Copyright 2013 John Wiley & Sons, Inc. Chapter 1 Operations Strategy and Global Competitiveness.
Chapter 2 - Competitiveness, Strategy & Productivity_2
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Transcript of Chapter 2 - Competitiveness, Strategy & Productivity_2
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STRATEGY ANDPRODUCTIVITYProductions & OperationsMana ementBA 11
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Hierarchy of ManagementDecisions
STRATEGIC
TACTICAL
OPERATIONAL
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Why Some Organizations Fail?
Too much emphasis on short-term financial performanceFailing to take advantage of strengths / opportunities
Failing to recognize competitive threatsToo much emphasis in product and service design andnot enough on improvement
Neglecting investments in capital and human resourcesFailing to establish good internal communicationsFailing to consider customer wants and needs
Neglecting operations strategy
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Missions & Strategies
An effective operations management effortmust have a mission so it knows where it isgoing and a strategy so it knows how to getthere
Economic success, especially survival, is theresult of identifying missions to satisfycustomers wants and needs
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Mission Statement
Is a precise description of what the organizationdoes, the reason for its existence
It is a definition of why the organizationexists
Provides details of what is done and answersthe question What do we do? or What isour business?
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Mission Statement - Sample
Organize the worlds informationand make it universally accessible
and useful.
We will provide branded productsand services of superior qualityand value that improve the lives ofthe worlds consumers
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Mission Statement
The mission statement - basis fororganizational goals, which provide more
detail and describe the scope of the mission
Goals - serve as a foundation for the developmentof organizational strategies.These, in turn, provide the basis for strategies and tactics of the functional units of theorganization.
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Mission Statement
Once an organizations mission has beendefined, each functional area within the firm
determines its supporting mission
e.g.: OMs mission: To produce products
consistent with the companys mission as theworldwide low-cost manufacturer
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Strategy
When the mission is established, strategyand its implementation can begin
Strategy is an organizations action plan ora game plan to achieve its mission
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Strategy
How a firm intends to create and sustain value for itsshareholders
How you are going to get there
Major components:
Operations excellence Customer intimacy Product leadership
Shows how mission willbe achieved
Company has abusiness strategyFunctional areas have
strategies
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Tactics - arethe met hods
and acti onsused toaccomp lishstrategi es
Goals:destinations
Strategies:
roadmaps
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Strategic Management Process
Vision
SWOTAnalysisMission
Goals/Objectives
StrategyFormulation
StrategyImplement-
ation
StrategicControl
StrategicPlanning
Strategicmplementation
External
Analysis
InternalAnalysis
Long-termMedium-
termShort-term
CorporateBusinessFunctiona
l
BudgetPolicy
Procedur es
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Strategy
DifferentiationCost Leadership
Response
Better / DifferentCheaper
More responsive
Firms achieve missions in three conceptualways:
Each of these strategies provides an opportunityto achieve competitive advantage
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Strategy: Differentiation
Differentiation is concerned with providinguniqueness
Differentiation should be thought of as going beyond both physical characteristics and serviceattributes to encompass everything about the
product or service that influences the value that the
customers derive from ite.g.: broad product line, product feature, after salesservices, delivery & installation, experiencedifferentiation
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Strategy: Competing on Cost
Driver for low cost strategy:Effective utilization of facility: identify
optimum size, to allow firms to spread overheadcosts
Lowering costs does not mean sacrificing customers
expectations of valueLower costs does not mean inferior quality
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Strategy: Competing onResponse
Response includes the entire range of valuesrelated to timely product development and
delivery, reliable scheduling and flexible performance
ASPECTS of Response Strategy:1. Flexible response ability to match changes in
the marketplace where design innovations andvolumes fluctuates substantially
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Strategy: Competing onResponse
2. Reliability of scheduling or dependability
3. Quickness or speed
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Aims of an Operations Strategy
Support the higher strategies in achieving theorganizations purpose.
To provide superior performance in operations.
Its contents:The purpose of the operations, summarized inoperations mission.An expanded series of goals and objectives.Plans and methods to achieve these goals.
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Operations Strategy: Defined
Operations Strategy consists of all the long -term goals, plans, policies, culture, resources, decisions and actions thatrelate to its operations.
The total pattern of decisions which shape the long termcapabilities of any type of operation and their contribution tooverall strategy.
It is narrower in scope, dealing primarily with the operationsaspect of the organization.
Relates to Products, Processes, Methods, OperatingResources, Quality, Costs, Lead-Times and Scheduling
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Operations Strategy
For operations strategy to be truly effective
It is important to link it to organizationsstrategy. That is, both organizational strategyand operations strategy should not be formulatedindependently.
Thus, can have a major influence on thecompetitiveness of an organization.
