Productivity measurement at the factory level
Productivity measurement at the factory level

Summary/Abstract: The objective of this study was to develop a new partial productivity measurement method for the case company. The scope of this study was limited to factory-level productivity measurement. Material costs and value of inventory were excluded from the measurement. Labor productivity and capital productivity are the focus of the new method. The case company uses a make-to-order production approach, and it belongs to the mechanical engineering sector, as so many other companies in Finland do. The developed model includes two main components: ROA and the capacity model. Gold’s model and the American Productivity and Quality Center model (APQC model) have had the greatest influence on the structure of the presented model. The model has been tested with data covering the last four years. Strictly interpreted, the final result describes the impact of the combined effect of productivity changes and input price changes. The company representatives argued that it is crucial for them to know whether the efficiency of operations will increase, at least in such a way that it will at least cover inflation. Realized productivity development was a pleasant surprise for the steering group. The fear that the intake of total assets would have decreased productivity proved to be wrong. The level of productivity changed nearly every month. One of the main driving forces behind the change is capacity.

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