Chap002 - Competitiveness, Strategy, And Productivity

2-1 Competitiveness, Strategy, and Productivity

William J. Stevenson

Operations Management

8th edition


CHAPTER2

Competitiveness, Strategy, and Productivity

McGraw-Hill/IrwinOperations Management, Eighth Edition, by William J. StevensonCopyright © 2005 by The McGraw-Hill Companies, Inc. All rights

reserved.


Competitiveness:Competitiveness:

How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services


Businesses Compete Using MarketingBusinesses Compete Using Marketing

Identifying consumer wants and needs Pricing Advertising and promotion


Businesses Compete Using OperationsBusinesses Compete Using Operations

Product and service design Cost Location Quality Quick response


Businesses Compete Using OperationsBusinesses Compete Using Operations

Flexibility Inventory management Supply chain management Service


Why Some Organizations FailWhy 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


Why Some Organizations FailWhy 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


Mission/Strategy/TacticsMission/Strategy/Tactics

How does mission, strategies and tactics relate todecision making and distinctive competencies?

StrategyStrategy TacticsTacticsMissionMission


StrategyStrategy

Strategies Plans for achieving organizational goals

Mission The reason for existence for an organization

Mission Statement Answers the question “What business are we in?”

Goals Provide detail and scope of mission

Tactics The methods and actions taken to accomplish strategies


Planning and Decision MakingPlanning and Decision Making

Mission

Goals

Organizational Strategies

Functional Goals

Finance Strategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures

Figure 2.1


Strategy ExampleStrategy Example

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: Live a good life Goal: Successful career, good income Strategy: Obtain a college education Tactics: Select a college and a major Operations: Register, buy books, take

courses, study, graduate, get job

Example 1


Examples of StrategiesExamples of Strategies

Low cost Scale-based strategies Specialization Flexible operations High quality Service


Strategy and TacticsStrategy and Tactics

Distinctive CompetenciesThe special attributes or abilities that give anorganization a competitive edge. Price Quality Time Flexibility Service Location


Banks, ATMsConvenienceLocationLocation

DisneylandNordstroms

Superior customer service

ServiceService

Burger KingSupermarkets

VarietyVolume

FlexibilityFlexibility

Express Mail, Fedex,One-hour photo, UPS

Rapid deliveryOn-time delivery

TimeTime

Sony TVLexus, CadillacPepsi, Kodak, Motorola

High-performance design or high quality Consistent quality

QualityQuality

U.S. first-class postageMotel-6, Red Roof Inns

Low CostPricePrice

Examples of Distinctive CompetenciesExamples of Distinctive CompetenciesTable 2.2


Operations StrategyOperations Strategy

Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.


Strategy FormulationStrategy Formulation

Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners


Strategy FormulationStrategy 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


Economic conditions Political conditions Legal environment Technology Competition Markets

Key External FactorsKey External Factors


Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers

Key Internal FactorsKey Internal Factors


Quality and Time StrategiesQuality 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


Time-based StrategiesTime-based Strategies

JAN FEB MAR APR MAY JUN

Planning

Processing

Changeover On time!

Designing

Delivery


ProductivityProductivity

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


ProductivityProductivity

Partial measures output/(single input)

Multi-factor measures output/(multiple inputs)

Total measure output/(total inputs)

Productivity = Outputs

Inputs


Productivity GrowthProductivity Growth

Current Period Productivity – Previous Period ProductivityPrevious Period Productivity

Productivity Growth =


Measures of ProductivityMeasures of ProductivityTable 2.4

Partial Output Output Output Output

measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them


Units of output per kilowatt-hourDollar value of output per kilowatt-hour

Energy Productivity

Units of output per dollar inputDollar value of output per dollar input

Capital Productivity

Units of output per machine hourmachine hour

Machine Productivity

Units of output per labor hourUnits of output per shiftValue-added per labor hour

Labor Productivity

Examples of Partial Productivity Examples of Partial Productivity MeasuresMeasures

Table 2.5


Example 3Example 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 multifactorproductivity?

Ans. 2.20


Example 3 SolutionExample 3 Solution

MFP = OutputLabor + Materials + Overhead

MFP = (7040 units)*($1.10)$1000 + $520 + $2000

MFP = 2.20


Factors Affecting ProductivityFactors Affecting Productivity

Capital Quality

Technology Management


Standardization Quality Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers

Other Factors Affecting ProductivityOther Factors Affecting Productivity


Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity

Other Factors Affecting ProductivityOther Factors Affecting Productivity


Bottleneck OperationBottleneck OperationFigure 2.3

Machine #2Machine #2BottleneckOperation

BottleneckOperation

Machine #1Machine #1



10/hr

10/hr

10/hr

10/hr

30/hr


Improving ProductivityImproving 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

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Chap002 - Competitiveness, Strategy, And Productivity