Post Graduate Programme in Project

Engineering and Management

PEM M C02: Operations

Management
Dr. ANAND PRAKASH

Productivity and work-study

time study and method study
SESSION 16

Productivity
Ratio between output and input.
Arithmetic ratio between the amount produced and the
amount of any resources used in the production.
The resources may be: land, material, plant, machines,
tools, labor. It could be combination of all!
Over a period of time, one can say that productivity has
increased.
How?
Combination of improved technology, better planning, greater
skills etc.

Factors tending to reduce

productivity
Work content added due to the product
The product or its components are designed such that
it is impossible to use most economical
manufacturing processes.
Excessive variety or lack of standardization.
Incorrect quality standards.
Excessive amount of material removal required.

Factors tending to reduce

productivity
Work content added due to process
Incorrect machine (and/or hand tool) used
Process not operated properly
Non-optimal layout with wasted movements.
Working methods of operation causing wasted
movements, time and efforts.

Factors tending to reduce

productivity
Ineffective time due to management
Marketing policy which demands unnecessarily large
number of products.
Failing to meet customers requirement from the
beginning.
No plan for flow of work.
Improper supply of material, equipment.
Improper maintenance of plant and machines.
Insufficient safety measures.
Improper working conditions resulting in interrupted work.

Factors tending to reduce

productivity
Ineffective time within the control of worker
Taking time off without good cause: by lateness, by
idling at work etc.
Careless workmanship causing scrap or rework.
Failing to observe safety standards.

Management techniques to
reduce
work content

Work Study is the systematic examination of the

methods of carrying on activities so as to improve
the effective use of resources and to set up
standards of performance with reduced work
content for the activities being carried out.
Work Study thrive to be successful because it is
systematic both in the investigation of the
problem being considered and in the development
of its solution.
Techniques of work study are method study
and work measurement.

Techniques of work study

Method study is the systematic
recording and critical examination of
ways of doing things in order to make
improvements.
Work
measurement
is
the
application of techniques designed to
establish the time for a qualified
worker to carry out a task at a defined
rate of working.

Method Study
Method study is the systematic
recording
and
critical
examination of ways of doing
things
in
order
to
make
improvements.
The basic approach to method study
consists of the following eight steps:

Method Study
1. SELECT the job or process to be studied (M.S. & W.M.)
2. RECORD from direct observation everything that happens,
using the most suitable of the recording techniques, so that
the data will be in the most convenient form to be analyzed
(M.S. & W.M.)
3. EXAMINE the recorded facts critically and challenge
everything that is done, considering in turn: the purpose of
the activity; the place where it is performed; the sequence in
which it is done; the person who is doing it; the means by
which it is done (M.S. & W.M.)
4. DEVELOP the most economic method of taking into account
all the circumstances (M.S.)
5. MEASURE the quantity of work involved in the method
selected and calculate a standard for its performance (W.M.)
6. DEFINE the new method and the related time so that it can
always be identified (W.M.)
7. INSTALL the new method as agreed standard practice with
the time allowed (M.S.)
8. MAINTAIN the new standard by proper control procedure
(M.S.)

Selecting the
studied

job

or

work

to

be

There are three factors that should be kept in mind

when selecting a job.

1. Economic or cost-effective considerations.

2. Technical considerations.
3. Human considerations.

1 . Economic considerations
It is obviously a waste of time to start or continue a long
investigation if the economic importance of a job is
small. Questions that should always be asked

Will it pay to begin a method study of this job? Or

Will it pay to continue this study?

2.
Technical
considerations:

or

technological

One of the important considerations is the desire of the

management to acquire more advanced technology.
Therefore, management may want to computerize its office
paperwork or its inventory system, or to introduce
automation in the production operations.
Before such steps are taken, a method study can point out
the most important needs of the enterprise in this respect.
The introduction of new technology should therefore
constitute an important factor in the choice of methods of
work to be investigated.

3.Human considerations:
4. Certain operations are often a cause of dissatisfaction by
workers.
They may bring on fatigue or monotony or may be unsafe to
operate.
The level of satisfaction should point to a need for method
study.

