Productivity, Competitiveness, & Strategy

Three separate but related words extremely important to business success.
Productivity: One of the primary responsibilities of an industrial Engineer is to achieve productive use of a organization resources i.e. labor, facilities, money, equipments etc. Therefore, productivity is a measure of output based on input. Thus, Productivity(P) = Output/Input

Productivity measure can be of single factor; Take the following example: Develop a productivity measure for 4 workers who produce 720 pieces in 8hrs. Solution: P=Output pieces/Labor Hours, P=720/(4*8)=22.5 pieces/hrs.
It can also be multi-factor; Develop a productivity measure for the combined input of labor, machine time using the following data. Output: 7040 units, Input: Labor-$1000, Materials-$520, Overhead-$2000. Solution: P=output/(Labor + materials + overhead); 7040/(1000 + 520 + 2000);P=7040/3520; P=2 units/Input$
Why Productivity measures?
- Indicate where improvement should be made
- Are critical in the planning process
- are performance scorecards for departments
- Track performance overtime
Note: Productivity improvements are important to remain competitive.
How to improve productivity
- Develop productivity measures for each department
- Define critical operations by looking at the system as a whole to see how interrelationships/ bottlenecks affect productivity
- Develop methods for soliciting improvement ideas such as benchmarking competition
- establish reasonable goals for improvement
- Make it clear that management supports improvement ideas and develop incentives for contributors
- Publicize productivity measures ad make sure they are understood
- Don't confuse Efficiency with Productivity
Efficiency deals with the best way to do a job with current tools while Productivity deals with the best way to do a job and may require operational changes and retraining.