone in the company to work toward increasing profit. Since, profits can be improved even by simply increasing the selling prices.(causing inflation), it is not improvement. If profits are generated manufacturing costs. a direct approach to productivity due to overall reductions in total

The distribution of profits takes any one of the three forms: 1. Cash plan, wherein profits are paid directly to workers on a periodic basis. 2. Deferred plan, under which the profits are invested for the employee and paid to him or her upon retirement or separation. 3. Combined plan, under which both forms (1) and (2) are used.

50

2.9.6.

EMPLOYEE PROMOTION:

Employee promotion is both a financial and form of motivation to enhance human productivity. It involves the upgrading of an employees status, and is a natural way of recognizing an employees skills, knowledge, proficiency and effort at jib / her present job.

2.9.7.

JOB ENRICHMENT

Job enrichment is a nonfinancial motivation technique that provides Variety in assigned tasks Employee autonomy and discretion in performing tasks Feedback on performance the satisfaction of completing a whole or identifiable portion of work that can be associated with an end product or service.

2.9.8.

JOB ENLARGEMENT

Job enlargement involves the enlargement of responsibilities associated with a job. The proponents of job enlargement argue that jobs, when made very specialized and specific, become so routine that they get to be boring and monotonous, causing high absenteeism, high turnover, and low morale, with consequent low productivity.

2.9.9.

JOB ROTATION

Job rotation involves the rotation of workers into different jobs for short periods of time. This method can provide, all-rounds in a companys operations because the workers are given an opportunity to learn and perform tasks and operations that they were not originally hired for. Job rotation is not exactly the same as retraining. The need for the latter generally arises out of the necessity to displace an employee from his or her existing job, whereas job rotation is a conscious effort on an on-going basis to provide the opportunity for workers to exercise their freedom in staying on a given task for a certain length of time. Participation is an approach to overcoming resistance to change through employee involvement in planning and implementing. There are several participation approaches to improving partial or total productivity.

51

Quality-control 9QC) circles Productivity quality (PQ) teams Productivity action teams Productivity circles Productivity maintenance groups Employee participation groups(EPGs)

2.9.10.

SKILL ENHANCEMENT
Also, this technique may yield productivity

There is a certain amount of training cost involved whenever skill enhancement has to occur. improvement more on a long-term than a short-term basis.

2.9.11.

MANAGEMENT BY OBJECTIVES

Management by objectives (MBO) is a managerial motivation technique that has received worldwide attention. The MBO process aids motivation of all participants by having superior and subordinate managers jointly identify common goals, carefully define them, and together monitor progress toward achieving results. In setting up the goals, care must be taken not to : Set simplistic goals Set goals without adequate resources Set harsh goals that cause resentment

2.9.12. COMMUNICATION
Communication refers to the adequate and timely flow of information with a feedback mechanism. The purpose of effective communication is to achieve mutual understanding between the employees and management, and to help establish the social conditions that will motivate the employee to improve productivity.

## 2.9.13. WORKING CONDITON IMPROVEMENT

The factors that must be audited to assess the present working conditions at each workplace area are 1. Temperature, light, and humidity 2. Noise 3. Colors of the surroundings

52

4. Extent of handling hazardous materials, parts, or products 5. Extent of manual handling of heavy items. The level of safety for operators depends on the extent to which these five factors are in the satisfactory zone.

2.9.14.

TRAINING
On-the-job training Apprenticeship training Internship training Outside courses Visitation training

## Some of the common forms of training are

Training must be an on-going feature if total productivity is to be improved on a consistent basis. Training may actually decrease the total productivity initially (because the other expense input will increase when training expenses are incurred) without offering an immediate increase in the output. However, the long-term effect of training on human productivity and on total productivity should be favorable.

2.9.15.

QUALITY CIRCLES

The quality-control (QC) circles, or quality circles, are groups of employees who voluntarily cooperate to solve problems related to production, quality, work environment, maintenance, scheduling, or anything that affects these areas.

2.9.16.

TIME MANAGEMENT

Time management is a powerful technique, particularly for white-collar, supervisory, and management personnel. Time management involves the minimization of the wasteful elements of a persons administrative work. 1. Interruptions by drop-in visitors (without appointment) 2. Attending lengthy and unnecessary meetings that accomplish very little 3. Inability to say no for some tasks.

53

4. Inability to delegate work 5. Lack of responsibility and authority to do certain jobs To minimize these time-wasters, time management applies simple, common-sensical, but very effective programming rules to every item of work. Time management always improves human productivity.

## 2.10. PRODUCT - BASED PRODUCTIVITY IMPROVEMENT TECHNIQUES

2.10.1. VALUE ANALYSIS / VALUE ENGINEERING
Value analysis (VA) is concerned with the modification of the existing design of a product or service with the objective of reducing the overall cost of manufacturing or delivering of the service. On the other hand, value engineering (VE) is concerned with the development of a new design for a product or service with particular emphasis on the ease of use and cost of manufacturing or delivering value analysis and value engineering, the primary objective is to design for functional value. Improvements in the design of the products or service without sacrificing, the functional value in terms of quality, reliability, and functional capabilities are most likely to decrease total input for the same amount of output. Value engineering, the role of the design engineer is greater. Depending upon the type of product for which value engineering is being applied, there may be as few as one or two individuals to a large group on a VE team from design engineering, research and development, marketing, and purchasing. Value analysis and value engineering involve two basic features: 1. Component elimination 2. Material substitution

2.10.2.

PRODUCT DIVERSIFICATION

Product diversification involves the addition of new product types of models to the existing ones. The reasons for product diversification may: 1. The competition introduced a new product recently 2. The existing models of products are not sustaining the market share

54

3. The consumers perception of quality for the existing products has been poor in recent months and years. 4. Raw materials, component parts, and energy supplies have unexpectedly become scarce. 5. The company has developed product that is far ahead of the competition.

2.10.3.

PRODUCT SIMPLIFICATION

Product simplification: the elimination of extraneous or marginal lines, types, and models of products, it includes a reduction in the range of materials and component parts used, and a reduction in the complexity of methods and processes of manufacture.

2.10.4.

PRODUCT STANDARDIZATION
is a systematic effort on the part of design

Product standardization

engineers, industrial engineers, and marketing managers to create a product mix that minimize manufacturing, distribution, selling, and maintenance costs.

2.10.5.

## RESEARCH AND DEVELOPMENT

Research and development (R&D) takes two forms: basic and applied, basic research tends to focus on the development of fundamental knowledge, while applied research attempts to explore the potential applications for the fundamental knowledge so developed. in basic research. Although business organizations mostly emphasize applied research, there are many organizations that invest to a considerable extent

55

## UNIT-III ORGANIZATIONAL TRANSFORMATION

Principles of organizational transformation and reengineering Fundamentals of process reengineering Preparing the workforce for transformation and reengineering Methodology Guidelines
56

4.1.

## PRINCIPLES ORGANIZATIONAL TRANSFORMATION AND REENGINEERING

Organizational transformation and process reengineering require eliminating old and

archaic processes, policies, procedures, technologies, principles and structures that affect organizational operations. The organizational transformation and process reengineering effort can be seen as the continuous rethinking, assessment, evaluation, redesign and improvement of structures, work process elements, procedures, technologies, management systems, rightsizing and core competencies to achieve competitive performance.
TheManag em entS ystem
P olicies L eaders hip Procedures Mis sion V alues S ys tem sand s ervice

Thesocial s ys tem
C ulture S tructure T eam s V aluesand creativity P artners hip rewards

T ransform ation & R eeng ineering P lans, Approaches , D eploym e nt Mechanism s, E v aluation P rocedure And R esult

## TheT echnical S ystem W orkplansandproducts T oolsandtechniques W orkprocesses Jobdescription D ecisionm aking

TheBehavioral S ystem
H abits A ttitudes P erception beha viors

## Figure 3.1 Edosomwan organizational and process transformations

57

As shown in Figure 3.1, the transformation process must focus on the management system, the social system, the technical system, the behavioral system and critical competitive factors. The management system pertains to the way that policy, Procedures, practices, protocols and directives are established, enforced and maintained. The leadership system of the organization sets the tone, vision and indicators of what should be done, how it should be done and what should be accomplished. The management system carries into effect strategies, processes and project management, and it encompasses the vision, mission and values of the organization. The social system has a significant impact on motivation and the ability to implement new ideas; it addresses organizational culture, structure, rewards, teamwork, values and the creativity of individuals and groups. The social system is influenced by the values of the founders, leaders, families, peers and supervisors, as well as group behaviors. The technical, system includes the tools and mechanisms necessary to achieve excellent products and services. It pertains to measures which serve as the basis for improvement and planning. The behavioral system relates to the fundamentals of the human side of quality, as characterized by the habits, attitudes, work patterns and behaviors of individuals and groups. Through modification of the elements in the behavioral system, it is possible to implement change that can lead to a significant breakthrough in positively influences the speed of performance. The behavioral organizational and process elements are often difficult to change, and when a change is made, it transformation.

4.2.
4.2.1.

## THE 6 R'S OF ORGANIZATIONAL TRANSFORMATION AND REENGINEERING

REALIZATION
This phase of transformation and process reengineering involves recognition of the needs

and challenges that face the organization and individuals. This phase requires a detailed understanding of the competitive environment, products and services, socio-cultural factors,
58

economic and political factors, values, ethics and quality of working life issues. The realization phase should serve as a wakeup call to the organization and its individuals, bringing to their attention the fact that if an organization is to continue to operate in a competitive, global economy, it must constantly seek a means for incremental and radical improvement. This phase also should involve the use of comparative data and information to alert decision makers and the organizational workforce that there is a sense of urgency for incremental and radical performance improvement. The foundation premise which must be encouraged at all levels is that organizational transformation starts with individual initiative and leadership. This leadership for positive change is essential, especially at the highest level of the organization but also at every other level and in every function.

