Operation Management-ICAI-Inter-Productivity Measurement Techniques of Factors of Production

2.12 Productivity Measurement Techniques of Factors of Production
Productivity implies development of an attitude of mind and a constant urge to find better, cheaper, quicker,
easier and safe ways of doing a job manufacturing an article and providing a service. Since the beginning
of the industrial era, the manufacturers or producers have been facing the problem of how to use the
available resources and factors of production to the best of their ability and capacity so as to get the maximum
output with the minimum cost of production. Industrial revolution, social, technological and scientific
developments, changes in economic systems is the various efforts made in this direction and the process of
development and changes is still on. New and new machines, methods and technology are being invented
and used in the industrial field to minimise the wastage of men, materials and machines. It is all to increase
the productivity.
Productivity is the quality or state of being productive. It is some relationship of outputs to inputs. It is a
concept that guides the management of a production system, and measures its success. It is the quality that
indicates how well labour, capital, materials and energy are utilised. Productivity improvement is sought
everywhere because it supports a higher standard of living, helps control inflation, and contributes towards
a stronger national economy.
Productivity is an indicator reflecting the changes in the performance of the enterprise and having some
sort of input-output comparisons relating to various activities of an organisation. It also facilitates the
management to control and plan its future operations of the enterprise.
Productivity is the talk of the day and it is generally regarded as efficiency in industrial production to be
measured by some relationship between outputs and inputs. The increase in productivity is looked upon
as the key to prosperity at all levels. In its modern sense, it refers to the relationship between the result and
the means employed or to be more specific between the product and the factors used for obtaining it. It is
the quantitative relationship between what we produce and (the resources which we use to obtain it. It can
also be termed as the ratio of what is produced to what is required to produce it. The higher is the ratio, the
greater is the productivity. Thus, it seeks to measure the economic soundness of the use of the means. It
means productivity can be considered higher if the same amount of production is obtained with lesser
means or it will be lower if the same quantity of produce is obtained with larger quantity of means. It is
Operation Management
169
higher when there is maximum production with the least expense of resources.
A productivity index is a device of expressing the ratio between outputs and the inputs of the resources
numerically. These indices are prepared by comparing the volume of output of goods with the labour
employed on that job or the profits of the firm with the capital employed. If the comparison shows an
upward trend in indices, it is a sign of improved or better productivity or vice-versa.
The productivity is a measure of how much input is required to achieve a given output.
Symbolically:
P =
O
I
where P = Productivity;
O = Output,
I = Input.
The output may be measured in terms of the units of goods produced or the value of goods and services
produced. The input, on the other hand, can be referred to as the combination of different factors, i.e., raw
materials, machinery, worker’s time, power, efforts and imagination of entrepreneur and the managers. A
unit of input, therefore, can be expressed as one worker, or one hour of labour time or one tonne of raw
materials, or one kw of electricity and so on. Thus, it is very clear from the above description that the
productivity can be calculated or measured for each one of the factors comprising the input or of all the
factors together. The productivity of labour, for example, can be found out by ascertaining the ratio between
the quantity of goods produced and the number of workers or man-hours employed on the production of
such output.
The importance of the concept of productivity can be viewed from the following points:
1. To beat the competition: It is an age of cut-throat competition. There may be other commodities
which can serve as the substitutes of the terms ‘product’ and can attract the consumers’ purchasing
power. The firm whose productivity is higher can only beat the competition and can exist in the
market for long.
2. Guide to Management: The productivity indices are very useful for the management and can be used
for different purposes. These indices can serve as a valuable guide to the management for improving
the performance of its enterprise. The productivity measures can be used for the following purposes:
(a) Strategic : With the help of productivity indices, the efficiency of different firms can be measured,
analysed and compared. The necessary steps can be taken to improve the productiveness of the
firm taking in view the productiveness of the other competitive firms.
(b) Tactical: Different units or the sectors of the firm can also be compared as regards to their
productivity and the productivity of the less productive units or sectors can be improved.
(c) Planning: A firm uses different inputs in producing the goods. A comparison of relative benefits
accruing from the use of different inputs can be had and the most beneficial input can be used in
production. It helps the management to plan for the future.
(d) Administration: Productivity indices indicate the progress of the firm over a period of years.
The productivity of different inputs, including labour, can be measured individually. The
individual productivity indices help the management in bargaining with the labour leaders,
170
Production Planning and Productivity Management
trade unions and the Government in case of labour disputes regarding welfare activities. Thus
administration can be improved with the help of productivity indices.
3. An Indicator of Progress: In economically backward countries, productivity movement is basic aspect
of progress. It implies the development of an attitude of mind and a constant urge to better, cheaper,
quicker and safer ways of doing a job, manufacturing a product and providing a service. In an urge to
improve the productivity, new inventions take place. This productivity is an aspect of basic progress.
4. Maximum utilisation of Scarce Resources: In order to provide the articles or commodities to the
consumers at the lowest possible cost, the productivity urges to utilise the available resources to the
maximum to the satisfaction of customers. The productivity processes and techniques are designed to
facilitate more efficient work involving less fatigue to workers by improvements in the layout of the
plant and work, better working environment and simplification of works.
5. Key to National Prosperity: The productivity, in fact, has become the synonymous to progress. Higher
productivity is an index of more production with the same inputs at lower cost. It enables industry to
offer goods to the general public at cheaper rates and results in expansion of markets. The working
conditions and wages of workers will improve and industrialists too will get larger profits. Thus
higher productivity is the key to national prosperity. The secrets of Japan and Western countries’
prosperity lie in increased productivity.
6. Prosperity to Labour: The higher productivity is a boon to labour also. It brings improved working
conditions, better wages and salaries to workers, better labour welfare activities to labourers. Thus
their standard of living is improved.
7. Other Uses:
(i) Higher productivity increases the profits and reserve funds of the industry that can be used for
expansion and modernisation.
(ii) It increases the goodwill of the firm due to cheaper goods to the public, well-off staff and more
profits and better financial position.
(iii) It improves the competitive strength of the company in export markets through reduction in cost
of production and quality products.
In this way, productivity is the only way to make the overall progress of the country.
Measurement of Productivity: The productivity or the performance of various input and output factors
can be measured in many ways. These measures are mainly based on the following two criteria:
(i) Change in output per unit of input: indicates the change in the performance of corresponding input
during the given period, e.g., change in output per worker or per man-hour will signify the change in
performance of labour.
(ii) Change m input per unit of output: during the given period signifies the change in the performance
of the corresponding input factor, e.g., change in man-hour or workers’ per unit of output will also
indicate the change in the performance of the labour input.
Productivity measurement implies the use of standards set for each input factor in terms of output. In
circumstances where standards are not in use, productivity can be measured only when the output is
converted into ‘units or work’ which is defined as the amount of work that can be performed by one unit
Operation Management
171
of input. Thus productivity can be measured by dividing the output by the performance of each input
factor taken together.
