DUC Chapter 2 Prepared By: Mohammad Hameed K.

2.1 Productivity:
For any manufacturing firm, the input resources are men, money,
materials, machinery, time, etc. The output is the goods produced and/or
services provided. The objective of a firm is to earn profit by best
utilization of input resources and producing goods at minimum possible
cost and competition. The degree of effectiveness of utilization is often
measured by,
Output
η= where η is efficiency or system
Input

In manufacturing and production systems, we use the term 'productivity' in

place of efficiency. Thus productivity can be defined as the ratio between
the output of goods or services and the input of resources.

Value∨quantity of goods∨services produced

productivity=
Value∨quantity ot giveninput resources

2.2 Difference between Production and Productivity:

The two terms are entirely different from each other. This difference
is given below.
No. Production Productivity

1. Production is an absolute concept. It is a relative concept.

2. Production is measure of volume of Productivity is the operating

production of goods/services by firm.efficiency of manufacturing firm.
3. Production can be expressed in terms Productivity is the ratio of output and
of physical units per unit time. input.
4. Increase in production does not mean If the production is increased for the
that productivity should increase. same output, then there is an
increase in productivity.
5. If the company produces 100 parts of For the same output if company utilize 120
1 00 kg weight per day, then its kg of raw material then its productivity
production may be expressed as 100 may be expressed as.
parts/day. 100
×100=83.33 % .
120

2.3 Importance of Productivity:

Productivity is a key to prosperity. All developed countries have
higher productivity. Higher the productivity greater will be the prosperity

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DUC Chapter 2 Prepared By: Mohammad Hameed K.

and vice-versa. Every country has limited input resources. So in a world of

competition to survive in a better way is higher productivity with the given
input resources. Hence the given input resources must be utilized efficiently
and economically.
Benefits from higher productivity are given below:
(a) Higher productivity reduces the cost of production which make goods
available to public at cheaper rate.
(b) Lowest price increases demand of product in market which in turn
increases the profit margin of company.
(c) Higher profit enables organization to offer higher dividend for
shareholders,
(d) It increases export and increases foreign exchange reserves of a country,
(e) Better standard of living for a society / or nation,
(f) Better working conditions and wages to employees,
(g)It can minimize the level of poverty and unemployment,
(h) It ultimately develops the economy of the country.

2.4 Measurement of Productivity:

For measurement of productivity, one must find out input and
output of the system. To measure the input resources and goods or services
supplied is a critical job as they are of varying nature.
To compare output and input, the better method is to convert both
into money terms. So in general productivity of firm can be measured from
the following equation.
Value of goods∨services produced
Productivity=
Value∨input resources
Thus productivity can be measured either on aggregate basis or on
an individual basis. If individual input resource is considered, the output is
compared with any one of the input resource. Some of these are given
below.
Valueof total output
( a ) Labour Productivity =
Value of man−hours worked

Value of total output

( b ) Material Productivity=
Value of total material input

Value of total output

( c ) Machine Productivity =
Value of total machine hours worked

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DUC Chapter 2 Prepared By: Mohammad Hameed K.

Value of total output

( d ) Capital Productivity =
Value of total capital employed

On aggregate basis, productivity can be given as below:

Value of total output
Total Productivity =
Value of total inputs

Where inputs = Labour + Materials + Machinery + Money

2.5 Techniques for Improving Productivity:

Improvement in productivity depends largely upon improving the

means of production i.e. change in technology, scientific knowledge, active
co-operation of workers, production planning and control etc.
Following are the various techniques to productivity improvement
in large number of industries.
(i) Work Study:
• Work- study aims two objectives, one is to find out the best method of
doing job and another one is to find the time taken to do it.
• This is done by breaking down the job into its various elements,
eliminating all unnecessary movements and estimating the time taken to do
this job with the help of stopwatch.
• Second aim is to ensure that all workers engaged in the job are trained to
do it in v the best way.
(ii) Human Relations:
• Good human relations help in co-operative behavior from workers which
results in increase in productivity.
• Human relations can be improved by labour participation in goal setting,
simplification in communication system, minimizing the conflicts,
encouragement and awarding rewards etc.
(iii) Incentives:
• When incentive scheme is introduced in a firm, it results a considerable
improvement in productivity. It is something that encourages a worker to
put in more productive effort. Workers will not give 100% unless their
interest in work is created by some kind of reward.