## Figure 3.1 Edosomwan 6 Rs Organisational Transformation and Reengineering

4.2.2.

REQUIREMENTS

Before beginning the process reengineering effort, an organization needs to define its mission, vision, values and the key requirements to satisfy and exceed customer expectations. In defining the total requirements, the voice of the customer must be heard. The requirements of the internal customer (voice of the business), suppliers and process owners as well as external customers must be captured. Following this, key product and service performance indicators and specifications are established to support the requirements. The key requirements are then used to define the ideal primary, secondary and auxiliary work processes.

59

4.2.3.

RETHINK

The rethinking phase of process reengineering involves reexamining all current and existing conditions of the organization. Current processes are evaluated against objectives and expected outcomes. The sources of process weaknesses and variations are identified. A careful reevaluation of outdated procedures, policies, structures, technologies, methods and work habits is performed.

4.2.4.

REDESIGN

The process reengineering phase of redesign involves a careful understanding of the content, make-up, behavior, pattern and elements of work- processes. To understand and proceed with process redesign, the organizational process must be seen as a set of logical, related tasks performed to achieve a desired outcome. A set of processes forms an organizational system. The processes are used to transform inputs into useful outputs. A careful review of the entire system of an organization's procedures, products and services should be done. Each work element, task and job must be analyzed to determine how best to redesign the key processes in order to achieve desired outcomes. The process redesign efforts must obey three important rules. Rule 1: All the requirements of the organization and customers must be met. Rule 2: The redesign process must eliminate all sources of waste and improve the competitive position. Rule 3: The redesign process must fulfill job satisfaction requirements. Process redesign can be radical, which means that all current processes are eliminated and replaced by new ones, or incremental, which means that some of the existing process elements are adapted as part of the new, redesigned process

60

4.2.5.

RETOOL

The retool phase involves the evaluation and adaptation of more competitive systems, such as technologies, machinery and other critical tools required to improve the production or service work processes, in order for the retooling efforts to be adequate. Current technologies are mapped according to prequalified process characteristics. Items such as mean time to failure, mean time to repair, mean time to dismantle and output per technology or machine are identified. The new set of tools is based on ideal, redesigned processes that were derived after reviewing the weaknesses of current processes and tools.

4.2.6.

REEVALUATE

The final phase of process reengineering requires the reevaluation of the entire process to ensure that once the redesign and retool efforts are completed, the new process has met its objectives. The best way to reevaluate process performance is to collect data on critical performance success factors, such as quality, productivity, customer satisfaction, market share, variation levels, profitability indexes, job satisfaction indexes and cost reduction savings. Those who perform the work have responsibility for monitoring the performance of the process because they are best qualified to control the sources of variation in the process .

## 4.3. FUNDAMENTALS OF PROCESS REENGINEERING

A coordinated, continuous improvement approach is required to rethink, redesign, retool and reinvent new processes that will perform better than existing ones. The fundamental definitions and basic elements which must be understood include the following.

4.3.1.

## THE ORGANIZATION PROCESS ELEMENTS

These elements are comprised of activities and tasks. A process element may be referred to as a sub process when it is subordinate to,

61

but part of, a larger process. A sub process can also be defined as a group of activities within a process which comprise a definable component.

4.3.2.

## THE ORGANIZATION PROCESS

This can be defined as the organization of inputs, such as people, equipment, energy, procedures and materials, into work activities needed to produce a specified end result or output. It can also be viewed as a sequence of repeatable activities characterized as having measurable inputs, value-added activities and measurable outputs. It is a set of interrelated work activities characterized by a set of specific inputs and value-added tasks to produce a set of specific outputs.

4.3.3.

## THE ORGANIZATION PROCESS OWNER

The process owner coordinates the various functions and work activities at all levels of a process. The process owner has the authority or ability to make changes in the process as required and manage the process end to end, so -is to ensure optimal overall performance. The process owner coordinates the inputs and outputs related to a given process.

## 4.3.1. THE ORGANIZATION PROCESS ASSESSMENT AND ANALYSIS

This involves an objective assessment of how well a methodology identifies the strengths and weaknesses of the organization. The analysis involves a systematic examination of a process to establish a comprehensive understanding of the process itself. The analysis should include consideration of process simplification, eliminating unneeded or redundant elements and improving all elements involved in the process.

62

## 4.3.4. THE ORGANIZATION PROCESS OUTPUT MEASURES

These are measures that pertain to how well a particular process is meeting or exceeding the requirements of self-unit internal or external customers. The organization process output measures could include, but are not limited to, quality of products and services, productivity, efficiency, effectiveness, job satisfaction, morale, revenue growth, profitability, cost of quality, cost reduction indexes, reliability of systems and technology, market share, improvement indexes and process variation indicators.

4.3.5.

## PROCESS MANAGEMENT, CONTROL AND IMPROVEMENT

This can be defined as the disciplined management approach of applying prevention methodologies to the implementation, improvement and change of work processes in order to achieve performance objectives, such as productivity, efficiency, effectiveness and adaptability. A critical element in the success of process management is the concept of crossfunctional process focus improvement, which involves all stockholders in achieving designed performance improvement.

4.4.

## PREPARING THE WORK FORCE FOR TRANSFORMATION AND REENGINEERING

People may resist change for reasons connected to their own

activities. Change sometimes disrupts other plans, projects or even personal and family activities that have nothing to do with the job. The anticipation of those disruptions causes resistance to change. The following steps are recommended to prepare the organization team for transformation and reengineering.

63

## STEP 1: PEOPLE INVOLVEMENT

In beginning the organizational transformation and reengineering effort, it is important to identify the critical voices (such as custom ers, unions, suppliers, process owners, managers and employees) and involve them in the process of diagnosing for change. In diagnosing for change, employees should understand the business thoroughly and find out what is happening, what is likely to happen in the future and how the anticipated changes will affect their own organization. Specific attention should be paid to market-driven changes, customer expectations, technology changes, skill mix changes, product development cycles, regulations, competitors. Cultural changes and service and manufacturing capability, among others
STEP 2: PLANNING AND PREPARATION

Most change effort begins with the identification of a problem or stems from a need presented by a new market requirement. Change efforts involve attempting to reduce discrepancies between the real and the ideal. It should be pointed out those reducing discrepancies between the actual and the ideal means thinking the change through thoroughly and carefully. In this step, the participative management style works very well. Planning and preparation include the following: Description of the change and communication of the anticipated benefits. Obtaining input from those who will be affected by the change, those who will help to implement the change and those who will benefit from the change. Input from customers, employees, peers, superiors and subordinates should be encouraged. Assess the organizational readiness to make the change. This usually requires answering the following questions: o What is the maturity level of the people involved? o Are they willing and able to make the change?

64

o What leadership, decision-making and problem-solving skills are available, and what are the assumptions behind the change? o What are the expected risks and benefits? o Is everyone ready to undertake the change? Prepare the change plan with different options and highlight the preferred plan and timetable. Anticipate the skills and knowledge required to master and implements the change. Focus on the changes that are critical for success. Change the most important things once, if possible, to encourage stability, and change routine and minor operations when appropriate.

## STEP 3: DEVELOP CHANGE AGENTS AND TRANSITION STRUCTURES

Change agents must have the skills and ability to diagnose a given situation and develop acceptable solutions. The essential skills and abilities include, but are not limited to, the following: facilitating, listening, participative designer, team leader, catalyst and courage. The wisdom to know when to push the change versus when to step back and let people accept the change over time is also required. Humility can easily facilitate the implementation of change. Successful change management cannot be achieved without the proper communication channels. Appropriate new communication channels are required to get people involved and to let them know why the change makes sense. When appropriate, create a transition team to oversee the change and develop policies and procedures that make implementation of the change easy.

## STEP 4: CHANGE EXECUTION AND IMPLEMENTATION

Most change fails to yield expected results, not because it is not good but because the ingredients and mechanisms for implementation were not executed properly. Leadership, vision, courage, empathy, humility and

65

wisdom are required to implement transformation and reengineering projects. The work force must be inspired and motivated to change. Everyone within the organization must he helped to understand the environment and how to implement the desired change. Everyone in the organization needs to know how to implement the aspects of the change that affect their own work. In addition, the following must be done to ensure effective implementation: Help the managers and the members of the work force understand how to define the change and how to understand the management, communication and training process involved in managing the change. Develop the managerial tools and skills required to manage the change. These include analytical, behavioral and organizational management skills; willingness to change; commitment to change and the desire to manage the change. Recognize the informal organization and provide a positive climate for those affected to respond and accept the change quickly. An organization can be viewed as a social system consisting of a loose network of small groups of people. People in these groups can form a strong bond of loyalty to each other. These groups should be used to institute the change. If the informal groups and the informal leaders accept the proposed change, the change will occur much more smoothly. If they oppose the change, it may be nearly impossible to implement. Therefore, it is important to identify and get the informal groups involved for in the change execution execution and and implementation. Develop "change agents" change effective implementation. It is very important for the leader of the change to seek the active support of the critical mass of the work force. The critical mass usually "represents a sufficient number of influential people who support the proposed change. When the critical mass

66

support is obtained, the change execution and implementation occur much more smoothly. Assess the readiness of the enterprise to make the change, allowing enough flexibility for people to prepare for the change and deal with the consequences. Plans should be in place to deal with the logical, rational and irrational sides of change. In order to implement a change successfully at any level of the organization, the following steps are suggested: Step 1: it. Step 2: Divide the change into manageable and familiar steps and specify Implementation Step 3: timing. Communicate the change effectively. Assess the magnitude of the proposed change and the vision for

Step 4: Assess the potential response to the change. Identify potential avid supporters, those who are undecided and the resisters. Step 5: Develop and implement strategies to win the support of everyone, including the undecided and resisters. Step 6: Develop and implement actions to assist those affected by the Change and follow up on open issues.