Some of the well-known indices of productivity are given below:
(A) Man-hour output: The most widely used index of productivity is to work out the output per manhour
it can be put as –
Productivity = Units of output / Total man-hours
(B) Productivity Ratio : The rate of return on capital employed is a valuable and widely used guide to
many types of business decisions. This ratio of profit to capital employed is a valuable means of
measuring the performance of divisions, sections, plants, products and other components of a business,
and can be calculated as—
Productivity = Net Profit / Capital employed
(C) Use of Financial Ratios: There are many situations when time standards cannot be set and therefore,
it is very difficult in such cases to measure the productivity by a direct method. In these cases, financial
ratios can be used to measure the productivity by using its sales turn-over. But ‘added value’ is a
more useful approach for measuring productivity. ‘Added value’ means output - inputs.
The most common financial ratio of productivity is—
Productivity = Added Value / Labour Costs
Productivity = Added Value / Conversion Costs
The first ratio gives the financial productivity of labour force and the second ratio gives the financial
productivity of all the resources of the company put together.
(D) Other Useful Measures: There are many other useful productivity ratios to measure the productivity
of various input factors. These are:
(i) Manpower Productivity =
Value of output of goods or services
No.ofworker s or man hours used
(ii) Materials Productivity =
Valueof output of goodsor services
Units (or cos t)ofmaterials used
(iii) Capital Productivity =
Valueof outputofgoodsorservices
Capitalassetsemployed
(iv) Energy Productivity =
Valueof output of goodsor services
Unit (or cos t)of energy used
A combined measure of productivity can be taken as
Productivity =
Valueof output of goodsor services
Valuesof (labour +capital+materials+other in puts)
172
Production Planning and Productivity Management
There may be other input factors such as insurance, taxes, advertising etc. and their productivity can be
measured likewise.
Each measure requires different kinds of data and only rarely such information is available for all
commodities in an industry on continuous basis.
Tools of productivity or how to increase productivity:
The productivity of an enterprise can be improved by improving the performance of various inputs and
other factors affecting productivity. For this purpose, use of following tools can be recommended.
1. Human Aspects: Under this, cooperation of workers is sought in the following ways:
(i) More workers’ participation in management or in decision making through joint consultation.
(ii) Improving communication services.
(iii) Improving mutual trust and cooperation through improved job procedures, better training of
employees, more workers incentives by implementing various incentive schemes, and labour
welfare programmes.
(iv) Better planning of work, more effective management, more democracy in administration,
improved human relations and selection and training of personnel at various levels of management
are some human efforts from the side of management in order to improve the productivity.
2. Supply of Inputs:
(i) Improvement in the nature and quality of raw materials and their supplies to the work.
(ii) Proper provision of plant, equipment and their maintenance.
(iii) Introduction of more and more machines and equipment in place of physical work.
(iv) Fuller utilisation of manpower and efficiency or capacity of plant and equipment employed.
3. Technological Aspects:
Certain methodological and technological developments are also necessary to improve the productivity of
the concern.
These are;
(i) Work, time and motion studies to determine better ways and means of doing a job.
(ii) Implementing various simplification, specialisation and standardisation programmes.
(iii) Applying control techniques comprising production and planning control, cost control and quality
control techniques.
(iv) Improving layout of plants, shops and machine tools, and material handling and internal
transportation system.
(v) Improving inspection techniques so as to minimise the wastage and defective work.
Factors affecting industrial productivity:
Productivity is defined to be some ratio between output and input. Thus all factors which affect output
and inputs will also affect the measure of productivity.
Operation Management
173
The following factors affect the productivity.
1. Technological Development: Technical factors including the degree of mechanisation, technical
know-how, raw materials, layout and the methods and techniques of work determine the level of
technological development in any industry. The principal factors in technological development
affecting productivity are:
(a) The Size of the Plant: The size of the plant and the capacity utilisation has direct bearing on
productivity. Production below or above the optimum level will be uneconomical and will tend
towards lower level of productivity.
(b) Research and Development: Investment in research and development may yield better method
of work and better design and quality of products.
(c) Plant and Job Layout: The arrangement of machines and positions in the plant and the set-up of
the work-bench of an individual worker will determine, how economically and efficiently
production will be carried out.
(d) Machine and Equipment Design: Whether the design of machinery and equipment is modern
and in keeping with the limitations and capacities of the workers will also determine the
production efficiency and level of productivity.
(e) Production Processes: Advanced production processes involving the use of modern integrated
and automatic machinery and semi-processed materials have been known to help in raising
levels of productivity.
(f) Power, Raw Materials etc. Improved quality of raw materials and increased use of power have
a favourable effect on productivity.
(g) Scientific Management Techniques: Scientific management techniques such as better planning
of work, simplification of methods, time and motion study, emphasis for reduced wastage and
spoilage have positive effects on productivity.
It will be realised that technological development requires a great amount of funds and general
economic and technical environment in the country. Thus capital plays an important role in increasing
the productivity through implementing technological development. It should also be recognised that
such developments influence the job performance of employees. With better machines, tools and
processes, it should be considered that both ability and willingness to work should be increased.
2. Individual Factors: Individual factors such as knowledge, skill and attitude also affect the productivity
of industry. Knowledge is acquired through training, education and interest on the part of learner.
Skill is affected by aptitude (one’s capacity to learn a particular kind of work), personality (emotional
maturity, balance of mind etc.) as also by education, experience, training etc. Increased knowledge,
skill and aptitude certainly increased the productivity and a person deficient in these personal attributes
is less productive than an average man.
The attitude (willingness of employee to work for organisation) of employees towards the work and
the organisation affect their productivity to a great extent. Knowledge and skill without willingness
are futile. The urge to work is a complex phenomenon governed by several factors such as formal and
informal organisation, leadership, need, satisfaction, influence of trade unions etc. These factors
motivate the workers to work better and with enthusiasm.
174
Production Planning and Productivity Management
3. Organisation Factors: Organsiation factors include various steps taken by the organisation towards
maintaining better industrial relations such as delegation and decentralisation of authority, participative
management (workers’ participation in management), organisational efficiency, proper, personnel
policies relating to selection, placement, promotion, wage salary levels, incentives, merit rating, job
evaluation, training and provision for two-way communication, supervision, etc. These factors also
influence motivation. Likewise the existence of groups with higher productivity as their goal is likely
to contribute to the organisational objectives. These facts were brought out by Hawthorne experiments
in U.S.A. A properly-motivated worker will certainly contribute to the industrial productivity.
4. Work Environment: The importance of proper work environment and physical conditions on the job
has been emphasised by industrial psychologists and human engineers. Better work environment
ensures the greatest ease at work through better ventilation and light arrangement, improved safety
devices, reduction in noise, introducing suitable rest-pause etc.
5. Other factors: There are several other factors that affect productivity. These are:
(a) Natural Factors: Physical, geographical and climatic conditions influence the productivity at
large. Abundance of natural resources affects the productivity and similarly climate affects the
efficiency of workers to a great extent.
