Productivity Measurement,Analysis and Improvement

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Productivity Measurement, Analysis and Improvement

Instructors: Dr. Adel El Shabrawy Industrial Eng. Dept. High Technology Institute

Dr. Attia H. Gomaa Head of Industrial Eng. Dept. Fayoum University [email protected]

April 2006

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Productivity Measurement, Analysis and Improvement Authors: Dr. Adel El Shabrawy Industrial Eng. Dept. High Technology Institute

Dr. Attia H. Gomaa Head of Industrial Eng. Dept. Fayoum University [email protected]

Who Should Attend: Managers and senior staff members in public and private sector companies. Objectives:  To define concepts, methods, and indicators of performance evaluation.  To develop the participants capabilities in measuring and analyzing performance indicators in different areas.  To raise the skills of participants in planning, implementing and following-up performance improvement programs. Course Outline:  Definition and nature of performance evaluation & productivity.  Performance evaluation & productivity methods.  Productivity analysis  Technical indicators.  Economic and financial indicators.  Analysis of performance indicators.  Performance & productivity improvement techniques.  Planning and following-up of performance  Project risk management Global 2 PE – Dr. Attia Gomaa

AUC- Engineering  Case studies.

Global 3 PE – Dr. Attia Gomaa

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Productivity Measurement, Analysis and Improvement CONTENTS: INTRODUCTION 1. Productivity concept 2. Production & productivity 3. Origin of the word “ productivity ” 4. Production systems & resources 5. Management & control & productivity 6. Productivity analysis 7. Productivity & effectiveness & efficiency 8. Types of productivity 9. Productivity terms 10. Benefits of higher productivity 11. Benefits of higher productivity measurement 12. Measurement of production 13. Productivity measurement units 14. Labor productivity measurement 15. Material productivity measurement 16. Machine productivity measurement 17. Energy productivity measurement 18. Productivity & financial indicators 19. Project risk analysis 20. Productivity levels 21. Overall productivity analysis 22. P. indicators for production activities 23. Performance evaluation sheet for production activities 24. Productivity improvement techniques 25. Productivity improvement cycle 26. Real case studies Global 4 PE – Dr. Attia Gomaa

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INTRODUCTION This course is mainly concerned with the problems of productivity analysis in industry, especially manufacturing industries. This course systematically presents several conceptual and pragmatic methodologies, tools, and techniques for the productivity cycle. This course attempts to serve the practical needs of industrial engineers, productivity directors/coordinators, productivity managers, corporate planners, and administrators. This course is written in a relatively simple, easy-to-understand style, making it suitable for industrial engineers and practitioners. About 20 references and about 15 worked examples further help the reader understand the topics. Finally, I’m very grateful to my readers, participants & professional peers for joining us in this course. Dr. Attia H. Gomaa


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1. PRODUCTIVITY CONCEPT

What is the productivity? Productivity is a measure of the following:  System performance  System efficiency  Resource utilization  The relationship between real output and inputs.

Productivity is measured as:  The ratio of output to input.  The ratio between the amount produced and the amount of any resources used in the production.  Output per unit of input (resources) Waste Input

Output


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Productivity = Output / Input


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2. PRODUCTION & PRODUCTIVITY The term “Productivity” is often confused with the term “Production”. Many people think that the greater the production, the greater the productivity. That is not necessary true.



Production is concerned with the activity of producing goods and/or services.

Production …….... Quantity



Productivity is concerned with the efficient utilization of resources (inputs) in producing goods and/or services (output).

Productivity

………

Resource utilization

If viewed in quantitative terms, production is the quantity of output produced, while productivity is the ratio of the output produced to the input(s) used. In short, higher productivity means that more is produced with the same expenditure of resources, i.e. at the same cost in terms of land, materials,


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machine time or labor; or alternatively that the same amount is produced at less cost in terms of land, materials, machine time or labor used up, thus releasing some of these resources for the production of other things. 3. ORIGIN OF THE WORD “ PRODUCTIVITY ”



Quesnay, 1766, the word “productivity” appears for the first time.



Littre, 1883, “faculty to produce”.



Early 1900s, “Relationship between output and the means employed to produce this output”.



OEEC, 1950, the Organization for European Economic Cooperation: “Quotient obtained by dividing output by one of the factors of production”



Davis, 1955, “Change in product obtained for the resources expended”.



Fabricant, 1962, “Always a ratio of output to input”.



Kendric & Creamer, 1965, Functional definitions for partial, total-


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factor and total productivity. 

Siegel, 1976, A family of ratios of output to input.



Sumanth, 1979, Total productivity: the ratio of tangible output to tangible input.

4- PRODUCTION SYSTEM & RESOURCES

Production is a process of transforming input(s) to output(s).

Production process Input

Output

A system is a collection of components (or items) that work together to achieve a certain objective. Production system is a configuration of resources combined for the provision of goods or services.


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Planning and Control Cycle Update Scope Requirements Targets Constraints WBS

5) Actions: Proactive Preventive Corrective

PM

4) KPI DM

RM

CM

PM

SM

3) P.E.

2) Follow-up

Operational management

1) Policy 2) Master Plan

3) Action Plans 4) Detailed Plans 5) Work Orders

1) Feedback

Review

Site


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Constraints

Target Information Resources

Processes

Products/ Services

Control

- Technical constraints - Financial constraints - Targets - Information - Resources

Production processes

- Products / Services - Reports

Production performance indicators

This enables us to optimize the resources for maximizing the output of a production system.


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Two basic targets for any production system:  Provision of customer service  Resource productivity

The productivity of a certain set of resources (input) is therefore the amount of goods or services (output) which is produced from them. What are the resources at disposal of a manufacturing company?’ They are: 1- Materials 2- Machines 3- Manpower 4- Method & Technology 5- Land and building 6- Money 7- Market 8- Management Tools 9- Information Land in a convenient location on which to erect the buildings and other facilities necessary for the operations of the enterprise, and the buildings erected on it.


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Materials that can be converted into products to be sold. They include fuel, chemicals for use in the processes of manufacture, and packing materials. Machines, plant, equipment and tools necessary to carry out operations of manufacture and the handling and transport of materials; heating, ventilating and power plant; office equipment and furniture. Manpower (men and women) necessary to perform the manufacturing operations; to plan and control; to do clerical work; to design and to research; to buy and sell. The use which is made of all these resources combined determines the productivity of the enterprise. The resources consist of “real” things and services. When they are used up in the process of production, “real” costs are therefore incurred. Their cost may also be measured in terms of money. Since higher productivity means more output from the same resources, it also means lower money costs and higher net money returns per unit of output. The relative importance of each of the resources mentioned above varies according to the nature of the enterprise, the country in which it is operating, the availability and cost of each type of resource and the type of


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5. MANAGEMENT & CONTROL & PRODUCTIVITY

Who is responsible for making sure that the best use is made of all these resources? Who is responsible for seeing that they are combined in such as way as to achieve the greatest productivity? Answer:

The management of the project.

What is the project management? Project Management is a powerful systematic methodology to achieve a certain target and to improve the resource productivity. Through: (1) Define the target & scope & constraints (2) Information collecting & analysis (3) Planning & target plans (4) Organization (5) Motivation & Direction (6) Implementation (7) Control Global 16 PE – Dr. Attia Gomaa

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(8) Corrective Actions (9) Learned lessons (10) Closed out report Project Management is the application of knowledge, tools and scientific techniques to project activities in order to meet or exceed the system needs and expectations from the project.

Project Targets Dimensions:  Time wise

Right time or less

 Cost wise

Right cost or less

 Quality wise

Right quality or more

 Quantity wise

Right quantity or more

 Resource wise

Right resources or less

 Safety wise

Right safety or more

What are the main TARGETS In Production Systems?

- Maximization Targets:  Cost Wise:


Profit, Value added

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 Quantity Wise:

Production volume

 Material Wise:

Mat. utilization

 Manpower Wise:

Worker utilization

 Machines Wise:

M/c. utilization

 Quality Wise:

Yield

 Time Wise:

Availability

- Minimization Targets:  Cost Wise:

Cost elements

 Quantity Wise:

WIP

 Material Wise:

Mat. scrap

 Manpower Wise:

Unused capacity

 Machines Wise:

Unused capacity

 Quality Wise:

Rejected

 Time Wise:

Downtime


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Project Planning:      

What is to be achieved? Why? How? Who? When? Where? Project Time Plans:  Long term  Medium term  Short term

"Project description" "Target" "Method" "Resources" "Schedule" "Location"

2 to 10 y 6m to 1 y 1w to 3 m

Risk 15 to 25% Risk 7 to 10% Risk 3 to 5%

Project Level Plans:  Master plan Top management (10 -15 activity)  Action plan Control management (50-100)  Detailed plan Operational manag. (more than 500) Project Risk Plans:  Target plan (normal or most likely)  Optimistic plan  Pessimistic plan Project Strategic Plans:  Strategic plan  Tactical plan Global 19 PE – Dr. Attia Gomaa

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 Operational plan  Urgent plan

Project Information:  Complete information  Incomplete information  Without information


"Overall planning" "Partial planning" "Trial & error"

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Project data:  Certain data  Uncertain data

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"Deterministic" "Probabilistic"

Managing Project Budget:  Look at history of similar projects  Determine internal resources  Determine external resources Budget Calculation:  Direct cost (materials, labor, equipment)  Indirect cost (overhead)  Total cost = direct cost + indirect cost Project risk areas:  Data accuracy  Work contents  Schedule  Resources  Finance Project Planning Approaches:  CPM (Critical Path Method)  PERT (Program Evaluation & Review Technique)  GERT (Graphical Evaluation & Review Technique)


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 Simulation  Resource smoothing (time constraints)  Resource leveling (non-time constraints)  Duration compression (time crashing)  Project management software (Primavera, Microsoft

Project, .. etc.) Parameter Duration Logic diagram

Project Planning Approaches CPM PERT GERT Certain Uncertain Uncertain Certain Certain Uncertain

Project Planning & Control Planning WBS Master Plan Action Plan


Control Productivity Analysis Performance Evaluation Follow-up

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Project Planning & Control Steps:

Targets

Constraints

Resources

Information Long-run Plans Annual run Plans Short run Plans Management Action Control


Implementation

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Total Project Control: Quality

Quantity Under HSE Conditions

Cost

Resources

Total Control Indicators: 1- Work quantity control  Over estimation  Under estimation 2- Time control  Behind schedule (late)  Ahead schedule (early) 3- Cost control  Cost overrun


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 Cost underrun 4- Quality control  Acceptable level  Non-acceptable level 5- Inventory control  Over estimation  Under estimation 6- Resources control  Over estimation  Under estimation 7- Plant condition control (safety, etc.)  Acceptable level  Non-acceptable level


Services

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Control Steps: 1- What to control? 2- What is the standard (target) performance? 3- What is the actual performance level? 4- Comparison between the actual & target. 5- Detection of variance 6- Identification of causes of variance 7- Corrective actions 8- Learned lessons. Total Control Levels: 1- Review and data collection. 2- Follow-up. 3- Performance evaluation. 4- Productivity analysis. 5- Risk analysis for any future project. 6- Corrective actions. 7- Learned lessons.


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1- Project Integration Management

2- Project Scope Management

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3- Project Time Management

4- Project Resource Management

5- Project Cost Management

6- Project Quality Management

7- Project Contractors Management

8- Project

9- Project Procurement Management

Communications

Management

10- Project Risk Management

11- Project Implementation


12- Total Project Control

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6. PRODUCTIVITY ANALYSIS WHAT IS THE PRODUCTIVITY ANALYSIS?

Productivity

Analysis

is

a

powerful

systematic

methodology to measure the following: o System performance o System efficiency o System effectiveness o Resource utilization o Profitability

WHY PRODUCTIVITY ANALYSIS (PA)?

PA helps decision makers  to identify the driving factors of productivity.  to adopt the appropriate action / policy.  to monitor its consequences.


