Magazine article Industrial Management

Measuring and Improving Productivity: A New Quantitative Approach

Magazine article Industrial Management

Measuring and Improving Productivity: A New Quantitative Approach

Article excerpt

A significant number of books, articles, and papers have been written analyzing American productivity. Virtually every author admits that there are many disadvantages in American investment policy, technological improvement, quality control systems, organizational behavior, and structural organization of the economy. To solve this problem a great number of productivity improvement programs have been introduced and utilized in the U.S. Many of these are based on technological modernization, longterm investment policy, organizational improvements, etc. However, the results in manufacturing have not met management's expectations. This means that new, more innovated approaches are needed for substantial productivity increase. All productivity improvement projects should be based on a detailed analysis of the existing productivity movement. During this analysis several questions should be answered:

a. What are the factors that affect productivity?

b. How do we measure these factors?

c. What is the appropriate approach to analyze these factors?

d. What is the model that can be used for predicting productivity growth while varying the factors' values?

We attempted to analyze productivity in connection with losses which occurred during the production process.


Loss of labor and material resources (sometimes called waste) are a part of the production process. They can arise in any stage of the process and are due either to production necessities, or to disadvantages in the production process.

Variation of loss values affects productivity change. The standard definition of productivity is the ratio of output to input. Loss represents the input along with the productive expenses of material, labor, energy, and financial resources involved in the production process. The main difference between these two groups of input is that losses add only cost to input but not the value to product output. Decreasing the value of losses in input will contribute significantly to productivity growth.

Some manufacturing firms base their productivity improvement programs on the analysis of losses in the production process. Among the best examples of this kind of analysis is Toyota Motors Co. This company is one of the leaders in developing new approaches in production efficiency. Its program to improve productivity has been based on a critical review of company wastes (Bell, 1991). Among wastes analyzed are overproduction, idle time of workers and equipment, transportation delays, poor quality, etc. This analysis was used by the company to evaluate and improve the combination of equipment and processes to make the company more productive. Alan Lawlor (1985) presented a waste analysis as part of his productivity method study. He also classified the areas of waste and showed their influence on productivity.

Investigating these and other examples of loss-based analysis and productivity improvement, we may conclude that the following: labor and material loss play not only a great role as a productivity analysis base, but they also appear as an active element in productivity growth. However, companies do not use quantitative measurements or quantitative techniques to evaluate the real influence of loss on the productivity movement.

The main idea of this approach is to base productivity improvement on a new measurement system that fully describes the productivity behavior according to loss variation. The system should be able to produce scientifically based recommendations in productivity improvement. The assumptions of this approach are:

a. Achievement of significant productivity improvement without major expenses.

b. Elimination of the loss as a main basis for productivity growth.

c. Consideration of all possible losses.

d. Creation of an appropriate model describing loss influence on productivity. …

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