(b) Managerial Factors: The industrial productivity is influenced very much through managerial
ability and leadership. The managerial ability of utilising the available resources to the maximum,
organising capacity, foresightedness, decision-making ability and entrepreneurship are certain
factors that contribute to productivity.
(c) Government Policy: Government policies towards industry also contribute to industrial
productivity. Taxation policy, financial and administrative policy, tariff policy and protection
policy affect the productivity to a large extent.
Thus, the above factors are responsible for the increased productivity.
Production and Productivity:
Production and productivity are not synonymous. Production refers to the volume, value or quantity of
goods and services produced during a given period by a worker, plant, firm or economy. It is the sum total
of results achieved by the various factors used together. Productivity, on the other hand, is not concerned
with the volume of production. It is the ratio of output and input factors of an enterprise. It shows the
efficiency of production or the efficiency level of input factors. In other words, productivity is relative to
the resources used in turning out a certain amount of physical output, while production is used, more or
less, in absolute sense. The distinction between (lie two terms becomes more clear when we find that
increase in production does not necessarily mean the increase in productivity. If increase in production is
attributed to the increase in the inputs of production in the same proportion, the production will have
increased but productivity may have declined or may remain constant because the ratio of output and
inputs has shown a decline or has not shown any improvement.
Problems and Solutions
Problem: 1 In a particular plant there are 10 workers manufacturing a single product and the output per
month consisting of 25 days of that particular product is 200. How much is the monthly productivity?
Operation Management
175
Solution:
Monthly productivity per worker =
200
10
= 20 units
Problem: 2 There are two industries A and B manufacturing hose couplings. The standard time per
piece is 15 minutes. The output of two small scale industries is 30 and 20 respectively per shift of 8
hours. Find the productivity of each per shift of 8 hours. What is the expected production of each per
week consisting of 6 days?
Solution:
Productivity =
Actual production
S tan dard production
Standard production of hose complings per shift =
8 60
15
×
= 32 pcs.
Productivity of industry A =
30 15
32 16
= and productivity of industry B =
20 5
32 8
=
If the productivity is expressed in percentage, the same for A is
15
16
× 100 = 93.75%
and productivity of industry B is
5
8
× 100 = 62.5 %
Production per week of industry A = 30 × l6=480 nos.
Production per week of industry B = 20 × 6= 120 nos.
Problem: 3 The following data is available for a machine in a manufacturing unit:
Hours worked per day 8
Working days per month 25
Number of operators 1
Standard minutes per unit of production
Machine time 22
Operator time 8
Total time per unit 30
(i) If plant is operated at 75% efficiency, and the operator is working at 100% efficiency, what is the
output per month?
(ii) If machine productivity is increased by 10% over the existing level, what will be the output per month?
(iii) If operator efficiency is reduced by 20% over the existing level, what will be the output per month?
176
Production Planning and Productivity Management
Solution:
(a) Hours worked per day = 8
Working days per month = 25
Hours worked per month = 25 × 8 = 200 hrs.
Machine time = 22 minutes
Operator time = 8 minutes
Total per unit = 30 minutes = ½ hr.
No. of units produced/month/operator =
200
1/2 = 400
As the no. of operator is 1, monthly production = 400 units. As the plant operates at 75% efficiency.
Monthly production = 400 ×
75
100
= 300 units.
(b) If machine productivity is increased by 10% i.e. Machine time = 22 ×
100
(100 + 10) = 20 minutes.
Then, total time = 20 + 8 = 28 minutes
Monthly production =
400 30 75
321units.
28 100
× × =
(c) If operator efficiency reduced by 20% i.e.
Operator time = 8 x
(100 20)6
100
+
= 8 × 7.2 = 57.6 minutes.
Total time = 22 + 57.6 = 79.6 minutes.
Monthly production =
400 30 75
113.06units = 113units.
79.6 100
× × =
Problem : 4
An incentive scheme allows proportionate production bonus beyond 100% performance level.
Calculate the amount of (i) incentive bonus and (ii) total payment received by an operator on a particular
day during, which the following particulars apply:
Operation : Assembling pocket transistor radio set
Work content : 30 standard minutes per assembled set
Attended time : 8 hours
Time spent on unmeasured work : 2 hours
Number of sets assembled during the day : 15
Wage rate : Rs. 4/- per hour
(iii) What is the labour productivity achieved by the operator during the day?
Solution:
Attended time = 8 hrs. Time spent for unmeasured work = 2 hrs.
Actual time for production = 8 – 2 = 6 hrs.
Standard assembling period = 30 minutes/set. Standard production
Operation Management
177
=
6
30
× 60 set = 12 sets, in 8 hrs.
Wage rate = Rs.4/hr = 4 × 8/day = Rs. 32/day.
For 12 set of assembling Rs.32 is the wage
For 1 set of assembling
32
12
is the wage
For 15 set of assembling =
32
12
× 15 is the wage = Rs. 40/-
Total payment = Rs. 40/-
Incentive bonus = Rs. (40 – 32)/- = Rs. 8/-
Labour productivity =
S tandard Time
ActualTime
Actual Time =
6 60
24
15
×
= minutes.
Labour productivity =
30
100 125%
24
× =
Problem: 5
The following data is available for a manufacturing unit :
No. of operators : 15
Daily working hours : 8
No. of days per month : 25
Std. production per month : 300 units
Std. Labour hours per unit : 8
The following information was obtained for November 2007:
Man days lost due to absenteeism : 30
Unit produced : 240
Idle Time : 276 man hours
Find the following:—
(a) Percent absenteeism
(b) Efficiency of utilisation of labour
(c) Productive efficiency of labour
(d) Overall productivity of labour in terms of units produced per man per month.
178
Production Planning and Productivity Management
Solution:
No. of days per month = 25
Daily working hrs. = 8
No. of operators = 15
No. of Man days = 15 × 25 = 375 Man days.
Total working hrs. = 375 × 8 = 3,000
Hours lost in absenteeism = 30 × 8 = 240
i) Percent absentees =
240hrs. 100
8%
3000hrs
×
=
ii) Efficiency of utilisation of labour =
Standardlabourhourtoproduce240units 240 8
64%
Totallabourhour 3000
= × =
iii) Standard time required to produce 240units = 240 × 8 = 1920 labour-hours.
In November, man hours lost = 30 × 8 = 240
„ „ idle time = 276
Total loss of time = 516 hours.
Productive hours available in November = 3000
Less, Total loss of time = 516
Actual labour-hours = 2484 hours
Efficiency of labour =
Std.Labour hrs. 1920 100
77.3%
ActualLabour hrs. 2484
×
= =
v) 15 men produces 300 units,
Std. labour productivity = 300/15 = 20 units.
In November, overall productivity = 240/15=16 units. (Ans.)
i.e. productivity falls by 25%.
Problem: 6
A product is manufactured at the rate of 200 units per 4 day and sold for Rs. 8/- each. Direct material cost
is Rs.2/- per unit and direct labour cost is Re.1/- per unit, overheads (including selling) are Rs. 800/- per
day. If the selling price can be reduced by Re.1/- per unit, it is expected that 50% more units can be sold.