Record the facts

The next step in the basic procedure, after selecting the
work to be studied, is to record all the facts relating to
the existing method.
The success of the whole procedure depends on the
accuracy with which the facts are recorded, because they
will provide the basis of both the critical examination and
the development of the improved method.
Recording serves essentially as a basis for following
analysis and examination.
Recording may be carried out in two phases:
First, a rough sketch or charting of the job being
studied to establish whether the recorded information
is of use;
Second, a more formal and accurate chart or diagram
to include in a report or presentation.

Examine critically: by using the questioning

technique.
The questioning technique is the means by which the
critical examination is conducted, each activity
being subjected in turn to a systematic and
progressive series of questions.
The primary questions
The questioning sequence used follows a wellestablished pattern which examines:

 In the first stage of the questioning technique, the

purpose, place, sequence, person and means of
every activity recorded are systematically
questioned, and a reason for each reply is
required.

The secondary questions

The secondary questions cover the second stage of
the questioning technique, during which the answers
to the primary questions are subjected to further
question to determine whether possible alternatives
of place, sequence, persons or means are feasible
and preferable as a means of improvement upon the
existing method
Therefore, during this second stage of questioning
(having asked already, about every activity recorded,
what is done and why is it done), the method study
person goes on to inquire:
What else might be done? And, hence: What should
be done? In the same way, the answers already
obtained on place, sequence, person and means are
subjected to further inquiry.

 Combining the two primary questions with the two

secondary questions under each of the headings
purpose, place, etc., yields the following list,
which sets out the questioning technique in full:
PURPOSE: What is done? Why is it done? What else
might be done? What should be done?
PLACE: Where is it done? Why is it done there? Where
else might it be done? Where should it be done?
SEQUENCE: When is it done? Why is it done then?
When might it be done? When should it be done?
PERSON: Who does it? Why does that person do it?
Who else might do it? Who should do it?
MEANS: How is it done? Why is it done that way? How
else might it be done? How should it be done?

These questions, in the above sequence, must be

asked systematically every time a method study
is undertaken. They are the basis of successful
method study.

Setting Time Standards for

work
with machines

 Machine maximum time is the maximum

possible time during which a machine or group of
machines could work within a given period, e.g.
168 hours in one week or 24 hours in one day.
Machine available time is the time during
which a machine could work based on attendance
time, i.e. working day or week plus overtime.
Machine idle time is the time during which a
machine is available for production or ancillary
work.
Machine ancillary time is the time when a
machine is temporarily out of productive using
due to change-over, setting, cleaning, etc.

 Machine down time is the time during which

a machine cannot be operated on production
work
due
to
breakdown,
maintenance
requirements, or for other similar reasons.
Machine running time is the time during
which a machine is actually operating, (i.e. the
machine available time less any machine down
time, machine idle time, or machine ancillary
time).
Machine running time at standard is the
running time that should be incurred (acquired)
in producing the output if the machine is
working under optimum conditions.

For this purpose three indices are commonly used:

Machine utilization index, is the ratio of
Machine running time to machine available time.

Machine efficiency index, is the ratio of

Machine running time at standard to machine running
time.

Machine effective utilization index, the ratio of

Machine running time at standard to machine available
time.

Machine effective utilization index ratio can be

used to provide an indication of the scope for cost
reduction that would be available if the machine
were operated at full efficiency for the whole of the
working time.

Standard Time
Work Measurement helps determine how
long it should take to do a job
Involves determining Standard Time
Standard time: the length of time a qualified worker,
using appropriate processes and tools to complete a
specific job, allowing time for personal fatigue, and
unavoidable delays

Standard time is used in:

Costing the labor component of products
Tracking employee performance
Scheduling & planning required resources

Setting Standard Times

1. Choose the specific job to be studied
2. Tell the worker whose job you will be studying
3. Break the job into easily recognizable units
4. Calculate the number of cycles you must observe
5. Time each element, record data & rate the
workers performance
6. Compute the normal time
7. Compute the standard time

How to do a Time Study

When making a time study several
decisions are made to assure desired
results:
# of observations to make
Desired level of accuracy
Desired level of confidence
estimated standard time

for

the

Desired accuracy level is typically

expressed as a % of the mean observed
times

Doing a Time Study

Need to determine how many observations are
required
Involves determining the level of accuracy
required and confidence level
desired
2

z s
n
a x

n: number of observations of an element that are needed

z: the number of normal standard deviations needed for desired
confidence
s: the standard deviation of the sample
a: desired accuracy or precision
x-bar: the mean of the sample observations

Pats Pizza Place: Pat hires an analyst to determine a standard

time to prepare a large pepperoni and cheese pizza. He takes 10
observations of the 7 elements and calculates the mean time
and the standard deviation per element. He must then calculate
the # of observations to be within 5% of the true mean 95% of
the time.

