chapter two book/ class notes
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Chapter 2- Increasing Productivity and Quality
Productivity: a measure of efficiency that compares how much is produced with the resources used to produce
Quality: a product’s fitness for use in terms of offering the features that consumers want.
Responding to the Productivity Challenge:
- Measuring Productivity:
Labour productivity: partial productivity ratio calculated by dividing gross domestic product by total number
- Productivity among Global Competitors:
Domestic Productivity: A country that improves its ability to make something out of its existing resources can
increase the wealth of all its inhabitants. Conversely a decline in productivity shrinks a nation’s total health.
When that happens, an increase in one person’s wealth comes only at the expense of others with whom he or
she shares an economic system.
Manufacturing versus Service Productivity: manufacturing productivity is higher than service productivity.
Industry Productivity: In addition to differences between the manufacturing and service sectors, industries
within these sectors differ vastly in terms of productivity. Agriculture is more productive in Canada than in
many other nations because we use more sophisticated technology and superior natural resources.
Company productivity: high productivity gives a company a competitive edge because its costs are lower. As
a result, it can offer its product at a lower price (and gain more customers) or it can make a greater profit on
each item sold. Increased productivity also allows companies to pay workers higher wages without raising
Total Quality Management:
- Managing for Quality:
Total quality management (TQM): a concept that emphasizes that no defects are tolerable and that all
employees are responsible for maintaining quality standards.
- Planning for Quality:
Performance quality: the overall degree of quality: how well the features of a product meet consumer’s needs
and how well the product performs.
Quality reliability: the consistency of quality from unit to unit of a product.
- Organizing for Quality:
Perhaps most important to the quality concept is the belief that producing quality goods and services requires
an effort from all parts of the organization. The old idea of a separate “quality control” department is no
longer enough. Everyone from the chairperson of the board to the different part-time workers in the company
must work to ensure quality.
- Leading for Quality:
Quality ownership: the concept that quality belongs to each employee who creates or destroys it in producing
a good or service; the idea that all workers must take responsibility for producing a quality product.
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