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# Passage 27 (27/63) ======== Since the late 1970's, in the

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Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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Updated on: 27 Jul 2018, 12:18
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Passage 27 (27/63)

========
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 wreak havoc 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.

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

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
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives

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

4. The author refers to Abernathy’s study (line 36) most probably in order to

(A) qualify an observation about one rule governing manufacturing
(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

5. The author’s attitude toward the culture in most factories is best described as

(A) cautious
(B) critical
(C) disinterested
(D) respectful

6. In the passage, the author includes all of the following EXCEPT

(A) personal observation
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology

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
(E) misunderstood but promising

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Originally posted by nitya34 on 09 Apr 2009, 12:39.
Last edited by workout on 27 Jul 2018, 12:18, edited 2 times in total.
Updated to the correct format.
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Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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Updated on: 27 Jul 2018, 12:20
13 mins and My choices are
1 B 05:46
2 C 01:51
3 E 00:50
4 B 03:37
5 A 00:19
6 D 00:47
7 D 00:23
(Its 1 50 AM )

I need OEs of 4,5,6
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Originally posted by nitya34 on 09 Apr 2009, 13:15.
Last edited by workout on 27 Jul 2018, 12:20, edited 2 times in total.
Removed the OA from the post and updated them in the Question
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Re: Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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09 Apr 2009, 17:46
Quote:
(Its 1 50 AM )

This thing motivated me ...I was feeling sleepy at 8:48 PM Hope I can continue till 2 tonight
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Re: Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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13 Apr 2009, 23:00
I am getting BCEBBEA

5. 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.--------> suggests author is critical of the culture prevalent in most factories. Is he cautioning anybody? No. I think he is merely criticizing.

6.
(A) personal observation ---> Every company I know that has freed itself from the paradox has done so, in part, by developing and implementing a manufacturing strategy
(B) a business principle-----> 20 20 40 rule
(C) a definition of productivity ------> given in 1st para
(D) an example of a successful company-------> cited in last para
(E) an illustration of a process technology--------> could not fine one

7. ------> is supported by 2nd para ------> it became clear to me that the cost-cutting approach to increasing productivity is fundamentally flawed
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Re: Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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14 Apr 2009, 00:22
1 B 07:52
2 C 01:03
3 E 01:08
4 B 01:32
5 C 01:29
6 B 00:49
7 B 01:05

rampuria wrote:
5. 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.--------> suggests author is critical of the culture prevalent in most factories. Is he cautioning anybody? No. I think he is merely criticizing.

6.
(A) personal observation ---> Every company I know that has freed itself from the paradox has done so, in part, by developing and implementing a manufacturing strategy
(B) a business principle-----> 20 20 40 rule
(C) a definition of productivity ------> given in 1st para
(D) an example of a successful company-------> cited in last para
(E) an illustration of a process technology--------> could not fine one

Good job

I plan to object the OA of question 4, but I suddently find this:
"..But the tools quickly reach the limits of what they can contribute."

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.

4. The author refers to Abernathy’s study (line 36) most probably in order to

(A) qualify an observation about one rule governing manufacturing
(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

4 makes sense now
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Re: Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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14 Apr 2009, 00:31
sondenso , do you agree with my answers of 5 and 6
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rampuria

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Re: Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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05 Feb 2016, 13:59
How can answer for Q7 is D it should be A as it is flawed in second Paragraph. Kindly help
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Re: Passage 27 (27/63) ======== Since the late 1970's, in the  [#permalink]

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20 Apr 2017, 21:25
vketaraju wrote:
How can answer for Q7 is D it should be A as it is flawed in second Paragraph. Kindly help

I struggled on Q7 between A and D as well.

The argument states that cost-cutting is definitely flawed and in the very first paragraph it additionally mentions "the harder manufactures worked to implement cost-cutting, the more they lost their competitive edge.", which indicates that the approach will be ruinous, although I know that this word is quite extreme.
Re: Passage 27 (27/63) ======== Since the late 1970's, in the &nbs [#permalink] 20 Apr 2017, 21:25
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