Production and Productivity
Definition:
Production is the process of creating, growing, manufacturing, or improving goods and
services.
In
economics, productivity is used to measure the efficiency or
rate of production. It is the amount of output (e.g., number of
goods produced) per unit of input (e.g., labor, equipment, and capital).
Production is a process of
value addition, wherein at each level, some value is added to the product.
Conversely, productivity is a measure of efficiency.
Production exhibits the
number of units produced by the firm in a given period. As against, productivity highlights
the ratio of output to input consumed.
Production is the output
we normally get by using the inputs or resources we have. Resources can be
natural, man made and human. Whereas, productivity means increasing the amount
of production/produce by optimum usage of the resources. For example, if we get
100 bags of produce (paddy or anything else) per an acre normally, by using
fertilizers and others we might be able to get much more than that. This is
called increasing productivity.
For example,
if units (or cookies) produced = 15,000 and labor hours used are 250,
then productivity = units produced / labor hours used = 15,000
/ 250, or 60 units (cookies) per labor hour.
Production
• Production is a
process to transform raw material input into an output which will have desired
quality.
• Production is just a
number or quantity of output produced at a particular time.
• Production is measured
with respect to unit time.
Productivity
• Productivity is the
ratio of output to Input. It is an index which shows how effectively an
organization is using its resources (inputs).
• In the case of a
garment factory, the output can be taken as the number of pieces produced,
while "inputs" are the people, machines and time.
• To understand the
difference in a better way let's take one example -
Suppose a garment
factory produces 5000 pieces in a day with 500 operators.
(Production= 5000 pieces
is known as production of that factory.)
(Productivity = 5000/500
= 10 pieces per operator are the productivity of the factory.)
Content: Production
Vs Productivity
Comparison Chart
|
BASIS FOR COMPARISON |
PRODUCTION |
PRODUCTIVITY |
|
Meaning |
Production is
a function of an organization which is associated with the conversion of
range of inputs into desired output. |
Productivity
is a measure of how efficiently resources are combined and utilized in the
firm, for achieving the desired outcome. |
|
What is it? |
Process |
Measure |
|
Represents |
Numbers of
units actually produced. |
Ratio of
output to input |
|
Expression |
Absolute terms |
Relative (Comparative)
terms |
|
Determines |
Value of
output |
Efficiency of
factors of production |
Definition of Production
Production can be defined
as the systematic activity of gradually transforming one form of material into
another while maintaining the requisite quality and are capable of satisfying
human wants. It tends to combine, tangible inputs, i.e. raw materials, and
intangible inputs, i.e. ideas, information, etc. to turn it into finished
products for sale, through a mechanical or chemical process.
Types of Production
·
Job-Shop
Production: A production process, in which
few products are created according to the demand of the customer, in the
stipulated time and cost. In job-shop production, product volume is low, and
variety is high.
·
Batch Production: Batch production is one wherein product passes through various
stages over a series of functional departments, and a number of batches are
produced.
·
Mass Production: It is a manufacturing technique in which discrete parts are
produced with the help of continuous process.
·
Continuous
Production: The process of production in
which the production facilities are sequenced as per the production operations
chronologically.
Definition of Productivity
Productivity is a measure
that gauges the efficiency of the production process, i.e. in transforming
inputs such as raw material, labour, capital, etc. into the output of finished
goods. It can be expressed in terms of the ratio of outputs produced to inputs
consumed, in the given period.
Productivity tends to
determine the overall production performance of the firms by ascertaining how
efficiently the firm utilized its resources in the production of goods and
services, with minimum wastage. It can be enhanced by controlling factors of
production, improving process and technology.
Key
Differences Between Production and Productivity
The
difference between production and productivity can be drawn clearly on the
following premises:
1.
Production is an organized activity, wherein step by step conversion of raw
materials into useful output takes place. On the contrary, Productivity is an
indicator of efficiency in the production in terms of optimum utilization of
firm’s resources in the creation of desired output.
2.
Production is a process of value addition, wherein at each level, some value is
added to the product. Conversely, productivity is a measure of efficiency.
3.
Production exhibits the number of units produced by the firm in a given period.
As against, productivity highlights the ratio of output to input consumed.
4.
Production is always expressed in absolute terms, i.e. the volume of output
produced. On the other hand, productivity is denoted in relative terms, meaning
that it determines the quantitative relationship between output generated and
resources consumed.