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7. PRODUCTIVITY & EFFECTIVENESS & EFFICIENCY

Time

Productivity Dimensions Quantity Quality

Effectiveness = Actual output / Planned output

Efficiency 1- Technical Efficiency 2- Operating Efficiency 3- Production Efficiency 4- Economical Efficiency

Effectiveness:  It is related to performance.  It is the degree of accomplishment of objectives.  How well a set of results is accomplished.

Efficiency:  It is related to resource utilization.  It is the degree resources utilization.  How well the resources are utilized to achieve  the results.


Cost

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Productivity:  It is a combination of both effectiveness & efficiency.

Productivity index = Output obtained / Input expended = Performance achieved / Resources consumed = f (Effectiveness) / f (Efficiency)

8. TYPES OF PRODUCTIVITY

Based on outputs and inputs, productivity concepts may be classified to two main categories as:  Total productivity,  Specific (partial) productivity. 8.1. TOTAL PRODUCTIVITY:  Total productivity is the ratio of total output to the sum of all inputs factors.  It is a relationship between production volume and all production elements consumed to achieve it.


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The concept relies on the fact that production of an enterprise depends on factors as capital, machinery, materials….. etc, as well as labor. Hence, it becomes necessary to correlate different levels of productivity with performance and utilization of such other elements. Total productivity = Total output / Total input Total input = Labor + Material + Services + Depreciation + etc.

Total productivity reflects integrality of factors involved in production and avoids measuring high performance of one factor on the account of low performance for another. However, this concept has been criticized. It assigns an equal weight to both the human element and other human-innovated elements as machinery, and material. A human individual has a more crucial role in production as its development, organization, planning, control, and processing. Other elements are looked at as technical tool that are managed by individuals to induce high productivity. Another criticism is that total productivity is usually measured in monetary units, and this basis of measurement is sensitive to price and market changes which would lead to false productivity indicators.


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8.2. SPECIFIC (PARTIAL) PRODUCTIVITY  Partial productivity is the ratio of output to one class of input. 

It is a relationship between production volume and the amount consumed of this element to produce. Partial productivity = Total output / One of the inputs

Such as: Material productivity = Total output / Material cost Labor productivity = Total output / Labor cost Machinery productivity = Total output / Depreciation Energy productivity = Total output / Energy cost Capital productivity = Total output / Capital Total Factor Productivity (TFP)  It is the ratio of net output to the sum of associated labor and capital inputs factors. Net output = Total output – Intermediate goods & services purchased TFP = Net output / (Labor + Capital) TFP = Output index / Input index


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Productivity Change = Change in output y / Change in input x

Examples of each type of productivity may make its meaning clearer:  PRODUCTIVITY OF LAND: If, by using better seed, better methods of cultivation and more fertilizer, the yield of corn from a particular hectare of land can be increased from 2 quintals to 3 quintals, the productivity of that land, in the agricultural sense, has been increased by 50 per cent. The productivity of land used for industrial purposes may be said to have been increased if the output of goods or services within that area of land is increased by whatever means.  PRODUCTIVITY OF MATERIALS: If a skilful tailor is able to cut 11 suits from a bale of cloth from which an unskillful tailor can only cut ten, in the hands of the skilful tailor the bale was used with 10 per cent greater productivity.  PRODUCTIVITY OF MACHINES: If a machine tool has been producing 100 pieces per working day and through the use of improved cutting tools its output in the same time is in-creased to 120 pieces, the productivity of that machine has been increased by 20 percent. Global 33 PE – Dr. Attia Gomaa

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 PRODUCTIVITY OF MEN: If a potter has been producing 30 plates an hour and improved methods of work enable him to produce 40 plates an hour, the productivity of that man has increased by 331/3 percent. The factors affecting the productivity of each organization are many, and no one factor is independent of others. The importance to be given to the productivity of each of the resources (land, materials, machines or men, etc.) depends on the enterprise, the industry and possibly the country. To achieve the greatest increases in productivity, action must be taken by all sections of the community:  Governments,  Employers,  Workers. Governments can create conditions favorable to the efforts of employers workers to raise productivity. For these it is necessary, among other things:  to have balanced programmes of economic development;  to take the steps necessary to maintain employment;  to try to make opportunities for employment for those who are unemployed or underemployed, and for any who may become Global 34 PE – Dr. Attia Gomaa

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redundant as a result of productivity improvement in individual plants. This is especially important in developing countries where unemployment is a big problem. Employers and workers also have vital parts to play. The main responsibility for raising productivity in an individual enterprise rests with the management. Only the management can introduce and create a favorable climate for a productivity programme and obtain the cooperation of the workers which is essential for real success, though this requires the goodwill of the workers too. Trade unions can actively encourage their members to give such co-operation when they are satisfied that the programme is in the interests of the workers, as well as of the country as a whole. To manage productivity in a true sense of the term, four formal phases must be recognized:  Measurement,  Evaluation,  Planning, and  Improvement.


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Once the productivity level of an organization is measured in the current time period (for example, the current month, quarter, or year), it must be compared with the target level set up in the preceding period. Based on this evaluation, a new productivity level must then be planned for the next coming period. Finally, depending on the nature and level of the planned target of productivity, improvement must take place in the next period. To determine if the planned level has in fact been achieved, productivity must be measured again in the next period. The entire cyclic process repeats for as long as an organization formally manages its productivity level and growth rate. 9. PRODUCTIVITY TERMS:  Measuring unit  Measuring process  Standard  Performance  Performance standard  Objective  Norm  Material utilization factor  Ratio  Index Global 36 PE – Dr. Attia Gomaa

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10- BENEFITS OF HIGHER PRODUCTIVITY The following is a list of some benefits that accrue from higher productivity: 1. Higher productivities in a company with respect to human and physical resources will mean higher profits, because Profits = revenue - cost of goods and services produced by the utilization of human and material resources 2. Higher company productivity is generally translated into higher real earnings for its employees. 3. The public realizes more social benefits because of increased public revenues. 4. The consumer has to pay relatively low prices because the cost of manufacture is reduced through higher productivity. 11- BENEFITS OF PRODUCTIVITY MEASUREMENT Productivity measurement in an organization can have the following benefits:


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1. The organization can assess the efficiency of conversion of its resources so that more goods or services are produced for a given amount of expended resources. 2. Resource planning can be facilitated through productivity measurement; both on a short-and long-term basis. 3.The economic and non economic objectives of the organization can be re-organized by priority in the light of a productivity measurement effort. 4.Planned productivity-level targets for the future can be modified realistically based on the measured levels now. 5. Strategies for improving productivity can be determined based on the extent of the gap between the planned level and the measured level of productivity. 6.Productivity measurement can help in comparing the productivity levels between organizations within a particular category, either at the industry or at the national level. 7.Productivity values generated as a result of a measurement may be


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useful in planning the profit levels in an organization. 8.Measurement creates competitive action. 9.Collective bargaining can be accomplished more rationally once productivity estimates are available.

12. MEASUREMENT OF PRODUCTION 12-1- Physical Method:  Production is measured using physical units as ton, meter, liter, etc.  This method can be applied in industrial sectors with homogeneous production.  The following formula is generally used: P 

n

 qi i 1

where qi is the quantity of the ith product in physical units. 12-2- Modified-Physical Method:  This method is used whenever production is not homogeneous.  Coefficients of Equivalence are introduced to transform quantities of different products into a quantity of a standardized product.  The next expression can be applied for measuring production. Global 39 PE – Dr. Attia Gomaa

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n

 qi  ei i 1

where ei are the i th product coefficient of equivalence. The evaluation of the coefficients of equivalence are subject to few considerations as:  product unit cost,  processing time per unit,  manual labor used,  weight or volume of a product, or  Any other special characteristic of a variety of products. 12-3- Monetary Method: Whenever it is not possible to apply the physical method, the monetary value of production is used. In this case, the following formula can be applied: P 

n

 qi  pi i 1

where Pi is the price per unit of the i th product.

The price must be specified as either the whole sale, retail, or discounted price. Also when comparing productivity indices at different periods, a Global 40 PE – Dr. Attia Gomaa

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base period must be used to account for inflation and other changes effects. Even though this method is easy to apply, it suffers a major deficiency specially when applied on the national or sector level. The production, as measured, includes the value of all input elements (raw material, semi-finished products, standard parts, etc.) purchased from other sectors. The effect is such that the output of one sector, that will be purchased by another, will also be considered as part of the production for the other sector, and thus inflating the total value of production on the national Level. This phenomenon also occurs on the corporation level. Input elements for a corporation purchased from other corporations will be included in the value of production of this corporation, while the value of these elements do not represent actual contribution by it. A better approach that has been suggested is to use the value added (or not value added) to express production. The Value added concept expresses production (P) as the total value of production less the value of input elements purchased from outside. The advantage of this concept is that it accounts for the actual contribution of a given system only. Two forms are used, the value added (VA) and the net value added (NVA): VA  ij


n

q p   i i i 1

m

 I j c j j 1

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n

q p   i i i 1

m

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I c   D  j j k 1 k j 1

where, Ij: number of units purchased of the J th input element Cj: Cost/unit of input element j. Dk: depreciation cost for the fixed asset. 12-4- Labor Method: This method measures production in terms of labor units, where actual or standard time needed to produce one unit is evaluated. This method is particularly suitable when more than one product exists. Any of the following two expressions can be applied: P 

n

 qi  ti i 1

of the jth labor plan to produce P; lij labor consumed of the jth labor class to produce the i th product; and tij is the time per unit consumed of the jth labor class to produce qi of the i th product. As it can be seen in the physical method the problem is how to combine working hours of different labor classes with different skills. This problem is taken into consideration by the next method. 12-5- Labor Modified-Physical Method: This method uses weighing factor scheme to adjust for the different labor


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class effects. The time consumed by each labor class is weighted by the average wage rate for this class: m

L 

 w j l j j 1

m

wj j 1

where wj is an average wage weighing factor for the i th labor class, and lj is the time consumed by labor class j to produce P. Another weighing factor that may be suggested, however difficult to apply, is based on a skill point rating system for each class of labor. 12-6- Labor Monetary Method: This method is based on using money values to express labor consumed, it is the most straight forward and easy-to-apply method. It can be expressed mathematically as follows: P 

n

 qi  ti i 1

where ti., tj are the actual time and standard time of labor consumed per unit of product i. Here, it is recommended to use standard processing times to compensate for different labor skills and unify the method of measure-merit.


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13. PRODUCTIVITY MEASUREMENT UNITS Output units: - Physical units (ton, unit, m3) - Standard physical units - Monetary unit ($, L.E.) Input units: - Physical units (man, man-hour, ton, unit, m3) - Monetary unit ($, L.E.)


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14. LABOR PRODUCTIVITY MEASUREMENT: Measurement of Labor: Methods of labor measurement are also classified as Physical Method, Modified-Physical and Monetary Method, and we outline each of them as they will be applied: 1- Physical Method: Labor units used in this method are man-hours or man-days, necessary to produce a particular quantity Any of the following forms can be used. n

 li

L 

i 1 n

l j

L 

j 1

L  L 

n

m

i 1

j 1

  lij n

m

i 1

j 1

  qi  lij

where, li is labor consumed to produce quantity qi; lj is labor consumed: L 

n

wj j 1

where wj is the wage paid to the jth labor class to produce production volume P. Some few problems are associated with this method. The wages considered could be gross wage, basic wage, net wage or wages plus fringe benefits. Also wage systems are different from an enterprise to another and from a native currency to a foreign one. These limitations should be Global 45 PE – Dr. Attia Gomaa

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carefully considered especially in comparative analysis. As we have outlined above, there are twelve different methods for measuring labor Productivity as the quotient P/L. Some of the different methods along with their corresponding Productivity indices that we intend to use are outline in the following table: Labor unit Physical unit (worker, manhour, ..) Monetary unit (L.E.)

