How is productivity defined numerically

Productivity is largely determined by the technologies available and management's willingness and know-how to make process improvements. The calculation for productivity is straightforward: divide the outputs by a company by the inputs used to produce that output. The most regularly used input is labor hours, while the output can be measured in units produced or sales.

Sales can also be used as a measure of output. Auto manufacturing giant Toyota offers a prime example of high-end productivity in real life. The company has very humble beginnings but has grown to become one of the largest and most productive car manufacturers in the world.

TPS includes a few of the following principles:. In , Toyota had to recall roughly 9 million cars due to pedal entrapment and accelerator issues. Straying away from its foundational TPS principles were widely blamed for the recalls. Since then, management has refocused on its foundational TPS philosophy. Of course, a real-world look at productivity wouldn't be complete without talking about Amazon, the world's largest online marketplace. Amazon's fulfillment centers are at the heart of its operation.

Employees must work at machine-like efficiency levels in order to track, pack, and sort thousands of orders each day.

However, very few realize just how much Amazon pushes the envelope of productivity. According to a article by The Verge , Amazon fired "hundreds" of employees at a single facility between August and September for failing to meet productivity goals.

Productivity is the level of efficiency in the production process. It's usually expressed as the ratio between aggregate output and aggregate input in the production process. Productivity in the workplace refers simply to how much "work" is done over a specific period of time. Depending on the nature of the company, the output can be measured by things like customers acquired, phone calls made, and, of course, sales gained. Some commonsense ways to increase personal productivity on a daily basis include:.

The concept of productivity is simple: the level of output per unit of input. However, its importance can't be stressed enough. Whether we're coming at it from an economic standpoint, company standpoint, or personal standpoint, being able to measure and track productivity can be crucial to long-term success. The Conference Board. Bureau of Labor Statistics. Financial Analysis.

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Your Money. Personal Finance. Your Practice. Popular Courses. Economics Microeconomics. Table of Contents Expand. What Is Productivity? Understanding Productivity. Labor Productivity. Time Traveler for productivity The first known use of productivity was in See more words from the same year. Style: MLA. English Language Learners Definition of productivity. Get Word of the Day daily email! Test Your Vocabulary.

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They combine the various resources with the use of work stations and assembly lines. A work station is an area in which one or more employees are assigned a specific task. A work station may require machinery and equipment as well as employees. An assembly line consists of a sequence of work stations in which each work station is designed to cover specific phases of the production process. The production of a single product may require several work stations, with each station using employees, machinery, and materials.

Since the cost of all these resources along with the building can be substantial, efficient management of the production process can reduce expenses, which can convert into higher profits. Employees use buildings, machinery, and equipment to convert materials into a product or service.

For example, employees of printing firms use machines for typesetting, printing, and binding to produce books. Employees of General Nutrition Centers GNC use its manufacturing plant which is the size of four football fields to produce more than , bottles of vitamins per day.

A critical decision in production management is the selection of a site location for the factory or office. This is especially true for industrial firms such as Bethlehem Steel and DaimlerChrysler, which require a large investment in plant and equipment.

Factors Affecting the Site Decision :. Several factors must be considered when determining the optimal site. The cost of purchasing or renting workplace space such as buildings or offices can vary significantly among locations. Costs are likely to be high near the center of any business district where land costs are high. Costs also tend to be higher in certain regions.

For example, office rental rates are generally higher in the northeastern states than in other areas. This is one major reason why companies located in northern cities have relocated to the South during the last 10 years. The cost of hiring employees varies significantly among locations.

Salaries within a city tend to be higher than salaries outside the city for a given occupation. Salaries are also generally higher in the North than the South for a given occupation. This is another reason why many companies have relocated to the South. Some local governments may be willing to grant tax credits to attract companies to their area. The governments offer this incentive to increase the employment level and improve economic conditions in the area.

If a firm plans to sell its product in a specific location, it may establish its plant there. The costs of transporting and servicing the product can be minimized by producing at a site near the source of demand. When companies sell products across the nation, they may choose a site near their main source of transportation.

They also need to be accessible so that materials can be delivered to them. Some factories and offices are established near interstate highways, rivers, or airports for this reason. Firms that plan to hire specialized workers must be able to attract the labor needed. They may choose a location where a large supply of workers with that particular specialization exists. For instance, high-tech companies tend to locate near universities where there is an abundance of educated labor. Once a site for a manufacturing plant or office is chosen, the design and layout must be determined.

The design indicates the size and structure of the plant or office. The layout is the arrangement of the machinery and equipment within the factory or office. The design and layout decisions directly affect operating expenses because they determine the costs of rent, machinery, and equipment. Once the plant and design have been selected, the firm can engage in production control, which involves the following:. Managers perform the following tasks when purchasing supplies.

First, they must select a supplier. Second, they attempt to obtain volume discounts. Third, they determine whether to delegate some production tasks to suppliers. Inventory control is the process of managing inventory at a level that minimizes costs. It requires the management of materials inventories, work-in-process inventories, and finished goods inventories. Routing is the sequence or route of tasks necessary to complete the production of a product.

Raw materials are commonly sent to various work stations so that they can be used as specified in the production process. A specific part of the production process is completed at each work station. For example, the production of a bicycle may require 1 using materials to produce a bike frame at one work station, 2 assembling wheels at a second work station, and 3 packaging the frames and wheels that have been assembled at a third work station.

The routing process is periodically evaluated to determine whether it can be improved to allow a faster or less expensive production process. General Motors, DaimlerChrysler, and United Parcel Service have streamlined their routing process to improve production efficiency.

