Methods and Work Measurement LECTURE 3 MEASUREMENT MODEL

Methods and Work Measurement LECTURE 3 : MEASUREMENT MODEL OF PRODUCTIVITY 27 FEBRUARY 2009 Hanna Lestari, ST, M. Eng-FTI-UII @ 2009

Why do We Care About Productivity? Productivity is affected by efficiency, effectiveness, and quality. Productivity, together with innovation and quality of working life, determine the total organizational performance – profitability Without productivity improvement, businesses do not survive in a global economy. Higher productivity means higher standard of living Hanna Lestari, ST, M. Eng-FTI-UII

Total Organizational Performance Efficiency Innovation Effectiveness Quality Hanna Lestari, ST, M. Eng-FTI-UII Productivity Quality of working life Profitability (organizational Performance)

Productivity Measurement Techniques Partial productivity : Output/single inputs Multi-factors productivity: Output/multiple inputs Total Productivity: Output/total inputs Hanna Lestari, ST, M. Eng-FTI-UII

Partial Productivity Labour Productivity • = Output/Labour Material Productivity • = Output/Material Machine Productivity • =Output/Machine Hanna Lestari, ST, M. Eng-FTI-UII

Partial Productivity Energy Productivity Etc… • =Output/Energ y Contoh Soal: Dalam sebulan PT. Noodle mampu memproduksi 10. 000 units produk dengan 500 jam kerja, berapa produktivitas tenaga kerja perusahaan tsb? Jawab: 10, 000 units/500 hrs = 20 units/hour Hanna Lestari, ST, M. Eng-FTI-UII

Multi-factors Productivity Multi-factors productivity Etc… Hanna Lestari, ST, M. Eng-FTI-UII • Output/(Labor + machine) • Output/(Labor + machine+ material) • Output/(Labor + energy+ material)

Case Study Berikut ini adalah data output hasil produksi dan input yang digunakan oleh PT. Noodle dalam satu periode waktu: - Output : $ 5000 - Labor : $ 600 - Material: $ 800 - Energy : $ 500 - Capital : $ 400 - Other expense input : $ 500 berdasarkan data-data tersebut diatas maka rasio produktivitas parsial dan total perusahaan tsb pada periode dasar adalah: Hanna Lestari, ST, M. Eng-FTI-UII

Answer : Partial Productivity Labor Productivity Material Productivity • = 5000/600= 8. 33 • = 5000/800= 6. 25 Energy Productivity Capital Productivity • = 5000/500= 10 • = 5000/400= 12. 5 Other expense productivity Hanna Lestari, ST, M. Eng-FTI-UII • = 5000/500= 10

Answer: Total Productivity : = Total Output/ (labor + material + capital + energy + other expense input) = 5000 / (600+800+400+500) = 5000/2800 = 1. 785 Hanna Lestari, ST, M. Eng-FTI-UII

Measurement Model of Productivity Objective Matrix (OMAX) • Model Craig Haris • Marvin E Mundel (1976) American Productivity Center (APC) Hanna Lestari, ST, M. Eng-FTI-UII

Objective Matrix (OMAX) OMAX is a partial productivity measurement developed for controlling productivity in the each part of firm system based on criteria of productivity. Developed by James L. Riggs (Dept. of Industrial Engineering at Oregon State University) in 1980. Hanna Lestari, ST, M. Eng-FTI-UII

Objective Matrix (OMAX) Model DEFINITION BLOCK QUANTIFICATION BLOCK WEIGHT AND VALUE BLOCK

Objective Matrix (OMAX) Model

Objective Matrix (OMAX) Model: Example No. Productivity criteria units 1 January 2003 The worst performance Expected performance Based performance Measured performance on 30 dec. 2003 1. Speed of service min. /man 10 2 4 3 2. Lateness min. /day 60 10 45 30 3. Queuing man 8 2 5 5 4. Idle time minute 60 15 30 40 5. Absent man/day 10 2 4 5 6. Complain man/wk 7 0 5 2

Objective Matrix (OMAX) Model : Example Index of Performance = (Productivity Indicator – Based Performance)/Based Performance) x 1 00% Based Performance = 300 Productivity Indicator = a sum of all values = 120+180+30+30+30+70 = 460 Value = Score x Weight Index of Performance = ((460 – 300)/300) x 100% = 53. 33% Hanna Lestari, ST, M. Eng-FTI-UII