The analyst must calculate the observations for each element

to determine how many additional observations must be
taken. The maximum number of 25 (in this case) for element
#7 means that an additional 15 observations must be made
and then the observed times are revised.

Other Time Factors Used in

Calculating Standard Time
The normal time (NT) is the mean
observed
time
multiplied
by
the
performance rating factor (PRF)
The PRF is a subjective estimate of a
workers pace relative to a normal work pace
The frequency of occurrence (F) is how
often the element must be done each cycle.

Other Time Factors Used in

Calculating Standard Time
The allowance factor (AF) is the amount
of time allowed for personal, fatigue, and
unavoidable delays
Standard
Time=normal
allowance factor, where:

time

1
1

1.176 117.6%
1 PFD 1 0.15
ST (NT)(AF)
AFTme Worked

Calculating Normal Time and

Standard Time at Pats Pizza

The standard time for preparing a large, hand-tossed

pepperoni pizza is 2.312 minutes. This means that a worker
can prepare 207 pizzas in an 8-hour shift (480 minutes
divided by 2.312 minutes)

Work Sampling Time

Studies
Salespeople

Telephone
sales
12%

Telephone
within firm
13%

Sales in
person
20%

Travel
20%
Paperwork
17%
Lunch and
personal
10%
Meetings
and other
8%

Work Sampling Time

Studies
Startup/pep talk
3%

Assembly-Line
Employees

Breaks and lunch

10%
Dead time
between tasks
13%
Productive
work
67%

Unscheduled tasks
and downtime
4%
Cleanup
3%

Other Time Study Methods

Elemental time data establishes standards
based on previously completed time studies,
stored in an organizations database.
Predetermined time data (e.g. MTM and MTS)
is a published database element time data
used for establishing standard times
Reach, grasp, move, engage, insert, turn, etc.

Work Sampling is a technique for estimating

the proportion of time a worker spends on an
activity

Wage incentive plans, work

sampling
SESSION 17

Work Sampling Procedures

1.
2.
3.
4.

5.

6.

Identify the worker or machine to be sampled

Define the activities to be observed
Estimate the sample size based on level of
accuracy and confidence level
Develop the random observation schedule.
Make observations over a time period that is
representative of normal work conditions
Make you observations and record the data.
Check to see whether the estimated sample
size remains valid
Estimate the proportion of the time spent on
the given activity

Work Sampling Example: We are interested in

estimating the proportion of time spent by secretaries
arranging and scheduling travel. We are considering the
possibility of bringing an on site travel agency to free up
secretaries from this time consuming task. We estimate
that the proportion might be as high as .50.
Step 1 We need to estimate the number of observations
needed to provide an estimate with 97% confidence (z=2.17),
0.5
and the resulting estimate will be within 5%pof
its true value. We
2
2
use
z
2.17

p 1 p

0.51 0.5 470.89 observations

0.05

Step 2 Based on the first 30 observations the secretary was

making travel reservations 6 times (6 out of 30 observations =
0.2). With this
new estimate, recalculate the sample size
2
2.17

needed
n .
0.21 0.2 302 observations
0.05
Final Step After making the 302 observations, the secretary
was making reservations 60 times or 19.9%. This estimate can
now be used to make the decision on savings that might result
by consolidating this task with an in house travel agency.

