The impact of technology on production

The impact of technology on production processes has been huge in recent years. Through modern computing methods a business is able to monitor and improve production processes so that output and quality are both as high as possible.

Productivity

All businesses will want to improve productivity. By investing less resources into a process and still getting the same result, a company will see a better return on the assets that it uses and will ultimately see an increase in profits.

It is very common in business to monitor the amount produced compared with what is used to do this process. This is typically done in two different ways – by working out ‘labour productivity’ or by working out ‘capital productivity’.

Labour productivity

Labour productivity gives us an idea of how much is produced in a business when compared with the number of staff required in this process. For example, a business that makes office chairs may employ five members of staff with an output of 100 chairs per day. This means the labour productivity is 20 chairs per person, per day. In order to use technology to improve this, the business owners may decide to invest in better equipment that can help their workforce make more chairs. They could keep the same number of workers and purchase a new machine that aids the production process. This would lead to a higher labour productivity as they may now produce 125 chairs in a day with the same number of staff.

Alternatively, the business could keep the level of output the same and reduce staff. To do this, new machinery could be purchased (robotic assembly is a common choice) so that the same output can be achieved with only three members of staff. This would keep the same output but improve labour productivity since the same number of workers are employed to create 100 chairs.

Capital productivity

An alternative way to measure productivity during manufacturing is through the use of capital productivity. This is where a business looks at the output it has compared to the money spent on this process. In order to increase the capital productivity, the business can again invest in new technology or try to source cheaper materials that would allow it to produce the same products for less money. New machinery may be purchased that is able to produce goods faster and use less materials. This will help the business to reduce the capital productivity through a reduction in the costs of production.