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Resource productivity refers to the amount of product or income produced by a specific resource. This resource could be an individual or group of individuals, a machine or an entire manufacturing plant, depending on the frame of reference. Resource productivity has long been used in traditional business models to pinpoint areas of low productivity and areas that may require augmentation to continue to operate at current or higher productivity levels.
When used in general businesses practice, determining resource productivity is a multifaceted process. It takes into account the amount of work each unit of labor accomplishes and compares that number to the minimum acceptable and average production levels to ensure that the worker is generating enough output to justify the cost of employing him. It also gauges worker output to ensure that no employee is producing more output than can reasonably be produced without ignoring quality controls or safety processes. This methodology can then be applied to a group of workers, such as a department, to ensure that the group, as a whole, is meeting productivity standards without risking injury or mistakes.
This same process is applied to machinery. For example, if a company has three printing presses, it will monitor the productivity of each machine. If there is only enough work to keep each machine running half of the time, the company might consider selling one press because the other two will be adequate to meet the current need and still have time left for additional work. Conversely, if each machine is running 22 hours each day and the manufacturer recommends running a maximum of 18 hours per day, it might be time to buy another press.
Similar methodology can be used to assess the resource productivity of entire plants or operations. If a manufacturer has three plants and two of them do not produce enough goods to cover the expense of operating them, the company might opt to close one plant and consolidate operations. While the company then has only two plants, it is doing the same amount of business, but with roughly two thirds of its previous expense level.