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Productivity and Profitability

1. Basic Productivity Ratio: Prod. Output/Input

2. Productivity may be measured in terms of physical units, monetary units, depending upon the availability of data and requirement of specific situation.

3. Increase in the productivity occurs when the ratio of output to input rises from one period to the next.

4. Profitability= (Revenue + Cost) Investment

5. Profitability can be increased be reducing costs and that would also increase the productivity

6. A decrease in the price of the product may lead to decrease profitability even though productivity may be rising or vis -a-sis

Importance of Productivity

* Increase in productivity

* Reduction in cost

* Increase in profits

* Competitive advantage

* Better quality of Life

Factors Affecting Productivity

*

* Categories of Factors

* Internal Factors

* Internal Factors or controllable

* External Factors or uncontrollable

A. Technology Factors

* Size and capacity of plant

* Product design and standardization

* Timely supply of material and fuel

* Rationalization and automation measures

* Repairs and maintenance

* Production planning and control

B. Human Factors

* Existence of adequate skilled personnel in the org for increasing the productivity

* Two process which affect the productivity of human labor are

1. Ability to work

2. Willingness to work

C. Financial Factors

* Adequate amount of capital required for running the org.

D. Material and Energy

* Efforts to reduce consumption of energy and materials

* Factors to be considered

I. Selection of quality material

II. Control of wastage

III. Effective stock control

IV. Development of sources of supply

V. Optimum energy utilization and energy savings.

External Factors

a. Natural factors (physical, geographical and climatic conditions)

b. Sociological Factors (social customs, traditions and...