The effects of productivity on profitability: a case study at firm level using an activity-based costing approach

Productivity and profitability are important concepts and measures describing the performance and success of a firm. We know that increase in productivity decreases the costs per unit produced and leads to better profitability. This common knowledge is not, however, enough in the modern business environment. Productivity improvement is one means among others for increasing the profitability of actions. There are many means to increase productivity. The use of these means presupposes operative decisions and these decisions presuppose informationabout the effects of these means. Productivity improvement actions are in general made at floor level with machines, cells, activities and human beings. Profitability is most meaningful at the level of the whole firm. It has been very difficult or even impossible to analyze closely enough the economical aspects of thechanges at floor level with the traditional costing systems. New ideas in accounting have only recently brought in elements which make it possible to considerthese phenomena where they actually happen. The aim of this study is to supportthe selection of objects to productivity improvement, and to develop a method to analyze the effects of the productivity change in an activity on the profitability of a firm. A framework for systemizing the economical management of productivity improvement is developed in this study. This framework is a systematical way with two stages to analyze the effects of productivity improvement actions inan activity on the profitability of a firm. At the first stage of the framework, a simple selection method which is based on the worth, possibility and the necessity of the improvement actions in each activity is presented. This method is called Urgency Analysis. In the second stage it is analyzed how much a certain change of productivity in an activity affects the profitability of a firm. A theoretical calculation model with which it is possible to analyze the effects of a productivity improvement in monetary values is presented. On the basis of this theoretical model a tool is made for the analysis at the firm level. The usefulness of this framework was empirically tested with the data of the profit center of one medium size Finnish firm which operates in metal industry. It is expressedthat the framework provides valuable information about the economical effects of productivity improvement for supporting the management in their decision making.

Procurement, Quality and Productivity Enhancements and Manufacturing Strategy Formulation Applying Product Life Cycle Method

The objective of the thesis was to create a framework that can be used to define a manufacturing strategy taking advantage of the product life cycle method, which enables PQP enhancements. The starting point was to study synkron implementation of cost leadership and differentiation strategies in different stages of the life cycles. It was soon observed that Porter’s strategies were too generic for the complex and dynamic environment where customer needs deviate market and product specifically. Therefore, the strategy formulation process is based on the Terry Hill’s order-winner and qualifier concepts. The manufacturing strategy formulation is initiated with the definition of order-winning and qualifying criteria. From these criteria there can be shaped product specific proposals for action and production site specific key manufacturing tasks that they need to answer in order to meet customers and markets needs. As a future research it is suggested that the process of capturing order-winners and qualifiers should be developed so that the process would be simple and streamlined at Wallac Oy. In addition, defined strategy process should be integrated to the PerkinElmer’s SGS process. SGS (Strategic Goal Setting) is one of the PerkinElmer’s core management processes. Full Text: Null

Productivity of Business Services - Towards A New Taxonomy

Statistics show that the expanding service sector accounts already for three quarters of GDP in the developed economies. Moreover, there is abundant evidence on high variation in productive performance across the service industries. This suggests divergent technological and institutional trajectories within the tertiary sector. While conceptual knowledge on services and their performance has accumulated substantially, the overall landscape on productivity and competitiveness is still inconclusive. As noted by number of authors the research on service productivity is still in its infancy. The purpose of this paper is to develop further the analytical framework of service productivity. The approach is based on the notion that service definitions, classifications and performance measurement are strongly interdependent. Given the ongoing restructuring of businesses activities with higher information content, it is argued that the dichotomy between manufacturing and services should not be taken too far. Industrial evolution also suggests that the official industry classifications are increasingly outdated and new taxonomies for empirical research are therefore needed. Based on the previous analyses and new insights the paper clarifies the debated concept of service productivity and identifies the critical dimensions by which the service industries cluster. It is also demonstrated that the dimensions enable to construct new service taxonomies which bear essentially on productivity opportunities at the business level. Needles to say the key determinant explaining the development and potential of productivity growth is innovation activity. As an extensive topic of research, however, service innovation is tackled here only in a cursory way. The paper is constructed as follows: the first section focuses on the conceptual issues and evolving nature of service activities. A workable definition of service should capture the diversity of service activities, as well as the aspects of service processes, comprehensively. The distinctions and similarities between services and manufacturing are discussed, too. Section 2 deals with the service productivity, a persistent and controversial issue in academic literature and policy. With the assessments of strengths and weaknesses of the main schools new insights based on value creation will be brought in. Industry classifications and taxonomies are discussed in Section 3. It begins with a short analysis of the official classifications and their evaluation from the perspective of empirical research. Using well-known examples it is shown that the taxonomies on the manufacturing industries have a clear analogy with the business services. As there is a growing interest to regroup services too, the work to date, has been less systematic and inherently qualitative. Based on the earlier contributions threedimensional service taxonomy is constructed which highlight the key dimensions of productive performance. The main findings and implications are summed up in Section 4.

