(1) Productivity: How well you use your resources
Productivity increased greatly after we moved to the new factory.
(2) Input: Something used in creation
The inputs into our bikes include steel frames, labor, and rubber tires.
(3) Output: The things you create
Our factory produces 20,000 units right now, but we want to increase the outputs to 30,000 during the holiday season.
1. Why is it important to measure productivity?
a. To check your profits or losses
b. To check how well you’re using your resources
c. To check how many employees you need
2. What is an example of an input?
c. A hotdog
3. What is an example of an output?
c. A hotdog
By Jeremy Schaar
Productivity is the most important thing for supply chain managers and business in general. Today on the blog, you’ll learn the basic definition of productivity. You’ll learn some useful vocabulary and think about how to decide if your productivity is good or bad.
Productivity is so important because it measures how well you’re producing things. It gives you a way to answers questions like:
How well am I using my resources?
How well am I using my labor?
Am I getting better or worse?
How do I compare to my competitors?
Simply said, productivity is a measure of outputs over inputs. (Outputs/Inputs)
For example, if you make hot dogs, your outputs are hot dogs. Your inputs are labor (your work) and materials (bread, meat). You need to think of a common measurement for these things. An easy one is dollars. Your work might cost $10 and the bread and meat could cost $20. Then, let’s say you sell the hotdogs for $60. What is your productivity?
$60/($10+$20) = 2
Is “2” good productivity? It’s impossible to know. You need to compare it with something else. You can compare productivity numbers across time or location. Said another way, you can see if your productivity was better or worse during a past time period. If you have more than one location, you can see which location has better productivity. You can also compare yourself with a competitor or industry numbers.
Today was a very simple overview. Next time, we’ll look at how companies actually use productivity and compare productivity measures in different industries.