4.5.

## PRINCIPLES AND METHODOLOGY FOR ORGANIZATIONAL TRANSFORMATION AND REENGINEERING

Organizations and people are led by vision and guided by mission

and purpose. The organizational continuous improvement process must be guided by results-oriented principles and methodology.

67

PRINCIPLE 1: LEADERSHIP AND WORK FORCE FOCUS ON CONSTANCY OF PURPOSE AND CONTINUOUS IMPROVEMENT
The organization leaders should create a sense of urgency for continuous- improvement and constancy of purpose. I ncluding goal setting, planning, policy deployment and efficient implementation of improvement projects. Strategic, tactical and operational transformation plans must address both the needs and means to achieve meaningful results. It is important that the voices of the customers, suppliers, process owners, unions, management and work force be heard and incorporated in the transformation plans. The policy deployment process also should be used to set priorities, including a focus on the following task Promote the transformation and reengineering vision, policies, goals, objectives and expected benefits. Ensure that comprehensive plans are in place at all levels to manage transformation projects. Develop a comprehensive guideline for reengineering and restructuring work processes. Provide training to everyone on the skills required to achieve successful transformation.

## PRINCIPLE 2: SIMPLIFY STRUCTURES, PROCESSES, PROCEDURES, POLICIES, SYSTEMS AND PROGRAM

Organizational and process reengineering efforts should focus on reducing layers of management and structures that cause delays. Processes that have too many steps should be redesigned achieve steps and improvement in cycle time. Outdated procedures, policies, systems and programs need to be evaluated, simplified or eliminated when they no longer serve any useful purpose.

68

## PRINCIPLE 3: ELIMINATE AND MINIMIZE WASTE

Every member of the organization should take it as a personal responsibility to eliminate waste. Any activity, task, work elements system or process that does not add value to the final output or outcome desired by an organization or individuals can be defined as waste. Waste results in delays increased costs, increased cycle time, decreased productivity and an increase in rework. Excessive transportation, storage steps and duplicate machines.

## PRINCIPLE 4: DESIGN AND IMPLEMENT PARALLEL PROCESSES

Linear processes produce long cycle times. The linear process requires that everything must wait for the completion of a previous step before the next step can begin. The parallel process reduces cycle time, process bottlenecks and delays that affect customer satisfaction.

## PRINCIPLE 5: FOCUS ON CONSTANT INNOVATIONS AND USE OF TECHNOLOGY TO IMPROVE PROCESSES

Constant innovation of work processes can lead to breakthrough and improvement. Everyone should be encouraged to examine their own job and work habits to find better ways to creatively accomplish the same work Technology should be utilized to increase productivity and improve quality when the benefits far outweigh the costs. However, the social aspects and impact of new technology should be analyzed thoroughly before introduction to the work environment.

## PRINCIPLE 6: CREATE AND IMPLEMENT PERFORMANCEBASED MEASURES TO ASSESS PROCESS OUTCOMES

1f the performance of any system or process is not measured, it cannot be meaningfully improved. Quantitative and qualitative measures that address both objective and subjective elements should be

69

implemented. The measures recommended should include, but are not limited to, the following: Revenue per employee Percent defectively Process control limits Cost of quality Total factor and partial productivities Profitability ratios Customer satisfaction indexes Reliability rates Morale and job satisfaction indexes

## PRINCIPLE 7: IMPLEMENT ERROR AND DEFECT PREVENTION PHILOSOPHY AT ALL LEVELS

Error and defect prevention mechanisms are the primary source of controlling process variation. Everyone should be trained to prevent errors and defects at the source. Processes that have no errors and defects produce error- and defect-free outputs. An error and defect prevention philosophy can best be implemented when the following mechanisms are in place: Appropriate tools and techniques for solving problems Adequate training provided to handle the challenges and process problems Decision-making latitude and constructive empowerment provided to people to handle their own responsibilities effectively Existence of a support structure for implementing new process improvement ideas Several types of errors and defects can occur due to technology, methods, machines, data, process complexity, training, factors, techniques, design flaws, materials, policies, manpower, environmental

70

procedures, decision-making process and lack of experience and attention to detail. Errors and defects can be prevented and cor rected by reviewing process and performance data, evaluating the skill base, examining causes and effects of problems, and implementing variation control mechanisms within the process.

## No process can be fully reengineered without defining the key owners. A

process owner is the person responsible for overseeing the evaluation, assessment and implementation of process improvement ideas. When there is no process ownership, the responsibility for reengineered, new ideas has no home. In order to avoid this, primary, secondary and auxiliary process owners must be defined at all levels. The definition of the process owners should also include key process outcomes, measures, suppliers, process customers, process dependencies, decision-making-gates and problem resolution sources.

PRINCIPLE 9: INVOLVE CUSTOMERS, PROCESS OWNERS, SUPPLIERS AND UNIONS IN REENGINEERING EFFORTS
Understanding and responding to the needs, inputs and expectations of these voices are essential in order to identify potential beneficial areas for reengineering as well as identify sources of implementation obstacles to new ideas. The dialogue between these voices also ensures that no inputs, process variables or outputs are ignored in the process reengineering effort In order to achieve the full involvement process, the reengineering team must take the following actions: Provide a framework for defining and identifying process owners, customers, suppliers and unions Provide policy that requires each individual and organizational work unit to know its suppliers, process owners, customers and unions

71

Define a measurement system that evaluates total performance and the relationship between process owners, customers, suppliers and unions.

## PRINCIPLE 10: PROMOTE RADICAL AND INCREMENTAL IMPROVEMENTS

The radical redesign of a process involves the complete elimination of all process steps and elements and the substitution of a complete new process package. This approach is only cost effective and beneficial if the benefits of the radical new process clearly outweigh the costs of maintaining and improving the old process. Incremental process reengineering calls for a careful approach to promote improvements; a systematic approach is needed for the identification of small improvement opportunities in existing structures, processes; tools and systems in order to incrementally change the performance outcomes.

4.6.

## TRANSFORMATION AND REENGINEERING METHODOLOGY

Organizational transformation and reengineering cannot be

achieved in a crisis management manner. All aspects of the transformation and reengineering effort must be coordinated properly. The final outcomes can be achieved if the ten-phase methodology.

## PHASE 1: CURRENT ENVIRONMENT ASSESSMENT

The assessment provides the product a baseline for product, process and process information quality, as well as human resource utilization. The next step is to break down and service system into part or characteristics and determine qualitative and quantitative issues and target values for the defined characteristics. The following suggestions are recommended for enhancing the partnership among the supplier, process owner and customer. First, maintain continuous communication with customers and suppliers. This requires one-on-one
72

contact, an on-line communication channel, telephone contact and periodic site visit. Second, encourage customer participation in developing quality excellence strategies for new products and services. Encourage suppliers to participate in implementing a quality excellence and total customer satisfaction program. Organizational structure, span for processes. Leadership improvement Culture and Environment: The culture that promotes continuous improvement and building blocks and values that guide the organization toward excellence. This also includes the operating philosophy at all levels of the organization, including work force empowerment, ability to encourage partnership for progress at all levels and a customer-driven culture of excellence. Information Strategic Utilization and Analysis: The The effectiveness of the of the company's collection and analysis_ of quality improvement and planning. Quality Planning: effectiveness company's integration of the customers' quality requirements into its business plan. Human Resource Utilization: The success of the company's efforts to realize the full potential of the work force for quality management. Quality Assurance Results: The effectiveness of the company's systems for assuring quality control in all its operations and in integrating control with continuous quality improvement. The demonstration of quality excellence is based upon quantitative measures and results. Customer Satisfaction: The effectiveness of the company's utilization and integration of new technology into new and mature products and processes. Transformation and Reengineering: The senior management vision and commitment to organizational transformation and Structure: of control, The effectiveness procedures of the organizational

policies,

and

decision-making

73

Innovation, Technology and Process Management: levels of the organization. Supplier Management:

## The ability and

commitment of the company to encourage and manage innovation at all The successes of the company's efforts to

encourage and develop a supplier network that utilizes effective quality assurance and management techniques and controls.

## PHASE 2: DEFINE ORGANIZATIONAL MISSION, VISION, VALUES AND PROCESS OBJECTIVES

The senior management of the organization has the ultimate responsibility to define a clear and shared vision of where the organization is headed. It is very important that the vision is written, disseminated and understood by everyone. The organization's values should extend beyond the basic requirements for legal behavior. These values should include, but are not limited to, customer satisfaction priorities, honesty, fairness, teamwork, strength, business ethics and integrity, and commitment to growth.

PHASE 3: TRAIN REENGINEERING TEAM AND DEFINE PRIMARY, SECONDARY AND AUXILIARY WORK PROCESSES
The creation of an organizational transformation and reengineering team is an excellent way to achieve results quickly. The team must be trained in change management, cohesiveness, tools, techniques for problem solving and decision making, measures and critical success factors, people sensitivity and project management. Once the team is trained, the various levels of the process should be identified. The following are three recommended levels of processes: Primary Processes: Primary processes are the key processes within an organization which produce the main products, services or final output for the external customer.

