Page 130 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Unit 6: Productivity

 Economy Notes
 Quality,
 Elimination of waste
 Satisfaction of human beings through increased employment, income and better
standard of ”living.
From a broader perspective, an increase of productivity is due to a squeeze in waste of
resources. The resources may be productive resources, governance, markets or social
needs. The real issue is how to achieve them.
Some issues can be simple improvements in the working conditions. For example, attention
to the details of the production process, like placement of the work piece at the work
centre such that it simplifies the job loading of the machine. This adjustment can be an
important contribution in reducing movements and eliminating physical stress, therefore
leading to greater output. This type of improvement is important, however, it does not
provide the whole picture. The larger picture includes:
 Issues related to the structure of operations, such as the number size, location, and
capacity of the facilities providing the service or producing the products.
 The equipment and methods used in the activities.
 The detailed analysis of the individual jobs and activities.
The structure of operations is not as simple as saying that fewer, bigger facilities will
result in higher productivity and lower costs. According to conventional economic theory,
this tends to be true up to a certain limit. Economies of scale allow firms to increase
productivity by making operations larger. Service and manufacturing operations can take
advantage of this to improve productivity and lower costs.

Consolidation in the many industries is being driven by the need to spread Fixed Costs,
such as information systems, infrastructure, and management, over a broader base of
operations. But this action assumes that demand is infinite. Therefore, matching the
characteristics of the market to the needs of the customer is crucial. Very often, adding
facilities is not the right answer.

Example: when Indian Airlines purchased Boeing aircraft, it arranged for the maintenance
of the aircraft to be undertaken by Air India, which already had an established infrastructure. In
this way, Indian Airlines avoided duplicating expensive equipment, highly trained staff, and
administrative overhead. Similarly, many hospitals are forming alliances with super speciality
services to avoid duplication of expensive facilities. In both these cases, the cost of the service
declines and the quality improves.
However, it must be remembered that developments in technology often drive productivity
improvements. As organizations invest in technology, they can optimize time, expand options,
and reduce costs.
Technology is in many cases revolutionizing business and Operations Management by changing
everything from the way products are designed to how inventory is managed and controlled. It
is helping in decision making by gathering, organizing, analyzing, and presenting data to
managers faster and cheaper each day. This has an impact not only on how effectively and
efficiently the equipment is used but also on designing activities that help enhance productivity.
Detail analysis of individual jobs and activities focuses on making people more productive.
Analysis might suggest a better way to do the allocated work. An example of this is the placement

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