Chapter II:

PRODUCTIVITY
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PRODUCTIVITY
 An index that measures output (goods and services)
relative to the input (labor , materials, energy, and other
resources) used to produce them.
 A measure of the effective use of resources, usually
expressed as the ratio of output and input.
Output
Productivity = Input

 Productivity measures can be based on a single input

(partial Productivity ) on more than one input (multifactor
productivity), or on all inputs (total productivity).
MEASURING PRODUCTIVITY
• Partial measures = output
(single input)

• Multifactor measures = output

(multiple inputs)

• Total measure = output

(total inputs)
 MEASURES OF PRODUCTIVITY
Output Output Output Output
Partial Measures Labor Machine Capital Energy

Multifactor Measures Output Output

Labor + Machine Labor + Capital + Energy

Goods or Services Produced

Total Measure
All inputs used to produced them
PRODUCTIVITY MEASURES
Productivity Measure Given Examples

Units of output per labor hour

Labor Productivity Units of output per shift
Value – added per labor hour
Dollars/ Peso value of output per labor hour

Units of output per machine hour

Machine Productivity Dollar / Peso value of output per machine hour

Units of output per dollar / peso input

Capital Productivity Dollar / Peso value of output per dollar / peso input

Units of output per kilowatt-hour

Energy Productivity Dollar / peso value of output per kilowatt-hour
PRODUCTIVITY PROBLEMS
Problem 1: A company that processes fruits and vegetables is able to
produce 400 cases of canned peaches in one-half hour with four
workers. What is the labor productivity?

Labor Productivity = quantity produced

labor hours

= 400 cases

4 workers x 1/2 hour / worker

= 200 cases / hr
PRODUCTIVITY PROBLEMS
Problem 2: Four workers installed 720 square meters of carpeting
in 8 hours.

720 m2
Labor Productivity =
4 workers x 8 hrs/worker

= 22.5 m2 / hr

Problem 3: A machine produced 68 usable pieces in 2 hours.

Machine Productivity = 68 pieces

2 hours

= 34 pieces per hour

PRODUCTIVITY PROBLEMS
Problem 4:Determine the multifactor productivity for the combined input of
labor and machine using the following data :

Labor : P 20,000.00
Materials : P 5,000.00
Overhead : P 1,000.00
Output : 1,760 units

Multifactor Productivity = Output

Labor + Materials + Overhead

= 1760 units
P 20,000 + 5,000 + 1,000

= .07 unit / P
PRODUCTIVITY AND
EFFICIENCY
 Efficiency is a measure of how well the production or
transformation process is performing.
 It reflects the effective operation as measured by a
comparison of production with cost (as in energy, time,
and money).
 Increasing efficiency will boost the capacity of a
business, assuming there is no change in the number of
inputs employed. The capacity of a firm refers to how
much a business can produce during a specific period of
time.
 A more efficient business will produce lower cost goods
than competitors and may generate more profit possibly
at lower prices.
HOW TO IMPROVE
PRODUCTIVITY?
A company or a department can take a number of key steps
towards improving productivity:

1. Develop productivity measures for all operations;

measurement is the first step in managing and controlling
operation.
2. Look at the system as a whole in deciding which
operations are most critical; it is overall productivity that
is important. Use the bottleneck operation. Productivity
improvements to any non-bottleneck operations will not
affect the productivity of the system. Improvements in the
bottleneck operations will lead to increased productivity.
 HOW TO IMPROVE
PRODUCTIVITY?
3. Develop methods for achieving productivity improvements,
such as soliciting ideas from workers, studying how other
firms have increased productivity, and reexamining the way
work is done.
4. Establish reasonable goals for improvement.
5. Make it clear that the management supports and
encourages improvement. It considers incentives to reward
workers for contributions.
6. Measure improvements and publicized them.
7. Don’t confuse productivity with efficiency. Efficiency is a
narrower concept that pertains to getting the most out of a
given set of resources; productivity is a broader concept
that pertains to effective use of overall resources.
STRATEGIES IN
INCREASING PRODUCTIVITY

1. Increase production using the same or smaller amount of

resources.

2. Reduce the amount of resources used while keeping the

same production or increasing it.

3. Allow the amount of resources used to increase as long

as production increases more.

4. Allow production to decrease as long as amount of

resources used decreases more.
RELATIONSHIP OF PRODUCTIVITY
TO METHODS ENGINEERING
1. Elimination of unnecessary work.
2. Design of methods and procedures, which are most effective.
3. Design of methods and procedures, which require the least
effort.
4. Design of methods and procedures, which are suited to person
who uses them.
5. Provide methods for measuring work for determining a
performance index or productivity index for an individual or for
a group of workers, a department, or for an entire plant.
6. Increase human effectiveness and improve life satisfaction
through work itself
SAMPLE PROBLEMS

1. A certain assembly plant has the following data:

Standard Time = 5 mins/unit
Actual Output = 160 units/day
No. of shifts = 2 (day shift & night shift)
Working Time per shift = 7.50 hrs

Compute for the plant’s efficiency in %.

SAMPLE PROBLEMS
2. JQG, Inc., a company that makes bread trays for
bakeries and other stores, purchased some new
equipment that reduces the labor content of the jobs
needed to produce the trays. Prior to buying the new
equipment, the company used 10 workers who
produced an average of 80 trays/hr. Labor cost was P
40/hr and machine cost is P 80/hr. With the new
equipment, it was possible to transfer 2 of the workers
to another department but equipment cost increased by
5%. Similarly, the output increased by 10 trays/hr.
a) Compute for labor productivity under each condition
(express in trays/worker)
b) Compute the multifactor productivity under each
condition (express in trays/Php)
c) Which is more advisable? Why?
SAMPLE PROBLEMS
3. The Manager of a certain assembly plant has tracked the
workers’ output for the week. The production output is as
follows:
Day No. of Output
Workers
Monday 7 525
Tuesday 9 440
Wednesday 7 350
Thursday 8 480
Friday 10 420

Compute for labor productivity of each day.