The workmen are prepared to produce 50% more only if there is a proportionate increase in their earnings.
A suitable incentive scheme would cost Rs. 100/- per day to administer. With appropriate calculations
justify if the Company should go in for such an incentive scheme.
Operation Management
179
Solution:
Production/day = 200 units/day = Rs. 200/- × 8 = Rs. 1600
Direct material cost = Rs. 2/-
Direct labour cost = Re. 1/-
Total = Rs. 3/-
Over head = Rs. 800/day = 800/100= Rs. 8/- per unit
Profit = 8 – 7 = Re. 1/per unit = Rs. 200/ day
If selling price = Rs. (8 – 1)/- = Rs. 7/- per unit
No. of unit sold / day = 200 ×
150
100
= 300
Turnover/day = 7 × 300 = Rs. 2100/-
Profit = Rs. (2100 - 1800 )/- = Rs .300/- per day.
So, it is justified for the company to go in for this incentive scheme.
Incentive either on individual or on group basis plays the following role in increasing productivity: –
i) Efficiency of production is increased.
ii) Labour cost and consequently cost of production can be reduced.
iii) Incentives ensure more earning of the labour force.
iv) It increases volume of production and makes the products available at reasonable price.
v) Incentive improves productivity and helps growth of national wealth at a faster rate.
Though incentive is very much beneficial to everyone related to it (employer, employee and indirectly
the society) but an incentive scheme tends to increase the material wastage if not properly guarded
against.
Problem: 7
The targeted weekly output of a manufacturing unit employing 20 workers is 400 pieces. The group is
entitled to earn an incentive @ 10% on the aggregate of wages based on basic piece rate plus dearness
allowance (which is Rs. 120 per week) upon achievement of a minimum of 80% of the output target.
This incentive rate increases by 21/2% flat for every 10% of increase in achievement of targets up to a
maximum of 10% at the level of 120% of the output target in the following manner:
50 % increase in labour cost, i.e. it will be Rs. 300/- day.
Direct Material cost = Rs. 2/- unit Rs. 600/- day.
Overhead Rs. 800/- day.
Extra cost Rs. 100/- day.
Total cost Rs. 1800/- day.
180
Production Planning and Productivity Management
During the four weeks in February, the actual outputs achieved by the workers are 383 pieces, 442
pieces, 350 pieces and 318 pieces respectively. The average basic piece rate is Rs. 5. Compute the
amount of incentive earned by the group during each of the four weeks.
Solution:
Computation of Incentives in February
Problem: 8
Payment of bonus is made in a company on the following scale on the basis of the percentage of time saved
on time allowed.
Time saved Bonus
(% of standard) (% of time saved)
(a) Up to 25% 10%
(b) 26% to 30% 20%
(c) 30% and above 30%
You are required to calculate the earnings of A who takes 50 hours; B who takes 70 hours; C who takes 90
hours. The standard time is 100 hours and the wage rate is Rs. 3 per hour.
Output target Incentive rate
80% - 90% 10%
90% - 100% 12 1/2%
100% - 110% 15%
110% - 120% 171/2%
120% and above 20%
Week
1st 2nd 3rd 4th
Actual output achieved 383 442 350 318
Achievement percentage
(Actual output/ Targeted output) 95.75 110.5 87.5 79.5
Wages at basic piece rate of Rs. 5 1915 2210 1750 1590
Dearness allowance 120 120 120 120
Total 2035 2330 1870 1710
Incentive (%) 12.5 17.5 10 Nil
Incentive earned by group
(Total x incentive %) 254.38 407.75 187 nil
Operation Management
181
Problem: 9
Workmen of a particular grade working on 8-hour shift duty are guaranteed a wage of Rs. 32. An incentive
scheme is in operation according to which production bonus is earned directly proportional to performance
but only after 100% performance is reached. Four workmen A, B, C and D produce 48, 60, 75 and 90 units
respectively in 6 hours spent on working on a job which has a standard time of 6 minutes per unit as
measured work content. Remaining 2 hours of the shift are spent in doing unmeasured work for which no
incentive bonus can be paid. Find for each workman: (i) the production performance level achieved,
(ii) total earnings for the day.
Solution:
Rs. 32 Here the general base wage rate = Rs. 32 / 8 = Rs. 4 per hour
(i) Production performance levels
Workman A B C D
Standard units produced S = 48 × 6 60 × 6 75 × 6 90 × 6
at 6 minutes per unit (s) = 288 = 360 = 450 = 540 mins.
Time worked on 360 360 360 360 mins.
measured work for 6
hours (T)
Thus, performance (288/360) × 100 (360/360) × (450/360)× (540/360) ×
(S/T) x 100 = 80% 100 = 100% 100 = 125% 100 = 150%
(ii) On the basis of this information, let us calculate total earnings for the day.
A B C D
Earnings on unmeasured work for 2 hours @ Rs. 8 Rs.8 Rs. 8 Rs. 8
Rs. 4 per hour
Earnings on measured work for 6 hours @ Rs. 24 Rs. 24 Rs. 30 Rs. 36
Rs. 4 per hour plus performance bonus when
performance exceed 100%
Total earnings for the day Rs. 32 Rs. 32 Rs. 38 Rs. 44
A B C
Standard time 100hrs. 100hrs. 100hrs.
Time taken 50hrs. 70hrs. 90hrs.
Time saved 50hrs. 30hrs. 10hrs.
% of the time saved on standard time 50 % 30 % 10 %
Time wages (Time taken x Rs.3) Rs. 150.00 Rs.210.00 Rs.270.00
Bonus up to 25 % 7.50 7.50 3.00
Bonus up to 30 % 3.00 3.00 -
Bonus up to 30 % 18.00 - -
Total earnings 178.50 220.50 273.00
Solution:
182
Production Planning and Productivity Management
Here C and D get bonus of Rs. 6 and Rs. 12 respectively because their performance is 25% and 50%
respectively higher than 100%.
Problem: 10
Fair Play Co. Ltd. has introduced a Scanlon Plan of Incentive Bonus for its employees in 200 based on the
following information relating to the previous three years:
Years Sales Revenue Total Salaries and Wages
2004 1,20,000 36,000
2005 1,25,000 35,000
2006 1,35,000 35,100
For 2007 the Sales Revenue has been Rs.1,50,000 and the total salary and wage payment has been
Rs. 36,000. What is the amount due as Bonus to the employees according to Scanlon Plan? If 30% is set aside
in a bonus equalisation reserve fund, how much money is available to be paid out as Scanlon Bonus for 2007?
