Production vs Productivity PDF

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,...

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. 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. Dynamic Concept of Productivity Competition triggers productivity, as intense competition results in higher productivity, which in turn provides better value to the customers, leading to higher share in the market. Comparison Chart BASIS FOR PRODUCTION PRODUCTIVITY COMPARISON Meaning Production is a function of an Productivity is a measure of how organization which is associated efficiently resources are combined with the conversion of range of and utilized in the firm, for inputs into desired output. achieving the desired outcome. What is it? Process Measure Represents Numbers of units actually Ratio of output to input produced. Expression Absolute terms Relative terms  BASIS FOR PRODUCTION PRODUCTIVITY COMPARISON Determines Value of output Efficiency of factors of production 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. Types of factor productivity Land productivity – output of goods divided by the acreage of land. For example, a farmer produces 500 kg of sweet potato using 2 acres of land. Calculate the land productivity? 500/2 = 250 kg per acre of land With the same 2 acre of land, the farmer now produces 750 kg of sweet potato. Calculate the land productivity? 750/2 = 375 kg per acre of land Production has increase by 250 kg and productivity has increased by 250/500 x 100 = 50% Labour productivity – output of goods and services divided by total labour hours employed. For example, 10 workers worked 8 hrs per day has repaired 160 computers per day. Calculate the labour productivity? Total output = 160/80 = 2 computer per labour hrs With the same labour hours, another group of workers repaired 240 computers. Calculate the labour productivity. 240/80 = 3 computer per labour hr. Production has increased by 80 and productivity has increased by 80/160 x 100 = 50% Capital productivity – output of goods and services divided amount of capital employed. For example, a company using 3 forklifts to 300 tons of cargoes. Calculate the capital productivity. 300 tons / 3 forklifts = 100 tons of cargo per forklift With the same number of forklifts, the company increases the number of cargoes to 630 tons. Calculate the capital productivity. 630/3 = 210 tons of cargo per forklift Production has increased by 330 tons and productivity has increased by 330/300 x 100 = 110%