2. INTRODUCTION
The ratio between “Output of Work” and “Input of resources”
used in the process of creating wealth. – ILO
Productivity = Output (within a defined time and good quality)
Input
It is the ratio between the amount produced and amount of
resources used in production
This definition applies to an industry or an economy as a
whole.
Input Output
Waste
(Muda)
Process
3. Units of Input means resources utilised
Units of output means anything generated from production
Land – Hectares
Material - Metric ton
Plant and Machinery – machine hours
People – Man Hours
Capital – Rupees
Eg: a worker producing 100 pieces is now able to produce 130 pieces
after undergoing a training session. Productivity of worker has
increased by 30%
4. FACTORS AFFECTING PRODUCTIVITY
Controllable or internal factors
Product – extent to which it meets requirements
Plant and equipment – availability and reduction of idle time
Technology – automation
Material and energy – reduce material and energy consumption
Human factors – motivation and training
Work methods – improvement in the way of doing things
Management style – communication, policy and proceedure
Uncontrollable or external factors
Natural resources – manpower land and raw materials
Government and infrastructure – government norms. Transport,
power, etc.
5. DIFFERENCE BETWEEN PRODUCTIVITY AND PERFORMANCE
Output in relation to input
Productivity = Output
Input
Considers output alone
Performance Index
= Actual work done
expected or standard work
Productivity Performance
Eg:
It takes 3mts. Of cloth to make a coat. In a day Prashant is
expected to make 50 coats. He makes 40 coats from 111mts. of
cloth
Performance Index is = 80%
Prashant’s productivity is = 108%
Cloth Productivity = 0.36 coats/mt.
7. To workers:
Yields more wages
Better standard of living
Improved morale
Satisfied worker
Resulting into goodwill
To the organisation:
Higher production of goods and services.
Reduction in costs
High turnover, More profits and dividends
Cheaper goods to customers
Revenue to government
Wide spread markets and overall prosperity
BENEFITS OF INCREASED PRODUCTIVITY
8. To the nation
High employment opportunities
Increased Gross National Produce
Improved utilisation of resources
Expansion in international markets
To Consumers and Society in General
Increase in supply of quality goods and services
Reasonable cost of goods and services
Greater customer satisfaction
9. WAYS AND MODELS OF CALCULATING PRODUCTIVITY
1. Partial productivity
Ratio of output to one particular class of input.
Partial Productivity = Output
A particular class of input
Often there is a factor which plays an important role.
There is one factor which is an appropriate factor for
comparison, this is called an “apple to apple” comparison
Such ratios are used for selection of a particular area of
improvement.
Organistions can use this formula to determine performance
of labour, machines, energy, capital, department,
organisation, etc.
10. EXAMPLES
Bajaj Auto produces 5000 scooters in a shift employing
200 workers, whereas Hero motors manufactures 9000
scooters employing 300 workers. The productivity in
relation to manpower of Hero motors is higher compared to
Bajaj Autos.
R. petroleum sells its petrol at Rs.30000 with the help of
three pumps in an area of 1000sq ft. whereas Y petroleum
sells its petrol worth Rs.40000 with the same parameters.
Partial Productivity space Y petroleum is better than R
because of better layout and an appropriate entry and exit
system.
11. Easy to understand.
Easy to obtain the data.
Easy to compute the
productivity indices
Easy to sell to management
because of the above three
advantages.
Some partial productivity
indicator data is available
industry wide.
Good diagnostic tools to
pinpoint areas for productivity
improvement, if used along
with total productivity
indicators
Profit control through partial
can be a hit-
and-miss approach.
Tend to shift the blame to
the wrong areas of
management control.
Do not have the ability to
explain overall cost
increases
If used alone, can be very
misleading and may lead to
costly mistakes.
Advantages Limitations
12. 2. Total Productivity
is the ratio of Total Output and Total Input
Total Productivity = Total Output (Value of Produce)
Total Input (Value of Input)
3. Total Factor Productivity
Labour and capital are always considered important
contributors to the process of production.
In TFP model was developed by John W. Kendrick
He has taken labour and capital as only two input factors
for calculating TFP
Data is easy to obtain in TFP
It does not consider the impact of material and energy
input, even though materials constitute 60% of the cost
13. Example: production worth Rs.80 lakhs was
manufactured and sold in a month. It consumed
labour hours worth Rs.12 lakhs and capital worth
Rs.48 lakhs
TFP = Output
Inputs of (Labour + Capital)
= 80 = 1.33
(12+48)
14. 4. Multi Factor Productivity
Scott D. Sink further developed the total factor
productivity model
MFP model considers labour, material and energy as
major inputs
Capital was left out since it is very difficult to estimate
how much capital is being consumed in a unit of time.
MFP = Output
Inputs (labour + energy + material)
15. 5. V. Sumanth’s Total Productivity Model
It is the ratio of tangible output to tangible input
Total Productivity (Pt) = Total Tangible Output (Ot)
Total Tangible Input (It)
Pt = 01 + 02 + 03 + 04 + 05
H + M + FC + WC + E + X
Where,
Total tangible Output (Ot)
01 – finished goods produced
02 – partial units produced
03 – dividends from securities
04 – interest from bonds
05 – other incomes
Total tangible Input (It)
H - human inputs
M – material purchased
FC – fixed capital
WC – working capital
E – energy inputs
X – other expenses (taxes,
transport, office cost, etc.)
16. Disadvantages
Data is difficult to compute
Does not consider intangible inputs and outputs
Advantages:
All quantifiable inputs are considered
Provides firm level and operational unit level productivity
17. 6. APC Model
American Productivity Center (APC) has been advocating
a productivity measure that relates profitability with
productivity and price recovery factor.
The price recovery factor takes care of inflation
Over a period of time changes in this factor indicate:
Whether the firm has been able to absorb the changes
in the cost inputs
Has passed on or has over compensated the same
price of the company’s output
Profitability = Sales = Quantities of Output * Price
Costs Quantities of Input * Price
= Productivity * Price Factor
18. Price Recovery Factor:
Captures the effect of inflation.
Inclusion of this factor will show whether gains or losses
of a firm are due to changes in productivity or it merely
indicates the fluctuations in the prices of the material
consumed and sold
19. WAYS TO IMPROVE PRODUCTIVITY
Technology based
CAD, CAM, integrated CAM, Robotics, laser beam
technology, energy technology, group technology,
computer graphics, simulation, maintenance
management, rebuilding old machinery, energy
conservation
Employee Based
Financial incentives, group incentives, fringe benefits,
promtions, job enrichment, job enlargement, job rotation,
worker participation, MBO, Skill enhancement, learning
curve, working condition improvement, communication,
zero defects, punishment, recognition, quality circle,
training, education, role perception, supervision quality.
20. Material Based
Material planning and control, purchasing, logistics,
material storage and retrieval, source selection and
procurement of quality material, waste elimination
Process based
Methods engineering and work simplification, job design
evaluation, job safety, human factors engineering
Product based
Value analysis and value engineering, product
diversification, standardisation and simplification,
reliability engineering, product mix and promotion
Task based
Management style, work culture, communication in the
organisation, motivation, promotion group activity