2-1Competitiveness, Strategy, and Productivity William J. Stevenson Operations Management 8 th edition

2-2Competitiveness, 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 reserved.

2-3Competitiveness, Strategy, and Productivity Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services

2-4Competitiveness, Strategy, and Productivity Businesses Compete Using Marketing  Identifying consumer wants and needs  Pricing  Advertising and promotion

2-5Competitiveness, Strategy, and Productivity Businesses Compete Using Operations  Product and service design  Cost  Location  Quality  Quick response

2-6Competitiveness, Strategy, and Productivity Businesses Compete Using Operations  Flexibility  Inventory management  Supply chain management  Service

2-7Competitiveness, 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

2-8Competitiveness, 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

2-9Competitiveness, Strategy, and Productivity Mission/Strategy/Tactics How does mission, strategies and tactics relate to decision making and distinctive competencies? StrategyTacticsMission

2-10Competitiveness, 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

2-11Competitiveness, Strategy, and Productivity Planning and Decision Making Figure 2.1

2-12Competitiveness, Strategy, and Productivity 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, take courses, study, graduate, get job Example 1

2-13Competitiveness, Strategy, and Productivity Examples of Strategies  Low cost  Scale-based strategies  Specialization  Flexible operations  High quality  Service

2-14Competitiveness, 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

2-15Competitiveness, Strategy, and Productivity Banks, ATMsConvenienceLocation Disneyland Nordstroms Superior customer serviceService Burger King Supermarkets Variety VolumeFlexibility Express Mail, Fedex, One-hour photo, UPS Rapid delivery On-time delivery Time Sony TV Lexus, Cadillac Pepsi, Kodak, Motorola High-performance design or high quality Consistent qualityQuality U.S. first-class postage Motel-6, Red Roof Inns Low CostPrice Examples of Distinctive Competencies Table 2.2

2-16Competitiveness, Strategy, and Productivity Operations Strategy  Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.

2-17Competitiveness, Strategy, and Productivity Strategy Formulation  Distinctive competencies  Environmental scanning  SWOT  Order qualifiers  Order winners

2-18Competitiveness, 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

2-19Competitiveness, Strategy, and Productivity  Economic conditions  Political conditions  Legal environment  Technology  Competition  Markets Key External Factors

2-20Competitiveness, Strategy, and Productivity  Human Resources  Facilities and equipment  Financial resources  Customers  Products and services  Technology  Suppliers Key Internal Factors

2-21Competitiveness, 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

2-22Competitiveness, Strategy, and Productivity Time-based Strategies JANFEBMARAPRMAYJUN Planning Processing Changeover On time! Designing Delivery

2-23Competitiveness, 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

2-24Competitiveness, Strategy, and Productivity Productivity  Partial measures  output/(single input)  Multi-factor measures  output/(multiple inputs)  Total measure  output/(total inputs) Productivity= Outputs Inputs

2-25Competitiveness, Strategy, and Productivity Productivity Growth Current Period Productivity – Previous Period Productivity Previous Period Productivity Productivity Growth =

2-26Competitiveness, Strategy, and Productivity Measures of Productivity Table 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

2-27Competitiveness, Strategy, and Productivity Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Energy Productivity Units of output per dollar input Dollar value of output per dollar input Capital Productivity Units of output per machine hour machine hour Machine Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Labor Productivity Examples of Partial Productivity Measures Table 2.5

2-28Competitiveness, Strategy, and Productivity Example 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

2-29Competitiveness, Strategy, and Productivity Example 3 Solution MFP =Output Labor + Materials + Overhead MFP =(7040 units)*($1.10) $ $520 + $2000 MFP =2.20

2-30Competitiveness, Strategy, and Productivity Figure 2-2

2-31Competitiveness, Strategy, and Productivity Factors Affecting Productivity CapitalQuality TechnologyManagement

2-32Competitiveness, Strategy, and Productivity  Standardization  Quality  Use of Internet  Computer viruses  Searching for lost or misplaced items  Scrap rates  New workers Other Factors Affecting Productivity

2-33Competitiveness, Strategy, and Productivity  Safety  Shortage of IT workers  Layoffs  Labor turnover  Design of the workspace  Incentive plans that reward productivity Other Factors Affecting Productivity

2-34Competitiveness, Strategy, and Productivity Bottleneck Operation Figure 2.3