Productivity and Quality Management Third Lecture

Summary of Last Lecture The Role of Productivity – role of Productivity in increasing national welfare – the main source of economic growth Productivity Concept – accomplishing more with the same amount of resources or achieving higher output in terms of volume and quantity for the same input

Summary of Last Lecture Misconceptions about Productivity – productivity is not only labour efficiency – it is possible to judge performance simply by output – confusion between productivity and profitability Importance of Productivity Low Productivity Trap Model

This Lecture History of Background of Productivity Productivity Models Productivity Measurement Models Productivity Improvement

HISTORY AND BACKGROUND OF PRODUCTIVITY MANAGEMENT

Learning Objectives Describe some important historical figures in operations management Explain productivity Define operations management Identify OM decisions Distinguish goods & services Describe organization functions

Frederick W. Taylor Born 1856; died 1915 Known as ‘father of scientific management’ In 1881, as chief engineer for Midvale Steel, studied how tasks were done – Began first time & motion studies Created efficiency principles © 1995 Corel Corp.

Frank & Lillian Gilbreth Frank ( ); Lillian ( ) Husband-and-wife engineering team Further developed work measurement methods Applied efficiency methods to their home & 12 children! © 1995 Corel Corp.

Henry Ford Born 1863; died 1947 In 1903, created Ford Motor Company In 1911, first used moving assembly line to make Model T – Unfinished product moved by conveyor past work station Paid workers very well for 1911 ($5/day!) ‘Make them all alike!’ © 1995 Corel Corp.

W. Edwards Deming Born 1900; died 1993 Engineer & physicist Credited with teaching Japan quality control methods in post-WW2 Used statistics to analyze process His methods involve workers in decisions

Economic System

Productivity Measure of process improvement Represents output relative to input Productivity increases improve standard of living Since 1889, U.S. productivity has increased at 2.5% annual rate Productivity Units produced Input used  

Productivity Variables Labor – Education, diet, & sanitation Capital – Equipment – Building Management – Technology – Knowledge % Capital Labor Mgmt

Thinking Challenge Employment (Emp) in services (Svc) is greater than in manufacturing (Mfg). Yet, the contribution of services to the gross domestic product (GDP) is proportionally less. Why is service productivity lower? % AloneGroupClass

Organization Functions Marketing – Gets customers Production/Operations – Creates product Finance/Accounting – Obtains funds – Tracks money © 1995 Corel Corp.

PRODUCTIVITY MODELS

What is productivity ? Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Productivity is the determinant of the efficiency of an enterprise to convert its variable resources into useful finished goods and services. – Productivity = output/input.

Partial productivity Easiest to measure, there can be more than one input factor but the output is one factor. It uses a single major input which plays an important role to determine the productivity ratio

Total Productivity It is a systematic & quantitative approach. It was developed by “David.J. Sumanth”. It is customer oriented one integrating technical and human resources situation during the conversion process.

Reasons to improve Productivity Increase in income & profitability. Lowering running costs & operational costs. It important to improve productivity at all levels by an organization to be more competitive. An organization is in problem when if its human resource is not productive.

Methods to improve productivity Ineffective time in work content front. Product and process front. Labour front. Building trust to improve productivity. Incentives and bonus front. Use of electronics waste reduction front. Six sigma

Productivity Model Inputs Transformation Process Outputs Efficiency Effectiveness Material Resources Human Resources Technology Systems Quality Quantity Customer Relationships Figure 1.3

Productivity Model Inputs Efficiency Material Resources Human Resources Technology Figure 5.4 Technology Human ResourcesFinance Materials Procurement

Systems Transformation Process Productivity Model Figure 5.5 Operations

Effectiveness Quality Quantity Customer Relationships Outputs Productivity Model Figure 5.6 Marketing

Functional Systems Figure 4.4 Materials Procurement Technology Finance Human Resources OperationsMarketing

Service Transactions Guest/Client Production Delivery Maintenance Repairs Production Systems Figure 5.2

Productivity Model Inputs Transformation Process Outputs Efficiency Effectiveness Material Resources Human Resources Technology Systems Quality Quantity Customer Relationships Figure 5.7 Reduce Increase Maintain Increase ReduceMaintain

PRODUCTIVITY MANAGEMENT MEASUREMENT MODELS

Introduction

Benefits (contd.)

Ways of Calculating Productivity

Ways to Improve Productivity

Summary History of Background of Productivity Productivity Models Productivity Measurement Models Productivity Improvement

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