MANAGEMENT OF PRODUCTIVITY What is productivity? - a measure for effective utilization of resources in an organization.

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Production Management
Concept of Production & Operation Types of Products Tangible/Intangible Consumer /Industrial Consumer durable & Non-durable Discrete/Continuous Standard/Customized

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When does someone buy a product? Need Experience and Satisfaction Choice of a particular product from variety? Concept of value How can we [add] improve value [function/cost]? Can we define production now? Production Activities - alter physical state, alter form, alter chemical composition, alter metallurgical condition, transport, preserve, store, impart knowledge, information, give advice medical advice, legal opinion, give medical treatment
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What is management?
Important features of management Efficiency & Effectiveness Visualize & Plan Resource allocation Review PDCA Accountability for resource utilization Production management Coordinating production resources to meet organizational objectives Production resources: men, machines, equip., material, methods
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INFO FEEDBACK, ORDERS

Ia

Ib Ic

C/P

O/P

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Organizational objectives P,Q,C,D,E,F,S,H,E QCD Production Management Objectives Performance Objectives Efficiency & Effectiveness Quality Lead times Capacity utilization Flexibility

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Cost Objectives Explicit[visible]costs: material, labor, scrap, rework, maintenance Implicit [invisible]costs: inventory, stock-outs, shortages, delayed deliveries, mat.handling, inspection, grievances, dissatisfaction, down time, opportunity Productivity

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RESOURCE UTILIZATION

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MATERIAL

OTHERS LABOR ENERGY CAPAITL

INPUT

OUTPUT

WASTE (MUDA)
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Comparison of Indian & Global industries Comparison factors Japanese companies US/Europea n co. General Indian co.

1.Cycle time from production to development 2. inventory level

0.5 to 2 years

1 to 2 years

3 to 6 years

A few days of sales

One month of sales

9 t0 12 months of sales

3. output per employee

4. rejection rate

Rs. 32 Lacs

Rs. 12 Lacs

Rs. 2.5 Lacs

3 to 4 PPM

30 to 40 PPM

8 to 20 RPH

5. quality cost with respect to sale

3% to 5%

5% to 10%

35% to 45%

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wastes in factories 1.defects ( scrap and rework) 2. inventory 3.waiting 4. searching for 5.over production 6.down time 7. poor vendor quality 8.manpower idle or misused 9.excessive material handling 10.setup time 11. waiting time , delays 12. customer complaints 13. accidents 14. absenteeism 15. waste of power [ electric appliances left on ], air [leakage], water [ leaking taps, overflowing tanks],
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wastes in offices 1. High document retrieval time 2. Visitors waiting time - high 3. Customer waiting time is high 4. Payment to suppliers delays 4. Absenteeism, late coming 5. Long telephone talks 6. Long memos 7. Forgotten messages 8. Concerned person not available 9. Waste of paper/water/power 10. Mail addressed to wrong addressee 11. Long processing time
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What does low productivity mean? Costly conversion process, as more inputs[resources] are required for same outputs due to ineffective utilization of resources, costs go up, costly products, high prices Shortages No place for the company in Competitive Environment

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 Company will shortly close down When so many such companies close down what happens? Unemployment, poverty, black marketing due to shortages and an unhealthy economy, law and order problems, deterioration of standard of living, a weak economy, a poor country open to exploitation What are the causes of low productivity? Lack of delegation Poor contract review with customer
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Poor attitude Ignorance Lack of training Poor PDCA on management decisions Poor overall management What are productivity improvement initiatives? Work study 5S Kaizen Management TQM JIT, kanban, pokayoke 6 - sigma 4/9/2012 16

 Elimination of 3Ms (Muda - waste, Mura strain, Muri - discrepancy) OJT as a result of all or any of the above initiatives and awareness training Mathematical tools & models like Dr. Sumanths model ILO approach Dr. Sumanths five pronged approach of material based techniques, Technology based techniques, Task based techniques, Employee based techniques, Product based techniques
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 What are the gains of productivity

improvement? Lean Organizations [NVAs & NPAs reduced, organizations are effective and efficient] High morale Products are popular, expanding business [QCD improved] Overall Prosperity, Better Standard of Living To be an economic power National pride, happiness and prosperity for generations
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 How do we institute Productivity

Improvement Measures? No Termination As A Result Of Productivity Improvement Measures Train Your Own People in Specialized Areas & enable them to seek better employment Multi skilling Stop recruitment when some one retires redeploy people Compensate Voluntary Retirement
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Productivity Improvement And Unemployment Growing economy, more opportunities for rewarding work Prosperity

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Why should we measure productivity? For assessing efficiency of conversion of conversion process For practical resource allocation one should know how much is needed For making objectives realistic For strategising productivity improvement, one should know the current situation For stimulating bench marking For realistic profit planning For stimulating competitive action For using as base for rational collective bargaining 4/9/2012 21

towards productivity objectives [measure monitor control direct ] We must remember that productivity is not Volume of production Measure of profitability profit under unusual demand conditions A technique to make worker work harder but to make work easier

For facilitating direction of organizational efforts

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What is productivity so that we can measure? Productivity= Out put / input [ expressed in common units] [Total production of goods and services / labor+materials+capital+energy] Total factor productivity = net out put / labor + capital [Net out put = total out put intermediate materials and services purchased] Partial productivity or factorial productivity 1. Labor productivity [1] = total out put / labor hours used
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[2] = total out put / gross labor hours 2. Machine productivity [1] = total out put / machine hours used [2] = total out put / gross machine hours 3. Material productivity = Total out put / material used 4. Land productivity = total out put / area of land used Index approach to productivity measurement Productivity indices enable comparison of productivity levels at a base period and current period
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Calculate Total productivity, total factor productivity and partial [factorial] productivity measures for the following data. Please note that this company purchases the materials, energy & services. Plant & equipment is on lease.

