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2. Quality
-Many companies claim that quality is their top priority, and
many customers say that they look for quality in the products they
buy.
• it depends on who is defining it. For example, quality could be -the
product that lasts a long time, such as with a Volvo, a car known for
its durability; Or It might mean high performance, such as a BMW.
• When companies focus on quality as a competitive priority, they are
focusing on the dimensions of quality that are considered important
by their customers.
Quality as a competitive priority has two dimensions:
i) high-performance design -means that the operations function will be
designed to focus on aspects of quality such as superior features,
close tolerances, high durability, and excellent customer service.
Cont’d…
• Competitiveness
– degree to which a company/ nation can produce goods and
services that meet the test of markets.
– The most common measure of competitiveness is productivity.
– Increase in productivity allow wages to grow without producing
inflation, thus raising standard of living.
– Productivity growth also represents how quickly an economy
can expand its capacity to supply goods and services…
• Productivity
– ratio of output to input
• Output
– sales made, products produced, customers served, meals
delivered, or calls answered
• Input
– labor hours, investment in equipment, material usage, or
square footage
Productivity
The most common measure of competitiveness is
productivity. Increases in productivity allow wages to grow
without producing inflation, thus raising the standard of
living.
Productivity is the ratio of outputs (goods and services)
divided by the inputs (resources such as labour and
capital)
Measure of process improvement
Represents output relative to input
Only through productivity increases can our standard of
living improve
Productivity = Units produced
Input used
• Output can be expressed in units or dollars in a variety of
scenarios, such as sales made, products produced,
customers served, meals delivered, or calls answered.
• Single-factor productivity compares output to individual
inputs, such as labor hours, investment in equipment,
material usage, or square footage.
• Multifactor productivity relates output to a combination
of inputs, such as (labor +capital) or (labor + capital +
energy + materials). Capital can include the value of
equipment, facilities, inventory, and land.
• Total factor productivity compares the total quantity of
goods and services produced with all the inputs used to
produce them. These productivity formulas are
summarized in the following Table.
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Measures of Productivity
Productivity Increase
• Become efficient
– output increases with little or no increase in input
• Expand
– both output and input grow with output growing
more rapidly
• Achieve breakthroughs
– output increases while input decreases
• Downsize
– output remains the same and input is reduced
• Retrench
– both output and input decrease, with input
decreasing at a faster rate
Productivity Calculations One resource input
Example of single factor productivity
A furniture company is trying to determine their labour
productivity for the week from the following data given
below
Units produced 1,000 tables
Labour hours 250 and Labour rate $ 12/hr
Units produced
Productivity = Labour-hours used
1,000
= = 4 units/labour-hour
250
If asked in terms of Dollar value or money spent
1,000
= 0.3units per dollars spent
250(12)
Example: Osborne Industries is compiling the monthly
productivity report for its Board of Directors. From the
following data, calculate (a) labor productivity, (b) machine
productivity, and (c) the Multifactor productivity of dollars
spent on labor, machine, materials, and energy. The
average Labor rate is $15 an hour, and the average
machine usage rate is $10 an hour.
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