Page 25 - DMGT501_OPERATIONS_MANAGEMENT

Unit 1: Introduction to Operations Management

However, there are many examples from leading-edge service companies that have achieved Notes
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.

1.8 Computing Productivity

Effectiveness of production management is measured by the efficiency through which the inputs
are converted into outputs, i.e., effectiveness of outputs and inputs. This efficiency is called
productivity of the system. The higher the productivity, the more efficient is the production
system.
Conceptually, productivity is defined as an attitude of mind and prevention of all kinds of
waste. Mathematically,

Productivity = Output/Input = Goods or Services Produced/All Factors of Production
1.8.1 Productivity Indices

When both output and input are expressed in the same unit, productivity reduces to a mere
number. Quite often it is expressed as a % of output to input. It is also expressed as:
OMS : Output per man-shift

Example: A coalminer produces coal @ 2 tonnes per day, we say that his OMS is 2t/day.
Production per month:
1. For better understanding in an industry, e.g., in a steel plant, it is expressed as 10,000
tonnes (of steel produced) per month.
2. GNP (Gross National Product): National productivity is given as per capita income.
3. In agriculture sector: Output per hectare, etc.
For industries having incentive Schemes:
Productivity = SMH/AMH
= Standard Man-Hours Earned/Actual Man-Hours Worked

1.8.2 Wastivity

Wastivity = 1/Productivity

Another way of looking at the concept of productivity is to look at the amount of wastage
generated in the system. The wastage could be an unnecessary input, a defective output, idling

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