74

Secondary Processes: These are the second-level work processes within an organization. They support the key processes to deliver the final output to the external customer. Auxiliary Work Processes: These are the third-level work processes which support the secondary work processes to deliver the final output.

## PHASE 4: DEFINE KEY PROCESS OWNERS, SUPPLIERS AND CUSTOMERS

The Edosomwan tri-level definition of processes, suppliers, process owners and customers represents an organization as a total system, which contains inputs, processes and outputs. The system is maintained by suppliers, process owners and customers.

Figure 3.2 The Edosomwan Tri level definitions of process, suppliers, process owner and customer External Customer: The final arbiter who receives the work output. The external customer is the judge of whether or not the quality, price, delivery, schedule, service and other specifications are exceeded and met. Internal Customer: The internal judge of the output that comes from another department or individual. Self-Unit Customer: Every individual is a self-unit customer of themselves. Excellence at the individual level calls for self-inspection, a disciplined

75

attitude, better work habits, self-measurement and evaluation, and selfownership and accountability for the final output. Supplier: Anyone responsible for supplying inputs to a process or system. There are also three levels of suppliers: (a) external suppliers, who provide desired inputs from outside the organization (also called external vendors); (b) internal suppliers, who provide input from one department or one individual to another within the same organization and (c) self-unit suppliers, which means every individual supplies himself or herself with critical input, such as personal time and materials. Process Owner: The person charged with the ultimate responsibility for a set of primary, secondary or auxiliary work processes. The process owner is also the final decision maker on process improvement implementation and allocation of resources and can take the blame or credit for the problems or progress involved in the process.

PHASE 5: DOCUMENT, MAP AND ANALYZE CURRENT PROCESS ELEMENTS AND SYSTEMS

The key tasks in this phase include (a) identify and record all steps in

the process; (b) detailed description of each process step; (c) arrange each process step in its correct order; (d) identify each process step by type, such as operation, delay, inspection, transportation and decision gates; (e) determine the process beginning and end; (f) identify process inputs and outputs and (g) determine the process metrics. At the completion of this phase, the process analysis team or individual should gain general familiarity with the process, identify the key purpose for analysis and identify opportunities for improvements and current strengths.

PHASE 6: DEFINE KEY RESULTS AREAS AND CRITICAL SUCCESS FACTORS FOR PROCESSES

76

The success factors include, but are not limited to, the following: customer satisfaction, financial measures, productivity measures, quality measures, job satisfaction measures and profitability measures. It is strongly recommended that critical measures be monitored periodically.

PHASE 7: SELECT PILOT PROJECTS FOR REENGINEERING THAT FOCUS ON CUSTOMER-DRIVEN RESULTS

## The goal of process reengineering is to eliminate waste, delays,

redundancies and excessive bottleneck . Focus on opportunities for improving the following: (a) inefficiency in process steps; (b) time-consuming delay steps; (c) redundant inspection steps; (d) sources of rework and repairs, (e) excessive paperwork, policies and procedures; (f) sources of lost productivity and efficiency and (g) excessive process steps that increase cost of quality.

## PHASE 8: DESIGN, IMPROVE AND PROTOTYPE NEW PROCESSES

Reengineering has a cross-functional perspective is to assemble a team that represents the functional units involved in the process being reengineered and all the units that depend on it. Rather than looking for opportunities to improve the current process, the team should determine which of its processes really add value and search for new ways to achieve the end result. When looking for improvement opportunities. Questioning the value of every process step Eliminating non-value-added work elements and activities Reducing process complexity Using technology or systems to improve performance Combining process steps through linear or parallel design Selecting the most efficient method of transportation, movement and sequencing

77

## PHASE 9: IMPLEMENT IMPROVEMENT AND REEVALUATE PROCESSES FOR CONTINUOUS IMPROVEMENT

The key to achieving radical quantum performance and results is implementing improvement ideas at all levels. Improvements often reflect drastic changes in culture, structure, systems, policies, procedures, technologies and tasks. The improvement may also reflect significant changes in existing jobs by integrating task elements and empowering workers with the authority to deliver better results. Process improvements can be implemented in four ways: Radical switch to the new method Incremental or gradual switch to the new method Controlled implementation of portions of recommended

## PHASE 10: CONTINUOUS REENGINEERING AND PERFORMANCE IMPROVEMENT

The vision for improvement should be continuous. Everyone within the organization needs to be involved in the ongoing identification of new improvement opportunities; the improvement effort, responsibilities and ownership of results are clearly defined. It is recommended that a breakthrough in new knowledge and the pilot approach to testing should be encouraged. In order to avoid a sudden stop in process improvement progress, strategies for overcoming resistance to change must be and implemented. Continuous measurement, evaluation, planning

4.7.

## ORGANIZATIONAL TRANSFORMATION GUIDELINES

78

It is important to have guidelines for organizational transformation because they facilitate integration, execution and transition from the current state to the future organizational state in the most effective manner. The following guidelines are recommended for handling the organizational transformation process.

4.7.1.

## OBTAIN COMMITMENT TO THE TRANSFORMATION EFFORT

Perform a thorough evaluation to understand the organization's climate and culture. Secure and obtain total support of everyone who will be affected by the transformation and changes. The process of building commitment begins with the senior management of the organization and is continued until all the stakeholders and members of the work force are committed. Stage 1. Visualization and Awareness: People have a sense of what needs to be done differently. They can visualize the elements of the future, but they are uncertain how the vision for transformation can be realized. Stage 2. Apprehension and Self-Concern: The means for realizing the transformation effort becomes very clear, and people are concerned about how they will be affected by the transformation and changes. Several personal questions are asked: How will the changes affect careers?.. .compensation?. . job security?.. decision making latitude?.. .the quality of work life? Stage 3. Reality and Mental Tryout: People now view the transformation effort as reality and know that changes are inevitable. People's attitudes begin to shift to either avid supporters or resisters. The supporters will find ways to make the perceived changes work for them, and the resisters will find ways to defeat the new ideas. At this point, most resisters are converted to supporters if the benefits of the changes are explained properly.

79

Stage 4. Transformation and Change Acceptance: People accept the changes and are willing to deal with the consequences. Stage 4 is easier to achieve if there are specific implementation steps for the change4 and the timing and content are realistic and open to new opportunity.

## 4.7.2. LMI CIP TRANSFORMATION MODEL

Broad goals are focused down through all the organizations layers, and improvement practices follow a structured, disciplined methodology. Training and tread building have fundamental, supporting roles throughout the LMI CIP Transformation Model, as people and groups in the organization must be trained in appropriate subjects at the appropriate times and groups must learn to function as teams. The ultimate objectives are to (1) establish a perpetual and total commitment to continuous improvement throughout the organization and (2) involve everyone. Continuous process improvement should become the organizations way of life. Envisioning, shown in is a process that includes developing the organization's overall mission and goals and, within the context of that overall mission, building individual and group awareness of positive and transformation and reengineering objectives, philosophy, principles

practices. Creating a customer focus is a key element of improving the organization's effectiveness. Each individual must demonstrate belief in the organization's mission and ownership of its vision. An Executive Steering Committee (ESC), led by the head of the organization, guides and leads the overall transformation and reengineering effort, which becomes integrated into the organization's way of doing business. The ESC is also instrumental in enabling the achievement of the mission.

80

Figure 3.3 LMI CIP Transformation model Top management must become committed to the implementation and must demonstrate that commitment; highly visible and vocal champions can help publicize that commitment. Everyone must work tow ard removing the barriers to transformation and establish support, rewards and recognition systems that encourage positive behavior and drive out the inherent fear of change. Training and time resources for the entire work force are essential. Finally, the organization must empower individuals and groups at all levels by providing them the authority necessary to meet their responsibility for process improvement

Figure 3.4 Envisioning Improving the processes, illustrated in Figure 3.6, is the result of envisioning a new way of doing business, enabling that vision and focusing the effort to achieve specific goals and objectives. The organizations improvement activities include many of the more mechanical processes to define and standardize processes, to assess

81

measurement

are

critical

elements

throughout

the

continuous

improvement process. Learning is one of the fundamental elements supporting the organizational transformation and continuous improvement effort. It comprises training and education. Team building begins with the establishment of the ESC and continues through all levels to the bottom of the organization. In many cases, team building simply means training existing work groups to act as teams; in other situations, common problems and concerns may be addressed through creating cross-functional teams which dram participants from all interested areas. All teams should be linked, horizontally and vertically, and should follow the structured process improvement cycle within the framework of the common organizational goals

4.8.

## DSMC Q&PMP TRANSFORMATION MODEL

The DSMC Q8PAMP Transformation Model, is a broad conceptual model

with interrelated actions and emphases that describe a general process for transformation from the point v,-hen an organization recognizes a need to change to the point at which it becomes a competitive organization of the future The model depicts an organization as an open system with various feedback loops from the environment, and it highlights the interrelationships between the various components of a quality and productivity management effort.

82

## Figure 3.5 DSMC Q & PMP Transformation model

4.8.1.

ORGANIZATIONAL SYSTEM

The "organizational system" box in the middle of the model represents the system that exists; it could be an entire company, a division, a plant, a department or just individual day-to-day activities. The system has upstream systems (internal and external suppliers) which provide inputs in the form of labor, material, capital, energy and data/information. The system takes these inputs and converts them into outputs in the form of products or services. Downstream systems (internal and external customers) then react to those outputs, creating outcomes, such as customer satisfaction, readiness, profitability, etc.

