PRODUCTIVITY MANAGEMENT

Transcription

1 C h a p t e r PRODUCTIVITY MANAGEMENT 8.1 INTRODUCTION In today s competitive environment, enterprises need to provide better goods and service with limited resources. This means enterprises have to be operated more efficiently and competitively than in the past for continuous growth and survival of organization. In the context of globalization and trade liberalization products with good quality have to be produced at a cut throat prices. This indicates that enterprises can not rely on rampantly increasing product prices to increases their profit because the market forces will not allow them. For sustainable development, these enterprises have no choice but to be increasingly efficient and competitive. No enterprise can be competitive and efficient with out improving its productivity level. Productivity measurements help to find out the current level of the organizational productivity, which help on taking the strategic decision for future improvements. Productivity is the relation between output and input. The higher the ratio between output and input the higher will be the productivity level which indicates higher level of productivity improvements. Most enterprises are concerned not only about their productivity level but are also concerned about the productivity level of similar other firms and competitors. This will give them the understanding of the comparative position the firm compared to others. Understanding productivity level requires productivity measurement, which in itself is the first step towards productivity improvement process. Productivity measurement itself is not an end but is an effective tool used for improving productivity. These processes should be made effective to bring about continuous productivity improvements which can be possible through institutionalizing productivity measurement system in an enterprise. The benefits of productivity measurement should be carefully explained to everybody in an organization. Otherwise workers and employees could have negative concepts that productivity improvements and measurements could displace workers, which will make it difficult to introduce productivity measurements system in an enterprise. Enterprises usually show profitability indicators. If these indicators are also linked with productivity, the indicators will have more meaning. This is because profitability in long run is dependent on the productivity level of an organization. Productivity measurement enhances an organization s strategic planning and also works as a gauge to ascertain whether strategic objective have been achieved. Everybody will be interested in productivity and made people conscious about the benefit of productivity. Productivity indicators will help to set practical goals of an enterprise and also serve as a diagnostic tool to remove difficulties and problems by setting appropriate check points. Healthy productivity measurement system will help to build industrial relation by improving gain sharing system. Productivity measurements analysis is very useful to search improvements areas for productivity improvements. It also indicates what has been achieved or not achieved in the past from productivity improvement activities MISUNDERSTANDING ABOUT PRODUCTIVITY There are some misunderstanding between relation of productivity with production, profitability, cost reduction, labor productivity, effectiveness and effectiveness. The major difference between them is explained below. Production versus Productivity

2 Productivity Management More production does not mean the high or more productivity. High production could be achieved from high or more inputs used but may have low productivity. Productivity is concerned with efficient and effective utilization on inputs. Productivity versus Profitability Profit can be obtained through price recovery even though productivity has been gone down. High productivity insures high profit but high profit does not necessarily indicate the high productivity. Productivity versus Cost Reduction It is believed that cost reduction increases the productivity. But it may be the matter of worse in the long term. In all times the cost reduction is not always associated with higher productivity. Productivity versus Labour Productivity Productivity does not refer only labor efficiency or labor productivity. It is efficiency of all utilized resources. Productivity versus efficiency and effectiveness Efficiency refers how well resources are utilized to achieve desired results, where as effectiveness refers to degree of accomplishment. Efficiency - How efficiently resources are used to generate output. Effectiveness - What is achieved compared with what would be possible LINKAGE BETWEEN PRODUCTIVITY AND PROFITABILITY Productivity measurement when linked with profitability indicators gives a new understanding of the strategies an enterprise should take. This can be appropriately shown in the table below. Cases Table 8.1: Productivity linked with profitability If Then Productivity Profitability What would happen What should be done 1 High High Financial condition is sound and stable 2 Low High Here profit is not going to be sustainable in the long run 3 High Low Company will start loosing money and may have to be shut down Maintain the same strategy and further improve productivity Concentrate on improving productivity Should focus on strengthening market strategy, market research, market promotions, advertisements and pricing policy. 4 Low Low Shut down or Bankruptcy Improve productivity and strengthen market at the same time. 8.2 PRODUCTIVITY MEASUREMENT Productivity measurement is derived from the ratio between output and input. Productivity is usually defined as follows: Productivity (P) = Output O Input P Where, P = Productivity O = Output I = Input 127

