1. Methods and Work Measurement
Lecture 2
Productivity and Quality
20 February 2009
Hanna Lestari, ST, M.Eng

2. What is Productivity?
One of the primary responsibilities of an operations manager is to achieve productive use of an organization’s resources.
The first time the word "productivity" was mentioned in an article by Quesnay in the year 1766.
Hanna Lestari, ST, M.Eng

3. What is Productivity?
In 1883, Littre defined productivity as the "faculty to produce," that is, the desire to produce.
The early twentieth century (1900s), that the term acquired a more precise meaning as a relationship between output and the means employed to produce that output
Hanna Lestari, ST, M.Eng

4. What is Productivity?
Productivity is the quotient obtained by dividing output by one of the factors of production. In this way it is possible to speak of the productivity of capital, investment, or raw materials according to whether output is being considered in relation to capital, investment or raw materials, etc. (Organization for European Economic Cooperation (OEEC), 1950)
Hanna Lestari, ST, M.Eng

5. What is Productivity?
productivity is always a ratio of output to input (Fabricant, 1962)
productivity as a family of ratios of output to input (Siegel, 1976)
total productivity is the ratio of tangible output to tangible input (Sumanth,1979)
Hanna Lestari, ST, M.Eng

6. What is Productivity?
Productivity is an index that measures output (goods and services) relative to the input (labor, materials, energy, and other resources) used to produce them. It is usually expressed as the ratio of output to input:
Output
Productivity =
Input
Hanna Lestari, ST, M.Eng

7. What is Productivity?
Productivity is affected by efficiency, effectiveness, and quality.
Productivity, together with innovation and quality of working life, determine the total organizational performance, which is usually measured by profitability in the free-enterprise
Hanna Lestari, ST, M.Eng

8. Ways to Increase Productivity
Increase output using the same or a lesser amount of (input) resource. (↑ O ↔ I)
Reduce amount of (input) resource used while keeping output constant or increasing it.
(↔ O ↓ I)
Use more resource as long as output increases at a greater rate. (↑ O ↑ I)
Decrease output as long as resource use decreases at a greater rate. (↓ O ↓ I)
Hanna Lestari, ST, M.Eng

9. Ways to Increase Productivity
The term "productivity" is often confused with the term "production." Many people think that the greater the production, the greater the productivity. This is not necessarily true.
Production is concerned with the activity of producing goods and services.
Productivity is concerned with the efficiency and effectiveness with which these goods and services are produced.
Hanna Lestari, ST, M.Eng

10. Greater “productivity” reduces the Expense per
Unit of Service!
Hanna Lestari, ST, M.Eng

11. Efficiency and Effectiveness for productivity improvement
Efficiency is a necessary but not a sufficient condition for productivity. In fact, both effectiveness and efficiency are necessary in order to be productive.
Efficiency is the ratio of actual output generated to the expected (or standard) output prescribed. Effectiveness, on the other hand, is the degree to which the relevant goals or objectives are achieved.
Effectiveness involves first determining the relevant (right) goals or objectives and then achieving them. If, for example, nine out of ten relevant goals are achieved, the effectiveness is 90%. One can be very efficient and still not be productive.
Hanna Lestari, ST, M.Eng

12. Are we doing the right thing?
Efficiency:
Are we doing the things right?
Effectiveness:
Are we doing the right thing?
Hanna Lestari, ST, M.Eng

13. Greater “productivity”
increases
department income !
Hanna Lestari, ST, M.Eng

14. Effects of Productivity on Business
Profits
Sales
Wage Increase
Competition
Growth
Hanna Lestari, ST, M.Eng

15. Quality of Work: What is Quality?
Quality is conformance to requirements or specifications
Quality is fitness for use (Juran,1988)
It places emphasis on the consumer aspect of quality, including design quality.
Quality = what is wanted + when it is needed
Quality = accuracy + timeliness
Hanna Lestari, ST, M.Eng

16. Five Factors Affecting Quality
Design
Equipment
Materials
Scheduling
Performance
Hanna Lestari, ST, M.Eng

17. Five Factors Affecting Quality
Design
Design of Product
Design of the system
Equipment
Accurate
Reliable
Materials
conform with specifications or requirements
Hanna Lestari, ST, M.Eng

18. Five Factors Affecting Quality
Scheduling
Equating quality with customer satisfaction, including receipt of what is needed on a timely basis.
poor scheduling can adversely affect the conformance of outputs to standard.
Performance
Performance is dependent upon two factors: skill and motivation.
Skill is a function of two factors: training and experience.
Motivation is also a function of two factors: attitude and environment
Hanna Lestari, ST, M.Eng

19. What are Quality Cost? Hanna Lestari, ST, M.Eng Control Cost
Prevention Cost
Appraisal Cost
Failure Cost
Internal Failure Cost
External Failure Cost
Hidden Cost
Opportunity cost from lost sales
Hanna Lestari, ST, M.Eng

20. What are Quality Cost? Prevention costs
Design/Process Improvement, Engineering
Personnel Training,High Quality Material
Appraisal costs (Detection)
Inspection & Testing thru sampling
Internal Failure costs
Scrapping, Reworking
Downtime, Delay Time
External Failure costs
Repair, Replacement under warranty
Product Recall
Product Liability
Hanna Lestari, ST, M.Eng

21. Quality and Productivity
Hanna Lestari, ST, M.Eng

22. Quality-Productivity Ratio
Formula 1
(Banyaknya unit produk berkualitas yang diproduksi)/{(Banyaknya unit output yang diproduksi x ongkos produksi per unit) + (Banyaknya unit cacat yang diproduksi x ongkos pengerjaan kembali/rework cost per unit)}
Formula 2
(total sales)-{(percentage of return)x(sales)}/{(cost of good sold)+(cost of rework)}
Hanna Lestari, ST, M.Eng