Lesson 307 of IEKC Industrial Engineering ONLINE Course Notes.
Industrial Engineering Measurements - Online Course Module
Sumanth's total productivity model
https://books.google.co.in/books?id=mLAv09ocvTsC&pg=PA5#v=onepage&q&f=false
‘Productivity’ is the standard that indicates measures how efficiently the material, the labor, the capital and the energy can be utilized. Analysis and measurement of ‘Productivity’ can help to know the areas for taking corrective actions towards planning of business firm.
Productivity is known as the relationship between output and all employed inputs measured in real terms. It refers to a comparison between what comes out of production and what goes into production that is the arithmetical ratio between the amount produced and the amount of all resources used in terms of manufacture.
It may be measured for manufacturing organizations or their departments for which separate records are maintained.
The success of an industrial organization is determined by the level of efficiency in reducing cost and providing consumer services. Analysis and Measurement of Productivity can help to find out the areas where the corrective steps will have been taken in the way of planning of business firm.
TOTAL PRODUCTIVITY MODEL
Total Productivity Model developed by David J. Sumanth in 1979 considered 5 items as inputs.
These are Human, Material, Capital, Energy and other expenses.
This model can be applied in any manufacturing or service organization.
Total Productivity= Total Tangible Output÷ Total Tangible Input.
Total tangible output= Value of finished units produced + partial units produced + Dividends from securities + Interests from bonds +Other incomes.
Total tangible inputs= Value of human inputs+ capital inputs+ materials purchased+ energy inputs + other expenses (taxes, transport, office expenses etc.)
Sumanth’s provided a structure for finding productivity at product level and summing product level productivities to total firm level productivity.
The model also has the structure for finding partial productivities at the product level and aggregating them to product level productivities.
Total Productivity= Total Tangible Output÷ Total Tangible Input
= O1+O2+O3+O4+O5 / H+M+FC+WC+E+X
Where,
O1 is value of finished units of output.
O2 value of partially completed units of output ,
O3 dividend income,
O4 interest income ,
O5 other income.
H human input, M material input , FC fixed capital input , WC working capital input, E energy input , and x other expense.
https://www.slideshare.net/anilp264/sumanths-total-productivity-model-29348562
A Case Study
Adapted from Edosomwan, J. A and David J. Sumanth. (1996). Productivity Measurement Guide: A Practical Approach for Productivity Measurement in Organizations. New York: McGraw-Hill, Inc. (pp. 179-198)
Human partial productivity index
Employees Measure January October
Workers
Hourly paid Units/$ 17.88 24.14
P.P.I 1.00 1.35
Salaried Units/$ 0.366 0.354
P.P.I 1.00 0.967
Professionals
Hourly paid Units/$ 2.438 3.155
P.P.I 1.00 1.294
The calculation procedure used: Divide the units produced in the month by expenses paid to a category of human resource. This gives Units/$. Then calculate index with the first month as the base year.
Comments made on various tables by the authors. (Tables for all resources will be added)
Human Productivity
The human partial productivity index showed a trend that followed the output curve very closely.
Two major areas of input in this category (salaried workers and salaried professionals) had not changed significantly during the periods.
The human partial productivity index for hourly paid professionals did show very significant gains during the last several measurement periods due to decreases in input.
Material Productivity
The index showed a steady decline through the first seven measurement periods, and then, showed a dramatic improvement in productivity for the final periods. This was apparently caused by the way in
which purchases of materials from source #1 was planned. These were planned at the beginning of the year, based on a then current forecast for total productivity demand.
Through the year, as demand fell short of the forecast, the appropriate action would have been to curtail purchases of materials from all sources. Contracts that were in place between systems manufacturing and source #1, however contained a clause that froze the level of purchases for several periods. For this reason, material productivity declined until the orders could be reset to lower levels to more accurately
reflect the lower demand for the product.
Capital Productivity
The working capital partial productivity was by far the major ingredient for capital productivity and represented a major input for total productivity.
The index showed stable or improved productivity through the first six periods, but a dramatic drop in productivity was evident in the final periods.
