Why productivity tends to be lower in the service sector than in the manufacturing sector?

Operations Management, 12e (Heizer/Render/Munson)

Chapter 1 Operations and Productivity

Section 1 What is Operations Management?

1) Some of the operations-related activities of Hard Rock Café include designing meals and analyzing them for ingredient

cost and labor requirements.

Answer: TRUE

Diff: 1

Key Term: Operations management

Objective: LO 1.1 Define operations management

Learning Outcome: Discuss operations and operations management as a competitive advantage for the organization

2) Because Hard Rock Cafés are themed restaurants, operations managers focus their layout design efforts on

attractiveness while paying little attention to efficiency.

Answer: FALSE

Diff: 1

Learning Outcome: Discuss operations and operations management as a competitive advantage for the organization

3) All organizations, including service firms such as banks and hospitals, have a production function.

Answer: TRUE

Diff: 2

Key Term: Production

Objective: LO 1.1 Define operations management

Learning Outcome: Discuss operations and operations management as a competitive advantage for the organization

4) Operations management is the set of activities that creates value in the form of goods and services by transforming

inputs into outputs.

Answer: TRUE

Diff: 1

Key Term: Operations management

Objective: LO 1.1 Define operations management

Learning Outcome: Discuss operations and operations management as a competitive advantage for the organization

5) An example of a "hidden" production function is the transfer of funds between accounts at a bank.

Productivity is the measure of an organization's ability to produce a good or a service. While organizations that produce goods can point to the total finished number of products as evidence, it's notoriously difficult to measure the service sector's productivity. As a result, when you're not sure where you're beginning, it's difficult to know where to end up. Nevertheless, there are key areas analysts should examine to determine a sector's productivity.

Quality Versus Quantity

One reason that increasing productivity in the service sector is difficult is that raising the number of customers helped doesn't necessarily increase the quality of service they're provided. In fact, the opposite may be true; customers who feel they've been rushed through or given generic service may be unlikely to return. It may also be unsafe; in the health care industry, for example, nurses are judged based not just on the quantity of patients they help, but on the quality, as well. As a result, if increasing productivity is not in the best interests of the customer, there's little incentive to improve it.

Measurement Difficulties

Because measuring productivity is so difficult in the service sector, it's difficult to know how much productivity has increased, according to Qualtrics. For example, imagine a retail salesperson who is helping a client select a new fall wardrobe. The client may spend well over a thousand dollars on three items in an hour's time.

Compare this salesperson with one who assists five customers over the same period of time – except each customer spends roughly ​$50​ on two items. Determining the productivity of each worker is difficult, because the metric could be total dollars sold, total number of inventory moved, total number of full-price items moved or total number of satisfied customers.

Efficiency and Productivity

Increased productivity leads to reduction in staffing required. One way a non-service sector company can increase productivity is by producing more goods with the same – or smaller – amount of input. However, in the service sector, it's not always possible to increase output given the same number of input, because the input is usually people. In other words, while a goods-producing business may be able to use its resources more efficiently, a service sector business can't usually decrease its assets – people – without negatively affecting productivity.

Improving Service Sector Productivity

Because productivity in the service sector is difficult to measure and improve, there are a lot of difficulties of increasing labor productivity. There is no specific labor productivity formula, so it's wise to discuss ways to improve productivity with employees and possibly clients. Poor productivity may be a result of low morale or outdated technology, or from employing the wrong team, according to Your Article Library. Providing quality service while maximizing efficiency by helping the highest number of clients possible and keeping them satisfied at the same time is the best determinant of an efficient and productive organization.

Which two factors make measurement of productivity for services more challenging than for manufactured products?

Which of the following is not true when explaining why productivity tends to be lower in service sector than in manufacturing sector?

What are the three productivity variables?

Which of the following statement is a good reason on studying production operation management?