Solution:
Ratio of Labour cost to sales revenue = Total Salaries & Wages / Sales Revenue
For, 2004 = 36,000/120,000 = 0.30 ; For 2005 = 35,000/125,000 = 0.28 and 2006
= 35,100/1,35,000 = 0.26
Average for three years = 0.84/3 = 0.28; Expected Labour Cost on Sale Revenue of 2007
= 0.28 × 1,50,000 = Rs. 42,000;
Actual Labour Cost (Salaries & Wages for 2007) = Rs. 36,000. Savings in labour cost due to increased
productivity = Rs. 6,000. If 30% is set aside in a bonus equalisation reserve fund, the bonus for 2007
will be = Rs. 6,000 – Rs. 1,800 (30% of 6,000) = Rs. 4,200.
Problem: 11
An incentive scheme allows proportionate production bonus beyond 100% performance level. Calculate
the amount of (i) Incentive bonus and (ii) Total payment received by an operator on a particular day
during which the following particulars apply:
Operation : Assembling pocket transistor radio set
Work Content : 30 Standard minutes per assembled set
Attended Time : 8 Hours
Time spent on unmeasured work : 2 Hours
Numbers of sets assembled during the day : 15
Wage rate : Rs. 4 per hour
(iii) What is the net labour productivity achieved by the operator during the day?
Operation Management
183
Solution:
Total standard minutes worked during the day = 30 × 15 = 450, working time = 8 – 2 = 6 hours = 360
minutes. Performance = (450 × 100) /360 = 125% or 0.25
(i) Incentive bonus = 0.25 × 6 × 4 = Rs. 6 for six hours on measured work
(ii) Guaranteed wage for 8 hours = 8 × 4 = Rs. 32; Total earnings for the days
= Rs. (6 + 32) = Rs. 38
(iii) Net labour productivity = Output in units / Net man hours = 15 / 6 = 2.5 sets per hour
Problem: 12
The following data is available for a machine in a manufacturing unit:
Hours worked per day 8
Working days per month 25
Number of operator 1
Standard minutes per unit of production: Machine time 22
Operator time 8
Total per unit 30
(i) If plant is operated at 75% efficiency, and the operator is working at 100% efficiency, what is the
output per month?
(ii) If machine productivity is increased by 20% over the existing level, what will be the output per month?
(iii) If operator efficiency is reduced by 20% over the existing level, what will be the output per month?
Solution:
(i) If plant is operated at 75% efficiency, output per month = (Actual Time / Standard Time) ×
efficiency level =
25 8 60 75
30 100
× × × = 300 units. (ii) If the machine productivity is increased by
10% actual machine time becomes (22 × 100) / 120 = 18.33 minutes; Actual total time per unit =
18.33 + 8 = 26.33 minutes.
(ii) Output per month = (8 × 60 × 25 × 75) / (26.33 × 100) = 342 units.
(iii) If operator’s efficiency is reduced by 20% operator time becomes = (8 × 100) / 80 = 10 mts; Actual
total time per unit = 10 + 22 = 32 mts.; Output per month = (8 × 60 × 25 × 75) / (32 × 100) = 281.
Problem: 13
An operator is paid a flat rate of Rs. 30 per day and Re. 1 per every additional 5 points of efficiency rating
over a rating of 100 which represents standard performance, as incentive bonus. The standard minutes per
unit of production are 20 and the operator makes 27 units in a shift of 7.5 working hours. (i) How much
incentive bonus he would get per day? (ii) If the incentive system is modified to pay the incentive at the
rate of 50% of the time saved, what incentive would he get?
184
Production Planning and Productivity Management
Solution:
(i) Standard performance (100 points) = (7½ hours × 60) ÷ 20 = 22.5 units; Actual performance = 27
units. Efficiency rating % = (27 / 22.5) × 100 = 120%; Incentive bonus per day = (20/5) × 1 = Rs. 4/-
(ii) Time required for producing 27 units; 27 × 20 = 540 minutes.
Time actually spent = 7½ × 60 = 450 minutes
Time saved = 90 minutes; Incentive bonus =
90 30
50%
450
× × =Rs. 3/-
Problem: 14
The following information about a company is available
Year Sales Revenue (Rs.) Total employee
Remmeration (Rs.)
2004 2, 40,000 72, 000
2005 2, 50, 000 70, 000
2006 2, 70,000 70, 200
For 2007, the sales revenue has been Rs. 3, 00,000 and the employee remuneration has been Rs. 72,000.
What would be the amount due to the employees, if a Scanlon Plan is introduced?
Solution:
Average sales revenue for three years period
= Rs. (2,40,000 + 250000 + 270000) / 3 = Rs. 253333.33/-
Average employee remuneration = (72,000+70,000+70,200) / 3 = Rs. 70,733.33/-
Total bonus = Rs. 3,00,000
Rs.70,733.33
Rs.84,000 (approx.)
Rs.2, 53, 333.33
× =
... Amount due to employees = 84,000 – 72,000 = Rs. 12,000/-
Problem: 15
Manufacture of a component requires operations to be performed on three machines P, Q and R respectively,
the standard times and operator efficiency being as follows:
If the factory operates 2 shifts of 8 hours each and the machines are available for production throughout
Machine Standard hours per component Operator efficiency
P 0.16 80%
Q 0.23 100%
R 0.09 90%
the shifts on six days in a week, how many of machines P, Q and R will be required to produce 4,800
components per week? How many hours of capacity, if any, would be available from the machines P, Q
and R for doing other jobbing work?
Solution:
Available hours = 6 days × 2 shifts × 8 hours = 96 hours.
Actual hours Required
= (Standard hrs. per unit × Production quantity) / Operator efficiency
Operation Management
185
Machine P = (0.16 × 4800) / 80% = 960 hours; Machine Q = (0.23 × 4800) / 100% = 1104 hours
Machine R = (0.09 × 4800) / 90% = 480 hours; No. of machines required = (Actual hours required /
Available hours); P = 960 / 96 = 10 machines; Q = 1104 / 96 = 11.5 i.e., 12 machines; R= 480 / 96 = 5
machines.
Machines P and R will be fully utilised with no spare capacity. Machine Q will have ½ machine to
spare, i.e., ½ × 96 = 48 hours per week can be utilised for doing other jobbing work.
Problem: 16
Workmen of a certain grade are guaranteed a wage of Rs. 48 for an eight hour shift. An incentive scheme is
in operation which pays production hours directly proportional to production performance only after
100% level is reached. Four workmen P, Q, R and S produce 90, 75. 60 and 48 units respectively in 6 hours.
Work content of the job is 6 standard minutes per unit. Remaining 2 hours of the shift are spent on doing
miscellaneous unmeasured work for which no incentive hours can be paid.
Solution:
Performance of R at 100% and S at 80%. Both earn Rs. 48 for the 8 hours shift. This is a problem with
incentive schemes with ‘ guaranteed base wage’ . If S does not improve to 100% performance after a period,
he may be transferred to unmeasured work.
Problem: 17
An operator manufactures 11 identical components in a week of 48 hours duration. Each component takes 360
standard minutes. Estimate the cost per component if the company operates an incentive system as below.
Guaranteed basic rate is Rs. 4 per hour upto 80% performance level, 11% of the basic rate is paid if the
performance level is between 80% and 100% and 120% of the rate is paid if the performance level falls
between 101 and 110%. Above 110% performance level, 130% of the basic wages are paid. Materials
component of each job is 150% of the direct labour.