Output unit Physical unit Monetary unit (Ton, unit, ..) (L.E.) Ton / worker L.E. / worker Unit / worker L.E. / man-hour Ton / man-hour Ton / L.E. L.E. / L.E. Unit / L.E. Ton / L.E.

In Conclusion to this section we recommend using the physical method whenever applicable. Otherwise, on the national level, we recommend using the monetary method (value added) to measure production, and on the corporate level, either the monetary or the labor method may be used. 15. MATERIAL PRODUCTIVITY MEASUREMENT Material unit Physical unit (Ton, unit, ..)


Output unit Physical unit Monetary unit (Ton, unit, ..) (L.E.) Ton / ton L.E. / ton Unit / ton L.E. / unit

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Ton / unit Ton / L.E. Unit / L.E.

L.E. / L.E.

There are many industries in which the cost of raw material represents 60 per cent or more of the cost of the finished product, the balance of 40 Percent divided between labor and overhead costs. Many countries have to import a very large proportion of their basic raw materials and pay for them in scarce foreign currencies. Under either of these conditions the productivity of materials becomes a key factor in economic production or operation; it is likely to be far more important than the productivity of land or labor or even plant and machinery. Although the technique of work study deals primarily with improving the utilization of plant and of the services of labor, it can frequently contribute to savings in materials, either directly or indirectly, as in saving the erection of buildings through the better utilization of existing space. In general, however, savings in materials, direct or indirect, are affected in the following ways: * At the design stage or time of specification:  by ensuring that the design is such that the product can be manufactured with the least possible use of materials, especially


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when they are scarce or dear;  by ensuring that plant and equipment specified for purchase is the most economical possible in terms of materials consumed in its operation (e.g. fuel) for a given level of performance. *At the process or operation stage:  by ensuring that the process used is the right one; by ensuring that it is being operated correctly;  by ensuring that operatives are properly trained and motivated so that they will not turn out faulty work which has to be rejected, leading to loss of material;  by ensuring proper handling and storage at all stages from raw materials to finished products, first eliminating all unnecessary handling and movement; and  by proper packaging to avoid damage in transit to the customer. The question of material saving is so important to many countries that a separate volume would be needed to discuss it.


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16. MACHINE PRODUCTIVITY MEASUREMENT Output unit Physical unit Monetary unit (Ton, unit, ..) (L.E.) Ton / machine L.E. / machine Unit / machine L.E. / m/c-hour Ton / m/c-hour Ton / L.E. L.E. / L.E. Unit / L.E. Ton / L.E.

Machine unit Physical unit (machine, m/c-hour, ..) Monetary unit (L.E.)

System Effectiveness

Efficiency

Utilization & Resource productivity

Availability

Reliability MTBF MTBM

Maintenance Control Levels: - Maintenance Follow-up (Actual/Plan) - Maintenance Performance Evaluation -0 Time Availability -1 Reliability -2 Mean Time Between Failures (MTBF) Global 49 PE – Dr. Attia Gomaa

Maintainability MTTR MTTM

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-3 Mean Time To Failures (MTTF) -4 Mean time to repair (MTTR) -5 Mean time between repairs (MTBR) -6 Mean Time Between Maintenance (MTBM) -7 Preventive Maintenance Rate (PM rate) Availability = A =

S d x 100% S

Percentage of downtime = Id = 100% - A Mean time between failures = MTBF = df

S d f

Mean time to repair MTTR = f Where, S = Scheduled production time d = Downtime f = Number of failures. df = Downtime delays from failures. Example: Scheduled production time = 31 day Downtime = 6 day Number of failures = 3 failure/month 31  6

A = 31 x 100% = 80.6 % Id = 100 - 80.6 = 19.4% 31  6 MTBF = = 8.33 days 3 6 MTTR= = 2 days 3


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MEASUREMENT OF MAINTENANCE EFFECTIVENESS Equipment Losses Categories Category Equipment losses Indicator Down-time losses Equipment failures Equipment (lost availability) Set-up and adjustments availability Speed losses Idling and minor Equipment (lost performance) stoppages performance Reduced speed operation efficiency Defect losses Scrap and rework Equipment quality (lost quality) Start-up losses Rate Resource losses Critical resource Resource consumption rates productivity Cost losses All the previous losses Repair cost CM/PM cost ratio Down time cost Overall equipment effectiveness (OEE) OEE = Equipment Availability × Performance efficiency × Quality rate

Total effective equipment productivity (TEEP) TEEP =Utilization × Availability × Performance efficiency × Quality rate

Net equipment effectiveness (NEE) NEE = Uptime ratio × Performance efficiency × Quality rate

Mean unit between assists (MUBA): MUBA = Total number of units produced / Number of stoppages


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What is the effect of Maintenance Policy on the Equipment OEE? Maintenance Policy Operate to failure (RTF)

OEE 30 – 50 %

Good PM Program Good bonus & incentive system Good PM Program based on RCM Good bonus & incentive system

60 – 80 % More than 80 %

What are the main factors, which affect the Equipment OEE?        

Product quality Production continuity & rates Shutdown frequency HSE factors Equipment availability Resource availability Operating & maintenance cost Down time cost rate

17. ENERGY PRODUCTIVITY MEASUREMENT Energy unit Physical unit (K.w.h.) Monetary unit (L.E.)

Output unit Physical unit Monetary unit (Ton, unit, ..) (L.E.) Ton / K.w.h. L.E. / K.w.h. Unit / K.w.h. Ton / L.E. L.E. / L.E. Unit / L.E.


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18. PRODUCTIVITY & FINANCIAL INDICATORS Change in Resource Quantity

Change in Productivity

Change in Product Quantity

Change in Cost

Change in Profit

Change in Revenue

Change in Resource Price

Change in Price Contribution

Change in Product Price

Profit = Revenue – Expenses Profitability = Revenue / Expenses Output quantity * Unit price Profitability = ----------------------------------Input quantity * Unit cost Output quantity Price Profitability = ----------------------- * -------Input quantity Cost Profitability = Productivity * Contribution factor Productivity = Value added / hour worked. Global 53 PE – Dr. Attia Gomaa

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Value added = Gross real revenue - intermediate goods


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19. Project Risk Analysis: Risk Radar ® is a risk management database that is designed to help project managers identify, prioritize, and communicate project risks in a flexible and easy-to-use form. Risk Radar ® provides standard database functions to add and delete risks, together with specialized functions for prioritizing and retiring project risks. Each risk can have a user-defined risk management plan and a log of historical events. A set of standard detailed and summary reports can be easily generated to share project risk information with all members of the development team. The number of risks in each probability/impact category by time frame can be displayed graphically, which allows the user to visualize risk priorities and easily uncover increasing levels of detail on specific risks. Risk Radar ® also provides flexibility in prioritizing risks through automatic sorting and risk-specific movement functions for priority ranking. Risk Radar ® will assist Risk Officers to identify the highest-priority risks and to keep attention focused on them as a project evolves over time.


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Risk Radar ® does not discover risks; the project team must do that. But once a risk is identified. Risk Radar ® allows the risk to be fully described and prioritized relative to the other risks a project faces. The key to successful use of Risk Radar ® is to keep the highest-priority risks at the top of the risk-ranking list and to focus mitigation efforts on them. With Risk Radar ® a risk can be described; prioritized relative to all the other risks in the database; a risk mitigation plan can be developed; and events and decisions recorded that affect the risk over time. Risk Radar ® includes a full set of standard short- and long-format reports as well as a viewgraph-formatted report for communicating risk priorities and mitigation efforts to upper management and the entire project team. Risk Radar ® performs many of the Risk Analysis and Prioritization functions automatically once the risk is entered into the data base. To perform the risk prioritization process, subjective estimates must be made based on professional judgment of the Probability that a risk will become a problem and its impact on the project if the problem does occur.


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A Probability value of the risk occurrence of A = 10%, B = 30%, C = 50%, D = 70%, or E = 90% is chosen, and then an Impact value of the risk becoming a problem is chosen between 1 = very low, to 5 = very high. Risk Radar then calculates a Risk Exposure for each risk. Consistent with government and commercial best practices. Risk Radar ® defines the Risk State using two qualitative values (1) Probability and (2) Impact and then the Risk Exposure is calculated from the Probability and Impact. The Probability and Impact fields are provided as drop-down boxes. Risk Radar ® uses risk exposure as a means to help rank risks relative to one another, but it assumes these numbers have little or no meaning in an absolute sense. In most cases, it would be inappropriate to compare risks across projects based solely on numerical factors such as probability, impact, or exposure. The best that can be hoped for is that the project team will use numerical risk values consistently over the life of the project so there is a consistent ranking of risks to keep the most important ones at the top of the list.


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A Risk Level is determined based on the Risk Exposure classes according to the following mapping. This calculated value is displayed on the Risk Edit screens as shown in Figure 1.

Risk Radar ® calculates a Risk Exposure (RE) value based on the assigned probability and impact using the following formula.

RE = Probability x Largest Impact

Probability Level A B C

Criteria Remote Unlikely Likely

Probability 0.1 0.3 0.5

D E

Highly Likely Near Certainty

0.7 0.9


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Impact Definitions Impact Technical 0 Does not apply

Schedule

Cost

Does not apply

Does not apply Minimal or no Impact <5

1

Minimal or no impact

Minimal or no impact

2

Acceptable with some reduction in margin

3

Acceptable with significant reduction in margin Acceptable, no remaining margin

Additional resources required, able to satisfy Minor slip in key milestones; not able to meet need date Major slip in key milestones or critical path impacted Can’t achieve key milestone

4 5

Unacceptable major program milestone milestone

5-7%

7-10%

> 10%

Risk Exposure Range Risk Level 0.1 to 0.7 Low 0.9 to 2.1 Medium 2.5 to 4.5 High The detailed Risk Level mapping is shown in the table below: Probabili ty

E D C B A

Risk Level (Risk Exposure)

Medium (0.9) Low (0.7) Low (0.5) Low (0.3) Low

Medium (1.8) Medium (1.4) Medium (1.0) Low (0.6) Low


High (2.7) Medium (2.1) Medium (1.5) Medium (0.9) Low

High (3.6) High (2.8) Medium (2.0) Medium (1.2) Low

High (4.5) High (3.5) High (2.5) Medium (1.5) Low

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(0.1)

(0.2)

(0.3)

(0.4)

(0.5)

1

2

3

4

5

Impact

Red = Unacceptable. Major disruption is likely. Different approach required. Priority management decision required. Yellow = Moderate. Some disruption approach may be required. Additional management attention may be needed. Green = Low. Minimum impact. Minimum oversight needed to ensure risk remains low.


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Risk analysis for certain project: Risk Exposure Area

Risk Unit

0 to $50,000 overrun

1 2 3 4 5

Budget $50,001-$100,000 overrun $100,000-$200,000 $300,000-$500,000 over $500,000 Schedule Impact 0 to 3 month slip 3 month to 6 month slip 6 month to 12 month slip 12 month to 18 month slip over 18 month

1 2 3 4 5

Staff and Other Resources 0 to 5% resource shortfall 5.1% to 10% resource shortfall 10.1% to 15% resource shortfall 15.1% to 25% resource shortfall over 25% resource shortfall

1 2 3 4 5

Quality Impact 0 to 5% quality gate failure 5.1% to 10% quality gate failure 10.1% to 15% quality gate failure 15.1% to 25% quality gate failure over 25% quality gate failure

1 2 3 4 5

User Satisfaction Impact 0 to 5 unresolved user comments 6 to 12 unresolved user comments 13 to 25 unresolved user comments 26 to 50 unresolved user comments over 50 unresolved user comments


1 2 3 4 5

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20. PRODUCTIVITY LEVELS: Level Top management Middle Management Operational management

Productivity indicators Monetary indicators

Technical indicators

21- OVERALL PRODUCTIVITY ANALYSIS

Production Activities

Quality Activities

Spare Parts Activities Marketing Activities

Inventory Activities Quality Activities

Total Productivity Analysis

Financial Activities Law Activities Global 62 PE – Dr. Attia Gomaa

Purchasing Activities Administration Activities

…..

