Real net output ratio

The Real Net Output Ratio ^[1] (or Vertical Range of Manufacture ^[2] ) is a term commonly used by German economists ^[3] and infrequently used in wider Europe, and globally. ^[4] It is used as a measure of vertical integration, though typically limited to a business, rather than across a group of associated companies or a nation. The term was first popularized outside Germany in Hermann Simon's 1996 publication, Hidden champions: lessons from 500 of the world's best unknown companies. ^[5]

In a value chain, the Real Net Output Ratio is the fraction of the internal (company specific) production on the total production value of one company. The total production value of a company consists of internal production plus the sum of externally produced goods and services.

${\displaystyle \textstyle Real\,Net\,Output\,Ratio={\frac {internal\,production}{total\,production\,value}}={\frac {internal\,production}{internal\,production\,+\,externally\,produced\,goods\,+\,externally\,produced\,services}}}$

A Real Net Output Ratio of 0% relates to a company that does not have its own production and therefore only does trading.

References

1. Gabler Wirtschafts Lexikon . 1984. doi:10.1007/978-3-322-87454-2.
2. Shraddha (2023-05-04). "Vertical integration - Leanbyte". wordpressdemo.leanbyte.de. Retrieved 2025-05-29.
3. "Germany: Industry sectors put to the test". Prognos. Retrieved 2025-07-03.
4. "vertical range of manufacture - Fertigungstiefe - Wrong entry in LEO?: English ⇔ German Forums". dict.leo.org. Retrieved 2025-07-03.
5. Simon, Hermann; Lorenz, Jürgen Ulrich; Simon, Hermann (1998). Die heimlichen Gewinner: die Erfolgsstrategien unbekannter Weltmarktführer = (Hidden champions) (5. Aufl ed.). Frankfurt/Main: Campus-Verl. ISBN   978-3-593-35460-6.