3 A Text Book of Operational Research and Food Plant Management Therefore productivity measures, how well input or resources are utilized to obtain the desired output. The higher ratio, the greater will be the productivity. Given similar situation entrepreneur or an enterprises should try to improve this ratio over time which indicates productivity improvements. Before productivity measurement can be calculated both the Output and Input should be measured MEASUREMENT OF OUTPUT Output can be measured in three ways as described on the subsequent paragraphs. Production Quantity This requires expressing output in physical volume. These however can be done only if the output is homogeneous. If not then weighing system must be adopted to include all types of products. Production value In case of several different type of product, expressing them in money terms would be appropriate. This comprises the sales value of the units of finished products during a specified period of time. It can be calculated by multiplying the physical output by its sales price. is the wealth created by an enterprise through its production or service process. is generally regarded as the best output measurement when dealing with heterogeneous output. The more productive an organization is, the more is the value added. is shown in diagram below. Figure 8.2 : Value addition by company Company Supplier Price paid for material energy and other resources. Value addition Customer Value addition can be derived in two different methods getting the same results. They are Subtraction method Addition method. Subtraction Method Value addition in this case is derived by deducting purchase made from outside such as materials, energy and others from net sales and by adding change in inventory of work in process and finished goods. Purchase of materials from outside includes raw materials used in operation process. Energy refers to energy and utilities such as power, light and water. Other purchase includes office supplies, repairs and maintenance, insurance, advertising, consultants etc. This method shows how value add is created. Value addition = Net sales Value of purchase from outside + Change in inventory Addition Method As the name implies value addition is calculated in this case by adding all the expenses items such as personnel expenses, financial cost, rents, depreciation, taxes, net profit before tax and other non operating expenses. = Personnel expenses + financial cost + rent + depreciation + taxes + net profit before tax + non operating expenses. Further illustration of these expenses could be done as follows: Personnel expenses: This includes expenses like salaries, wages bonuses, allowances etc. Financial cost: This includes interest from loans. Rent: This include rent fee charged for use of land, building, machinery, equipments and other fixed assets. Depreciations: This includes reductions in the original value of machineries and equipments over time. Taxes: This includes import taxes, tariffs, duties, excise taxes etc (excluding income tax) 128

4 Productivity Management Net profit: This includes net income before income tax Other non operating expenses: This includes expenses not directly related to operation such as donation/charitable contributions, bad debts, losses etc MEASUREMENT OF INPUT Input refers to resources both tangible and intangible necessary to produce goods or services. Inputs can be classified into labor, capital and intermediate input. One of the important inputs is the labor. It can be calculated in three ways Number of Employees Personnel Expenses Total man hour worked Capital input: This can be measured either in physical volume terms (machine hour used for machinery or equipment) or in money value terms (machinery and equipment, fixed assets, total assets) Intermediate input: This consists of purchases of materials, energy and services in physical volume terms or in money value terms (value of energy purchase, material purchase etc). 8.3 TYPES OF PRODUCTIVITY Basically there are following three basic types of productivity or types of productivity measurements, they are: Partial productivity Total factor productivity Total productivity. Partial Productivity Partial productivity is the ratio of output to partial input. It measures the productivity of each input. It determines the contribution of each factor in producing and generating output. It can be measured as follows. O PP = PI Where, PP = Partial Productivity O = Total Output PI = Partial Input Different partial inputs can be labor, capital, energy, machinery and materials etc. Some examples of partial productivity measurements are given below: Labor productivity = Capital productivity = Material productivity = Energy productivity = Capital input Total raw material used Total energy used Machinery productivity = Total machine hour used The partial productivity is easy to understand compute and can be highlighted to management. These partial productivity data are available with similar organization in industry. It makes easy to compare. It is thus a good diagnostic tool to pin point areas for productivity improvements. However the partial productivity is misleading if done or used alone. It doesn t explain overall cost. So, increasing productivity via focusing on new single area may not give good result. Example if organization wants to increase labor productivity, simultaneously energy and material productivity has to be increased, because these are associated to each other. Total Factor Productivity This is the ratio between total output on the one hand and labor and capital on the other hand. It can be expressed as: 129

