Difference Between Production And Productivity

The article discusses what are production and productivity. It covers how production is about the creation of goods and services, while productivity is about how efficiently that production process is carried out.

The article discusses production and productivity and talks about the key difference between production and productivity.

What is Production?

Production is an activity dedicated to creating and supplying goods and services and creating value. It involves adding qualities that not only make the product different from the existing ones but also make modifications and add more utilities.

Production takes place within an economic system. The capacity includes a productive factor to create certain goods in a certain period. It encompasses a range of different activities. It is the manufacture of physical objects and influences the provision of services.

Also Read – Difference Between Production and Manufacturing

What is Productivity?

Productivity is the relationship between the number of products obtained by a productive system and the number of resources used to achieve said production. It is also defined as the relationship between the results and the time spent to obtain them. The less time spent to achieve the desired result, the more productive a system is.

Productivity can be defined as an efficiency indicator that relates the resources used with the production obtained. It evaluates a system’s ability to produce the required products and its use of resources. 

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Greater productivity using the same resources or producing the same goods and services implies greater profitability for the company.

You can also explore: Difference Between Forward and Future Contract

Difference Between Production and Productivity

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Below is an explanation of the fundamental differences between production and productivity.

1. Measurement

Production measures what a company has produced, either in the form of goods or services. o, n the other hand, productivity measures efficiency, including the company’s total output.

2. Expression

Production is measured and expressed in absolute terms since it focuses on what is produced. For example, if a company produces 100 soaps daily, we will say that it produces precisely 100 soaps per day. This is a relatively simple and easy-to-understand measure.

On the other hand, productivity is measured in relative terms. Given that it encompasses many more variables than production and some need to be easier to measure, it is impossible to calculate it accurately or concretely.

Returning to the example of the soap company, we need more information to calculate its productivity. They make 100 soaps daily. It is valuable information, but it is necessary to consider other aspects, such as total investments, cost of resources, the time dedicated, the individual production of each employee, the machinery used, and its maintenance.

3. Product and Usability

Output measures the total quantity of products and services offered at the end of the process. It needs to indicate how well the raw materials have been used.

Thus, the production measure allows us to know to what degree the company’s production helps it to generate profits or, on the contrary, entails losses.

On the other hand, productivity is a measure that allows us to know to what degree the resources have been used. 

An organization is productive if it has wisely used resources, materials have not been wasted, or waste has been produced during the process.

4. Added value

When a product is produced, or a service is offered, the company gives it value, considering what has been initially invested and what percentage of income is desired.

On the other hand, productivity, although it is a measure that is difficult to calculate, cannot be given an arbitrary value. It is the company’s total efficiency in producing a product or service, with which the expenses and benefits must be considered. 

Productivity-Production Relationship

As we have already seen, the primary difference between the two concepts is that production refers to the number of goods and services offered in a certain period. In contrast, productivity refers to the level of use of resources, whether material, human or energetic. Understanding this fundamental difference, it is time to see the close relationship between these two terms.

It is only possible to calculate productivity by considering the efficiency of production within an organization. To know how efficient a company is, it is necessary to know how many products/services are offered. In this way, we can know to what extent there may be losses or gains and in what way an appropriate use of resources is being made within the organization.

The degree of production and productivity influence each other. For example, suppose a decrease in production has been detected in a company. In that case, it is necessary to investigate what happened, if the workers have suffered an accident, if a machine has broken down or if any raw material has run out? Employees may also need to change their way of working, making it necessary to invest in training or replace them if there is no other option.

Production and productivity are interrelated terms. We hope this article helped you understand the difference between production and productivity.