How to Increase Profit  


Increase Sales Volume (Increase Market share) Increase Sale Price Reduce Purchase cost of Input Reduce cost of production Improve quality (Reduce cost of Quality) Improve productivity

Example of Productivity



By spending Rs 100 I make 100 pieces, the productivity is 1 By spending Rs 200 I make 250 pieces , the productivity is 1.25 By spending Rs 400 I make 300 pieces, the productivity is 0.75 So my action 2 gives me higher productivity although action 3 gives higher output

‡ Number of products / No. equipment.ProductivityProductivity.Definition (Productivity is a ratio) The amount of output per unit of input (labor. and capital). of hours taken to produce them ‡ Revenue generated by employee / Salary of employee 4 .

Inputs          Materials Tools Equipment People Abilities People Attitude Knowledge Level Processes Systems Management 5 .

How to improve Productivity     Increasing the output with the same input Decreasing the input for the same output Increasing the output more than the increase in input Increasing the output with decreasing input 6 .

Continuous Improvements 9. Quality Awareness and understanding 2. Problem solving Tools 10. Quality Processes 5. Statistical Application 11. Cross Functional Teams 7. Breakthrough Improvements 7 . Cost of Poor Quality 8. Quality Measurement 4. Quality Systems 6. Quality Principles 3.Human Resource Development (Employee Productivity) Identify Training Needs of Employees: 1.

Employee Motivation Maslow s Level Level Level Level Level 1: 2: 3: 4: 5: Hierarchy of Needs Survival Security of job Social Belonging Self Esteem Self Actualization 8 .

the environment for work should be conducive and enjoyable. 9 . The work alone may not motivate but challenges and responsibility would surely help Extrinsic motivators are related primarily to job benefits. Such motivators are short lived. one does the job in anticipation of a reward.Intrinsic and Extrinsic Motivators   To promote intrinsic motivation.

Strategic Steps to Improve Productivity       Improve processes by R & D or redesign or new technology Improve/provide new plant and equipment Simplify product spec and reduce variation Improve existing methods and procedures Improve the work plan and the use of manpower by automation Increase overall effectiveness of employees 10 .

Productivity and Profitability       Profitability is dependent on Break-even point BreakBEP is the point where the sales revenue equals to expenses Hence there is no profit & no loss at BEP Every business will try to lower the BEP so that they can make some profit BEP can be lowered by improving productivity thereby reducing cost BEP can not be lowered by increasing price as the market share is likely to shrink 11 .

BreakBreak-even Analysis      Everyone in the organization must know the breakbreak-even point (BEP) This gives them a clear picture of expenses and what it takes to run the business In a company it is every person s responsibility to bring down the break-even point breakCost reduction of any kind brings down the BEP When BEP comes down the profit improves 12 .


taxes for plant . component cost.Elements of Cost   Fixed cost has elements like plant and machinery depreciation. labour cost and electric power used to manufacture the product 14 . managers remuneration. common electricity use etc Variable cost is composed of material cost.

Partial & Total Productivity    Partial productivity is the ratio of output to one class of inputs while Total Productivity takes into consideration the sum total of inputs Partial Productivity=output Quantity / one class of input Total Productivity= output Quantity / total input quantity 15 .

Measures of Productivity   Partial Productivity Measure = PPM PPM= Gross Domestic Product / total Hours worked Total Productivity Measure = TPM TPM = Real Gross Output / Real Gross input TPM = Products+Services+value addition / Labour+Capital+Energy+Materials+Other Inputs    16 .

Incentives and Bonus 17 . Method study and Work measurement Product and Process improvements Automation to avoid manual effort Common sense Management Techniques Structured techniques like TQM. Kaizen. JIT. QC etc.Productivity Improvement        Create a Motivated atmosphere Work study.

