Three members of the operations management team at a
plant manufacturing steel tubing for construction projects
are discussing a possible increase in production. Each
suggests a way to make this decision.
a. Team member 1: We should base the decision on
whether labour productivity would rise if we increased
output.
b. Team member 2: We need to focus more on cutting our
average cost per tube – this will help us to be more
competitive against our rivals.
c. Team member 3: We should only increase output if the
extra revenue from selling the additional tubes would be
greater than the extra costs.
Who do you think is right? Why?