Operation Analysis 3

• Productivity• Resource Management

2

Unit objectives

• Gain a frame of reference about productivity conundrums, develop a point of view and be able to discuss this with others.

• Consider how services measurements might be developed to be useful.

• Think about the “new economy” and these questions:

– Why do services resist productivity gains?

– Is services productivity an oxymoron?

– What are some relationships between innovation and productivity?

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The paradox

• What is productivity anyway?– Measure of economic efficiency– Advances are a big source of increased potential income

• Baumol’s disease and productivity in Services– “it still takes four musicians to play a string quartet”.– As consumption shifts more and more toward services

• If productivity growth in services is inherently sluggish, economic growth must inevitably slow.

• BUT productivity in Services is up!

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Economics• Global services based economies

– Increasing ever faster

• Measuring services is a problem– Data biases– Inaccuracies– Challenges

• New economy requires new economics?

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Productivity

Labor productivity = (Output / Labor input*)

*Where labor input = people or hours

Multi-factor productivity = (Output / Labor input**)

**Where labor input = expanded to include multiple forms

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• History• Productivity• Quality• Innovation

• New approach– Although productivity measurement should be part of services

measurement, it should not be the major focus– Proposed: create a holistic multiple indicator/multiple

stakeholder approach to services measurement

Measuring services is a challenge

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Many factors must combine to create a viable services measurement model

Potential Services Indicators

Classification of Services

Anatomy of a Measure

StakeholderPerspectives

ValidateModels

Develop Services

Measurement Models

Business Measurement

Models (Dean’s work)

DefineServices

Measures Test, challenge, improve

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• What is measured• Purpose of the measure• Validity• Reliability• Instrumentation• Precision • Role relations to measure• Time periods

Anatomy of a measure

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Measurement of servicesRevenue

Productivity

ProcessResource levelsRiskSocial capitalVariabilityWaste

Value

Labor + CapitalCohesivenessComplexityCorrectionEfficiencyOptimizationRisk

•Price•Flexibility•Competitiveness

•Service outcomes•Availability•Quality•Value•Variability•Accessibility

•Experience•Prestige•Satisfaction

Out

put

Inpu

t CapabilityCapacityCost

~==

•Adaptability•Innovation•Focus•Interchangeability

EmployeesTotal Cost

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The role of measurement in services sciences

• Measurements will– Help define the new discipline– Identify innovations in Services Science

• Validity of a measure– Right purpose?– Affected by other factors?– Affected by the quality of the service?– Effect on profit?

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Innovation and productivity

• Technology key to eliminate repetitive work– Free people up to be creative

• What can we learn from manufacturing?– Are there well known frameworks we can use

to increase productivity in services?

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Engineering model versus interpretive model for enhancing productivity

• Engineering model

– Product design comes before process design

– Process predictable, repeatable

• For services, sometimes the engineering model works but has limitations.

– Human judgment required

• Interpretive model

– Skills in understanding customer wants and needs

– Process continuously adaptive

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The two models have different implications for performance improvement

Engineering model Interpretive model

Design comes before process Product and process intertwined, Product design emerges from the process, not specified in advance

Workers execute tasks Workers interpret needs and execute tasks

Improvements come from changes to design or process

Improvements follow from improving worker’s ability to elicit

and interpret, respond to the situation to select work practices from repertoire or learn or invent

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Devolving

• Stuck at the top?

• To reach next peak requires– Going down!

• Change perspective

• Not a natural human inclination

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Move away from studying manufacturing

• Another point of view– Service associated with goods– Knowledge

• Study services innovation

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High

LowHighLow

Employee Pro-activenessIndividualizedExperience to

customers

IndividualCreativity

Employee motivationTo apply own creativity and ingenuity

To invent solutions to problems

Employment(security)

Encouragement(respect)

Empowerment(responsibility)

Employable(independence)

“Innovention”(personal

fulfillment)

Phases of a company’s view toward its people

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Work Measurement• Objective: determine the time for an average, trained person

to perform a task for 8-hour day under usual working conditions and working at a normal pace “Standard Time” or “Normal Time”

• Bottom-up approach: adjust standard time according to operator pace, allow “deviation” (almost always)

• Top-down approach: fixed standard time

• Normal Pace• Actual Time: observed time perform a task• Allowance: (+/-) time for delay, personal needs, fatigue, etc

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Work Measurement (cont.)• Direct Time Study

– Total actual time = 1+1.5+1+1.5+1 =6– Performance rating = 90%

(10% slower)– Normal time = (6 hrs)*(.9) = 5.4 hrs– Allowance = 12.5%

(reduced 3 hours sleeping time)– Standard time = (5.4 hrs)*(1.125)

= 6.075 hrs

Subject Hours English 1

Calculus 1.5

Intro to IE 1

Physics 1.5

Psychology 1

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Work Measurement (cont.)• Time Study Standard Data: normal times from

direct time study of similar operation earlier• Predetermined Times:

– Time values are assigned to the sub-task/element– Total time =

• Predetermined Time Standard Data: – Time values are assigned to the element which its

value is from the “time study standard data”

tasksubelementT /

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Productivity Measurement Basics

• A ratio of organizational outputs & inputs• Static Measurement: no base year comparison.

Direct ratio• Dynamic measures:

Dynamic Productivity Index = Productivity this year

Productivity base year

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Physiological Aspects of Human Activities

Money talksMoney talksBored if nothing to doBored if nothing to doMonotone jobMonotone jobAsk then they will give itAsk then they will give itPositive response: clear objective, job Positive response: clear objective, job description, fair treatment, consistent, description, fair treatment, consistent, and with respectand with respect

Introduction to IE, Spr2008/KGA/GaTech ©KGA. All Rights Reserved

22

Machine versus Human Being

Introduction to IE, Spr2008/KGA/GaTech ©KGA. All Rights Reserved

PerformancePerformance

Characteristic Characteristic ““Typical”Typical”

Machine ToolMachine Tool““Typical” Typical”

Human BeingHuman Being

Range of operationRange of operation Mostly perform one basic Mostly perform one basic operation but some may operation but some may perform moreperform more

Extremely broad rangeExtremely broad range

Work-piece sizeWork-piece size Ranged from microscopic-Ranged from microscopic-sized to extremely large sized to extremely large sizesize

Cannot perform operations on Cannot perform operations on extremely small or large sizeextremely small or large size

Operation speedOperation speed Can be very fastCan be very fast Quite slowQuite slow

Tolerance CapabilitiesTolerance Capabilities Up to 0.001 inchUp to 0.001 inch Very poor at accuracy and Very poor at accuracy and repeatabilityrepeatability

Energy ConsumptionEnergy Consumption Very efficientVery efficient No stable consumption levelNo stable consumption level

Maintenance requirementMaintenance requirement Need regular maintenanceNeed regular maintenance Need minor “maintenance” Need minor “maintenance” frequently, i.e. basic needs. frequently, i.e. basic needs. Major overhauls are performed Major overhauls are performed continuouslycontinuously

Response to unexpected Response to unexpected occurrencesoccurrences

Very limited capabilityVery limited capability Extremely resourceful and Extremely resourceful and creativecreative