The total productivity and partial productivity measures for labour, capital and raw materials have decreased from 2002 to 2003. This indicates that the company's overall efficiency and utilization of resources have reduced over the years. The company needs to focus on improving its operations to enhance productivity.

1. 1
Operations Strategy
and
Competitiveness

2. 2
Operations Strategy as a
competitive weapon
One of the key objectives of any business
organization is to reach a position where it is able to
attract more customers than it’s competitors
• Shorter Product Cycle / Pioneer status advantage
• Production flexibility
• Low-cost process (e.g. Outsourcing)
• Convenience and Location (e.g. Courier services)
• Product variety and Facility size (e.g. super markets)
• Quality (e.g. MNCs’ producing cars in India for
Exports)

3. Competitive 3
Dimensions
• Cost or Price
Make the Product or Deliver the Service Cheap
• Quality
Make a Great Product or Deliver a Great Service
• Delivery Speed
Make the Product or Deliver the Service Quickly
• Delivery Reliability
Deliver It When Promised
• Coping with Changes in Demand
Change Its Volume
• Flexibility and New Product Introduction Speed
Change It
• Other Product-Specific Criteria
Support It

4. Order Qualifiers and 4
Winners
Defined
Order qualifiers are the basic
criteria that permit the firms
products to be considered as
candidates for purchase by
customers
Order winners are the criteria that
differentiates the products and
services of one firm from another

5. 5
Service Breakthroughs
 A brand name car can be an
“order qualifier”
•Repair services can be “order
winners”
Examples: Warranty, Roadside Assistance,
Leases, etc

6. 6
Operations Strategy
Strategy Process Example
Customer Needs More Products
Corporate Strategy Increase Org. Size
Operations Strategy Increase Production Capacity
Decisions on Processes
and Infrastructure Build New Factory

7. 7
Strategy Design Process
Strategy Map What it is about!
Financial Perspective Improve Shareholder Value
Customer Perspective Customer Value Proposition
Internal Perspective Build-Increase-Achieve
Learning and Growth Perspective A Motivated and Prepared
Workforce

8. 8
The Balanced Scorecard
Judicious mix of financial and operational
measures for measuring the performance
• Customer perspective
• Business process perspective
• Innovation and learning perspective
• Financial perspective

9. Balanced Scorecard Model for Measuring
Operations Performance How do
stakeholders view
Operations?
Financial Perspective
Goals Measures
How do customers At which
view the Operations tasks
Operations? must we excel
Customer Perspective
Internal / Process
Goals Measures Perspective
Goals measures
Innovation & Learning
Perspective
Goals Measures

10. 10
Kaplan and Norton’s Generic
Strategy Map
In the Kaplan and Norton’s Generic Strategy
Map, under the Financial Perspective, the
Productivity Strategy is generally made up from
two components:
1. Improve cost structure: Lower direct and
indirect costs
2. Increase asset utilization: Reduce working
and fixed capital

11. Kaplan and Norton’s 11
Generic Strategy Map
(Continued)
In the Kaplan and Norton’s Generic Strategy
Map, under the Financial Perspective, the
Revenue Growth Strategy is generally made
up from two components:
• Build the franchise: Develop new sources of
revenue
• Increase customer value: Work with
existing customers to expand relationships
with company

12. Kaplan and Norton’s 12
Generic Strategy Map
(Continued)
In the Kaplan and Norton’s Generic Strategy
Map, under the Customer Perspective, there
are three ways suggested as means of
differentiating a company from others in a
marketplace:
1. Product leadership
2. Customer intimacy
3. Operational excellence

13. 13
Kaplan and Norton’s Generic
Strategy Map (Continued)
In the Kaplan and Norton’s Generic Strategy
Map, under the Learning and Growth
Perspective, there are three principle
categories of intangible assets needed for
learning:
1. Strategic competencies
2. Strategic technologies
3. Climate for action

14. Developing an Operations Strategy
Corporate
Objectives
Functional Areas
Business Plan
Operations
Marketing
Marketing Plan Business Strategies Financing/Accounting
Research & Dev.
Budget Strengths and Weaknesses Human Capital
Operations
Objectives
Production Plan
Other Plan
Operation Strategies
Long-range Decisions about
Products, Processes and Facilities
Position the Production System
Focus of Factories or Service Facilities
Product / Service Design and Development
Allocation of Resources to Alternatives
Facility Planning : Capacity, Location and Layout

15. 15
Steps in Developing a
Manufacturing Strategy
 1. Segment the market according to the
product group
 2. Identify product requirements, demand
patterns, and profit margins of each group
 3. Determine order qualifiers and winners for
each group
 4. Convert order winners into specific
performance requirements

16. 16
Service Strategy Capacity
Capabilities
• Process-based
Capacities that transforms material or information and
provide advantages on dimensions of cost and
quality
• Systems-based
Capacities that are broad-based involving the entire
operating system and provide advantages of short
lead times and customize on demand
• Organization-based
Capacities that are difficult to replicate and provide
abilities to master new technologies

17. 17
What is Productivity?
Defined
Productivity is a common measure
on how well resources are being
used. In the broadest sense, it can
be defined as the following ratio:
Outputs
Inputs