Model of Marvin E. Mundel This model measures total productivity by comparing between productivity in Measured Period and Base Period Index of Productivity in base period is 100 so that there are three states of index of productivity in measured period: IP < 100. It means that the productivity in measured period less than base period IP = 100. It means that the productivity in measured period equals base period IP > 100. It means that the productivity in measured period more than base period The better the productivity, the higher the IP. The IP is always more than 100 Hanna Lestari, ST, M. Eng-FTI-UII

Model of Marvin E. Mundel

Model of Marvin E. Mundel Case Study : Garuda Indonesia has data as follow: No 1. 2. 3. 4. 5. 6. 7. 8. 9. Statement 2007 Ticketing Direct labor cost Indirect labor cost Cargo service Overhead cost VIP flight service Building cost for rent Maintenance cost Administration cost 10 billion 4 billion 2 billion 1 billion 500 million 1. 5 billion 800 million 2008 15 billion 3 billion 1. 4 billion 700 million 600 million 2 billion 500 million 300 million Determine: AOMP, AOBP, AIMP, AIBP, CPI, BPI, OI, II and IP

Model of Marvin E. Mundel Solution: 1. Statements of output: Ticketing Cargo service VIP flight service 2. Statements of input: Direct labor cost Indirect labor cost Overhead cost Building cost for rent Maintenance cost Administration cos Hanna Lestari, ST, M. Eng-FTI-UII

Model of Marvin E. Mundel AOMP = 15 + 1. 4 +0. 600 (billion) = 17 billion AOBP = 10 + 2 + 0. 500 (billion) = 12. 5 billion AIMP = 5 + 3 + 0. 700 + 2 + 0. 500 + 0. 300 = 11. 5 billion AIBP = 4 + 2 + 1. 5 + 0. 800 + 0. 200 = 9. 5 billion

APC Model The American Productivity Center (APC) has been advocating a productivity measure that relates profitability with productivity and price recovery factor. The way this measure is derived is: Hanna Lestari, ST, M. Eng-FTI-UII

APC Model The “productivity” ratio gives an indication of the amount of resources consumed to produce the firm’s output The changes in “price recovery factor” over time indicate whether changes in input cost are absorbed, passed on, or overcompensated for in the prices of the firm’s output In this model, the capital input is given by total depreciation plus profit relative to the total assets (i. e. fixed assets + working capital) employed Thus, the capital input for any particular period = depreciation for that period + (return on assets in base period) x (current assets employed)

APC Model Example:

APC Model In period 1, the firm had capital assets $ 100, 000, yielding $10, 000 depreciation at the average rate of 10%. The profit earned in period 1 was the difference between the revenue and total input cost, that is, $49, 000 output minus $38, 100 resulting in $10, 900. The base period (period 1) return on total capital is calculated as follows: Hanna Lestari, ST, M. Eng-FTI-UII

APC Model Assuming that the working capital in period 1 was $50, 000; Hanna Lestari, ST, M. Eng-FTI-UII

APC Model In period 2, we have assumed that the fixed assets remained at $100, 000, but the working capital increased to $80, 000. Thus return (profit) of the firm is $13, 140, which is the profit should have made if it had maintained its profitability relative to its total assets However, the actual profit in period 2 is given as $54, 500 minus $44, 500 resulting in $10, 000 This means that the firm’s profit fell short by ($13, 140 - $10, 000) = $3, 140.

APC Model

APC Model

APC Model : Table 7. 3 shows that labor productivity improved by 11. 81 % in period 2, and that the wage rates increased considerably, as indicated by a price recovery index of 0. 814 This means that the productivity increase was overshadowed, with the net effect of a drop in profitability by 1. 000 – 0. 962 = 0. 038 or 3. 8%

Model Craig Haris Pt = produktivitas total C = Faktor masukan total L = Faktor masukan tenaga kerja R = Raw material and purchased parts input O = Faktor masukan barang dan jasa lain Ot = total ouput Hanna Lestari, ST, M. Eng-FTI-UII

Hanna Lestari, ST, M. Eng-FTI-UII