2 1 Competitiveness Strategy and Productivity Operations Management

2 -1 Competitiveness, Strategy, and Productivity Operations Management William J. Stevenson 8 th edition

2 -2 Competitiveness, Strategy, and Productivity CHAPTER 2 Competitiveness, Strategy, and Productivity Mc. Graw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

2 -3 Competitiveness, Strategy, and Productivity Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services

2 -4 Competitiveness, Strategy, and Productivity Businesses Compete Using Marketing Identifying consumer wants and needs · Pricing · Advertising and promotion ·

2 -5 Competitiveness, Strategy, and Productivity Businesses Compete Using Operations · · · Product and service design Cost Location Quality Quick response

2 -6 Competitiveness, Strategy, and Productivity Businesses Compete Using Operations Flexibility · Inventory management · Supply chain management · Service ·

2 -7 Competitiveness, Strategy, and Productivity Why Some Organizations Fail Too much emphasis on short-term financial performance · Failing to take advantage of strengths and opportunities · Failing to recognize competitive threats · Neglecting operations strategy ·

2 -8 Competitiveness, Strategy, and Productivity Why Some Organizations Fail Too much emphasis in product and service design and not enough on improvement · Neglecting investments in capital and human resources · Failing to establish good internal communications · Failing to consider customer wants and needs ·

2 -9 Competitiveness, Strategy, and Productivity Mission/Strategy/Tactics Mission Strategy Tactics How does mission, strategies and tactics relate to decision making and distinctive competencies?

2 -10 Competitiveness, Strategy, and Productivity Strategy · Strategies · Plans · Mission · The · for achieving organizational goals reason for existence for an organization Mission Statement · Answers · Goals · Provide · the question “What business are we in? ” detail and scope of mission Tactics · The methods and actions taken to accomplish strategies

2 -11 Competitiveness, Strategy, and Productivity Planning and Decision Making Figure 2. 1 Mission Goals Organizational Strategies Functional Goals Finance Strategies Tactics Operating procedures Marketing Strategies Tactics Operating procedures Operations Strategies Tactics Operating procedures

2 -12 Competitiveness, Strategy, and Productivity Strategy Example 1 Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably Mission: · Goal: · Strategy: · Tactics: · Operations: Live a good life Successful career, good income Obtain a college education Select a college and a major Register, buy books, take courses, study, graduate, get job

2 -13 Competitiveness, Strategy, and Productivity Examples of Strategies Low cost · Scale-based strategies · Specialization · Flexible operations · High quality · Service ·

2 -14 Competitiveness, Strategy, and Productivity Strategy and Tactics · Distinctive Competencies The special attributes or abilities that give an organization a competitive edge. · Price · Quality · Time · Flexibility · Service · Location

2 -15 Competitiveness, Strategy, and Productivity Examples of Distinctive Competencies Table 2. 2 Price Low Cost U. S. first-class postage Motel-6, Red Roof Inns Quality High-performance design Sony TV or high quality Consistent Lexus, Cadillac quality Pepsi, Kodak, Motorola Time Rapid delivery On-time delivery Express Mail, Fedex, One-hour photo, UPS Flexibility Variety Volume Burger King Supermarkets Service Superior customer service Disneyland Nordstroms Location Convenience Banks, ATMs

2 -16 Competitiveness, Strategy, and Productivity Operations Strategy · Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.

2 -17 Competitiveness, Strategy, and Productivity Strategy Formulation Distinctive competencies · Environmental scanning · SWOT · Order qualifiers · Order winners ·

2 -18 Competitiveness, Strategy, and Productivity Strategy Formulation · Order qualifiers · · Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase Order winners · Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition

2 -19 Competitiveness, Strategy, and Productivity Key External Factors Economic conditions · Political conditions · Legal environment · Technology · Competition · Markets ·

2 -20 Competitiveness, Strategy, and Productivity Key Internal Factors Human Resources · Facilities and equipment · Financial resources · Customers · Products and services · Technology · Suppliers ·

2 -21 Competitiveness, Strategy, and Productivity Quality and Time Strategies · Quality-based strategies Focuses on maintaining or improving the quality of an organization’s products or services · Quality at the source · · Time-based strategies · Focuses on reduction of time needed to accomplish tasks

2 -22 Competitiveness, Strategy, and Productivity Time-based Strategies JAN FEB MAR APR MAY JUN Planning Designing Processing Changeover Delivery On time!

2 -23 Competitiveness, Strategy, and Productivity · · A measure of the effective use of resources, usually expressed as the ratio of output to input Productivity ratios are used for Planning workforce requirements · Scheduling equipment · Financial analysis ·

2 -24 Competitiveness, Strategy, and Productivity · Partial measures · output/(single · input) Multi-factor measures · output/(multiple · inputs) Total measure · output/(total inputs) Outputs Productivity = Inputs

2 -25 Competitiveness, Strategy, and Productivity Growth = Current Period Productivity – Previous Period Productivity

2 -26 Competitiveness, Strategy, and Productivity Measures of Productivity Table 2. 4 Partial measures Multifactor measures Total measure Output Labor Output Machine Capital Output Labor + Machine Output Energy Output Labor + Capital + Energy Goods or Services Produced All inputs used to produce them

2 -27 Competitiveness, Strategy, and Productivity Examples of Partial Productivity Measures Table 2. 5 Labor Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Machine Productivity Units of output per machine hour Capital Productivity Units of output per dollar input Dollar value of output per dollar input Energy Productivity Units of output per kilowatt-hour Dollar value of output per kilowatt-hour

2 -28 Competitiveness, Strategy, and Productivity Example 3 7040 Units Produced Sold for $1. 10/unit Cost of labor of $1, 000 Cost of materials: $520 Cost of overhead: $2000 What is the multifactor productivity? Ans. 2. 20

2 -29 Competitiveness, Strategy, and Productivity Example 3 Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units)*($1. 10) $1000 + $520 + $2000 MFP = 2. 20

2 -30 Competitiveness, Strategy, and Productivity Factors Affecting Productivity Capital Quality Technology Management

2 -31 Competitiveness, Strategy, and Productivity Other Factors Affecting Productivity Standardization · Quality · Use of Internet · Computer viruses · Searching for lost or misplaced items · Scrap rates · New workers ·

2 -32 Competitiveness, Strategy, and Productivity Other Factors Affecting Productivity Safety · Shortage of IT workers · Layoffs · Labor turnover · Design of the workspace · Incentive plans that reward productivity ·

2 -33 Competitiveness, Strategy, and Productivity Bottleneck Operation Figure 2. 3 Machine #1 Machine #2 10/hr Machine #3 Bottleneck Operation 10/hr Machine #4 10/hr 30/hr

2 -34 Competitiveness, Strategy, and Productivity Improving Productivity Develop productivity measures · Determine critical (bottleneck) operations · Develop methods for productivity improvements · Establish reasonable goals · Get management support · Measure and publicize improvements · Don’t confuse productivity with efficiency ·

2 -35 Competitiveness, Strategy, and Productivity Value Results VO 10 ABTco example