What Is Meant By Production & Productivity, Their Difference Explained

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The words production and productivity sound similar; many people think they have a similar meaning, but production and productivity are not the same things.

Production is about manufacturing goods from the raw material form to a finished product. 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.

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 that 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,” which can mean goods are completed and ready to go 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 that it needs to be a product or service with value and is something that individuals want to purchase. Production is an economic activity that is often referred to as the production theory.

In short, production means producing a product from the raw materials to the finished product or service that has a value produced for consumption.

What is Productivity?

Productivity is part of the production process; productivity has to do with the efficiency of the production process. When looking at productivity, quantitative aspects will be looked at, such as labor, capital, and other resources.

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 at because they directly affect corporate profits and shareholder’s 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 it takes labor 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; this is 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 to look at 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
ProcessManufacturing process Economic formulas that are calculated
Part Of Economy Production Process
Theory Production Theory Output per unit of input
Production Vs. Productivity

Even though production and productivity seem to be the same, they are pretty different. They have various reasons and uses in part of a manufacturing process. However, they have different definitions and uses; they are both considered essential principles of economics.

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Anita Hummel

Hi, I am Anita Hummel. I am the President of Mondoro. I am passionate about helping you CREATE, DEVELOP, and MANUFACTURE home decor and home furnishing products. I am also an avid blogger with a love of travel and riding my motorcycle around the streets of Hanoi, Vietnam.

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What Is Meant By Production & Productivity, Their Difference Explained