Measuring productivity for all inputs at once is called total productivity measurement.
In practice, it may not be necessary to measure the effect of all inputs. Many firms measure the productivity of only those factors that are thought to be relevant indicators of organizational performance and success. Thus, in practical terms, total productivity measurement can be defined as focusing on a limited number of inputs, which, in total, indicates organizational success. In either case, total productivity measurement requires the development of a multi-factor measurement approach. A common multi-factor approach suggested in the productivity literature (bus rarely found in practice) is the use of aggregate productivity indices. Aggregate indices are complex and difficult to interpret and have not been generally accepted. Two approaches that have gained some acceptance are profile measurement and profit-linked productivity measurement.
Profile Productivity Measurement
Producing a product involves numerous critical such as labor, material, capital, and energy. Profile measurement provides a series or vector of separate and distinct partial operational measures. Profiles can be compared over time to provide information about productivity changes. To illustrate the profile approach, we will use only two inputs: labor and material. Let’s return to the Navada Company example. As before, Nevada implements a new production and assembly process in 2007. Only now, let’s assume that the new process affects both labor and materials. Initially, let’s look at the case for which the productivity of both inputs moves in the same direction. The following data for 2006 and 2007 are available:
Cost Management
Information technology can be the source of significant productivity gains. International Paper, large company with about 200,000 employees, stores information about factory operations, customer, suppliers, etc. the total data stored reportedly take up approximately 25 terabytes of storage space, enough to fill 2,500 trucks. Because of its importance, 191 technicians were spending about half their time backing up the data. An investment in an instant backup system provided by EMC significantly cut labor costs. The daily backup routines were reduced from 10 hr. to 15 minutes. This reduced the required number of technicians by almost 50 %. It is difficult to imagine an unfavorable trade-off between capital and labor in this instance! The saving from eliminating the salaries of 95 technicians promise a quick recovery of the capital investment in an instant backup system
Measuring productivity for all inputs at once is called total productivity measurement.In practice, it may not be necessary to measure the effect of all inputs. Many firms measure the productivity of only those factors that are thought to be relevant indicators of organizational performance and success. Thus, in practical terms, total productivity measurement can be defined as focusing on a limited number of inputs, which, in total, indicates organizational success. In either case, total productivity measurement requires the development of a multi-factor measurement approach. A common multi-factor approach suggested in the productivity literature (bus rarely found in practice) is the use of aggregate productivity indices. Aggregate indices are complex and difficult to interpret and have not been generally accepted. Two approaches that have gained some acceptance are profile measurement and profit-linked productivity measurement.Profile Productivity Measurement Producing a product involves numerous critical such as labor, material, capital, and energy. Profile measurement provides a series or vector of separate and distinct partial operational measures. Profiles can be compared over time to provide information about productivity changes. To illustrate the profile approach, we will use only two inputs: labor and material. Let’s return to the Navada Company example. As before, Nevada implements a new production and assembly process in 2007. Only now, let’s assume that the new process affects both labor and materials. Initially, let’s look at the case for which the productivity of both inputs moves in the same direction. The following data for 2006 and 2007 are available:Cost Management Information technology can be the source of significant productivity gains. International Paper, large company with about 200,000 employees, stores information about factory operations, customer, suppliers, etc. the total data stored reportedly take up approximately 25 terabytes of storage space, enough to fill 2,500 trucks. Because of its importance, 191 technicians were spending about half their time backing up the data. An investment in an instant backup system provided by EMC significantly cut labor costs. The daily backup routines were reduced from 10 hr. to 15 minutes. This reduced the required number of technicians by almost 50 %. It is difficult to imagine an unfavorable trade-off between capital and labor in this instance! The saving from eliminating the salaries of 95 technicians promise a quick recovery of the capital investment in an instant backup system
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