Chapter 2 - Competitiveness, Strategy & Productivity_2

8/13/2019 Chapter 2 - Competitiveness, Strategy & Productivity_2

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STRATEGY ANDPRODUCTIVITYProductions & OperationsMana ementBA 11


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Hierarchy of ManagementDecisions

STRATEGIC

TACTICAL

OPERATIONAL


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Why Some Organizations Fail?

Too much emphasis on short-term financial performanceFailing to take advantage of strengths / opportunities

Failing to recognize competitive threatsToo much emphasis in product and service design andnot enough on improvement

Neglecting investments in capital and human resourcesFailing to establish good internal communicationsFailing to consider customer wants and needs

Neglecting operations strategy


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Missions & Strategies

An effective operations management effortmust have a mission so it knows where it isgoing and a strategy so it knows how to getthere

Economic success, especially survival, is theresult of identifying missions to satisfycustomers wants and needs


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Mission Statement

Is a precise description of what the organizationdoes, the reason for its existence

It is a definition of why the organizationexists

Provides details of what is done and answersthe question What do we do? or What isour business?


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Mission Statement - Sample

Organize the worlds informationand make it universally accessible

and useful.

We will provide branded productsand services of superior qualityand value that improve the lives ofthe worlds consumers


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Mission Statement

The mission statement - basis fororganizational goals, which provide more

detail and describe the scope of the mission

Goals - serve as a foundation for the developmentof organizational strategies.These, in turn, provide the basis for strategies and tactics of the functional units of theorganization.


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Mission Statement

Once an organizations mission has beendefined, each functional area within the firm

determines its supporting mission

e.g.: OMs mission: To produce products

consistent with the companys mission as theworldwide low-cost manufacturer


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Strategy

When the mission is established, strategyand its implementation can begin

Strategy is an organizations action plan ora game plan to achieve its mission


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Strategy

How a firm intends to create and sustain value for itsshareholders

How you are going to get there

Major components:

Operations excellence Customer intimacy Product leadership

Shows how mission willbe achieved

Company has abusiness strategyFunctional areas have

strategies


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Tactics - arethe met hods

and acti onsused toaccomp lishstrategi es

Goals:destinations

Strategies:

roadmaps


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Strategic Management Process

Vision

SWOTAnalysisMission

Goals/Objectives

StrategyFormulation

StrategyImplement-

ation

StrategicControl

StrategicPlanning

Strategicmplementation

External

Analysis

InternalAnalysis

Long-termMedium-

termShort-term

CorporateBusinessFunctiona

l

BudgetPolicy

Procedur es


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Strategy

DifferentiationCost Leadership

Response

Better / DifferentCheaper

More responsive

Firms achieve missions in three conceptualways:

Each of these strategies provides an opportunityto achieve competitive advantage


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Strategy: Differentiation

Differentiation is concerned with providinguniqueness

Differentiation should be thought of as going beyond both physical characteristics and serviceattributes to encompass everything about the

product or service that influences the value that the

customers derive from ite.g.: broad product line, product feature, after salesservices, delivery & installation, experiencedifferentiation


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Strategy: Competing on Cost

Driver for low cost strategy:Effective utilization of facility: identify

optimum size, to allow firms to spread overheadcosts

Lowering costs does not mean sacrificing customers

expectations of valueLower costs does not mean inferior quality


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Strategy: Competing onResponse

Response includes the entire range of valuesrelated to timely product development and

delivery, reliable scheduling and flexible performance

ASPECTS of Response Strategy:1. Flexible response ability to match changes in

the marketplace where design innovations andvolumes fluctuates substantially


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Strategy: Competing onResponse

2. Reliability of scheduling or dependability

3. Quickness or speed


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Aims of an Operations Strategy

Support the higher strategies in achieving theorganizations purpose.

To provide superior performance in operations.

Its contents:The purpose of the operations, summarized inoperations mission.An expanded series of goals and objectives.Plans and methods to achieve these goals.


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Operations Strategy: Defined

Operations Strategy consists of all the long -term goals, plans, policies, culture, resources, decisions and actions thatrelate to its operations.

The total pattern of decisions which shape the long termcapabilities of any type of operation and their contribution tooverall strategy.

It is narrower in scope, dealing primarily with the operationsaspect of the organization.

Relates to Products, Processes, Methods, OperatingResources, Quality, Costs, Lead-Times and Scheduling


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Operations Strategy

For operations strategy to be truly effective

It is important to link it to organizationsstrategy. That is, both organizational strategyand operations strategy should not be formulatedindependently.

Thus, can have a major influence on thecompetitiveness of an organization.


