Concepts and mensuration of the productivity. M. En C. Eduardo Bustos Farías 31 mayo 2005

Transcription

1 Concepts and mensuration of the productivity M. En C. Eduardo Bustos Farías 31 mayo

2 OBJECTIVES To expose the student the concept of productivity. To present a variety of perspectives from which one can study the productivity. To develop an appreciation of the characteristics of the challenge from the productivity to national level, of industry, and of company. To show that the management of the productivity is essential for the survival and the success of a company and that the successful management of the productivity requires of arduous work, effective planning, consistency, persistence, patience, and it disciplines. 2

3 Introduction Standars Definitions Ratios 3

4 Standards Norms. Standard are Used for planning labor, material and overhead requirements. Benchmarks for measuring performance. Used to simplify the management system. 4

5 Standard Managers focus on quantities and costs that exceed standards, a practice known as management by exception. Amount Direct Labor Direct Material Manufacturing Overhead Standard Type of Product Cost 5

6 Variance Analysis and Management by Exception How do I know which variances to investigate? Larger variances, in dollar amount or as a percentage of the standard, are investigated first. 6

7 MOVIE 7

8 Setting Standard Accountants, engineers, personnel administrators, and production managers combine efforts to set standards based on experience and expectations. 8

9 Setting Standard Should we use practical standards or ideal standards? Engineer Managerial Accountant 9

10 Setting Standard Practical standards should be set at levels that are currently attainable with reasonable and efficient effort. Production manager 10

11 Setting Standard I agree. Ideal standards, based on perfection, are unattainable and discourage most employees. Human Resources Manager 11

12 Setting Direct Material Standards Price Standards Quantity Standards Final, delivered cost of materials, net of discounts. Use product design specifications. 12

13 Setting Direct Labor Standards Rate Standards Time Standards Use wage surveys and labor contracts. Use time and motion studies for each labor operation. 13

14 PELÍCULA 14

15 What is a definition? Although the answer sounds obvious, people often miss the fact that "definition" is used in two different ways. An extracted definition is based on the common usages of a word. It may not say precisely what the word means; for example, the definition of when objects are called "chairs". As common usage shifts, extracted definitions shift. A stipulated definition spells out precisely what a concept means in terms of other known concepts. This is usually the situation in games; for example, the definition of "touchdown" in football. 15

16 Ratios Ratios are simply comparisons among quantities of the same kind. 16

17 Common-Size Statements in Finance Common-size statements use percentages to express the relationship of individual components to a total within a single period. This is also known as vertical analysis. 17

18 PROFITABILITY The ratios in finance measure the ability of the business to make a profit. Example: 18

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20 CONCEPTOS A PRIORI Presente una definición personal de productividad. Enumere conceptos o ideas que usted crea que representan a la productividad. 20

21 Profitability Efficiency Effectiveness Quality Value Innovation Performance 21

22 Profitability The ability to earn a profit. A measure of present value per monetary unit invested. 22

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24 Efficiency FINANCE How easily and inexpensively transactions can occur. THERMODYNAMICS In thermodynamics and the theory of machines, efficiency is defined as the ratio of the useful work derived from a machine to the energy put into it. The mechanical efficiency of a machine is always less than 100%, some energy being lost as heat in friction. When the machine is a heat engine, its thermal efficiency can be found from the second law of thermodynamics. A typical petrol engine may have a thermal efficiency of 25%, a steam engine 10%. 24

25 Efficiency Order Received Production Started Goods Shipped Wait Time Process Time + Inspection Time + Move Time + Queue Time Throughput Time Delivery Cycle Time Manufacturing Cycle Efficiency = Value-added time Manufacturing cycle time 25

26 Effectiveness eficacia This is the extent to which the set goals or objectives of a industry or person are accomplished. 26

27 absenteeism accidents communication control cooperation initiative moral motivation Effectiveness in HR 27

28 Quality 1. Customer-Based 2. Manufacturing-Based Fitness for use, meeting customer expectations. Conforming to design, specifications, or requirements. Having no defects. 3. Product-Based The product has something that other similar products do not that adds value. 4. Value-Based 5. Transcendent The product is the best combination of price and features. It is not clear what it is, but it is something good... 28

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30 Value The concept of Value relies on the relationship between the satisfaction of many differing needs and the resources used in doing so. The fewer the resources used or the greater the satisfaction of needs, the greater the value. Stakeholders, internal and external customers may all hold differing views of what represents value. The aim of Value Management is to reconcile these differences and enable an organization to achieve the greatest progress towards its stated goals with the use of minimum resources (see figure below) 30

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32 Innovation Innovation is the conversion of knowledge and ideas into a benefit, which may be for commercial use or for the public good; the benefit may be new or improved products, processes or services. Innovation and technological change are without doubt the main drivers of economic growth at organisational, sector and economy-wide levels. Worldwide studies show that innovation is the key to the competitiveness of businesses and of nations. 32

33 Performance The degree of accomplishment of the tasks that make up an employee s job. Is the record of outcomes produced on a specified job function or activity during a specified period of time. Performance on the job as a whole is the sum (or average) of performance on the job functions or activities. 33