…..

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22 - PRODUCTIVITY INDICATORS FOR PRODUCTION ACTIVITIES The major production activities can classified into six groups: - Production process - Materials - Labor - Machines - Maintenance - Inventory

22-1- Production process targets & measures: Targets Maximize: - Production quantity

Measures - Production rate (Output per hour) - WIP %

Minimize: - WIP - Lateness

- Production progress % (Actual output/ Target output) - Work orders progress % (Actual orders / Target orders)


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22-2- Materials targets & measures: Targets Maximize:

Measures - Yield %

- Yield

- Scrap % - Rework %

Minimize:

- Rejected %

- Scrap

- Material cost %

- Material cost

22-3- Labor targets & measures: Targets Maximize: - Output per man-hour - Used capacity

Measures - Labor productivity (Output per Man-hour) - Labor utilization factor % - Labor idle time %

Minimize: - Idle time - Labor cost


- Labor cost %

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22-4- Machines targets & measures: Targets Maximize: - Machine output - Used capacity

Measures - Machine productivity (Output per Machine-hour) - Machine utilization factor % - Machine idle time %

Minimize:

- Machining cost %

- Idle time - Machining cost

22-5- Maintenance targets & measures: Targets Maximize:

Measures - Average availability %

- Availability

- Average reliability

- Reliability

- MTBF / MTTF / MTTR - Down time due to maintenance

Minimize:

- Corrective maintenance %

- Down time

- Maintenance cost %

- Maintenance cost

- Losses due to maintenance


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22-6- Inventory targets & measures: Targets Maximize:

Measures - Material Inventory availability%

- Material availability

- Material Inventory rejected% - Down time due to inventory

Minimize: - Rejected


- Losses due to inventory

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23- PERFORMANCE EVALUATION SHEET FOR PRODUCTION ACTIVITIES Item 1-

Measures - Production rate

Production

- WIP %

Process

- Production progress %

2-

- Work orders progress % - Yield %

Materials

- Scrap % - Rework % - Rejected %

3-

- Material cost % - Labor productivity

Labor

- Labor utilization factor % - Labor idle time %

4-

- Labor cost % - M/c productivity

Machines

- M/c utilization factor % - M/c idle time % - Machining cost %


Actual Target Change%

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Measures - Average availability %

Maintenance

- Average reliability - MTBF / MTTF - MTTR - D.T. due to maintenance - Corrective maintenance % - Maintenance cost %

6-

- Losses due to maintenance - Inventory availability%

Inventory

- Inventory rejected% - D.T. due to inventory - Losses due to inventory


Services

Actual Target Change%

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24. PRODUCTIVITY IMPROVEMENT TECHNIQUES Productivity can improve through:  Technological development  Improved operational efficiency  Allocation of the resources to produce the right outputs by the right inputs, utilizing the optimal scale and the scope In a comprehensive survey of the literature, more than 50 different techniques of productivity improvement were cataloged. These techniques can classified into seven basic groups: 1- Technology based techniques 2- Material based techniques 3- Product based techniques 4- Employee based techniques 5- Task based techniques 6- Management based techniques 7- Investment based techniques


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24-1- Technology based techniques - Computer Applications - Computer Graphics (Auto-Cad) - Computer Aided Design (CAD) - Computer Aided Process Planning (CAPP) - Computer Aided Manufacturing (CAM) - Group Technology - New Production lines / Machines - Rebuilding old machines - Maintenance planning & control - Layout

24-2- Material based techniques - Inventory control - Material Requirements Planning (MRP) - Quality control - Material handling improvement - Material reuse & recycling - New materials


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24-3- Product based techniques - Research & Development (R&D) - Product design - Product standardization - Product reliability improvement - Value engineering 24-4- Employee based techniques - Individual financial incentives - Group financial incentives - Training & education - Quality circles - Brain storming - Working conditions improvement - Communication improvement - Job rotation 24-5- Task based techniques - Work study - Job evaluation - Job safety Global 71 PE – Dr. Attia Gomaa

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- Human factors engineering (Ergonomics) - Computer aided data processing - Scheduling 24-6- Management based techniques - Marketing Management - Production Management - Quality Management - Cost Management - Maintenance Management - Material Management - Resource Management 24-7- Investment based techniques - Reducing the administration cost - Increasing value added - Increasing contribution - Increasing profit


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25. PRODUCTIVITY IMPROVEMENT CYCLE To manage productivity in a true sense of the term, four formal phases must be recognized: Phase I: Measurement Phase II: Evaluation Phase III: Planning & Implementation Phase IV: Control & Updating Once the productivity level of an organization is measured in the current time period (for example, the current month, quarter, or year), it must be compared with the target level set up in the preceding period. Based on this evaluation, a new productivity level must then be planned for the next coming period. Finally, depending on the nature and level of the planned target of productivity, improvement must take place in the next period. To determine if the planned level has in fact been achieved, productivity must be measured again in the next period. The entire cyclic process repeats for as long as an organization formally manages its productivity level and growth rate.


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Phase I: Measurement  Data collection & analysis  Productivity indicators  Determination of problems types  Determination of problems priorities  Information collection & analysis  System analysis  Proposal solutions Phase II: Evaluation  Feasibility study  Determination of functional requirements  Choose the best solution Phase III: Planning & Implementation  Preparation of implementation specification  Programming  Implementation Phase IV: Control & Updating  Review  Follow-up  Performance evaluation  Productivity analysis  Corrective actions  Plans update  Report preparation


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Performance Management & Appraisal Case Studies


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8- PMIS for a Small Company 8-1- Project Study Phase 8-1-1- Description of the current system M-1- Top management level: M-1-1- Planning: M-1-1-1- Next year predictions M-1-1-2- Risk analysis M-1-1-3- Work Breakdown Structure (WBS) M-1-1-4- Master plans M-1-1-5- Master budget analysis M-1-1-6- Critical resource analysis M-1-2- Control: M-1-2-1- Annual performance evaluation (target / actual) M-1-2-2- Annual performance evaluation for last two years M-1-2-3- Annual performance eval. for last multi years M-1-2-4- Annual performance eval. for critical projects


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M-2- Control management level: M-2-1- Planning: M-2-1-1- Work Breakdown Structure (WBS) M-2-1-2- Master projects schedule M-2-1-3- Resource predictions M-2-1-4- budget predictions M-2-1-5- Risk analysis M-2-1-6- Critical resource allocation M-2-1-7- Action plans (schedule, resources, cost) M-2-1-8- Project Planning (schedule, resources, cost) M-2-1-9- Critical resource analysis for each project M-2-2- Control: M-2-2-1- Annual performance evaluation (Target / Actual) M-2-2-2- Annual performance evaluation for last two years M-2-2-3- Annual performance eval. for last multi years M-2-2-4- Annual critical resource productivity analysis M-2-2-5- Monthly Perf. eval. for the current and last year M-2-2-6- Project performance evaluation (Target / Actual) M-2-2-7- Critical resource productivity anal. for each Project


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M-3- Operational management level: M-3-1- Project targets & requirements M-3-1-1- Target budget, time, quality, etc. M-3-1-2- Constraints. M-3-2- Project design M-3-2-1- Engineering calculations M-3-2-2- Project drawings M-3-2-3- Bill of Materials (BOM) M-3-3- Project Quality M-3-3-1- Standard quality (required) M-3-3-2- Inspection information M-3-3-3- Quality control M-3-4- Project planning M-3-4-1- Master plan M-3-4-2- Action plan M-3-4-3- Detailed plan M-3-4-4- Job description M-3-4-5- Performance rates M-3-4-6- Resource profiles M-3-5- Procurement M-3-5-1- Material Requirements Planning (MRP) M-3-5-2- Suppliers selection M-3-5-3- Procurement planning M-3-5-4- Procurement control


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M-3-6- Inventory M-3-6-1- Inventory ABC analysis M-3-6-2- Inventory limits M-3-6-3- Inventory Lot sizes M-3-6-4- Inventory transactions M-3-6-5- Inventory cost analysis M-3-6-6- Inventory control M-3-7- Production (Construction, Fabrications, .. etc.) M-3-7-1- Production target schedule M-3-7-2- Production materials plans M-3-7-3- Production manpower plans M-3-7-4- Production machines plans M-3-7-5- Production cost analysis M-3-7-6- Production control M-3-8- Maintenance planning M-3-8-1- Maintenance target schedule M-3-8-2- Maintenance spare parts plans M-3-8-3- Maintenance manpower plans M-3-8-4- Maintenance cost analysis M-3-8-4- Maintenance control M-3-9- Project updating M-3-9-1M-3-9-2M-3-10- Project control (target / actual) M-3-10-1- Performance evaluation for production system M-3-10-2- Performance eval. for maintenance system M-3-10-3Global 79 PE – Dr. Attia Gomaa

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8-1-2- Module descriptions: For examples, M-1-2-1- Annual performance evaluation (target / actual)

I- Module block diagram: Inputs

Tools/ Approach

1- Production volume 2- Unit Price Excel 3- Average manpower 4- Average labor rate 5- Direct material quantity 6- Direct material cost 7- Indirect material cost 8- Depreciation 9- Capital cost 10- Total energy consumption 11- Energy cost rate 12- Other expense


Outputs 1- Follow-up indicators. 2- Performance evaluation. 3- Productivity analysis. 4- Perf. Eval. for base year (Actual 2002). 5- Prod. analysis for base year (Actual 2002). 6- Conclusion.

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Inputs Form:

Consider the XYZ company, the data for target and actual for year 2002 are given below: Item Production volume (unit) Unit Price ($) Average manpower (worker) Average labor rate ($/year/worker) Direct material quantity (ton) Direct material cost ($/ton) Indirect material cost (1000$) Depreciation (1000$) Capital cost (1000$) Total energy cons. (1000 k.w.h.) Energy cost ($/ k.w.h.) Other expense (1000$)

Year 2002 Target Actual 1200 1000 900 1000 320 300 950 1000 160 150 970 1000 60 50 100 100 300 300 230 200 0.6 0.5 45 50

Based on these data, construct the following: 1. Follow-up indicators. 2. Performance evaluation. 3. Productivity analysis. 4. Performance evaluation for base year (Actual 2002). 5. Productivity analysis for base year (Actual 2002). 6. Conclusion.


