Module 2: Productivity Flashcards
Productivity
Units output produced / Units of input
Multifactor productivity
Output / ($Capital + $Labor + $Materials + $Services + $Energy)
Inefficiencies and waste
Distance between a company’s position and the efficient frontier
Seven sources of waste
1) Overproduction
2) Transportation
3) Rework
4) Over-processing
5) Motion
6) Inventory
7) Waiting
Overproduction
To produce sooner or in greater quantity than customers demand
Transportation
Unnecessary movement of parts or people between processes
Rework
Repetition or correction of process
eg. Bouncebacks in hospitals
Over-processing
Processing beyond what the customer requires
eg. stirring a fully mixed cup of coffee
Motion
Unnecessary movement of parts or people within a process
Inventory
Number of flow units in the system
“Product has to flow like water”
Waiting
Underutilizing people or parts while a process completes a work cycle
Trick for estimating waste / inefficiency
Go to the work area and turn around 360 degrees. Count the # of workers directly adding value vs. those waiting or using time inefficiently
8th source of waste
Intellect of workers - failing to capture the ingenuity and and intellect of workers
Big rewards from productivity improvement are more likely for a company with high fixed or variable costs?
High fixed costs. Incremental revenue will go straight to the bottom line.
KPI trees
Provide a visualization of the ties between operational variables and the financial bottom line
