Lecture C
Productivity
Productivity
Productivity=Output/Resources Used
Productivity is the ratio of output to all or some of
the resources used to produce that output. Output
can be homogenous or heterogeneous. Resources
comprise: labour, capital, energy, raw materials, etc.
The productivity ratio can relate output to all
resources used (‘Multi-Factor Productivity’ or
‘Total Factor Productivity’) or to a single factor,
such as units of labour or capital or energy. The
most common single factor productivity measure is
labour productivity.
Productivity
In the case of construction, these output
measurement issues are especially difficult
and complex owing to the extreme
heterogeneity of constructed products.
Productivity
The three most commonly used
productivity ratios, based on ‘resources
used’ are:
• Total Factor Productivity* – output in
relation to all resources used
• Labour Productivity – output in relation
only to labour used
• Capital Productivity – output in relation
only to capital used
* also termed ‘Multi-Factor Productivity’
Productivity
Labour can be measured as:
• persons employed (the most available)
• hours worked (the most accurate)
• labour cost
Account also needs to be taken of changes in
the quality of labour. Educational attainment is
the usual proxy for quality. In construction,
this proxy is less reliable, since many skills are
acquired through the trade system and through
experience.
Productivity
‘Capital’ refers to physical capital, not
investment. Physical capital is machinery
and equipment. Physical capital is measured
at a depreciated value, which is only an
approximation of wear and tear. The
‘capital input’ is the service provided by a
piece of capital in the production of output.
The service is the amount of the capital that
is consumed in production as a result of
wear and tear.
Productivity
While attention is usually focused on labour
productivity, the importance of capital
productivity should also be borne in mind.
Estimates of capital productivity for the
construction industry as a whole suggest that it
declined in the late 1980s and remained
stagnant thereafter. A deterioration in capital
productivity necessarily reduces output per
unit of labour.
Capital Productivity=Output/Capital Services
Productivity
Productivity growth is the foundation of
improved living standards. Productivity is
also important to competitiveness, though it
is not the sole determinant of
competitiveness. The buyers of construction
products differ in the relative importance
that they attach to cost and to the
uniqueness of design and finish.
Productivity
The cause of this ‘systemic problem’ is
variously attributed to:
(1) A decline in the ratio of skilled-to-unskilled
labour attendant upon an increase in the non-
union share of construction,
(2) Stagnation in labour quality compared to
improved labour quality in the economy as a
whole,
(3) Lower capital/labour ratios arising from the
craft nature of many construction processes,
Productivity
(4) Lower absorption of IT which has been
a productivity driver in other sectors,
(5) Increased use of pre-fabricated
components which capture the productivity
gains in the manufacturing sector, not in
construction.
Productivity
Opportunities to improve the cost and quality of built products
fall into four categories:
1. Improvements in trade processes through the adoption of new
machinery and equipment, new materials, or new methods.
2. Improvements in the management and co-ordination of trade
processes to eliminate non-productive time and re-work.
3. Improvements in pre-fabricated components such that total
cost is reduced and/or performance of the constructed product is
improved.
4. Improvements in architectural and engineering design that
maximize the opportunity to exploit improvements in trade
processes, management and co-ordination, and the use of
prefabricated components.
Productivity
Factors affecting productivity
Internal and External Constraints
Productivity
External Constraints
Statutory Compliance:
1) NSSA SI 68 of 1990; Ensure compliance of
Factories and Works Act and Pneumoconiosis
Act
2) Labour Act;
3) NEC Collective Bargaining Agreement SI
244 of 1999
4) Public Health Act
5) Building Act/Building Consent/Building
Regulations;
Productivity
Unforeseen Events:
1) Inclement Weather;
2) Ground Conditions necessitating
revisions;
3) On-site Accidents/ Acts of God;
4) Natural Disasters;
Productivity
Other External Forces:
1) Inflation/ Fluctuations in Material Prices;
2) Fluctuations in Exchange Rate;
3) Energy Crisis/Costs;
4) Interest Rate/Cost of Capital;
5) Market Conditions and Level of Competitions in
the Industry for Jobs;
6) Frequent Changes in Government
Policies/Legislations Impacting on Construction;
7) Rapid Technological Advances;
8) Increase in industry or Society-wide
Litigations/Adversarial Relations;
Productivity
Internal Constraints
Project Finance:
1) Late payments;
2) Reworks;
3) Under valued work/poor estimation;
4) Dispute and litigation costs;
5) Lenders‟ high interest charges;
6) High insurance premiums.
