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operations strategy
New answer on Nov 07, 2021
4 Answers
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Carmen asked on Nov 03, 2021

Hi all, 

I am going to sit for an interview focusing on Operational Improvement or Supply Chain Management.

However, I am confused about several terms that are usually used in these types of cases. 

From my understanding, 

1) Capacity = number of units can be produced

2) Productivity = output/input or output/time

3) Utilisation = utilisation rate of a machine from its maximum capacity

4) Efficiency = output/input but in terms of quality

I am really confused about productivity and efficiency. Are productivity and efficiency the same?

Hope someone can answer my questions! Thanks!

 

 

 

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Ian
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 replied on Nov 03, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

I like the way you're approaching this!

1) Capacity = number of units can be produced

Correct. Normally within a timespan (hours/days/week/years)

2) Productivity = output/input or output/time

Correct. For a given input (hours, lbs, etc) how much do we make)

3) Utilisation = utilisation rate of a machine from its maximum capacity

Correct.

4) Efficiency = output/input but in terms of quality

It's actually essentially the same as #2 (productivity), but almost flipped. For a given item produced, how little can we use?

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Agrim
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 replied on Nov 03, 2021
BCG Dubai Project Leader | Learn to think like a Consultant | Free personalised prep plan | 6+ years in Consulting
  1. Capacity = Theoretical maximum number of units can be produced in the line
  2. Labor Productivity = Units produced per employee per hour (also know as man-hour)
  3. Capital Productivity = Revenue produced per dollar invested in the line.
  4. Combined Productivity = Revenue produced per combination of dollar invested and labor employed. This is governed by theories like Cobb-Douglas Function.
  5. Utilisation = Actual units produced divided by theoretical maximum possible (capacity)
  6. Efficiency = Total man-hours of effort spent divided by the theoretical man-hours required based on an ideal labor productivity level
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Pedro
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 replied on Nov 03, 2021
30% off in April 2024 | Bain | EY-Parthenon | Roland Berger | Market Sizing | DARDEN MBA

Productivity is how much output there is per input unit.
Efficiency is the percentage of the actual output to the expected output (if everything was working well).
 

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Antonello
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 replied on Nov 07, 2021
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi!

I think you're actually on the right track and I agree with your definitions.

Best,

Anto

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