5 A Text Book of Operational Research and Food Plant Management TFP = O L + C Where, TFP = Total factor productivity O = Total Output L = Labor C = Capital Total factor productivity has benefit of easy calculation and more useful form economic view points. Total Productivity Total productivity is the ratio of total output to the sum of all inputs. Thus, total productivity measures reflect the joint impact of all the inputs in producing and generating of output. TP = O I Where, TP = Total Productivity O = Total Output I = Total Input Total productivity considers all quantifiable factors and output. It is more accurate to represent real economic condition. Control through total productivity measure is a tremendous benefit to top management. Total productivity is easy to relate with total cost. However the data computation for total productivity is very difficult. It does not consider intangible factors of outputs and inputs like partial and total factors productivity measure SOME IMPORTANT PARTIAL PRODUCTIVITY MEASURE The partial productivity measures the ratio between the total output and partial input. There are various partial inputs like labor, material, machine, capital, energy etc. These inputs could be expressed on the various ways as stated earlier. Therefore partial productivity could be expressed on various ways to best suit the productivity measurement objective. Few measurement criterions are expressed below: Physical Productivity Measurement Under physical productivity measurement both input and output are measured in physical volume terms. Few physical productivity measures are: Labor productivity = Material productivity = Energy productivity = Machinery productivity = Labor input (man-hour) Material input (quantity) Energy input (quantity) Machine input (machine hour) Value Productivity Measurement Under value productivity measure, all input and output are expressed in value or monetary terms. Few value productivity measures are as follows: Labor productivity = Material productivity = Energy productivity = Machinery productivity = Capital productivity = Labor input (cost) Material input (cost) Energy input (cost) Machine input (cost) Capital input (cost) 130

6 Productivity Management Value Added Productivity Measurement Here output is expressed in value added and input is expressed either as in cost (expenses) or physical volume. Some value added productivity measures are expressed below: Labor Productivity = Labor input The labor input could be expressed as Personnel expenses or as Number of employees as shown below: Labor productivity = Personnel expenses (labor cost) Labor productivity = Number of employees Here first labor productivity measure (A) express productivity as value added per unit labor cost, however second (B) express productivity as value added per labor. Similarly Capital productivity could also be expressed as: Capital productivity = Capital input The Capital Input could be expressed as total capital or tangible fixed assets. Capital productivity = Total capital Capital productivity = Tangible fixed assets Here first capital productivity measure (A) express productivity in terms of value addition per rupee capital investment and second (B) express productivity as value added per rupee fixed assets. Except these productivity measures the following productivity measure could be useful in evaluating the company s performance. Wage per employee = Labor distribution ratio = Capital share ratio = Personnel expenses Number of employees Personnel expenses Profit before tax Total capital Capital intensity = Number of employees From these we know that productivity can be measured in various ways. However if it is not done properly it will give the bad figure, so it is essential to make an effective way of productivity measurement, which will help in productivity improvement programme. Productivity measure will help in following activities. Focus on the improvement opportunity points Effectiveness of improvement activities Identification of element affecting in income and investment. Decision making priorities Identification of weak points. Optimum use of resources. Analysis of effectiveness and efficiency. Carry our diagnostic activities for bottle necks and barriers so that realistic targets and checkpoints can be established. Inter-Intra firm comparison. 8.3 VARIOUS LEVEL OF PRODUCTIVITY MEASUREMENT Measurement of productivity is not limited to firm level only. It is found beneficial to other higher levels like industrial, national and international level also. Productivity at International Level Productivity at international level is generally measure to compare productivity of two or more countries in similar aspects. In addition it is used for understanding and evaluation of productivity impacts on national and international market of competing countries. 131

