Productivity

What is productivity
How is it measured
Its importance
Partial & total Productivity

What is Productivity

Productivity 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
level
At times productivity is expressed as efficiency ( % age) which is
effective utilization of resources against the standard attainable
performance
Productivity may be partial or Total

What is productivity

Partial Productivity versus Total Productivity

Partial productivity is Total productivity is

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

Partial Productivity versus Total Productivity

Partial productivity
Advantages:
1) its easy to understand and
use
2) Its a good diagnostic tool for
pinpointing areas of
improvement
Disadvantages:
1) If used alone can be
misleading and lead to costly
mistakes
2) Partial measures cannot be
used to explain cost
increases.

Total productivity
Advantages:
1) Considers all quantifiable
output and input and hence is
more accurate
2) Presents the real picture of a
manufacturing unit
Disadvantages:
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-Added
Value added productivity measurement method
Its 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 input
Capital productivity= value added/capital