34 Linkage Between Strategy, Outcomes, and Organizational Results 34

35 What is Productivity? 35

36 Productivity An economic measure of efficiency that summarizes the value of outputs relative to the value of the resources used to produce them. 36

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38 Generally productivity is a function of Capital Quality Technology Management 38

39 Some Factors Affecting Productivity Standardization Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers Cuts in health benefits Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity 39

40 Why Measure Productivity? 40

41 Why Measure Productivity? You can t correct a problem if you don t know it exists By the time the job is over, you ve lost the money You will have current information to manage and control your project You should correct losses arising from internal problems You may be able to recover losses arising from external causes 41

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43 Why Measure Productivity? 43

44 The Importance of Productivity Productivity is a primary determinant of an organization s level of profitability and its ability to survive. Productivity partially determines people s standard of living within a particular country. 44

45 Source: Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright 1992 by Houghton Mifflin Company. Used with permission. Levels of Productivity 45

46 Levels of Productivity The unit of analysis used to calculate or define: Aggregate productivity the total level of productivity for a country. Industry productivity the total productivity of all the firms in an industry. Company productivity the level of productivity of a single company. Unit productivity the productivity level of a unit or department. Individual productivity the productivity attained by a single person. 46

47 Productivity Productivity is a measure of how efficiently inputs are converted to outputs (outputs can include finished goods not yet sold as well as work in progress) Productivity = output/input Total Productivity Measure (includes all inputs in an organization i.e. labor, materials, capital) Total Productivity = $sales/inputs $ Partial Productivity Measure (measures a single input at a time to a specific output) Partial Productivity = i.e. cars/employee Multifactor Productivity Measure (ratio of output to a group of inputs such as labor and material) Multi-factor Productivity = sales/total $costs (total cost productivity) 47

48 Forms of Productivity Total factor productivity an overall indicator of how well an organization uses all of its resources (i.e., labor, capital, materials, and energy) to create all of its products and services. Productivity = Outputs Inputs 48

49 Forms of Productivity Labor productivity a partial productivity ratio that uses only one category of resource (labor) to gage the organization s productivity in utilizing that resource. Labor Productivity = Outputs Direct Labor 49

50 What is Labour Productivity? Inputs - material - information Equipment - facilities - systems ACTIVITY what tasks are required? OUTPUT - product/service - how measured? People - knowledge - skills - abilities 50

51 Job Characteristic Model Core Job Dimensions Skill Variety Task Identity Task Significance Autonomy Feedback 51

52 Job Characteristic Model Core Job Dimensions Skill Variety Task Identity Task Significance Autonomy Feedback Psychological States Meaningful Work Responsibility for outcome Knowledge of results 52

53 Job Characteristic Model Psychological States Meaningful Work Responsibility for outcome Knowledge of results Work Outcomes High Motivation High Quality Work High Satisfaction Low Absenteeism and Turnover 53

54 Summary of Job Design Approaches Job Design Approach Motivational Satisfaction Dimension job satisfaction motivation job involvement Performance Dimension job performance absenteeism training time chance of error chance of stress use levels Mechanistic chance of stress job satisfaction motivation training time chance of error use levels absenteeism Legend: = positive = negative 54

55 Summary of Job Design Approaches Job Design Approach Satisfaction Dimension Performance Dimension Biological job satisfaction physical effort fatigue absenteeism medical incidents financial costs Perceptual /motor chance of stress job satisfaction motivation training time chance of error use levels Legend: = positive = negative 55

56 What is Labour Productivity? Productivity = Output / Input (e.g. Earned hours / Worked hours) Or the reciprocal: Productivity = Input / Output (e.g. Manhours per unit produced) 56

57 Labor Rate Variance A Closer Look Using highly paid skilled workers to perform unskilled tasks results in an unfavorable rate variance. High skill, high rate Low skill, low rate Production managers who make work assignments are generally responsible for rate variances. 57

58 Productividad de la mano de obra en México por división de actividad económica 58

59 Example for improving productivity 59

60 DATA Item Workers Raw Mat'l Profit Tables 2 1 $30 Chairs 3 2 $40 Capacity

61 Productivity Example Approach 1 Item Workers Raw Mat'l Profit Tables 2 1 $30 Chairs 3 2 $40 Capacity Based on the maximum requirement Chairs require more workers than tables 3 workers => 160/3 = Chairs use up more raw material than tables 2 units of RM => 100/2 = 50 Thus if we take the minimum of the maximum requirements we should be safe => Produce 50 Chairs, 0 Tables => Profit = $ 2,000 => Utilization of workers 94%, of RM 100% 61

62 Productivity Example Approach 2 We can solve both equations simultaneously. Item Workers Raw Mat'l Profit Tables 2 1 $30 Chairs 3 2 $40 Capacity T + 3 C = T + 2 C = 100 => Produce 20 Tables and 40 Chairs => Profit = $ 2, 200 => Utilization of Workers 100%, of RM 100% 62