Business Growth v/s Productivity      Improvement in productivity results in less requirement of labour force If there is no growth in the business then retrenchment of labour force is inevitable Growth is a natural outcome of improvement in productivity If there is no productivity improvement the business is likely to close down due to competition So business growth and productivity improvements take place simultaneously 18 .

employers and workers organizations They provide training .National Productivity Council (NPC)      NPC is a national level organization to promote productivity culture in India It is a non-profit organization established by GOI nonin 1958 It has equal participation from GOI. consultancy and undertaking research in the area of productivity It works in conjunction with Asian Productivity Organization (APO) an inter-Govt body of which interGOI is a founder member 19 .

agriculture.Objectives Of NPC     To promote the cause of Productivity in Industry. services and infrastructure sectors of economy It aims at enhancement of quality of life of people in general It aims at professional approach to provide worldworld-class services needed by Indian industry to become internationally competitive in a global economy NPC is also a change agent. aiming to assist central and state govt in improving the quality and efficiency of public services 20 .

Consultancy Services by NPC           Process Management Energy Management Environmental Management Integrated Human Resource Solutions Technology Management Agri Business Strategic Consultancy Information Technology Productivity Awareness Economic Services 21 .

KAIZEN It is a system of continuous improvement in quality  technology  processes  company culture  productivity  22 .

.KAIZEN  Kaizen is focused on making small improvements on a continuous basis and finding creative solutions instead of capital expenditures KAI ZEN to change or modify .to improve 23    =modify to improve .

shared and implemented 24 .What is Kaizen    Kaizen is a system in which every employee is encouraged to come up with small improvement suggestions in their area of work on a regular basis This is a continuous exercise 60/70 suggestions per employee per year are written down.

materials and supervision needed for employees to achieve higher standards 25 . Kaizen also involves providing the training. safety and effectiveness and reducing waste To support the higher standards.Process of Kaizen    Ideas are not for major changes Ideas are little changes on a regular basis always improving productivity.

Elements of Kaizen      Quality Circles Improved Morale Teamwork Personal discipline Suggestions for Improvement Happy employee is a Productive Employee  26 .

FIVE ³S´ Program Sort (clean up)  Systematize (organize)  Sweep (regular cleaning)  Standardize (simplify)  Self Discipline  27 .

seven deadly wastages Try solution (PDCA). plan do check act Implement solution Monitor results Standardize on new process 28 .Kaizen Problem Solving Tools         Pick a project (Pareto Principle) Gather data (Histogram and control chart) Find cause (Process flow diagram and fish bone diagram). Brainstorm Pick likely causes.

Kaizen v/s Innovation   Small improvements Fair knowledge Personal involvement Many people Improve the process   Major improvements Technology or equipment Money investment A few champions Improve results Mainly in good       29 .

Steps to Implement Kaizen        Discard conventional fixed ideas Think how to do it. use your wisdom Find root cause of the problem Seek wisdom of 10 people Kaizen ideas are infinite 30 . not why it can t be done Start by questioning current practices Do it right way. correct it Do not spend money for Kaizen. if you make a mistake.

faster delivery. safety.Benefits of Kaizen     Involves every employee in making a change Focuses on identifying problems at their source and addresses seven deadly wastages Continual small changes add up to major immediate benefits Results: Improved productivity. lower costs and greater customer satisfaction 31 . quality.

Suggestion Scheme      This is a method of cost reduction and productivity improvement The employees are working in the organization at different levels While on the job they get number of ideas in their mind to do some improvements Every improvement yields some gains To garner these gains suggestion scheme is implemented 32 .

American v/s Japanese Approach   

Both these countries have immensely benefited from this technique American style tends to buy ideas depending on how much the company benefits and give 10% to the suggestor Japanese style is to create ideas to make jobs easier to do and motivate the concept of group exercise

Suggestion Scheme in India 


In India we tend to follow American style A form is developed to be filled in by the suggestor where he has to write present method , proposed method and expected savings in money terms Such forms are collected periodically Suggestion committee approves/rejects the proposals based on implementability 1010-20% of annual savings are paid to the suggestor as one time award It is ensured that suggestor does not give suggestion on the area where he/she is employed


Structure of Suggestion scheme 

Scheme co-ordinator coSuggestion Scheme Committee The Suggestion Evaluator The Suggestor


Principles of Suggestion Scheme 

Give a subject for each month Motivate employees to think about that subject, like energy saving, water saving, Lubricant saving etc. Give details of the subject so that employees know the current consumption, the purchase price, best in the industry norms etc. Give a token gift for each suggestion Announce the annual awards to motivate employees

How to make the Suggestion Scheme effective? 


