Gibson Products produces cast bronze valves for use in offshore oil platforms. C

Question

Gibson Products produces cast bronze valves for use in offshore oil platforms. Currently, Gibson produces 1600 valves per day. The 20 workers at Gibson work from 7 a.m. until 4 p.m., with 30 minutes off for lunch and a 15 minute break during the morning work session and another at the afternoon work session. Gibson is in a competitive industry, and needs to increase productivity to stay competitive. They feel that a 20 percent increase is needed.

Gibson's management believes that the 20 percent increase will not be possible without a change in working conditions, so they change work hours. The new schedule calls on workers to work from 7:30 a.m. until 4:30 p.m., during which workers can take one hour off at any time of their choosing. Obviously, the number of paid hours is the same as before, but production increases, perhaps because workers are given a bit more control over their workday. After this change, valve production increased to 1800 units per day.

a.         Calculate labor productivity for the initial situation

b.         Calculate labor productivity for the hypothetical 20 percent increase

c.         What is the productivity after the change in work rules?

d.         Write a short paragraph analyzing these results.

Explanation / Answer

Answers:
a). You need to calculate the total working hours that Gibson has per worker:
Given they work from 7AM to 4PM which is equal to 9 hours.
Given they take take a break for 30 minutes (Lunch) and 2 more 15 minutes break Thus total of 1 hour.
Total number of hours they work 8 hours
Total production 1600 units, total labor force 20, thus productivity shall be = 166/(20*8)=10 valves/hour.

b). If Productivity rises by 20 percent (20% increase on 10 valves /hour) , to 12 valves/hour; The new output would therefore be 12 × 8 × 20 = 1920.

c).Given they produce 1800 units after the change, the productive time is the same thus the new productivity shall be = 1800/(8*20)=11.25 valves.

d). Gibson could not achieve the expected target of 20% increase however they did achieve (200/1600)*100% = 12.5% increase without making any investments in equipment or energy pr increasing the workforce.

Thanks!

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