83

4.8.2.

## INCENTIVE AND STRATEGIES FOR CHANGE

At the top of the diagram is the new competition the organization must respond to in order to compete in a global economy. This new competition and global economy influence the business strategy and visions of the organization and the future. Key performance indicators are identified to provide feedback on performance progress. The following steps are included in ,in effective strategic planning process: (a) develop a collective strategic awareness among the management team; (b) convert that awareness into specific planning assumptions; (c) create a set of agreed-upon, prioritized, strategic objectives; (d) focus those objectives into a series of action items, (e) determine who will be accountable and responsible for each action item and develop teams to take action; (E) measure, assess and evaluate the effectiveness of improvement actions and (g) continuously support the improvement effort.

4.8.3.

## PERFORMANCE IMPROVEMENT METHODOLOGY AND TECHNIQUES

Interventions happen at five checkpoints: upstream systems, inputs, process, outputs and downstream systems. Quality management efforts must be defined relative to these five checkpoints. In effect, transformation and continuous improvement efforts are commitments to a practice of managing all five quality checkpoints. The management team then develops, through the performance improvement planning process, a balanced attack to improve total system performance, not just system subcomponents.

4.8.4.

## MEASUREMENT AND EVALUATION

After interventions are made to the system, - measure, and access and analyze performance at the five checkpoints to determine whether the

84

expected impact actually occurred. Based on these data, make an evaluation relative to the business strategy, the environment (both internal and external), the vision, the plan and the improvement actions themselves.

85

86

## UNIT IV REENGINEERING PROCESS IMPROVEMENT MODELS

PMI MODEL EDOSOMWAN MODEL MOEN AND NOLAN STRATEGY FOR PROCESS IMPROVEMENT LMICIP MODEL

87

NPRDC MODEL

## 5.1. PMI MODEL

The PMI Leadership Expectation Setting (L.E.S.) Model revolves around the continuous improvement of quality indicators the primary expectation of this eight-step model is the continuous improvement of processes and systems within an employee's own function. Leaders and co-workers participate and are expected to provide constructive help and support. L.E.S. is predicated on the belief that individuals in organizations are leaders just as much as top management.

## STEP 1: DEVELOP A MISSION STATEMENT

The first step is to develop a personal mission statement which is consistent with the mission of the entire organization. Make it explicit, but remember that it is to be a guideline for future decision making As a leader, a personal vision and mission must be understood by other individuals in the organization. A vision understood only by one individual will not move others. A feeling of employee ownership in the organization's future must be cultivated.

## STEP 2: IDENTIFY KEY LEADERSHIP FUNCTIONS

The main improvement priority should be to focus process improvement efforts on the highest priority functions. To do this identifies the responsibilities of the job which have the greatest effect group's results.

88

From this identification, determine specific opportunities for improvement in the personal leadership processes.

## STEP 3: IDENTIFY IMPROVEMENT OPPORTUNITIES

In identifying improvement opportunities, understand what the major job functions and tasks are, focus on the customers' requirements and priorities and, using those requirements, define personal improvement efforts. Finally, identify factors that indicate the level of quality in the work, establish a basis for results and measure the level of improvement achieved.

## STEP 4: SHARE THE RESULTS WITH MANAGER

Discuss the personal improvement plan with a manager to ensure that it is meaningful to the organization as a whole and that it contributes to overall organizational goal s-f-he manager should agree with the proposed plan for improvement and should provide comments on the approach where appropriate Since the time and resources available for improvement depend l0 a large extent on the manager's support, it is essential to obtain the manager's agreement before proceeding.

## STEP 5: SHARE THE L.E.S. PLAN WITH SUBORDINATES

Leadership improvement is meaningless absent the context of those individuals being led. Subordinates are the ultimate purpose of the improvement plan; in effect, they are the major customer. share the plan with subordinates and ask for their comments and perceptions. Invite them and individual leaders to begin the L.E.S. process themselves. Encourage each individual to share his or her progress with the group.

## STEP 6: USE A SYSTEMATIC APPROACH

To provide consistency to the improvement process, adopt a structured, systematic approach An approach, such as this one, enables individuals to display progress in a manner understandable by all. A

89

disciplined method of defining a problem, observing it, determining its causes, taking action, checking the effectiveness of that action, standardizing the solution and evaluating the process is a key to providing consistency.

## STEP 7: SHARE PROGRESS

Leadership Expectation Setting is not only a model for individual improvement; it is also a basis for continuous performance communication and feedback between employees and supervisors. When sharing progress, do not focus on completing or updating forms; rather, engage in substantive discussion of improvement objectives obstacles to meeting those objectives and lessons learned along the way. Often, more important lessons are learned in failure than in success; therefore, the performance assessment, both with the supervisor and with the subordinates, should focus on the underlying causes of failure instead of the fact of failure itself.

## STEP 8: CASCADE L.E.S. MANAGEMENT THROUGH THE ORGANIZATION

Set the expectation that L.E.S. and individual improvement can be applied at any level in the organization However, personal leadership and adherence to the process are crucial to its success in the organization. Demonstrate a belief in, and commitment to, the improvement process to help inspire its adoption by others.

## 5.2. EDOSOMWAN PRODUCTION AND SERVICE IMPROVEMENT MODEL (PASIM)

The Production and Service Improvement Model (PASIM is a disciplined process improvement approach which requires continuous process assessment and an organized use of common sense to find easier and better ways of doing work, as well as streamlining the production and service processes to ensure that goods and services are offered at minimum cost.

90

The PASIM concept is shown in Figure 4.2. The PASIM improvement strategy focuses on the following areas: Elimination of bottlenecks Reduction in production costs, wasted materials, engineering changes, nonvalue-added operations, the amount of paperwork, chronic overtime, error rate, work repetition, work-in-process inventory, transportation and materials handling, and training time Improved job safety, employee morale, customer service, and productivity and quality at the source

## Figure 4.1 PASIM Conceptual frame work

THE PASIM PRINCIPLES ARE AS FOLLOWS:

Principle 1: Management and employees must have the positive attitude that productivity and quality improvement can result from the organized use of common sense to address service and production problems. Management support must be shown through example, practice and an organization policy statement. Principle 2: A total teamwork approach among functional organizations, such as research and development, marketing, personnel, and purchasing, manufacturing, information systems, quality, facilities engineering and others, must be used to address all problems.

## distribution, maintenance, finance, production control, service centers,

91

Principle 3: There must be total productivity and quality improve ment at the source of production and service. Heavy reliance on inspection and other non-value-adding operations within the work organization must be discouraged. The required basic training must be provided to obtain highquality goods and services at the source of production or service. Principle 4: Reduction in the layers of management at all levels must be encouraged. Too many levels of management cause additional bottlenecks. A level of management must be instituted within the organization only if it will add value to the improvement of the production and service function. Principle 5: A total impact assessment must be done for all service and process changes, policy changes and implementation of new ideas and techniques. Principle 6: A total reward system, based on contribution to improving and managing all aspects of a task to obtain acceptable goods and services, must be in place. Principle 7: Production and service errors that affect productivity and quality are controllable through common sense and good judgment. The production rate must be equal to the consumption rate. Principle 8: Both management and explodes must be encouraged to question every task and job in detail. Principle 10: Both management and employees should adopt the practice of seeing every job as make-ready, do it and put it away.

## 5.3. MOEN AND NOLAN STRATEGY FORPROCESS IMPROVEMENT

The eleven steps begin with the selection of a process to improve and result in the implementation of a continuous improvement cycle which operates on the process. The model looks at an organization as a network of linked processes run by internal producers and customers.

92

## STEP 1: DETERMINE TEAM OBJECTIVE

The team must begin with a clear statement of the objective it hopes to achieve. Each member of the team should view the accomplishment of this objective as important and worthwhile.

## STEP 2: DESCRIBE THE PROCESS

Once the team has determined and agreed upon its objective, it should describe and document the process it intends to improve.
STEP 3: FLOW CHART THE PROCESS

The flow chart visually demonstrates the flow of the process over time. Flow charts work best when simple, including only enough detail to give a basic understanding of what is happening.

93

## STEP 4: IDENTIFY SUPPLIER/CUSTOMER RELATIONSHIPS

Overall performance is improved as [producers work in teams with their suppliers (internal and external) to improve internal customer satisfaction and, hence, external customer satisfaction.

## STEP 5: IDENTIFY MEASURES OF PERFORMANCE

It must identify basic measures of performance for the outcome of each stage. These measures are identified as checkpoints on the flow chart. Each measure must be clearly defined as to what specifically is being measured and, more importantly, what that measure means. Identifying performance measures creates windows through which processes can be observed.

## STEP 6: DEVELOP POSSIBLE CAUSE FACTORS

Measurements provide key indications of process performance problems and their causes. Use a number of tools to keep track of and assess these possible cause factors, which will identify opportunities for improvement.

## STEP 7: DOCUMENT WHAT WAS LEARNED

Strict, consistent documentation is essential to maintaining control over the improvement process. Once improvements have been implemented, maintain a history of the entire improvement effort." This history serves to provide lessons which might be applied to other projects and also provides a data trail to analyze the success or failure of the improvement efforts.

STEP 8: PLAN
Once a project has been selected, the theory phase of the planning step begins. Theory may range from a hunch or "gut feeling" to well accepted scientific principles at various times throughout the cycle. The next phase is to plan data collection. Data will be used to increase process knowledge and help establish a consensus among team members. The questions to be answered by the data will guide the data collection process.

