1. © Wiley 20051 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

2. © Wiley 20052 Business/Functional Strategy

3. © Wiley 20053 Operations Strategy – Designing the Operations Function

4. © Wiley 20054 Competitive Priorities- The Edge Four Important Operations Questions: Will you compete on – Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?

5. © Wiley 20055 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

6. © Wiley 20056 Competing on Quality? High performance design: Superior features, high durability, & excellent customer service Product & service consistency: Meets design specifications Close tolerances Error free delivery

7. © Wiley 20057 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

8. © Wiley 20058 Product Strategies and Process Choice

9. © Wiley 20059 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

10. © Wiley 200510 Productivity

11. © Wiley 200511 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)

12. © Wiley 200512 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

13. © Wiley 200513 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

14. © Wiley 200514 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

15. © Wiley 200515 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 )

16. © Wiley 200516 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

17. © Wiley 200517 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. 2003 2002 2001 Labor Productivity Unit Car Sales/Employee 24.1 21.2 18.3 Year-to-year Improvement 13.7% 15.8% Total Productivity Total Cost Productivity 1.26 1.24 1.19 Year-to-year Improvement 1.6% 4.2% Which is the best measurement? 200320022001 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

18. © Wiley 200518 Homework Ch. 2 Problems: 1, 5, 6, 8, 9.