How To Measure Productivity in a manufacturing environment

Productivity and Efficiency and how to calculate it.

How to calculate productivity and
efficiency.

A guide .

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Production performance measurement - Efficiency
Performance in production is normally measured in one of two ways depending on
the pressures faced by the business;
1. Efficiency
2. Productivity
Efficiency is worked out in the following fashion:

(run time of the machine including setup and changeovers) X (total good units
produced) / (total production time available – breaks) X (standard rate of machine)

Efficiency tends to be focussed on more in a capacity constrained situation as it is
entirely focussed on output.

Production performance measurement - Productivity
Productivity is more complicated as is relies on the principle of Earned Standard
Labour Hours in order to give a fair reflection of performance and enable fair
comparisons of performance to be made.

In order to calculate an ESLH you need to specify what the standard speed for the
line is and the standard crew. This can either be done by line if there is no variation
in rate and crew for different products, otherwise a standard needs to be defined for
each product on each line.

A standards database would look something akin to the following:

Direct Staff Indirect staff
Bottles Boxes Cases
Cycle On the Case Plt Plt Total Ware Total per per per
SC NO DESCRIPTION Machine Product Time Machine making Stacking /wrap Direct TL Packaging QC Lab Manf house Yard Indirect case pallet minute
SC002 4x5Lt PARASAN THICK BLEACH 6 Thk Bleach25 4 1 1 6 1 2 1 2 4 2 7 19 4 40 6.3
SC004 4x5Lt JANITOL NEUTRAAL (C/EUR) numo Utlity 0 1 2 1 2 4 2 7 19 4 40 -
SC006 20Lt PARPAK MACHINE D/WASH numo Utlity 0 1 2 1 2 4 2 7 19 4 40 -
SC007 1000Lt COLOURED HYCOLIN Utlity 0 1 2 1 2 4 2 7 19 4 40 -
SC009 4x5Lt WHITE DISINFECTANT numo Disinfectant 0 1 2 1 2 4 2 7 19 4 40 -
SC011 24x500ml NETTO LEMON ULTRA 4 Det 90 3 1 4 1 2 1 2 4 2 7 19 24 54 3.8
SC012 4x4.5Lt FEMPACK GERMICIDE Bxd numo Utlity 0 1 2 1 2 4 2 7 19 4 40 -
SC013 200Kg META CRESOL beast 0.5 1 1 2 1 2 1 2 4 2 7 19 4 40 0.1

This database will then drive performance measurement and allow product costings
to be factored for labour content with use of the productivity measure.



Earned Standard labour hours
An ESLH is how many units of product we should be able to produce in 1 man-hour
of work.

Example :

A machine runs at 100 units per minute;
The machine needs 6 people to run it;

• You run the machine for 2.5 hours with 5 people and achieve 9,800 units –
how productive have you been?

Calculation:

The time it should have taken you to do the job (The standard time) is 9,800
units divided by the standard machine rate of 100 units per minute which gives
you 98 minutes.

• In order to arrive at how many standard labour minutes you should have
used (the minutes that you should have to pay for) you multiply the standard
time by the standard crew of 6, this gives you 588 minutes.

• However you only used 5 staff and you ran for 150 minutes rather than the
98 you should have done so your actual labour time is 150*5 = 750 labour
minutes.

Converting productivity to a financial evaluation

The benefits of using ESLH’s is that it is possible to calculate what the standard cost
of producing a unit is, and this can then be factored according to the productivity.

Example :

Labour costs £6.50 per hour on the line
If the line had run at 100% productivity it should have cost 588/60 = 9.8 hours @
£6.50 which would mean you should have paid £63.7 for your 9,800 units or 0.65
pence per unit.
The true cost of the production was 750/60 = 12.5 hours @ £6.50 which means
that we will pay £81.25 (£17.55 more than we should have done) or .082 pence
per bottle.
Another way is to say the standard cost is 0.65 per bottle and we achieved 78.4%
productivity so 0.65/0.784 = 0.82 pence per bottle.



The benefit of evaluation performance like this is that you can relate your operational
productivity % directly to your costing system. Another very important factor is that
the measure is not skewed by changes in your product mix or volumes.

Evaluating historical performance

By using the methodology outlined we can take each of the products produced in a
period and by using the standards database can evaluate productivity for the period.

This can then be compared with performance today using the same standards.


How To Measure Productivity in a manufacturing environment

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How To Measure Productivity in a manufacturing environment