| Cost, as a basic measure of productivity, and cost measurement and analysis, as a subject of study, are not considered part of academic training and practice in Industrial Engineering. This thesis provides evidence to prove that the founders of the profession recommended the use of cost to measure productivity, by measuring the cost of employed resources, in detail. Operation Based Costing, a cost measurement technique specifically designed to measure productivity and to meet the cost information requirements of engineers and shop floor management, is described in this thesis. The technique is helpful in generating detailed cost information of resources for engineers and shop floor managers, who are tasked to improve production processes for reducing the cost of production. The structure of the technique matches the typical manufacturing operation structure, and can employ a maximum of eight resource categories, i.e. Machine, Fixture, Operator, Space, Contract, Incentive, Material, and Tied Capital resources.; In this thesis, it is shown that the use of physical productivity measures is not suitable to measure productivity at functional levels, and at the firm level. A case study of a mining company shows that the use of different physical productivity measures for different parts of a production process incorrectly measures productivity. In another case study of a tractor manufacturing company, it is shown that the improvements shown in the physical productivity measures do not always mean reduction in cost.; Resource Cost Productivity, a measure of resource use efficiency, is developed in this thesis to determine the productivity loss of a production process. Synchronization problems that occur between suppliers of inputs and production operations, within production operations, between production operations at the shop floor, between customers of products and production operations, and the availability of idle plant capacity, are the main causes of productivity loss, identified in this thesis. A brief methodology is also described to determine the share of productivity loss due to any identified cause, for the purpose of designing the process improvement project for reducing the cost of production.; At the end, the Operation Based Costing technique is compared with the Activity Based Costing technique to emphasize the differences in terms of basic concepts, objectives, perceptions, structures, approaches, capabilities, and limitations. |