Respond to all the suggestions immediately Highlight the suggestions publicly Award must be given immediately for best suggestions Establish categories for regular awards Award presentation should be a big function Act upon the suggestions Participate in Indian National Suggestion Schemes Association contest

Kaizen v/s Suggestion Scheme          Kaizen is generally a group activity Suggestion Scheme is an individual activity Kaizen focuses on pain areas Suggestion scheme aims at cost reduction Kaizen is small continuous improvements Suggestion scheme can give big benefits Kaizen aims at eliminating pain areas in employees work Suggestion scheme aims at cost reduction in any department of the company Kaizen motivates employees and suggestion scheme focuses on award for cost reduction 38 .

Incentive Schemes        The sole objective of the incentive schemes is to increase the production with or without increase in productivity The basis of this system is on the time standards The standards are laid down and communicated to all workmen Anyone giving more production than the standard is paid extra This is one of the methods of sharing gains of improvement in production/productivity This is also a part of collective bargaining This is a useful tool when the demand for the product is high 39 .

Incentive Schemes     Incentive programs are used to motivate employees Different schemes are designed for individuals as well as for the groups This improves productivity of employees due to attraction of rewards It is necessary that employees and managers trust and respect each other 40 .

Advantages of Incentive Scheme     Employee effort is focused on important targets which match organizational goal Rewards are variable cost linked directly to results Incentives are directly related to improved performance Rewards go to the responsible persons for higher performance 41 .

Limitations of Incentive Schemes       Employees suspect that the standards are set unfairly on higher side Employees feel that they have to work very hard to get the benefit of rewards The schemes create unfair competition among employees Increased earnings result in tougher standards Schemes are sometimes complex to understand Schemes create friction between employees and management 42 .

if he finishes the job in 90 min in place of normal 120 min. This is common in project type of business  43 .Types of Incentive Plans  Piece Rate Plans Direct link of increased wages to the increase in production Standard Hour Plans Incentive is given for saving time.

Profit Sharing Plans     Profit sharing plan distributes a portion of the annual profit to the employees by way of ESOP (Employee stock ownership plan) Typically a percentage of profits is distributed among the employees The company gets loyalty and commitment in return The company does not pay any money but gives them shares based on their length of service and pay levels 44 .

Effects of Incentive Systems      In the beginning the production goes up but gradually this system loses the charm There are frequent clashes between union and management Unions oppose this system due to the abuses under such plans and ill effects Collective bargaining becomes very complex due to confusion created by complex incentive schemes Employees treat this as a matter of right and demand extra wages as annual bonus contd 45 .

Effects of Incentive System        Creates friction among workmen Tends to affect the quality of product Managements feel that the gain through such schemes is not adequate The cost of computation of extra wages for each worker becomes very high Customer discontent due to inferior quality Increased frequency of accidents DisDis-satisfaction among management staff to run such schemes due to frequent disputes 46 .

Work Study     Work study involves investigation of what employees do. how they do it and how long they take to do the job assigned to them Work study/ Industrial Engineering uncover inefficiency and task redundancy Change the methods and the need for the job itself may brought into question Diplomacy and sensitivity are integral part of work study/ Industrial Enginnering 47 .

critical scrutiny in order to make it more effective and / or more efficient Method study was designed for analysis and improvement of repetitive manual work but now it is used for all types of activities at all levels 48 .Method Study    Work study has two elements: Method Study ( Actions ) Work Measurement ( Time taken ) Method Study is the process of subjecting work to systematic.

