The tempting expansion
A furniture maker’s owner must decide whether to add an overtime shift. A batching pilot has raised the assembly count, and the order book looks full. More chairs per hour seems to justify expansion. But customers pay for accepted chairs, while the business pays for every repair hour. Scaling the wrong measure could turn the backlog into more unfinished work.
All figures below are hypothetical illustrations, not reported results.
Follow the chairs through repair
Before the pilot, the team delivers 40 accepted chairs using 80 paid labour hours. Larger batches then yield 48 assembled chairs of the same model after 80 paid hours, including inspection. Eight fail inspection and require another 16 paid hours; all 48 are accepted after repair.
The assembly report improves from 0.5 to 0.6 chairs per hour. Complete labour productivity stays at 0.5: 48 accepted chairs divided by 96 paid hours. The projected labour saving has no support.
Check the whole order
The mechanism is an incomplete count: assembly ends before acceptance, and its hours omit repair. Ask the shop manager to reconcile the same completed order’s “Accepted units” with all paid hours, including inspection and rework. Fail the check if unfinished chairs enter the numerator or repair hours disappear from the denominator. Correct the report before authorising overtime. Compare revenue from the extra accepted chairs with their materials and all extra labour costs; more sales need not improve margin. Check collection dates separately: an unpaid invoice cannot fund wages.
When the shortcut earns its place
Consider a new hypothetical boundary case: repeat orders use an unchanged chair specification, every chair passes inspection, and the report already includes all paid labour. Assembly output then equals accepted output, so the simpler measure remains useful. Call an increase a productivity gain only if accepted chairs per paid hour rise. Add the shift when confirmed orders cover its incremental costs and cash covers wages before collection. Even unchanged productivity can support profitable expansion.