Productivity is closely tied into the transformation process, and improving productivity has become a major goal in virtually every organization. By productivity we mean the overall output of goods and services produced divided by the inputs needed to generate that output. For countries high productivity can lead to economic growth and development. Employees can receive higher wages and company profits can increase without causing inflation. For individual organizations, increased productivity lowers cost and allows firms to offer more competitive prices.
Productivity = Outputs (labor + capital + materials).
Increasing productivity is the key to global competitiveness. For instance, a great deal of Japan’s economic prosperity in business. As Japanese businesses became more competitive, US businesses responded by making dramatic improvements to increase their efficiency. For example, US Technical Ceramics in Morgan Hill, California invested in a diamond coated cutting tool that resulted in a 300 percent increase in parts being produced. The cutting tool investment also prevented downtime and significantly increased employee’s productivity. In India, too established players like TISCO, Bajaj auto and Gujarat Ambuja among others, have been focusing on increasing productivity and efficiency in response to the needs of globalization. For example, Gujarat Abuja systematically focused on kiln operations introducing new technologies like the Surface Miner from Australia production increase of about 25 percent.
Organizations that hope to succeed globally are looking for ways to improve productivity. For example, McDonald’s drastically reduced the amount of time it takes to cook its French fries — now only 65 seconds as compared to the 210 seconds it once took –savings time and other resources. And Skoda auto AS, the Czech car company owned by Germany’s Volkswagen AS, improved its productivity through an intensive restructuring of its manufacturing process and now produces 500 cars per day, almost doubling the number it was capable of producing just a few years ago, at Ford’s Kansas city plant, it’s producing one truck a minute. Closer home, Bharat Forge has increased turnover per employer to Rs 42.5 lakh from Rs 17 lakh with the help of sophisticated technology and advanced management techniques. Bajaj Auto has increased employee productivity the three vehicles per employee at its new plant at Chakan, as opposed to an average of 0.8 vehicles per employee at the old Akurdi plant by using a team of diploma engineers on the shop floor and focusing on productivity and efficiency.
Productivity is composed of people and operations variables. To improve productivity managers must focus on both. W Edwards Deming a management consultant and quality expert believed that managers not workers were the primary source of increased productivity His 14 points for improving management’s productivity reveals. Deming’s understanding of the interplay between people and operations. High productivity can’t come solely from good people. Management the truly effective organization will maximize productivity by successfully integrating people into the overall operations system. For instance at Gujarat Ambuja CEO Sekhsaria combines investment in productivity enhancing technologies with people policies that allow employees the freedom to determine their own ways for achieving goals. For example engineers at the Darlaghat plant devised an ingenious solution for installing a new, larger pre heater cyclone by building it around the existing one, thereby ensuring that the old remained functional till the new one was ready. This allowed the company to save Rs 4 crores in losses if they had to shut down the plant for 40 days to install a new cyclone from scratch.
Allen Edmonds Shoe Corporation improved productivity by investing $1.5 million in upgrading its production facilities. The upgrade included reconfiguring the factory floor and using a new manufacturing method to increase production and reduce errors. The improvements increased productivity by 30 per cent, and boosted order fulfillment to almost 100 percent enabling the company to better serve its customers.