18. Productivity – Introduction &
Definition
• Productivity primarily is an attitude of mind – an attitude of
looking at the scope for improvement
• It stands for the elimination of MUDA( Japanese ) or Waste
in all forms
• It is the function of providing more and more of everything,
for more and more people with less and less consumption of
Resources
• The essence of productivity lies in producing the same
volume with less resources or producing more output with
proportionately less increase in inputs

19. Factors affecting Productivity
External Factors
• Beyond the control of individual Enterprise
• External Infrastructure
• Non- availability of Funds, Water, Power,
Transportation
• Raw Material Supply constraints
• Government Policies ( Emission Laws etc.)
• Social / Political / Economic Environment

20. Factors affecting Productivity ( contd.)
Internal Factors
• Hard Factors – Products / Technology / Plant & Eqpt.
/ Raw Materials
• Soft Factors – People / Work Methods / Systems &
Procedures / Organisation Structure / Management
Practices

21. 21
Total Measure
Productivity
Total Measure Productivity = Outputs
Inputs
or
= Goods and services produced
All resources used

22. 22
Partial Measure
Productivity
 Partial measures of productivity =
 Output or Output or Output or Output
Labor Capital Materials Energy

23. 23
Multifactor Measure
Productivity
 Multifactor measures of productivity =
 Output .
Labor + Capital + Energy
or
 Output .
Labor + Capital + Materials

24. Example of Productivity
24
Measurement
 You have just determined that your service
employees have used a total of 2400 hours of labor
this week to process 560 insurance forms. Last
week the same crew used only 2000 hours of labor
to process 480 forms.
 Which productivity measure should be used?
 Answer: Could be classified as a Total Measure or
Partial Measure.
 Is productivity increasing or decreasing?
 Answer: Last week’s productivity = 480/2000 = 0.24,
and this week’s productivity is = 560/2400 = 0.23.
So, productivity is decreasing slightly.

25. 25
Question Bowl
An operations strategy is concerned
with which of the following?
b. Setting specific policies and plans
c. Short-term competitive strategies
d. Coordination of operational goals
e. All of the above
f. None of the above
Answer: c. Coordination of operational
goals

26. 26
Question Bowl
Typically a strategy breaks down
into what major components?
b. Operations effectiveness
c. Customer management
d. Production innovation
e. All of the above
f. None of the above
Answer: d. All of the above

27. 27
Question Bowl
A criterion that differentiates the
products and services of one firm
from another can be which of the
following?
b. An order qualifier
c. An order winner
d. PWP
e. KPI
f. None of the above
Answer: b. An order winner

28. 28
Question Bowl
A travel agency processed 240 customers on Day 1
with a staff of 12, and 360 customers the on Day 2
with a staff of 15. What can be said about the
productivity shift from Day 1 to Day 2?
↑ An increase in productivity from Day 1 to Day 2
↑ A decrease in productivity from Day 1 to Day 2
↑ The same productivity from Day 1 to Day 2
↑ Can not be computed from data above
↑ None of the above
Answer: a. An increase in productivity from Day 1 to
Day 2(Day 1 productivity = 240/12=20
Day 2 productivity = 360/15=24)

29. 29
Question Bowl
In addition to traditional financial measures, what
critical questions can a Balanced Scorecard
help a company answer?
b. How do customers see us?
c. What must we excel at?
d. How can we continue to improve and create
value?
e. All of the above
f. None of the above
Answer: d. All of the above

30. 30
Solved Problems – OPERATIONS MANAGEMENT
(Class of 2010)
Q3. d) Various financial data for 2002 & 2003 follow. Calculate the total productivity
measure and the partial measure for labour, capital and raw materials for this company
for both years. What do these measures tell you about this company?
2002 2003
Output Sales $ $2,20,000
2,00,000
Input Labour
30,000 40,000
Raw
Material 35,000 45,000
Energy
5,000 6,000
Capital
50,000 50,000
Others
2,000 3,000
Answer :- Total Productivity = Output
Input

31. 31
 Output 2002 2003
2,00,000 2,20,000
 Input 2002 2003
Labour 30,000 40,000
Raw Materials 35,000 45,000
Energy 5,000 6,000
Capital 50,000 50,000
Others 2,000 3,000
Total Inputs 1,22,000 1,44,000

32. 32
a) Total Productivity measure
Year 2002
Total Productivity = Output
Input
= 2,00,000
1,22,000
= 1.66
Year 2003
Total Productivity = 2,20,000
1,44,000
= 1.53

33. 33
- Partial Productivity measure (Labour)
Partial Productivity measure = Total Output
Cost of Labour
for the year 2002 = 2,00,000 = 6.67
30,000
for the year 2003 = 2,20,000 = 5.5
40,000
c) Partial Productivity measure (Capital)
Partial Productivity measure = Total Output
Capital
for the year 2002 = 2,00,000 = 4
50,000
for the year 2003 = 2,20,000 = 4.4
50,000

34. 34
d) Partial Productivity measure (Raw Materials)
Partial Productivity measure = Total Output
Cost of Raw Materials
for the year 2002 = 2,00,000 = 5.71
35,000
for the year 2003 = 2,20,000 = 4.88
45,000