Chap002 (1)

2-1 Competitiveness, Strategy, and ProductivityOperations Management William J. Stevenson 8th edition 2-2 Competitiveness, Strategy, and Productivity CHAPTER 2 Competitiveness, Strategy, and Productivity Operations Management, Eighth Edition, by William J. Stevenson McGraw-Hill/Irwin Copyright © 2005 by The McGraw-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 Operations  Product and service design  Cost  Location  Quality  Quick response  Flexibility  Inventory Management  Supply Chain Management  Service  Managers and Workers . 2-5 Competitiveness. 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 . Strategy. 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 .2-6 Competitiveness. 2-7 Competitiveness. strategies and tactics relate to decision making and distinctive competencies? . Strategy. and Productivity Mission/Strategy/Tactics Mission Strategy Tactics How does mission. Strategy. and Productivity 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 .2-8 Competitiveness. and Productivity Planning and Decision Making Figure 2.2-9 Competitiveness.1 Mission Goals Organizational Strategies Functional Goals Finance Marketing Operations Strategies Strategies Strategies Tactics Tactics Tactics Operating Operating Operating procedures procedures procedures . Strategy. get job . buy books. study. She would like to have a career in business. Strategy.2-10 Competitiveness. and earn enough income to live comfortably Mission: Live a good life  Goal: Successful career. take courses. graduate. have a good job. and Productivity Strategy Example Example 1 Rita is a high school student. good income  Strategy: Obtain a college education  Tactics: Select a college and a major  Operations: Register. 2-11 Competitiveness. Strategy. and Productivity Examples of Strategies  Low cost  Scale-based strategies  Specialization  Newness  Flexible operations  High quality  Service  Sustainability . 2-12 Competitiveness. and Productivity Strategy and Tactics  Core Competencies The special attributes or abilities that give an organization a competitive edge. Strategy.  Price  Quality  Time  Newness  Flexibility  Service  Location . On-time delivery One-hour photo. Kodak. first-class postage Motel-6. and Productivity Examples of Distinctive Competencies Table 2.2-13 Competitiveness. Motorola Time Rapid delivery Express Mail. Strategy. Fedex. Cadillac quality Pepsi.S.2 Price Low Cost U. UPS Flexibility Variety Burger King Volume Supermarkets Service Superior customer Disneyland service Nordstroms Location Convenience Banks. Red Roof Inns Quality High-performance design Sony TV or high quality Consistent Lexus. ATMs . . Strategy. and Productivity Strategy Formulation  Environmental scanning  The considering of events and trends that present threats or opportunities for a company.2-14 Competitiveness. 2-15 Competitiveness. 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 . Strategy. Strategy. and Productivity Key External Factors  Economic conditions  Political conditions  Legal environment  Technology  Competition  Markets .2-16 Competitiveness. and Productivity Key Internal Factors  Human Resources  Facilities and equipment  Financial resources  Customers  Products and services  Technology  Suppliers  Others .2-17 Competitiveness. Strategy. 2-18 Competitiveness. 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 . Strategy. Strategy.2-19 Competitiveness. and Productivity Time-based Strategies JAN FEB MAR APR MAY JUN Planning Designing Processing Changeover On time! Delivery . usually expressed as the ratio of output to input  Productivity ratios are used for  Planning workforce requirements  Scheduling equipment  Financial analysis .2-20 Competitiveness. and Productivity Productivity  Productivity  A measure of the effective use of resources. Strategy. 2-21 Competitiveness. Strategy. and Productivity Productivity  Partial measures  output/(single input)  Multi-factor measures  output/(multiple inputs)  Total measure  output/(total inputs) Outputs Productivity = Inputs . 2-22 Competitiveness. Strategy. and Productivity Productivity Growth Productivity Growth = Current Period Productivity – Previous Period Productivity Previous Period Productivity . 2-23 Competitiveness. and Productivity Measures of Productivity Table 2. Strategy.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 . 5 Labor Units of output per labor hour Units of output per shift Productivity Value-added per labor hour Machine Units of output per machine hour machine hour Productivity Capital Units of output per dollar input Dollar value of output per dollar input Productivity Energy Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Productivity .2-24 Competitiveness. Strategy. and Productivity Examples of Partial Productivity Measures Table 2. 10/unit Cost of labor of $1.2-25 Competitiveness. Strategy.000 What is the multifactor Cost of materials: $520 productivity? Cost of overhead: $2000 Ans.20 . and Productivity Example 3 7040 Units Produced Sold for $1. 2. and Productivity Example 3 Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units)*($1.10) $1000 + $520 + $2000 MFP = 2.2-26 Competitiveness. Strategy.20 . Strategy.2-27 Competitiveness. and Productivity Factors Affecting Productivity Capital Quality Technology Management . Strategy. and Productivity Other Factors Affecting Productivity  Standardization  Quality  Use of Internet  Computer viruses  Searching for lost or misplaced items  Scrap rates  New workers .2-28 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 .2-29 Competitiveness. 3 10/hr Machine #1 10/hr Machine #2 Bottleneck 30/hr Operation Machine #3 10/hr Machine #4 10/hr . and Productivity Bottleneck Operation Figure 2.2-30 Competitiveness. Strategy. 2-31 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 . 2-32 Competitiveness. and Productivity Value Results VO10 ABTco example . Strategy.