Solution
Standard performance per week = (48 × 60) / 360 = 8 components
Actual performance per week = 11 components; Efficiency level = 11/8 × 100 = 137.5%. As the
Workmen P Q R S
Units produced in 6 hours
spent on measured work
90 75 60 48
Standard minutes per unit (s) 6 6 6 6
540 450 360 288
Minutes worked in measured work 6
hours (A)
360 360 360 360
Performance = S /A × 100
540
100
360
×
450
100
360
×
360
100
360
×
288
100
360
×
= 150% = 125% = 100% = 80%
Earnings on measured work for 6
hours
= 36 × 1.5 = 36×1.25 = 36 × 1 = 36 × 1
= Rs. 54 = Rs. 45 = Rs. 36 = Rs. 36
Earning on unmeasured work for 2
hours @ Rs. 6 per hour
12 12 12 12
Total earning for the 6 hours shift = Rs. 66 = Rs. 57 = Rs. 48 = Rs. 48
186
Production Planning and Productivity Management
performance level exceeds 110%, 130% of the basic wages are payable.
Wage Rate = (Rs. 4 × 130)/ 100 = Rs. 5.20 per hour
Labour cost (48 × 4 × 130)/(11×100) = Rs. 22.69
Material cost = Rs. 20.00
Over head cost @ 150% of direct Labour = Rs. 34.04
Total cost per component = Rs. 76.73
Problem: 18
A company manufactures 200 units of a product everyday and sells it for Rs. 8 each. Direct material cost is
Rs. 2 per unit and direct labour is paid Re. 1 per unit. Overheads are Rs. 800 per day in total. A market
research survey indicates that 300 units can be sold per day if the price can be brought down to Rs. 7.
Production can be increased to this level, if an incentive scheme which would cost Rs. 100 per day to
administer is implemented, giving the workmen proportionate increase in their earnings. Examine with
appropriate calculations whether and, if so, how much gains are made by the company and the workmen.
Comment on the social desirability of such incentive schemes.
Solution:
Direct material cost per unit = Rs. 2; Direct labour cost per unit = Re. 1
Total revenue for 200 units = 200 × 8 = Rs.1600;
Total cost for 200 units = Rs. 800 + (200 ×3) = Rs. 1400; Profit: 200
Total revenue for 300 units = 300 × 7 = 2100;
Total cost for 300 units = Rs. 800 + Rs. 100 + (300 × 3) = Rs.1800
Profit: 300. Gains made by the company from the incentive scheme
= Rs. 300 – Rs. 200 = Rs. 100
Gains made by workmen = Rs.100. Such incentive schemes are socially desirable as both workmen
and the company stand to gain. Consumers also gain because the product is available at a lower price.
Problem: 19
A company operates a wage incentive plan as follows:
Productivity Level Total incentive in a month
Rs. (lacs)
Less than 75% Nil
75% to 76% 1
76.1 to 77% 2
77.1 to 78% 3
78.1 to 79% 4
79.1 to 80% 5
80.1 and above 6
The total incentive is shared by the workers with hours worked by each as the basis. In a month the output
was 80,000 standard hours. There are 600 workers, the total hours worked being 90,000 in the month,
(i) What is the overall productivity? (ii) What is the total incentive? (iii) A worked for 150 hours and B for
200 hours. What are their individual earnings?
Operation Management
187
Solution:
(i) Overall productivity= (80,000 / 90,000) × 100 = 88.89% (ii) Total incentive = Rs. 6 lacs (iii) Earnings
of A = (6,00,000 /90,000) × 150 = Rs. 1,000; Earnings of B = (6,00,000 /90,000) × 200 = Rs. 1,333.33
Problem: 20
A soap factory adopts the piece rate system for its packing section, the rate being 10 paise. There is a
guaranteed wage of Rs. 20 per day. The following data is available in regard to the number of soap cakes
packed per day.
(a) (i) What is the wage payable to each worker? (ii) What is the average cost of packing per soap cake
for the day?
(b) The standard time for packing is 4 minutes in the above example.(i) What is the labour productivity of
each worker for a shift duration of 480 minutes?(ii) What is the productivity of the group? (iii) Give
your comments on the productivity figures obtained.
Solution:
(i) Wages payable are – (A) 800 × 0.10 = Rs. 80; (B) 600 × 0.10 =Rs.60; (C) 100 × 0.10 = Rs. 10
= Rs. 20 (guaranteed wage) ; (D) 700 × 0.l0 = Rs.70
(ii) Average cost of packing per soap for the day
=
80 60 20 70
100
800 600 100 700
+ + + ×
+ + + = 23000/2200 = 10.45 Paise approx.
(b) (i) labour productivity of each worker (A) : [800 ÷ (480/4)] × 100 = 666.7%; (B) : [600 ÷ 480 / 4]
× 100 = 500%; (C): [100 ÷ 480 / 4] × 100 = 83.3% ; (D): [700 ÷ 480 / 4] × 100 = 583.3%
(ii) Productivity of the group = [(800 + 600 + 100 + 700)] ÷
480 4
4
×
× 100 = 458.3%,
(iii) Productivity figures of all the workers except C are excellent. Group productivity is also quite
good.
Problem: 21
The time study section of a tyre factory has fixed the following work standards for the tyre trimming
section:
Worker No. of soap cakes packed
A 800
B 600
C 100
D 700
188
Production Planning and Productivity Management
Production data for 2 groups are as follows —
(i) What is the productivity of each group? (ii) What is the overall productivity of both groups
combined? (iii) Each worker is paid a basic wage of Rs. 50 per day, D.A. of Rs. 60 per day and
incentives as per the scheme shown below:
Size of Type Standard Time (Man – Mins)
Tractor 10
Truck 6
Passenger-car 4
Scooter 2
Group I Group II
No. of men 10 10
Hours worked 8 8
Production - Tractor 100 50
Truck 200 250
Passenger-car – 50
Scooter 200 100
Productivity Rate / day (Rs.)
<49% 0
50 – 60 % 10
60 – 70 % 20
> 70 % 40
What will be the total wages of a worker in Group I and a worker in Group II?
Solution:
(i) Productivity of Group I:—
Standard time = 100 × 10 + 200 × 6 + 200 × 2 = 2600 Man-Mins.
Actual time taken = 10 × 8 × 60 = 4800 Man-Mins.
Productivity = (2600 / 4800) × 100 = 54%.
Productivity of group II:—
Standard time = 50 × 10 + 250 × 6 + 50 × 4 + 100 × 2 = 2400 Man-Mins.
Actual time taken = 10 × 8 × 60 = 4800 Man-Mins;
Productivity = (2400 /4800) × 100 = 50 percent
(ii) Overall productivity of both groups combined, standard time
= 2600 + 2400 Man-Mins = 5000 Man-Mins.