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Key Strategies for Operations

Quality-based strategiesFocus on satisfying the customer by integrating qualityinto all phases of the organizationQuality includes both products and processes such asdesign, production, and service after the sale

Time-based strategiesGain competitive advantage by performing certainactivities more quickly than competitors


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Any questions?


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Tactical Decisions

Intermediate-term decisions, such as:How many workers will we need? When do we need them?

When should we have material delivered?

Tactical planning primarily addresses how to efficientlyschedule material and labor within the constraints of

previously made strategic decisions.

These tactical decisions become the operating constraintsunder which operational planning and control decisionsare made.


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Organizational Chart JGSummit


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Organizational Chart URC


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Operational Excellence

This strategy attempts to lead the industry in price andconvenience by pursuing a focus on lean and efficientoperations

Work to minimize costs by reducing overhead,eliminating intermediate production steps, reducingtransaction costs, and optimizing business processes

across functional and organizational boundaries

The focus is on delivering products/services to customersat competitive prices with minimal inconvenience


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Customer Intimacy

Customer intimacy means continually tailoring and shaping products and services to fit an increasingly refined definition ofthe customer

The approach is to combine detailed customer knowledge withoperational flexibility (customization)

Responding quickly to almost any need, from customizing a product to fulfilling special requests to create customer loyalty

Companies are willing to spend money now to build customerloyalty for the long- term, considering each customers lifetimevalue to the company, not the profit of any single transaction

Two things: responsiveness and flexibility


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Product Leadership

Companies that pursue the discipline of productleadership strive to produce a continuous state ofstate-of-the-art products and services

The strength of product leaders lies in reacting tosituations as they occur

Product leaders act as their own competition.These firms continually make the

products/services they have created obsolete


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PRODUCTIVITY

One of the primary responsibilities of a manager isto achieve productive use of an organization'sresources. The term productivity is used to

describe this.

Productivity is an index that measures output

(goods and services) relative to the input (labor,materials, energy, and other resources) used to produce it. It is usually expressed as the ratio ofoutput to input


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PRODUCTIVITY MEASURES

Partial = =

= =

=+

= + +

=


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=

=


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

EnergyProductivity

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

Capital

Productivity

Units of output per machine hourmachine hourMachine

Productivity

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

LaborProductivity


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PRODUCTIVITY

Productivity measures can be based on a single input(partial productivity), on more than one input(multifactor productivity), or on all inputs (total

productivity).

The choice of productivity measure depends primarilyon the purpose of the measurement. If the purpose isto track improvements in labor productivity, thenlabor becomes the obvious input measure.

Partial measures are often of greatest use in operationsmanagement


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PRODUCTIVITY

Productivity measures can be based on a single input(partial productivity), on more than one input(multifactor productivity), or on all inputs (total

productivity).

The choice of productivity measure depends primarilyon the purpose of the measurement. If the purpose isto track improvements in labor productivity, thenlabor becomes the obvious input measure.

Partial measures are often of greatest use in operationsmanagement


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PRODUCTIVITY

Determine the productivity:a. Four workers installed 720 square yards ofcarpeting in eight hours.


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PRODUCTIVITY

In essence, productivity measurements serve as scorecards of theeffective use of resources.

Business leaders are concerned with productivity as it relates to

competitiveness

Government leaders are concerned with national productivity because of the close relationship between productivity and anation's standard of living.

High levels of productivity are largely responsible for therelatively high standards of living enjoyed by people in industrialnations. Furthermore, wage and price increases not accompanied

by productivity increases tend to create inflationary pressures ona nation's economy.


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PRODUCTIVITY VARIABLES

These are the factors that are critical to productivity improvements

LaborCapitalManagement

PRODUCTIVITY VARIABLE


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PRODUCTIVITY VARIABLE:Labor

Improvement in the contribution of labor to productivity is the result of a healthier, bettereducated and better nourished labor force

To sum it up, the factors that improve labor productivity are:

Appropriate basic educationProper dietSocial overhead (transportation & sanitation)



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PRODUCTIVITY VARIABLE:Capital

Human beings are tools-using animals, and capitalinvestment provide those tools

Capital investments are influenced by inflation andtaxes mainly because both affect the cost of capital



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PRODUCTIVITY VARIABLE:Mngt

Management is responsible for ensuring that laborand capital are effectively used to increase

productivity

Productivity improvements can happen through theuse of knowledge and the application oftechnology

PRODUCTIVITY IN THE SERVICE


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PRODUCTIVITY IN THE SERVICESECTOR

Productivity of the service sector has provendifficult to improve because service sector work is:

Typically labor intensiveFrequently individually processedOften an intellectual task performed by

professionalsOften difficult to mechanizeOften difficult to evaluate for quality

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Chapter 2 - Competitiveness, Strategy & Productivity_2