Scheduling is the act of setting time periods for each task in the production process. A production schedule is a plan for the timing and volume of production tasks. For example, the production schedule for a bicycle may set a time of two hours for each frame to be assembled and one hour for each wheel to be assembled.

Scheduling is useful because it establishes the expected amount of production that should be achieved at each work station over a given day or week.

Therefore, each employee understands what is expected. Furthermore, scheduling allows managers to forecast how much will be produced by the end of the day, week, or month. If a firm does not meet its production schedule, it will not be able to accommodate customer orders in a timely fashion and will lose some of its customers.

Customers are more likely to purchase additional products from the same firm if they are satisfied with the quality. Firms now realize that it is easier to retain existing customers than it is to attract new customers who are unfamiliar with their products or services. Thus, firms are increasingly recognizing the impact that the quality of their products or services can have on their overall performance. Quality control is a process of determining whether the quality of a product or a service meets the desired quality level and identifying improvements if any that need to be made in the production process.

Quality can be measured by assessing the various characteristics such as how long the product lasts that enhance customer satisfaction. The quality of a computer may be defined by how well it works and how long it lasts.

Quality may also be measured by how easy the computer is to use or by how quickly the manufacturer repairs a computer that experiences problems. All of these characteristics can affect customer satisfaction and therefore should be considered as indicators of quality.

The quality of services sold to customers must also be assessed. For example, Amazon dot com produces a service of fulfilling orders of books, CDs, and other products ordered over the Internet by customers.

Its customers assess the quality of the service in terms of the ease with which they can send an order over the Internet whether they receive the proper order, and how quickly the products are delivered. The act of monitoring and improving the quality of products and services produced is commonly referred to as total quality management TQM , which was developed by W.

Edwards Deming. Production quotas are discouraged so that employees can allocate more of their time to leadership and the improvement of the production process. Many firms use teams of employees to assess quality and offer suggestions for continuous improvement.

To ensure that quality is maintained, firms periodically evaluate the methods used to measure product or service quality. In order to have a value for comparison purposes, organizations compute their productivity index.

By tracking productivity indexes over time, managers can evaluate the success, or lack thereof, of projects and decisions. Productivity may be measured either on aggregate bases or on individual basis, which are called total and single factor productivity respectively. This index measures the efficiency in the use of all the resources. Partial productivity Indices depends upon factors used; it measures the efficacy of individual factor of production.

Following are productivity indices for individual inputs. A large number of techniques have been developed for improving productivity. Scientific analysis and improvement of work in all its aspects is a very useful technique of increasing productivity. Work study results in improvements in plant layout, material handling system, process design and standardization, working conditions, etc.

These in turn help to minimize defective works and waste. The rate of technological progress is a direct determinant of productivity. That is why companies and countries spend huge sums of money on research and development activities. Wage incentive schemes seek to motivate employees by paying extra remuneration. Profit sharing or bonus, labour welfare measures and good working conditions also help in this objective.

All these schemes foster sense of belonging and closer human relationships. As a result, there is reduction in idle time caused by absenteeism, labour turnover, accidents and disputes. It facilitates full utilization of plant capacity and achievement of production targets.

Labour participation in management is considered an effective tool for improving productivity. It helps in developing mutual understanding and cooperation between management and labour. Mechanization, automation and rationalization are major breakthroughs for increasing productivity. These schemes are effective provided the productivity gains are equitably shared with workers. Such measures increase the speed and accuracy of work. MBO is a process whereby the superior and subordinates jointly identify the specific measurable goals, define results expected of each individual and jointly assess the contribution of every individual.

It is an approach for integrating the individuals with the organization. The focus of MBO is on participative goal setting, joint evaluation of performance and results to be achieved. It is also known as Management by Results. As a result there is improvement in the understanding, motivation and morale of the individual.

However, MBO requires education and training of subordinates and a democratic leadership style on the part of managers. Job enrichment is the process of redesigning a job in order to enlarge its scope and to give the worker more to do. Its purpose is to improve job satisfaction, motivation and morale of workers. When the job is engineered to workers the dehumanization element is reduced so as to improve productivity and to reduce cost.

It provides an opportunity for the satisfaction of higher level needs. The following methods can be adopted for job enrichment:. More diverse tasks and responsibilities imply greater flexibility in work assignments. Job enrichment provides an experience that widens the skill, knowledge and confidence of employees. Flexitime is a relatively new work pattern which is a major departure from tradition.

It allows the workers to set their own work hours subject to a minimum number of hours per week. During a particular period all workers are required to be present. Flexitime helps to reduce worker alienation and to raise productivity. It reduces the tyranny of supervisors and provides job opportunity to working mothers, aged persons and students. By permitting workers the right of self-determination, flexitime reduces tardiness, overtime and short-term absenteeism.

A quality circle is a small group of workers which regularly meets to discuss problems, investigate causes, recommend solutions and if authorized, to take corrective action. It usually consists of five to fifteen members who collectively identify, analyze and resolve work-related problems and may even implement solutions.

A leader is appointed to direct and guide the circle. A Facilitator makes integration of programme easier at all levels. The Coordinator supervises the facilitators and directs administration of the programme. There is a Steering Committee which oversees and directs the efforts of all quality circles in the organization. The purpose of a quality circle programme is to improve motivation, productivity and product quality. It is designed to optimize the manpower by capturing the creative and innovative power of the workforce.

It provides workers an opportunity to participate in decisions about their work. As a result, they take greater interest in their jobs.