Labor productivity on your books, on your supplier’s books is absolutely critical in operations.
Labor Utilization
Cost of Direct Labor
Either of these two measures is good or bad by itself. Labor utilization is more a measure of
line belts. The cost of direct labor is capturing another angle of that productivity. This captures the wages that we have, as well, as the productivity of the employees in terms of how many units of output that
they can create relative to their wages.
Productivity Variables
Labor content – the sum of the processing time
cycle time=1/flowrate – is like measuring at the end of the process how much time passes between the completion of two subsequent units.
idle time – or slight time; the difference between the cycle time and the processing time.
Performance Measures
average labor utilization – a ratio between the labor content, and the labor content plus all the direct idle time (total time).
cost of direct labor
direct labor content – the sum of the processing times.
direct idle time – captures how much time I have to be paying for in total
Firms can hide labor from their box (or labor productivity reports), and relying more on their suppliers by outsourcing ultimately that labor.
**These are my notes on my Labor Productivity subject on Operations Management Course
