Despite these two words pertaining to improving the production process of a manufacturing, agriculture, or service sector company, they refer to different things. Once you think about the differences, you can better utilize productivity and efficiency in your business.
Many manufacturing companies may only be running at 60-80% efficiency. For example, you produced 40% more units in one month than the prior period, but later learned 30% of those units were defective. Though productivity has gone up, efficiency went down. Better selection of raw materials can lead to increased efficiency by being easier to work worth and improving consistency.
Where productivity was more focused on increasing the quantity being manufactured, efficiency refers to the quality and effectiveness of the work being done. The definition is “the ability to do something or produce something without wasting materials, time or energy.” This means that efficiency is often expressed by a percentage, with 100% being the ideal.
Furthermore, increasing efficiency can lead to more productivity. Once the manufacturing process gets bolstered by better sales, you begin making investments in elevating the production rate. This may be done through purchasing automated equipment, improving logistics, acquiring more skilled laborers, and implementing LEAN methodologies. When the line moves faster, productivity increases.
The definition of “productivity” from a manufacturing perspective is “the ratio of output to input in production” and is a measure of efficiency. When something is produced, how much time does it take? What is the quantity—not quality—of the production rate? Think of it like this: Your manufacturing line produces 500 units in one week. If you boost your production rate to 700 units in the following week, your productivity has increased by 200 units.
Two key concepts in manufacturing that often get misconstrued or even used synonymously are productivity and efficiency. Do you know what the difference is? Despite these two words pertaining to improving the production process of a manufacturing, agriculture, or service sector company, they refer to different things. Once you think about the differences, you can better utilize productivity and efficiency in your business.