Reduction in production
The concept of production reduction (also productivity reduction) describes along the value-added chain the share of in-house production of goods and services.
Brief description
The reduction in output is calculated as a quotient by contrasting own production with total production (own and foreign production). A reduction in output from 100% means that a company can produce its own products without purchasing parts. A reduction in output from 0% means that the company is neither producing its own output nor improving its products. This generally applies to trade.
Depending on the company and the industry, productivity reductions are localized at different levels. In general, however, one can recognize the trend that companies are increasingly specializing on their core competency and shifting inefficient or too expensive sectors to specialized service providers, leading to the acquisition of their own productivity reduction. As a result of the reduction in efficiency, we have a “Make-or-Buy” decision alongside the Outsourcing question.