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DIFFERENCE BETWEEN PRODUCTIVITY AND PRODUCTION

Production and productivity are different terms and carry different meaning. It is wrong to assume that higher production will always lead to higher productivity or vice-versa. 1.Production is related to the activity of producing goods or services. It is a process (or system) of converting input into some useful, value-added output. 2.Productivity is related to the efficient utilization of input resource into produced in the form of value added goods or services. Production is a measure of output produced. The emphasis is Not on how well the inputresources are utilized. Productivity, on the other hand, puts emphasis on the ratio of output produced to the input used. Its focus is on how well the input resource is used for conversion into output. Example A company is manufacturing 24,000 components per month by employing 100 workers in 8 hour shift. The company gets additional order from government to supply additional 6000 components. The manage-ment decides to employ additional workers. What will be production and productivity level when the number of a additional workers employed are: (i) 30 (ii) 25 (iii) 20. Solution Present production = 24,000 Components Present productivity (of Labor) = Present Production (i.e., output)/Total man-hours (i.e., output) = 24,000 components/(100 workers) (8hour) (30 days of the month) = 24,000 / 24,000 = 1 Component/man-hour With increased order (i) When additional 30 workers are hired Production = 24,000 + 6000 = 30,000 components Productivity (of labor) = Increased total production/ Total man-hour = 30,000 / (100 + 30) (8) (30) = 0.96 Component/man-hour

(ii) When additional 25 workers are hired Production = 24,000 + 6000 = 30,000 components Productivity (of labor) = 30,000/ (100 +25) (8) (30) = 1 Component/ man-hour (iii) When additional 20 workers are hired Production = 24,000 + 6000 = 30,000 components Productivity (of labor) = 30,000/ (100 +25) (8) (30) = 1.04 Component/ man-hour

In this example, it is clear that production has increased by 6000 units. Therefore,

Increase in Production = 30,000 24,000/24,000 * 100 = 25% In case of productivity, the labor productivity falls below the initial level of 1 component per man-hour if more than 25 workers are hired. This level of additional man-power may be termed as break-even level from the labor productivity point of view. Therefore other things remaining constant, no more than 26 workers should be hired for this increased production.

We have understood three things from the above example: 1. Production and productivity are two different things. 2. Increase in production does not necessarily mean increase in productivity. 3. Productivity is always associated with the context in which it is calculated. For example, in the above case, we have calculated and interpreted labor productivity. In another case, someone may like to know about material productivity or energy productivity. If labor productivity has decreased due to some reason, it may not always mean that other forms of productivity, say material productivity, will also fall. Various forms of productivity will be explained in sections to follow.

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