Productivity Of Conversion Process Economics Essay

Productivity is used to analyze the manner a concern is making in footings of its efficiency every bit good as its effectivity.Actually efficiency indicates how a concern is conserving its resources to give a given end product. On the other manus effectivity indicates how a certain aim of concern is achieved irrespective of the inputs needed to accomplish it. Therefore, the two footings are rather different.

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Productiveness on the other manus is a ratio of value of end product and cost of input.In the ideal instance it is ever greater than one and is an index if the synergism created by the house to magnify the Inputs to the production /operations system by intelligent harnessing of the input resources during the transition procedure from inputs to outputs.. Efficiency of a system can non be greater than one because of the losingss in the system The purpose of finding Productivity steps are: carried out to:

Where ‘Output ‘ refers to the goods and services generated and Input refers to the cost of factors of production like work forces, machines, stuff, , methods, cognition, engineering etc.It should be pointed out that in present times cognition is besides regarded as an of import resource input to a production/operations system. The lone point to be remembered is that in the stuff based or the so called brick and howitzer systems the part of cognition is lesser than in instance of Rand D type industries or Information Technology type industries.

Productivity of Conversion Process

Effectiveness of productions direction may be viewed as the efficiency with which inputs is converted into end products. This transition efficiency can be gauged by the ratio of the end product to the input and is normally known as productiveness of the system. Fig 2.1 illustrates the production / transition procedure.

The higher the productiveness of production system, more effectual and efficient the production map is said to be.The direction of a production system is basically concerned with direction of its productiveness.

Finish Merchandises

Conversion Procedure

Natural Materials

Manufacturing / Assembly

Operationss

End product

Input signal

Feed Back

Fig 2.1ProductionsystemasInput/output theoretical account

procedure

Japenese respect riddance of waste which is unwanted end product and/or faulty end product from the system, so the productiveness of the system can be improved by eliminating/minimizing the waste happening in the system. Some illustrations of waste generated in a system are:

:

1 Waste in the signifier of work forces, stuff, and machines waiting in the waiting line because of hapless programming of these resources

2 Production of faulty goods and services ( e.g. components/parts non conforming to criterions etc. )

3 Higher transition costs ( higher costs ensuing from inefficient methods, hapless quality of tools, bad status of equipment, ill trained workers etc

) .

4 Higher sum throughput clip ( due to waiting clip, runing clip, queuecing clip, buried waiting clip etc. )

In an efficient production system, wastes of all sorts must be eliminated or at least minimized.

Importance of productiveness see VBD for points

Productivity is procedure of change overing resource inputs into goods or services in an organisation. by using labour, accomplishments, invention, engineering and organisational construction. The productiveness is of import for any organisation because it helps-

to better in existent incomes and economic wellbeing.

to better pecuniary policy ( inflationary force per unit areas )

to better financial policy ( funding of wellness, instruction, public assistance )

Is a primary determiner of an organisation ‘s degree of profitableness and its ability to last.

Partially determines people ‘s criterion of life within a peculiar country.A

TYPES OF PRODUCTIVITY MEASURES

“ A productiveness measuring is the best yardstick for comparing direction of different units within an endeavor, and for comparing directions of different endeavors. ” By Drucker

Assorted steps for productiveness are listed as follows and shown in Fig. 2.2.

Partial or Single Factor Productivity

Entire Factor Productivity

Multi-Factor Productivity

Multi-Factor Productivity

Partial or Single

Factor Productivity

Labor

Capital

Labor

Capital

Material

Power

Productiveness

Entire Factor Productivity

Labor

Capital

FIGURE 2.2 Types of productiveness measurings

2.4.1A Partial or individual factor productiveness

The benefits of ciphering partial productiveness steps are: Ease in obtaining relevant informations and designation of a individual input upon productiveness. Partial productiveness is simple to understand and enables direction to concentrate on the specific country which needs to be improved through direction by exclusion due to designation of the countries where there is a range for betterment Another benefit of caculating Partial productiveness step is the easiness provided by this step to compare the public presentation of one house with other houses in similar type of industry.It is utile to find the value added per human resource such as figure of engines manufactured per adult male per twelvemonth.It efficaciously identifies the installing of betterments created by steps like TPM or TQM in a house.However partial productiveness does non assist in measuring the overall public presentation of the concern done by the house.

2.4.2 Entire factor productiveness

The entire productiveness is defined as below

The benefit of ciphering entire factor productiveness is that it gives a slightly realistic estimation of productiveness by deducting purchased goods and services from entire end product thereby giving a true estimation of the end product.However, it has a drawback in non accounting for the engineering and energy inputs in the denominator but lone considers labour and capital inputs which is a pure economic experts approach Therefore, it is an oversimplified though easy to cipher step. This defect is overcome in other step of Productivity taken up in the following subdivision.

