Analysis and Management of Productivity and Efficiency in Production Systems for Goods and Services

Fabio Sartori Piran, Daniel Pacheco Lacerda, Luis Felipe Riehs Camargo

• Publisher: CRC Press
• Year: 2020
• Print ISBN: 9780367357726
• eBook ISBN: 9781000766516
• Edition: 1
• Topic: Technology & Engineering
• Subtopic: Industrial Design
• Index: Technology & Engineering

In companies that produce goods and services, productivity and efficiency improvements are a constant challenge. This book reviews the differences between productivity and efficiency. It proposes a new method and makes available a computational tool for implementation that contributes to facilitating the use of Data Envelopment Analysis (DEA).

The book presents a discussion about productivity and efficiency, illustrating the potentials of use and conceptual differences. It covers the concepts and techniques for analysis of productivity and efficiency, analyzing critical benefits and limitations, explains in detail how to use DEA for analysis, provides innovative methods for using DEA, offers a free online computer tool with a direction guide, shows real empirical applications, and covers other techniques that can be used to complement the analysis performed.

The book is for professionals, managers, consultants, students working and taking courses in productive systems of goods and services.

Ancillary materials include a free online computer tool to operationalize the concepts and methods proposed in the book, a guide on how to use the method and the software developed for the DEA application. Solutions manual, instructor's manual, PowerPoint slides, and figure slides also will be available upon qualified adoption.

1 Introduction

Productivity and efficiency are widely debated concepts, whether in academia or among business and government professionals. Despite the number of studies on this theme, Brazil has been facing difficulties in distinguishing the two concepts. According to the magazine Exame (2017a), between 1981 and 1990, the productivity per worker in the country fell by an average of 2% a year, whereas, from 1991 to 2000, it rose on average by 1.6% a year. This trend remained positive between 2001 and 2010, increasing at an annual rate of 1.2%. In the period 2011–2016, productivity per worker reverted to a negative path, presenting a mean annual decline of 1.1%. The data contrast with those from the period 1950–1980, when work productivity grew on average by 3.5% per year. It is to be noted that this was the principal factor responsible for the significant growth in income per capita in the country (averaging 3.9% a year) throughout the period. However, as of the 1980s, productivity stagnated. Among the salient factors, one may cite the reduced adoption of new technology and taxation distortions that led to inefficient allocation of funds (Exame, 2017a).

Among the reasons explaining the low Brazilian productivity that lasted for decades, there were structural factors related to: (i) technology (in today’s production structure, sectors show a low capacity to incorporate technology and produce better products); (ii) poor educational standards; and (iii) inadequate occupational skills training. Deficient infrastructure is also recognized as a significant factor, added to which excessive bureaucracy, complex taxation and an unfavorable business environment explain the scenario of production stagnation (EXAME, 2017b).

Productivity and efficiency constitute factors of extreme importance in companies’ competitiveness, for economic sectors and entire countries. Productivity, as much as efficiency, may be observed on diverse scales of analysis, ranging from the macro level of whole economies to the micro scale in the ambit of sectors, processes and the companies themselves. Besides this, distinct factors interfere with and explain productivity and efficiency in accordance with the level of analysis desired.

What hinders the researchers’ and professionals’ understanding is that productivity and efficiency may be considered in both technical and economic terms. In general, the analyses realized for economic sectors and whole countries are economic. In turn, in organizations, the analysis is in technical terms with the broad use of Overall Operational Performance Index (OOPI)/ Overall Equipment Effectiveness (OEE). As will be seen in subsequent chapters, the primacy of OOPI/OEE may lead to limitations in the analytical capacity, and, as a consequence, reduce managers’ range of options for action.

Thus, our focus is directed toward analysis of productivity and efficiency in the company context. Such a focus does not exclude use of the concepts, techniques and tools presented for broader contexts, such as economic sectors and entire countries. In addition, productivity and economic efficiency may also be analyzed, even if only partially, based on what will be described in later chapters.

In this book, we seek to bolster the analysis of productivity and efficiency by means of Data Envelopment Analysis (DEA). DEA is a broadly divulgated technique and is used by the scientific community for a range of applications. However, its use in everyday life and the business environment is developing. It is, therefore, an important instrument to complement and qualify analyses that are performed centrally by OOPI/OEE. Among the benefits of DEA use are the following:

1. Simultaneous analysis of multiple outputs and inputs in a single efficiency measurement.
2. Identification of the benchmarks over the periods of analysis.
3. Analysis of productivity and efficiency in constant or variable economies of scale.
4. Analysis oriented toward maximization of outputs or reduction of inputs in an operation, process or organization.
5. Analysis and definition of the goals and opportunities for improvement based on identification of targets and slack calculation.
6. Support for assessment of external and internal benchmarks.

Although this book presents a mathematical structure that is rather advanced for organizations, we have sought to structure it in such a way as to facilitate its use via different mechanisms. First, we seek to present a solid definition of the concepts that permeate the phenomena of productivity and efficiency. Second, we present the metrics and techniques used to operationalize and measure these concepts. Third, we describe DEA in depth and a method for its operationalization in organizations. Fourth, we develop a computational platform to enable use of the examples provided, and for realization of analyses with the use of DEA in companies. Finally, evidence is provided from case studies of its application, originating from the scientific research conducted over the past 10 years. Some of these cases were published in the main scientific journals in the operations management area (for example, International Journal of Production Economics, Benchmarking and International Journal of Advanced Manufacturing Technology).