This, again, relates back to the problems with the controls on material inputs and the resulting increasing of material inventory until the inputs could be reduced. During the final four periods, a slight improvement was seen and this could be expected to continue, as this measurement will follow the trend of the material productivity index, lagging by several periods. The occupancy and depreciation productivity measurements followed the same basic trend as the output since they had a small degree of variance and output had a large variance.
Other Expense Productivity
This category of partial productivity included many diverse expense type inputs. It was apparent, that for certain items partial productivity improved. For example, the travel and professional fees partial productivity improved during the last several periods primarily due to management attention.
However, the stationery, telephone and education partial productivity measurements did not show any
improvements.
Total Productivity
The total productivity index followed the trend of the capital partial productivity most closely. This is due to the large percentage of input the capital productivity represents, most of this input being in the form of working capital. The total productivity index followed very closely, the output level of the product. That is the productivity index showed decline when output is below the base period output and the index shows improvements when the output is above the base period level.
Case Studies on Sumanth's Approach
See chapter 6 case studies in
Total Productivity Management (TPmgt): A Systemic and Quantitative Approach to Compete in Quality, Price and Time
David J. Sumanth
CRC Press, 27-Oct-1997 - Business & Economics - 424 pages
Poised to influence innovative management thinking into the 21st century, Total Productivity Management (TPmgt), written by one of the pioneers of productivity management, has been a decade in the making.
This landmark publication is the most extensive book available on the subject of total productivity management. At a time when downsizing and layoffs are the norm, this innovative and highly organized book shows you how to treat human resource situations with a caring, customer-oriented, yet competitive attitude through integration of technical and human dimensions. This book makes use of a set of proven models and provides a systematic framework and structure to link total productivity to an organization's profitability.
Total Productivity Management describes the tasks required of all constituents in an understandable format that they can relate to and by which regards can be realized for performance in all resource categories including direct labor, administrative staff, managers, professional personnel, materials, liquid assets, technologies, energy, and other areas.
Total Factor Productivity
Multifactor productivityTotal, Annual growth rate (%), 2005 – 2022
Source: GDP per capita and productivity growth
Data table for: Multifactor productivity, Total, Annual growth rate (%), 2005 – 2022
https://data.oecd.org/lprdty/multifactor-productivity.htm
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▾ 2005 ▾ 2006 ▾ 2007 ▾ 2008 ▾ 2009 ▾ 2010 ▾ 2011 ▾ 2012 ▾ 2013 ▾ 2014 ▾ 2015 ▾ 2016 ▾ 2017 ▾ 2018▾ 2019▾ 2020▾ 2021▾ 2022