7 A Text Book of Operational Research and Food Plant Management Productivity at National Level Productivity is generally measured by economists in order to formulate plans and policies at national level. It is preliminarily used by economists. It can be measured as follows. Real gross domestic product (GDP) at factor cost National productivity = Active population Where, GDP includes total goods and service produced by nation and active population equal to total population of the nation. Productivity at Industrial Level Productivity measurement at industry level are important to know economic indicators, manpower analysis, company performance analysis, forecast of industrial growth and future condition. It can be measured as follows: Industrial productivity = Productivity at Company/Firm Level Real values added contribution by industry group Economically active population of the industry group The firm level productivity can be measured to know productivity of the firm itself. It can be measured as follow: Partial productivity Total factor productivity Total productivity. All these three methods are previously described. 8.5 CASE STUDY FOR PRODUCTIVITY MEASUREMENTS Case 1 : From the following data relating to an enterprise, estimate value added and value added partial productivity (Labor, material etc.) measures. Investments (in 000 Rs): Fixed Capital 500 Working capital 600 Production pcs (of different size photo album) Price 194 / pcs (Average price) Production (in 000 Rs.) Rs ( = Rs 3880,000) Production cost and expenses (in 000 Rs): Raw material Labor (D + I) Electricity Interest Depreciation Insurance Other (outside purchase) Tax Profit after tax Solution Determination of Value addition by subtraction and addition methods ( from both methods should give same answer) by addition method = Labor + Interest + Depreciation + Tax + Profit = = 970 by subtraction method = Net sales RM Electricity Insurance Outside purchase = =

8 Productivity Management % = % = 25% Determination of value addition productivity Labor productivity = Personnel expenses (labor cost) = = 2.16 value addition per rupee labor cost Material productivity = Material cost = = 0.34 value addition per rupee material cost Energy productivity = Energy expenses = = 19.4 value addition per rupee energy cost 9750 Capital productivity = Total capital = = 0.88 value addition per rupee capital Case 2 : Following figures provides the output and input of producing item A and B. Compute partial productivity (labor, material, capital and energy) and total productivity and compare the productivity level in two different years. Total capital investment : Rs 50, (Both period) Interest Rate : 3.64 % (Both period) Base Period (2002) Review Period (2002) Outputs Products Quantity Price / Unit (Rs) Quantity Price / Unit (Rs) Output A 200 Pcs Pcs 4.00 Output B 200 Pkt Pkt Inputs Resources Quantity Total Cost (Rs) Quantity Total Cost (Rs) Labor 80 hour hour 960 Material 80 Kg kg 400 Energy 1200 KwH KwH 64 Solutions Total Capital Investment : Rs 50, (Both period) Interest Rate : 3.64 % (Both period) Base Period (2002) Review Period (2002) Outputs Products Quantity Price per Unit (Rs) Total sales (Rs) Quantity Price per Unit (Rs) Total sales (Rs) Output A 200 Pcs , Pcs , Output B 200 Pkt , Pkt , Total (TO) 3, , Inputs Resources Quantity Total Cost Quantity Total Cost (Rs) (Rs) Labor (L) 80 hour hour Material (M) 80 Kg kg Energy (E) 1200 KwH KwH Capital (C) * 1, , Total (TI) 3, , * Total capital x Interest rate Productivity Ratio Labor (TO / L) Material (TO / M) Energy (TO / E) Capital (TO / C) Total Factor (TO / L+C Total Productivity (TO / TI) Productivity change from base period to review period 1.20 / 1.07 =

