Productivity in Industry

Abstract

This book seeks to reveal to the reader the extent to which the concept of productivity has been subject to abuse and misunderstanding by different interest groups, provides a solid platform for defining and calculating productivity in all different industries and situations and finally shows the definition and evaluation processes in one of the most important and complex industries, namely mining and minerals. The starting chapters concentrate on the importance of productivity and its improvements. The history of the concept, its relationship with profitability and the production level are well illustrated in these chapters. It is argued here that the only way to cause increases in the national aggregates, especially in their "per capita" values and hence increase the standard of living, is to cause or bring about productivity increases. The next part is all about productivity measurement. When reviewing the literature, it is amazing to note that despite all the talks about the concept, particularly in the post war era, it still remains to be one of the most illusive and ambiguous words in economic analysis. The situation remains that the level of concern and interest far exceeds that of analysis and therefore effectiveness. It is further argued that it is not due to the complexity of the concept that its measurements have been avoided. It is rather due to the lack of understanding and the ease of use of the concept as a qualitative measure rather than a quantitative value. This book shows to the reader how exactly to calculate productivity. It first provides an argument for the fact that it is impossible and meaningless to provide or try to devise a detailed quantitative model that fits all situations. It is therefore necessary that although the basic starting model is common between all such situations, a definitive and concise model is devised for every case under consideration. Such formula would initially decide upon the reasons for measuring productivity and then concentrate on the especial characteristics of the industry or firm. These criteria which are of extreme importance for the serious productivity analyst are covered in details in this part of the book. Parameters that determine the values of productivity are described in the next part. Such variables could include: labor cost and all its implications; capital as one of the most important of determinants, its availability, rate of interest etc; the macro economics parameters influencing measurements; investments, costs, depreciation, taxation, the extent of governmental intervention and many other variables. Another subject that and productivity analysis must encompass is the necessity of providing relevant, accurate and practicable quantifiable definition of the productivity for the situation under measurement and analysis. Most available literature states that there are essentially two types of productivity measures, partial and total. They then recognize physical measures of output per labor cost as, for example, labor productivity. In the same manner, they make attempts to measure capital productivity, energy productivity etc. It is argued in this book that, productivity is the most comprehensive engineering economics term that is composed of many measureable and non-measureable components. Furthermore, these components are often interrelated and always inseparable. Any attempt to separate these input components would only mislead the analyst into an area which can be more ambiguous and dubious than the starting point. The book therefore argues that there can only be one measure for productivity that firstly measures productivity rather than profitability or efficiency and secondly that it takes into account all financial and non-financial inputs that are required to produce some outputs. A real case study is then introduced in the final chapter of the book. The case under calculation is the mining and minerals industry of Iran. Being one of the most important sectors of the economy of the country, any improvement in its productivity would lead to significant enhancement in the standard of living. Total productivity has been adopted as the measure that truly measures the concept and provides guidelines for the management to obtain increases that are economically feasible. The mining and minerals industry has been described briefly and then the main components of productivity starting model discussed. Outputs in physical terms together with all inputs in financial term have been calculated and hence the productivity values for different years have been subject to quantification. Reading of this book is recommended to all those academics and practitioners who are interested in the real meaning, value and effectiveness of one of the most important determinants of well being of all industrial organizations. Students reading economics and all related disciplines at different levels, engineers involved in practice, academics interested in quantification of the concept of productivity in particular and all those who somehow show an interest in the concept, in general, would find the reading of this book useful and interesting.