Busm 361

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Busm 361

• Productivity

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Productivity

• Represents output relative to input
• Measure of process improvement

• Productivity increases improve standard of living
  
• From 1889 to 1973, U.S. productivity increased at
  a 2.5 annual rate

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Multi Factor Productivity

• Convert all variables to common unit ()
• Sum all input variables
• Apply Formula

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Productivity Variables

• Labor - contributes about 1/6 of the annual
  increase
• Capital - contributes about 1/6 of the annual
  increase
• Management - contributes about 2/3 of the annual
  increase

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Relate all this to Whirlpool case
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Whirlpool
Productivity improved Costs were pared
Wages increased
Parts per man hour
Average worker's annual cash compensation
Cost per unit of a spin pinion
2.25
115
110
27000
2.00
105
26000
1.75
25000
100
95
24000
1.50
1989
1990
1991
1989
1990
1991
1989
1990
1991
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Measurement Problems

• Quality may change while the quantity of inputs
  and outputs remains constant
• External elements may cause an increase or
  decrease in productivity
• Precise units of measure may be lacking

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Key Variables for Improved Labor Productivity

• Basic education appropriate for the labor force
• Diet of the labor force
• Social overhead that makes labor available
• Maintaining and enhancing skills in the midst of
  rapidly changing technology and knowledge

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Productivity Growth 1971- 1992
Labor
per year
Whole Economy
Manufacturing
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Comparison of Productivity
The Gap is Closing, But U.S. Maintains the Lead
100 80 60 40 20 0
100 80 60 40 20 0
U.S.
Germany
Japan
1960 65 70 75 80 85 90 95 2000
Labor Productivity
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Investment and Productivity in Selected Nations
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Service Productivity

• Typically labor intensive
• Frequently individually processed
• Often an intellectual task performed by
  professionals
• Often difficult to mechanize
• Often difficult to evaluate for quality

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Group Work

• Break into groups
• Do problem 1.3 and 1.4
• Report results

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Assignment

• 1.1, 1.6, 1.7, 3.3, 3.4