Professional Documents
Culture Documents
2-1
Process
The economic system
transforms inputs to outputs
at about an annual 2.5%
increase in productivity
(capital 38% of 2.5%), labor
(10% of 2.5%), management
(52% of 2.5%)
Feedback loop
2-2
Outputs
Goods and
Services
Measures of Competitiveness
Productivity
GDP (Gross domestic product) growth
Market capitalization
Technological infrastructure
Quality of education
Efficiency of government
2-3
What is Productivity?
Productivity is a common measure of how well
resources are being used or a measure of the effective
use of resources usually expressed as the ratio of
output to input
Output
Input
Productivity =
2-4
2-5
2-6
Wages increased
Average worker's annual cash
compensation increased
$2.25
115
110
27000
$2.00
105
26000
$1.75
100
95
25000
24000
$1.50
Year A
Year B
Year C
Year A
2-7
Year B
Year C
Year A
Year B
Year C
Measures of Productivity
Partial
measures
Output
Labor
Output Output
Machine Capital
Output
Energy
Multifactor
Output
Output
measures
Labor + Machine Labor + Capital + Energy
Total
measure
2-8
Machine
Productivity
Capital
Productivity
Energy
Productivity
2-9
Retail store
Chicken farm
Utility plant
Paper mill
Example 1
7040 Units Produced
Sold for $1.10/unit
Cost of labor
: $1,000
Which productivity
measures can be
calculated?
What is the
multifactor
productivity?
Solution 1
MFP =
MFP =
Output
Labor + Materials + Overhead
(7040 units)*($1.10)
$1000 + $520 + $2000
MFP = 2.20
2-12
Example 2
5,500 Units Produced
Sold for $35/unit
500 labor hours are used
Cost of labor: $25/hr
Cost of raw material: $5,000
Cost of overhead: 2 x labor cost
What is the labor productivity?
What is the multifactor
productivity?
2-13
2-14
MFP =
Output
Labor + Materials + Overhead
(5,500 units)*($35)
(500hrs.)*$25/hr. + ($5000) + 2*(500hrs.)*$25/hr.
MFP = 4.52
2-15
Example 3
You have just determined that your service employees
have used a total of 2400 hours of labor this week to
process 560 insurance forms. Last week the same crew
used only 2000 hours of labor to process 480 forms.
Which productivity measure should be used?
Answer: Could be classified as a Partial Measure.
Is productivity increasing or decreasing?
Answer: Last weeks productivity = 480/2000 = 0.24,
and this weeks productivity is = 560/2400 = 0.23. So,
productivity has decreased slightly.
2-16
2-17
Productivity Growth
Current productivity - Previous productivity
Productivity Growth =
100%
Previous productivity
2-18
Example 4
Labor productivity on the ABC assembly line was 25
units per hour in 2006. In 2007, labor productivity was
23 units per hour. What was the productivity growth
from 2006 to 2007?
23 - 25
Productivity Growth =
100% 8%
25
2-19
2-20
2-21
Measurement Problems
Quality differences may distort productivity
measurements
External elements may cause an increase or
decrease in productivity
Precise units of measure may be lacking
Technological differences may lead to
misleading results.
2-22
2-23
Quality
Management
2-26
2-27
Bottleneck Operation
Machine
Machine #1
#1
Machine
Machine #2
#2
10/hr
10/hr
Machine
Machine #3
#3
Bottleneck
Bottleneck
Operation
Operation
10/hr
Machine
Machine #4
#4
10/hr
2-28
30/hr
Service Productivity
Typically labor-intensive as in teaching
Frequently individually processed (doctors)
Often an intellectual task is performed by
professionals (medical diagnosis)
Often difficult to mechanize or automate
(haircut)
2-29
2-30
7
6
5
4
3
2
1
0
-1
-2
-3 |
90
US
Germany
Japan
|
91
|
92
|
93
|
94
|
95
2-31
|
96
|
97
|
98
|
99
|
|
00 2001