Productivity measurement in multi-product manufacturing firms: Evaluation and control through sensitivity analysis

The usefulness of available productivity measurement models arises from the fact that they consist of a large number of important production factors. However, in a complex manufacturing situation, such as a multi-stage multi-product production system, monitoring and controlling of all these factors of the productivity model may be difficult and uneconomical. Selection and control of the important factors could be a right step in application of productivity models in the industries. In this paper, the details of the sensitivity analysis of the factors considered in the Ray-Sahu model of productivity measurement for multi-product manufacturing firms have been provided. The proposed methodology, with all its simplicity and reasonable assumptions under a given condition, has been applied in a manufacturing firm producing four products. In particular, the effect of incremental change in the values of three output-related factors and total inputs for each product has been considered. The information obtained through sensitivity analysis determines the possible combinations of production factors with which management would be able to increase the total productivity of each of the products.