Since the late 1970’s, in the face of a severe loss of market
share in dozens of industries, manufacturers in the United
States have been trying to improve productivity—and therefore
enhance their international competitiveness—through cost-
cutting programs. (Cost-cutting here is defined as raising labor
output while holding the amount of labor constant.) However,
from 1978 through 1982, productivity—the value of goods
manufactured divided by the amount of labor input—did not
improve; and while the results were better in the business upturn
of the three years following, they ran 25 percent lower than
productivity improvements during earlier, post-1945 upturns.
At the same time, it became clear that the harder manufactures
worked to implement cost-cutting, the more they lost their
competitive edge.
With this paradox in mind, I recently visited 25 companies; it became
clear to me that the cost-cutting approach to increasing productivity
is fundamentally flawed. Manufacturing regularly observes a “40, 40, 20”
rule. Roughly 40 percent of any manufacturing-based competitive
advantage derives from long-term changes in manufacturing structure
(decisions about the number, size, location, and capacity of facilities)
and in approaches to materials. Another 40 percent comes from major
changes in equipment and process technology. The final 20 percent
rests on implementing conventional cost-cutting. This rule does not
imply that cost-cutting should not be tried. The well-known tools of
this approach—including simplifying jobs and retraining employees to
work smarter, not harder—do produce results. But the tools quickly reach
the limits of what they can contribute.
Another problem is that the cost-cutting approach hinders innovation and
discourages creative people. As Abernathy’s study of automobile manufacturers
has shown, an industry can easily become prisoner of its own investments
in cost-cutting techniques, reducing its ability to develop new products.
And managers under pressure to maximize cost-cutting will resist innovation
because they know that more fundamental changes in processes or systems
will wreakhavoc with the results on which they are measured. Production
managers have always seen their job as one of minimizing costs and maximizing
output. This dimension of performance has until recently sufficed as a basis
of evaluation, but it has created a penny-pinching mechanistic culture in most
factories that has kept away creative managers.
Every company I know that has freed itself from the paradox has done so,
in part, by developing and implementing a manufacturing strategy. Such a
strategy focuses on the manufacturing structure and on equipment and
process technology. In one company a manufacturing strategy that allowed
different areas of the factory to specialize in different markets replaced the
conventional cost-cutting approach; within three years the company regained
its competitive advantage. Together with such strategies, successful
companies are also encouraging managers to focus on a wider set of
objectives besides cutting costs. There is hope for manufacturing, but
it clearly rests on a different way of managing.
1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes
B--
2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives
C
3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations
tough one btw A and E..will pick E
4. The author refers to Abernathy’s study most probably in order to
(A) qualify an observation about one rule governing manufacturing
(B) address possible objections to a recommendation about improving manufacturing competitiveness
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy
C...
5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
(C) disinterested
(D) respectful
(E) adulatory
B is best
6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology
Simple one E..
7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising
B is what i would have said about this topic
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