94

## STEP 9: OBSERVE AND ANALYZE

The observation phase begins when the plan for data collection is put in place. The data should be observed as soon as they become available. Any data collection process has many opportunities for error and many opportunities for special causes to occur. Plotting the data chronologically as they are obtained is vital in order to recognize problems. Once the data are obtained, they are analyzed to help answer the questions posed in the theory phase. In preparing for this analysis, the team should determine the resources needed. They will usually be able to analyze their own data, but there will be times when help from a statistician or other expert is needed.

## STEP 10: SYNTHESIZE

This phase brings together the results of the data analysis and the existing knowledge of the process. The theory is modified if the data contradict certain beliefs about the process. If the data confirm the existing theory about the process, then the team will be confident that the theory provides sufficient basis for action on the process.

## STEP 11: ACT

Agreement on the suitability of improvement action is obtained by repeating the improvement cycle; it is the repeated use of the cycle that is important.

## 5.4. LMI CIP PERSONAL IMPROVEMENT MODEL

It involves establishing a vision for the personal improvement effort and enabling that effort, focusing on personal behavior and the expectations to achieve continuous improvement in performance, and finally evaluating the efforts to improve.

95

## STEP 1: ENVISION PERSONAL IMPROVEMENT

Build self-awareness of the need to improve and the individual ability to improve. Assessing relationships within the organization as well as customers and suppliers provides a fundamental understanding . Develop expectations for personal behavior and begin creating the personal vision for improvement.

## STEP 2: ENABLE PERSONAL IMPROVEMENT

This effort starts with educating oneself about improvement goals and about performance improvement concepts, principles and practices. Process of learning-learning about using performance improvement tools, about the processes, about the collection and use of data and about the process of learning itself.

## STEP 3: FOCUS ON IMPROVEMENT

Making improvement a high personal priority and creating time in the schedule for improvement activities are vital to this effort and are a clear demonstration of a personal commitment to improvement.

96

## STEP 4: IMPROVE YOUR JOB

Define your job as the collection of the processes owned. By removing complexity from the personal processes and pursuing small, incremental improvements, a substantial increase in the effectiveness of personal performance can be achieved.

## STEP 5: IMPROVE YOURSELF

Facilitate communication between yourself and others, as well as among others. Remove personal barriers, seek the assistance of others to remove the barriers you do not control and work to eliminate your personal fears of change and improvement. This is best done through education and through communication with others. Depend on the vision to guide the improvements, and use that vision to maintain momentum.

## STEP 6: HELP OTHERS IMPROVE

Through the personal improvement effort, the organization as a whole can improve. By training and coaching others, by creating more leaders, by working to create teams and eliminate barriers and by encouraging the improvement activities of others. and enabling that effort, focusing on personal behavior and the expectations to achieve continuous improvement in performance, and finally evaluating the efforts to improve.

## STEP 7: EVALUATE PERSONAL IMPROVEMENT PROGRESS

The value of improvement lies in the effort to improve beyond the results and by documenting personal improvement efforts so they may be shared with and used by others, you will derive the most from your own efforts. Celebrate personal success and the success of others. Ensure through personal evaluation that the improvement effort itself is rewarding and provides further incentive for continuous improvement effort.

97

## 5.5. NPRDC PROCESS IMPROVEMENT MODEL

The NPRDC Process Improvement Model is also a PDCA-based model. It begins by stating a goal for improving a process and proceeds through institutionalizing standards. successful process changes in documented process

## Figure 4.4 NPRDC Process improvement model

STEP 1: PLAN
Documenting the current understanding of how the process functions, defining the customers of the process and understanding customer needs and requirements. Once the process is understood, make the improvement goals more specific; define the actual desired changes in process outcomes.

98

STEP 2: DO
Define the structure for improving the process. Identify the elements of the process, both internal and external, that potentially have an effect on the quality of the process and its products. To verify the theoretical causes of quality, identify measures of process performance. In defining measurement points, ensure that they are specific, repetitive and consistent. Before obtaining measurement data, establish clear, concise data collection procedures to ensure that the data are collected periodically and consistently. ,

STEP 3: CHECK
Check the process performance to ensure that the process is understood and, more importantly, to improve the process. Collecting and analyzing data is the primary tool for doing this. Data collection must be focused and consistent, performed in accordance with the procedures established in the Do phase. Analyze the data aggressively and thoroughly,

STEP 4: ACT
Select the causes to be changed, taking one-time action on special causes and developing remedial changes for common causes. Implement both types of actions on a trial basis and evaluate their effects. For ineffective changes, go back and identify new causes of poor quality or causes of performance problems. Document effective changes and build them into the normal way of performing the process; this usually entails modification of existing process standards. Finally, set in place a means of monitoring process performance over the long term, ensuring that the suggested changes continue to have their desired effects and that people are performing the process according to the new standard. The process improvement cycle continues forever...without end.

99

## UNIT V REENGINEERING TOOLS AND IMPLEMENTATION

ANALYTICAL AND PROCESS TOOLS AND TECHNIQUES INFORMATION AND COMMUNICATION TECHNOLOGY ENABLING ROLE OF IT RE OPPORTUNITIES PROCESS REDESIGN - CASES SOFTWARE METHODS IN BPR SPECIFICATION OF BP

100

5.1.

## PROCESS ANALYSIS TECHNIQUE (PAT)

This is a systematic approach to defining all tasks required to execute a process (Figure 5.1 and Table 5.1). The following steps are recommended for performing the PAT: Step 1: Select a particular process based on the degree of performance problem. Step 2: List the value-added and a non-value-addled. task within the process. Step 3: Record process times for all activities. Step 4: Based on the information obtained in Steps 2 and 3, determine which task or activity is required to produce the final output. Step 5: Seek alternative approaches or methods to perform existing task at reduced cost and improved quality levels. Step 6: Eliminate the waste and non-value-added tasks, and implement improved value-added methods in the process. Step 7: Implement the right controls for process monitoring and follow-up on continuous improvement actions.

101

5.1.1.

## FLOW CHARTING AND PROCESS ANALYSIS TECHNIQUE

The flow chart shown in Figure 5.2 provides an example of how the various factors and steps can be interrelated in an assembly process. It provides the basis for understanding the standard process procedures and the relationship between the people and the work to be done. When constructed accurately and analyzed properly, a flow chart can help to understand and identify process bottlenecks, such as delays, excessive transportation, waiting time and queuing time. It also is used to identify key customers, suppliers and process owners by operational work-unit performance level, quality level.

102

Step1: Understand the process and the relationship between all process parameters (manpower, machines, materials, methods, procedures, technology, systems and policies). Step 2: Understand the flow chart process symbols (Process, transportation, delays and decision points).

Figure 5.2 sample flow chart Step 3: Construct the flow chart starting with the first activity or event. Connect all activities or processes using arrows in a chronological order. Step 4: Identify the key problems by reviewing every step and element specified. Step 5: Develop a solutions strategy for problems, identifying and implementing corrective actions for continuous improvement.

5.1.2.

## WORK FLOW ANALYSIS (WFA)

WFA is a structured system which improves work process by eliminating unnecessary tasks and streamlining the work flow. WFA identifies and eliminates unnecessary process steps by analyzing functions, activities and tasks. It uses cross-functional teams and is implemented in seven steps.

103

Figure 5.3 sample workflow diagram Step 1: Define the process in terms of purposes, objectives and start end points. Step 2: Identify functions and major responsibilities of the organization, including manpower and planning. Step 3: Identify activities below functions. Step 4: Identify tasks or basic steps used to perform each activity and to provide the most specific description of a process. Step 5: Analyze the proves with a cross-functional team. Step 6: Identify lengthy tasks, choke points, repetitious tasks, etc. Step 7: Determine and implement an action plan for improvement.

5.1.3.

## VALUE ANALYSIS APPROACH

The value analysis is a systematic approach to examining the functional design of a product or specific part, to develop a more efficient,

104

less

costly

alternative.

The

following

steps

are

recommended

for

implementing the value analysis approach. Step 1: Select the product or part for analysis and evaluate its importance. Step 2: Develop a functional definition of the part and describe its purpose and use in the product in question. Specific questions to ask when analyzing parts are: Does it contribute to the use of the product? Is it cost effective? Are all the features required? Are there alternative parts that are better? Can recycled material be used? Can another supplier provide the part for less cost? Can the function of the part be combined with something else?

Step 3: collect data on part performance and cost, and evaluate the contribution of the part to the final product. Step 4: Develop alternatives. Conduct a brainstorming session to determine the function of the part and to develop ways to overcome any apparent roadblocks. Step5: Design or establish specifications for the proposed new component or part. Step 6: Evaluate the new part through prototype testing, and compare the cost of new and existing parts. Select the best alternative. Step 7: Implement the preferred part in the product and subassembly, and put it into operation. Follow up to ascertain that the new part is performing the same function at a lower cost and improved quality.

5.1.4.

