2-1

Productivity

 Productivity ratios are used for

 Planning workforce requirements
 Scheduling equipment

 Financial analysis

 Productivity
 A measure of the effective use of resources,
usually expressed as the ratio of output to input.
2-2

Productivity

 Partial measures
 output/(single input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)
Outputs
Productivity =
Inputs
2-3

A. Productivity Growth

Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
2-4 C. Examples of Partial Productivity
Measures

Labor Units of output per labor hour

Units of output per shift
Productivity Value-added per labor hour

Machine Units of output per machine hour

machine hour
Productivity
Capital Units of output per dollar input
Dollar value of output per dollar input
Productivity
Energy Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Productivity
2-5

Example

7500 Units Produced

Sold for Rs.10/unit

What is the
Cost of labor of Rs.10,000 multifactor
productivity
Cost of materials: Rs.5,000 “MFP”?

Cost of overhead: Rs.20,000

2-6

Example Solution

MFP = Output
Labor + Materials + Overhead

MFP = (7500 units)*(100)

10,000 + 5,000 + 20,000
MFP = 750,000
35,000
MFP = 21.420
2-7

Factors Affecting Productivity

Management Capital

Technology Quality
2-8

Factors Affecting Productivity

1. CAPITAL

2. QUALITY

3. TECHNOLOGY

4. MANAGEMENT
2-9

Other Factors Affecting Productivity

 Standardization
 Use of Internet

 Computer viruses

 Search for right product or misplaced

item
 Scrap Rates

 New Workers
2-10

Other Factors Affecting Productivity

 Safety
 Shortage of IT Trained Workers

 Layoffs

 Labor turnover

 Design of the workspace

 Motivation or Incentive plans that reward

productivity
2-11

Bottleneck Operation
 Bottleneck is one process in a chain of processes,
such that its limited capacity ( increased time of
completion, or increased labour requirement)
reduces the capacity of the whole chain
2-12

Improving Productivity

1. Develop productivity measures

2. Determine and isolate critical (bottleneck)
operations
3. Develop methods for productivity improvements
4. Establish reasonable goals
5. Get management support
6. Measure and publicize improvements
7. Clearly differentiate between productivity and
efficiency
2-13

Pakistani Productivity Example

 Calculate the change in productivity of Pakistani
Textile Industry between the years 2003-04 and
2004-05? ( Installed Capacity)
Parameter 2003/4 2004/5 Change
Number of 399 426
mills
Spindles (000) 9286 9815
Rotors(000) 145.6 151.6
2-14

Pakistani Productivity Example

 Calculate the change in productivity of Pakistani
Textile Industry between the years 2003-04 and
2004-05? ( Working Capacity)
Parameter 2003/4 2004/5 Change
Number of 4.3 4.9
Looms(000)
Spindles (000) 7710 8531
Rotors(000) 67.3 75.1
2-15

Pakistan Automobile Industry

 Calculate the Productivity Change for Pakistani Automobile
Industry between the years 2003-04 and 2004-05?

Type 2003-04 2004-05 % change in

Productivity
Cars 79655 100213
Motorcycles 263149 386589
Trucks 1669 1999
Buses 1151 1503

Tractors 28583 35308