Engineering management chapter 02

1. CHAPTER TWO
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PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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Chapter 2
Productivity,
Competitiveness,
and Strategy

2. CHAPTER TWO
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Productivity
• Partial measures
– output/(single input)
• Multi-factor measures
– output/(multiple inputs)
• Total measure
– output/(total inputs)
Productivity =
Outputs
Inputs

3. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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Measures of Productivity
Table 2-1
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

4. CHAPTER TWO
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Example
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the
labor productivity?

5. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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•10,000 units/500hrs = 20 units/hour
or we can arrive at a unitless figure
•(10,000 unit* $10/unit)/(500hrs* $9/hr) =
22.22
Can you think of any advantages or
disadvantages of each approach?
Example--Labor Productivity

6. CHAPTER TWO
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Example--Multifactor Productivity
MFP = Output
Labor + Materials
MFP = (10,000 units)*($10)
(500)*($9) + ($5000) + ($25000)
MFP = 2.90

7. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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Factors Affecting Productivity
Capital Quality
Technology Management

8. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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Improving Productivity
• Develop productivity measures
• Determine critical operations
• Develop methods for productivity
improvements
• Establish reasonable goals
• Get management support
• Measure and publicize improvements
• Don’t confuse productivity with
efficiency

9. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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Bottleneck Operation
Operation
Bottleneck
Operation
Operation
Operation
Operation
Figure 2-2

10. CHAPTER TWO
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PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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Competitiveness
Quality
Price
Time

11. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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Mission/Strategy/Tactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Strategy Tactics
Mission

12. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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Strategy
• Mission
– The reason for existence for an
organization
• Mission Statement
– A clear statement of purpose
• Strategy
– A plan for achieving organizational
goals
• Tactics
– The actions taken to accomplish
strategies

13. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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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 3

14. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
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Planning and Decision Making
Mission
Goals
Organizational strategy
Functional strategies
Finance Marketing Operations
Tactics Tactics Tactics
Finance
operations
Marketing
operations
Operations
operations
Figure 2-3

15. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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Strategy Formulation
• Distinctive Competencies
– The special attributes or abilities that
give an organization a competitive
edge.
• Environmental Scanning
– The considering of events and trends
that present threats or opportunities
for a company.

16. CHAPTER TWO
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New Strategies
• Quality-based
strategies
– Focuses on quality in all
phases of an organization
– Quality at the source
• Time-based strategies
– Focuses on reduction of
time needed to
accomplish tasks

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

18. CHAPTER TWO
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Production
• Craft Production - Highly skilled workers
use simple flexible tools to produce small
quantities of customized goods.
• Mass Production - Lower-skilled workers
use specialized machinery high volumes
of standardized goods.
• Lean Production - Uses minimal amounts
of resources high volume of high-quality
goods.