Production is the transformation of organizational resources into products.2 In this definition, organizational resources are all the assets available to a manager to generate products; transformation is the set of steps necessary to change these resources into products; and products are various goods or services aimed at meeting human needs. Inputs at a manufacturing firm, for example, include raw materials, purchased parts, production workers, and even schedules. The transformation process encompasses the preparation of customer orders, the design of various products, the procurement of raw materials, and the production, assembly, and (perhaps) warehousing of products. Outputs, of course, consist of products appropriate for customer use.

“Production” occurs at service organizations as well. Inputs at a hospital, for instance, include ambulances; rooms; employees (doctors, nurses, administrators, receptionists); supplies (medicines, bandages, food); and (as at a manufacturer) funds, schedules, and records. The transformation process might begin with transporting patients to the facility and end with discharging them. In between, the hospital attends to patients’ needs (nursing and feeding them, administering their medication, recording their progress). The output in this case is health care.

Productivity is an important consideration when designing, evaluating, and improving modern production systems.3 We can define productivity as the relationship between the total amount of goods or services being produced (output) and the organizational resources needed to produce them (input). This relationship is usually expressed by the following equation:4

The higher the value of the ratio of outputs to inputs, the higher the productivity of the operation.

Managers should continually strive to improve their production processes.5 As an example, Duke Energy committed to investing $1 billion over five years in smart grid technology. The new technology promises to save energy, lower operating costs, and reduce the world’s carbon footprint. Under the plan, Duke is replacing conventional electric meters with digital meters that allow remote meter reading, connections, and disconnections.6

It is no secret that over the past several years, workers in the United States have been among the world’s most productive.7 Some of the more traditional strategies for increasing productivity are as follows:8

1. Improving the effectiveness of the organizational workforce through training

2. Improving the production process through automation

3. Improving product design to make products easier to assemble

4. Improving the production facility by purchasing more modern equipment

5. Improving the quality of the workers hired to fill open positions

Intel is an example of an organization that has taken steps to improve worker productivity by changing the way it designs offices.9 Although Intel was initially credited with the popularization of cubicles, Intel executives have reconsidered the costs and benefits of cubicle arrangements, which block worker visibility while failing to reduce noise. Intel is now testing alternative office arrangements in several locations. One such arrangement involves providing large tables that employees can sit around in groups with notebook computers. Intel is hopeful that this arrangement will help to boost both morale and productivity.