Total Quality Management

MBA650Dr Pavlos Panayi

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Globalization and Competitiveness

• Favorable cost• Access to international

markets• Response to changes in

demand• Reliable sources of supply• 14 major trade agreements

in 1990s• Peak: 26% in 2000

World Trade Compared to World GDPSource: “Real GDP and Trade Growth of OECD Countries, 2001–03,” International Trade Statistics 2003, World Trade Organization, www.wto.org

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Globalization and Competitiveness (cont.)

Hourly Wage Rates for Selected CountriesSource: “International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing,” Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003.

Germany: $26.18Germany: $26.18

USA: $21.33USA: $21.33

Taiwan: $5.41Taiwan: $5.41

Mexico: $2.38Mexico: $2.38

China: $0.50China: $0.50

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Globalization and Competitiveness (cont.)

Trade with China: Percent of each country‘s trade Source: “Share of China in Exports and Imports of Major Traders, 2000 and 2002,” International

Trade Statistics 2003, World Trade Organization, www.wto.org

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Risks of Globalization

• Cultural differences• Supply chain logistics• Safety, security, and stability• Quality problems• Corporate image • Loss of capabilities

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Competitiveness and Productivity

• Competitiveness– degree to which a nation can produce goods and

services that meet the test of international markets• Productivity

– ratio of output to input• Output

– sales made, products produced, customers served, meals delivered, or calls answered

• Input– labor hours, investment in equipment, material usage,

or square footage

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Measures of Productivity

Competitiveness and Productivity (cont.)

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Changes in Productivity for Select Countries

Internet-enabled productivityInternet-enabled productivity

- Dot com bust- 9/11 terrorist attacks- Dot com bust- 9/11 terrorist attacks

Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau of Labor Statistics, U.S. Department of Labor, September 2003. U.S. figures for 2002–2003 from “Major Sector Productivity and Costs Index,” Bureau of Labor Statistics, U.S. Department of Labor, March 2004

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• Become efficient– output increases with little or no increase in input

• Expand– both output and input grow with output growing more

rapidly• Achieve breakthroughs

– output increases while input decreases• Downsize

– output remains the same and input is reduced• Retrench

– both output and input decrease, with input decreasing at a faster rate

Productivity Increase

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Competitiveness and Productivity

Productivity as a Function of Inputs and Outputs, 2001–2002Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau of Labor Statistics, U.S. Department of Labor, September 2003

Breakthrough PerformanceBreakthrough Performance

More EfficientMore Efficient

RetrenchRetrench

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Global Competitiveness Ranking

1. Finland2. United States3. Sweden4. Denmark5. Taiwan6. Singapore7. Switzerland8. Iceland9. Norway10. Australia

Source: Global Competitiveness Report 2003–2004, World Economic Forum, January 2004, www.weforum.org

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• Economies of Scale• Capital Investment• Access to Supply and Distribution

Channels• Learning Curve

Operations–oriented Barriers to Entry

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Primary Topics in Operations Management

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Primary Topics in Operations Management (cont.)