2. the workplace and equipment Hand and body movements used in each step 49 . 3.Method study  1. 5. Defination: Method Study is a scientific & analytical procedure for determining a preferable work method considering Raw Material Design of the product Process or order of work Tools . 4.

machine time.Objective of Method Study     To find economy of money. tools etc Method Study is used for locating deficiency in any the factors stated above Method Study encourages designing a work method through logical analysis and synthesis Improve the work method to get maximum efficiency 50 . material. space. economy of human effort. economy of time. skill.

equipments and tools   C: Work content due to operator 51 .Analysis of Work Content             Reason of work Basic work content poor product design Material wastage Bad quality Poor layout Inadequate material handling Inappropriate work method Breakdown of machine Late coming/absenteeism Poor workmanship accidents    Category of work Unavoidable A: Work content due to poor design B: Work content due to process.

Analysis of work content        General study indicates that the basic work content is about 30% of total work and this can not be reduced A category is generally 50 to 54 % B category is about 18 to 20 % C category is 12 to 15 % Method study has the scope to reduce or eliminate all three types of work content A . B &C Type C is a bit sensitive and can be minimized However type A and B should be eliminated 52 .

Technique to Conduct Method Study        Select the task to study Record the facts about it Examine these critically Eliminate / reduce A B & C categories Develop a new efficient method Install / implement the new method Maintain the new method 53 .

Selection of Task         Decide aim of Study Determine the objective in terms of area of the job to be changed Establish better solution for doing the job Concentrate hand and body movements Study the process and work sequence Study product design Study input Raw Material Study layout . tools and equipment 54 .

Record the Facts      Record all facts and use charts and diagrams Collect and collate the data Analyze and arrive at a conclusion Get more data to verify the conclusions Try out the conclusions 55 .

Examine the data    The recorded data are subjected to examination and analysis Normal methods of this process are critical examination and system analysis The aim is to identify questioning process which will decide the improvements or beneficial change 56 .

Develop a new method      Thorough analysis automatically leads to identified areas of change The aim is to identify possible actions for improvement and develop a preferred solution Identify short term and long term solutions to get the benefits The success of method study project is realized when actual change is implemented The change should meet the initial objective at the time of selection of the project 57 .

retraining and supporting through the acquisition of new skills Installing new method may require a parallel running of old and new systems Sometimes there is only one chance to make a change It is essential to document the changes 58 .Install      Making a real change demands careful planning and handling of the people involved in the solution They may need reassuring.

Maintain       It is necessary to check that the new method is working as per expectations Also it is giving desired benefits It is common that people slowly shift to old methods Initiate Method audit to observe irregularities Industrial Engineers must monitor that the changes are followed in totality The changes have to be stabilized quickly 59 .

work methods. productivity and efficiency This will result in reduction in the risk of physical injury. stress and fatigue 60 .Ergonomics      Greek words Ergo means work and nomoi means natural laws This is the application of knowledge about human capabilities and limitations to the design of workplaces. products and organizational structures Ergonomics is based on the concept that workplace injuries and illnesses can be caused by the very tools and equipment used in the job processes The purpose of ergonomics is to promote physical comfort. equipment. tools.

Principles of Ergonomics    While working all activities should permit the worker to have several different healthy and safe postures Largest appropriate muscle groups should exert maximum where muscular exertion has to take place Work activities should be performed with the joints at about midpoint of their range of movement 61 .

leg cramps etc 62 .Factors affecting a worker          Force used by man causes exertion Repetition of action again and again Awkward posture of unnatural style Overexertion due to excessive strength Repeated exposure to work condition Temperature. backache. ventilation and humidity Noise level at workstation Poor lighting or seeing continuously Posture of man at work giving rise to muscular pain. neck ache.

