2 production and operation problems. MSD 340
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chapter_2_p__o.pptxCHAPTER 2 Competitiveness, Strategy, and Productivity
Outline
Competitiveness
Strategy
Productivity
The Cold Hard Facts -- Competition
Those who understand how to play the game will succeed; those who don’t are doomed to fail…
Don’t think the game is just companies competing with each other. In companies with multiple factories or divisions producing the same goods or services, factories or divisions find themselves competing with each other…
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A Cold Hard Fact
Better quality, higher productivity, lower costs, and the ability to respond quickly to customer needs are more important than ever and…
the bar is getting higher
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Case: Smartphone
U.S. Mobile Phone Carrier
Mobile Phone Operating System Provider
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Competitiveness
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services.
Organizations compete through some combination of their marketing and operations functions
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Businesses Compete Using Marketing
Identifying consumer wants and/or needs
Basic input in decision making
Central to competitiveness
Pricing
Key factor in consumer buying decision
Trade-off with other aspects
Advertising and promotion
Ways to inform and attract customers
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Compete Using Operations
Product & service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service
Managers & workers
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Why Some Organizations Fail
Neglecting operations strategy
Failing to take advantage of strengths and opportunities, and/or failing to recognize competitive threats
Too much emphasis on short-term financial performance at the expense of research and development
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 and cooperation
Failing to consider customer wants and needs
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GM
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Ford
Ford sold Aston Martin on March 12, 2007.
Ford sold Jaguar and Land Rover to Tata Motors of India in March 2008.
In November 2008 it reduced its 33.4% controlling interest in Mazda of Japan, to a 13.4% non-controlling interest.
Ford sold Volvo to Zhejiang Geely Holding Group of China in 2010.
By the end of 2010, Ford discontinued Mercury.
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Keys to Successfully Competing
What do the customers want?
What is the best way to satisfy those wants?
Understanding competitive issues can help managers develop successful strategies.
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Is it a Strategic, Tactical, or Operational issue?
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How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Mission/Strategy/Tactics
Strategy
Tactics
Mission
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Mission
Mission
The reason for the existence of an organization
Mission statement
States the purpose of the organization
The mission statement should answer the question of “What business are we in?”
's mission is to organize the world's information and make it universally accessible and useful.
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Goals
The mission statement serves as the basis for organizational goals
Goals
Provide detail and the scope of the mission
Goals can be viewed as organizational destinations
Goals serve as the basis for organizational strategies
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Strategies
Strategy
A plan for achieving organizational goals
Serves as a roadmap for reaching the organizational destinations
Organizations have
Organizational strategies
Overall strategies that relate to the entire organization
Support the achievement of organizational goals and mission
Functional level strategies
Strategies that relate to each of the functional areas and that support achievement of the organizational strategy
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Tactics and Operations
Tactics
The methods and actions taken to accomplish strategies
The “how to” part of the process
Operations
The actual “doing” part of the process
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Hierarchical Structure
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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 a job
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Core Competencies
Core Competencies
The special attributes or abilities that give an
organization a competitive edge
To be effective, core competencies and strategies need to be aligned
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Examples of operation strategies
Banks, ATMs
Convenience
Location
Disneyland
Nordstroms
Superior customer service
Service
Subway
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
Table 2.2
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Strategy Formulation
Successful strategy formulation requires taking into account:
Order qualifiers
Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase
A car which passes the highway safety test
Order winners
Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition
A car with 50 miles per gallon: Toyota Prius
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Strategy Formulation
Effective strategy formulation requires taking into account:
Core competencies
Environmental scanning
SWOT
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Environmental scanning: The considering of events and trends that present threats or opportunities for a company
Environmental Scanning is necessary to identify
SWOT
Internal Factors
Strengths and Weaknesses
External Factors
Opportunities and Threats
Environmental Scanning
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| Strengths | Weaknesses |
| Opportunities | Threats |
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Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
Key External Factors
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Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers
Key Internal Factors
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Operations Strategy
Operations strategy
The approach, consistent with organization strategy, that is used to guide the operations function.
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Quality-Based Strategies
Quality-based strategy
Strategy that focuses on quality in all phases of an organization
Pursuit of such a strategy is rooted in a number of factors:
Trying to overcome a poor quality reputation
Desire to maintain a quality image
A part of a cost reduction strategy
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Time-Based Strategies
Time-based strategies
Strategies that focus on the reduction of time needed to accomplish tasks
It is believed that by reducing time, costs are lower, quality is higher, productivity is higher, time-to-market is faster, and customer service is improved
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Time-Based Strategies
Areas where organizations have achieved time reductions:
Planning time
Product/service design time
Processing time
Changeover time
Delivery time
Response time for complaints
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Productivity
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Productivity
Productivity is a measure of the effective use of resources, usually expressed as the ratio of output to input.
One of the primary responsibilities of an operations manager is to achieve productive use of an organization's resources.
Input: labor, material, energy, and others.
Output: goods and services.
Productivity
=
Output
Input
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Computing Productivity
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
Business, Industry, Country
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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 Productivity
Units of output per labor hour
Units of output per shift
Value-added per labor hour
Labor Productivity
Partial Productivity Measures
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Example 1
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of overhead: $5,000
Cost of material: $25,000
What is the
labor productivity?
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Solutions to Example 1
Output : 10,000 units
Input : 500 hours
Labor productivity= 10,000 / 500 = 20
units/ hours = units/hour
What is the unit of the productivity number?
MFP (multifactor productivity)
= output / (labor + material + overhead)
=(10,000 units*$10/unit ) / (500 hours*$9/hour + $25,000 + $5,000)
MFP = 2.9 $/$
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Have to make sure you are using the same unit in the MFP. (converted to $ amount)
Shopping Cart Production Example
Prior to New Equipment
Workforce: 5 workers
Output: 80 carts/hr
Labor: $10/hr
Machine: $40/hr
With New Equipment
Workforce: 4 workers
Output: 84 carts/hr
Labor: $10/hr
Machine: $50/hr
Labor Productivity
Before:
After:
80 carts/hr
5 workers
84 carts/hr
4 workers
= 16 carts per worker per hour
= 21 carts per worker per hour
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Shopping Cart Production Example
Prior to New Equipment
Workforce: 5 workers
Output: 80 carts/hr
Labor: $10/hr
Machine: $40/hr
With New Equipment
Workforce: 4 workers
Output: 84 carts/hr
Labor: $10/hr
Machine: $50/hr
Multifactor Productivity
Before:
After:
80 carts/hr
$10/hr 5 + $40/hr
84 carts/hr
$10/hr 4 + $50/hr
= 0.89 carts/$
= 0.93 carts/$
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Service Sector Productivity
Service sector productivity is difficult to measure and manage because
It involves intellectual activities
It has a high degree of variability
A useful measure related to productivity is process yield
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Bottleneck Operation
Wooden barrel theory: the capacity of a barrel is determined not by the longest wooden bar, but by the shortest.
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Recap
competitiveness
mission
goals
tactics
operations strategy
core competencies
environmental scanning
order qualifiers
order winners
SWOT
productivity
partial productivity
multifactor productivity
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