production

1. 2-1 Competitiveness, Strategy, and Productivity
William J. Stevenson
Operations Management
8th edition

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

3. 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

4. 2-4 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing
 Identifying consumer wants and needs
 Pricing
 Advertising and promotion

5. 2-5 Competitiveness, Strategy, and Productivity
Businesses Compete Using Operations
 Product and service design
 Cost
 Location
 Quality
 Quick response

6. 2-6 Competitiveness, Strategy, and Productivity
Businesses Compete Using Operations
 Flexibility
 Inventory management
 Supply chain management
 Service

7. 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

8. 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

9. 2-9 Competitiveness, Strategy, and Productivity
Mission/Strategy/Tactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Strategy Tactics
Mission

10. 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

11. 2-11 Competitiveness, Strategy, and Productivity
Planning and Decision Making
Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Marketing
Strategies
Operations
Strategies
Tactics Tactics Tactics
Operating
procedures
Operating
procedures
Operating
procedures
Figure 2.1

12. 2-12 Competitiveness, Strategy, and Productivity
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 1

13. 2-13 Competitiveness, Strategy, and Productivity
Examples of Strategies
 Low cost
 Scale-based strategies
 Specialization
 Flexible operations
 High quality
 Service

14. 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

15. 2-15 Competitiveness, Strategy, and Productivity
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
Examples of Distinctive Competencies
Table 2.2

16. 2-16 Competitiveness, Strategy, and Productivity
Operations Strategy
 Operations strategy – The approach,
consistent with organization strategy, that is
used to guide the operations function.

17. 2-17 Competitiveness, Strategy, and Productivity
Strategy Formulation
 Distinctive competencies
 Environmental scanning
 SWOT
 Order qualifiers
 Order winners

18. 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

19. 2-19 Competitiveness, Strategy, and Productivity
 Economic conditions
 Political conditions
 Legal environment
 Technology
 Competition
 Markets
Key External Factors

20. 2-20 Competitiveness, Strategy, and Productivity
 Human Resources
 Facilities and equipment
 Financial resources
 Customers
 Products and services
 Technology
 Suppliers
Key Internal Factors

21. 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

22. 2-22 Competitiveness, Strategy, and Productivity
Time-based Strategies
JAN FEB MAR APR MAY JUN
Planning
Processing
Changeover On time!
Designing
Delivery

23. 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

24. 2-24 Competitiveness, Strategy, and Productivity
Productivity
 Partial measures
 output/(single input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)
Productivity =
Outputs
Inputs

25. 2-25 Competitiveness, Strategy, and Productivity
Productivity Growth
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
Productivity Growth =

26. 2-26 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

27. 2-27 Competitiveness, Strategy, and Productivity
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
Examples of Partial Productivity Measures
Table 2.5

28. 2-28 Competitiveness, Strategy, and Productivity
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

29. 2-29 Competitiveness, Strategy, and Productivity
Example 3 Solution
MFP = Output
Labor + Materials + Overhead
MFP = (7040 units)*($1.10)
$1000 + $520 + $2000
MFP = 2.20

30. 2-30 Competitiveness, Strategy, and Productivity
Factors Affecting Productivity
Capital Quality
Technology Management

31. 2-31 Competitiveness, Strategy, and Productivity
 Standardization
 Quality
 Use of Internet
 Computer viruses
 Searching for lost or misplaced items
 Scrap rates
 New workers
Other Factors Affecting Productivity

32. 2-32 Competitiveness, Strategy, and Productivity
 Safety
 Shortage of IT workers
 Layoffs
 Labor turnover
 Design of the workspace
 Incentive plans that reward productivity
Other Factors Affecting Productivity

33. 2-33 Competitiveness, Strategy, and Productivity
Bottleneck Operation
Figure 2.3
Machine #2
Bottleneck
Operation
Machine #1
Machine #3
Machine #4
10/hr
10/hr
10/hr
10/hr
30/hr

34. 2-34 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

35. 2-35 Competitiveness, Strategy, and Productivity
Value Results
VO10
ABTco example