PRODUCTIVITY

Productivity

Aggregate output = Gross sales = G

Aggregate input = Cost = C
Total Productivity = P = G/C
Profit = ╥ = G-C
Productivity = P = 1 + ╥/C
‘0’ Profit Productivity ‘ 1 ’
Profit Productivity ‘ 1’
‘Loss’ Productivity ‘ 1’
 Total Productivity
Number of units produced =Xi
Base price for the product =Yi
Aggregate output (All products) = Z = ∑ X iY i
Material quantity input =Mi
Unit cost of raw material= C i
Value of Material input = M = ∑ M i C i
Number of man hours =li
Hourly wage =hi
Labor input = L = ∑ l ih i
Depreciation =Di
% Cost of capital =B
Total working capital =A
Rental or proportionate land value =R
Capital and Land input = K = ∑ D i + AB + R
Aggregate Input =I=M+L+K

Total Productivity = TP = Z / I
 Total Factor Productivity
Total Value added output
Total Factor Productivity = -------------------------------------
Labor + Capital

Value added output = VA = S + I2 – I1 + N – E

S = Sales
I1= Beginning Inventory
I2= End Inventory
N = Items manufactured for own use
E = Cost of Material input + Rentals
 Productivity Improvement
By reducing Work content & Ineffective time

Total time of operation = Total work content + Ineffective time

Total work content = Basic work content + Excess time

Basic Work content:

“Irreducible minimum time theoretically required to produce one
unit of output”

Excess time = (Time due to defects in design/specification of the

product + time due to inefficient methods of
manufacture / operation)
Ineffective time:
Time for which the worker / machine / both are idle to the
shortcomings of the management / worker
 How manufacturing time is made-up

Basic work content of

product and/or
Total operation
work
content Work content added
by defects in design /
specification
Total time
of
operation Work content added
under by inefficient methods
existing
conditions
Ineffective time due to
Total shortcomings of the
Ineffective management
time
Ineffective time within
the control of the
worker
Work content Added due to product and processes

• By Defects in design / specification:

• Bad design leads to uneconomic process
• Lack of standardization
• Incorrect quality standards
• Design demands excess material
• By inefficient methods of manufacture
• Wrong machine
• Bad process conditions
• Wrong tools
• Bad layout
• Poor working methods
 Ineffective time
• Due to short comings of management:
• Excessive product variety
• Lack of standardization
• Bad planning
• Shortage of raw materials
• Frequent breakdowns
• Poor working conditions
• Lack of safety
• Due to worker:
• Absenteeism, late coming, low motivation
• Lethargic
• Unsafe work practices
 Management techniques to reduce excess work
content
• Product development and value analysis:
• Reduce excess work content due to design
• Reduces excess materials used
• Specialization and standardization:
• Enables high production processes
• Market , consumer & product research:
• Ensures correct quality standards
• Process planning & research:
• Selection of correct machines
• Selection of correct processes
• Method study:
• Selection correct tools
• Good lay out
• Operator training:
• Better/faster working methods
Management techniques to reduce ineffective time
• Marketing and specialization:
• Reduce idle time caused due to excess variety
• Specialization and standardization:
• Reduces idle time due to short runs
• Product development:
• Design is modified to have less ineffective time
• Production control with work measurement:
• Reduces idle time due to poor planning
• Material control:
• Reduces waiting time for material
• Maintenance management:
• Reduce break downs
• Improved working conditions:
• Less fatigue
• Safety precautions/training:
• Reduce loss due to accidents
• Personal policy and incentives:
• Improve motivation
• Reduction of absenteeism
Capacity
 Capacity-Introduction
It is productive capability potential (output) of a plant,
machine or work centre in a given period of time.

Capacity is created from the availability of resources like

machine, time (labor), space and facilities that require
capital investment by the firm.

• Measured in units of out put (garments/garment parts)

• Also expressed in terms of input (number of hrs or days)

• Factors affect capacity:

– Space utilization and limitations

– Equipment type, configurations and uses
– Size, skill, versatility and productivity of labor
– Product variation
 Capacity-Dimensions
The capacity has many dimensions in relation to
production planning as given below;

• Maximum capacity (Plant capacity): total hours available

under normal conditions in a given period of time
• Potential capacity: maximum capacity adjusted for efficiency
• Committed capacity: total hours previously allocated for
production during a certain time period
• Available capacity: difference between potential capacity and
committed capacity for a certain time period
• Required capacity: SAHs (standard allowed hours) necessary
to produce a specified volume in a certain time period
• Excess capacity: difference between potential capacity and
required capacity
 Measuring capacity
• Capacity, being the ability to produce work in a given
time, must be measured in the unit of work.
• For example, consider a factory that has a capacity of
10,000 " machine hours" in each 40 hour week. This
factory should be capable of producing 10,000
"standard hours of work" during a 40-hour week. The
actual volume of product that the factory can produce
will depend on:
• - The amount of work involved in production (e.g. does
a product require 1, 5, 10 standard hours?)
- Any additional time required in production (e.g.
machine set-up, maintenance)
- The productivity or effectiveness of the factory
 Example
Jim’s small apparel unit employs 10 operators,
work 7 hrs/day. The plant has 90% eff. A
customer brought an order for 6000 units of
Garment that needs a 10 days turn around. The
meets its technical requirements. The plant has
a committed capacity of 300 hrs. for 10 days
period. The garment has a work content of 5
SAM .
What will be Jim’s further course of action and
what will be his decision?
 Answer
Max. capacity for 10 days = 10x7x10 = 700 hrs
Potential capacity for 10 days =700x0.9= 630hrs
Required capacity for new order=6000x5/60 =500 SAH
Excess capacity = 630 – 500 = 130 hrs
Available capacity = 630 – 300 = 330 hrs
Capacity shortage = 330 – 500 = -170 hrs

Adjustments to be made to accept that order:

• Expedite the new order so it would have priority over
previously committed order\
• Run over time
• Offer bonus to operators to encourage operators to
achieve over 100% eff. for these 10 days.
• Out source