9 A Text Book of Operational Research and Food Plant Management Case 3 : A Steel Furniture Manufacturing Company has provided the following data. Compare the labor, raw materials and supplies, and total productivity of 2003 and Output: Sales value of production $24,000 $36,000 Input: Labor Raw materials and supplies Capital equipment depreciations Other 11,000 8, ,000 16,000 12,500 12,500 5,000 Solution Partial productivity Labor Raw materials and supplies Total productivity Conclusion: The labor and raw materials productivity of the company has increased in 2004 than in 2003 but the total productivity of 2003 is better than 2004 it is because the high capital depreciation and miscellaneous expenses in 2004 than in FACTOR AFFECTING PRODUCTIVITY Productivity is affected by various factors. These can be divided into External factor Internal factor EXTERNAL FACTOR External factor are those factors, which are beyond the control of management or individual enterprises. They affect organizations productivity level but organization cannot control them. These external factors are also called macro-productivity factors. They can be listed as follows: Structural adjustment Natural resources Government and infrastructure. Structural Adjustment Changes in social, economic, political, demographic structure of nation directly influence national and industrial productivity. However the change in national and industrial productivity later has long term affects on the socio, economical, political and demographic structure of nation. Natural Resources Natural resources like manpower, land energy, raw material are important for improving productivity at international, national, industry and firm level. In order to improve productivity all these sources should be utilized efficiently and effectively with proper policy and strategy. Government and Infrastructure National and organizational productivities are directly affected by governmental policies, strategies and programmes. The underlying factors under government and infrastructures are as follows: Practices of government agencies Rules and regulations like pricing, income and wages policies. Transportation and communication Power supply Financial measure and incentives such as interest rates and tax rates etc. 134

10 Productivity Management INTERNAL FACTORS Internal factors could be adjusted with some ease compared to external factors. However these factors very significant role in improving productivity of an organization. Internal factors also known as micro-productivity factors. These factors can be classified into following two groups. Hard factors Soft factors. Hard Factors Hard factors are internal factors which are quite inflexible towards change, compared to soft factors. These hard factors are as follows: Product Plant/equipment Technology Material and energy. Soft Factors Soft factors are those internal factors which can be changed as required by management. Some of the soft factors are as follows: Manpower Organization and systems Work methods Management styles. Figure 8.2: An overview of factor affecting productivity Enterprise Productivity Affecting Factors EXTERNAL FACTOR Structural Adjustment Economic changes Demographic changes Social changes Natural Resources Manpower Land Energy and RM Govt. and Infrastructure Institutional practices Policy and strategy Infrastructure Financial measure INTERNAL FACTORS Hard Factor Product Plant / equipment Technology Material and energy Soft Factors Man power Organization and system Work methods Management styles More about Hard Factors Products Product affecting productivity relates the extent to which the product meets output requirement. Product must be of use value and affordable by the customer. So product may be required to re-design to improve its use value. To maximize these use value, product place value, time value and price value should also be considered. Plant and Equipment The plant and equipment is another important hard factor influencing productivity of any organization. Unless and until the adequate plant and machinery are installed, it is impossible to increase productivity compared to other similar organizations of industry. Similarly the maintenance of plant and machinery is also crucial for 135

