Page 477 - Fundamentals of Management Myths Debunked (2017)_Flat

476 Part 5 • Controlling
All organizations produce goods or services
through the transformation process. Simply stated,
every organization has an operations system that cre-
ates value by transforming inputs into finished goods
and services outputs. For manufacturers, the products
are obvious: cars, cell phones, or food products. After
all, manufacturing organizations produce physical
goods. It’s easy to see the operations management
(transformation) process at work in these types of
organizations because raw materials are turned into
recognizable physical products. But that transforma-
tion process isn’t as readily evident in service organi-
zations because they produce nonphysical outputs in
the form of services. For instance, hospitals provide
medical and health care services that help people
manage their personal health; taxi companies provide
transportation services that move people from one
location to another; cruise lines provide vacation
and entertainment services; and residential plumbers
and electricians ensure that we have electricity and
Kyodo/AP Images running water where we live. All of these service
Eri Otsubo is a flight attendant for Japan’s
Peach Aviation Ltd., a service firm that organizations transform inputs into outputs. For example, look at your college. College
provides low-cost air transportation. Peach’s administrators bring together inputs—instructors, books, multimedia classrooms, and similar
operations system creates value by
transforming inputs such as aircraft and crew resources—to transform students into educated and skilled individuals.
members into the nonphysical output of air The reason we’re making this point is that the U.S. economy, and to a large extent the
travel. Like other developed nations, Japan global economy, is dominated by the creation and sale of services. Most of the world’s
has a service-based economy.
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developed countries are predominantly service economies. In the United States, for instance,
almost 78 percent of all economic activity is services, and in the European Union, it’s nearly
73 percent. In lesser-developed countries, the services sector is less important. For instance,
in Chad, it accounts for only 32 percent of economic activity; in Laos, only 44 percent; and
in Bolivia, 48 percent.

2 How Do Businesses Improve Productivity?
One jetliner has some 4 million parts. Efficiently assembling such a finely engineered
product requires intense focus. Boeing and Airbus, the two major global manufacturers,
have copied techniques from Toyota. However, not every technique can be copied because
airlines demand more customization than do car buyers and there are significantly more
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rigid safety regulations for jetliners than for cars. At the Evans Findings Company in East
Providence, Rhode Island, which makes the tiny cutting devices on dental-floss containers,
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one production shift each day is run without people. The company’s goal is to do as much
as possible with no labor. And it’s not because they don’t care about their employees.
Instead, like many U.S. manufacturers, Evans needed to improve productivity in order to
survive, especially against low-cost competitors. So they turned to “lights-out” manufactur-
ing, where machines are designed to be so reliable that they make flawless parts on their
own, without people operating them.
Although most organizations don’t make products that have 4 million parts and most
organizations can’t function without people, improving productivity has become a major goal
in virtually every organization. For countries, high productivity can lead to economic growth
transformation process and development. Employees can receive higher wages and company profits can increase
The process that converts resources into finished without causing inflation. For individual organizations, increased productivity gives them a
goods and services
more competitive cost structure and the ability to offer more competitive prices.
manufacturing organizations Over the past decade, U.S. businesses have made dramatic improvements to increase
Organizations that produce physical goods
their efficiency. For example, at Latex Foam International’s state-of-the-art digital facility in
service organizations Shelton, Connecticut, engineers monitor all of the factory’s operations. The facility boosted
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Organizations that produce nonphysical products capacity by 50 percent in a smaller space and achieved a 30 percent efficiency gain.
in the form of services
And it’s not just in manufacturing that companies are pursuing productivity gains. Pella