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Understanding Productivity Ratios

The document discusses productivity, including definitions and measures. Productivity is a ratio of output to inputs and can be measured partially or totally. Partial measures look at output relative to a single input like labor, while multifactor or total measures look at overall output relative to all inputs used in production. The document provides examples of calculating total and multifactor productivity and lists factors that can affect productivity levels such as capital, technology, management, and workplace design. Improving productivity involves developing measures, identifying critical operations, setting goals, and gaining management support.

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Parthi Parti
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66 views15 pages

Understanding Productivity Ratios

The document discusses productivity, including definitions and measures. Productivity is a ratio of output to inputs and can be measured partially or totally. Partial measures look at output relative to a single input like labor, while multifactor or total measures look at overall output relative to all inputs used in production. The document provides examples of calculating total and multifactor productivity and lists factors that can affect productivity levels such as capital, technology, management, and workplace design. Improving productivity involves developing measures, identifying critical operations, setting goals, and gaining management support.

Uploaded by

Parthi Parti
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

2-1 Competitiveness, Strategy, and Productivity

Productivity

Productivity

A measure of the effective use of resources, usually expressed as the ratio of output to input

Productivity ratios are used for

Planning workforce requirements Scheduling equipment Financial analysis

2-2 Competitiveness, Strategy, and Productivity

Productivity

Partial measures

output/(single input) output/(multiple inputs) output/(total inputs)

Multi-factor measures

Total measure

Outputs Productivity = Inputs

2-3 Competitiveness, Strategy, and Productivity

Productivity Growth

Productivity Growth =
Current Period Productivity Previous Period Productivity Previous Period Productivity

2-4 Competitiveness, Strategy, and Productivity

Measures of Productivity

Partial measures
Multifactor measures Total measure

Output Labor

Output Output Machine Capital

Output Energy

Output Labor + Machine

Output Labor + Capital + Energy

Goods or Services Produced All inputs used to produce them

2-5 Competitiveness, Strategy, and Productivity

Examples of Partial Productivity Measures

Labor Productivity
Machine Productivity Capital Productivity

Units of output per labor hour Units of output per shift Value-added per labor hour
Units of output per machine hour machine hour Units of output per rupee input Rupee value of output per rupee input

Energy Productivity

Units of output per kilowatt-hour Rupee value of output per kilowatt-hour

2-6 Competitiveness, Strategy, and Productivity

Example

7040 Units Produced Sold for Rs 1.10/Unit Cost of labor of Rs 1,000

Cost of materials: Rs 520


What is the Total productivity ? What is the multifactor productivity of labor and materials? What is the multifactor productivity of overhead and materials? What is the multifactor productivity of labor and overhead? What is the partial productivity of each of the inputs?

Cost of overhead: Rs 2000

2-7 Competitiveness, Strategy, and Productivity

Solution

MFP =

Output Labor + Materials + Overhead

MFP =

(7040 units)*(1.10) 1000 + 520 + 2000 2.20

MFP =

2-8 Competitiveness, Strategy, and Productivity

Solution

MFP =

Output Labor + Overhead

MFP =

(7040 units)*(1.10) 1000 + 2000

MFP =

2-9 Competitiveness, Strategy, and Productivity

Solution

MFP =

Output Labor + Materials

MFP =

(7040 units)*(1.10) 1000 + 520

MFP =

2-10 Competitiveness, Strategy, and Productivity

Example 3 Solution
Output Materials + Overhead

MFP =

MFP =

(7040 units)*(1.10) 520 + 2000

MFP =

2-11 Competitiveness, Strategy, and Productivity

Example 3

7040 Units Produced Sold for Rs 1.10/Unit Cost of labor of Rs 1,000 What is the multifactor productivity? Ans. 2.20

Cost of materials: Rs 520


Cost of overhead: Rs 2000

2-12 Competitiveness, Strategy, and Productivity

Factors Affecting Productivity

Capital

Quality

Technology

Management

2-13 Competitiveness, Strategy, and Productivity

Other Factors Affecting Productivity

Standardization Quality Searching for lost or misplaced items Scrap rates New workers

2-14 Competitiveness, Strategy, and Productivity

Other Factors Affecting Productivity

Safety Shortage of workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity

2-15 Competitiveness, Strategy, and Productivity

Improving Productivity

Develop productivity measures


Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals

Get management support


Measure and publicize improvements

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