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Productivity / efficiency is the measure of the relationship of outputs to inputs and is usually expressed as a ratio. These measures can be expressed in terms of actual expenditure of resources as compared to expected expenditure of resources. They can also be expressed as the expenditure of resources for a given output. Examples:
total cost of operations (2) labor productivity
# of completed transactions (or units produced) (3) cycle time
# days to complete job order Allocative efficiency is the extent to which the "right" mix of goods and services is provided to the "right" people at the "right" time at a cost that is likely to lead to "return business" The consequences of distributing goods and services in a particular way in a "market place". If the way goods and services are distributed leads to unacceptable distortions in the allocation of resources in the "market place", then to that extent there is poor allocative efficiency
Cost effectiveness is an evaluation process to assess changes in the relationship of resources to:
Examples: (2) efficiency: Will an investment in equipment whose depreciation increases unit cost by 5 percent reduce operating costs by more than that amount? (3) effectiveness: Will a change in the process result in the same efficiency rate but at a much improved effectiveness rate as measured by quality, timeliness, etc.? |
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