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Manufacturing Productivity and Efficiency: Not the Same Thing
Two key concepts in manufacturing that often get misconstrued or even used synonymously are manufacturing productivity and manufacturing efficiency. Do you know what the difference is? Despite these two words about improving the production process of a manufacturing, agriculture, or service sector company, they refer to different things. Once you think about the differences, you can better utilize productivity and efficiency in your business. Because more output does not automatically mean better performance. That is where the difference between productivity and efficiency becomes important.
Read this blog to better understand productivity vs efficiency and how it impacts your manufacturing business.
What is Productivity in Manufacturing?
Manufacturing productivity is the relationship between output and the resources used to produce that output.
Inputs can include labor hours, machine hours, materials, or other resources. The specific productivity metric you use depends on what you are trying to understand.
For example:
- A production team makes 500 units in a 40-hour workweek.
- After improving the production process, the team makes 600 units in the same 40 hours.
- Assuming the quality and other conditions remain comparable, productivity has increased by 20%.
The important point is that productivity tells you how much output you are getting from a given amount of input.
Manufacturing companies might track productivity through metrics such as:
- Units produced per labor hour
- Units produced per machine hour
- Revenue per employee
- Production volume per shift
- Output per production line
These metrics can help identify whether your operation is getting more output from the resources available.
But productivity alone does not tell you whether you are using those resources well.
For that, you need to look at efficiency.
What is Productivity in Manufacturing?
The definition of “productivity” from a manufacturing perspective is “the ratio of output to input in production” and is a measure of efficiency. When something is produced, how much time does it take? What is the quantity—not quality—of the production rate? Think of it like this: Your manufacturing line produces 500 units in one week. If you boost your production rate to 700 units in the following week, your productivity has increased by the amount of goods or 200 units. You have increased the amount of goods produced in the same unit of time. This is an increase in your productivity levels. This applies to both goods and services, even though we'll talk primarily about manufacturing production efficiency in this article, and make sure you are using our manufacturing KPIs.
Furthermore, increasing efficiency can lead to more productivity. Once the manufacturing process gets bolstered by better sales, you begin making investments in elevating the production rate. This may be done through purchasing automated equipment to produce goods, improving logistics, acquiring more skilled laborers, and implementing LEAN manufacturing methodologies. When the line moves faster, your measure of productivity increases.
What is Efficiency in Manufacturing?
Where productivity was more focused on increasing the quantity being manufactured, efficiency refers to the quality and effectiveness of the work being done. The definition is “the ability to do something or produce something without wasting materials, time, or energy.” This means that efficiency is often expressed by a percentage, with 100% being the ideal target with maximum efficiency so goods are produced at the lowest average total cost, with all else being constant.
However, many manufacturing companies may only be running at 60-80% efficiency. For example, you produced 40% more units in one month than the prior period but later learned that 30% of those units were defective. Though productivity has gone up, efficiency has gone down. Better selection of raw materials can lead to increased efficiency by being easier to work with and improving consistency. You want to make sure that you maximize efficiency (or at least not lose it) as you increase your output for the period.
Another way to look at efficiency is the number of earned hours of good quality productive work divided by the number of work hours available in a day. You may also refer to this as a measure of your return on
There are various ways to boost efficiency that also boost productivity: investing in improvements in the manufacturing line and those responsible for it. Design for Six Sigma was introduced to ensure processes are designed to be efficient and successful from the initial design stage. You may have heard the statement that you cannot build quality into a poor design and it is very true.
Productivity vs. Efficiency in Manufacturing
The easiest way to understand the difference is to put the two side by side:
| Productivity | Efficiency | |
|---|---|---|
| Primary question | How much are we producing? | How well are we using our resources? |
| Focus | Output relative to input | Waste, quality, time, materials, labor and resources |
| Example metric | Units per labor hour | Scrap rate, rework rate, downtime, OEE |
| What improvement looks like | More output from the same input | Less waste and fewer resources required for the desired output |
| Potential risk | Producing more but creating more waste | Cutting resources so aggressively that quality or capacity suffers |
The distinction becomes especially important when a company is trying to improve manufacturing performance.
If you only measure productivity, you might celebrate an increase in production volume without noticing that scrap, overtime, or defects are also climbing.
If you only focus on efficiency, you might reduce labor hours or material usage without considering whether the change is limiting your ability to meet customer demand.
The goal is not to choose between productivity and efficiency. It is to improve both.
Jessica Wishart
Jessica is Senior Product Manager at Rhythm Systems. She has experience in Client Services and Rhythm software technical support. Her background is in Organizational Execution.
Connect with me on LinkedIn.