Lecture Notes: Why Productivity Matters and Quality Management

Importance of Productivity

• Definition: Productivity measures performance, indicating the ratio of inputs to outputs.
• Benefits for Companies:
  • Higher productivity results in lower costs, quicker service, higher market share, and increased profits.
  • Raises employee wages without increasing prices.
• Impact on Living Standards:
  • Long-term increases lead to higher wages and more affordable products.
  • Example: American family incomes increased significantly from 1967 and 1980 after accounting for inflation.

Measures of Productivity

• Partial Productivity: Focuses on specific input types for producing output (e.g., labor).
• Multi-factor Productivity:
  • Considers all inputs like labor, capital, materials, energy.
  • Provides a holistic view but lacks specific contribution analysis, which partial productivity can offer.

Quality in Products and Services

• Quality Definition: Products/services free from deficiencies satisfying customer needs.
• Characteristics of Quality Products:
  • Reliability: Measures time between breakdowns.
  • Serviceability: Ease of maintenance or repair.
  • Durability: Mean time to failure.
• Quality in Services:
  • Reliability: Consistency in service delivery.
  • Responsiveness: Promptness in service.
  • Assurance & Empathy: Confidence and individual attention.

International Standards

• ISO Standards:
  • ISO 9000: Consistency in quality management.
  • ISO 14000: Minimizing environmental impacts.
  • ISO 27000: Security management for IT.

Total Quality Management (TQM)

• Principles:
  • Customer focus and satisfaction.
  • Continuous improvement.
  • Teamwork.
• Focus: Meeting/exceeding customer expectations.

Differences Between Goods and Services

• Goods are produced/tangible; services are performed/intangible.
• Services are perishable and cannot be stored.
• Service Profit Chain: Quality treatment of employees affects service capabilities.

Service Recovery

• Importance of empowering employees for resolving customer complaints.
• Majority of customers desire quick problem resolution.

Manufacturing Operations

• Classified by processing degree and flexibility.
• Make-to-Order: Starts after customer order.
• Assemble-to-Order: Uses pre-assembled modules.
• Make-to-Stock: Pre-produced standardized products.
• Flexibility: Ability to quickly adapt to market changes.
• Continuous Flow Production: Ongoing product creation.

Inventory Management

• Types of Inventory:
  • Raw materials, component parts, work-in-process, finished goods.
• Inventory Measures:
  • Average aggregate inventory, weeks of supply, inventory turnover.
• Costs:
  • Ordering, setup, holding, and stockout.
• Goals:
  • Avoid stockouts but minimize inventory levels and costs.

Inventory Management Systems

• Economic Order Quantity (EOQ): System for independent demand systems.
• Just-In-Time (JIT) & MRP: Dependent demand systems for precise production and inventory control.