Industrial Engineering

Productivity
• Concept- It is quantitative relation between what we produced and we use
as a resource to produce it
• It is the arithmetic ratio of amount produced (output) to amount of
resources (Input)
• Productivity= Output/Input
• Refers to the efficiency of production system, also an indicator of how well
the factors of production(Capital, labor, machine, land and energy) are
utilized
• Economist determines it from Gross National product
• Manager view it as cost cutting and speed up
• Engineers think it in terms of more output per hour
 Definitions of productivity
• It is function of producing more and more of everything to more and more
people with less and less consumption of resources
• It is a measure of how well the resources are brought together in an
organization and utilized for accomplishing a set of objectives
• Productivity is concerned with establishing congruency between
organizational goals and societal aspiration through input-output relationship
• Productivity is multiplier effect of efficiency and effectiveness
 Production
• It is process or procedure to transform a set of input into output having the desire utility and quality
• It is a value adding process
• Concept of production and productivity is different as production refer to absolute output whereas
productivity is relative term wherein output always expressed in terms of input
• Increase in production may not be increase in productivity
Problem- A company produces 160 kg of plastic molded parts of acceptable quality by consuming 200 kg of raw
materials for a particular period. For next period, the output is doubled (320 kg) by consuming 420 kg of raw
materials and for third period, the output is increased to 400 kg by consuming 400 kg of raw material.
Solution- During first year, production is 160 kg
Productivity= Output/Input = 160/200= 0.8= 80%
For second year, production is increased to 320 kg, increased by 100%
Productivity= Output/Input = 320/420= 76%
For third period, production is increased to 400 kg, increased by 150%
Productivity= Output/Input = 400/400=100%
Comment- Though for second period, production is doubled but productivity is decreased and for third period
the production is increased by 150% and productivity is increased to 100%
 Productivity Measures
Partial Productivity Measures(PPM)
• Depending upon individual input, partial productivity measures expressed as
Partial productivity = Total Output/ Individual Input
1. Labor productivity= Total output/Labor input (man-hours)
2. Capital productivity= Total output/Capital input
3. Material productivity=Total output/Material input
4. Energy productivity = Total output/Energy input
▪ This can not represent the overall productivity of the firm
▪ It over emphasize on one of the input factor to the extent that other inputs are underestimated or
ignored.
The following information regarding the output produced and inputs consumed for a particular time
period for a particular company given below
Output = Rs.10000
Human Input = Rs. 3000
Material Input = Rs. 2000
Capital input= Rs 3000
Energy Input = Rs.1000
Other miscellaneous= Rs.500
Compute the various productivity Indices
Sol- 1. Labor (Human) productivity = Total output/ Human input = 10000/3000= 3.34
2. Material productivity = Total output/ Material input= 10000/2000= 5
3. Capital Productivity= 3.34
4. Energy Productivity=10000/1000= 10
5. Other=10000/500=20
Total productivity= total output/total input= 10000/9500= 1.05
 Numerical
• A factory an manufacture two products A and B by using either of two materials P and Q. A is expected to sell
at Rs. 70 per unit and product B at Rs.30 per unit. The operating data are as follows
Description Type Material P Material Q
Output A 200 units 400 units
B 300 units 200 units
Quantity of raw material usage 1000 kg 1000 kg
Labor usage 300 man hrs 250 man hrs
Energy electric consumption 1000 KWhr 1500 KWhr
Cost of raw material/kg Rs.20 Rs.30
Labor per man hour Rs. 5 Rs. 5
Electric energy/ KWhr Rs.1.5 Rs.1.5

• Solution- Productivity= Value of output/Value of input

• Sales value of output with material P = output of product A in units * rate /unit of A + output of product B *
rate/ unit of B = 200* 70 +300 * 30=
sales output values, P=Rs.23000
• Sales value of output with material Q = 400 *70 + 200 *30=34000
Partial Productivity measures
Productivity of raw materials = Sales
value of output/ value of raw material
used
Labor productivity= sale value of
output/value of labor
Electrical energy productivity
Material P
Total output/ value of raw material=
23000/ (1000*20)= 1.15
Total output/ value of labor= 23000/
(300*5) =15.34
Total output/ value of energy=
23000/(1000*1.5)= 15.34
Material Q
Total output/ value of raw material=
34000/(1000*30)= 1.13
34000/ (250*5)=27.2
34000/(1500*1.5)=15.11
 • Following information is available for factory
Daily working hours=8
No. of working days in a week= 6
No. of operators =20
Standard hours per unit of the production=4 hrs.
During particular work
Number of units produced=48
Absentee man days=40
Idle time due to load shedding=30 man days
Find-
Absenteeism %, Labour utilisation %, production efficiency of labour
And overall productivity of labours in terms of units
produced/week/employees
• Absenteeism % = (Absentee mandays/week) / Total operator mandays / week
=40/ (20 * 6) = 40/120= 0.33= 33%
Labor utilization%=(working mandays/week)/ (attended mandays /week)
= (20*6) - 40 - 30 / (20*6 - 40) =50/80= 62%
Production efficiency of labour = 4 * 48/ (20*6-40-30) *8= 192/400 = 48%
Overall productivity of labor in terms of units produced/week/employee= 48/20
48/20=2.4 units/week/operator
 Productivity Model
• Kendrick-Creamer Model
• Sumanth’s Model
• Crag and Harris Model
• Taylor and Davis model
• APC Model
 Kendrick and Creamer Model
• It introduces productivity indexes and proposed two types of indices:
total productivity and partial productivity
• Partial productivity index for a period = output in base period price/
any input in base year price
• Total productivity index= measured period output in base period
price/ measured period input in base period price

