Page 133 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes
Did u know? What is Productivity Paradox?
That productivity measures do not seem to show any impact from new computer and
information technologies has been labelled the “productivity paradox”.
Several explanations have been advanced to explain this lag, including ineffective measures for
services sector productivity and macroeconomic factors, such as the low savings rate while on
the other hand fear of job loss by manufacturing workers, which motivates them to work harder
and smarter.
However, there are many examples from leading-edge service companies that have achieved
dramatic improvements in productivity while other firms within the same industry have lagged.
In many cases, these competing companies use the same basic technology, pay the same wage
rates, and operate under the same basic labour agreement. This contradiction is often explained
by lack of intelligent focus in the use of new technologies.
The animating force for productivity and wage growth in the new economy will be the pervasive
use of digital electronic technologies. This is expected to increase efficiency and productivity,
particularly in the low-technology service sector.
It is forecasted that with increased learning, the digitization of the economy in the 21st century
will bring in the kind of economic benefits that mechanization brought in the 20th. And this will
be spurred by the “network effect” – the more we use these technologies (e.g., Internet, smart
cards, broadband and telecommunications), the more applications will be developed, and the
more value they will provide for users. Once this occurs, the productivity paradox could very
likely give way to a productivity and wage boom.

Task Consider the balance sheet of a company for two successive years. Analyze it from
the productivity point of view. Using this as the basis, show the advantages and limitations
of the productivity measures.

Self Assessment

Fill in the blanks:
11. Productivity is a ratio, while production relates to a ……………… .

12. Productivity applies ……………… to the blue-collar workforce as to people doing
intellectual work.
13. The productivity tree is shown in three parts, the roots, the trunk and ……………… .

14. Cost and ……………… are characteristics that must be designed into a product in the first
place.
15. Technology to improve physical productivity focuses on understanding the diffusion of
technology in use and ……………… of processes that exist within and between companies.

6.4 Summary

 Productivity signifies the ratio between the input and output with respect to given resources.

 Productivity data is available from different sources for national productivity, for sector-
wise as well as industry-wise performance.

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