Packet backbone design differences between commercial network and Container Trial System of LTE/SAE

The mobile networks of earlier and current generations, or 2G and 3G networks, provide users voice and packet services with higher transmission rates and good quality over the same core network. When developing the next generation of mobile networks the current quality of services needs to be maintained. This thesis concentrates on the next generation mobile network, especially on the evolution of the packet network part. The new mobile network has requirements for the common packet backbone network, Mobile Packet Backbone Network, which is additionally discussed in this study. The next generation mobile network, called LTE/SAE, is currently under testing. The test system is called Container Trial System. It is a mini sized LTE/SAE site. The LTE/SAE is studied in this thesis concentrating on the evolved packet core, the SAE part of the composition. The empirical part of the study compares the LTE/SAE Container Trial System and commercial network designs and additionally produces documentation for internal personnel and customers. The research is performed by comparing the documentations and specifications of both the Container Trial System and commercial network. Since the LTE commercial network is not yet constructed, the comparison is done theoretically. The purpose is furthermore to find out if there are any design issues that could be done differently in the next version of the Container Trial System.

Unitizing in Supply Chain – Case SECU Container

The aim of this thesis is to analyze how increasing the level of unitizing affects to the costs in the transport system of a Finnish paper and board company. The parts of the supply chain where costs are analyzed are limited to domestic inland transport and port operations. Supply Chain management is important aspect of modern day companies’ strategies. Intermodal transport and different transport systems are the key items which are studied in the theory part of this thesis. In the case study the payload simulations for SECU container (Stora Enso Cargo Unit) stuffed in mills sites are base of the cost analyze of this thesis. Thesis also makes a glance for the restrictions and development trends in Finnish railroads. In analyze SECU containers are moved up to the mill site for stuffing. This increases the level of unitizing in supply chain. Analyze is made for three variation of current traffic lines. Analyze shows that when idea of intermodalism is well used there is considerable cost savings to gather in pre-transportation and port operations. But also effects to mill sites and destination ports needs to be take under considering. In analyze the effects of increased axle weight for SECU container transportation in Finnish railroads is studied. When transport unit is stuffed in earliest possible point supply chain and unloaded the last possible point the savings made in chain can be considerable. In case study of this thesis almost 40% savings in total costs could be reached in pre transportation and port operations when unitizing level is increased in supply chain.

Towards increased productivity and quality in software development using agile, lean and collaborative approaches

