Productivity and Manufacturing Management

BITS Pilani
Pilani Campus

Prof. Pavan Kumar, BITS Pilani

BITS Pilani
Pilani Campus

Productivity and Manufacturing Management

MM ZG511- Manufacturing Organization and Management - Session 01

Contents
Productivity Social and Economic Background International Setting Characteristics of Modern Management Challenges and Opportunities in Manufacturing

BITS Pilani, Pilani Campus

Introduction
Continuing inflation Inadequate productivity The Managers Intense foreign competition Fluctuating energy costs High taxes Government regulations Capital shortage

Worker dissatisfaction

A challenge to manage a manufacturing firm

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Introduction
Focus on productivity over the years has made countries like Japan, France, Germany, Italy, Great Britain, Canada, Korea, China and India compete with the might of USA which has only 5% of Worlds population but produces 25% of Worlds industrial output.

Nobody is free of intense competition.

New products will come form any part of the world.

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Productivity
What is productivity? Production is the output of productive forces, whereas productivity is a measure of output resulting from a given input. Productivity = (Output) / (Input). Productivity may be designated in many ways such as output per workers, direct labor or group of workers, or unit of material or unit of energy or Rupee of capital investment etc.

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Productivity
Higher productivity results if more output can be obtained from same input or same output can be derived from less input or more increase in output with correspondingly lesser increase in input.
Effectiveness of management The machines used Employee innovation Worker skill Motivation and effort

Job methods used Quality of workmanship

Productivity

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Productivity
Why is high productivity important? Productivity is the backbone of economic progress of any nation. Higher productivity results in reduction of costs as well as increased sales potential, more responsive customer service, increased cash flow and profits. Higher productivity leads to higher standard of living. Greater success in existing business can lead to expansion of operations and increase in number of jobs.

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Productivity
If wage increases without accompanying productivity increase, then it will lead to increased product cost and contribute to inflation. Significant productivity increases in long run cannot be achieved solely by increased worker effort. Real growth can happen through capital investment in newer and better machines equipment and facilities. In addition, attention to improved worker motivation and incentives such as profit sharing increases productivity.

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Purposes of productivity measurement

Technology: measuring productivity growth is to trace technical change. Efficiency: The quest for identifying changes in efficiency is conceptually different from identifying technical change. Full efficiency in an engineering sense means that a production process has achieved the maximum amount of output that is physically achievable with current technology, and given a fixed amount of inputs (Diewert and Lawrence, 1999). Real cost savings: A pragmatic way to describe the essence of measured productivity change. Although it is conceptually possible to isolate different types of efficiency changes, technical change and economies of scale, this remains a difficult task in practice.

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Purposes of productivity measurement

Benchmarking production processes: In the field of business economics, comparisons of productivity measures for specific production processes can help to identify inefficiencies. Living standards. Measurement of productivity is a key element towards assessing standards of living. A simple example is per capita income, probably the most common measure of living standards: income per person in an economy varies directly with one measure of labour productivity, value added per hour worked.

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Measurement of Productivity
Bureau of Labor Statistics of the US Department of labor Productivity = output (units, parts, etc..)/labor hours If an operator can produce 20 items in an hour then productivity is 20/1 = 20. If the operator can produce 25 items in an hour then it is 25/1 = 25. If the operator can produce 20 items in half an hour then productivity is 20/0.5 = 40. For example output could be plant sales in Rupees and input in Rupees could be sum of labor costs, material cost, power cost, capital cost and miscellaneous cost.

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Measurement of Productivity
Productivity in Percentage Generally it is common to compare current productivity figures with those of a past base period and the change is reported as a percentage (like increase of 10%). Index Number Alternatively, productivity may be expressed on the basis of index numbers which are commonly based on adding or subtracting the percent change from 100. Index numbers are popular as they can be used along with other index numbers like price index, inflation index etc. and facilitates calculation of percentages as well as useful in drawing trend charts. Also they can be used to compare with productivity index published by Government agencies from time to time for various sectors which include manufacturing.
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Measurement of Productivity
Is Productivity Measurement Easy? Productivity measurement is not easy but difficult and hence many organizations may not have meaningful or accurate measurements. If a company produces same product year after year, then it becomes easy to measure productivity. Over a time period, product modifications, use of new raw materials, different quality standards, different manufacturing methods, different equipment, changed operator skills etc may happen. For effective productivity measurement, one must develop an index number then can take into account the contribution of each factor of production and then track them. Productivity measurement gives management a measure of operating efficiency and a means of evaluating progress.

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Productivity in the world

Manufacturing productivity in the US grew 2.5% per year from 1950 to 1985 whereas in Japan 8.5%, Germany 5.3%, France 3.5% etc. Significant increase in productivity in the long run can not be achieved by only increased worker effort, real growth can come through capital investment, better machines, equipment and facilities Fujio Cho points out waste is any thing other than the minimum amount of equipment, material, parts, space and workers time which are absolutely essential to add value to a product

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Basic approaches to productivity improvement#

restructuring the organization; rationalizing the product/service range; introducing financial incentive schemes; applying technology to reduce staff; redesigning products and/or processes; outsourcing/sub-contracting; implementing a quality improvement programme; conducting productivity audits; and changing the management information system
#Anna Baines, Freelance Journalist based in Leeds, West Yorkshire, UK

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Characteristics of Modern Management

The primary functions of management are Planning Organizing, Staffing, Directing and Controlling.
Planning is goal setting at all levels and outlining the steps to achieve the goals. Organizing is dividing the job into various aspects and levels so that they can be assigned to various people. Staffing involves, hiring, training and placement of human resources for achieving the goals. Directing is the process of issuing orders and instructions to carryout plans. Controlling compares progress with plans for suitable action.

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Nine practices of Modern Management

1. 2. 3. 4. 5. 6. 7. 8. 9. Balanced emphasis on all phases of business activity. Willingness to take business risks. Willingness for information sharing. Take expert advice through specialists and consultants. Adopt decision making aids Great stress on market research, advertising, sales promotion and distribution. Great emphasis on organizational structure Great emphasis on human resource development Great emphasis on work integrated learning programmes and industry University Collaborations.????

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Characteristics of Modern Management

1. 2. 3. 4. 5. 6. Manufacturing is important Quality People Cost control Focus and specialization Old large, mass production plant can be horrible impediments to progress 7. Mechanization 8. Computer 9. Simulation and mathematical models

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Characteristics of Modern Management

Only organizations which aim to be world class can hope to compete in domestic and global markets. Increased emphasis on quality and strive for coveted awards like Malcolm Baldridge, Deming etc. Treating human resources as vital assets for the organization and strive for flat organizational structure with no functional barriers and empowering the employees to achieve corporate goals. Emphasis on cost control Emphasis on focus and specialization

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Characteristics of Modern Management

Realization that old large mass production plants are liabilities and trend is for small autonomous units with flexibility to produce large variety of products Increasing importance to mechanization for achieving speed, accuracy and quality goals by deploying intelligent machines and flexible manufacturing systems. Increasing use of computers for solving complex business, design, engineering, R & D, inventory, maintenance, quality problems.

Trend for using simulation and mathematical models to aid in decision making.

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Challenges and Opportunities in Manufacturing

Market share Improve basic education system Transforming basic research to applied research Manufacturing excellence World-class product (there will be great need for design, marketing and manufacturing teams to produce high quality products)

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Recap
What is productivity. Importance of Productivity, how it is represented. Purpose of Productivity measurement Approaches to Productivity improvement Functions of Manager Characteristics of Modern Management Changes in Management thought. Challenges and Opportunities in Manufacturing.

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