Actual time = 4800 + 4800 = 9600 Man-Mins;
Productivity = (5000 /9600) × 100 = 52 per cent
(iii) Total wages of a worker = Basic wage + DA + incentive
Group I = Rs. 50 + 60 + 10 = Rs. 120, Group B = Rs. 50 + 60 + 10 = Rs. 120
Operation Management
189
Problem: 22
A shop undertaking piece work and word processing job has the following working systems. There are
four operators A, B, C and D. Each one is given a minimum guaranteed wage of Rs. 50 for a working day
for keying in and taking out printing of 25 pages. For any extra page they are given Rs. 3. Following data
is available by each operator for a week of 6 days.
Operator Number of Excess over Incentive
pages completed Standard output payment
A 200 50 50 ×3 = Rs. 150
B 180 30 30 ×3 = Rs. 90
C 150 0 0
D 220 70 70 ×3 = Rs. 210
Operator Number of pages completed
A 200
B 180
C 150
D 220
(a) What is the remuneration payable to each worker? Does the cost per page depend on quantity?
Any variation from normal? (b) How do you incorporate quality incentive in the system?
Solution:
(a) Standard production = 25 × 6 = 150 pages. Standard remuneration = 50 × 6 = Rs. 300
Thus, the remuneration payable to each operator is as follows:
A Rs. 300 + Rs. 150 = Rs. 450
B Rs. 300 + Rs. 90 = Rs. 390
C Rs. 300 + 0 = Rs. 300
D Rs. 300 + Rs. 210 = Rs. 510
Cost per page does not depend upon quantity. The incentive scheme is unbalanced due to low benefit
for management.
Problem: 23
Workmen in a particular grade are guaranteed a daily wage of Rs. 64 for an eight hour shift. According to
an incentive scheme in operation, incentive bonus is earned directly proportional to production above
100%. Four workmen A, B, C and D produce 48, 60, 75 and 90 units respectively in six hours spent in
working on a job which has standard time of 6 minutes per unit. The remaining 2 hours are spent in doing
some unmeasured work for which no incentive bonus can be paid. For each of the four workmen find:
(i) the level of production performance achieved ;(ii) the total earnings for the day.
Solution:
Here the general base wage rate 64/8 =Rs. 8 per hour
190
Production Planning and Productivity Management
(i) The level of production performance achieved:
Worker Nos. Piece rate (Rs.) Guaranteed rate Earnings payable
packed (Rs.)
A 400 80 35 80
B 300 60 35 60
C 175 35 35 35
D 150 30 35 35
1025 210
Worker No. of cakes packed
A 400
B 300
C 175
D 150
Workmen A B C D
Standard units produced at 6 minutes per 48 × 6 60 × 6 75 × 6 90 × 6
unit (S) = 288 = 360 = 450 = 540
Time worked on measured for 6 hours (T) 360 360 360 360
Performance (S/T) x 100 80 100 125 150
Earnings on unmeasured work for 2 hours
@ Rs. 8 per hour 16 16 16 16
Earnings on measured work for 6 hours @ 48 48 48 48
Rs. 8 per hour Performance – – 12 24
Rs. 64 64 76 88
(ii) Total earnings per day:
Problem: 24
The packing section in a detergent factory operates under the guaranteed piece rate system of wage payment.
The piece rate per cake packed is 20 paisa. The guaranteed wage per day is Rs. 35. On a typical day, the
production of four workers in the packing department is as follows:
(i) What are the earnings of each worker on this day?
(ii) What is the average labour cost of packing on this day?
(iii) The management wants to do away with the present individual incentive system and instead introduce
a group incentive system for all the 4 workers together (i.e.) giving them a flat incentive of Rs. 15 per
day per worker if the combined production for the day exceeds 1,000 nos. and Rs. 20 per day per
worker if the output exceeds 1,300 nos. What would be your advice to the management in this regard?
You may assume a standard time per unit as 1.333 minutes and that the management saves Rs. 5 per
day in the administration of the new group incentive scheme as compared to the earlier one.
Solution:
Given piece rate = Re. 0.20 per piece. Guaranteed wage rate = Rs. 35 per day. Payment as per guaranteed
piece rate system.
(i) Computation of earnings:
Operation Management
191
Job Cards Std. Hrs No. of persons
1 17 3
2 15 2
3 19 3
4 18 3
5 23 5
6 16 5
7 22 3
8 14 4
(ii) Average labour cost or packing: Labour cost = Rs. 210; Nos. packed = 1,025; Cost per pack =
Re. 0.20 (approx.) (iii) Evaluation of the group incentive scheme: Standard time per unit = 1.333
mins.; Standard output for 4 persons = (480/1.33) × 4 = 1,440; Earnings based on this scheme in
the present case: Normal wage = Rs. 140;
Incentive = Rs. 15 × 4 = Rs. 60; Actual cost = Normal wage + Incentive – Savings.
= Rs. (140 + 60 – 5) = Rs. 195
Since the group incentive costs are less than the present guaranteed scheme, management should go
for it.
Problem: 25
(a) Find out the productivity index of a section from the following figures:
(i) Standard Man-Hrs:
Reasons Idle time (Hrs.) No. of persons involved
No work 10 1
No Material 5 2
Power Failure 10 15
No Material Handling Equipment 2 3
Machine Breakdown 10 4
Others 5 3
Workers Attended Hrs.
3 180
5 170
4 160
3 150
(ii) Idle Card:
(iii) Record of attended hours for direct workers :
Compute: Productivity Index and Wastivity Index.
b) Do you agree with the view “Job security is an impediment to productivity”? Justify your answer.
192
Production Planning and Productivity Management
Solution:
(a) Standard Man Hrs Produced (S.M.H.) would be = Std. hrs x no. of persons for each job.
= 17 × 3 +15 × 2+ 19 × 3 + 18 × 3 + 23 × 5 + 16 × 5 + 22 ×3 + 14 × 4 = 51 + 30 + 57 + 54 + 115 + 80 +
66 + 56 = 509 hrs.
Attended Man-hrs (A.M.H.) = Attended hrs. × No. of workers
(as per record of attended hrs. for direct workers — as given)
= 180 × 3 + 170 × 5 + 4 × 160 + 3 × 150
= 540 + 850 + 640 + 450 = 2480 hrs.
Idle man-hrs = Idle Hrs (as given) × no. of persons involved = 10 × 1 + 5 × 2 +10 × 15+ 2 × 3 +10 × 4 +
5×3 = 231 hrs.
Effective A.M.H. = 2480 – 231 = 2249 hrs. Productivity index (P.I.) = (509 / 2,249) × 100 = 22.63%
Wastivity = 100 – 22.63% = 77.37%
(b) I agree with this statement especially with reference to our country. In general, a worker has no
incentive or pressure to improve his productivity when there is no likelihood of losing his job
despite low levels of performance. In Government jobs, in public sector and in industries where
powerful trade unions exist, productivity tends to be low because workers know them. In this
type of work culture it is not possible to increase productivity. Therefore, general productivity
levels remain low. On the other hand, if workers know that they will lose their jobs in case they
fail to give a minimum level of productivity; they would work hard to retain their jobs. There
would be a continuous pressure on them to perform better. According to behavioural scientists
human beings tend to perform better under a little tension. This tension at the work place can be
created if job security is not guaranteed. At the same time safeguards must be provided to ensure
that a worker is not thrown out of the job on frivolous grounds or for reasons which are not his
responsibility. Suitable legislation can be created to protect workers against victimisation. Thus,
absolute job security is an impediment to productivity in India.
