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n We see that the output per non-labor dollar n We see that the total per total dollar input was
was higher in 2005. higher in 2004.
Productivity Measure: n
Productivity Measure:
Productivity measures are statistics; as with all statistics, it is easy to misuse them
or to mask information unintentionally. Consider for example:
n Total or multifactor productivity measures are generally preferable to partial
measures. The reason for this is that focusing on productivity improvement in a n An employee earning $18,000 per year, who produces 1000 units of output per
narrow portion of an organization may actually decrease overall productivity. This year. A trainee of lesser skill is hired at $10,000 to assist this employee, and
can be seen by a simple example. Suppose that together they produce 17000 units per year.
A partial measure of labor productivity is (Number of units produced per year / Labor
Present Total productivity is measured by [total unit produced (total labor cost +
year) = (1700/2) = 850 units of output per labor year.
total equipment cost)] = [10,000 (50,000 + 25,000)] = 0.133 unit output per dollar
input. Because the current (one person) system has a labor productivity value of 1000 we
conclude that the productivity has decreased in term of average output per worker.
Present Labor productivity = (10,000 / 50,000) = 0.20 units of output per labor
dollar. n However, suppose that labor productivity is measured as number of units produced
per dollar input. For the one-person system,
n Suppose that a $10,000 reduction in labor can be achieved by investing in a more
advanced machine. the labor productivity is = (number of units/Dollar input) = (1000/$18000) = 0.056 units
per labor dollar.
New Labor productivity will increase to (10,000/40,000 = 0.25 units output per For the two-person system the labor productivity = (1700/$28,000) = 0.061 units per
labor dollar). labor dollar.
n Thus from partial productivity perspective, it would appear that this investment is n on this basis, hiring the trainee resulted in about 9% improvement in productivity. In this
attractive. If, however, the annual cost with the new equipment increases to situation, it is better to use the units per dollar input productivity measure since it takes
$40,000, then into account the relative value of the input, that is, the difference in wages implies a
New total productivity would be = [10,000 (40,000 + 40,000)] = 0.125 units of difference in skill level. The first measure, on the other hand, implicitly assumes that
output per dollar input. And hence overall productivity would be actually decrease. each labor-year is equivalent. The point of these illustration is that we must be very
careful when using partial productivity measures.
n Causes: n Causes:
Poor Layouts & Facilities Poor Training
Poor Work Place Designs Poor Manufacturing Instructions
Lost Items/Searching Poor Equipment & Tooling
Lack of Needed Tooling & Equipment Poor Materials
Definitions of Quality
n ASQC: Product characteristics & features that
affect customer satisfaction.
n User-Based: What consumer says it is.
Quality Improvement n Manufacturing-Based: Degree to which a
product conforms to design specification.
n Product-Based: Level of measurable product
characteristic.
Computing and Interpreting Quality Cost Indexes Computing and Interpreting Quality Cost Indexes
Quarter
Watches Clocks
1 2 3 4
Cost Category Quarter
Watch Clock Watch Clock Watch Clock Watch Clock
1 2 3 4 1 2 3 4
Preventive 2 4 2 4 2 4 2 4 Cost Category
Prevention 5.7 7.1 5.0 6.7 4.4 4.7 4.3 4.3
Appraisal 10 20 13 31 16 22 9 24
Internal Failure 19 106 16 107 23 194 17 195 Appraisal 28.6 46.4 40.0 30.0 22.2 36.0 23.4 25.8
External Failure 23 16 21 14 34 14 30 12 Internal Failure 54.3 57.1 57.5 56.7 117.8 124.4 206.4 209.7
Total Quality Cost 54 146 52 156 75 234 58 235 External Failure 65.7 75.0 85.0 100.0 17.8 16.3 14.9 12.9
Direct Labor 35 90 28 86 40 94 30 93 Total Quality cost 154.3 185.7 187.5 193.3 162.2 181.4 248.9 252.7