Dagens programvaruindustri står inför alltmer komplicerade utmaningar i en värld där programvara är nästan allstädes närvarande i våra dagliga liv. Konsumenten vill ha produkter som är pålitliga, innovativa och rika i funktionalitet, men samtidigt också förmånliga. Utmaningen för oss inom IT-industrin är att skapa mer komplexa, innovativa lösningar till en lägre kostnad. Detta är en av orsakerna till att processförbättring som forskningsområde inte har minskat i betydelse. IT-proffs ställer sig frågan: “Hur håller vi våra löften till våra kunder, samtidigt som vi minimerar vår risk och ökar vår kvalitet och produktivitet?” Inom processförbättringsområdet finns det olika tillvägagångssätt. Traditionella processförbättringsmetoder för programvara som CMMI och SPICE fokuserar på kvalitets- och riskaspekten hos förbättringsprocessen. Mer lättviktiga metoder som t.ex. lättrörliga metoder (agile methods) och Lean-metoder fokuserar på att hålla löften och förbättra produktiviteten genom att minimera slöseri inom utvecklingsprocessen. Forskningen som presenteras i denna avhandling utfördes med ett specifikt mål framför ögonen: att förbättra kostnadseffektiviteten i arbetsmetoderna utan att kompromissa med kvaliteten. Den utmaningen attackerades från tre olika vinklar. För det första förbättras arbetsmetoderna genom att man introducerar lättrörliga metoder. För det andra bibehålls kvaliteten genom att man använder mätmetoder på produktnivå. För det tredje förbättras kunskapsspridningen inom stora företag genom metoder som sätter samarbete i centrum. Rörelsen bakom lättrörliga arbetsmetoder växte fram under 90-talet som en reaktion på de orealistiska krav som den tidigare förhärskande vattenfallsmetoden ställde på IT-branschen. Programutveckling är en kreativ process och skiljer sig från annan industri i det att den största delen av det dagliga arbetet går ut på att skapa något nytt som inte har funnits tidigare. Varje programutvecklare måste vara expert på sitt område och använder en stor del av sin arbetsdag till att skapa lösningar på problem som hon aldrig tidigare har löst. Trots att detta har varit ett välkänt faktum redan i många decennier, styrs ändå många programvaruprojekt som om de vore produktionslinjer i fabriker. Ett av målen för rörelsen bakom lättrörliga metoder är att lyfta fram just denna diskrepans mellan programutvecklingens innersta natur och sättet på vilket programvaruprojekt styrs. Lättrörliga arbetsmetoder har visat sig fungera väl i de sammanhang de skapades för, dvs. små, samlokaliserade team som jobbar i nära samarbete med en engagerad kund. I andra sammanhang, och speciellt i stora, geografiskt utspridda företag, är det mera utmanande att införa lättrörliga metoder. Vi har nalkats utmaningen genom att införa lättrörliga metoder med hjälp av pilotprojekt. Detta har två klara fördelar. För det första kan man inkrementellt samla kunskap om metoderna och deras samverkan med sammanhanget i fråga. På så sätt kan man lättare utveckla och anpassa metoderna till de specifika krav som sammanhanget ställer. För det andra kan man lättare överbrygga motstånd mot förändring genom att introducera kulturella förändringar varsamt och genom att målgruppen får direkt förstahandskontakt med de nya metoderna. Relevanta mätmetoder för produkter kan hjälpa programvaruutvecklingsteam att förbättra sina arbetsmetoder. När det gäller team som jobbar med lättrörliga och Lean-metoder kan en bra uppsättning mätmetoder vara avgörande för beslutsfattandet när man prioriterar listan över uppgifter som ska göras. Vårt fokus har legat på att stöda lättrörliga och Lean-team med interna produktmätmetoder för beslutsstöd gällande så kallad omfaktorering, dvs. kontinuerlig kvalitetsförbättring av programmets kod och design. Det kan vara svårt att ta ett beslut att omfaktorera, speciellt för lättrörliga och Lean-team, eftersom de förväntas kunna rättfärdiga sina prioriteter i termer av affärsvärde. Vi föreslår ett sätt att mäta designkvaliteten hos system som har utvecklats med hjälp av det så kallade modelldrivna paradigmet. Vi konstruerar även ett sätt att integrera denna mätmetod i lättrörliga och Lean-arbetsmetoder. En viktig del av alla processförbättringsinitiativ är att sprida kunskap om den nya programvaruprocessen. Detta gäller oavsett hurdan process man försöker introducera – vare sig processen är plandriven eller lättrörlig. Vi föreslår att metoder som baserar sig på samarbete när processen skapas och vidareutvecklas är ett bra sätt att stöda kunskapsspridning på. Vi ger en översikt över författarverktyg för processer på marknaden med det förslaget i åtanke.

