Productivity

What is productivityHow is it measuredIts importancePartial & total Productivity

What is ProductivityProductivity is the relationship between output and input in other words ratio of output (produced) to input (resources utilized) It denotes productiveness of factors of production: labor, operator, machine, energy, capital etc. Its effective utilization of resources (inputs) in producing goods (output)Productivity measurement can be done at micro level or at macro levelAt times productivity is expressed as efficiency ( % age) which is effective utilization of resources against the standard attainable performanceProductivity may be partial or Total

What is productivity

Partial Productivity versus Total ProductivityPartial productivity is the ratio of one class of output to input and hence is a partial measure e.g.. Material productivity, machine productivity, labor productivityTotal productivity is the ratio of total output to sum of total input factors. It measure the joint impact of all inputs in producing the output. It considers all quantifiable output and input factors

Partial Productivity versus Total ProductivityPartial productivityAdvantages:its easy to understand and useIts a good diagnostic tool for pinpointing areas of improvementDisadvantages:1) If used alone can be misleading and lead to costly mistakes2) Partial measures cannot be used to explain cost increases.

Total productivityAdvantages:Considers all quantifiable output and input and hence is more accurate Presents the real picture of a manufacturing unitDisadvantages:1) doesn't pinpoint the real cause of change in growth (+ve/ -ve)

Productivity Measurement Methods: ( Physical, Value and Value-Added) Physical productivity measurement method: labor productivity =volume of output/ volume of labor input

Material productivity = volume of output/ volume of material input

Machine Productivity= volume of output/ volume of machine input

Productivity Measurement Methods: ( Physical, Value and Value-Added Value productivity Measurement method:

Labor Productivity= value of output/ labor inputs (value)

Material Productivity = value of output/ value of material inputs

Capital productivity= value of output/ capital input

Machine productivity= value of output/ value of machine input

Energy Productivity= value of output/ value of energy input

Total Productivity= total value of output/ total value of input

Productivity Measurement Methods: ( Physical, Value and Value-AddedValue added productivity measurement methodIts generally used in organizations with highly diverse outputs or have very expensive raw material

Value added=current income (before tax) + personal expenses+ financial costs + rent + tax+ depreciation cost

Labor productivity=value added/ labor inputCapital productivity= value added/capital