Problem: 26
A product is manufactured at the rate of 200 units per day and sold for Rs. 8 each. Direct Material cost is
Rs. per unit and direct labour cost is Re. 1/- per unit, overheads (including selling) are Rs. 800 per day.
If the selling price can be reduced by Re. 1/- per unit, it is expected that 50% more units can be sold. The
workmen are prepared to produce 50% more only if there is a proportionate increase in their earnings. A
suitable incentive scheme would cost Rs. 100 per day to administer. With appropriate calculations, justify
if the company should go in for such an Incentive Scheme.
Operation Management
193
Solution:
Comparative cost and profitability: (per day)
Particulars Without With
Incentive (Rs.) Incentive (Rs.)
Units produced & sold 200 300
Selling price – Rs. 8 7
Sales value – Rs. 1,600 2.100
Direct cost: Direct Materials at Rs. 2 400 600
per unit
Direct Labour cost at
Rs.1/- per unit 200 300
600 900
Contribution : (Sales - Direct cost) 1,000 1,200
Overheads 800 800
Incentive __ 100
Profit 200 300
Daily working hours 8
No. of working days in a week 6
No. of operators 20
Std. Hours per unit of production 4
Number of units produced 48
Absentee man days 40
Idle time due to load shedding 30 Mandays
Problem: 27
The following information is available for a factory:
During a particular week
Find:
(i) Absenteeism percentage
(ii) Labour utilisation percentage
(iii) Productive efficiency of labour
(iv) Overall productivity of labour in terms of units produced/week/employee.
Solution:
(i) Absenteeism percentage =
Absenteemandays/ week 40
100 33.33%
Totaloperatormandays/week 2 6
= × =
×
(ii) Labour utilisation percentage =
Working mandays/week
100
Attendedmandays/weeks
×
194
Production Planning and Productivity Management
Totaloperatormandays/week Absenteeism Idle time
100
Attended mandays
− −
= ×
=
(20 6) 40 30
100 62.50%
(20 5) 40
× − − × =
× −
(iii) Productive efficiency of labour =
Std.man hoursproduced/week
100
Actualman hoursworked/week
×
4 48
100 48%
[(20 6) 40 30] 8
× × =
× − − ×
(iv) Overall productivity of labour =
Totalproduction/week
48/ 20
Totaloperators
=
= 2.4 Units/Week /operator
Problem: 28
A factory can manufacture two products A and B by using either of two materials P or Q. A is expected to
sell at Rs. 70 per unit and product B at Rs. 30 per unit.
Material P Material Q
Output A 200 units 400 units
B 300 units 200 units
Quantity, of raw material usage 1,000 kg 1,000 Kg
Labour usage 300 man hrs. 250 man hrs.
Electric energy consumption 1000 KWhr 1500 KWhr
Cost of raw material/kg Rs.20 Rs.30
Labour per manhour Rs.5 Rs.5
Electrical energy/KWhr Rs.1.5 Rs.1.5
The operating data are as follows:
Compare the productivity of material, labour and electrical energy in using materials P and Q. Comment
on the relative advantage of using either of the materials.
Solution:
Productivity =
Valueof output
Value of input
Sales value of output with material P
= Output of product A in units × Rate/unit of A
+ Output of product B × Rate/unit of B= 200 × 70 + 300 × 30 = Rs. 23,000
Sales value of output with material Q = 400 × 70 + 200 × 30 = Rs. 34,000
The partial productivity of different factors of production are computed as follows:
Operation Management
195
Comments:
The productivities of (1) and (3) is nearly same by using either material P or Q. If labour is the key factor it
is better to use material Q as labour productivity, for Q is higher, i.e., 27.200 > 15.333
Problem: 29
The following data is available for a machine in a manufacturing unit.
Material P Material Q
1. Productivity of raw materials
=
Value of raw material used
Sales value of output
1000 20
23000
×
= 1.150
30000
34000
=1.133
2. Labour productivity, i.e.,
=
Value of labour
Sales value of output
300 5
23000
×
=15.333
250 5
34000
×
=27.200
3. Electrical energy productivity, i.e.,
=
Value of electrical energy
Sales value of output
1000 1.5
23000
×
=15.333
1500 1.5
34000
×
=15.111
Number of hours worked per day 8
Working days per month 25
Number of operators 1
Machine time 22 min
Operator time 08 min
Total time/unit 30 min
Standard time per unit of production,
(i) If plant is operated at 75% efficiency, and the operator is working at 100% efficiency, what is the
output per month?
(ii) If the machine productivity is increased by 10% over the existing level, what will be the output per
month?
(iii) If the operator efficiency is reduced by 10% over the existing level, what will be the output per month?
Solution:
(i) Plant is operated at 75% efficiency
Machine time = 22 ×
100
75
= 22 ×
4
3
min
Operator time = 8 min
Total time/unit =
22 4 112
8
3 3
× + = min
Total time available = 8 × 60× 25 min
196
Production Planning and Productivity Management
Output Target Incentive Rate
80% - 90% 10%
90% - 100% 121/2
%
100% - 110% 15%
110% - 120% 171/2
%
120% and above 20%
Number of units produced per month
8 60 25
(112/ 3)
× ×
= 321.43 ≈ 322 units.
(ii) If the machine productivity is increased by 10%, i.e., plant efficiency = 75 + 10 = 85%.
Machine time =
22
0.85
= 25.88 min
Operator time = 8 min (assuming 100% efficiency)
Total time/unit = 33.88 min.
Number of units produced/month =
8 60 25
33.88
× ×
= 354.19 ≈ 355 units.
(iii) If the operator efficiency is reduced by 20%, plant efficiency is 75%.
Machine time =
22
0.75
= 29.33 min
Operator time =
8
0.9
= 9 min/unit (operator efficiency 90%)
Total time/unit = 29.33 + 9 = 38.33 min
Number of units produced/month =
8 60 25
38.33
× ×
= 313 unit S
Problem: 30
The targeted weekly output of a manufacturing unit employing 20 workers is 400 pieces. The group is
entitled to earn an incentive @ 10% on the aggregate of wages based on basic piece rate plus dearness
allowance (which is Rs. 120 per week) upon achievement of a minimum of 80% of the output target. This
incentive rate increases by 2 1/2% flat for every 10% increase in achievement of targets upto a maximum of
10% at the level of 120% of the output target in the following manner :
During the four weeks in February, the actual output achieved by the workers is 383 pieces, 442 pieces, 350
pieces and 318 pieces respectively. The average basic piece