Towards the Best A++ Rating Productivity of Research and Teaching in Finnish Universities

Tämän tutkimusraportin suomenkielinen versio on osoitteessa: http://urn.fi/URN:ISBN:978-951-29-4509-2

Combining Productivity and Renewal in a Production Organization: a Case Study on Organizational Ambidexterity

This case study examined how productivity and renewal are combined in a production organization operating in process industry through the antecedents of organizational ambidexterity; structure, culture, and management. The empirical material consisted of semi-structured interviews, observations and case organization documents. The findings suggest that the case organization structurally separates exploitation and exploration to separate units. However, it was found that the units focusing on exploration also devote resources to exploitation. External networks, such as customers, suppliers, and other factories seemed to play a role in the exploration activities, as well as in learning activities, which were connected to renewal. Productivity was seen as a natural part of a production organization and pursued at manufacturing units. Process management techniques appeared to be spread across the organization and having positive impact on exploitation and negative impact on exploration. The managerial culture and management’s capability to communicate goals, vision and strategy was found to be unsatisfactory. This thesis contributes to the new research paradigm of organizational ambidexterity by providing unique results on how the antecedents of organizational ambidexterity are accomplished in a production organization. Furthermore, the thesis extends the previous research of organizational renewal capability by connecting it to the ambidexterity theory.

The Productivity, Economy and Quality of Welding in the Different Geographical Areas of China - Today and in the Future

This master’s thesis gives out the real situation of the China welding industry and factories nowadays in different geographical areas, in order to inform the Finnish companies who have the willing to find a Chinese welding subcontractor a proper and correct selection concept by analyzing and supplying the information of different scale and form welding factories in different Chinese areas. The first section of this thesis gives out the general situation about the co-operation between China and Finland in the welding industry, also includes the general introduction of the Chinese welding industry. The second section gives out the geographical compartmentalization result of Chinese welding industry, which is where and how many areas will be studied in this thesis. The main body of this thesis is the real information of welding productivity, welding cost, and welding quality in China. All the information was collected from real factories in China by the author. The last section of this thesis is the improvements to the Chinese welding factories that have the willing to become a subcontractor, and the suggestions to the Finnish companies who may find a Chinese welding factory as their subcontractor in future.

Productivity and Services – Safety Telephone Services for the Elderly

Previous research on productivity is often associated with manufacturing or uses manufacturing definitions of productivity. Marketing research on services has not been satisfied with the manufacturing definitions. No universal definition for service productivity exists. The lack of a universal definition highlights the complexity entailed in the concept of productivity. The objective of this study was to investigate service productivity in situations, where traditional ways are in some cases even not possible or are not enough. In one definition of the productivity of service organisations there is the efficiency of the organisation on the input side and on the output side the customers’ perceived quality or value-in-use. To learn about value-in-use, many methods have been developed. A common practice is to make customer opinion surveys in the form of customer questionnaires and interviews. However, customers cannot always be asked directly, for example, because of impaired cognitive abilities. Such cases include the elderly and children. Furthermore, customer opinion surveys are time consuming. In addition, customers do not always know what kind of services they would benefit from. For the empirical part of the study, a business area was identified where traditional ways of measuring value-in-use are difficult or in some cases even not possible. This business area is safety telephone services. These services are most often used by the elderly. The way to define value-in-use here was to assess how well the services offered met customer expectations. Comparing the services customers asked for and the services provided to them indicated whether customer expectations were met. This study showed that customers had their ideas concerning the contents of the services but many times the services provided did not meet these expectations. Organisational efficiency aspirations can decrease customers’ value-in-use. This study found a solution, in which increasing organisational efficiency would go hand-in-hand with increasing customers’ value-in-use; the result being that the organisations’ needs and the service users’ expectations were in line. Value creation for customers produced organisational efficiency and thus increased productivity. In this study, customer expectations were observed by means of wellness technology. With the help of modern technology, customer expectations can be followed quickly and easily and customers can co-create with the organisation. This type of an approach could be useful even in the development of other services for other ages and in different contexts. If a service organisation decreases the number of personnel and, at the same time, tries to offer services to the same or a larger clientele, customers easily notice the change, which is often negative. To avoid harmful decrease in value-in-use, limitations to the aspiration of efficiency should be implemented – one of such is that the organisation is required to meet certain quality standards defined by experts. The aim is to secure that, as a result of efficiency aspirations in the organisation, the quality of the service offerings does not diminish below mutually agreed standards. Traditionally, when productivity in services has been estimated, organisational efficiency has not been combined with both customer expectations and an expert assessment of quality. This study contributes with novel thinking entitled ‘Relationship Management of the Elderly’. This study handles productivity, expert defined quality and value-in-use in an organisational context, which is practically untouched in previous research studies.