• Total factor productivity index= net output/ total factor input

• Net output= gross output- intermediate goods and services
• Total factor input= manhour input and total capital
 Sumanth’s model
• This model applied to any manufacturing organization and service company
• Total productivity= total tangible output/Total tangible input
• Total tangible outputs are values of finished goods, value of partial units
produced, dividends on securities, interest and other income
• Total tangible input= value of (human + material + capital + other inputs) used
• Output and inputs must expressed in common measurement unit. Best way to
express it in rupee value.
• To compare productivity, indices are adjusted to the base year. Deflator is
used to adjust these indices which nullify the effect of changing price from one
year to another
• Deflator= Current year price/Base year price
 Following are the information given in pertaining to firms performance for last four period. Compute partial productivity
and total productivity indexes for company for each of four periods
Particulars Period-1 Period-2 Period-3 Period-4
A. Output 2500 2200 2800 3200
1. Finished good produced

2. Work in process 1200 1600 1000 4000

%completion 60 50 30 15
Price per unit(Rs) 1000 1200 = 3013513.5 1500 1700

3.Dividened from securities 12000 15000 28000 29000

Deflator for items(3) 1 1.11 1.12 1.5

B. Inputs 10000 12000 12000 10000
1. Skilled labor(hrs)
Average wage rate 60 70 745 75
2. Unskilled labor 5000 8000 5000 3000
Wage rate 30 40 40 50
3. Raw Materials 20 18 23 25
Price per ton 1200 1600 2000 2000
4. Total plant hrs worked 1800 2400 2500 2500
Plant hour rate 650 650 1500 2400
5. Energy 5000 3000 2000 1500
Oil
Coal 200 150 50 -
• Deflator for period 2 = Current year price/base year price(Period-I)
• Total output for period-2=
Craig and Harris model
• Model points out inadequacy of partial productivity measure.
• It is also called ”Service flow model” as physical inputs are converted
into rupee that are payment for services provided by inputs
• Productivity viewed as efficiency of conversion process
• P= O/ (L+C+R+Q)
 Taylor and Davis model
• They have derived total factor productivity model(TFP)
• TFP= (S+C+ MP –E)/(W+B)+[(KW+KF)fb *d
Where S= Net sales adjusted (i.e. deflated to base year)
C= Inventory change(Raw materials, finished goods and WIP)
MP= Manufacturing plant (Unsaleable products like jigs and fixture, SPM)
E= Exclusions (Materials and services purchased from outside + depreciation of buildings + plant +
equipment +rental)
W=wages, B= Benefits KW= Working capitals, KF= Fixed capital
Fb= investor contribution(expressed as %), df= price deflator
In this model, raw material was not considered as input on basis that raw material is result of some
other labour and effort
 APC Model
• It distinguish among profitability, price recovery and productivity
• Utilised to measure productivity changes in labour, materials, energy and
capital.
• Measure corresponding effect each one has on profitability
• Productivity related to quantities of output and inputs and price recovery
relates to price of output and costs of inputs,
• Price recovery is the degree to which input cost increases are passed on to
customers in form of higher output price
• Profitability = Revenue/ Cost
= (Output Quantities * Sale Price) / (Input Quantities *Unit Cost)
= (Output Quantities/Input Quantities) * (Sales Price/ Unit Cost)
Profitability = Productivity * PRICE RECOVERY
 Work study
• It forms basis for work system design.
• It is generic term for those techniques, method study and work measurement which
are used in the examination of human work in all its contexts. And which lead to
systematically to the investigation of all factors which affect the efficiency and
economy of the situation being reviewed, in order to effect improvement.
• Method study is systematic recording and critical examination of existing and
proposed ways of doing work, as a means of developing and applying easier and
more effective methods and reducing cost.
• Work measurement is the application of techniques designed to establish the time
for qualified worker to carry out a specified job at a defined level of performance.
• Method study is concerned with reduction of the work content and
establishing the one best way of doing job where as the work
measurement is concerned with investigation and reduction of any
ineffective time associated with the job and establishing time
standard for the operation carried out as per the standard method
Steps involved in work study
• 1. SELECT
• 2. RECORD
• 3. EXAMINE
• 4. DEVELOP
• 5. MEASURE
• 6. DEFFINE
• 7. INSTALL
• 8.MAINTAIN
Concept of work content
• Amount of work contained in a given job referred as work content.
For a given job work content is measured in terms of man-hours or
machine-hours
• 1. Basic work content:- minimum time required to do an operation or
job. This can not be reduced
• 2. Excess work content: Actual time required to complete an
operation or job is more than basic time in practical situation. This
additional portion is called excess work content
 Demand Forecasting
• LEAST SQUARE METHOD:
• Mathematical method of obtaining “the line of best fit between the
dependent variable and independent variable.
• Sum of the deviations of various points from the line of best fit is minimum
or least.
• Y= a + b * x
• b- slope of the line
• a- is the y-intercept
• ∑y= N*a + b. ∑x
• ∑xy = a* ∑x + b*∑x²