In the search for new ways to diagnose the performance of companies and their processes, and in the urgent need to have effective control methods, a unique method was generated to measure productivity and quality, where the calculation of an index intervenes quality and productivity. The index is calculated on a regular and systematic basis and is reported to the administrators and other employees of the organization, punctually for each period. The index uses multiple measures of production with specific and measurable units, scrap and rework, as well as what the system consumes of labor and materials and the cost of capital per unit produced. This total quality and productivity system comprises the measurement of the following:
- Technology Psychological or sociological dimensions of work Economic variables of efficiency or functionality
Systematic use of the index enables managers to quantify and analyze the impact of simultaneous changes in quality and productivity. Managers can then evaluate results, both positive and negative, of the activity changes.
Productivity is defined as the ratio of units produced to units consumed. Similarly, a quality ratio can be defined as the number of acceptable units produced divided by the total number of units produced, or the number of units discarded or reprocessed divided by the total number of units produced.
A new relationship, called the Productivity Quality Ratio, RCP, combines those separate measures of quality and productivity into a single number as follows:
RCP = number of units accepted / (# processed) * (cost to process) + (# rejected) * (cost to correct rejections)
This relationship is different from most productivity relationships because it measures the cost of correcting rejected items, rather than just examining the ratio of production units (some of which could be corrected or reprocessed) to units of production. produced. Below is an example of the various changes in productions.
If processing costs or quality costs decrease, or quality is improved, RCP increases. The example described in the table above indicates the following:
- Going from the basic case to the highest volume does not affect the RCP, because the process costs and the quality level remain constant. Going from the basic case to the lowest process costs improves the RCP, since the process cost improved from $ 5 per unit to $ 4 per unit Going from the base case to the lowest cost of correction also improves the ratio of quality to productivity, as the cost of quality due to correction has improved, from $ 10 per unit to $ 7 per unit. Going from the basic case to the higher quality level also improves the RCP, since the quality level has improved from three rejections to one, for every 60 units produced.
This method can be applied equally to service operations. Let's look at the case of a baggage handling facility at an airport. Suppose it costs $ 2 to handle a suitcase, and $ 15 to search for a lost suitcase. The airline has recently suffered 10 losses per 1000 bags. The calculation of the CPR is:
RCP = 990 / (1000 * $ 2) + (10 * $ 15) = 990 / $ 2150 = 0.460
If new training is introduced and baggage losses are cut in half, the effect would be seen immediately, and the new RCP would be 995 / $ 2,075 = 0.48. This shows the interdependence of the level of quality, level of productivity and cost.
Thus, managers must be persuaded to try to improve quality by reducing the frequency of rejects, improve productivity by changing methods and procedures, and reduce process and rework costs, all simultaneously.
It must be understood that quality and productivity are derived from the same performance measurement. There is no economic value in higher levels of production, if the increase is overshadowed by lower quality. Any productivity study must measure production as the number of usable, salable, and acceptable goods and services.
Bibliography
Productivity and Quality: Measurement as a Basis of Improvement - Everet Adam Jr., James Hershauer and William Ruch - Research Center / University of Missouri - 1986