Thus, this book has arisen from a line of research and set of investigations conducted in GMAP | UNISINOS (http://gmap.unisinos.br) since its establishment. This research focus has been manifested previously in recent discussions about the need to increase productivity and efficiency in Brazil, in a range of spheres of interest. Looking to the future, we can confidently state that the analysis of productivity and efficiency will remain, despite the need to incorporate and deepen the economic analysis.

Recent advanced manufacturing technology, for example, requires more profound analysis of the effects on production systems in technical and economic terms. The simple use of Augmented Reality, Additive Manufacturing, Cyber-Physical Systems and Automation, among others, are not justified per se. These technologies need to raise the productivity and efficiency of the production systems.

One additional aspect to be considered refers to the need to improve the productivity and economic efficiency of organizations. Considering the high costs of acquisition, implementation and operationalization of the technologies associated with Advanced Manufacturing, additional attention to this aspect is necessary. Therefore, although there may be an increase in productivity and efficiency in technical terms, it would imply a reduction in economic terms. As a consequence, a company should not lose sight of its goal, “Earn money today and in the future” as Eliyahu Goldratt affirms in his novel, The Goal. In other words, in the final analysis, all the efforts employed in the technologies of Advanced Manufacturing should revert to an increase in productivity and economic efficiency in organizations. In terms of Advanced Manufacturing, we seek to illustrate Modularity, which is a technology that could contribute to an increase in productivity and efficiency.

Finally, we have sought to cover an important gap in production and operations management in the Brazilian literature. The analysis and management of productivity and efficiency, although treated sparingly and with a focus on the tools to increase them, is lacking in terms of concepts, techniques and tools for the analysis itself. There is a presupposition that use of OOPI/OEE is sufficient for companies. However, as may be observed, this metric, albeit necessary, is not sufficient for a broad profound analysis and management of productivity and efficiency in organizations.

References

1. Exame (2017a). Acesso em 31 de janeiro de 2018. Disponível em: https://exame.abril.com.br/economia/produtividade-brasileira-nao-cresce-desde-1980-diz-estudo/. Acesso em: 31 de janeiro de 2018.
2. Exame (2017b). Acesso em: 31 de janeiro de 2018. Disponível em: https://exame.abril.com.br/revista-exame/para-crescer-de-verdade-brasil-precisa-vencer-atraso-de-50-anos/.
3. Goldratt, E. M., & Cox, J. (2002). A meta: um processo de melhoria contínua (2nd ed.). São Paulo: Nobel.

2 Vision of Productivity and Efficiency from a Systemic Perspective

This chapter presents the concepts related to productivity and efficiency. Understanding the difference between productivity and efficiency is important, as, despite being distinct concepts, in many cases they are treated as if they were the same. We deal with productivity and efficiency from a systemic perspective, analyzing the system as a whole (the production of goods as much as the provision of services), avoiding distortions derived from an assessment that considers the whole as the sum of the parts. In addition, in this chapter we present other important concepts, such as efficacy, effectiveness and benchmarking.

Improvement in productivity and efficiency is a contemporary challenge for organizations that produce goods and services. As a consequence, it is necessary to measure productivity and efficiency precisely, objectively and as a whole. Analysis of productivity and efficiency allows managers to qualify their decision-making. Such decisions could lead to better use of resources, cost reduction, better allocation of investment and more precise definition of goals, among others.

Although productivity and efficiency are distinct concepts, in many cases, as mentioned above, they are treated as synonyms. In this book, we will differentiate them in the following manner. Productivity is the relation between the input resources and the results, the outputs generated by machinery, an operation, a process or a system (Charnes et al., 1978), that is, the ratio of outputs to inputs. Efficiency is a comparative measurement that represents the exploitation of resources, that is, what was produced with the use of certain resources compared to what could have been produced with the same resources (Cummins & Weiss, 2013).

However, the productivity index is related to the efficiency index. If a productivity index of a goods production or service unit was compared with the productivity index of a unit with better performance, a relation would be formed in which it would be possible to make a comparison between these units. This comparative relation is the efficiency index, in which the more productive unit is used as a reference (Førsund, 2017a).

In many companies, efficiency is measured by calculation of the ratio between the hours worked and the hours available for production. This calculation refers only to the control of operational efficiency and is limited by not considering a set of other resources used in the goods and services production processes (f...

Table of contents

• Cover
• Half-Title
• Title
• Copyright
• Contents
• Foreword
• Acknowledgments
• Authors
• Chapter 1 Introduction
• Chapter 2 Vision of Productivity and Efficiency from a Systemic Perspective
• Chapter 3 Practical Problems in Relation to Productivity and Efficiency
• Chapter 4 Techniques for Calculation of Productivity and Efficiency
• Chapter 5 Data Envelopment Analysis (DEA)
• Chapter 6 Modeling Method in DEA (MMDEA)
• Chapter 7 Illustrating the Application of MMDEA
• Chapter 8 Application for Calculation of Productivity and Efficiency in DEA
• Chapter 9 Analysis in Two Stages: Techniques for Joint Assessment with DEA
• Chapter 10 DEA Application Examples
• Chapter 11 Concepts and Types of Modularity
• Chapter 12 Future Prospects
• Index