System Potential-Based Productivity Evaluation Model

Abstract

Productivity evaluation if based on historical record, and not the system’s potential, does not fully account for the maximum exploitation of the system. This work uses an optimization technique, the Linear Program, to establish the system’s potential; and then developed the Potential-based Productivity Evaluation model. Applying this model in an example problem gave productivity as 0.98, price recovery 1.07 and profitability 1.06; while the historical approach gave 2.81, 0.34 and 0.97 respectively. A comparison show 187% over-reporting, 65% under-reporting and 8% lag respectively. These would affect the firm’s decisions differently. The model can be used for strategic planning.