productiivity vs production
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Productivity vs ProductionTRANSCRIPT
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Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as
labor and capital)
The objective is to improve productivity!
Important Note!Production is a measure of output only
and not a measure of efficiency
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Feedback loop
Outputs
Goods andservices
Processes
The U.S. economic system transforms inputs to outputs at
about an annual 2.5% increase in productivity per year. The
productivity increase is the result of a mix of capital (38% of 2.5%),
labor (10% of 2.5%), and management (52% of 2.5%).
The Economic System
Inputs
Labor,capital,
management
Figure 1.7
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Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines Saved 12 seconds per shot
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Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines Saved 12 seconds per shot
Operations improvements have helped Starbucks increase yearly revenue per outlet by $200,000 to $940,000 in six years.Productivity has improved by 27%, or about 4.5% per year.
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Measure of process improvement Represents output relative to input Only through productivity increases can
our standard of living improve
Productivity
Productivity =Units produced
Input used
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Productivity Calculations
Productivity =Units produced
Labor-hours used
= = 4 units/labor-hour1,000250
Labor Productivity
One resource input single-factor productivity
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Multi-Factor Productivity Output
Labor + Material + Energy + Capital + Miscellaneous
Productivity =
Also known as total factor productivity Output and inputs are often expressed in
dollars
Multiple resource inputs multi-factor productivity
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Measurement Problems
Quality may change while the quantity of inputs and outputs remains constant
External elements may cause an increase or decrease in productivity
Precise units of measure may be lacking
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Productivity Variables Labor - contributes
about 10% of the annual increase
Capital - contributes about 38% of the annual increase
Management - contributes about 52% of the annual increase
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Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force Social overhead that makes labor
available
Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
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Service Productivity
Typically labor intensive
Frequently focused on unique individual attributes or desires
Often an intellectual task performed by professionals
Often difficult to mechanize Often difficult to evaluate for quality
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Productivity at Taco BellImprovements:
Revised the menu Designed meals for easy preparation Shifted some preparation to suppliers Efficient layout and automation Training and employee empowerment
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Productivity at Taco BellImprovements:
Revised the menu Designed meals for easy preparation Shifted some preparation to suppliers Efficient layout and automation Training and employee empowerment
Results: Preparation time cut to 8 seconds Management span of control increased
from 5 to 30 In-store labor cut by 15 hours/day Stores handle twice the volume with
half the labor Fast-food low-cost leader
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Ethics and Social Responsibility
Challenges facing operations managers:
Developing and producing safe, quality products
Maintaining a clean environment Providing a safe workplace Honoring community commitments