The History Of Factors Affecting Productivity Accounting Essay

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.


The techniques could be classified into 5 basic types which are as follows


Merchandise and Process based



Task-based techniques

1. Technology-based techniques:

Automation based such as CAD/CAM, Robotics, Energy preservation engineering, Maintenance direction, reconstructing old machines, These techniques cut down assorted Input values.

2. Merchandise and Process based techniques:

Merchandise based techniques leverage stuffs input ( IM ) to the greatest extent. Product variegation, Product simplification, Standardization, Advertising and Promotion.enhance market size and value of end product to increase productiveness

3. Employee-based techniques:

Incentives, occupation rotary motion, occupation expansion, occupation enrichment, developing & A ; instruction, quality circles, wages and penalty etc. These techniques preponderantly cut down human resource inputs ( IH ) value.thereby increasing Productivity

4. Material-based techniques:

Inventory control, material demand planning, stuff handling betterment, recycling of stuffs, quality control. These techniques cut down stuff input costs IM value straight.resulting in increased productiveness

5. Task-based techniques:

Methods technology, Work measuring, Ergonomics ( Human Factors Engineering ) .

The above list is merely an declarative list. Any peculiar industry has to find for itself which of the techniques will ensue in enhanced productiveness. The productiveness betterment commission has to take the technique which suits their demand without needlessly increasing the cost of input. What is most of import is that a scheme should be implemented efficaciously.

Such a doctrine is critical for increasing the opportunities of accomplishing the desired long-run profitableness. Furthermore, in many instances ( in which the house is loath or unable to set about the necessary selling research surveies ) I is the lone variable manner of supplying guidelines for resulting old ages schemes.

Related to the adaptative experimentation attack is the needful focal point on productiveness. Strategy entirely, can non take to the desired consequences. Good operations are besides required. The relationship between scheme and operations is illustrated in Fig 2.3. The thought, of class, is to be in cell IV. Yet, houses frequently find themselves in cells I or III the hapless operations cells. Adaptive experimentation can assist better the quality of the house ‘s long-range scheme ; nevertheless, it must be supplemented with attacks to better operations.











FIGURE 2.3 The Relationship between Strategy and Operations

Glossary of Footings


Matching physical work capacities and physical environment.

Inventory Control

Deals with two basic inquiries ; when to order and how much to order

Job Enlargement

Addition in the duties linked with a job.It is a non-financial motive technique to better human productiveness.Gives worker pride of ownership of occupation He can stamp name on merchandise

Job Enrichment

Supplying assortment in assigned undertakings giving liberty to finish a occupation of higher position.

Job Rotation

Job is changed for short periods of clip to interrupt humdrum and ennui.

Methods Engineering

A systematic process to extinguish, unite or cut down work content of a undertaking. through method survey tools like flow charting ; micro gesture analysis

Merchandise Diversification

Addition of new merchandise types to bing theoretical new markets.A hazardous but promising scheme

Merchandise Simplification

Elimination of excess merchandise lines, types and theoretical accounts.


Bettering human productiveness by specialisation on the occupation work.


Productiveness may be measured quantitatively, qualitatively, or in footings of results.

Quantitative Measure – A type of productiveness step that focuses on the measure of merchandise produced. and both the input and end product can be expressed in pecuniary footings

Qualitative Measurement – A type of productiveness step that is concerned with the quality of what is produced.but can non be counted numerically.A point evaluation can assist in such instances where the end product and input are intangible e.g. in instance of service suppliers

Outcome Measurement – A type of productiveness step that determines whether the merchandise satisfied the functional demands which it was supposed to make.

Unit Analysis of Productivity

The unit of analysis used to cipher or specify productiveness are

Aggregate productivity-the entire degree of productiveness for a state.

Industry productivity-the entire productiveness of all the houses in an industry.

Company productivity-the degree of productiveness of a individual company.

Unit productivity-the productiveness degree of a unit or section.

Individual productivity-the productiveness attained by a individual individual.

2.7.2 Productivity Model: This theoretical account was developed by Schnieder ( 1965 ) and is used even today as one of the most of import attacks to the computation of productiveness because it is comprehensive and logical.

Entire Productivity Factor is expressed as ratio of end product divided by entire inputs. The inputs include Human, Material, Capital, Energy and other factors.


TPF = Output O/Input I =

Where, Input ( I ) includes

IH Human resource Inputs

IM Material inputs

IC Capital inputs

IE Energy inputs

IX Other Inputs and working capital ( W )

Individual Productivity factors can be calculated based on any specific input, say IH or IM or IC and so forth to find the influence of any peculiar input on Productivity.

2.8 Break Even Analysis utilizing Entire Productivity Equation:


C — -Total Input I minus working capital W

T — — entire productiveness factor

W — — -Working Capital

O — — -Output

I — — Entire Input including working capital

It is to be noted that the on the job capital W includes the hard currency, histories receivable, stock list, etc which are used to pay for other inputs such as rewards and salary, of human resource, oil, gas, H2O and energy measures. Thus W is non included in cost inputs ( C ) in the theoretical account

If TPF is denoted by T we can compose,

T = aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦2.1.

