- Production is the process of creating goods or services to satisfy human wants and needs.
- It involves transforming inputs, such as raw materials and labour, into outputs, such as finished products or services.
- Productivity, on the other hand, is the measure of how efficiently inputs are used to produce outputs. It reflects the ratio of output produced to the inputs used in the production process.
- There are different types of productivity, including:
- Labour productivity – the output per worker in a given time period.
- Capital productivity – the output per unit of capital invested in the production process.
- Total factor productivity – the output per unit of all inputs used in the production process.
Importance of Productivity to an Operations Manager/Business Manager
- As an operations manager or business manager, it is essential to understand the importance of productivity because:
- It helps to improve efficiency and reduce costs. By maximizing productivity, a business can produce more output using the same amount of inputs or produce the same output using fewer inputs.
- It enhances competitiveness. A business that is more productive than its competitors can offer lower prices, higher quality, or both, which can give it a competitive advantage.
- It allows for better resource allocation. By measuring productivity, a business can identify areas where it can improve efficiency and allocate resources accordingly.
- It helps with decision making. By analyzing productivity data, managers can make informed decisions about how to improve production processes and increase profitability.
- It enables performance monitoring. By tracking productivity over time, managers can monitor performance and identify trends and patterns.
- It encourages continuous improvement. By setting productivity targets and tracking progress towards those targets, businesses can encourage continuous improvement in their production processes.
- It can lead to increased profitability. By improving productivity, a business can produce more output with the same costs or produce the same output with lower costs, leading to increased profits.
- It helps to measure the effectiveness of operations management. By measuring productivity, operations managers can assess the effectiveness of their management strategies and identify areas for improvement.
- It provides a basis for performance evaluation. By measuring productivity, businesses can evaluate the performance of individual workers or departments and provide feedback for improvement.
- It is essential for long-term success. A business that fails to maintain productivity levels over the long term may struggle to remain competitive and profitable in the marketplace.
