2-1 Competitiveness, Strategy, and Productivity
Operations Management
William J. Stevenson
8th edition
2-2 Competitiveness, Strategy, and Productivity
CHAPTE
R 2
Competitiveness, Strategy,
and Productivity
Operations Management, Eighth Edition, by William J. Stevenson
McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
2-3 Competitiveness, Strategy, and Productivity
Competitiveness:
How effectively an organization meets the
wants and needs of customers relative to
others that offer similar goods or services
2-4 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing
∙ Identifying consumer wants and needs
∙ Pricing
∙ Advertising and promotion
2-5 Competitiveness, Strategy, and Productivity
Businesses Compete Using Operations
∙ Product and service design
∙ Cost
∙ Location
∙ Quality
∙ Quick response
2-6 Competitiveness, Strategy, and Productivity
Businesses Compete Using Operations
∙ Flexibility
∙ Inventory management
∙ Supply chain management
∙ Service
2-7 Competitiveness, 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
2-8 Competitiveness, 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
2-9 Competitiveness, Strategy, and Productivity
Mission/Strategy/Tactics
Mission Strategy Tactics
How does mission, strategies and tactics relate
to
decision making and distinctive competencies?
2-10 Competitiveness, 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
2-11 Competitiveness, Strategy, and Productivity
Planning and Decision Making
Figure 2.1
Mission
Goals
Organizational Strategies
Functional Goals
Finance Marketing Operations
Strategies Strategies Strategies
Tactics Tactics Tactics
Operating Operating Operating
procedures procedures procedures
2-12 Competitiveness, Strategy, and Productivity
Strategy Example
Example 1
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
2-13 Competitiveness, Strategy, and Productivity
Examples of Strategies
∙ Low cost
∙ Scale-based strategies
∙ Specialization
∙ Flexible operations
∙ High quality
∙ Service
2-14 Competitiveness, 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
2-15 Competitiveness, Strategy, and Productivity
Examples of Distinctive Competencies
Table 2.2
Price Low Cost U.S. first-class postage
Motel-6, Red Roof Inns
Quality High-performance design Sony TV
or high quality Consistent Lexus, Cadillac
quality Pepsi, Kodak, Motorola
Time Rapid delivery Express Mail, Fedex,
On-time delivery One-hour photo, UPS
Flexibility Variety Burger King
Volume Supermarkets
Service Superior customer Disneyland
service Nordstroms
Location Convenience Banks, ATMs
2-16 Competitiveness, Strategy, and Productivity
Operations Strategy
∙ Operations strategy – The approach,
consistent with organization strategy, that is
used to guide the operations function.
2-17 Competitiveness, Strategy, and Productivity
Strategy Formulation
∙ Distinctive competencies
∙ Environmental scanning
∙ SWOT
∙ Order qualifiers
∙ Order winners
2-18 Competitiveness, 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
2-19 Competitiveness, Strategy, and Productivity
Key External Factors
∙ Economic conditions
∙ Political conditions
∙ Legal environment
∙ Technology
∙ Competition
∙ Markets
2-20 Competitiveness, Strategy, and Productivity
Key Internal Factors
∙ Human Resources
∙ Facilities and equipment
∙ Financial resources
∙ Customers
∙ Products and services
∙ Technology
∙ Suppliers
2-21 Competitiveness, 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
2-22 Competitiveness, Strategy, and Productivity
Time-based Strategies
JAN FEB MAR APR MAY JUN
Planning
Designing
Processing
Changeover On
time!
Delivery
2-23 Competitiveness, 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
2-24 Competitiveness, Strategy, and Productivity
Productivity
∙ Partial measures
∙ output/(single input)
∙ Multi-factor measures
∙ output/(multiple inputs)
∙ Total measure
∙ output/(total inputs)
Outputs
Productivity =
Inputs
2-25 Competitiveness, 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
2-26 Competitiveness, Strategy, and Productivity
Examples of Partial Productivity Measures
Table 2.5
Labor Units of output per labor hour
Units of output per shift
Productivity Value-added per labor hour
Machine Units of output per machine hour
machine hour
Productivity
Capital Units of output per dollar input
Dollar value of output per dollar input
Productivity
Energy Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Productivity
2-27 Competitiveness, Strategy, and Productivity
Example 3
7040 Units Produced
Sold for $1.10/unit
Cost of labor of $1,000 What is the
multifactor
Cost of materials: $520 productivity?
Cost of overhead: $2000 Ans. 2.20
2-28 Competitiveness, Strategy, and Productivity
Example 3 Solution
MFP = Output
Labor + Materials + Overhead
MFP = (7040 units)*($1.10)
$1000 + $520 + $2000
MFP = 2.20
2-29 Competitiveness, Strategy, and Productivity
Factors Affecting Productivity
Capita Quality
l
Technolog Managemen
y t
2-30 Competitiveness, Strategy, and Productivity
Other Factors Affecting Productivity
∙ Standardization
∙ Quality
∙ Use of Internet
∙ Computer viruses
∙ Searching for lost or misplaced items
∙ Scrap rates
∙ New workers
2-31 Competitiveness, Strategy, and Productivity
Other Factors Affecting Productivity
∙ Safety
∙ Shortage of IT workers
∙ Layoffs
∙ Labor turnover
∙ Design of the workspace
∙ Incentive plans that reward productivity
2-32 Competitiveness, Strategy, and Productivity
Bottleneck Operation
Figure 2.3
10/hr
Machine #1
10/hr
Machine #2
Bottleneck 30/hr
Operation
Machine #3
10/hr
Machine #4 10/hr
2-33 Competitiveness, Strategy, and Productivity
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