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DUC Chapter 2 Prepared By: Mohammad Hameed K.

• The incentive is a kind of financial or non financial reward which is

closely related to the performance of worker, resulting increase in wages
corresponding to an increase in output.
• Typical examples of incentives arc increments, promotions, paid holidays,
company car, etc.
(iv) Cost Control:
Productivity can be increased by reducing the cost of production.
This can be done by keeping careful watch over expenditure, reduction in
wastage, reducing machine breakdown time, reducing waiting time for
inventory avoiding excessive handling, minimizing overtime expenses, etc.
(v) Product Design:
A good design of product helps in economical and convenient
manufacturing. It will also minimize wastage or scrap and reduce the cost
of production.
In order to achieve high productivity,
a) Product design must be simple to understand.
b) Standardization and simplification increases the production efficiency.
c) Research and development contributes improvement in product design.
d) Product development reduces ineffective time due to change in design.
e) Design must consider the current available technology,

(vi) Working Conditions or Ergonomics:

It is nothing but the designing the man machine system in such a
way that to ensure high productivity and safety of workers.
Working conditions like lighting, ventilation, working hours, supervision
etc. definitely affects the productivity. Also water facility, sitting room,
bathroom, toilets in sufficient numbers are considered to maintain working
conditions.
To motivate workers productivity related statements are displayed
in a firm such that workers can read it frequently.

(vii) Management by objectives (MBO):

Management of objectives is a style of managing an organization
which gives stress on the achievement of results expressed in terms of
objectives. It is a process where the superior and subordinate management
jointly:
(a) Identify common goals,
(b) Define individuals responsibility in terms of results expected from
him.All this helps to increase productivity.
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DUC Chapter 2 Prepared By: Mohammad Hameed K.

(viii) Total Quality Management (TQM):

TQM means set of activities involving everybody in an organization
in a totally integrated efforts improving performance at every level.
Here the word quality has wider meaning, it means quality of output
of every department and by every employee, cleanliness, discipline,
customer service etc.
Effective TQM results in greater customer satisfaction, fewer
defects, less waste, improved profitability and increased productivity

Figure 9.5 Work study comprises method study and work measurement
Method study
The analytical study of methods of doing jobs with the aim of finding the
‘best’ or an improved job method.
Work measurement
A branch of work study that concerned with measuring the time that
should be take for performing jobs.
Work study
The term generally used to encompass method study and work
measurement, derives from the scientific management school.

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DUC Chapter 2 Prepared By: Mohammad Hameed K.

Two separate but related fields of study emerged. One, method

study, concentrates on deter-mining the methods and activities which
should be included in jobs. The other, work measurement, is concerned
with measuring the time that should be taken for performing jobs.
Together, these two fields are often referred to as work study (see Figure
9.5). Work measurement and method study are discussed later in this
chapter.
The important thing to remember about scientific management is
that it is not particularly ‘scientific’ as such, although it certainly does take
an ‘investigative’ approach to improving operations. Perhaps a better term
for it would be ‘systematic management’. For example, a tale is told of
Frank Gilbreth (the founder of method study) addressing a scientific
conference with a paper entitled ‘The Best Way to Get Dressed in a
Morning’. In his presentation, he rather bemused the scientific audience by
analyzing the ‘best’ way of buttoning up one’s waistcoat in the morning.
Among his conclusions was that waistcoats should

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Figure 3.5 Different competitive factors imply different performance

objectives

Table 4.1 The impact of strategic performance objectives on process design

objectives and performance

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DUC Chapter 2 Prepared By: Mohammad Hameed K.

Figure 5.2 The design activity is itself a process

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DUC Chapter 2 Prepared By: Mohammad Hameed K.

Q 1) Define productivity and production.

Q 2) Differentiate between production and productivity with appropriate
illustration.
Q 3) List down the different types of production systems practiced in the
industry. Give practical example of each type of production system.
Q4) Explain in brief various techniques used for improving the productivity
in an organization.
Q5) Name different types of production systems and give advantages of
any of them.
Q6) What is the importance of productivity?
Q7) Is it possible to improve output of a production system without
increasing the input? Explain how it can be done?
Q8) How the productivity is measured in an organization?
Q9) Differentiate between production and productivity with appropriate
illustration.
Q10) Compare job production with mass production in the domain of (i)
Application (ii) Type of machines used (iii) Layout (iv) Production
planning.
Q11) How the productivity is measured in an organization?