chap002 - competitiveness, strategy, and productivity
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2-1 Competitiveness, Strategy, and Productivity
William J. Stevenson
Operations Management
8th edition
2-2 Competitiveness, Strategy, and Productivity
CHAPTER2
Competitiveness, Strategy, and Productivity
McGraw-Hill/IrwinOperations Management, Eighth Edition, by William J. StevensonCopyright © 2005 by The McGraw-Hill Companies, Inc. All rights
reserved.
2-3 Competitiveness, Strategy, and Productivity
Competitiveness: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 MarketingBusinesses Compete Using Marketing
Identifying consumer wants and needs Pricing Advertising and promotion
2-5 Competitiveness, Strategy, and Productivity
Businesses Compete Using OperationsBusinesses Compete Using Operations
Product and service design Cost Location Quality Quick response
2-6 Competitiveness, Strategy, and Productivity
Businesses Compete Using OperationsBusinesses Compete Using Operations
Flexibility Inventory management Supply chain management Service
2-7 Competitiveness, Strategy, and Productivity
Why Some Organizations FailWhy 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 FailWhy 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/TacticsMission/Strategy/Tactics
How does mission, strategies and tactics relate todecision making and distinctive competencies?
StrategyStrategy TacticsTacticsMissionMission
2-10 Competitiveness, Strategy, and Productivity
StrategyStrategy
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 MakingPlanning and Decision Making
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
MarketingStrategies
OperationsStrategies
Tactics Tactics Tactics
Operatingprocedures
Operatingprocedures
Operatingprocedures
Figure 2.1
2-12 Competitiveness, Strategy, and Productivity
Strategy ExampleStrategy 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
2-13 Competitiveness, Strategy, and Productivity
Examples of StrategiesExamples of Strategies
Low cost Scale-based strategies Specialization Flexible operations High quality Service
2-14 Competitiveness, Strategy, and Productivity
Strategy and TacticsStrategy and Tactics
Distinctive CompetenciesThe special attributes or abilities that give anorganization a competitive edge. Price Quality Time Flexibility Service Location
2-15 Competitiveness, Strategy, and Productivity
Banks, ATMsConvenienceLocationLocation
DisneylandNordstroms
Superior customer service
ServiceService
Burger KingSupermarkets
VarietyVolume
FlexibilityFlexibility
Express Mail, Fedex,One-hour photo, UPS
Rapid deliveryOn-time delivery
TimeTime
Sony TVLexus, CadillacPepsi, Kodak, Motorola
High-performance design or high quality Consistent quality
QualityQuality
U.S. first-class postageMotel-6, Red Roof Inns
Low CostPricePrice
Examples of Distinctive CompetenciesExamples of Distinctive CompetenciesTable 2.2
2-16 Competitiveness, Strategy, and Productivity
Operations StrategyOperations Strategy
Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.
2-17 Competitiveness, Strategy, and Productivity
Strategy FormulationStrategy Formulation
Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners
2-18 Competitiveness, Strategy, and Productivity
Strategy FormulationStrategy 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
Economic conditions Political conditions Legal environment Technology Competition Markets
Key External FactorsKey External Factors
2-20 Competitiveness, Strategy, and Productivity
Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers
Key Internal FactorsKey Internal Factors
2-21 Competitiveness, Strategy, and Productivity
Quality and Time StrategiesQuality 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 StrategiesTime-based Strategies
JAN FEB MAR APR MAY JUN
Planning
Processing
Changeover On time!
Designing
Delivery
2-23 Competitiveness, Strategy, and Productivity
ProductivityProductivity
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
ProductivityProductivity
Partial measures output/(single input)
Multi-factor measures output/(multiple inputs)
Total measure output/(total inputs)
Productivity = Outputs
Inputs
2-25 Competitiveness, Strategy, and Productivity
Productivity GrowthProductivity Growth
Current Period Productivity – Previous Period ProductivityPrevious Period Productivity
Productivity Growth =
2-26 Competitiveness, Strategy, and Productivity
Measures of ProductivityMeasures of ProductivityTable 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
2-27 Competitiveness, Strategy, and Productivity
Units of output per kilowatt-hourDollar value of output per kilowatt-hour
Energy Productivity
Units of output per dollar inputDollar value of output per dollar input
Capital Productivity
Units of output per machine hourmachine hour
Machine Productivity
Units of output per labor hourUnits of output per shiftValue-added per labor hour
Labor Productivity
Examples of Partial Productivity Examples of Partial Productivity MeasuresMeasures
Table 2.5
2-28 Competitiveness, Strategy, and Productivity
Example 3Example 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 multifactorproductivity?
Ans. 2.20
2-29 Competitiveness, Strategy, and Productivity
Example 3 SolutionExample 3 Solution
MFP = OutputLabor + Materials + Overhead
MFP = (7040 units)*($1.10)$1000 + $520 + $2000
MFP = 2.20
2-30 Competitiveness, Strategy, and Productivity
Factors Affecting ProductivityFactors Affecting Productivity
Capital Quality
Technology Management
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 ProductivityOther Factors Affecting Productivity
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 ProductivityOther Factors Affecting Productivity
2-33 Competitiveness, Strategy, and Productivity
Bottleneck OperationBottleneck OperationFigure 2.3
Machine #2Machine #2BottleneckOperation
BottleneckOperation
Machine #1Machine #1
Machine #3Machine #3
Machine #4Machine #4
10/hr
10/hr
10/hr
10/hr
30/hr
2-34 Competitiveness, Strategy, and Productivity
Improving ProductivityImproving 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
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