.

2.4.3 Entire productiveness or Multi-factor productiveness

The entire productiveness or multi-factor productiveness is given by the undermentioned expression

.

Multi-factor productiveness is a holistic step and Considers intermediate inputs of a concern and steps proficient alteration in an industry but suffers from the trouble in obtaining all the inputs and trouble in pass oning inter-industry linkages and aggregation.The theory discussed supra is illustrated through some simple exemplifying illustrations

Deflators:

Example 1. Calculate the productiveness for an organisation which generate an end product of

` 1,20,000 per twenty-four hours and entire input of ` 1,10,000.

Solution:

Example 2. Calculate the machine productiveness for the given informations.

Calendar month

Working Hours

No of Machines

Production Unit of measurements

January

2000

500

1,25,000

February

2500

550

1,50,000

March

3000

600

1,75,000

Solution: Machine productiveness is calculated as,

Entire machine hours = Working Hours/machine x No of Machines

Calendar month

Working Hours ( a )

No of Machines ( B )

Entire machine hours ( c = a ten B )

Production Unit of measurements ( vitamin D )

Productivity = d/c

January

2000

500

10,00,000

11,25,000

1.13

February

2500

550

13,75,000

16,50,000

1.20

March

3000

600

18,00,000

22,75,000

1.26

Example 3. Calculate the labour productiveness for the given informations.

Calendar month

Output units ( ` )

Direct rewards

Indirect rewards

January

1,75,000

80,000

15,000

February

2,50,000

80,000

20,000

March

3,75,000

1,00,000

30,000

Solution: Labour productiveness is calculate as,

Entire Labour rewards = Direct rewards + Indirect rewards

Calendar month

Output ( ` )

A

Direct rewards

Bacillus

Indirect rewards

C

Entire rewards

D=B+C

Productivity = A/D

January

1,75,000

80,000

15,000

95,000

1.84

February

2,50,000

80,000

20,000

1,00,000

2.50

March

3,75,000

1,00,000

30,000

1,30,000

2.88

Example 4. The information for end product produced and inputs consumed for Vinayaka Pvt Ltd is given below.

Value of Output

` 50,000

Labor

`18,000

Material Input

` 12,000

Capital Input signal

` 18,000

Energy Input

` 6,000

Other Expenses

` 3,000

Calculate:

Partial productiveness / Labour, Material, Capital, Energy and Other Expenses productiveness / Various productiveness indices

Entire factor productiveness

Entire productiveness

Solution:

Partial productiveness / Labour, Material, Capital, Energy and Other Expenses productiveness / Different productiveness indices are as

Entire factor productiveness is

Entire productiveness is

Example 5.A The productiveness informations of Arjuna Pvt Ltd for the first two quarters ( Q ) of the twelvemonth is given below.A Using Indian rupee ( ` ) steps of input and end product,

a. Compare the entire net income and productiveness achieved for the first two quarters.A

B. How does Q2 productiveness comparison with Q1 productiveness? A

c. Use partial factor productiveness to place what might be done to better productiveness and profitableness during Q3.

Arjuna Pvt Ltd Quarterly Productivity Data

Sr No

Description

One-fourth 1

One-fourth 2

a

No. of units sold

20,000

17,000

B

Selling price/ unit

`40

`42

degree Celsiuss

Labor in hours

18,000

15,550

vitamin D

Labor cost /hr

`20

`20

vitamin E

Material use ( kilogram )

10,000

9,000

degree Fahrenheit

Material cost/kg

`30

`31

g

Other operating expenses

`40,000

`36,000

Solution: A

Comparisons of the entire net income and entire productiveness for the first two quarters

Description

Formulas

Calculation for Quarter 1

One-fourth 2

op

End product

a ten B

20,000 ten 40 = 8,00,000

7,14,000

information science

Input signal

degree Celsiuss x 500 + vitamin E x degree Fahrenheit + g

18,000 ten 20+10,000 ten 30 +40,000= 7,00,000

6,26,000

P

Net income

op – information science

8,00,000 – 7,00,000

= 1,00,000

88,000

Pr

Productiveness

op / information science

8,00,000 / 7,00,000 = 1.14

= 1.14

When productiveness of Quarter 1is compared with productiveness of Quarter 2, net income reduces by 12,000

( 1, 00,000 – 88,000 ) but productiveness remains the same.

c. Looking at partial factor productiveness for labour and stuffs:

Description

Calculation

One-fourth 1

One-fourth 2

Remark

Labor productiveness

op / degree Celsius x vitamin D

8,00,000 / 18,000 ten `20 = 2.22

2.30

Increased

Material productiveness

op / vitamin E x degree Fahrenheit

8,00,000 / 10,000 ten `30 = 2.67

2.56

Decreased

Labor productiveness appears to hold increased whereas stuff productiveness has decreased.

