Operation management 9e stevenson mcgrwhill chap002

2 Competitiveness, Strategy, and Productivity McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc All Learning Objectives     List and briefly discuss the primary ways that business organizations compete List five reasons for the poor competitiveness of some companies Define the term strategy and explain why strategy is important for competitiveness Contrast strategy and tactics 2-2 Learning Objectives  Discuss and compare organization strategy and operations strategy, and explain why it is important to link the two  Describe and give examples of time-based strategies  Define the term productivity and explain why it is important to organizations and to countries  List some of the reasons for poor productivity and some ways of improving it 2-3 Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services 2-4 Businesses Compete Using Marketing  Identifying consumer wants and needs  Pricing  Advertising and promotion 2-5 Businesses Compete Using Operations      Product and service design Cost Location Quality Quick response 2-6 Businesses Compete Using Operations      Flexibility Inventory management Supply chain management Service and service quality Managers and workers 2-7 Why Some Organizations Fail  Too much emphasis on short-term financial performance  Failing to take advantage of strengths and opportunities  Neglecting operations strategy  Failing to recognize competitive threats 2-8 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 2-9 Mission/Strategy/Tactics Mission Strategy Tactics How does mission, strategies and tactics relate to decision making and distinctive competencies? 2-10 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 2-24 Time-based Strategies JAN FEB MAR APR MAY JUN Planning Designing Processing Changeover On time! Delivery 2-25 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 2-26 Productivity  Partial measures  output/(single input)  Multi-factor measures  output/(multiple inputs)  Total measure  output/(total inputs) Outputs Productivity = Inputs 2-27 Productivity Growth Productivity Growth = Current Period Productivity – Previous Period Productivity Previous Period Productivity 2-28 Measures of Productivity Table 2.4 Partial measures Multifactor measures Total measure Output Labor Output Output Machine Capital Output Labor + Machine Output Energy Output Labor + Capital + Energy Goods or Services Produced All inputs used to produce them 2-29 Examples of Partial Productivity Measures Table 2.5 Labor Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Machine Productivity Units of output per machine hour machine hour Capital Productivity Units of output per dollar input Dollar value of output per dollar input Energy Productivity Units of output per kilowatt-hour Dollar value of output per kilowatt-hour 2-30 Example 7040 Units Produced Cost of labor of $1,000 Cost of materials: $520 Cost of overhead: $2000 What is the multifactor productivity? Ans 2.0 units per dollar of input 2-31 Example Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units) $1000 + $520 + $2000 MFP = 2.0 units per dollar of input 2-32 Process Yield  Process yield is the ratio of output of good product to input  Defective product is not included in the output  Service example:  Ratio of cars rented to cars available to rent 2-33 Factors Affecting Productivity Capital Quality Technology Management 2-34 Other Factors Affecting Productivity        Standardization Quality Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers 2-35 Other Factors Affecting Productivity       Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity 2-36 Outsourcing  Higher productivity in another company is a key reason organizations outsource work  Improving productivity may reduce the need for outsourcing 2-37 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 2-38 ... Using Operations      Product and service design Cost Location Quality Quick response 2-6 Businesses Compete Using Operations      Flexibility Inventory management Supply chain management. .. services Technology Suppliers 2-21 Operations Strategy  Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function 2-22 Strategic... short-term financial performance  Failing to take advantage of strengths and opportunities  Neglecting operations strategy  Failing to recognize competitive threats 2-8 Why Some Organizations Fail 