Australia -0.54 -0.09 0.14 1.44 -1.44 0.31 0.22 0.80 0.69 -0.08 1.80 -0.19 0.91 -0.01 0.32 1.42 1.05 -0.59
Austria 1.59 2.10 1.98 -0.45 -2.16 0.98 0.67 0.27 -0.30 -0.18 0.62 -0.32 0.74 0.14 -0.65 -0.74 0.22 1.99
Belgium 0.51 -0.07 1.11 -1.46 -1.88 1.03 -0.93 -0.16 0.16 0.78 0.91 -0.37 -0.49 -0.13 0.38 0.20 0.11 1.11
Canada 1.15 0.31 -0.66 -0.99 -1.07 0.84 1.30 -0.37 0.93 2.09 -0.49 0.40 1.51 0.29 0.26 3.56 -2.67 -0.40
Denmark 0.71 0.83 -0.68 -2.24 -2.87 2.62 0.26 0.97 0.39 1.11 1.17 1.08 1.46 1.41 0.42 -0.39 1.58 -0.23
Finland 1.41 2.17 2.87 -1.49 -6.13 2.93 1.33 -1.86 -0.19 -0.11 0.57 2.25 2.34 -0.97 -0.09 -0.84 0.95 1.33
France 0.35 1.69 -0.64 -1.30 -2.00 0.90 0.75 -0.27 0.59 0.42 0.32 -0.11 1.47 0.07 0.03 -2.37 -0.08 -1.37
Germany 0.90 1.60 1.01 -0.34 -4.07 2.42 2.45 0.22 0.19 1.02 0.37 1.15 1.55 -0.06 0.35 -0.41 0.96 0.46
Greece -3.06 3.09 0.95 -2.68 -4.22 -2.99 -8.27 -5.47 -1.50 0.85 3.28 -2.37 1.74 -1.71 2.24 -0.40 1.08 1.39
Ireland 0.01 0.28 1.10 -4.14 1.20 3.26 0.66 -1.27 -2.90 4.25 -5.51 2.53 3.72 -5.32 4.92 8.63 6.75
Israel 0.94 2.56 0.86 -0.64 -1.63 2.57 2.45 -0.61 1.77 1.48 0.07 0.75 1.40 1.69 2.16 3.15 1.57 0.01
Italy -0.16 -0.39 -0.39 -1.27 -3.30 1.74 0.40 -1.40 -0.03 0.04 0.23 0.04 0.80 0.10 0.35 -0.60 1.09 0.49
Japan 0.92 -0.05 0.39 -1.04 -2.97 3.28 0.37 1.04 1.94 -0.05 1.51 0.05 0.89 0.38 0.22 -2.12 1.58 0.73
Korea 3.08 2.96 4.53 3.53 1.56 4.65 1.64 0.29 1.23 1.17 0.45 1.50 2.58 2.27 1.31 0.91 1.89 -0.25
Luxembourg 0.52 2.09 2.62 -5.24 -1.58 1.31 -2.21 -1.05 1.18 -0.61 -0.81 1.96 -1.68 -1.71 -0.75 2.19 -1.46 -2.06
Netherlands 1.58 1.14 0.25 0.12 -3.17 1.45 0.38 -0.80 -0.06 0.61 -0.26 0.05 0.82 0.07 -0.43 -2.22 1.99 1.07
New Zealand -1.05 0.08 2.35 -4.01 3.36 -1.38 0.99 2.33 -2.09 -0.22 1.76 -0.58 0.20 1.59 -1.02 0.33 1.58 -1.28
Norway 0.48 -1.07 -2.06 -3.69 -1.57 -0.33 -1.05 0.60 -0.09 0.43 0.90 0.16 1.42 -1.12 -0.97 -0.56 1.32 -0.42
Portugal -0.11 0.66 0.57 -0.73 -2.22 1.61 -0.15 -0.92 0.49 -0.69 0.24 0.33 1.05 0.08 1.12 -1.93 1.34 4.83
Spain -0.16 -0.01 0.17 -1.05 -0.31 0.86 -0.03 -0.29 0.01 0.16 1.12 0.67 0.94 -0.02 0.47 -3.27 -0.03 1.97
Sweden 1.59 2.14 -0.01 -2.51 -2.85 3.56 0.72 -1.23 0.25 0.88 2.27 -0.76 0.21 -0.17 1.32 -0.90 2.24 -0.38
Switzerland 1.36 1.72 1.07 0.20 -3.17 2.05 -0.60 -0.25 1.03 0.65 -0.71 0.37 0.76 1.82 0.15 -0.29 1.52 0.34
United Kingdom 0.65 1.16 0.97 -0.63 -3.44 2.02 -0.34 -0.77 0.22 0.30 1.29 -0.45 1.33 0.16 0.18 -2.22 -0.01 0.94
United States 1.39 0.30 0.49 0.08 1.07 1.99 -0.23 0.14 0.06 0.13 0.43 -0.02 0.52 0.77 0.68 1.07 1.57 -1.18
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3% #productivity increase every year will make #production double in 24 years from the same #resources.
Industrial Engineering increases prosperity of the society.
New Links
https://rrojasdatabank.info/87573_determinants_of_total_factor_productivity.pdf 2007
https://www.oecd-ilibrary.org/economics/measuring-total-factor-productivity-at-the-firm-level-using-oecd-orbis_5k46dsb25ls6-en
https://www.semanticscholar.org/paper/Total-Factor-Productivity-Growth-in-Historical-Shackleton/b436d848641fd396e13094d3327255cb777348cd
https://www.frontiersin.org/articles/10.3389/fenvs.2022.1058664/full
Ud 21.10, 15.10.2023, 13.2.2022
Pub: 26.1.2022
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