Using Malmquist Index Approach to Measure Productivity Change of a Jordanian Company for Plastic Industries

Abstract

Measurement of a production unit-performance is crucial in determining whether it has achieved its objectives or not, and it generates a phase of management process that consists of feedback motivation phases. The purpose of this paper is to analyze the growth potentials of five production machines in a Jordanian company for plastic industries by employing the non-parametric Malmquist productivity index (MPI) over the period from February to July 2014 in both day and night shifts. The productivity change is decomposed into technical efficiency change (TEC) and technological change (TC). Inefficiency values are observed in each period. The percentage of input utilization is determined in all periods. Then, the Malmquist productivity index (MPI) values are calculated for all periods. Finally, comparisons of TEC, TC and MPI are conducted among the five machines and between the day and night shifts for each machine. The MPI results indicate that the needs for internal training, effective operating procedures, and enhancing quality procedures are required to increase the technical efficiency. On the other hand, figuring out more efficient ways of making existing products allowing output to grow at a faster rate than economic inputs, like using new technologies, will increase technological change. In conclusions, Malmquist model analysis shall provide valuable reference information to management when evaluating the progress in the performances of production machines in plastic industry.