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III- Module Output Forms: (1): FOLLOW-UP INDICATORS Item Production volume (unit) Unit Price ($) Average manpower (worker) Average labor rate $/year/worker Direct material quantity (ton) Direct material cost ($/ton) Indirect material cost (1000$) Depreciation (1000$) Capital cost (1000$) Total energy consumption (1000 k.w.h.) Energy cost ($/ k.w.h.) Other expense (1000$) Total output (M$) Total inputs (M$) Profit (1000$) (%)


Target 2002 1200 900 320 950 160 970 60 100 300 230 0.6 45

Actual Change 2002 % 1000 1000 300 1000 150 1000 50 100 300 200 0.5 50

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(2): PERFORMANCE EVALUATION INDICATORS Item Total output (M$) Labor cost (1000$) Material cost (1000$) Depreciation (1000$) Capital cost (1000$) Energy cost (1000$) Other expense (1000$) Total inputs (1000$) Profit (1000$) (%) Value Added (1000$) ($/$)


Target 2002

Actual 2002 1.0 300 200 100 300 100 50 950 50 5.2% 800 4

Change %

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(3): PRODUCTIVITY ANALYSIS INDICATORS (Monetary unit $/$) Productivity indicator

Target 2002

Total productivity ($/$) Material productivity ($/$) Labor productivity ($/$) Machinery productivity ($/$) Energy productivity ($/$) Capital productivity ($/$) Other expense prod. ($/$) Total factor prod. ($/$)

Actual 2002 1.053 5.000 3.333 10.00 10.00 3.33 20.00 0.583

(Physical units) Labor productivity unit /worker Material productivity unit /ton Energy productivity k.w.h./ unit


3.33 6.67 200

Change %

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(4): PERFORMANCE EVALUATION INDICATORS BASE YEAR – ACTUAL 2002 Item Total output (M$) Labor cost (1000$) Material cost (1000$) Depreciation (1000$) Capital cost (1000$) Energy cost (1000$) Other expense (1000$) Total inputs (1000$) Profit (1000$) (%) Value Added (1000$) ($/$)


Target 2002

Actual 2002 1.0 300 200 100 300 100 50 950 50 (5.2%) 800 (4 $/$)

Change %

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(5): PRODUCTIVITY ANALYSIS INDICATORS BASE YEAR – ACTUAL 2002 (Monetary unit $/$) Productivity

Target 2002

Total productivity ($/$) Material productivity ($/$) Labor productivity ($/$) Machinery productivity ($/$) Energy productivity ($/$) Capital productivity ($/$) Other expense prod. ($/$) Total factor prod. ($/$)

Actual 2002 1.053 5.00 3.33 10.00 10.00 3.33 20.00 0.583

(Physical units) Labor prod. (unit /worker) Material prod. (unit /ton) Energy prod. K.w.h. / unit


3.33 6.67 200

Change %

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IV- Module Calculations: Available Information: Output elements:  Production volume  Unit price Total output = Production volume * Unit price Inputs elements:  Labor cost  Material cost  Depreciation  Capital cost  Energy cost  Other expense Total inputs = Labor cost + Material cost + Capital cost + Energy cost + Other expense


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Follow-up indicators: 1- Profit = Total output - Total inputs Profitability = Total output / Total inputs Performance indicators: 2- Value Added = Revenue – Material Cost Value Added % = Value Added / Material Cost 3- Contribution = Fixed cost + Profit or Contribution = Total output – Variable inputs Contribution % = Contribution / Variable inputs Productivity Indicators (Monetary unit $/$): 4- Total productivity = Total output / Total inputs 5- Material productivity = Total output / Material cost 6- Labor productivity = Total output / Labor cost 7- Machinery productivity = Total output / Depreciation 8- Energy productivity = Total output / Energy cost 9- Capital productivity = Total output / Capital 10- Other expense productivity= Total output / Other expense


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11- Total factor productivity = Net output / Internal resources Net output = Total output – External resources Assume that the company purchases all its materials and services. External resources = Material cost + Capital cost + Energy cost + Other expense Productivity Indicators (Physical units): 12- Labor productivity = Production volume / Average manpower 13- Material productivity = Production volume / Direct material quantity 14- Energy productivity = Total energy consumption / Production volume


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M-1-2-2- Annual performance evaluation for last two years

Module block diagram: Inputs

Tools/ Approach



Outputs 1- Follow-up indicators. 2- Performance evaluation. 3- Productivity analysis. 4- Perf. Eval. for base year 2002. 5- Prod. analysis for base year 2002. 6- Conclusion.

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I- Module Inputs Form: Consider the XYZ company, the data for output produced and inputs consumed for May 2001 & May 2002 are given below:

Item Production volume (unit) Unit Price ($) Average manpower (worker) Average labor rate ($/year/worker) Direct material quantity (ton) Direct material cost ($/ton) Indirect material cost ($) Depreciation ($) Capital cost ($) Total energy consumption (K.W.H.) Energy cost ($/ K.W.H.) Other expense ($)

Year 2001 1200 800 310 900 180 900 45,000 100,000 300,000 250,000 0.5 60,000

Based on these data, construct the following: 1. Follow-up indicators. 2. Performance evaluation. 3. Productivity analysis. 4. Performance evaluation for base year 2002. 5. Productivity analysis for base year 2002. 6. Conclusion.


Year 2002 1000 1000 300 1000 150 1000 50,000 100,000 300,000 200,000 0.5 50,000

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II- Module Output Forms: (1): FOLLOW-UP INDICATORS

Item Production volume (unit) Unit Price ($) Average manpower (worker) Average labor rate $/year/worker Direct material quantity (ton) Direct material cost ($/ton) Indirect material cost (1000$) Depreciation (1000$) Capital cost (1000$) Total energy consumption (1000 k.w.h.) Energy cost ($/ k.w.h.) Other expense (1000$) Total output (M$) Total inputs (M$) Profit (1000$) (%)


Year

Year

Change

2001 1200 800 310 900 180 900 45 100 300 250 0.5 60

2002 1000 1000 300 1000 150 1000 50 100 300 200 0.5 50

% - 16.7 + 25.0 - 3.2 + 11.1 - 16.7 + 11.1 + 11.1 0.0 0.0 - 25.0 0.0 + 16.7

0.96 .971 - 11 -1.1

1.0 .950 50 5.2

+ 4.20 - 2.2 + 6.3

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(2): PERFORMANCE EVALUATION INDICATORS Item Total output (M$) Labor cost (1000$) Material cost (1000$) Depreciation (1000$) Capital cost (1000$) Energy cost (1000$) Other expense (1000$) Total inputs (1000$) Profit (1000$) (%) Value Added (1000$) ($/$)


Year

Year

Change

2001 0.96 279 207 100 300 125 60 971 - 11

2002 1.0 300 200 100 300 100 50 950 50 5.2%

% + 4.20 + 7.53 + 3.38 0.0 0.0 - 20.0 - 16.7 - 2.2

- 1.1 453

+ 6.3 800

2.19

4

+ 82.64

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(3): PRODUCTIVITY ANALYSIS INDICATORS (Monetary unit $/$) Productivity indicator Total productivity ($/$) Material productivity ($/$) Labor productivity ($/$) Machinery productivity ($/$) Energy productivity ($/$) Capital productivity ($/$) Other expense prod. ($/$) Total factor prod. ($/$)

Year

Year

Change

2001 0.989 4.638 3.441 9.600 7.680 3.200 16.000 0.463

2002 1.053 5.000 3.333 10.00 10.00 3.33 20.00 0.583

% + 6.47 + 7.81 - 3.23 + 4.17 + 30.21 + 4.06 + 25.0 + 25.92

3.33 6.67 200

- 13.95 0.0 - 3.98

(Physical units) Labor productivity unit /worker Material productivity unit /ton Energy productivity k.w.h./ unit


3.87 6.60 208.3

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(4): PERFORMANCE EVALUATION INDICATORS BASE YEAR – 2002 Item Total output (M$) Labor cost (1000$) Material cost (1000$) Depreciation (1000$) Capital cost (1000$) Energy cost (1000$) Other expense (1000$) Total inputs (1000$) Profit (1000$) (%) Value Added (1000$) ($/$)


Year

Year

Change

2001 1.2 310 230 100 300 125 50 1015 185

2002 1.0 300 200 100 300 100 50 950 50

% - 16.7 % - 3.2 % - 13.0 % 0.0 0.0 - 20 % 0.0 - 6.4 %

(15.4%) 970

(5.2%) 800

- 10.2

(4.2 $/$)

(4 $/$)

- 4.76 %

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(5): PRODUCTIVITY ANALYSIS INDICATORS BASE YEAR – 2002 (Monetary unit $/$) Productivity Total productivity ($/$) Material productivity ($/$) Labor productivity ($/$) Machinery productivity ($/$) Energy productivity ($/$) Capital productivity ($/$) Other expense prod. ($/$) Total factor prod. ($/$)

Year

Year

Change

2001 1.182 5.217 3.871 12.00 9.60 4.00 24.00 0.811

2002 1.053 5.00 3.33 10.00 10.00 3.33 20.00 0.583

% - 10.9 - 4.16 - 13.98 - 16.67 + 4.17 + 16.75 + 16.67 - 28.11

3.33 6.67 200

- 13.95 0.0 - 3.98

(Physical units) Labor prod. (unit /worker) Material prod. (unit /ton) Energy prod. K.w.h. / unit

3.87 6.67 208.3

IV- Module Calculations: See M-1-2-1 M-1-2-3- Annual performance evaluation for last multi years

I- Module block diagram:


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Tools/ Approach



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Outputs 1- Follow-up indicators. 2- Performance evaluation. 3- Productivity analysis. 4- Perf. Eval. for base year 2002. 5- Prod. analysis for base year 2002. 6- Risk analysis for the future year (2003) 7- Conclusion.

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II- Module Inputs Form: Consider the XYZ company, the data for output produced and inputs consumed for four last years (from 1999 to 2002) are given below: Item Production volume (unit) Unit Price ($) Average manpower (worker) Average labor rate ($/year/worker) Direct material quantity (ton) Direct material cost ($/ton) Indirect material cost (1000$) Depreciation (1000$) Capital cost (1000$) Total energy consumption (1000 k.w.h.) Energy cost ($/ k.w.h.) Other expense (1000$)

Year 1999 1450 720 340 700

Year 2000 1300 750 330 750

Year 2001 1200 800 310 900

Year 2002 1000 1000 300 1000

220 700 25 100 300 310

200 750 30 100 300 300

180 900 45 100 300 250

150 1000 50 100 300 200

0.3 75

0.4 70

0.5 60

0.5 50

Based on these data, construct the following: 1. Follow-up indicators. 2. Performance evaluation indicators. 3. Productivity analysis indicators. 4. Performance evaluation for base year 2002. 5. Productivity analysis for base year 2002. 6. Risk analysis for the future year (2003). 7. Conclusion.


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III- Module Output Forms: See M-1-2-2(1): FOLLOW-UP INDICATORS (2): PERFORMANCE EVALUATION INDICATORS (3): PRODUCTIVITY ANALYSIS INDICATORS (4): PERFORMANCE EVALUATION INDICATORS BASE YEAR – 2002 (5): PRODUCTIVITY ANALYSIS INDICATORS BASE YEAR – 2002 (6):RISK ANALYSIS Item P. volume (unit)

Year Year Year Year 1999 2000 2001 2002 1450 1300 1200 1000


Exp. 2003 ?

forecasting Limit ?

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IV- Module Calculations: See M-1-2-1 Forecasting & Risk estimation Y=a+bX Sum Y = n . a + b Sum X ,

Sum XY = a Sum X + b Sum X2

Measuring the accuracy of forecasting: 1- Coefficient of correlation r =( n Sum XY - Sum X Sum Y) / ( n Sum X2 – (Sum X) 2 ) 0.5 ( n Sum Y2 – (Sum Y) 2 ) 0.5 2- Mean Absolute Deviation MAD = sum | A – F | / (n -1) 3- Mean Squared Error MSE = sum (A – F)2 / (n -1) Controlling the forecast: CLs = 0 ± Z S

0

S = Standard deviation of the distribution of errors = MSE Z=3 Z=2 Z=1

99.7% of the values can be expected. 95.5% of the values can be expected. 68.5% of the values can be expected.


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Example: Production volume Year 1999 1450

Item P. volume (unit) X 1 Y 1450 XY 1450 n=4 Sum X = 10 Sum Y = 4950

Year 2000 1300

2 1300 2600

3 1200 3600

Year 2001 1200

Year 2002 1000

4 1000 4000

5 ?

Exp. 2003 ?

Risk% 2003 ?

