Chapter 2
Chapter 2
• If, for example, nine out of ten relevant goals are achieved, the
effectiveness is 90%. One can be very efficient.
Production improvement does not necessarily mean
productivity improvement.
• Suppose a garment factory produced 1,040 shirts using
80 operators yesterday.
• Let’s say that the same factory produced 1,100 shirts
today, using 84 operators.
• Production has increased by 5%, from 1,040 to 1,100
shirts. However, the labor productivity for this operation
is unchanged, because 1,040 / 80 is equal to 13 shirts per
worker yesterday, and 1,100 / 84 is equal to 13 shirts per
worker today.
• Therefore, improvement in production does not
necessarily generate improvement in labor productivity.
Measuring Productivity (Continued)
• Partial-Factor: Uses a single “I” factor; e.g., output/labor-
hour, sales/employee
• Multi-Factor: Uses more than one “I” factor; e.g.
output/direct costs (labor, materials, and overhead).
• Total-Factor: Uses all “I” factors.
(Note: Total-Factor captures “trade-offs” between input
factors.)
Other Measures Affecting Productivity
• Efficiency
• Effectiveness
• Quality
• Innovation
Efficiency
• Measures the resources expected to be consumed to the
resources actually consumed.
• Hence, it focuses on the input side of the system. (To what
degree did the system utilize the “right” things.)
Effectiveness
• Measures what the system sets out to accomplish (objective)
with what was actually accomplished; plan vs. actual
• Hence, effectiveness is an output measure. (Is the output
“right” - right quality, right quantity, on time, etc.)
Quality
Parts per man hour Cost per unit decreased Average worker's annual cash
compensation increased
$2.25
115
105 26000
$1.75
100 25000
95 24000
$1.50
Year A Year B Year C Year A Year B Year C Year A Year B Year C
2-17
Example.
1. A potter working
• eight hours a day
• produces 400 pots a month
• wood-fired furnace
• Let us assume that as a result of a change in the method of
work he was able to produce
• 500 pots a month instead of 400
• with the same equipment and hours of work.
• His productivity calculated in terms of number of pots
produced will then have increased by 25 percent. ((500-
400)/400)
• Let us now assume unable to sell all 500 pots and had to
lower his price from 20 Birr a pot to 18 Birr a pot.
…cont.
• If he wants to assess his productivity gain, the potter may
be more interested in using monetary terms rather than
simply the number of pots produced.
• He could then argue that the value of his output used to be
400 X 20 = 8000 Birr a month
• and is now 500 X 18 = 9000 Birr a month.
• His input has not changed. Hence his productivity gain is
((9000-8000)/8000) ----12.5%
…cont.
one can make two observations.
• First, productivity was used to measure increase in output
expressed in numbers of pots produced, in the first case, and
• in monetary terms in the second, giving different values in each
case.
• In other words, depending on what one is interested in
measuring, the nature of the output and input will vary
accordingly.
• Second, while actual production increased in this example from
400 to 500 pots, productivity in monetary terms did show the same
corresponding increase.
• This means that we have to distinguish between increased
production and increased productivity, which in this example was
measured in terms of monetary gains.
…cont.
Method study
To simplify the job and
develop more economical
methods of doing it.
Work
study
Work measurement
To determine how long it should
take to carry out
Higher
Productivity
…cont.
• As will be discussed from later lessons of this course,
both method study and work measurement are themselves
made up of a number of different techniques.
• Although method study should precede the use of work
measurement when time standards for output are being
set,
• it is often necessary to use one of the techniques of work
measurement, such as work sampling, in order to
determine why ineffective time is occurring and what is
its extent, so that management can take action to reduce it
before method study is begun.
• Again, time study may be used to compare the
effectiveness of alternative methods of work before
deciding on the best method to install.
3. Basic procedure of work study