11 A Text Book of Operational Research and Food Plant Management increasing organizational productivity. Few plant and equipment parameters affecting productivity are as follows: Good maintenance Operating the plant and equipment in optimum process conditions Increase in plant capacity by eliminating bottlenecks and by corrective and preventive measures. Reducing idle time and making more effective use of available machines and plant capacities. Modernization and expansion Cost control in work process Inventory control and production planning. Technology Technological innovations are another important source of high productivity. Automation and information technology help to increase the existing productivity level of organizations. Similarly these technology help for better service as well as improved marketing for customer satisfaction. Material and Energy Attempt to reduce the use of material and energy is vital to improving productivity. A material productivity factor includes: Achieving higher material yield by selecting right material, its process control and quality control Use and control of wastage and scraps Upgrading the use of material in process Cost control in material Import substitution Developing continuous source of supply of materials. More about Soft Factors Manpower (Human) People (human resources) are the central factor in productivity improvement program. People in organization play an important role in using their creative skills and talents to achieve efficiency and effectiveness for getting the desired results. They must be motivated to be productive. Only a motivated employee could achieve standards of performance and have the feeling of belongingness. So, it is very vital to consider psychosocial values, economic and cultural background of the employees working in an organization. Various methods and techniques such as financial schemes like wages and salaries, training and education, social security, rewards, incentive plans, participation in management, control negotiation, attitudes to work, supervision to change, cooperation, organization development, planning attendance turnover and job security etc are few motivational techniques often used by managers for increasing the productivity. Organization and System Well organization and system of working are important for smooth, uninterrupted and dynamic functioning towards the achievement of objectives of an enterprise. The principle of good organization such as unity of command, delegation of authority and span of control are intended to provide frame wok for better productivity. However organization and system should be designed in such a say that it is dynamic and flexible, so that any change in the system can be carried out in order to maximize productivity. Work Methods Work method is another internal factor affecting productivity. Application of improved technology often decreases the number of labor hour required for the work increasing the labor productivity. However, without changing technology, existing work methods could also be improved by the use of various techniques, thus increasing productivity. Improvement in work process, human movement, tools used, work place, handling of materials and machines used, work study, industrial engineering and training are the mains tools of improving work methods. Management Styles Management is the driving force for improving productivity by way of effective use of all scare resources under enterprise control. Effectiveness depends upon the management styles and practices include all the major aspect of an organization such as planning, organizing, budgeting and controlling. 136

12 Productivity Management 8.7 PRODUCTIVITY IMPROVEMENT TECHNIQUES The existing productivity of an organization could be improved considering on the three factors. Viz. Human ware, Soft ware and Hard ware. Content of these three factors is shown on the following diagram and all the factors are dealt in details. Figure 8.3: Productivity improvement techniques PRODUCTIVITY IMPROVEMENT TECHNIQUES Human Ware Soft Ware Hard Ware Economic incentive scheme. Non-financial techniques Small group activities Management by committee Employee participation Training for employees. Profitability analysis. Work measurement. Method study. Work simplification Pareto analysis. Operation research Specialized production system. Value analysis Ergonomics. Technologically advance machine. Autonomous maintenance. Improved material handling equipment HUMAN WARE ORIENTED PRODUCTIVITY IMPROVEMENT TECHNIQUE Various techniques can be used to motivate human for higher productivity in their work. The some techniques are. Economic Incentive Scheme It is based on work more earns more philosophy. It aims at providing monetary incentives to motivate employees to work more. Profit and gain sharing schemes linked with performance in terms of output, quality and realization of target are some of example of financial techniques than came under human ware productivity improvements techniques. Non Financial Techniques Non financial techniques (NFT) relate with satisfying the unsatisfied needs of employee with out any financial measures. Some of NFT are Job rotation, Job enlargement, Job enrichment, Employee participation etc. Small Group Activities Small group activities (SGA) are commonly known as Quality Control Circle (QCC) or Quality Circle (QC). This is an important productivity improvement tools widely accepted in Japan. QCC is a small group of volunteers from the same shop-floor or work place who meet regularly once a week in order to identify and analyze actual or potential work related problem to suggest solutions to the management or to act on the solution them self. Small group activities are dealt in detail on Chapter 9. Management by Committee Committee is a formal group of employees formed to fulfill specific task and responsibilities to produce synergistic result. Committee has certain property in relation to size, composition and agenda. Committee is expected to reach at decision but is not a decision implementation authority. Committee may take the help of different approach and techniques to make its activity effective e.g. Brain storming Strength, Weakness, Opportunity and Threat (SWOT) analysis Force field analysis Nominal group techniques. Employee Participation 137

