## SCMS 3510 – Operations Management – Chapter 2 Productivity

What is productivity?
Making the most with the least (efficiency)
With quality
Minimum possible time
What are 2 reasons to measure productivity?
1) For improvement purposes
2) For benchmarking setting
If you want to measure and improve something, how do you do it?
It must be compared to something else (benchmark) for verification.
When you make an improvement, how do you know you did make an improvement?
You have to compare the changes to prior accomplishments (benchmark).
What are 3 things you have to watch out for when measuring productivity?
1) Units of measure
2) Time frame
3) Valid comparison (only compare if you have 2 identical things to compare. Must be apples-to-apples).
What is the formula for measuring productivity?
P = Output/Input
What does input mean?
Means all resources.
It is investment going into the business.
What does output mean?
It is the return on the investment coming out of the business.
What are the inputs in single factor productivity?
Labor or Materials
What are the inputs in multi-factor productivity?
Means more than 1 of the following:
Labor & Materials & Overhead
How do you calculate overhead? If overhead number is not given, what can you assume it to be?
Typically, overhead cost is expressed as a percentage of labor cost. Ex: 150% of labor cost OR 1.5(labor cost). Can assume 1.5(labor cost) if not given.
What is a good P value?
If > 1, making money.
If = 1, not making or losing money.
If <1, losing money.
When calculating productivity, explain how time is important.
-If there are 200 units produced PER DAY, you can assume there are 8 labor hours in a day unless otherwise specified.
-Must make sure that the units of measure are equal in terms of hours per day, per week, per month, etc.
When calculating Materials, what do you need to remember to do?
Multiply by the number of units given in the Output.
And make sure that the per hour/day/week/month is the same.
What is the formula for determining whether there is a growth or loss of productivity?
(New – Old) / Old
then multiply by 100, to get a percentage. Then round to 2 decimals places like 50.41%
What are 3 ways to increase P?
1) (increase Output / Input remains same)
2) (Output remains same / decrease Input)
3) (increase Output / decrease Input)

#3 is the best

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