5.
While production ascertains the value of output generated, productivity
determines the how well the resources are utilized by the firm in the
generation of output.
Conclusion
By and large, production
and productivity are not contradicting terms, but these are closely connected
one. Production is a conversion process, in which the firm is engaged, whereas
productivity is all about how efficiently the company allocates its factors to
produce the output, with least amount of wastage and essential quality. In
short, the efficiency in production is the firm’s productivity.
Different Definitions of Productivity:
In general
sense, productivity is some relationship between inputs and output of an
enterprise. It is the quantitative relationship between what we produce and the
resources used. The only way of raising the living standard of the society is
to increase productivity. Productivity can be increased by increasing output
from each unit of input.
The level of
concepts of productivity measurement is many sided. It can relate to every
item/activity on which money is spent to get the final product.
Some of the
definitions, given below explain the fundamental concept of productivity:
(i)
Productivity is measure of how much input is required to produce a given output
i.e., it is ratio of output to input.
(ii)
Productivity is the ratio between the amount produced and the number of
resources used in the course of production. The resources may be any
combination of materials, machines, men and space.
(iii) European
productivity council defines “Productivity is an attitude of
mind. It is a mentality of progress, of the constant improvement of that which
exists; it is the certainty of being able to do better than yesterday and
continuously. It is constant adaptation of economic and social life to changing
conditions. It is continual effort to apply new techniques and methods. It is the
faith in human progress.”
(iv) According
to Peter Drucker, “Productivity means balance between all factors of production
that will give the maximum output with the smallest effort.”
(v) I.L.O.
generally takes productivity to mean, “The ratio between the volume of output
as measured by production indices and the corresponding volume of labour input
as measured by employment indices.”
(vi)
Organization of European Economic Community (OEEC) defines productivity as the
ratio between the production of given commodity measured by volume and one or
more of the corresponding input factors also measured by volume. Thus, there
can be a number of measures indicating the level of performance corresponding
to each input. In general sense, productivity is measuring how much input is
required to produce a given output i.e.,
Inputs in a
business organization can be labour, capital etc. The measures can be expressed
in terms of money value or in terms of quantity. In most cases output will be
goods and services produced, for which input will be men, money, equipment,
power, plant facilities and other items used in the process of production.
Total productivity
of the firm can be defined as:
where PT: Total productivity
L = Labour
input
C = Capital
input
R = Raw material
and purchased parts input
M = Other
miscellaneous goods and services input factors
QT = Total output
All the input and output
factors are measured in some common unit. Productivity is a measure of how well
the resources are utilized to achieve given objectives.
IMPORTANCE OF PRODUCTIVITY
Importance of Productivity:
The concept of
productivity is of great significance for undeveloped and developing countries.
In both the cases there are limited resources that should be used to get the maximum
output i.e. there should be tendency to perform a job by cheaper, safer and
quicker ways.
The aim should
be optimum use of resource so as to provide maximum satisfaction with minimum
efforts and expenditure. Productivity analysis and measures indicate the stages
and situations where improvement in the working of inputs is possible to
increase the output.
The productivity
indicators can be used for different purposes viz. comparison of performances
for various organizations, contribution of different input factors, bargaining
with trade unions etc.
1. Increasing Profitability
Companies
experience an increase in profitability when it becomes less expensive to
produce their goods and services. When workers become more efficient, less labour
is required to produce the same amount of goods. The company could choose to
reduce the number of employees to produce the same output, but if it chooses to
maintain the same amount of labour, it will benefit from an increase in output.
2. Lowering Operational Costs
Companies
can reduce operational costs through a number of initiatives. If
individual workers improve their personal workflow, they will either produce
more in less time or reduce the amount of hours they need to work to achieve
the same output. Operational costs can often be reduced through an investment
in technology, and over time improved processes can lead to a reduction in
labour costs. The introduction of flexitime and three day weeks can see
productivity increase when people feel more valued and engaged and suffer less
from stress as a result of less commuting. Often people can achieve the same
amount of work in three flexi days as they might previously have done in a
week.
