productivity

• What is productivity a measurement of?

  The efficiency with which a business turns production inputs into output
• What is the most common measure of productivity?

  Labour productivity (output per worker)
• How is labour productivity calculated?

  By dividing total output by the number of workers
• If a factory produces 1000 bicycles a day with 100 workers, what is the productivity per worker?

  10 bicycles per worker per day
• What other measures of productivity can be used besides labour productivity?

  Capital productivity and productivity in retailing
• How is productivity in retailing measured?

  Through sales per square foot
• What does higher productivity indicate?

  More efficient production or sales generation
• What are the key factors that can improve productivity in manufacturing?

  • Output (per period)
  • Number of employees (per period)
  • Labour productivity
  • Capital employed
  • Capital productivity
  • Technology
  • Workplace reorganisation
  • Lean production
  • Training
• What does full capacity mean in a business context?

  All employed factors of production are being used to their optimum level of efficiency
• How is spare capacity measured?

  By looking at output as a percentage of total capacity
• If a factory can produce 2000 car exhausts per day but is only producing 1700, what is the spare capacity?

  300 exhausts, representing 15% of maximum capacity
• What are some effects of significant spare capacity on a business?

  Demotivation of staff and increased costs
• What are the problems associated with spare capacity?

  • Demotivation of staff
  • Increased costs to the business
  • Reduced profits
  • Lack of return on investment capital
• What is subcontracting in the context of production?

  Getting another business to produce goods for you
• What are the risks associated with subcontracting production?

  Lack of control over quality and potential high prices
• What does rationalisation mean in a business context?

  Concentrating on core products or services and disposing of unprofitable ones
• What are the potential costs of rationalisation?

  Writing down the book value of assets and redundancy costs
• What does "making your assets sweat" refer to?

  Increasing the use of investment goods
• Why might businesses choose to ride out periods of spare capacity?

  They expect the market to recover and demand to increase
• What are the problems associated with working at full capacity?

  • Possible fall in quality
  • Lack of flexibility
  • More breakdowns/machine failures
  • Pressure on staff