## NOMINAL GROUP TECHNIQUE

The nominal group technique (NGT) is a proactive search process that involves a participative group approach to identifying specific problems and issues, or providing ideas and solutions to resolve problems previously

105

identified. It is a methodology for generating ideas, recording those ideas and prioritizing them to move toward consensus decisions, NGT can be especially useful when resolving complex problems, when a group is under time pressures or to avoid potential conflicts associated with discussing and prioritizing sensitive issues. The steps for using NGT are displayed in Figure 5.7 and described below. Step 1: Idea Generation Process The group leader resents the purpose of the meeting, which may be to generate ideas for resolving a specific productivity or quality problem. The ground rules for proactive group participation are provided, and time is given for group members to silently record ideas on paper individually without comment. Step 2: Round Robin Silent Reporting of ideas Ideas are collected by the facilitator. Two methods are commonly used: If the ideas tare sensitive or if the quantity of participants or anonymously for the group. Each person can present his or her ideas one at a time in turn, with no evaluation or prejudgment by other team members, while the facilitator records the ideas. Step 3: Clarification of Ideas and Group Discussion Once all ideas have been recorded, each is discussed for accurate interpretation, to clarify misunderstandings and to combine any lams that are repetitious in nature. Step 4: Ranking of ideas The ideas are then prioritized by each participant. There are many methods for ranking, the most common being simple voting or weighted voting and pare to prioritization. The goal of this step is to use ranking techniques to reach a consensus decision by the group on the ideas of interest. Step 5: Implementation ideas is verylarge, facilitator collects the ideas and records them individually and

106

Once an idea is selectee for recommendation or implementation, the group works together to develop an implementation plan and establish an expected results time line.

5.1.5.

## FISHBONE DIAGRAM OR CAUSE-AND-EFFECT DIAGRAM

The fishbone diagram or cause-and-effect diagram, helps to relate the elements of a process. It relates possible causes to specific effects. All variation levels are identified by examining all the possible cause. All the possible causes that add to the variation level of the resulting effect are identified using; a brain storming approach. The cause-and-effect diagram provides a method to involve all the people and factors in ale service or manufacturing process to see how the various factors come together to make up flat ideas are then prioritized by each participant. There is many the total performance.

Figure 5.4 Fish Bone Diagram HOW TO CONSTRUCT A CAUSE-AND-EFFECT DIAGRAM The steps for constructing a fishbone diagram and implementing recommended solution strategies are as follows: Step 1: Perform a thorough analysis of the production service diagram. Step 2: Initiate group meetings involving all parties likely to be affected by the problem. Step-3: Use the brainstorming or nominal group technique to identify all possible causes of the specific problem and identify potential effect and
107

operation

work unit and define the purpose and problem for using the fishbone

impact

on

quality,

performance,

productivity

and

total

customer

satisfaction. Step 4: Pinpoint the main causes of the problem. Identify the key contributor (machine, material, methods, technology systems, people, policies or procedures). Step 5: Develop alternative solutions to fix the problem identified. Step 6: Implement the solution and follow up with continuous corrective action and improvement.

5.1.6.

PARETO ANALYSIS

A Pareto diagram can be described as a graphic representation of identified causes, shown in descending order of magnitude or frequency, as depicted in Figure 5.9. The magnitude of concern is usually plotted against the category of concern. The Pareto diagram enables the process improvement analyst to identify the vital key problems, projects or issues on which to concentrate.

## HOW TO CONSTRUCT A PARETO DIAGRAM

The following steps are recommended for constructing a Pareto diagram. Step 1: Specify why a Pareto diagram is required, and create a clear definition of the items to be ranked, the-criteria to be used and the factor. The
108

Motivation for Pareto analysis usually comes from too many complex problems occurring within an operation unit or a specific process. The Pareto diagram is then used to categorize the various problems in their order of magnitude. For example, a computer manufacturer wanted to understand the repair and analysis cost associated with specific types of computer products. The Pareto analysis technique was applied in order to understand the magnitude of tins problem. Steps 2 through 4 give specific examples of the application of the Pareto analysis technique. Step 2: Perform data collection and record the data by item. In this step, the number of occurrences of each problem and the associated magnitude in weight, cost or time are collected and recorded. For the computer products example, the repair and analysis cost for each type of computer is presented in Table 5.2. Step 3: Calculate percentages for each item and rank them in order. The percentages for each item and the total cumulative percentages for all items are calculated as follows: each item % Item % = = x 100

## Example for computer type C2: Item % = x 100% = 47.5%

Cumulative % = (each item % + previous cumulative %) Table 5.1 Repair and analysis Costs for Computer Products Computer Type Defect Occurrence (Total Number) Average (s) Cost Total Repair Pert Per Occurrence Cost (s)

Computer Type

109

C1 C2 C3 C4 C5 C6 Total

15 18 20 14 10 5 82

20 40 10 5 10 25

## 300 720 200 70 100 125 1515

The product and cumulative percentages for the computer example are presented in Table 5.1 Step 4: Construct graph axes, and plot bars and a cumulative percent line. Based on the values of items obtained in Step 3, the Pareto diagram is constructed. The Pareto diagram for the computer examples is presented.

Contents
UNIT-I INTRODUCTION.............................................................................................. 1 1.1.PRODUCTIVITY...................................................................................................... 2 1.2.PRODUCTIVITY BENEFIT MODEL...........................................................................6 1.3.THE PRODUCTIVITY CYCLE.................................................................................... 7 1.4.MACRO AND MICRO FACTOR OF PRODUCTIVITY:..................................................9 Micro data analysis:.................................................................................................. 10 2.1.PRODUCTIVITY MEASUREMENT AT THE INTERNATIONAL LEVEL.........................11 2.1.1.MEASUREMENT APPROACHES..........................................................................12 2.2.PRODUCTIVITY MEASUREMENT AT THE NATIONAL LEVEL...................................13 2.2.1.Index approach................................................................................................ 13 2.3.PRODUCTIVITY MEASUREMENT IN ORGANIZATIONS LEVEL................................14 2.3.1.Index Approach:.............................................................................................. 14 2.3.2.Production Function Approach.........................................................................17

110

2.3.3.Input Output Approach.................................................................................18 2.3.4.Servo-System Approach..................................................................................18 2.3.5.Capital Budgeting Approach............................................................................ 18 2.3.6.Unit Cost Approach.......................................................................................... 18 2.4.TOTAL PRODUCTIVITY MODEL (TPM)..................................................................19 2.4.1.Notation for the Total Productivity Model........................................................21 2.4.2.Tangible Output Elements............................................................................... 24 2.4.3.Tangible Input Elements:.................................................................................25 2.4.4.STEPS IN IMPREMENTING THE TOAL PRODUCTIVITY MODEL............................26 2.5.PRODUCTIVITY EVALUATION IN COMPANIES AND ORGANIZATIONS...................27 2.5.1.EXPRESSION FOR TOTAL PRODUCTIVITY CHANGE...........................................27 2.5.2.THE PRODUCTIVITY EVALUATION TREE (PET) ..................................29

2.6.PRODUCTIVITY IMPROVEMENT MODEL ..............................................................29 2.6.1.Goodwins Model............................................................................................. 29 2.6.2.Sutermeisters Model....................................................................................... 30 2.6.3.Hershauer and Ruchs Model...........................................................................31 2.6.4.Crandall and Wootons Strategies...................................................................32 2.6.5.Stewarts Strategy........................................................................................... 33 2.6.6.Aggarwals Approach....................................................................................... 36 2.7.TECHNOLOGIES BASED PRODUCTIVITY IMPROVEMENT TECHNIQUES..............37 2.7.1.COMPUTER - AIDED DESIGN (CAD)..................................................................37 2.7.2.COMPUTER AIDED MANUFACTURING (CAM)..................................................38 2.7.3.COMPUTER INTEGRATED MANUFACTURING (CIM)..........................................39 2.7.4.ROBOTICS........................................................................................................ 39 2.7.5.LASER TECHNOLOGY....................................................................................... 39 2.7.6.ENERGY TECHNOLOGY.................................................................................... 40

111

2.7.7.GROUP TECHNOLOGY...................................................................................... 40 2.7.8.MAINTENANCE MANAGEMENT.........................................................................40 2.7.9.REBUILDING OLD MACHINERY.........................................................................40 2.8.MATERIALS - BASED PRODCUTIVITY IMPROVEMENT TECHNIQUES......................41 2.8.1.INVENTORY CONTROL..................................................................................... 41 2.8.3.THE ABC ANALYSIS:......................................................................................... 43 2.8.4.MATERIAL REQUIREMENT PLANNING (MRP):....................................................43 2.8.5.MATERIALS MANAGEMENT:.............................................................................44 2.8.6.QUANTITY CONTROL:....................................................................................... 44 2.8.7.MATERIAL HANDLING SYSTEMS IMPROVEMENT:...........................................46 2.8.8.MATERIAL REUSE AND RECYCLING:.................................................................46 2.9.EMPLOYEE - BASED PRODUCTIVITY IMPROVEMENT TECHNIQUES.......................47 2.9.1.FINANCIAL INCENTIVES (INDIVIDUAL)..............................................................47 2.9.5.FINANCIAL INCENTIVES (GROUPS)...................................................................48 2.9.6.EMPLOYEE PROMOTION:.................................................................................. 51 2.9.7.JOB ENRICHMENT............................................................................................. 51 2.9.8.JOB ENLARGEMENT.......................................................................................... 51 2.9.9.JOB ROTATION................................................................................................. 51 2.9.10.SKILL ENHANCEMENT.................................................................................... 52 2.9.11.MANAGEMENT BY OBJECTIVES.......................................................................52 2.9.12.COMMUNICATION.......................................................................................... 52 2.9.13.WORKING CONDITON IMPROVEMENT............................................................52 2.9.14.TRAINING....................................................................................................... 53 2.9.15.QUALITY CIRCLES.......................................................................................... 53 2.9.16.TIME MANAGEMENT....................................................................................... 53 2.10.PRODUCT - BASED PRODUCTIVITY IMPROVEMENT TECHNIQUES.....................54