Wage Incentive Plans

A system which provides additional pay (or bonus)
for qualitative and quantitative performance
which exceeds standard or normal levels

Relationship building
Increasing productivity
Employee morale
Employee motivation
Employee regularity
Cost control
Improvement in quality of life
Optimum resource utilisation
Flexibility in changing business
conditions

Types of Wage Incentive

Plan
Most common
method
Time-based
wages
Mostly for
general roles
(administratio
n,
maintenance,
etc.)
Tendency to
creep
upwards
(inflation,
promotion,
etc.)
Easier from an

Time-Rate
System

Piece-Rate
System

Halsey Plan

Straight
Piece Rate

Rowan Plan

Straight-Piece
with minimum
guarantee

Emerson Plan

Differential
Piece Rate

Bedeax Plan

Payment by
results system
Outputrelated
payment
Encourages
effort at the
cost of quality
Home-based
workers, subcontractors
Working hours
are
unaccountabl
e
Earnings
mostly below

Straight Piece Rate

Example:
If a worker produces 325 pieces per
day and he is paid at the rate of
Rs.0.20 per piece, the daily wage is
325 0.20 = Rs.65

Straight Piece with

minimum guarantee
If output > expected or standard production then:
Wages = Base wage + (Current Output
Standard Production) X Wage Rate
Example
The standard output in a hypothetical welding
shop is 110 pieces per day. For a production less
than or up to the standard output, the minimum
guaranteed or daily base wage is Rs.70. Over the
standard output an incentive at the rate of Rs.0.50
per piece is given.If the output is 150. What is the
total wage?

Rs.90

Halsey Premium Plan

Time Taken (T)

Standard time (S)
Current Wage (R)
Incentive for time saved (Bonus
percentage)
Conditions:
Time Taken < or = Actual Time
Time taken > Actual Time (No incentive)

Halsey Premium Plan

(Contd)
When T < or = S
Total Wages (W) = S*R + S*R*Bonus rate
Example
If the standard time taken to produce 10
units is 240 hours and the actual time
taken is 220 hours, with average wages of
Rs.4 per hour and 50 % bonus. What is the
wage rate under Halsey Premium Plan?
240X4 + 240X4X0.5 =
1440

Halsey Premium Plan

(Contd)
When T > S
Total Wages (W) = S*R + R *(S-T)/100 (No
bonus)
Example
If the standard time taken to produce 10 units
is 240 hours and the actual time taken is 260
hours, with average wages of Rs.4 per hour
and 50 % bonus. What is the wage rate
under Halsey Premium Plan?

240X4 + 4X(240-260)/100
= 959.20

Rowan Plan

Time Taken (T)

Standard time (S)
Current Wage (R)
Incentive for time saved (No bonus
percentage)
Conditions:
Time Taken < or = Actual Time
Time taken > Actual Time (No incentive)

Rowan Plan (Contd)

When T < or = S
Total Wages (W) = S*R (No bonus)
Example
If the standard time taken to produce 10
units is 240 hours and the actual time
taken is 220 hours, with average wages
of Rs.4 per hour and 50 % bonus. What
is the240X4
wage rate
=under Rowan plan?

960

Rowan Plan (Contd)

When T > S
Total Wages (W) = S*R + R *[(S-T)/S]
(Never a bonus but an incentive to improve)
Example
If the standard time taken to produce 10 units
is 240 hours and the actual time taken is 250
hours, with average wages of Rs.4 per hour
and 50 % bonus. What is the wage rate under
Rowan plan?

= 240X4 + 4X(240-

Differences & Comparisons

Advantages

Straight Piece
Rate

Straight Piece
Rate with
minimum
guarantee

Simple and easy to

understand
Focus of Productivity
Satisfaction to efficient
and fast workers

Disadvantages
No quality focus
No job security
No compensation for breakdown
or sickness
No guarantee of minimum wage
Discourage group effort

No standardised basis for

minimum guarantee
Encouragement for
Beginners and average workers
higher production
cannot earn enough due to
Efficient methods can be inability to work faster
adopted to increase
Quantity will be
production
overemphasised than quality
Easy to prepare
(unless there is close
quotation estimates and
supervision
budgets
Overwork and health concerns
No pay for idle time
Not suitable for intermittent
Less supervision cost
work
Not suitable when jobs are unstandardised

Differences & Comparisons

Advantages

Hasley
premium Plan

Rowlan Plan

Simple
Beneficial for efficient
worker
Causes no harm to
trainee, new or slow
worker
Benefits sharing
Minimum base-wage
guaranteed
Checks over-speeding
overstrain by workers
Assured minimum basewage
Efficiency is rewarded

Disadvantages
Workers get a small percentage
of return over their achievement
Quality may suffer due to overachievement
Management gets a wrong picture
of workers ability

