Production efficiency and its components

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2020-07-03 01:33:06

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Economic efficiency, as a rule, is a major integrated indicator of the success of doing business for any enterprise in any industry.

In the simplest terms, production efficiency (EPE) implies a quantity ratio of the result achieved by the enterprise or company and industrial and commercial activities and the costs incurred by the firm or company to achieve this result. A quantitative parameter, this ratio is called the index of economic efficiency and is defined as the relative performance of the entire economic system (this refers to the full production and commercial cycle for a given enterprise). The relative performance parameter is determined by the fact that its parameters are taken in comparison with cost of resources.

As an integral indicator of economic efficiency of production expresses the amount of statistical performance indicators at different levels of this economic system (companies, firms) and acts as the characteristics of the resulting aggregate economic activity (facility-specific, or even unit, to the economy of the country as a whole). At the same time, as an integrated option, it still possesses the qualities of universality, that is, with the same degree characterizes any efficiency factors, whether economic efficiency of agricultural production, industrial, services, or the economic efficiency of livestock production.

At the level of microeconomic analysis EUE is calculated as the ratio of the costs of final products production cost minus one. This calculation is similar and at the macroeconomic level, just as the first indicator, the total GDP of the country. In addition, very revealing and calculations for individual factors of production – capital, personnel, land, means of production. This allows a more detailed analysis of the situation at a particular enterprise or in the country overall and form-specific management decisions based on a cumulative technology, that is to focus investment and other resources on the weakest part of the economic process from the point of view of its effectiveness.

In very global terms, the main criterion of social production is the level of satisfaction of people's needs in the required socio-economic benefits. More narrow and specific in content to this criterion is actually economic efficiency of production, which is characterized by a number of special options. The chief of these is such an important and widely used indicator is labour productivity, which expresses the quantitative side of the results produced in relation to the time indicators. In addition to productivity, quite succinctly characterize the efficiency of the production parameters capital productivity, profitability, and the profitability and return on investment.

It is considered that the support of such a cost-effective method of production activities, which gives the correspondence of the volumes of output in a given amount of costs for its production. If the company cannot support such volumes without additional resources, such production is deemed inefficient. That is, the effective is the economic activity with the least cost.

In this context, production efficiency differs from technical efficiency, because it takes into account a much broader list of indicators, such as compliance of product quality to market demands or the demands of the consumers.


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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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