112

2.10.1.VALUE ANALYSIS / VALUE ENGINEERING.......................................................54 2.10.2.PRODUCT DIVERSIFICATION..........................................................................54 2.10.3.PRODUCT SIMPLIFICATION............................................................................. 55 2.10.4.PRODUCT STANDARDIZATION.......................................................................55 2.10.5.RESEARCH AND DEVELOPMENT....................................................................55 UNIT-III ORGANIZATIONAL TRANSFORMATION .......................................................56 4.1.PRINCIPLES ORGANIZATIONAL TRANSFORMATION AND REENGINEERING..........57 4.2.THE 6 R'S OF ORGANIZATIONAL TRANSFORMATION AND REENGINEERING........58 4.2.1.REALIZATION................................................................................................... 58 4.2.2.REQUIREMENTS............................................................................................... 59 4.2.3.RETHINK.......................................................................................................... 60 4.2.4.REDESIGN........................................................................................................ 60 4.2.5.RETOOL........................................................................................................... 61 4.2.6.REEVALUATE.................................................................................................... 61 4.3.FUNDAMENTALS OF PROCESS REENGINEERING.................................................61 4.3.1.THE ORGANIZATION PROCESS ELEMENTS.......................................................61 4.3.2.THE ORGANIZATION PROCESS.........................................................................62 4.3.3.THE ORGANIZATION PROCESS OWNER...........................................................62 4.3.1.THE ORGANIZATION PROCESS ASSESSMENT AND ANALYSIS..........................62 4.3.4.THE ORGANIZATION PROCESS OUTPUT MEASURES........................................63 4.3.5.PROCESS MANAGEMENT, CONTROL AND IMPROVEMENT................................63 4.4.PREPARING THE WORK FORCE FOR TRANSFORMATION AND REENGINEERING. .63 STEP 1: PEOPLE INVOLVEMENT................................................................................ 64 STEP 3: DEVELOP CHANGE AGENTS AND TRANSITION STRUCTURES......................65 STEP 4: CHANGE EXECUTION AND IMPLEMENTATION..............................................65 Step 5: Develop and implement strategies to win the support of everyone, including the undecided and resisters. ................................................................................67 113

4.5.PRINCIPLES AND METHODOLOGY FOR ORGANIZATIONAL TRANSFORMATION AND REENGINEERING....................................................................................................... 67 PRINCIPLE 1: LEADERSHIP AND WORK FORCE FOCUS ON CONSTANCY OF PURPOSE AND CONTINUOUS IMPROVEMENT........................................................................68 PRINCIPLE 2: SIMPLIFY STRUCTURES, PROCESSES, PROCEDURES, POLICIES, SYSTEMS AND PROGRAM...................................................................................... 68 PRINCIPLE 3: ELIMINATE AND MINIMIZE WASTE.......................................................69 PRINCIPLE 4: DESIGN AND IMPLEMENT PARALLEL PROCESSES................................69 PRINCIPLE 5: FOCUS ON CONSTANT INNOVATIONS AND USE OF TECHNOLOGY TO IMPROVE PROCESSES............................................................................................ 69 PRINCIPLE 6: CREATE AND IMPLEMENT PERFORMANCE-BASED MEASURES TO ASSESS PROCESS OUTCOMES...............................................................................69 PRINCIPLE 7: IMPLEMENT ERROR AND DEFECT PREVENTION PHILOSOPHY AT ALL LEVELS 70 PRINCIPLE 8: DEFINE PROCESS OWNER(S), .............................................................71 STAKEHOLDERS AND SUPPLIERS..............................................................................71 PRINCIPLE 9: INVOLVE CUSTOMERS, PROCESS OWNERS, SUPPLIERS AND UNIONS IN REENGINEERING EFFORTS..................................................................................... 71 PRINCIPLE 10: PROMOTE RADICAL AND INCREMENTAL IMPROVEMENTS..................72 4.6.TRANSFORMATION AND REENGINEERING METHODOLOGY.................................72 PHASE 1: CURRENT ENVIRONMENT ASSESSMENT....................................................72 PHASE 2: DEFINE ORGANIZATIONAL MISSION, VISION, VALUES AND PROCESS OBJECTIVES........................................................................................................... 74 PHASE 3: TRAIN REENGINEERING TEAM AND DEFINE PRIMARY, SECONDARY AND AUXILIARY WORK PROCESSES...............................................................................74 PHASE 4: DEFINE KEY PROCESS OWNERS, SUPPLIERS AND CUSTOMERS.................75 PHASE 5: DOCUMENT, MAP AND ANALYZE ..............................................................76 CURRENT PROCESS ELEMENTS AND SYSTEMS.........................................................76 PHASE 6: DEFINE KEY RESULTS AREAS AND ...........................................................76 CRITICAL SUCCESS FACTORS FOR PROCESSES........................................................76

114

PHASE 7: SELECT PILOT PROJECTS FOR REENGINEERING.........................................77 THAT FOCUS ON CUSTOMER-DRIVEN RESULTS........................................................77 PHASE 8: DESIGN, IMPROVE AND PROTOTYPE NEW PROCESSES.............................77 PHASE 9: IMPLEMENT IMPROVEMENT AND REEVALUATE .........................................78 PROCESSES FOR CONTINUOUS IMPROVEMENT........................................................78 PHASE 10: CONTINUOUS REENGINEERING AND PERFORMANCE IMPROVEMENT......78 4.7.ORGANIZATIONAL TRANSFORMATION GUIDELINES............................................78 4.7.1.OBTAIN COMMITMENT TO THE TRANSFORMATION EFFORT.............................79 4.7.2.LMI CIP TRANSFORMATION MODEL..................................................................80 4.8.DSMC Q&PMP TRANSFORMATION MODEL...........................................................82 4.8.1.ORGANIZATIONAL SYSTEM.............................................................................. 83 4.8.2.INCENTIVE AND STRATEGIES FOR CHANGE.....................................................84 4.8.3.PERFORMANCE IMPROVEMENT METHODOLOGY AND TECHNIQUES.................84 4.8.4.MEASUREMENT AND EVALUATION...................................................................84 UNIT IV REENGINEERING PROCESS IMPROVEMENT MODELS...................................87 5.1.PMI MODEL......................................................................................................... 88 STEP 1: DEVELOP A MISSION STATEMENT ..............................................................88 STEP 2: IDENTIFY KEY LEADERSHIP FUNCTIONS.......................................................88 STEP 3: IDENTIFY IMPROVEMENT OPPORTUNITIES...................................................89 STEP 4: SHARE THE RESULTS WITH MANAGER.........................................................89 STEP 5: SHARE THE L.E.S. PLAN WITH SUBORDINATES............................................89 STEP 6: USE A SYSTEMATIC APPROACH....................................................................89 STEP 7: SHARE PROGRESS....................................................................................... 90 STEP 8: CASCADE L.E.S. MANAGEMENT THROUGH THE ORGANIZATION..................90 5.2.EDOSOMWAN PRODUCTION AND SERVICE IMPROVEMENT MODEL (PASIM).......90 5.3.MOEN AND NOLAN STRATEGY FORPROCESS IMPROVEMENT..............................92

115

STEP 1: DETERMINE TEAM OBJECTIVE......................................................................93 STEP 2: DESCRIBE THE PROCESS.............................................................................93 STEP 4: IDENTIFY SUPPLIER/CUSTOMER RELATIONSHIPS.........................................94 STEP 5: IDENTIFY MEASURES OF PERFORMANCE.....................................................94 STEP 6: DEVELOP POSSIBLE CAUSE FACTORS..........................................................94 STEP 7: DOCUMENT WHAT WAS LEARNED...............................................................94 STEP 8: PLAN............................................................................................................ 94 STEP 9: OBSERVE AND ANALYZE..............................................................................95 STEP 10: SYNTHESIZE............................................................................................... 95 STEP 11: ACT............................................................................................................ 95 5.4.LMI CIP PERSONAL IMPROVEMENT MODEL.........................................................95 STEP 1: ENVISION PERSONAL IMPROVEMENT...........................................................96 STEP 2: ENABLE PERSONAL IMPROVEMENT..............................................................96 STEP 3: FOCUS ON IMPROVEMENT........................................................................... 96 STEP 4: IMPROVE YOUR JOB..................................................................................... 97 STEP 5: IMPROVE YOURSELF.................................................................................... 97 STEP 6: HELP OTHERS IMPROVE...............................................................................97 STEP 7: EVALUATE PERSONAL IMPROVEMENT PROGRESS........................................97 5.5.NPRDC PROCESS IMPROVEMENT MODEL............................................................98 STEP 1: PLAN........................................................................................................... 98 STEP 2: DO............................................................................................................... 99 STEP 3: CHECK......................................................................................................... 99 STEP 4: ACT.............................................................................................................. 99 5.1.PROCESS ANALYSIS TECHNIQUE (PAT).............................................................101 5.1.1.FLOW CHARTING AND PROCESS ANALYSIS TECHNIQUE................................102 5.1.2.WORK FLOW ANALYSIS (WFA).......................................................................103

116

5.1.3.VALUE ANALYSIS APPROACH.........................................................................104 5.1.4.NOMINAL GROUP TECHNIQUE........................................................................105 5.1.5.FISHBONE DIAGRAM OR CAUSE-AND-EFFECT DIAGRAM................................107 5.1.6.PARETO ANALYSIS......................................................................................... 108 Contents................................................................................................................. 110

117