1. Operations Management
William J. Stevenson
8th edition

2. Competitiveness, Strategy, and Productivity
CHAPTER 2
Competitiveness, Strategy, and Productivity
Operations Management, Eighth Edition, by William J. Stevenson
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin

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

4. Businesses Compete Using Marketing
Identifying consumer wants and needs
Pricing
Advertising and promotion

5. Businesses Compete Using Operations
Product and service design
Cost
Location
Quality
Quick response

6. Businesses Compete Using Operations
Flexibility
Inventory management
Supply chain management
Service

7. 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

8. 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

9. Mission/Strategy/Tactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?

10. Strategy Strategies Mission Mission Statement Goals Tactics
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

11. Planning and Decision Making
Figure 2.1
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

12. Strategy Example Mission: Live a good life
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

13. Examples of Strategies
Low cost
Scale-based strategies
Specialization
Flexible operations
High quality
Service

14. Strategy and Tactics Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.
Price
Quality
Time
Flexibility
Service
Location

15. Examples of Distinctive Competencies
Table 2.2
Banks, ATMs
Convenience
Location
Disneyland
Nordstroms
Superior customer service
Service
Burger King
Supermarkets
Variety
Volume
Flexibility
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 quality
Quality
U.S. first-class postage
Motel-6, Red Roof Inns
Low Cost
Price

16. Operations Strategy
Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.

17. Strategy Formulation Distinctive competencies Environmental scanning
SWOT
Order qualifiers
Order winners

18. Strategy Formulation Order qualifiers Order winners
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

19. Key External Factors Economic conditions Political conditions
Legal environment
Technology
Competition
Markets

20. Key Internal Factors Human Resources Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers

21. 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

22. Time-based Strategies
JAN
FEB
MAR
APR
MAY
JUN
Planning
Processing
Changeover
On time!
Designing
Delivery

23. Productivity Productivity Productivity ratios are used for
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

24. Productivity Productiv ity = Outputs Inputs Partial measures
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs)
Productiv
ity =
Outputs
Inputs

25. 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

26. Examples of Partial Productivity Measures
Table 2.5
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

27. 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
multifactor productivity?
Ans. 2.20

28. Example 3 Solution MFP = Output Labor + Materials + Overhead
MFP = (7040 units)*($1.10)
$ $520 + $2000
MFP = 2.20

29. Factors Affecting Productivity
Capital
Quality
Technology
Management

30. Other Factors Affecting Productivity
Standardization
Quality
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers

31. Other Factors Affecting Productivity
Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity

32. Bottleneck Operation Machine #1 Machine #2 Bottleneck Operation
Figure 2.3
Bottleneck
Operation
Machine #1
Machine #3
Machine #4
10/hr
30/hr
Machine #2

33. 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