Productivity category examines the productivity of your workforce through the course of the simulation. There are three criteria:
Sales/Employee is scaled based upon historical results in past semesters with the simulation. If you reach or exceed these targets, you earn 50 points:
Threshold Sales/Employee Target Sales /Employee Year 1 $80,000 $160,000 Year 2 $90,000 $180,000 Year 3 $100,000 $200,000 Year 4 $112,500 $225,000 Year 5 $125,000 $250,000 Year 6 $140,000 $280,000 Year 7 $157,500 $315,000 Year 8 $177,500 $355,000
You earn points for anything above the threshold. For example, in Year 1, if your sales are $80,000 or below, you earn nothing for Sales/Employee. At $120,000/Employee, you earn 25 points, and at $160,000/Employee you earn 50 points.
You can improve Sales/Employee several ways:
Profit/Employee is scaled based upon historical results with Capstone®. The threshold is $0/Employee. If your profits are negative, you earn no points. If you reach or exceed these targets, you earn 50 points:
Target Profit/Employee Year 1 $10,000 Year 2 $12,000 Year 3 $14,500 Year 4 $17,500 Year 5 $21,500 Year 6 $26,000 Year 7 $32,000 Year 8 $39,000
For example, in Year 1, if you have negative profits, you earn no points. At $5,000/Employee you earn 25 points, and at $10,000 and above you earn 50 points.
You can improve Profit/Employee many ways, since there are many ways to improve profits. From a productivity standpoint, reducing complement will improve Profit/Employee.
However, there is one counter-intuitive relationship you should recognize. To improve Profits/Employee, you would expect to always reduce complement. But consider two Cases (see below).
REVENUE Case 1 Case 2 Sales $110,050 $135,300 VARIABLE COSTS Direct Labor $31,215 $38,330 Direct Material $44,637 $55,151 Inventory Carry $1,413 $1,390 Total Variable Costs $77,264 $94,871 Contribution margin $32,786 $40,429 PERIOD COSTS Depreciation $7,587 $7,587 SG&A: R&D $1,958 $1,958 Promotion $4,100 $4,100 Sales $4,070 $4,070 Admin $848 $1,186 Total Period Costs $18,562 $18,901 Net Margin $14,223 $21,528 Other (Fees, Write Offs, TQM) $0 $0 EBIT $14,223 $21,528 Interest $5,395 $5,395 Taxes $3,090 $5,647 Profit Sharing $115 $210 Net Profit $5,624 $10,277 Complement 707 854 Sales/Employee ($000) $156 $158 Profits/Employee ($000) $8 $12 Employee Turnover 10.0% 10.0%
Both cases were produced with Capstone.xls. In Case 2 we increase Sales by $25M. To build the additional units, Complement increases by 147 workers, a whopping 21%. Yet Profits/Employee actually increase from $8 thousand/Employee to $12 thousand/Employee.
How can this be? The secret lies in the Period Costs. As Complement increases, Period Costs stay about the same, and Expenses/Employee actually fall. This reflects the more general principal that you want to work resources, including fixed expenses, as hard as possible.
Let's look at another example. Suppose you are running 100% First Shift, but can sell another 20% if you run on Second Shift. The Second Shift labor costs are 50% higher and you require a larger Complement. However, notice that the First Shift has already paid for Period Costs. Anything you produce on Second Shift gets a free ride on the fixed expenses. It is possible that your Second Shift units are more profitable than the First Shift units.
When the HR and Labor Negotiation decisions are turned off, you will not lose points for having a Turnover rate higher than 10%. However, if one or the other is active, you will lose 10 points for every percentage point above 10%. Employee turnover can be kept at 10% by spending money in Recruiting and Training hours. It is driven up by Overtime and dissatisfaction with the labor contract.