Sound business strategy and supporting operations strategy make an organization more competitive in the marketplace. But how does a company measure its competitiveness? One of the most common ways is by measuring productivity. In this section we will look at how to measure the productivity of each of a company's resources as well as the entire organization.

Measuring Productivity

Recall that operations management is responsible for managing the transformation of many inputs into outputs, such as goods or services. A measure of how efficiently inputs are being converted into outputs is called productivity. Productivity measures how well resources are used. It is computed as a ratio of outputs (goods and services) to inputs (e.g., labor and materials). The more efficiently a company uses its resources, the more productive it is:

images Productivity

A measure of how efficiently an organization converts inputs into outputs.


This equation can be used to measure the productivity of one worker or many, as well as the productivity of a machine, a department, the whole firm, or even a nation. The possibilities are shown in Table 2-2.

images Total productivity

Productivity computed as a ratio ...

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