Productivity is the quantitative relation between what we produce and we use as a resource to produce them, i.e., arithmetic ratio of amount produced (output) to the amount of resources (input). Productivity can be expressed as:
Productivity refers to the efficiency of the production system. It is the concept that guides the management of production system. It is an indicator to how well the factors of production (land, capital, labor and energy) are utilized.
European Productivity Agency (EPA) has defined productivity as, “Productivity is an attitude of mind. It is the mentality of progress, of the constant improvements of that which exists. It is the certainty of being able to do better today than yesterday and continuously. It is the constant adaptation of economic and social life to changing conditions. It is the continual effort to apply new techniques and methods. It is the faith in progress.”
A major problem with productivity is that it means many things to many people. Economists determine it from Gross National Product (GNP), managers view it as cost cutting and speed up, engineers think of it in terms of more output per hour. But generally accepted meaning is that it is the relationship between goods and services produced and the resources employed in their production.
Factors Influencing Productivity
Factors influencing productivity can be classified broadly into two categories:
Factors influencing productivity
Social changes such as women’s participation in the labor force, education, cultural values, attitudes are some of the factors that play a significant role in the improvement of productivity.
Total Productivity Measure (TPM)
It is based on all the inputs. The model can be applied to any manufacturing organization or service company.
Total productivity =Total tangible output +Total trangible input
Total tangible output = Value of finished goods produced + Value of partialunits produced + Dividents from securities + Interest+ Other income
Total tangible input = Value of (human + material + capital + energy+ other inputs) used. The word tangible here refers to measurable.
The output of the firm as well as the inputs must be expressed in a common measurement unit. The best way is to express them in rupee value.
Partial Productivity Measures (PPM)
Depending upon the individual input partial productivity measures are expressed as:
Partial productivity =Total output%Individual input
Labor productivity =Total output%Labour input(in terms of man hours)
Capital productivity =Total output%Capital input
Material productivity =Total output%Material input
Energy productivity =Total output%Energy input
One of the major disadvantages of partial productivity measures is that there is an over emphasis on one input factor to the extent that other input are underestimated or even ignored.
Productivity Improvement Techniques
CAM is very much useful to design and control the manufacturing. It helps to achieve the effectiveness in production system by line balancing.
A company produces 160 kg of plastic moulded parts of acceptable quality by consuming 200 kg of raw materials for a particular period. For the next period, the output is doubled (320 kg) by consuming 420 kg of raw material and for a third period, the output is increased to 400 kg by consuming 400 kg of raw material.
During the first year, production is 160 kg
Productivity =Output%Input=160%200=0.8 0r 80%>
For the second year, production is increased by 100%
Productivity =Output%Input=320%420=0.76 or 76%
For the third period, production is increased by 150%
Productivity =Output%Input=400%400=1.0 i.e., 100%↑
From the above illustration it is clear that, for second period, though production has doubled, productivity has decreased from 80% to 76% for period third, production is increased by 150% and correspondingly productivity increased from 80% to 100%.
ILLUSTRATION 2 :
The following information regarding the output produced and inputs consumed for a particular time period for a particular company is given below:
The values are in terms of base year rupee value. Compute various productivity indices.
Labor productivity =output%Human input=10,000%3,000=3.33
Capital productivity =output%Capital input=10,000%3,000=3.33
Material productivity =output%Material input=10,000%2,000=5.00
Energy productivity =output%Energy input=10,000%1,000=10.00
Other misc. expenses =output%Other misc. input=10,000%500=20.00
Total productivity =Total output%Total input=Total output(Human + Material + Capital + Energy + Other misc. input)=10,000%3, 000 + 2, 000 + 3, 000 + 1,000 +500=10,000%9,500=1.053
Total factor productivity (TFP) =Net output%( Labor +Capital) Input=Total output - Material and services purchased%(Labor + Capital) Input
Assume that the company purchases all its material and services including energy, misc. and equipment (leasing). Then,
Total factor productivity =10,000 - (2000+3000+1000+500)%3000+3000=3500%6000=0.583
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