7) Inadequate supply or high cost of needed
resources: money, labour, etc.
Productivity
Workforce:
1) Level of commitment;
2) Level of empowerment;
3) Level of skill and experience
4) Level of familiarity with current job and
conditions:
5) Level of involvement of direct labour or
subcontract;
6) Workforce Absenteeism;
7) Level of staff turnover/churn rate;
8) Health of the workforce;
Productivity
Technology/ Process:
1) Suitability or adequacy of: Plant &
equipment;
2) Method of construction;
3) Technology employed;
4) Lack of awareness of or training on new
technologies;
5) Resistance to accept new technologies;
6) Inadequate IT infrastructure and application
in construction industry;
Productivity
Project Characteristics:
1) Site conditions: access, subsoil;
topography;
2) Project complexity;
3) Buildability issues;
4) Site location and environment;
5) Type of procurement adopted;
Productivity
Project Management:
1) Adequacy of planning and risk management
process;
2) Coordination; supervision; performance
monitoring & control;
3) Project organizational culture;
4) Relationship management;
5) Competencies of the project team;
6) Project management style;
7) Frequency of design changes;
8) Client's over influence on the construction
process;
Productivity
Suggest ways of improving productivity
within the Construction Industry
Productivity
Best Productivity Practices Implementation
Materials Management
•Materials Management System
•Receipt and Inspection of Materials
•Procurement Management
Equipment Logistics
•Site Tool Management
•Machinery Availability
Productivity
Craft Information Systems
•Short Interval Planning
•Work Force Planning
•Constructability Review
Human Resource Management
•Training and Development
•Behaviour
•Organizational Structure
•Employment
Productivity
Construction Methods
•Sequence and Scheduling of Work
•Start-up, Commission, and Turnover Plan
•New Product Investigation
•Site Layout Plan
Environmental Safety and Health
•Job Safety
•Substance Abuse Programs
•Safety Training and Orientation
Productivity
Work study
Method study
Work measurement
Loss control
Value analysis
Lean construction
Productivity
Work Measurement Studies
Work Measurement Study is a general term used to
describe the systematic application of industrial
engineering techniques to establish the work content
and time it should take to complete a task or series
of tasks.
Work measurement is a productivity improvement
tool. Before improvements can be made, the current
productivity level of an organization must be
measured. This measurement is then used as a
baseline to determine if improvement projects have
resulted in genuine improvement.
Productivity
Work measurement helps to uncover non-
value added areas of waste, inconsistency,
and non-standardization that exist in the
workplace. Work measurement studies
uncover ways to make work easier, and to
produce products or services more quickly
and economically.
Productivity
Work is measured for four reasons:
To discover and eliminate lost or
ineffective time.
To establish standard times for
performance measurement.
To measure performance against realistic
expectations.
To set operating goals and objectives.
Productivity
Work Measurement Techniques
Under the work measurement umbrella there are a
number of techniques for collecting the information
necessary to develop engineered labour standards.
Time Study is the most widely used work measurement
technique that employs a decimal minute stopwatch to
record and determine the time required by a qualified
and well-trained person working at a normal pace to do a
specific task under specified conditions. The result of
the time study is the time that a person suited to the job
and fully trained in the specified method will need to
perform the job if they work at a normal or standard
pace.
Productivity
Work Sampling is a random sampling
technique (statistical sampling theory) that
involves observing the worker(s) at randomly
selected times and recording the type of
activity that is observed at that instance. Work
sampling is most commonly used to collect
information for allowance calculation, to
determine the distribution of work activities,
and to determine the productive and non-
productive utilization of workers.
Productivity
Objectives of a Work Measurement
System
Work measurement standards provide
information on what it should cost to
complete an operation or series of
operations in product production. Managers
can use this information to identify areas
requiring particular management emphasis
and focus on improvements in productivity
Productivity
Variance analysis should identify,
categorize, and develop plans to control all
variances from standard. Plans will
typically concentrate on the operations with
the largest variances from standard, because
these operations present the greatest
opportunity for cost reduction.
Productivity
Contractors should consider the use of
labour standards whenever contractor
employees will be performing the same
tasks repetitively over an extended period
of time. Labor standard development
requires extensive detailed effort