Where C is cost of inputs W is working capital Re-arranging combining weight. 2.1,

P= ( T-1 ) I +Waˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦..2.2

If T is set equal to one, net income P = W

Like-wise, at Break-even point P=O, so Total Productivity Factor

O= ( T-1 ) I+W OR TI -I+W =O OR TI = ( I-W ) But ( I-W ) =C

Hence at BEP: TI = C or T = aˆ¦aˆ¦aˆ¦aˆ¦2.3

Therefore, mentioning to the figure 2.4 Breakeven Point occurs at a Entire Productivity factor TB which is slightly less than 1. The reading is that when the net income peers Working capital the Total productiveness factor is one. The net income made in this instance is spent in running the works and paying wages to the workers, At net income equal to zero wages etc have to be paid from companies militias and indicates a place of loss with a TPF less than oneThe theoretical account is explained through an exemplifying illustration:

Example: A certain house has the following informations collected over a specific clip frame:

Entire Input I= Rs 1050,000 ; Output O =Rs 1250, 000 Working capital W =Rs 35,000

Calculate the entire productiveness factor TPF, entire productiveness factor at the break- even point. and Profit based on the Break Even Analysis theoretical account


TPF = Output O/ Input I = 1250,000/1050,000= 1.1 ( about )

TPF at break-even point = C/I = ( 1050,000-35,000 ) /1050,000= .966

Net income = ( Output O-Input I ) + Working capital W.This is because the theoretical account states that a existent net income is made merely when at least a net income equal to the working capital W is made at TPF equal to one ( Refer to fig 2.4 )

Therefore Profit P = ( 1250,000 -1050,000 ) + 35000 = Rs 135,000

Some Additional Examples on Productivity Measures:

In the present subdivision some practical illustrations of Productivity followed in fabrication sector and are typical in nature are taken up These illustrations will give the pupil an increased appreciation of how productiveness is calculated in industrial state of affairss:

Q 1: The following information is available from the Industrial technology section in an car works:

Plant capacity: 7200 autos per twelvemonth, Overall works effectivity: 0.4 Number of production machines:102 Number of 8 hr displacements: One Number of working yearss per month:25.Allow interruption @ 3 per centum in the displacement.

Calculate the Productivity of the works in footings of figure of autos per twelvemonth per direct worker

Solution: Number of autos really produced per twelvemonth = 7200×0..4 =2880 autos

Ideal man-hours available per year= 102x25x12=30600

Actual man-hours available per twelvemonth leting for interruption @ 3per cent =30600x.97 =29682

Number of work forces required= 29682/8 =3710 work forces

Productivity ratio= Number of cars/Number of men=2880/3710 = .776

Q 2: Calculate the value added per employee in an car works on the footing of the undermentioned informations obtained from the Industrial Engineering Department:

Number of autos sold per twelvemonth =2880, Unit monetary value of a auto = 4 lacs Assume natural stuff cost: 65 per centum of the Price of the auto Variable cost is to be taken as 12.5 per centum of the monetary value of the auto.Total direct and back uping employees = 4000


Formula used for value added per employee per auto is:

VA = Net Contribution/Number of employees = ( Price-Variable cost ) /Number of employees

Substituting the given values from available informations, we have

VA = [ 4-4 ( .65+.125 ) ] /4406

= [ 4-3.1 ] /4406

Value added for the sale of 2880 autos per employee per twelvemonth = VA X2880 =.588


In the present chapter the writers have discussed assorted facets of Productivity which is one of the most of import pillars of World Class Manufacturing. Productivity is defined as the ratio of value of end product to cost of input which is best understood through sing Production system as an input- end product procedure.Productivity steps such as Entire Productivity, entire factor productiveness, , partial productiveness are explained. A alone theoretical account developed by Kendrick on interruption even aspect has been explained. The subdivision on factors impacting Productivity several internal factors such as capital, human, stuff, managerial accomplishments and other assets are considered, while the micro degree external factors like rivals, clients and macro-level external factors like authorities influence and legal factors considered

Sing the importance of Productivity as a step of success of a house, several techniques of betterment of Productivity like Technology based, Task based, Employee-based, Product and Process based factors are discussed.One of the high spots of the chapter is the inclusion of solved numerical illustrations which should assist the pupil to hold on the significance of Productivity

Review inquiries:

1 Define Productivity in the visible radiation of a Production system as an Input-Output procedure

2 Differentiate between Total productiveness, Total factor productiveness and partial productiveness.

3 What are the factors impacting Productivity? Explain in item

4 Explain the interruption even Productivity theoretical account

5 Explain the assorted methods of bettering productiveness.

6 What partial productiveness steps are utilized by car and other technology industries.