This is a discussion about the difference and relationship between productivity and efficiency in manufacturing plant management, including the effect production increase has on efficiency, and what other areas of effective plant management can impact productivity and efficiency.
Productivity, in business terminology and according to Investopedia, is a measure of a unit of output divided by a unit of input. Input is calculated by determining costs of labor, materials and overhead, including capital. Output is determined by revenues, inventory, and similar received assets. It is also more difficult to determine productivity in a service business compared to a goods producing business.
Efficiency, also according to Investopedia, is a level of performance that describes a process that uses the lowest amount of inputs to create the greatest amount of outputs.
While productivity is a measurement, efficiency is a goal oriented process that compares different levels of productivity in an effort to find the best one.
If production increases, it does not necessarily result in an increase in efficiency, because since as a ratio, ...
Productivity and efficiency are very important concepts to understand in effective plant management. While productivity is a mathematical measure, efficiency describes the level of performance while using the lowest level of inputs. Continuous quality testing can produce the best level of both productivity and efficiency.