13 A Text Book of Operational Research and Food Plant Management This technique promotes employee participation in decision making for smooth implementation of any improvement programme. This will increase mutual co-operation between employees and employer in achieving good industrial relation and thus increase productivity in the interest of organization, the employees and the customer. Training of Employees Human resource development is an essential factor for improving productivity continuously. For achieving the desired purpose, a sustainable and cost effective training program both short term and long term, related to job should be conducted from time to time. This training will help to develop employee skill, thus increases the productivity. For this the training design should be compactable with the organization need. The objective and purpose of programme should be clear and the outcomes should be measurable SOFTWARE ORIENTED TECHNIQUES Software focuses on the productivity improvement via methods, systems or procedure. Some software oriented techniques are: Profitability Analysis Profitability analysis is required to develop system of continuous monitoring and control of both profit and productivity. Profitability analysis is one of the powerful tools to monitor the elements of capital productivity and cost benefits relationship and take corrective action whenever and wherever necessary. Some of the widely used techniques for profitability analysis are: a. Du Pont model This model is developed by Swedish Federation of Productivity Services. It focuses on analyzing the return on net assets (RNA). Profit RNA = Working capital b. ACP performance measurement model. This is developed by National Productivity Institute of South Africa and later developed by American Productivity Centre in This focus on the relationship of profitability and productivity with price recovery. Profitability = Productivity Price recovery c. Company performance model Different partial productivity is monitored in this model. Some partial productivity measures are: Material productivity Labor productivity Capital productivity Energy productivity Other expense productivity. Work Measurement Work measurement is an industrial engineering technique of productivity improvement. It aims at controlling the process capacity by standardizing the time for each operation. It requires establishing a standard time needed to complete the specified job by the worker. So work measurement is a technique of controlling workers performance by comparing the actual time taken to complete the job with standard time. Method Study Method study is the systematic recording and critical examination of each element of the work such as raw materials procurement, material handling, operation procedure, machinery layouts etc. This aims in developing better working methods; that makes work easier and reduces the cost. Simply, objective is to design optimal procedure for efficient operation. Work Study Work-study is a combination of two groups of techniques; method study and work measurements; which are used to examine people s work and indicate the factors which affect efficiency. Work-study is a technique to increase output from a given quantity of resources with little or no further capital investment. This requires the systematic procedure to analyze the existing process and work methods. 138

14 Productivity Management Work Simplification This is a philosophy and set of procedures aiming to providing people the best place to work and improve it. Work simplification consists of three elements. They are the philosophy, pattern and plan of actions. Philosophy is that workers know the best way of doing their job and could improve it. Thus in work simplification, trust in organization and management commitment are two pillars. The pattern in work simplification means the developing the tools and techniques of an organized approach, which in practice ensure the work simplification. The plan of action refers to how the commitment to produce quality output with least effort and cost by the employees. Plan of action should be simple, understandable and acceptable and motive to the people who perform the job. Pareto Analysis Pareto analysis is a technique for ordering causes or problems from the most to the least significant. In this way the most significant aspects are identified and the efforts can be concentrated on those, thus getting the maximum benefit with the lest effort. The analysis make the use of Pareto diagram, which is a special case of the bar chart and is used in conjunction with brain storming, cause and effect analysis and cumulative line chart. The diagram displays, in decreasing order, the relative contribution of each cause (or problem) to the total. The relative contribution can be based on the number of occurrences, the quality damage or the cost associated with each cause (or problem). The Pareto diagram is based on the Pareto principle which states that a few causes accounts for the most of the effects. This common concept was first noted in the nineteenth century by Italian economist Vilfredo Pareto, who noticed that a large proportion of the national wealth was controlled by a relatively small number of people, roughly according to the ratio 80:20. This fact has also been referred to by Juran (Dr. Joseph Juran, a renown quality scientist) in his concepts of vital few and trivial many. The Pareto principle is widely used in productivity improvements by solving a few key productivity problems, which ultimately leads to other improvements. Operation Research (OR) Operation research (also known as Quantitative methods, Management science, Decision science and few other names) provides a quantitative techniques or a scientific approach to the executives for making better decisions for operation under control, which ultimately leads to higher productivity. OR is not a fixed formula which can be applied to all types of problem. This requires that problem be defined, analyzed and solved in a rational, logical, systematic and scientific manner based on data, facts, information s and logic and not on intuition and subjective judgment. Some common OR techniques for productivity improvements are as follows: Linear programming Decision models Network theory Inventory control models Queuing theory Sequencing Game theory Simulation. Specialized Production System Specialized production systems are generally considered as improved system requiring high technology. Incorporation of these systems are supposed to increase productivity. Some examples of specialized production systems are: Service automation Flexible manufacturing system Computer integrated manufacturing Computer aided manufacturing HARDWARE ORIENTED TOOLS AND TECHNIQUES There are various techniques available which help to design and maintain hardware to improve productivity in an organization some of the hardware-oriented techniques are Value analysis Value analysis is an important technique for improvement of productivity. It is a boarder sense of value engineering. It also considered as the modified form of methods study. It is an approach to cost reduction, which emphasizes functions rather than methods, identifies excessive or unnecessary costs, improves the value of the 139