Example 6.A The productiveness informations of Yashraj Pvt Ltd is as follows

Yashraj Pvt Ltd Productivity Data

Sr No

Particulars

2009

2010

1

Goods Produced price/ unit ( ` )

35,000

30

40,000

35

2

Other Income ( ` )

Deflator for point 2

30,000

1

35,000

1.14

3

Labor in hours

Labor ( `/hr )

9000

90

8000

100

4

Material use ( MT ) Material ( `/MT )

20

2500

25

3000

5

Power ( KWH )

Power ( `/KWH )

1800

4.0

2000

5.2

6

Other operating expenses

Deflator for point 2

32000

1

25000

1.2

Estimate the productiveness indices for labor, stuff, power and other operating expenses

Solution: As deflator is given we have to cipher for 2010, presuming 2009 as base period.

We know,

Entire end product for 2010:

Input signal for 2010:

Productivity indices for labor, stuff, power and other operating expenses are

2.5 FACTORS AFFECTING PRODUCTIVITY

The factors which are impacting productiveness are

Job satisfaction: Human resource is an of import input to the production /services system..It is the duty of Management to see to it that employees are motivated through just compensation for the work done by them.Incentive systems shoule be designed to honor workers for a occupation good done.It should be seen that workers do their occupation in safe and hygienic conditions which gives them quality of work life..Labour turnover and absenteeism should non take topographic point because it straight affects Productivity

Government Policy: While taking a expression at production/operations system it is noted that among the macro- environmental factors Government Policy plays a major function in doing Torahs which decide the freedom given to a concern house through enforcing several Torahs. These Torahs like MRTP, FERA etc which have a profound inpact on the productiveness of a house.

Management: The mission, vision and aims of an Organization are framed by Top Management. It is in-between direction which gives guidelines to the workers what they should make and how they should make it in the best possible manner so that the mission of the Organization is fulfilled. A supervisor represents the lowest degree of direction and is in close contact with the workers.Good co-ordination between them is qa warrant of accomplishing good productiveness.

Capital: Financial input is one of the major inputs in the input end product system.Productivity which is an index of the synergism should do wise usage of money while buying of stuffs. , Machinery and Capital equipment so that non a rupee is wasted..Even directors should put an illustration before subsidiaries by a economical usage of money. They should non seek to go a quarry to a 5 star civilization and unrecorded apparently.Such an attack is called Entire Cost Management.

Competition: Rivals form the micro-level environment.A house should try to heighten it ‘s productiveness maintaining in head the attack of the rivals towards betterment of productivity..The positive points of rivals should be emulated by the house to heighten its productiveness.

Natural Resources: Effective harnessing of available natural resources is a necessary status to heighten productiveness.

Technological facet

Material Planning and Management: The procurance of stuffs should be planned on the footing of 5Rs i.e right beginning, right clip, right measure, right quality and right monetary value.

Plant and Equipment: The works and equipment should hold be capable to give right end product with maximal handiness and operate at the rated speed.The overall equipment effectivity should be more than 70 per centum which is a really good industry criterion.

Quality: The quality of the merchandise or service as per the specifications.and should be verified by proper proving procedures.It is an wrong impression that Quality and Productivity are diametrically opposite standards.According to Deming, the quality Guru, good quality merchandise denotes less defectives and more utile end product.

Plant layout: and Operationss scheduling: Proper workplace layout and design helps in a streamlined flow of stuffs. which is contributing to fewer constrictions if the programming is done decently

Research and Development: Harmonizing to Peter Drucker the direction Guru. Industries do merely two good things: One is developing new and competitory merchandises and secondly marketing them to the clients.Good Rand D helps houses to stay competitory and Fosters Productivity

Standardization of merchandise and procedures: The house should update its procedures so that the transition of natural stuffs into finished merchandises is achieved with the production of minimal bit. Equally far as possible standard constituents should be used in the concluding assembly.Designers should be encouraged to utilize standard parts alternatively of non criterion parts as per their caprices.By presenting modularity in the Product Design, a client can be supplied merchandises as desired by them.This gambit is termed Mass Customization.

8 Sociological factors ; A Proper work civilization should be inculcated in the workers.For accomplishing thie, the supervisors and even higher degrees of direction should non waver to dirty their hands.This can be a really good incentive to the workers and consequence I higher degrees of Productivity.

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