Malaysia Productivity Corporation (MPC)

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D r i v i n g P r o d u c t i v i t y o f t h e N a t i o n

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PRESENTATION OUTLINE

What is Productivity

Measures of Productivity : Firm Level

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Different people have different perspectives on the definition of productivity…

CONSUMER

“Productivity bring good quality

products and services at

cheaper prices and higher living

standards.”

WORKFORCE

“Productivity means getting higher wages, benefits and

better working conditions and environment.”

BUSINESSMAN

“Productivity is reducing cost and increase profits.”

ECONOMIST

“Productivity as a ratio of output to input of resources

used in the process of

production.”

SCIENTIST

“Productivity is to identify wasteful actions/practices

and take correctives

actions through method

improvement, technological upgrading of skills, better

teamwork and participations.”

EXECUTIVE

“Productivity is a gross value added less depreciation

of the inputs used in the process of

production.”

• Productivity is the ability to produce output from a given set of inputs – measures the efficiency and effectiveness of resource utilisations such as employees, technology, system and management etc., in converting inputs into useful outputs.

• Mathematically, Productivity = Output

Input

OUTPUT End-product of the process which can either be the finished goods or the services rendered. Gross Domestic Product (GDP) Total Output Added Value Monetary Value of Production Quantity of physical unit produced

INPUT The amount of resources that are utilised in producing the goods or in providing the services. Employees Total man-hours worked Labour cost Capital/Fixed assets Energy Material Services

What is Productivity: Economist?

Understanding Productivity Basic Model of Productivity Management

Know where you are

Set target to reach your destination

Identify potential obstacles

Inspire others to work with you to reach your destination

Productivity management is a continuous process involving 4 important phases (Create Awareness)

MEASUREMENT

Measures the productivity level or growth rate in order to determine the productivity position

Productivity Measurement Helps You To:

ANALYSIS

Defines the strength and weaknesses of an enterprise in order to search for areas for improvement

PLANNING

Review the results of phase 2, set goals to achieve, select alternatives and organise for improvement

IMPROVEMENT

The execution and implementation of the improvement plan

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TO = RM2

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TOTAL OUTPUT

LABOUR COST (Employee)

DEPRECIATION ( Fixed Asset)

INTEREST AND CHARGES (Financial Institution)

INDIRECT TAXES (Government)

PROFIT (Shareholders)

BOUGHT-IN MATERIALS & SERVICES (BIMS)

ADDED VALUE

BIMS = RM0.80

TO - BIMS = AV

RM 2 – RM 0.80 = RM 1.20

UNDERSTANDING ADDED VALUE CONCEPT

Example: • Net Sales • Income From Sales Of Goods Purchased In Same Condition • Income From Services Rendered

Example: • Materials consumed, • Supplies, consumables printing, lubricant • Utilities (water, electrical and fuel) • Payment to contractors

• Added value measures the wealth generated by the collective efforts of those who work in a company (the employees) and those who provide the capital (the investors

and shareholders).

• Added value can also be defined as the difference between a particular products final selling price and the direct and indirect input used in making that particular

product.

DEFINITION OF AV

WEALTH GENERATION WEALTH DISTRIBUTION

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=

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Firm Level: Productivity Gain Measurement (PGM)

“You Can Improve What You Can Measure”

Productivity measurement is an excellence vehicle to monitor the status of productivity. It provides an accurate estimation of overall efficiency and establish target for productivity improvement levels of enterprises. It gives valuable information on the productivity performance and its impact on the economy

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GUIDELINES FOR LABOUR COST COMPETITIVENESS 1. AV/LC must be positive (+ve ) 2. LC/E growth must be lower than AV/E growth 3. Unit Labour Cost should have a declining growth

PE>1

(AV/L)

(AV/FA)

(AV/ (TI –BIMS))

(Operating Profit /TO)

• Unit Labour Cost (ULC)

Measures the average wage rate per

employee

(Worker)

(Technology)

(Process)

AV Content ( Added Value Content) = Added Value / Total Output

(Product)

TO/E = Total Output per No. Of Employees

(Marketing)

Indicators (Poor Performance) Improvement Programme Organisation …

Labour Productivity (People)

Training HRDF. MOHR

MPC

Capital

• Productivity (CP)

• Intensity (CI)

Technology audit Sirim-Faunhofer

MIDF

Process Efficiency (PE)

Process Improvement programme

(lean mgt, 5S, ISO. TPM, MCS, ICC..)

MPC

Profitability - -

Labour Cost Competitiveness (LCC)

• AV / Labour Cost

• Unit Labour Cost (ULC)

• Labour Cost per Employee (LCE)

(Wages & salaries)

PLWS MPC

AV Content ( Added Value Content) = Added Value / Total

Output

Innovation product PPRN

AIM -Steinbeis

TO/E = Total Output per No. Of Employees

Marketing programme PlatCom

Matrade

Productivity Indicators : What to do and where to refer?

(Technology)

(Process)

(Product)

(Marketing)

• Collect and calculate individual company’s data (request MPC or self –assessment: ePGM)

• Calculate aggregate data of all the companies to see whether there is any productivity improvement before and after the intervention for policy decision

• Reasons:

i. Analyse the impact of incentives/grants given to industries by Government is beneficial and worth spending on this programme;

ii Justify to the Government this programme should be continued or discontinued;

iii. Recommend increase in budget allocation for this programme if continue; and

iv. Company’s can continually get incentive/grant on other productivity improvement programme

v. More SMEs will be involved in productivity improvement programme

Thank You

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Why PGM data Important

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Sample: ePGM Output