Productivity and utilisation Flashcards
What is productivity?
The efficiency at which inputs can be turned into outputs.
How can productivity be measured?
Output / worker/machine
Output / hour of labour
Output / hour/day/week
Unit average cost
What are the benefits of increased productivity?
Lowered costs.
Profit maximisation.
Higher wages.
Price competitive.
Higher profits.
Reinvestments.
Economic growth.
How can labour productivity be calculated?
Output / number of employees.
OR
Labour hours / units produced.
How can productivity be improved?
Training.
Motivational incentives.
Better quality raw materials.
Better or more capital equipment.
Improved organisation.
What role might AI play in increasing labour productivity?
Allowing the removal of mundane, repetitive tasks. Developing opportunity for strategic thinking, creativity, insight and unprecedented scale.
E.g robots to milk cows, über food delivery robots.
What is capacity?
The maximum that can be produced within a period of time.
How is capacity affected?
Equipment.
Labour.
Land.
What is capacity utilisation?
The current level of production compared to the maximum potential output.
How is capacity utilisation calculated?
Actual output / maximum possible output X 100
What is the objective of capacity management?
To find a balance between efficiency, quality and customer service.
What is under-utilisation?
When actual production is well below maximum capacity.
Why does under-utilisation occur?
Demand has fallen.
Capacity has been increased too high.
Inefficiency in the production process.
What are the consequences of under-utilisation?
Average costs will rise as they are spread over fewer units.
Profit will fall and loss of potential sales revenue.
Prices may have to rise to cover higher costs and boost revenue.
Employees may feel insecure - work force may drop.
What are the 3 responses to under-utilisation?
Reduce capacity.
Boost demand.
Do nothing