3. Optimising Resources
Often
companies don’t use their resources to the best potential. Employees are busy
some of the time and looking for work to do at other times. Better human
resource management offers a great opportunity to reduce costs and increase
productivity. Better role distribution and more effective staffing can make a
massive difference, the difference between profit and loss. Optimal workforce
utilisation should be on the agenda for change. Improved workflow systems will
identify places that roles are overlapping. Companies can rectify situations
where employees aren’t being used to their maximum potential, and they can
start to use their resources efficiently.
4. Improving Customer Service
Improvements
in productivity are usually felt all over an organisation. One of the external
benefits comes when customers are given more time and attention. Systems run
better, and the customer feels the benefit. Of course, when the customer is
benefiting, the company benefits because happy customers lead to happy managers
and happy shareholders.
5. Seizing the Opportunity For Growth
An
increase in productivity is always an opportunity for growth. How this increase
is used is up to management. If the productivity increase results in more time
for employees, it’s important to control how this time is spent. Far too
easily, this time can get used up by mundane tasks and time wasting activities
that pose as valid tasks. Don’t be deceived: a time suck is always a time suck,
and if it wasn’t important enough to take up your time before your productivity
enhancements, it certainly doesn’t merit your time now.
6. Reducing Waste and Environmental Impact
The
environment suffers when people aren’t efficient. If you’re not organised and
take ten hours to do work that could be done in six, you use four hours of
extra electricity that doesn’t need to be used. When you don’t look closely at
the way you’re doing things, you waste time, money, and resources. Heating can
be optimised and not wasted. When you do this, you create a more pleasant and
healthier working environment, which results in higher productivity and focus
amongst employees. Good building design that maximises natural light leads to a
reduction in lighting costs as well as an increase in workers’ productivity and
well‐being
due to good levels of daylight in the building. Lighting levels can have a
significant impact on productivity and the mood of the people who work in the
office.
7. Improving Competitiveness
Anything
you can do faster, more efficiently or better than your competitors gives you
an edge. Increased productivity leads to increased competitiveness. If you can
produce your products at a lower cost than your competitor, you can charge
less. If you can deliver your service more quickly than your competitor, you
can serve more clients or you can increase time spent on customer service,
increasing your value add to the customer.
8. Reducing Employee Burnout
When
people have too much to do and not enough time to do it, it can result in
stress, exhaustion or total burnout. Working more efficiently whether a
reduction in time spent on daily processes or a reallocation of roles and
responsibilities – results in people being able to cope better with their
workload and complete their responsibilities in the time allocated to them.
This is a positive consequence for both employer and employee. Better time
management leads to more organised, relaxed and efficient employees who can
focus on their daily tasks rather than worry about all the things they’re not
getting to.
9. Enhancing Wellbeing
Another
benefit of improved productivity is personal well‐being. Well‐being can be described as a state where
you’re healthy, comfortable and happy. When you’re more in control of your
workload, you can be more in control of your life, having time to include
exercise, to cook healthy food and rest when you need to relax. With less
stress, you can listen to your body and give it more of what it needs. All the
good things in life are within your reach. All it takes is a few little
changes, and you’ll see them all add up to stunning results.
10. Improving Morale
When
companies help employees become more organised and productive, they’re
investing in the well‐being
of the employee. Many workers see productivity as a way to squeeze more work
out of the worker. This vision has to change. Increased productivity is a
positive outcome for all involved. When employees understand what improving their
efficiency can mean to them reduced stress and increased control, well‐being and focus – they can then embrace
the process and accept the benefits that can be gained. When employees reap the
benefits of increased efficiencies, it usually improves their morale and
commitment toward the company.
11. Increasing Engagement
More
productive workers are usually more engaged in their work. Engagement is a
result of a number of factors, which are often linked to the quality of
leadership, the amount of autonomy an individual feels and the degree to which
they feel in control of their work and workload. When the effort your put into
your work makes a difference and your aren’t just treading water, you’ll be
more focused and engaged. When employees take control to get their work lives
organised, it usually leads to increased focus, commitment and engagement, or
they will move on to another job role that they feel is more suitable for them.
The Company
The employees
themselves are an investment, and like any investment, they should yield a
healthy or worthwhile return to the company. Therefore, when employees are
highly productive the company achieves its goals of investing in them in the
first place. Productivity also helps to motivate the workplace culture and
boost moral, producing an even better company environment.
Governments
Higher
economic growth will also generate larger tax payments for governments. This
allows governments to invest more towards infrastructure and social services (as noted above).
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