Sum X2 = 30 Sum XY = 11650

Sum Y = n . a + b Sum X

Sum XY = a Sum X + b Sum X2

4950 = 4 a + 10 b

11650 = 10 a + 30 b 14850 = 12 a + 30 b

a = 1600

b = - 145

Y = 1600 – 145 X X A F (A-F) (A-F)2

1 1450 1445 5 25

Y5 = 1600 – 145 (5) = 875 2 1300 1310 10 100

3 1200 1165 35 1225

MSE = 1750 / (4 -1) = 583 S = 24

Z=2

CLs = 0 ± Z S = 0 ± 48


4 1000 1020 20 400

5 875

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M-1-2-4- Annual performance evaluation for critical projects Module Input Forms: 1- Relations: Project ID Predecessors

P1 -

P2 -

P3 -

P4 -

P5 P2 & P4

P6 P3

P7 P6

P8 P5 & P7

Project #

Production plan & critical resources Duration Equipment Manpower cost Material cost (month) cost (M$) (M$) (M$) P1 5 5.0 10 30 P2 2 1.5 1.5 3 P3 2 1.5 2.5 8 P4 2 1.0 2.0 6 P5 3 2.0 8.0 14 P6 2 2.0 4.0 8 P7 3 0.5 1.5 4 P8 3 0.5 1.5 2 Target budget rate: 11 M$ /month & Target duration: 10 month Overhead cost rate = $ 4,000 /month & Downtime cost rate = $ 6,000/month Project #

Actual production & critical resources Duration Equipment Manpower cost Material cost (month) cost (M$) (M$) (M$) P1 6 4.0 10 32 P2 3 2.0 2.0 4 P3 2 1.5 3.0 7 P4 3 1.0 2.0 5 P5 4 2.0 7.0 15 P6 2 2.0 5.0 7 P7 3 0.6 1.4 4 P8 2 0.7 1.3 2 Maximum budget rate: 14 M$ /month & Actual duration: 12 month Based on these data, construct the following: 1. Target plans (schedule, equipment profile, cost profile, and S-curve). 2. Follow-up indicators 3. Performance evaluation indicators 4. Productivity analysis indicators


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5. Conclusion.

M-2-2-5- Monthly Performance evaluation for the current and last year Module Input Forms: The monthly production report for an Egyptian foundry is as follows: Indicator Production indicators: Planned production quantity Actual production quantity Rejected quantity Resources indicators: Average working manpower Total manpower working time Average working furnaces Furnaces working time Total charge material quantity Total energy consumption

Year 2001

Year 2000

Unit

January Year to date

January Year to date

Ton Ton Ton

160 130 10

1200 900 70

120 110 8

900 800 50

Man Man-hr. Furnace Fr.-hr. Ton K.W.H

50 7250 30 4500 185 78000

52 51000 33 33000 1300 550000

48 7000 28 3500 160 75000

50 50000 32 25000 1100 520000

Based on these data, determine the different performance evaluation indicators for the production system.


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M-2-2-6- Project performance evaluation (Target/ Act.) I- Module Input Forms: The production plan and the actual production in a power towers fabrication project are as follows: Activity ID (work order) A11 A12 A13 A14 A15 Predecessors A11 A13 Target plan: Target no. of equipment is 12 eq./week & Target duration: 24 week Work Production plan & critical resources order # Duration Number of Planned Standard Planned Planned (week) equipment quantity cost manpower material (ton) ($/ton) (Man(ton/ton) day/ton) A11 8 5 40 1000 100 1.20 A12 5 7 30 1200 110 1.20 A13 6 8 50 900 95 1.20 A14 8 5 30 850 80 1.20 A15 20 5 80 950 95 1.20 Overhead cost rate = $ 1,000 /week & Downtime cost rate = $ 3,000/week Actual plan: Work order #

Actual production & critical resources Duration Number of Actual Actual Actual (week) equipment quantity cost manpower (ton) ($/ton) (Manday/ton) A11 9 6 40 1100 95 A12 6 6 20 1200 110 A13 6 8 40 1000 100 A14 9 5 35 800 80 A15 20 5 90 1000 85 Actual no. of equipment is 14 eq./week & Actual duration: 27 week

Actual material (ton/ton) 1.30 1.25 1.20 1.15 1.16

Based on these data, determine the different performance evaluation indicators for the production system. Global 105 PE – Dr. Attia Gomaa

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M-3-4-5- Project performance evaluation (Target/ Actual) Gas Pipe Line 120 Km Target production: Activity ID

Activity Description

Performance Cost rate 1000 L.E. / Km Km/da y E Excavation 2 5 S Stringing 4 400 W Welding 1 20 N NDT 2 10 C Coating & Wrapping 2 2 L Lowering 4 1 B Backfilling 4 3 T Hydrotest (3 days) 0.1 Target duration: 6 month * 24 day/month Overhead cost rate = $ 1,000 /day & Downtime cost rate = $ 2,000/day Actual production:

Activity Activity Description Duration ID (day) E Excavation 50 S Stringing 25 W Welding 140 N NDT 80 C Coating & Wrapping 50 L Lowering 40 B Backfilling 25 T Hydrotest (5 days) Actual duration: 8 month * 24 day/month

Cost 1000 L.E. 500 40,000 2,500 1,500 250 150 350 10



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M-3-6-1- Production Performance evaluation (Target/ Actual) I- Module Input Forms: The monthly production plan and the actual production are as follows: Production Plan (Jan. 2001) Activity ID

Planned quantity (ton)

Standard cost ($/ton)

Planned period (day)

A01 A02 A03 A04 A05

40 30 50 20 20

1000 1200 900 850 950

10 6 9 6 5

Target date Jan. 2001 1 to 11 3 to 9 11 to 20 20 to 26 25 to 30

Estimated manpower (manhour/ton) 50 60 45 40 48

Estimated material quantity (ton) 52 45 70 24 26

Actual Production (Jan. 2001) Activity Actual ID quantity (ton) A01 A02 A03 A04 A05

40 20 40 10 20

Actual cost ($/ton)

Actual period (day)

Actual date Jan.

1100 1200 1000 800 900

9 5 8 3 6

2 to 11 3 to 8 12 to 20 20 to 23 25 to 31

Actual manpower (manhour/ton) 70 60 50 35 45

Actual material quantity (ton) 56 28 60 13 28



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M-3-6-2- Production Performance evaluation (Target/ Actual) Monthly Plan for Civil Works (Jan. 2004) 1- Activity List Activity

ID

1 2 3 4 5 6 7 8

MOB EX1 EX2 EX3 CO1 CO2 CO3 FIN

Mobilization Excavation #1 Excavation #2 Excavation #3 Concrete #1 Concrete #2 Concrete #3 Finishing

Duration Predecessors (day) 1 3 MOB 4 MOB 2 MOB 8 EX1 12 EX2 6 EX3 2 CO1 CO2 CO3

Relations (SS, FF, etc.)

SS 1 SS 1 SS 1 FS5 FS5 FS5

2- Resource List: Resource Resources description code L01 Excavation worker

md

L02

Concrete worker

md

6

12

60

E01

Excavator

eqd

1

2

400

E02

Concrete mixer

eqd

1

2

500

M01

Concrete material

m3

-

-

500

md = man-day

Unit

Limits/day Norm. Max. 3 6

Price LE/unit 40

eqd = Equipment day

3- Resource Allocation: Activity 1 2 3 4 5 6 7

ID Mobilization Excavation # 1 Excavation # 2 Excavation # 3 Concrete # 1 Concrete # 2 Concrete # 3


MOB EX1 EX2 EX3 CO1 CO2 CO3

Resource/day 1 2 L01, 2 L01, 3 E01, 1 L01, 3 E01, 1 L01, 3 E01, 1 L02, 6 E02, 1 L02, 6 E02, 1 L02, 6 E02, 1

3

M01, 40 M01, 50 M01, 40

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Finishing

FIN

L02, 3

4- Base Calendar (Working periods) Saturday Sunday Monday Tuesday X X X X Holidays:

Services

Wednesday X

Thursday X 1/01/04

Friday

20 to 21 Jan. 2004

Actual production: Activity MOB EX1 EX2 EX3 CO1 CO2 CO3 FIN

Duration (day) 1 2 4 2 7 13 7 3

1 L01, 2 L01, 2 L01, 2 L01, 3 L02, 6 L02, 7 L02, 5 L02, 4

Actual resources/day 2 E01, 1 E01, 1 E01, 1 E02, 1 E02, 1 E02, 1

3

M01, 35 M01, 45 M01, 45

Actual duration: 31 day

Based on these data, construct the following: 1. Target plans (schedule, resource profiles, cost profile, and S-curve). 2. Follow-up indicators 3. Performance evaluation indicators 4. Productivity analysis indicators 5. Conclusion.


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M-3-6-2- Maintenance performance evaluation (Target/ Actual) I- Module Input Forms: The yearly PM programs information for six similar gas turbines in a power station are as follows: Maintenance levels per gas turbine PM Type Frequency Duration No. of Spare parts Cost (day) Workers $1000 Y – Level 1 Yearly 15 20 10 S – Level 2 6 Monthly 10 20 8 3M – Level 3 3 Monthly 5 15 5 M – Level 4 Monthly 2 10 2  Gas turbine operating conditions: 24 hour/day  Workers operating conditions: 300 day/year & 8 hour/day  Average effort of CM = 380 man-day per gas turbine  Average annual spare parts CM cost = $ 12000 per gas turbine  Average CM downtime = 15 days/year per gas turbine  Average downtime cost rate = $ 1000 per day  Average labor cost rate = $ 10 per man-day  Overhead cost = 25 % direct cost (spare parts & labor)

Actual work performed:  Total labor force = 30 workers  Annual spare parts cost = $ 360,000  Average down time = 70 day/year per gas turbine Based on these data, determine the different performance evaluation indicators for the maintenance system.


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M-3-6-2- Maintenance performance evaluation (Target/ Actual) The yearly PM programs information for six similar gas turbines in a power station are as follows: Target work performed: Item Total labor force (worker) Annual spare parts cost ($1000) Annual labor cost ($1000) Overhead cost ($1000) Average down time (day/year per gas turbine)

PM 18 264 --51

CM 7 72 --15

Total 25 336 75 514 66

CM 10 100 --5

Total 30 400 80 520 50

Average downtime cost rate = $ 1000 per day Actual work performed: Item Total labor force (worker) Annual spare parts cost ($1000) Annual labor cost ($1000) Overhead cost ($1000) Average down time (day/year per gas turbine)

PM 20 300 --45

Based on these data, determine the different performance evaluation indicators for the maintenance system.


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M-3-6-2- Maintenance performance evaluation (Target/ Actual) The six-monthly maintenance costs ($1000) for a productive system are as follows: Target Costs: Cost item PM Cost: Spar parts Labor CM Cost: Spar parts Labor DT Cost

Jan

Feb

Mar

Month # Apr

May

Jun

Jly

100 50

100 50

100 50

100 50

100 50

100 50

100 50

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

Month # Jan Feb

Mar

Apr

May

Jun

Jly

23 32

38 65

49 96

56 94

68 94

65 90

54 72

231 503 407

213 370 397

181 293 320

185 164 290

199 201 330

196 193 320

157 142 362

Actual Costs: Cost item PM Cost: Spar parts Labor CM Cost: Spar parts Labor DT Cost



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M-3-6-3- Maintenance performance evaluation (Target/ Actual) Monthly Maintenance Plan for Wire Production Line (1 Jan. 2004)

9

W01

6

W02

3

2

W03

1- Activity List Activity 1 2 3 4 5 6 7 8

Preparation Mechanical maintenance # 01 Electrical maintenance # 01 Mechanical maintenance # 02 Electrical maintenance # 02 Mechanical maintenance # 03 Electrical maintenance # 03 Setup

ID

Duration (day)

PRP MM1 EM1 MM2 EM2 MM3 EM3

2 7 9 6 8 5 7

STP

1

Predece ssors PRP MM1 PRP MM2 PRP MM3 EM1 EM2 EM3

Relations (SS, FS, FF, and SF) SS 3 SS 2 SS 2 -

2- Resource List Resource Code L01

Resources description

Unit

Limits/day Norm. Max. 3 6

Price LE/unit 40

Mechanical worker

md

L02

Electrical worker

md

4

8

60

SPS

Spare parts & supplies

cost

-

-

1000


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3- Resource Allocation Resource Activity

ID

1 2 3 4 5 6 7

Preparation Mechanical maintenance # 01 Electrical maintenance # 01 Mechanical maintenance # 02 Electrical maintenance # 02 Mechanical maintenance # 03 Electrical maintenance # 03

PRP MM1 EM1 MM2 EM2 MM3 EM3

8

Setup

STP

L01/day

L02/day

2 4 3 2 2

1 5 4 3

SPS (Total) 1 3 4 2 3 2 3

2

1

4- Base Calendar (Working periods) Saturday Sunday X X

Monday X

Tuesday X

Holidays:

Wednesday X

Thursday X 1/01/04

Friday

20 to 21 Jan. 2004

Actual work performed: Activity

Duration (day)

Actual resources L01/ L02/ SPS day day (Total) 2 1 1 4 3 4 5 4 2 5 3 2 3 3 2 1 2 1

PRP Preparation 1 MM1 Mechanical maintenance # 01 6 EM1 Electrical maintenance # 01 9 MM2 Mechanical maintenance # 02 7 EM2 Electrical maintenance # 02 7 MM3 Mechanical maintenance # 03 6 EM3 Electrical maintenance # 03 7 STP Setup 1 Actual duration: 31 day Based on these data, construct the following: 1. Target plans (schedule, resource profiles, cost profile, and S-curve). 2. Follow-up indicators 3. Performance evaluation indicators 4. Productivity analysis indicators 5. Conclusion.


