Productivity

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Productivity is formally defined as the mathematical equation of output over input. (Stevenson, 1993, p.36) For example, in the manufacturing arena, productivity is determined by dividing the cost of raw materials and direct labor used to produce a product into the value of the products produced. This definition of productivity, however, fails to encompass the complete impact that IT investments have on business processes. For example, using this measure of productivity to evaluate the time and monies spent to update a system from a text based interface to a graphics based one would be difficult if not impossible. The costs for performing the upgrade are easy to capture. However, identifying and measuring the improvements and/or gains would be prohibitively expensive, if even possible.

Therefore, the authors define productivity in a more general light as "the efficient use of inputs to produce effective outputs." Where efficiency is defined as "the ratio of effective work to the energy expended in producing it" (Webster, 1982), and effectiveness is defined as "producing a definite or desired result." While this definition is more difficult to quantify, it permits the complete identification and categorization of IT productivity enhancements.

This study assumes that IT investment impacts corporate productivity in three primary ways: Direct Impact, Support Impact and Quality Enhancement. Using the author's definition of productivity, the efficiency component is influenced through direct impact on the production process and/or the streamlining of supporting processes. Productivity effectiveness is achieved by directly improving or adding to the product quality.

IT directly impacts productivity and its associated value chain by decreasing defects, decreasing the amount of labor required to produce a product, or decreasing the amount of raw materials used to produce a product. The impact of IT is easily measured in this situation. The increase in the number of products produced per time unit, the decrease in the number of labor hours used, and the decreased quantity of raw material are all standard metrics commonly utilized.

While the improvement in the value chain has direct implications on the productivity measure for production, it is in the supporting processes that much of IT's power has been utilized in the past. These processes include: automation of record keeping, integrating systems to facilitate the timely transfer of information, and support of supplier and customer systems to improve quality and timeliness of data sharing. Measuring the impact of IT on the efficiency of supporting processes is usually much more difficult. Some measurements are relatively simple. The introduction of a dedicated inventory system can be evaluated based on improvement in the number of inventory turns, or the decreased value of the inventory while still maintaining customer fill rates. However, if the system is integrated with a larger accounting system, the ability to directly associate the costs of the system used by the inventory component is much more difficult.

Finally, product quality is augmented as well. Decreasing the number of defects, tighter tolerances, increased number of options, and manufacturing flexibility all serve to improve quality and customer satisfaction, yet may not be directly or easily quantifiable. For example, modifying a customer interface in such a manner that the new interface is easier to read or is less confusing will not necessarily provide quantitative measures of productivity improvement.

Figure 1 illustrates the overlapping and integrated nature of the different components of the framework. It provides a visual representation to assist in the identification of appropriate measures and instruments necessary to evaluate IT productivity.

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Figure 1: Productivity Measurement Framework



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Advanced Topics in End User Computing (Vol. 3)
Advanced Topics in End User Computing, Vol. 3
ISBN: 1591402573
EAN: 2147483647
Year: 2003
Pages: 191

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