Page 123 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes types, irrespective of how long they have existed, have potential for productivity improvement.
No organization is an exception.
Technically, productivity signifies the ratio between the input and output with respect to given
resources, i.e., the ratio of the outputs achieved from an activity to the inputs consumed to make
those outputs.

Productivity = Output/Input
This definition, while accurate, does not convey the central role that productivity and productivity
improvements have in determining the competitiveness of the organization. Productivity is a
multi-faceted concept; no single definition can fully describe it. When more is produced with the
same expenditure of resources, it may be termed as effectiveness; when the same amount is
produced at less cost, it may be termed as efficiency.
The word ‘productivity’ is broad enough to cover both. It denotes the efficiency with which the
various inputs are converted into goods and services and the effectiveness with which resources
are used.

!
Caution To calculate productivity, it is essential to define and measure the inputs and the
outputs for the process or activity.

In simple cases, e.g. a manufacturing operation making a single product on an automatic machine,
calculating the productivity of that machine is simple. Let us explore this with an example.

Example: Rewa Engineering manufactures 20,000 components per month by employing
100 workers in one 8-hour shift. What is the productivity of the labour?
Present production = 20,000 Components

Productivity = Output/ Input = Production/ Total man-hours
Assuming 25 working days per month
= 20,000/ 100* 8* 25
Therefore, productivity is 1.0 components/man-hour

Notes Productivity
Productivity is a simple concept. It is the amount of output produced per unit of input. It
is the value of outputs (i.e., goods and services) produced divided by the values of output
resources (i.e., wages and cost of equipment, etc.) used. It is a measure of efficiency.

Productivity can be mathematically expressed as:
Productivity = Output / Input

Productivity Calculations

Compare the productivity of two teams of workers in a machine shop. If the team in ‘A’ shift
produces 400 units in the shift while the team in ‘B’ shift produces 360 units; then:
Productivity of “A” Team = 400 / 8 = 50 units/hour
Productivity of ‘B’ Team = 360 / 8 = 45 units/hour

118 LOVELY PROFESSIONAL UNIVERSITY