Computer related problems      Workstation design Keyboard working height Wrist rest Monitors Chair design and adjustment procedure 63 .

especially sitting Bending twisting Repetitive work Vibration Sudden. pushing. pulling. carrying. unexpected movement 64 . holding Heavy work Static work postures.Manual material handling        Lifting .

critical scrutiny in order to make it more effective and / or more efficient Method study was designed for analysis and improvement of repetitive manual work but now it is used for all types of activities at all levels 65 .Work Measurement    Work study has two elements: Method Study ( Actions ) Work Measurement ( Time taken ) Method Study is the process of subjecting work to systematic.

Work Measurement       Work Measurement has another name which is called Time Study It is an appraisal in terms of value of work involving human effort It produces time standard for the performance of a series of acts by man or group of men The standard is carefully defined so that consistent & reliable measurements are made Normally the standard time is 30% higher than most efficient worker is likely to take under given conditions This 30% is called an allowance for an average worker who is not expected to be most efficient day after day 66 .

Objectives of Work Measurement        To set schedules To set labour standards for evaluating the performance of workmen To determine number of machines that a person may run To balance the work of crew of production line To determine the standard cost To determine equipment and labour requirement To determine basis of incentive wages 67 .

Method of measurement     Decide the task to be measured Identify and note down all the elements of each task and see if there are any unwanted elements Observe the task being done and ensure that reliable observations are noted Record the time taken by stopwatch on the time sheet. this is called Observed Time for each element 68 .

Standard Time   Standard Time = Basic time + Allowances Allowances are given for sitting standing crouching stretching temperature humidity etc Basic Time = Observed time + Rating Allowances vary from industry to industry Generally a personal allowance is 5% Fatigue allowance may vary between 10-20% 10Relaxation allowance & performance allowance 69      .

Benefits of Work Measurement        Improvements of methods Contract estimation Estimate employee cost for a project Facility Planning Scheduling and balancing gap-capacity gapManpower planning Accurate Incentive payments structure 70 .

diplomatic and discrete in communicating project outcomes 71 . fair.Problems in Work Measurement       Accuracy of measurement is always doubted by labour Employees are very sensitive to data inaccuracy when their incentive pay is calculated Unless method study is done time study should not be conducted All elements of work including wasteful work elements should be listed on paper Before the study is started it should be communicated to all concerned with purpose and method of study The Industrial Engineer has to be objective.

5 4 3.415 1 4 2 6 3 3.6 Total Standard Time 72 .696 6.930 4.043 3.5 6 3.353 4.840 6.Calculation of Standard Time Element Ba ic Time elaxation allo ance 10% 5% 5% 5% 5% 15% erformance allo ance 110% 110% 110% 110% 110% 110% Standard Time 4.554 30.2 5 5.

8 73 .5 hours and the standard time for one piece id 30 minutes then in 7.Standard production    If the worker is expected to work for 7.5 hours*60=450 min he is expected to produce 15 pieces If he produces 12 pieces his efficiency is 80% If his machine had one hour breakdown or power shutdown then his expected out put is 13 pieces and his effy is 12/13*100 and machine productivity is 12/15=0.

667 74 .Productivity     Efficiency = output / input Productivity = output / input If a worker has produced 80 pcs in one hour and the standard production is 100 pieces per hour his effy is 80% If a worker is expected to produce 750 pieces in 7.5 hours his effy is 100% and productivity of the machine is 500/750 = 0.5 hours and he produced 500 pieces and his machine was under breakdown for 2.

Productivity    Two steel plants having identical equipment with a capacity of 3000 mt/month One produces 3000 mt with 300 people and second produces 3000 mt with 250 people The productivity for the first one is 10 mt/man and it is 12 mt/man for the second one 75 .

Productivity    Two steel plants having identical equipment with a capacity of 3000 mt/month One produces 3000 mt with 300 people and second one produces 2400 mt with 300 people Productivity of first is 10 mt per man and for the second it is 8 mt per man 76 .

responsibility. effort and working conditions 77 . each job is to be evaluated based on importance and responsibility and then group the jobs for a particular wage structure It is essential to do comparison to evaluate worth of each job with respect to other Generally job evaluation is done along with union in the organization Job evaluation is done to decide the levels or grades Normally the grades are fixed based on skill.Job Evaluation       Job Analysis means activities involved in the job which include duties. responsibilities and accountability Job Evaluation is used for proper wage structure.

knowledge and abilities The horizontal movement is generally known as job rotation whereas the vertical movement is called a promotion with or without job rotation 78 .Job Rotation   Job Rotation involves moving employees to various positions in an organization with an effort to enhance their skills.