63 Productivity Example Approach 3 We can use Linear Programming Maximize 30 T + 40 C Item Workers Raw Mat'l Profit Tables 2 1 $30 Chairs 3 2 $40 Capacity Subject to: 2 T + 3 C T + 2 C 100 => Produce 80 Tables and 0 Chairs => Profit = $ 2,400 => Utilization of Workers 100%, of RM 80% 63

64 Hypothetical Tender Labour 40% Materials 40% General Conditions & Indirect Costs 10% Overhead 5% Profit 5% Total 100% Largest cost component Most volatile Most critical to control 64

65 Hypothetical Tender Labour 40% 45% Materials 40% General Conditions & Indirect Costs 10% Overhead 5% Profit 5% Total 100% A 12.5% overrun in the labour component 65

66 Hypothetical Tender Labour 45% Materials 40% General Conditions & Indirect Costs 10% Overhead 5% Profit 0% Total 100% Wipes out all profit! 66

67 Productivity Example - Auto manufacturer data past three years Unit car sales ,700,000 2,400,000 2,100,000 Investment analysis Partial Prod. Measure Unit Car Sales/Employee Employees 112, , ,000 Year-to-year Improvement 13.7% 15.8% Multifactor Prod. Measures $ Sales (billions$) Cost of Sales (billions) $49,000 $41,000 $38,000 $39,000 $33,000 $32,000 Total Cost Productivity Year-to-year Improvement 1.6% 4.2% Which is the best measurement? 67

68 Common Factors Impacting Labour Productivity 68

69 Factors Affecting Productivity MCA - Labour Estimating Manual Factors Minor Average Severe 1. Stacking of Trades Muchas tareas 10% 20% 30% 2. Morale and Attitude 5% 15% 30% 3. Reassignment of Manpower 5% 10% 15% 4. Crew Size Inefficiency 10% 20% 30% cuadrillas 5. Concurrent Operations 5% 15% 25% 6. Dilution of Supervision 10% 15% 25% 7. Learning Curve 5% 15% 30% 8. Errors and Omissions 1% 3% 6% 9. Beneficial Occupancy 15% 25% 40% 10. Joint Occupancy 5% 12% 20% 11. Site Access 5% 12% 30% 12. Logistics 10% 25% 50% 13. Fatigue 8% 10% 12% 14. Ripple 10% 15% 20% 15. Overtime 10% 15% 20% 16 Season and Weather Change 10% 20% 30% 69

70 Factors Affecting Productivity Internal: Poor planning & management of work Rework & errors Bad estimate Lack of training Morale problems Staff turnover Material & equipment availability 70

71 Factors Affecting Productivity External: Overtime Changes Crowding agolparse Trade Stacking Weather Site Access These factors seldom occur in isolation aislamiento 71

72 Quantifying Productivity Losses 72

73 Crew Overmanning U.S Army Corps of Engineers, Modification Impact Evaluation Guide, % Total Crew Efficiency % Crew Size Increase Above Optimum 73

74 Effect of Congestion (Crowding) on Labour Efficiency U.S. Army Corp of Engineers "Modification Impact Evaluation Guide" - July % % Labour Loss to Inefficiency 15% 10% 5% 0% 0% 5% 10% 15% 20% 25% 30% 35% % Crowding 74

75 Effects of Overtime US Army Corps of Engineers

76 Summary of Overtime Curves 76

77 Impact Due to Change Orders Effects of Change Orders on Productivity: Civil and Architectural Work 45% 40% % LOSS OF PRODUCTIVITY 35% 30% 25% 20% 15% 10% 5% Reference: Impact of change orders on construction productivity, Moselhi, Leonard, and Fazio Canadian Journal of Civil Engineering, Volume 18, % 0% 10% 20% 30% 40% 50% 60% 70% % CHANGE ORDERS 77 CHANGES ONLY CHANGES PLUS ONE OTHER CAUSE CHANGES PLUS TWO OTHER CAUSES

78 Productivity Effect of Temperature and Relative Humidity PRODUCTIVITY IN % 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 5% RH 15% RH 25%RH 35% RH 45% RH 55% RH 65% RH 75%RH 85% RH 95% RH C -10 C 0 C 10 C 20 C 40 C 30 C EFFECTIVE TEMPERATURE IN F 78

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83 The Balanced Scorecard Management translates its strategy into performance measures that employees understand and accept. Financial Customers Internal business processes Performance measures Learning and growth 83

84 The Balanced Scorecard How do we look to the owners? In which internal business processes must we excel? How can we continually learn, grow, and improve? How do we look to customers? 84

85 The Balanced Scorecard Learning improves business processes. Improved business processes improve customer satisfaction. Improving customer satisfaction improves financial results. 85

86 Benefits of Balance Scorecard If implemented well: Forces management to articulate a coherent strategy. Strategy is communicated throughout organization. Performance measures are more likely to be consistent with strategy and actionable. Portfolio of measures reduces gaming problems. Feedback loop makes strategy dynamic. 86

87 Some Possible Problems Cultural/behavioral Program fatigue. Culture shock/resistance. Every existing performance measure has a champion. Gaming still possible. 87