Total productivity measurement based on partial productivity ratios

Abstract

Most of the productivity measures used in industry are partial productivity ratios. Despite the fact that a number of total productivity measurement methods for business unit level have been presented in the literature, these models are not widely used. In recent years the pressure of global competition has compelled firms to focus on strategies for productivity improvements. This emphasizes the need to find appropriate measures for total productivity. Partial productivity ratios are widely used in industry but as such they are too narrow to give a comprehensive picture of the productivity improvements at the business unit level. The main reason why total productivity measurement methods with acceptable validity are not used at the business unit level seems to be that they are too complicated to serve companies encountering the turbulence of today's business world. Most methods presented in the literature are useful for academic research work. However, the management of a business unit is forced to make compromises between validity and practicality, and excessively complicated methods are not found acceptable. The current challenge of productivity measurement is to find a practical total productivity measurement method with acceptable validity for the business unit level. In this paper, an effort to present such a method is described. The method is based on relatively simple and commonly used partial productivity ratios, which can be easily achieved and which are already widely used in industry. Meticulous literature review revealed no corresponding method in the literature. Although the essence of this paper is in the method itself, a case example based on real data is also presented. The aim is to illustrate how the measurement method presented can be implemented in practice.