The words production and productivity sound similar; many people think they have a similar meaning, but production and productivity are different.
Production is about manufacturing goods from raw materials to finished products. Productivity is considered part of the production process. Productivity is about how efficient a country or company is. Productivity is an economic principle; a formula is used to calculate productivity. Though they may seem similar, productivity and production are quite different.
Table of Contents
- Understanding Production vs. Productivity: Clarifying the Key Differences
- Production Vs. Productivity Difference Explained
- Related Content
Understanding Production vs. Productivity: Clarifying the Key Differences
While ‘production’ and ‘productivity’ often appear similar and are sometimes mistakenly used interchangeably, they represent distinct concepts in economics and business. Production refers to transforming raw materials into finished goods, encompassing the entire manufacturing journey.
In contrast, productivity measures the efficiency of this process, evaluating how effectively a company or country converts inputs into outputs. Productivity, a fundamental economic principle, involves specific calculations and formulas to assess efficiency levels.
Despite their seeming similarity, a clear understanding of production and productivity reveals their unique roles and differences in the broader context of economic performance.”
What Is Production?
Production is turning raw materials into a finished product; it is about manufacturing a product to ensure it is ready to be sold to the marketplace.
Some companies use the term production to refer to the manufacturing process before the goods are completed. An example is that the “goods are in production” means something is being produced but not completed.
Another way the word production is used is to talk about products already produced. An example would be “this is our production,” meaning goods are completed and ready to market.
Production can also be about the output of nonmaterial goods. It can be a combination of know-how that is then produced for consumption.
The key to production is to be a product or service with value and something that individuals want to purchase. Production is an economic activity often referred to as the production theory.
In short, production means producing a product from the raw materials to the finished product or service with a value paid for consumption.
What is Productivity?
Productivity is part of the production process; productivity has to do with the efficiency of the production process. Quantitative aspects, such as labor, capital, and other resources, will be looked at when looking at productivity.
The economy often calculates productivity as a gross domestic product (GDP) ratio to the hours worked.
Countries often break down labor productivity to look at trends in labor growth, wage levels, and technological improvements. These aspects of productivity are examined because they directly affect corporate profits and shareholder returns.
Productivity is also looked at on the business level to measure a company’s effectiveness; the effects can include the efficiency of the company’s production process. Productivity can consist of how long labor takes to produce an item, i.e., the number of minutes per piece. Productivity looks at how that productivity standard would compare to others making the same or similar product.
The Productivity Formula
There is a pretty straightforward formula that is used to calculate productivity. This formula is known as the productivity economics formula.
Here is the productivity formula:
Divide Output
By
Input To Produce Output
The most regularly used input is labor hours, which helps companies or manufacturers see how productive their labor or workers perform.
Output can be measured by units produced or sales.
Here is an example of how the productivity formula is calculated:
2.500 products (output)
divided by
1,000 labor hours (input)
equals
2.5 Productivity Rate
The calculation above means that an employee can produce about 2.5 products per hour, the productivity rate for manufacturing the products.
You can also change the output to sales for productivity and divide it by the input. For example, if the input is 100,000 and 5,000 hours, then the productivity is $20 in sales for each hour of labor.
Productivity is a widely used economic term that can be used for everything, from the productivity rate of a nation to the productivity of a manufacturing production facility.
Production Vs. Productivity Difference Explained
There are a lot of essential differences between productivity and production. The table below outlines some of the main differences between production and productivity.
| Description | Production | Productivity |
| Use | Goods from raw material to finished product | A measure of outputs and inputs |
| Details | The Manufacturing process | Economic term to look at how long it can take for products to be made |
| Location | Wherever goods are manufactured | An economic term used for countries (GNP) and manufacturers |
| Process | Manufacturing process | Economic formulas that are calculated |
| Part Of | Economy | Production Process |
| Theory | Production Theory | Output per unit of input |
Even though production and productivity seem the same, they are pretty different. They have various reasons and uses in part of the manufacturing process. However, they have different definitions and uses; they are both considered essential principles of economics.
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