Out put Human input Material input Capital input Energy Other expense inputs

Rs.1000/Rs.300/Rs.200/Rs.300/Rs.100/Rs.50/-

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Productivity Index output x price[current period] / input x cost [current period] -----------------------------------------output x price [base period] / input x cost [base period] National Productivity council Organization promoted by Government of India in 1958, headquarters at New Delhi to promote productivity culture in the country and promote productivity improvement in industry, agriculture service infrastructure and other sectors of economy 4/9/2012 26

non profit & tripartite in nature, govt., industry &

labor provides training and consultancy in productivity improvement also undertakes promotional programs for Tokyo based Asian productivity Council [APC]. India is a founder member of APC to make India a competitive economy improve quality of service by interacting as a change agent between central & state governments a favorite project of the then prime minister of India, Pt.Nehru
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Job Evaluation What is Job Evaluation? a procedure designed to rank jobs on a formal basis to measure the worth of a job for compensation purposes in relation to other jobs Why Job Evaluation? Establishes relative importance of the jobs Ensures rates for similar skills are at par in the industry Limits leapfrogging New jobs will be brought into the wage structure at a proper level 4/9/2012 28

 Gives clear cut picture of the person needed for

the job Rational selection policies Eliminates wage inequalities equity pay Basis for wage negotiations Who Does Job Evaluation? The evaluation committee, comprising of workmen,staff and if required an expert, internal or external How is it done? Steps in job evaluation are job analysis, job description, job specification, job evaluation 4/9/2012 analysis is collection of job facts Job 29

* Skills involved, responsibility, job knowledge,

mental application, dexterity and accuracy * Physical demands physical activities, working conditions, hazards * Purpose of the job job description : recording of the facts about job - how do we obtain facts? observation, interview, questionnaire * Job identification title,dept., no., location of the job, date on information was collected * Job summery overall picture of the purpose, nature and extent of the job
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* Job duties duties and responsibilities Job specification * Written statement giving minimum human
qualities required for successful performance of the job like education, training and experience, physical effort, mental skill, supervision, responsibility

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Methods of Job Evaluation: ranking, job classification, factor comparison, point rating method Ranking method *Using job description arrange the jobs according to difficulty in performance. The job most difficult is first, next in difficulty comes next and so on *Paired comparison method: is used for the above *Advantages: 1. Very simple 2. Adequate for small organizations * Disadvantages 1. Subjective in nature
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2. not suitable if no of jobs are many in an organization Job classification * certain grades or classifications are fixed in the company by identifying certain critical key characteristics of occupations. *These key characteristics[setting the machine, carrying out critical maintenance work] represent the grades * Various jobs in the occupation are put in these grades *Advantages: 1.Very simple 2. new jobs are easily fitted in the grades easily 33 4/9/2012

*Disadvantages:

in nature takes place in grades Factor Comparison Method Identify key jobs which are clearly understood by everyone in the organization [say, sweeper, cook, driver, security guard or as in the organization, welder, setter, tool maker]. Obtain job specification for these jobs. Identify key factors of these jobs like mental ability, skill, physical efforts and working conditions 4/9/2012 evaluate on a scale of 0 5 these factors34 And

1. Subjective 2. Overlapping of jobs

 Arrange these jobs in ascending order for each factor & then fit other jobs factor wise in this order and allot points to each factor. Fix monetary value to the factors and thereby to the job
Jobs Factors
Responsibility

Security guard
4

driver
4

cook
3

sweeper
1

Skill
Physical efforts

2
3

4
2 2 12

4
2 2 11

1
4 3 9

Working conditions 3 Total 10

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 Point Rating method Identify key jobs and obtain job specifications Establish clear understanding about worth of these jobs in the
evaluation committee Identify various factors important for performing jobs in the company say, education, experience, physical requirement, working conditions, hazards and allot points to them on a 0-100 scale based on the importance to work. Then divide them into 5 levels. Allot points to these levels.

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Total points Educn. Expn. 50 50

Level I 10 10

Level II 20 20

Level III 30 30

Level IV 40 40

Level V 50 50

Phy. Requ.
Work. Condn. Hazard

100
50 40

20
10 8

40
20 16

60
30 24

80
40 32

100
50 40

Fit the key jobs factor wise to the matrix. Find out what each job
weighs Now fit other jobs in the order
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Incentives Incentive is an award for performance above standard Such performance results into gain in productivity Management shares such gain with the workmen as per a mutually agreed scheme Such a reward motivates workmen to perform above standard regularly which further enhances productivity gains Types of Incentives-Financial and non financial Financial incentives award monitory reward according to an agreed scheme
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 Non financial incentives recognize the

performer publicly Why incentives fail? Loose industrial engg. Standards or outdated standards Poorly designed plan production incentive Vs productivity incentive,safety, quality, over production, no safeguards Complexity in calculations Inequities in earnings Pressure tactics by trade unions Poor supervisory practices
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 Distrust between management and workmen due

to management failures * No raw material *Equipment failures Salient features of a good incentive scheme A transparent scheme, simple to understand & easy to calculate reward per person Timely payment Built in safeguards against safety and bad quality Compensation is significant Productivity based, rather than quantity based
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 Some financial incentive schemes Individual Incentive Plans Straight Piece rate plans: example Standard hours plan: example Group Incentive Plans

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