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

2. Why do We Care About Productivity? Hanna Lestari, ST, M.Eng-FTI-UII 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

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

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

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

6. Partial Productivity Hanna Lestari, ST, M.Eng-FTI-UII =Output/Energy Energy Productivity Etc… 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/500hrs = 20 units/hour

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

8. Case Study Hanna Lestari, ST, M.Eng-FTI-UII 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:

9. Answer : Partial Productivity Hanna Lestari, ST, M.Eng-FTI-UII = 5000/600= 8.33 = 5000/800= 6.25 Labor Productivity Material Productivity = 5000/500= 10 = 5000/400= 12.5 Energy Productivity Capital Productivity = 5000/500= 10 Other expense productivity

10. Answer: Total Productivity Total Productivity : = Total Output/ (labor + material + capital + energy + other expense input) = 5000 / (600+800+400+500+500) = 5000/2800 = 1.785 Hanna Lestari, ST, M.Eng-FTI-UII

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

12. Objective Matrix (OMAX) Hanna Lestari, ST, M.Eng-FTI-UII  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.

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

14. Objective Matrix (OMAX) Model

15. Objective Matrix (OMAX) Model: Example No.Productivity criteria units1 January 2003Measured performance on 30 dec.2003 The worst performance Expected performance Based performance 1. 2. 3. 4. 5. 6. Speed of service Lateness Queuing Idle time Absent Complain min./man min./day man minute man/day man/wk 10 60 8 60 10 7 2 10 2 15 2 0 4 45 5 30 4 5 3 30 5 40 5 2

17. Objective Matrix (OMAX) Model : Example Hanna Lestari, ST, M.Eng-FTI-UII 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%

18. Model of Marvin E. Mundel Hanna Lestari, ST, M.Eng-FTI-UII 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

19. Model of Marvin E. Mundel

20. Case Study : Garuda Indonesia has data as follow: Determine: AOMP,AOBP,AIMP,AIBP,CPI,BPI,OI,II and IP NoStatement20072008 1. 2. 3. 4. 5. 6. 7. 8. 9. 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 200 million 15 billion 5 billion 3 billion 1.4 billion 700 million 600 million 2 billion 500 million 300 million

21. Model of Marvin E. Mundel Hanna Lestari, ST, M.Eng-FTI-UII 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

22. 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 + 1.5 + 0.800 + 0.200 = 9.5 billion Model of Marvin E. Mundel

23. APC Model Hanna Lestari, ST, M.Eng-FTI-UII 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:

24. 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

25. APC Model Example:

26. APC Model Hanna Lestari, ST, M.Eng-FTI-UII 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:

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

28. 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

31. 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% APC Model :

32. Model Craig Haris Hanna Lestari, ST, M.Eng-FTI-UII 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

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