1. © Wiley 20051 Chapter 2 Operations Strategy and Competitiveness Operations Management by R. Dan Reid & Nada R. Sanders 2 nd Edition © Wiley 2005 PowerPoint Presentation by R.B. Clough - UNH

2. © Wiley 20052 Chapter 2 Lecture Outline Business mission and strategy Operations strategy and other functional strategies Order qualifiers & order winners How operations helps firms compete Competitive priorities in operations Technology Productivity

3. © Wiley 20053 Mission Statement Explains What business the organization is in Who the customers are How the company's values will determine what the company does A mission statement explains what the organization will do.

4. © Wiley 20054 Business Strategy Explains how the organization will achieve its mission Long-range plan to compete in the marketplace Explains how the firm will differentiate itself from competitors Sets competitive priorities Basis for functional strategies

5. © Wiley 20055 Three Inputs to a Business Strategy

6. © Wiley 20056 Business Strategy and Functional Strategies

7. © Wiley 20057 Functional Strategies Marketing Operations Finance Management information systems Human resources management The functional strategies should be consistent with each other and with the business strategy

8. © Wiley 20058 Order Qualifiers & Order Winners Order qualifiers are characteristics that a product must have to be considered for purchase Order winners are characteristics that a product must have to make the sale. Both depend on the target market. Both change over time. If most competing products have a certain characteristic, it is likely to become an order qualifier.

9. © Wiley 20059 Competitive Priorities in Operations Product characteristics that can be order qualifiers & order winners. Cost Quality Time Flexibility Unique features, skills, or treatment of customers

10. © Wiley 200510 Competitive Priorities Meeting the needs of a target market What are the order qualifiers? What are the order winners? These dictate your competitive priorities. Product characteristics that are not order winners or qualifiers may not be needed. The company cannot be all things to all customers. The company may have to make choices (tradeoffs).

11. © Wiley 200511 Competing on Cost In marketing books, this is called competing on price Low prices require low costs Basic product with acceptable quality How do companies achieve low costs?

12. © Wiley 200512 2 Ways to Compete on Product Quality High performance design: Superior features, high durability, and excellent customer service Product or service consistency: Meets customer requirements in its market Product is made according to the design Error free service and delivery

13. © Wiley 200513 Process Quality Designing and operating a process to produce error-free products Essential for firms that compete on quality Reduces operating costs for any firm – "doing it right the first time" reduces costs and keeps customers

14. © Wiley 200514 3 Ways to Compete on Time Fast delivery: Reduce time between order placement and delivery On-time delivery: Deliver product exactly when needed every time Rapid new product development: Shorten new product development time

15. © Wiley 200515 2 Ways to Compete on Flexibility Product flexibility: Must be able to easily switch production from one item to another May customize product to customer needs Volume flexibility: Ability to increase or decrease production to match market demands

16. © Wiley 200516 Strategic Role of Technology Technology should support competitive priorities Product technology: used to create product characteristics and performance PDA's, hybrid vehicles, stain-resistant fabric, package tracking, e-commerce Product technology affects costs

17. © Wiley 200517 Strategic Role of Technology (2) Process technology: how goods and services are produced Includes both equipment and methods Often includes information technology Just-in-time, automation, fast food process, self- service checkout, bar-code scanners Can reduce costs Can be used to produce new goods or services

18. © Wiley 200518 Strategic Role of Technology (3) Information technology: allows users to create, collect, process, store, and transmit information Internet, wireless, point of sale systems, management information systems, communication networks

19. © Wiley 200519 Productivity Productivity = outputs inputs Single factor productivity measures Labor productivity = units produced labor hours Machine productivity = units produced machine hours

20. © Wiley 200520 Productivity (2) Total productivity = units produced _ cost of labor, materials, equipment, and energy Productivity is a measure of efficiency. Other competitive priorities may also be important to your firm When productivity increases, costs per unit decrease.

21. © Wiley 200521 Productivity (3) Track trends in your firm's productivity Compare your firm with industry averages Low demand often reduces productivity People and equipment may be idle High volume usually increases productivity.

22. © Wiley 200522 Productivity in Services Service productivity is often hard to measure. Demand varies at different times of the day and on different days of the week Affects numbers of employees needed Efforts to maintain very high productivity can increase the time that customers wait.

23. © Wiley 200523 Review of Operations (OM) and Operations Strategy Operations Management What is OM? Transformation process Work Value added and efficiency Measurement & feedback Similarities between manufacturing and service operations Operations Strategy Mission and strategy Operations and other functional strategies How operations helps firms compete Competitive priorities Technology Productivity