Lesson of Industrial Engineering ONLINE Course.
Lesson of Productivity Management Module.
Important Information for Productivity Planning
Companies expect efficiency gains of a total of 12% over five years. Cost reduction due to automation, better asset utilization and lower quality cost will contribute to efficiency gains.
Source: Digital Factories 2020: Shaping the future of manufacturing
PWC.de report 2017
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Planning for Productivity
The top management is to set productivity objectives and goals that are in line with and integrated into organisation’s long-term strategic plans. To ensure that these goals are met, key performance indicators and targets need to be identified and developed. The organisation’s productivity performance can be monitored against these targets.
Phase I – Diagnose
For any productivity intervention to be effective, management should have a thorough understanding of the organisation’s current situation. This can be done through a productivity diagnosis.
A productivity diagnosis covers a qualitative assessment of organisation’s performance in relation to the productivity levers and a quantitative assessment of organisation’s performance based on certain key indicators that are linked to the various productivity levers.
These assessments are undertaken specifically to:
Measure the gap between the current situation and the productivity goals set by the organisation in the past.
Identify organisation’s strengths and weaknesses in the area of productivity improvement.
Determine the underlying causes of the gaps (for the weak areas).
Determine areas for improvement.
Qualitative Assessment of Performance
The key levers that affect productivity can be identified.
Technology - Adoption on appropriate technology on a continuing basis
Machinery & Equipment - Selection of appropriate machinery and equipment and their replacement based on engineering economic analysis
Operators - Human effort engineering - Design manual activities incorporating motion studies, principles of motion economy and ergonomics
Productivity Levers
Reduction of Price and Reduction of External Failure of Products - Stimulate Demand providing market for increased productivity and economies of scale.
Productivity Innovations - Technology, Management - Processes, Policies, Programs, Rules, Human Effort
Productivity Standards Improvement
Productivity Control Effort
Productivity Knowledge Base Improvement
Increasing Skills of Operators and Managers - Productivity Training
Changing Attitudes of Operators and Managers
These levers are areas or actions that an organisation can focus on to improve productivity significantly.
Productivity levers do not operate in silos. Improvements made to one lever require complementary actions on some other levers, for it to be effective. For example, the adoption of new technology inevitably requires the complementary actions of training of employees and redesign of work processes. Similarly, weakness in one lever is likely to have an adverse effect on other levers.
Quantitative Assessment of Performance
There are 10 common indicators used to gauge an organisation’s productivity performance:
Labour productivity
Sales per employee
Value added-to-sales ratio
Capital productivity
Sales per dollar of capital
Capital intensity
Labour cost competitiveness
Labour cost per employee
Profit-to-value added ratio
Profit margin
Along with an analysis of organisation’s overall performance, the performance of the operational units and functions also needs to be measured.
To know how well an organisation is faring in the area productivity, a comparison the organisation’s performance against some standard has to be made. This can be done across time and space, with external entities (e.g. benchmarks and organisations within the same industry) and within the organisation (e.g. between departments for setting departmental goals) . Such comparisons provide valuable information on the organisation’s relative standing vis-à-vis competitors and the best-in-class performers.
Organisations who want to assess themselves against their competitors can use the Inter-firm Comparison (IFC) tool. Some industry organizations conduct IFC studies involve comparing productivity ratios of organisations in the same industry. Their identities are kept confidential and summary results are circulated or sold as reports to the members of the industry organization.
Phase II
Develop Road Map
After the diagnosis is completed, a productivity road map or action plan has to be developed. The road map indicates specific activities to achieve productivity goals in a coordinated and systematic manner.
A productivity road map addresses the following:
What affects productivity?
Identify the specific actions that need to be taken in relation to the findings from the diagnosis.
Spell out the key performance indicators, targets and deliverables for the actions to be taken.
Who affects productivity?
Identify the units or individuals who will carry out the actions.
Assign responsibilities and accountabilities to the parties identified.
When are the activities to be undertaken?
Set milestones and timelines for the actions to be taken.
The actions should then be taken and monitored according to the road map.
Read David Sumanth's discussion of productivity planning.
Productivity Planning - Bibliography
Sumanth, D. J., & Yavuz, F. P. (1984). A formal approach to productivity planning in companies. Engineering Management International, 2(4), 219-227. https://doi.org/10.1016/0167-5419(84)90043-7
Framework for Systematic Design of Productivity Strategies
In the proceedings
Advances in Ergonomics of Manufacturing: Managing the Enterprise of the Future: Proceedings of the AHFE 2017 International Conference on Human Aspects of Advanced Manufacturing, July 17-21, 2017, The Westin Bonaventure Hotel, Los Angeles, California, USA
Stefan Trzcielinski
Springer, 13-Jun-2017 - Technology & Engineering - 450 pages
Productivity Analysis and Planning
Updated on 3.3.2022, 13.2.2022, 1 Dec 2020, 14 July 2019
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