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CASE 14The monthly production plan and the actual production in ABC Company are as follows: Work order # A11 A12 A13 A14 A15

Production Plan (Jan. 2001) Planned Estimated quantity Material (ton) quantity (ton) 40 60 30 40 50 65 20 25 20 30

Actual production (Jan. 2001) Actual Actual quantity material quantity (ton) (ton) 40 63 20 40 40 62 10 22 20 27

Based on these data, determine the different control indicators. CASE 12The monthly production plan and the actual production in ABC Company are as follows: Work order # A11 A12 A13 A14 A15

Production Plan (Jan. 2001) Planned Estimated quantity Production (ton) date 40 1 to 9 Jan. 30 7 to 13 Jan. 50 11 to 20 Jan. 20 20 to 25 Jan. 20 25 to 30 Jan.

Actual production (Jan. 2001) Actual Actual quantity production date (ton) 40 1 to 8 Jan. 20 8 to 14 Jan. 40 12 to 22 Jan. 10 23 to 28 Jan. 20 26 to 31 Jan.

Based on these data, determine the different control indicators.


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CASE 15The monthly production plan and the actual production in ABC Company are as follows: Work order # A11 A12 A13 A14 A15

Production Plan (Jan. 2001) Planned Estimated quantity (ton) Manhours/ton 40 50 30 60 50 45 20 43 20 48

Actual production (Jan. 2001) Actual Actual quantity (ton) man-hours/ton 40 20 40 10 20

45 58 48 45 50

Based on these data, determine the different control indicators. CASE 14The annual budget and the actual cost for a production department are as follows: Cost item Direct labor Indirect labor Direct materials Indirect materials

Budget Current Year to month date 5000 70000 4936 53834 1000 10000 808 8565

Actual Current month 4000 3111 400 232

Year to date 60000 48834 5000 4711

Based on these data, determine the different cost indicators for this department?


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CASE 16The monthly production plan and the actual production are as follows: Production Plan (Jan. 2001) Activity ID

Planned quantity (ton)

Standard cost ($/ton)

Planned period (day)

Target date Jan. 2001

A01 A02 A03 A04 A05

40 30 50 20 20

1000 1200 900 850 950

10 6 9 6 5

1 to 11 3 to 9 11 to 20 20 to 26 25 to 30

Estimated manpower (manhour/ton) 50 60 45 40 48

Estimated material quantity (ton) 52 45 70 24 26

Actual Production (Jan. 2001) Activity ID A01 A02 A03 A04 A05

Actual quantity (ton) 40 20 40 10 20

Actual cost ($/ton) 1100 1200 1000 800 900

Actual period (day) 9 5 8 3 6

Actual Actual Actual material date manpower quantity Jan. (man-hour/ton) (ton) 2 to 11 70 56 3 to 8 60 28 12 to 20 50 60 20 to 23 35 13 25 to 31 45 28



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CASE 17The three monthly production plan and the actual production for an Egyptian foundry are as follows: Three Monthly Production Plan (Year 2001) Month

Planned quantity (ton) January 160 February 140 March 180

Standard cost (1000 $) 157 139 180

Estimated manpower (man-hour) 7810 7000 8500

Estimated material quantity (ton) 217 190 250

Three Monthly Actual Production (Year 2001) Month

Actual quantity (ton) January 130 February 128 March 175

Actual cost (1000 $) 134 126 177

Actual Manpower (man-hour) 7250 6900 8400

Actual material quantity (ton) 185 180 240



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CASE 18The annual budget and the actual cost for a production department are as follows: Item Production quantity (ton) Labor rate ($/ton) Indirect labor Material quantity (ton) Material price ($/ton) Indirect materials

Budget Current Year to month date 50 650 100 1000 70 300 1000

105 11000 800 290 9000

Actual Current Year to month date 40 550 102 1500 40 302 600

105 13000 600 295 6000

Based on these data, determine the different cost performance indicators for this department? CASE 18The annual material requirements plan and the actual needed for a production department are as follows: Plan (Jan. 2001) Actual (Jan. 2001) Material Planned Standard cost Actual Actual cost Code quantity ($/unit) quantity ($/unit) (unit) (unit) 1001 100 1000 120 1100 1002 500 1200 450 1300 1003 800 500 900 480 1004 100 250 1005 90 300 Based on these data, determine the different cost performance indicators for this department? Global 119 PE – Dr. Attia Gomaa

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CASE 19The annual spare parts plan and the actual needed for a maintenance department are as follows: Spare parts Code 2001 2002 2003 2004 2005

Plan Actual Planned quantity Standard Actual quantity Actual cost (unit) cost ($/unit) (unit) ($/unit) 200 10 220 12 600 12 550 13 900 50 900 48 1000 25 500 10 100 8

Based on these data, determine the different cost performance indicators for this department? CASE 20The annual overhaul plan and the actual overhauls for a maintenance department are as follows: Machine type Gas turbines 50 MW Gas turbines 100 MW Gas turbines 120 MW

Annual overhaul plan M/c Average time numbers man-hour/Mc. 6 500 4 800 1 1000

Actual overhauls M/c Average time Numbers man-hour/Mc. 4 600 3 750 1 1200

Based on these data, determine the different cost performance indicators for this department?


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CASE 21-

Monthly production information on Foundry Shop FS510 was as follows: Item Working days Standard production rate (ton/hr) Average daily time (hr/day) Average down time (hr/day) Average standby (hr/day) Average target quantity (ton/day) Average actual quantity (ton/day) Average sound quantity (ton/day) Average defect quantity (ton/day) Average energy consumption (1000 kwh/day) Material cost (1000 L.E/day)

Jan. 2004 31 8 24 6 3 120 80 70 10 49

Feb. 2004 28 8 24 4 3 136 105 98 7 67

100

130

Based on these data, determine the different PE indicators for the productive system.


AUC- Engineering Basic data Item Jan 04 Production rate (ton/hr) 8 Total time (hr/day) 24 Average down time (hr/day) 6 Average available time (hr) 18 Average standby (hr/day) 3 Average used time (hr/day) 15 Average target quantity 120 (ton/day) Average actual quantity 80 (ton/day) Average sound quantity 70 (ton/day) Average defect quantity 10 (ton/day) (1 4 % ) Energy productivity (kwh/ton) 700 Material productivity (1000 1429 L.E/ton)


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Feb 04 8 24 4 20 3 17 136

Feb. / Jan. 100 % 100 % 67 % 111 % 100 % 113 % 113 %

105

125 %

98

129 %

7 (7%)

64 %

684 1326

98 % 92 %

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Performance Evaluation January February 2004 2004 18/24= 75 % 20/24= 83 %

Feb. / Jan. 111 %

Performance efficiency Quality rate

80/120= 67 % 105/136= 77 115 % % 70/80= 88 % 98/105= 93 % 106 %

Utilization ratio

15/18= 83 %

17/20= 85 %

102 %

Uptime (hr/day)

70/8= 8.75

98/8= 12.25

140 %

Uptime ratio

8.75/15= 49% 12.25/17=72 %

147 %

OEE

44 %

60 %

136 %

TEEP

37 %

51 %

138 %

NEE

29 %

52 %

179 %

Energy productivity (kwh/ton) Material productivity (1000 L.E/ton)

700

684

98 %

1429

1326

92 %


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CASE 22-

The six-monthly maintenance costs ($1000) for a productive system are as follows: Target Costs: Jan

Feb

Month # Mar Apr May

100 50

100 50

100 50

100 50

100 50

100 50

100 50

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

Feb

Month # Mar Apr May

Jun

Jly

23 32

38 65

49 96

56 94

68 94

65 90

54 72

231 503 407

213 370 397

181 293 320

185 164 290

199 201 330

196 193 320

157 142 362

Cost item PM Cost: Spar parts Labor CM Cost: Spar parts Labor DT Cost

Jun

Jly


Jan



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Target: Cost item PM Cost CM Cost TM Cost DT Cost TM+DT PM/TM CM/PM

Jan 150 350 800 300 1100 0.14 2.33

Feb 150 350 800 300 1100 0.14 2.33

Mar 150 350 800 300 1100 0.14 2.33

Month # Apr May 150 150 350 350 800 800 300 300 1100 1100 0.14 0.14 2.33 2.33

Jun Jly Total 150 150 1050 350 350 2450 800 800 5600 300 300 2100 1100 1100 7700 0.14 0.14 0.955 2.33 2.33 16.33

Actual: Cost item PM Cost CM Cost TM Cost DT Cost TM+DT PM/TM CM/PM

Jan Feb Mar 55 103 145 734 583 474 1196 1083 939 407 397 320 1603 1480 1259 0.05 0.10 0.15 13.35 5.66 3.27

Month # Apr May 150 162 349 400 789 892 290 330 1079 1222 0.19 0.18 2.33 2.47

Jun Jly Total 155 126 896 369 299 3208 864 787 6550 320 362 2426 1184 1149 8976 0.18 0.16 1.007 2.38 2.37 31.82

Change %: Cost item

Jan

Month # Feb Mar Apr May Jun

PM Cost CM Cost TM Cost DT Cost TM+DT PM/TM CM/PM


Jly

Total

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CASE 23-

The yearly PM programs information for six similar gas turbines in a power station are as follows:

Target work performed: Item Total labor force (worker) Annual spare parts cost ($1000) Annual labor cost ($1000) Overhead cost ($1000) Average down time (day/year per gas turbine)

PM 18 264 --51

CM 7 72 --15

Total 25 336 75 514 66

Average downtime cost rate = $ 1000 per day

Actual work performed: Item Total labor force (worker) Annual spare parts cost ($1000) Annual labor cost ($1000) Overhead cost ($1000) Average down time (day/year per gas turbine)

PM 20 300 --45

CM 10 100 --5

Total 30 400 80 520 50



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Performance Evaluation Sheet: Change % + 20 + 19 + 6.6 + 1.2 + 8.1 - 24.3 - 24.3

Item

Target

Actual

Total labor force (worker) Annual s. parts cost ($1000) Annual labor cost ($1000) Overhead cost ($1000) Total m. cost ($1000) Average down time Down time cost ($1000)

25 336 75 514 925 66 66

30 400 80 520 1000 50 50

991 81.9 7/18 = 38.9 72/264 = 27.3 514/411= 1.25

1050 86.3 10/20 = 50 100/300 = 33.3 520/480= 1.08

+ 6.0 + 5.3 + 28.5

25/6= 4.17

30/6= 5.00

- 16.6

TMC + DTC Availability % CM/PM % (labor force) CM/PM % (Spare parts) Overhead %

Labor productivity % (worker/gas turbine)


