operations management - faculty of engineering-redirect€¦ · · 2008-06-112-7 competitiveness,...

2-1 Competitiveness, Strategy, and Productivity

William J. Stevenson

Operations Management

8th edition


CHAPTER

2

Competitiveness, Strategy,

and Productivity

McGraw-Hill/IrwinOperations Management, Eighth Edition, by William J. Stevenson

Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.


Competitiveness:

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


Businesses Compete Using Marketing

• Identifying consumer wants and needs

• Pricing

• Advertising and promotion


Businesses Compete Using Operations

• Product and service design

• Cost

• Location

• Quality

• Quick response


Businesses Compete Using Operations

• Flexibility

• Inventory management

• Supply chain management

• Service


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


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


Mission/Strategy/Tactics

How does mission, strategies and tactics relate to

decision making and distinctive competencies?

Strategy TacticsMission


Strategy

• 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 Making

Mission

Goals

Organizational Strategies

Functional Goals

Finance Strategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures

Figure 2.1


Strategy 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, takecourses, study, graduate, get job

Example 1


Examples of Strategies

• Low cost

• Scale-based strategies

• Specialization

• Flexible operations

• High quality

• Service


Strategy and Tactics

• Distinctive Competencies

The special attributes or abilities that give an

organization a competitive edge.

• Price

• Quality

• Time

• Flexibility

• Service

• Location


Banks, ATMsConvenienceLocation

Disneyland

Nordstroms

Superior customer

serviceService

Burger King

Supermarkets

Variety

VolumeFlexibility

Express Mail, Fedex,

One-hour photo, UPSRapid delivery

On-time deliveryTime

Sony TV

Lexus, Cadillac

Pepsi, Kodak, Motorola

High-performance design

or high quality Consistent

quality

Quality

U.S. first-class postage

Motel-6, Red Roof Inns

Low CostPrice

Examples of Distinctive CompetenciesTable 2.2


Operations Strategy

• Operations strategy – The approach,

consistent with organization strategy, that is

used to guide the operations function.


Strategy Formulation

• Distinctive competencies

• Environmental scanning

• SWOT

• Order qualifiers

• Order winners


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


• Economic conditions

• Political conditions

• Legal environment

• Technology

• Competition

• Markets

Key External Factors


• Human Resources

• Facilities and equipment

• Financial resources

• Customers

• Products and services

• Technology

• Suppliers

Key Internal Factors


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


Time-based Strategies

JAN FEB MAR APR MAY JUN

Planning

Processing

ChangeoverOn time!

Designing

Delivery


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


Productivity

• Partial measures

• output/(single input)

• Multi-factor measures

• output/(multiple inputs)

• Total measure

• output/(total inputs)

Productivity =Outputs

Inputs


Productivity Growth

Current Period Productivity – Previous Period ProductivityPrevious Period Productivity

Productivity Growth =


Measures 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-hour

Dollar value of output per kilowatt-hourEnergy

Productivity

Units of output per dollar input

Dollar value of output per dollar inputCapital

Productivity

Units of output per machine hour

machine hourMachine

Productivity

Units of output per labor hour

Units of output per shift

Value-added per labor hour

Labor

Productivity

Examples of Partial Productivity MeasuresTable 2.5


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

multifactorproductivity?

Ans. 2.20


Example 3 Solution

MFP = OutputLabor + Materials + Overhead

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

MFP = 2.20


Factors 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 Productivity


• Safety

• Shortage of IT workers

• Layoffs

• Labor turnover

• Design of the workspace

• Incentive plans that reward productivity

Other Factors Affecting Productivity


Bottleneck OperationFigure 2.3

Machine #2Bottleneck

Operation

Machine #1

Machine #3

Machine #4

10/hr

10/hr

10/hr

10/hr

30/hr


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


Value Results

VO10

ABTco example

operations management - faculty of engineering-redirect€¦ · · 2008-06-112-7 competitiveness,...

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