Discourages workers to overachieve

Difficulty in ascertaining wages as
it requires large data processing
Sharing of profit for overachievement may not be liked by
workers

Wages in India
Three types of wages: Minimum wages, Living wages, Fair
wages
Minimum wages (Revision every 5 years):
3 consumption units for 1 earner
Minimum food requirements of 2700 calories per
average Indian adult
Clothing requirement of 72 yards per annum per family
Rent corresponding to minimum area provided for
under Governments Industrial Housing Scheme
Fuel, lighting, etc expenditures that constitute to 20%
of the total minimum wages
Children education, medical requirement, minimum
recreation, etc that constitutes to 25% of the total
minimum wage
Local conditions and other factors affecting wages

Wages in India (Contd)

Minimum wages (Revision every 5 years):
Maharashtra state has devised minimum wages in
agriculture as follows
Scheduled
Employment*

Agriculture

Category
of
Workers

Total
Minimum
Wage
(Rs/Day)

Zone

Basic
Minimum
Wages

120.00

120.00

II

110.00

110.00

III

105.00

IV

100.00

*Scheduled employment means an employment

specified in the Schedule or any process or
branch of work forming part of such employment

V.D.A

No

105.00
100.00

Variable Dearness
Allowance: To protect
minimum wages from

Wages in India (Contd)

Scheduled
Employment

Automobile
Repairing
Workshops
and
Garages

Zone

Basic
Minimum
Wages

V.D.A

Total
Minimum
Wage
(Rs/Day)

Unskilled

73.08

53.31

126.38

Semiskilled

76.92

Skilled

80.77

53.31

134.08

Unskilled

II

69.73

53.31

122.54

Semiskilled

II

73.08

Skilled

II

76.92

53.31

130.23

Unskilled

III

65.38

53.31

118.69

Semiskilled

III

69.23

Skilled

III

73.08

Category
of
Workers

53.31

53.31

53.31
53.31

130.23

126.38

122.54
126.38

Wages in India (Contd)

Living Wage
More than the minimum wage
Considers national income
Paying capacity of industrial sector

Fair wage
Above minimum wage (lower-limit) and below
living wage (upper-limit)
Factors: labour productivity prevailing wage
rate, level of national income and its
distribution and capacity of industry to pay

Components of Employee
Remuneration
Financial
Basic Wages

Fringe
Benefits
Provident
fund
Medical
care
Accident
relief
Health and
group

NonFinancial

Incentives

Car and its

maintenan
ce
Club
membersh
ip
Paid
membersh
ip
Furnished

Job context
Challenging
job
Responsibilitie
s
Growth
prospects
Supervision
Working
conditions
Job sharing

Process of Managing
Compensation

Organisational Strategy
Compensation policy
Job analysis and evaluation
Analysis of contingent factors
Design
and
implementation
compensation plan
Evaluation and review

of

Cost-Revenue Model One Project

Quantity, Q An amount of the variable in
question, e.g., units/year, hours/month
Breakeven value is QBE
Fixed cost, FC Costs not directly dependent on the variable, e.g.,
buildings, fixed overhead, insurance, minimum workforce cost
Variable cost, VC Costs that change with parameters such as
production level and workforce size. These are labor, material
and marketing costs. Variable cost per unit is v
Total cost, TC Sum of fixed and variable costs, TC = FC + VC
Revenue, R Amount is
dependent on quantity sold
Revenue per unit is r

Profit, P Amount of
revenue remaining after costs
P = R TC = R (FC+VC)

Breakeven for linear R and TC

Set R = TC and solve
for Q = QBE
R = TC
rQ = FC + vQ
QBE
=

FC
rv

When variable cost,

v, is lowered, QBE
decreases (moves to
left)

Example: One Project Breakeven

Point
A plant produces 15,000 units/month. Find
breakeven level if FC = $75,000 /month, revenue is
$8/unit and variable cost is $2.50/unit. Determine
expected monthly profit or loss.

Solution: Find QBE and compare to 15,000; calculate

Profit
QBE = 75,000 / (8.00-2.50) = 13,636 units/month
Production level is above breakeven
Profit = R (FC + VC)
= rQ (FC + vQ) = (r-v)Q FC
= (8.00 2.50)(15,000) 75,000
= $ 7500/month

Profit