Advantages of Job Rotation     It is an excellent method for broadening individual s exposure to company s operations and for turning specialist into a generalist It reduces boredom and stimulate development of new ideas It can also provide opportunities for a more comprehensive and reliable evaluation of the employee over a period of time It is used to develop leadership qualities among the bright employees who can become the future leaders 79 .

5. 2. 6.Brain Storming    1. Brainstorming is a group activity The objective is to take benefit of synergy by involving all participants and obtain the benefit of collective thinking through a brainstorming session The rules of brainstorming are as under: A facilitator will lead the group The ideal group size is 5 to 12 All participants must be aware of the topic All ideas generated to be noted down on board The entire group must participate in the process Look at all ideas for their value 80 . 3. 4.

the entire group should get the full credit 9. If the idea is accepted.Brainstorming 7. A facilitator must keep the atmosphere relaxed and freewheeling 10. Judgment should not be passed during idea generation phase 81 . In case the idea is not accepted by the management. Encourage everyone to contribute 11. the same should be communicated to all members 8. Focus on quantity and not on quality of ideas 12.

determining best-ofhow they achieve those performance levels and using that information as a basis for our own company s targets. strategies and processes of implementation 82 .Benchmarking   Benchmarking is a systematic method by which organizations can measure themselves against the best industry practices It is defined as measuring our performance against the best-of-class companies.

Zerox could regain its market leadership by mid 1980 s Motorola successsfully practiced internal benchmarking resulting in ten fold improvement in ten years 83 .Benchmarking      Zerox corp USA introduced benchmarking in 1980 s when their global market share shrank to 35% in 1981 Having invented photocopying machines in 1959 the company had virtual monopoly till 1970 s Zerox became synonymous with photo copying With TQM approach with benchmarking as a quality tool.

Analysis. Integration and Action 84 . 2.  The 4 levels of Benchmarking are: Internal benchmarking Competitive benchmarking NonNon-competitive benchmarking World class Benchmarking The systematic management approach for Benchmarking has 4 phases: Planning.Benchmarking  1. 4. 3.

thereby producing the product with target goals or requirements with minimal variations He termed the word variation as noise His objective was to minimize the noise through on-line and off-line quality onoffactivities 85 .Taguchi¶s Quality Engineering    Dr Taguchi emphasized engineering approach to Quality.

Taguchi¶s Quality Engineering      Taguchi targets on design for Quality by defining three designed levels: System Design: ( Primary) Functional design focused on pertinent technology Parameter design: ( Secondary) a means of reducing cost and improving performance Tolerance design: ( Tertiary) a means of reducing variation by controlling causes. but at an increased cost Describe strategic ways of improving productivity 86 .

Question Bank     What is productivity and describe various ways of improving productivity What are the objectives and benefits of productivity How are the profits related to productivity. describe various ways of improving productivity Describe strategic ways of improving productivity 87 .

what steps are taken to lower the breakeven point Describe the relation between business growth & productivity What is NPC and what are their objectives 88 . draw the diagram and show all captions clearly What are fixed costs and variable costs.Question Bank     What is a breakeven point.

method study and studywork measurement 89 . benefits and limitations Describe work study.Question Bank       Differentiate: kaizen v/s innovation Differentiate: kaizen v/s suggestion scheme Describe the Steps to implement kaizen How to make suggestion scheme effective What is Incentive scheme. describe objectives.

Job Evaluation 2. Job rotation 3. Ergonomics  90 . Benchmarking 5. Taguchi s quality engineering 6.Question bank Describe the method by which we can calculate standard production  Short notes: 1. Brainstorming 4.