Importance of Productivity

Effectiveness of production and operation system may be viewed as the efficiency with which inputs are converted into outputs. The conversion efficiency can be gauged by ratio of the output to the inputs and is commonly known as productivity of the system. Productivity is the ratio of input facilities to the output of goods and services.

Productivity = Output / Input or

Productivity = Goods or services / Capital, manpower, materials, machines and building

The higher the productivity of the operating system, more efficient the operation function said to be. Management of operation system thus is essentially concerned with the management of productivity. Another way of looking at the concept of productivity is to look at the amount of waste generated in the system. If waste is unnecessary output and/or defective output from the system, then the productivity of the system can be improved by eliminating / minimizing the waste occurring in the system.

Policy formation in modern times has become a very complicated and time consuming phenomenon. Business enterprises now days want to plan their future strategies from the past performance. There are number of measures viz. Productivity, Profitability, rate of return etc. to illustrate the past performance. All these indicators are some sort of direct or indirect relationship between inputs and outputs factors. But none of the measures is able to determine or evaluate the overall performance of an enterprise. We shall be discussing measures of productivity in a little more detail in the following paragraphs.

The only way of raising the living standards of people is to increase productivity. Productivity can be increased by increasing output from each unit of input.

Concept of Productivity

In general sense, productivity is some relationship between inputs and outputs of an enterprise. It is quantitative relationship between what we produce and the resources used. The concept 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 concept of productivity.

Definition of Productivity

• Productivity is a measure of how much input is produced to a given output i.e. it is ratio of output to input.

• Productivity is the ratio between the amount produced and the amount of resources used in the course of production. The resources may be any combination of materials, machines, men and space.

• European productivity council defines “productivity is an attitude of mind. It is mentality of progress, of the constant improvement of that which exists. It is the certainty 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 the continual effort to apply new techniques and methods. It is the faith in human progress.”

• According to Peter Drucker, “productivity means a balance between all factors of production that will give the maximum output with the smallest efforts.”

• I.L.O generally takes productivity to mean. “The ratio between the volume of output as measured by production indices the corresponding volume of labor input as measured by employment indices.”

• 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 measure of how much input is required to produce a given output.


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