Productivity measurement and its relationship to quality in a South African Minting Company
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Authors
Mtotywa, Matolwandile Mzuvukile
Issue Date
2007
Type
Research Report
Language
en
Keywords
Measurement , Productivity , Quality , SA Mint , APC model , Correlation
Alternative Title
Abstract
The aim of this study was to investigate a productivity measurement at the South
African Minting Company and evaluate the relationship between productivity and
quality.
Special emphasis was given to profit-linked total factor model as the tool for
measurement. This was encouraged by their ability to separate productivity,
profitability and price recovery. Three models were selected and evaluated. These
models American Productivity Center (APC) Model, “Profitability = productivity +
price recovery” (PPP) model and multi-factor productivity measurement model
(MFPMM). APC model was selected as the suitable model because of its simplicity,
easy to set up, its ability to produce both financial and non financial data, and allow
for route cause analysis with expert system, and more insight for the manager with
Microsoft Excels’ What if analysis “Goal seek”.
APC model was set up for four periods, from 1 April 2004 to 30 September 2007.
The overall profitability results of the circulation coins profit center show an overall
positive contribution. There was a break-even of the price recovery for 2006 financial
year (period 2). In 2007 financial year (period 3), there was a negative contribution,
and this improved to almost break-even in the six month period during this 2008
financial year (period 4). This means there was much more inflation on input
resources and the recovery was not fully realised in the price of goods sold.
Individual input costs show that the negative price recovery is culminating from
material, labour and energy costs contributions. There is a plausible explanation for
material and labour, but not for energy. The metal volatility is the underlying cause of
the price variation. Labour variation was a company strategy to adjust employee to
higher percentiles.
Productivity was always positive with the highest contribution in the current financial
year (period 4). This means that the profitability at SA Mint has been driven by
productivity in the past two financial years.
iv
Survey of the questionnaire shows average scores for productivity and quality. It is
noteworthy, that the lowest mean score for productivity is for the statement “Products
are produced in error-free process”. This is a productivity quality measure. In
addition, the same variable shows r2 value of 0.42. A conclusion is that even though
productivity and quality are highly correlated and show a highly positive relationship,
there is a concern on quality in the company. A link can be made that low price
recovery becomes more difficult when the quality is not always good. Defective
product is a cost, because the product does not reach the customer and if the
product is reworked it is still a cost, though low, but more importantly it decreases the
available capacity.
This study was successful in setting up APC model and producing data that is worthy
to the company and academic world. Finally, this study was successful in its quest to
establish the relationship between productivity and quality.
Description
Citation
Publisher
University of South Africa