Competitiveness, Strategy, And Productivity 5w383i
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2-1 Competitiveness, Strategy, and Productivity
Operations Management
William J. Stevenson
8th edition
2-2 Competitiveness, Strategy, and Productivity
CHAPTER
2
Competitiveness, Strategy, and Productivity
McGraw-Hill/Irwin
Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights
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 for achieving organizational goals
Mission • The
•
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 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 , 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 Deg Processing Changeover Delivery
On time!
2-23 Competitiveness, Strategy, and Productivity
Productivity •
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
Productivity •
Partial measures •
•
Multi-factor measures •
•
output/(single input) output/(multiple inputs)
Total measure •
output/(total inputs)
Outputs Productivity = Inputs
2-25 Competitiveness, Strategy, and Productivity
Productivity Growth
Productivity Growth = Current Period Productivity – Previous 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 Output Machine Capital
Output Labor + Machine
Output Energy
Output Labor + Capital + Energy
Goods or Services Produced All inputs used to produce them
Examples of Partial Productivity Measures
2-27 Competitiveness, Strategy, and Productivity
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 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 Machine #1 #1 Machine Machine #2 #2
10/hr
10/hr
Machine Machine #3 #3
Bottleneck Bottleneck Operation Operation 10/hr
Machine Machine #4 #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 • Measure and publicize improvements • Don’t confuse productivity with efficiency
2-35 Competitiveness, Strategy, and Productivity
Value Results
VO10 ABTco example
Operations Management
William J. Stevenson
8th edition
2-2 Competitiveness, Strategy, and Productivity
CHAPTER
2
Competitiveness, Strategy, and Productivity
McGraw-Hill/Irwin
Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights
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 for achieving organizational goals
Mission • The
•
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 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 , 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 Deg Processing Changeover Delivery
On time!
2-23 Competitiveness, Strategy, and Productivity
Productivity •
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
Productivity •
Partial measures •
•
Multi-factor measures •
•
output/(single input) output/(multiple inputs)
Total measure •
output/(total inputs)
Outputs Productivity = Inputs
2-25 Competitiveness, Strategy, and Productivity
Productivity Growth
Productivity Growth = Current Period Productivity – Previous 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 Output Machine Capital
Output Labor + Machine
Output Energy
Output Labor + Capital + Energy
Goods or Services Produced All inputs used to produce them
Examples of Partial Productivity Measures
2-27 Competitiveness, Strategy, and Productivity
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 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 Machine #1 #1 Machine Machine #2 #2
10/hr
10/hr
Machine Machine #3 #3
Bottleneck Bottleneck Operation Operation 10/hr
Machine Machine #4 #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 • Measure and publicize improvements • Don’t confuse productivity with efficiency
2-35 Competitiveness, Strategy, and Productivity
Value Results
VO10 ABTco example
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