+ 22.0 - 13.6

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CASE 24-

The six-monthly maintenance costs ($1000) for a productive system are as follows: Target Costs: Cost item PM Cost: Spar parts Labor CM Cost: Spar parts Labor DT Cost

Jan

Feb

Month # Mar Apr May

Jun

Jly

100 50

100 50

100 50

100 50

100 50

100 50

100 50

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300

200 150 300


Jan

Feb

Month # Mar Apr May

Jun

Jly

23 32

38 65

49 96

56 94

68 94

65 90

54 72

231 503 407

213 370 397

181 293 320

185 164 290

199 201 330

196 193 320

157 142 362



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Target: Cost item Jan

PM Cost CM Cost DT Cost TM Cost

150 350 300 800

Feb

150 350 300 800

Month # Mar Apr May

150 350 300 800

150 350 300 800

150 350 300 800

Jun

Jly

150 350 300 800

150 350 300 800

Jun

Jly

155 369 320 864

126 299 362 787

Actual: Cost item

PM Cost CM Cost DT Cost TM Cost

Jan

Feb

55 734 407 1196

103 583 397 1083


Month # Mar Apr May

145 474 320 939

150 349 290 789

162 400 330 892

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Global Performance Evaluation Module Main Inputs: Review information (operational P.E.) Dimension Working conditions

Production Critical materials (XXX) Critical manpower (YYY) Critical equipment (ZZZZ) Critical supplies (WWW) Cost

Others

Item - Total monthly days - Planned working days - Unplanned working days - Actual working days - Std. working hours/day - Overtime (man-hour) - Std. perf. rate (ton/day) - Actual production (ton) - Rejected (ton) - Available materials (ton) - Used materials (ton) - Recycle materials (ton) - Total daily (worker) - Average daily (worker) - Operating units (eq.) - Standby units (eq.) - Actual hours (eq.-hour) - Std. rate (www/ton) - Total energy (www) - Material (1000LE) - Labor (1000LE) - Equipment (1000LE) - Subcontractor (1000LE) - Prod. overhead (1000LE) - Office overhead (1000LE) - Bonus (1000LE) - Total revenue (1000LE) -


Per 1 Per 2 %

PE

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Main Indicators: P.E. Report (Middle management level) Dimension Working conditions Production Critical materials Critical manpower Critical equipment Critical supplies Cost

Global

Item - Availability % - Reliability % - Utilization % - Overtime ratio % - Performance % - Quality rate % - Material utilization % - Material yield % - Manpower utilization % - Equipment utilization % - www utilization % - Overhead ratio % - Bonus ratio % - Profit % - Value added ratio % System: - Total productivity % - OEE % - OCE % Specific: - Material productivity % - Labor productivity % - Machine productivity % - Energy productivity % -


Jan.

Feb. %

PE

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KPIs report: P.E. Report (Top management level or System level) Dimension Cost

Global

Item - Overhead ratio % - Bonus ratio % - Profit % - Value added ratio % System: - Total productivity % - OEE % - OCE % Specific: - Material productivity % - Labor productivity % - Machine productivity % - Energy productivity % -

Recommendation:


Jan.

Feb. %

PE

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Real case study: Foundry department – xyz Company Global Performance Evaluation Module Review information (operational P.E.) Dimension Working conditions

Production Critical materials Critical manpower Critical equipment (furnace) Critical supplies (energy) Cost

Others

Item - Total monthly days - Planned working days - Unplanned working days - Actual working days - Std. working hours/day - Overtime (man-hour) - Std. perf. rate (ton/day) - Actual production (ton) - Rejected (ton) - Available materials (ton) - Used materials (ton) - Used alloys (ton) - Recycle materials (ton) - Total daily (worker) - Average daily (worker) - Operating units (eq.) - Standby units (eq.) - Actual hours (eq.-hour) - Std. energy rate (kwh/ton) - Total energy (1000 kwh)

Jan. 31 25 3 20 10 500 100 1800 200 2500 2200 20 500 20 18 2 1 180 600 1400

Feb. % 29 24 2 21 10 600 100 1700 100 2000 2000 8 460 20 17 2 1 200 600 1300

-

1600 1000 800 200 400 200 60 6000

1500 1000 800 300 300 200 58 6100

Material (1000 LE) Labor (1000 LE) Equipment (1000 LE) Subcontractor (1000 LE) Prod. overhead (1000 LE) Office overhead (1000 LE) Bonus (1000 LE) Total revenue (1000 LE)


PE

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Project Performance Evaluation Target Performance: Item Work Schedule:  Excavation  Concrete  F-Concrete Budget Cost:  Excavation  Concrete  F-Concrete Critical equipment:  Excavator  Concrete pump Critical materials:  Cement for concrete  Cement for F-concrete Actual Performance: Item Work Performed:  Excavation  Concrete  F-Concrete Actual Cost:  Excavation  Concrete  F-Concrete Critical materials:  Available Cement Global 134 PE – Dr. Attia Gomaa

unit

Value

m3 m3 m3

3000 1500 1000

LE/m3 LE/m3 LE/m3

5 100 800

m3/day m3/day

200 100

kg/m3 kg/m3

250 350

unit

Value

m3 m3 m3

4000 2000 800

LE LE LE

16,000 180,000 600,000

ton

800

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 Used Cement


Services

ton

800

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Bill of Quantities:  BCWS = Budget Cost of Work Schedule  ACWP = Actual Cost of Work Performed  BCWP = Budget Cost of Work Performed  Total Variance = BCWS – ACWP  Cost Variance = WP (BC – AC) = BCWP – ACWP  Schedule Variance = BC (WS – WP) = BCWS - BCWP  Schedule Late / early duration

Productivity:  Total Productivity %  Equipment Productivity %  Material Utilization %  Material Productivity %  Labor Productivity %


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Performance evaluation for maintenance projects Case Study: The annual maintenance works report for a maintenance project in XXX Company is as follows: No.

Description

1

Maintenance manpower (Man-hours)

2

Actual PM

3

Actual CM

4

Total cost (1000 LE)

5

Revenue (1000 LE)

Type Engineers Tech. Helpers No. of W/O Man Hours Duration (Hrs) Back Log No. of W/O Man Hours Duration (Hrs) Back Log Planned Actual Planned Actual

Year 2004 16000 18000 13000 4000 12000 4000 650 500 5000 500 50 3500 4200 5000 6000

Year 2005 15000 19000 12000 6000 14000 5000 600 700 6000 3000 70 3500 4500 5000 7000

Based on these data, determine the different performance evaluation indicators for this project.


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Performance evaluation for maintenance projects: KPI 1- CM / PM 23456-

Utilization Quality Rate Reliability OCE Performance Rate

( L.E / man-hour)

Type No. of W/O Man-hours Duration (Hrs) Overall (10-20%) (50-60%) (80-90%) (80-90 %) (30- 40%) Planned

2004

2005

PE

Actual

 CM/PM Overall = 10 X No of WO X man-hours X Durations  Utilization = Total Work orders man-hours / Total Available man-hours  Quality Rate = (No of PM) / (No of PM + No of CM)  Reliability = (PM man-hours) / (PM man-hours + CM man-hours)  Overall Craft Effectiveness = Utilization X Quality Rate X Reliability  Performance rate = Revenue / total man-hours


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Exam Please attempts all questions - No. of questions 4 – No. of Pages 3

Q1: The monthly civil works report for a civil project in ABC Company is as follows: Target Performance: Item Work Schedule:  Excavation  Concrete  F-Concrete Budget Cost:  Excavation  Concrete  F-Concrete Critical equipment:  Excavator  Concrete pump Critical materials:  Cement for concrete



Cement for F-concrete Actual Performance: Item Work Performed:  Excavation  Concrete  F-Concrete Actual Cost:  Excavation  Concrete  F-Concrete Critical materials:  Available Cement



Used Cement


unit

Value

m3 m3 m3

3000 1500 1000

LE/m3 LE/m3 LE/m3

5 100 800

m3/day m3/day

200 100

kg/m3 kg/m3

250 350

unit

Value

m3 m3 m3

4000 2000 800

LE LE LE

16,000 180,000 600,000

ton ton

800 800

AUC- Engineering

Services

Based on these data, determine the different performance evaluation indicators for this project.

Q2: The monthly production report for an Egyptian foundry is as follows: Indicator Production indicators: Planned production quantity Actual production quantity Rejected quantity Resources indicators: Average working manpower Total manpower working time Total charge material quantity Total energy consumption

Unit

Year 2001 January Year to date

Year 2000 January Year to date

Ton Ton Ton

160 130 10

1200 900 70

120 110 8

900 800 50

Man Man-hr. Ton K.W.H

50 7250 185 78000

52 51000 1300 550000

48 7000 160 75000

50 50000 1100 520000



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Q3: The monthly production report for a machining workshop is as follows: Dimension Working

Item - Total monthly days

Jan. 31

Feb. 29

conditions

- Planned working days

25

24

- Unplanned working days

3

2

- Actual working days

20

21

- Std. working hours/day

10

10

- Overtime (man-hour) - Std. perf. rate (ton/day)

500 100

600 100

- Actual production (ton)

1800

1700

- Rejected (ton) - Material (1000 LE)

200 1600

100 1500

- Labor (1000 LE)

1000

1000

- Equipment (1000 LE)

800

800

- Subcontractor (1000 LE)

200

300

- Prod. overhead (1000 LE)

400

300

- Office overhead (1000 LE)

200

200

- Bonus (1000 LE)

60

58

6000

6100

Production

Cost

- Total revenue (1000 LE)



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References: 1- Chase and Aquilano, “Production and Operations Management: A Life Cycle Approach”, 5 Th. ed., IRWIN, (1989). 2- Diewert, W.E., “Fisher Ideal Output, Input, and Productivity Indexes Revisited”, Journal of Productivity Analysis 3, 211-248. (Sections 1,2,3,9) , (1992). 3- Elsayed and Boucher, “Analysis and Control of Production Systems” Prentice-Hall, INC, New Jersey 076632, (1985) 4- Färe, R. and D. Primont., “Multi-Output Production and Duality: Theory and Applications”, Kluwer Academic Publisher, (1995). 5- Fried, H. O., C. A. K. Lovell, S. Schmidt (Eds.), “Measurement of Productive Efficiency”, New York, Oxford University Press, (1993). 6- Kuosmanen, T., and T. Post, “Measuring Economic Efficiency with Incomplete Price Information: With An Application to European Commercial Banks”, European Journal of Operational Research 134, 43-58, (2001). 7- Lovell, C.A.K., “The Decomposition of Malmquist Productivity Indexes”, mimeo, (2001). 8- Richard, T. “Forecasting, Monitoring and Controlling Productivity”, In developing work standards. Industrial Engineering and Management Press, U.S.A., (1985). 9- Riggs, James L., “Production Systems: Planning, Analysis, and Control” , 5th ed., John Wiley & Sons, Inc., New York, (1987). 10- Roman, Z. “Productivity and Economic Growth”, Akademiai Kiaato, Budapest, (1982). 11- Seiford, L.M., and R.M. Thrall, “Recent Developments in DEA: The Mathematical Programming Approach to Frontier Analysis”, Journal of Econometrics 46, 7-38, (1990). 12- Sumanth, David J., “Productivity Engineering and Management”, McGrawHill Book Company, New York, (1984). 13- Tsujimira, K., “The Measurement of Productivity”, Asian Productivity Organization, Japan, (1963). 14- Tulkens, H., “On FDH Efficiency Analysis: Some Methodological Issues and Applications to Retail Banking, Courts, and Urban Transit”, Journal of Productivity Analysis 4, 183-210 , (1993). 15- Wild, Ray, “Essentials of Production and Operations Management”, Holt, Rinehart and Winston Ltd., London, New York, Sydney, Toronto, (1980). 16- Willam, G. “The Economics of Industrial Organization”, 2nd ed., PrenticHall International, Inc London, (1985).


Productivity Measurement,Analysis and Improvement

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