15 A Text Book of Operational Research and Food Plant Management product or service, and provides the same or better performance at a lower cost and improved quality, reliability. For effective value analysis, the following steps of processing are required to follow: Select value analysis aims and set up the team with representative from different business area, such as marketing, engineering, production, purchase, finance etc. Describe the aims and functions, both primary and secondary of each product. Secondary functions are those, which enable the primary function to give additional value. Determine the costs of each function. Evaluate the degree of accomplishments and cost of functions. Come out with different possible improvement alternatives through creative techniques like brainstorming. Evaluate the alternative and select the improved system or product. Implement the selected improved design. Ergonomics Ergonomics often called human factor engineering is a multidisciplinary science to study the interface between man and machine. It aims in promoting safety, comfortability and efficiency at work situation through good relationship between man, materials, machine and work environment. Basically it deals with designing the hardware like machine, equipments, material handling, flow process that require minimum physical and psychological strains of employees which ultimately contribute in improving worker-machine performance and thus productivity. Especially ergonomics analysis improves the productivity improvement through: Developing the must comfortable conditions for the workers Facilitating psycho-senatorial functions in reading instruments displays. Making handling of the machine and control easier. Making better use of spontaneous and stereo typed reflexes and. Avoiding unnecessary recall efforts. Ergonomics analysis requires system analysis, workstation analysis and evaluation. Advance Technology Technologically advance machine make possible for performing more work at reduced time and cost. Their use improves partial productivity or even total productivity. But improving productivity through the use of advance technology very much depends on choosing the right technology. Robotics and robots are the least development in advance technology. Improved Material Handling Techniques Material handling equipments are equipments use to transport materials, parts and WIP, sub assembly and finished products form one place to another. Manual trolleys, fork lifts, cranes are the example of material handling equipments, which are used for many years. Automatic guided vehicle systems, which are used in developed industrial countries to improve material handling system, workers productivity and total productivity of an organization. Autonomous Maintenance Different forms of maintenance such as breakdown, preventive and predictive maintenance are come out to keep the machinery up to date and assist the smooth production. Total productive maintenance (TPM) is the latest development in this area. TPM started with preventive maintenance (PM) and it was expanded to include efforts to prevent quality degradation caused by equipment deterioration and malfunctioning. The additional responsibility was also within the scope of maintenance department activities. It has been realized that the operators, the people actually using the equipment who know the equipment best should be involved in the process of maintenance, repair and change. TPM involves every one from the top executives to the shop floor workers to promote productive maintenance through moral-building management and small group activities like QC circle in efforts to maximize equipment efficiency. TPM implies utilizing the plant capability to its fullest extent to: Reduce the equipment stoppages Quantitatively and qualitatively enhance equipment capability Improve safety, health and environmental factors in the expectation that such improvement will contribute to better quality and higher profits. In contrast to above listed techniques, Japanese management techniques are widely accepted as the productivity improvements techniques, which lead the Japan to today s success. Japanese management techniques like QC circle, 5 S, KAIZEN, JIT system, KANBAN systems are considered as the key for the success of Japan s economy. They are generally a combination of human ware soft ware and hard ware techniques, each having its own special properties. The adoption of these activities forces Japanese organization to Total Quality Management (TQM). 140