© Wiley Chapter 2 – Competitiveness and Productivity Operations Management by R. Dan Reid & Nada R. Sanders 2 nd Edition © Wiley 2005 PowerPoint Presentation by R.B. Clough - UNH

© Wiley Business/Functional Strategy

© Wiley Operations Strategy – Designing the Operations Function

© Wiley Competitive Priorities- The Edge Four Important Operations Questions: Will you compete on – Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?

© Wiley Competing on Cost? Typically high volume products Often limit product range & offer little customization May invest in automation to reduce unit costs Can use lower skill labor Probably use product focused layouts

© Wiley Competing on Quality? High performance design: Superior features, high durability, & excellent customer service Product & service consistency: Meets design specifications Close tolerances Error free delivery

© Wiley Competing on Time? Fast delivery: Focused on shorter time between order placement and delivery On-time delivery: Deliver product exactly when needed every time Rapid development speed Using concurrent processes to shorten product development time

© Wiley Product Strategies and Process Choice

© Wiley Competing on Flexibility? Product flexibility: Easily switch production from one item to another Easily customize product/service to meet specific requirements of a customer Volume flexibility: Ability to ramp production up and down to match market demands

© Wiley Productivity

© Wiley Measuring Productivity Productivity is a measure of how efficiently inputs are converted to outputs Productivity = output/input Total Productivity Measure Productivity relative to all inputs Partial Productivity Measure Productivity relative to a single input (e.g., labor hours) Multifactor Productivity Measure Productivity relative to a subgroup of inputs (e.g., labor and materials)

© Wiley Labor Productivity Example: Assume two workers paint twenty-four tables in eight hours: Inputs: 16 hours of labor (2 workers x 8 hours) Outputs: 24 painted tables

© Wiley Multifactor Productivity Convert all inputs & outputs to $ values Example (labor and materials productivity): 200 units produced that sell for $12.00 each Materials cost $6.50 per unit 40 hours of labor were required at $10 an hour

© Wiley Interpreting Productivity Measures Is the productivity measure of 1.41 in the previous example good or bad? Can’t tell without a reference point Compare to previous measures (e.g.: last week) or to another benchmark

© Wiley Productivity Growth Rate Can be used to compare a process’s productivity at a given time (P 2 ) to the same process’ productivity at an earlier time (P 1 )

© Wiley Productivity Growth Rate Example: Last week a company produced 150 units using 200 hours of labor This week, the same company produced 180 units using 250 hours of labor

© Wiley Productivity Example - An automobile manufacturer has presented the following data for the past three years in its annual report. As a potential investor, you are interested in calculating yearly productivity and year to year productivity gains as one of several factors in your investment analysis Labor Productivity Unit Car Sales/Employee Year-to-year Improvement 13.7% 15.8% Total Productivity Total Cost Productivity Year-to-year Improvement 1.6% 4.2% Which is the best measurement? Unit car sales 2,700,0002,400,0002,100,000 Employees112,000113,000115,000 $ Sales (billions$) $49,000$41,000$38,000 Cost of Sales (billions) $39,000$33,000$32,000

© Wiley Homework Ch. 2 Problems: 1, 5, 6, 8, 9.