PRODUCTIVITY

Productivity is a measure of operations management performance. Productivity plays a

dominant part in the standard of living of a community.
Operations management  productivity  quality of life

Economy and quality of life of any nation depend on its ability to sell its products and
services in the world market.

Factors contributing to decline in productivity

1. Short term financial results.
2. Imitation rather than innovation.
3. Company and equipment acquisition rather than product innovation and
process improvement.
Productivity is a measure of how well resources are managed and utilised in achieving a set
of desired results. It is the ratio of output to input. The ratio of result achieved to the
resources consumed.

Productivity = output/input = result achieved/resources consumed.

Productivity can be measured for a nation, an industry, an organisation, a department, or an

individual. It may be measured in terms of all resources consumed (total factor productivity)
or of a subset of resources. Labour productivity and capital productivity are examples of
partial productivity measures.

The measurements are especially useful when comparing the results achieved during one time
period to those achieved in another or when comparing the productivity of two individual
organisations, departments or two nations.

When an index is used, the productivity during a base period is given the value of 100 and
subsequent measurements focuses on the improvement or decline in productivity.

Comparing productivity in successive years or from one period to a base period enables
management to measure the increase or decrease in productivity and evaluate management
performance and decisions.

Measurement of productivity

Total factor productivity of an organisation equals its total output divided by the cost of all
contributing factors used. The actual measurement requires defining and measuring the
output and input.

T F P = output/[labour + capital + materials]

For a national economy T F P = gross national product (GNP)/ cost of all the contributing
factors.
A partial productivity measure is the ratio of the value of output to one of the inputs (single
factor) or a subset of inputs (multi- factor) example,

Single Factor Productivities

Labour productivity = Output/Labour hour (or cost)
 Capital productivity = Output/Capital cost

Multi- factor productivity

Labour and Capital productivity = output/(Labour + Capital Cost)

Relative productivity for any measure of productivity in a given period may be measured by
an index such as the following

Productivity index = [Productivity at a specified period/Productivity at a base

Period] x 100.
Industry productivity
The office of Labour statistics publishes productivity data for a wide range of manufacturing
and service industries. Although the indices are expressed in terms of output per employee
hour, many factors in addition to skills and effort of the workforce determine the level of
productivity.

Factors affecting productivity

1. Capacity utilisation and availability of capital.
2. Technological innovation.
3. Managerial skills.
4. Output per Labour hour.
5. Pricing obtainable for products.

Productivity measurement in manufacturing activities

1. Labour
Labour (direct, indirect or composite) = Total hours/Units produced.
Labour efficiency = Total hours/units produced.
= Total hours in productive activity/Standard hours.

2. Quality.
Yield = [Total units - Rejected units]/ Total units produced.
Scrap rate = (Sales value of scrap + ost of rework) / (Total shipment + Inventory
adjustment).
Warranty cost factor = Cost of warranty repairs / value of shipment during
warranty periods.
Idle cost factor = Productivity idle time due to poor quality/Total productive time.
Liability cost rate = Liability cost / Value of output.

3. Materials management ratios.

Down time = Productive time lost due to material shortages / Total
productive time.
Shipment = Shipment on schedule/Total shipment.
Inventory turns = Cost of sales / Inventory investment.

4. Safety Loss time

Lost time = Productive time lost due to accidents/Total productive time.

5. Manufacturing lead time.

Manufacturing lead time = Queue times + Set-up time + Wait time.
 Manufacturing cycle efficiency = Total operation time (set-up time + run time) /
Total manufacturing lead time.

Productivity measurement in service activities

Service industries provide their customers with the following intangible goods;
a. Atmosphere
b. Nostalgia
c. Friendliness
d. Security
e. Prestige
f. Reliability
1. Applications processing = Number of applications processed properly/staff
hours.
2. Criminal investigations = Crimes solved / Crimes reported.
3. Ambulance response efficiency = Response within time limit / Total number of
calls.
4. Theatre occupancy = Total number of tickets sold / Number of performances.
5. Street cleaning efficiency = Cost / Kilometers cleaned.
6. Court utilization = Cases adjucated/Days in session
7. Hotel occupancy = Occupied rooms in a day/Total room days
8. Theatre occupancy = No. of tickets sold/No. of performances