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Key Strategies for Operations
Quality-based strategiesFocus on satisfying the customer by integrating qualityinto all phases of the organizationQuality includes both products and processes such asdesign, production, and service after the sale
Time-based strategiesGain competitive advantage by performing certainactivities more quickly than competitors
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Any questions?
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Tactical Decisions
Intermediate-term decisions, such as:How many workers will we need? When do we need them?
When should we have material delivered?
Tactical planning primarily addresses how to efficientlyschedule material and labor within the constraints of
previously made strategic decisions.
These tactical decisions become the operating constraintsunder which operational planning and control decisionsare made.
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Organizational Chart JGSummit
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Organizational Chart URC
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Operational Excellence
This strategy attempts to lead the industry in price andconvenience by pursuing a focus on lean and efficientoperations
Work to minimize costs by reducing overhead,eliminating intermediate production steps, reducingtransaction costs, and optimizing business processes
across functional and organizational boundaries
The focus is on delivering products/services to customersat competitive prices with minimal inconvenience
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Customer Intimacy
Customer intimacy means continually tailoring and shaping products and services to fit an increasingly refined definition ofthe customer
The approach is to combine detailed customer knowledge withoperational flexibility (customization)
Responding quickly to almost any need, from customizing a product to fulfilling special requests to create customer loyalty
Companies are willing to spend money now to build customerloyalty for the long- term, considering each customers lifetimevalue to the company, not the profit of any single transaction
Two things: responsiveness and flexibility
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Product Leadership
Companies that pursue the discipline of productleadership strive to produce a continuous state ofstate-of-the-art products and services
The strength of product leaders lies in reacting tosituations as they occur
Product leaders act as their own competition.These firms continually make the
products/services they have created obsolete
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PRODUCTIVITY
One of the primary responsibilities of a manager isto achieve productive use of an organization'sresources. The term productivity is used to
describe this.
Productivity is an index that measures output
(goods and services) relative to the input (labor,materials, energy, and other resources) used to produce it. It is usually expressed as the ratio ofoutput to input
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PRODUCTIVITY MEASURES
Partial = =
= =
=+
= + +
=
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PRODUCTIVITY MEASURES
=
=
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PRODUCTIVITY MEASURES
Units of output per kilowatt-hourDollar value of output per kilowatt-hour
EnergyProductivity
Units of output per dollar inputDollar value of output per dollar input
Capital
Productivity
Units of output per machine hourmachine hourMachine
Productivity
Units of output per labor hourUnits of output per shiftValue-added per labor hour
LaborProductivity
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PRODUCTIVITY
Productivity measures can be based on a single input(partial productivity), on more than one input(multifactor productivity), or on all inputs (total
productivity).
The choice of productivity measure depends primarilyon the purpose of the measurement. If the purpose isto track improvements in labor productivity, thenlabor becomes the obvious input measure.
Partial measures are often of greatest use in operationsmanagement
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PRODUCTIVITY
Productivity measures can be based on a single input(partial productivity), on more than one input(multifactor productivity), or on all inputs (total
productivity).
The choice of productivity measure depends primarilyon the purpose of the measurement. If the purpose isto track improvements in labor productivity, thenlabor becomes the obvious input measure.
Partial measures are often of greatest use in operationsmanagement
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PRODUCTIVITY
Determine the productivity:a. Four workers installed 720 square yards ofcarpeting in eight hours.
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PRODUCTIVITY
In essence, productivity measurements serve as scorecards of theeffective use of resources.
Business leaders are concerned with productivity as it relates to
competitiveness
Government leaders are concerned with national productivity because of the close relationship between productivity and anation's standard of living.
High levels of productivity are largely responsible for therelatively high standards of living enjoyed by people in industrialnations. Furthermore, wage and price increases not accompanied
by productivity increases tend to create inflationary pressures ona nation's economy.
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PRODUCTIVITY VARIABLES
These are the factors that are critical to productivity improvements
LaborCapitalManagement
PRODUCTIVITY VARIABLE
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PRODUCTIVITY VARIABLE:Labor
Improvement in the contribution of labor to productivity is the result of a healthier, bettereducated and better nourished labor force
To sum it up, the factors that improve labor productivity are:
Appropriate basic educationProper dietSocial overhead (transportation & sanitation)
PRODUCTIVITY VARIABLE
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PRODUCTIVITY VARIABLE:Capital
Human beings are tools-using animals, and capitalinvestment provide those tools
Capital investments are influenced by inflation andtaxes mainly because both affect the cost of capital
PRODUCTIVITY VARIABLE
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PRODUCTIVITY VARIABLE:Mngt
Management is responsible for ensuring that laborand capital are effectively used to increase
productivity
Productivity improvements can happen through theuse of knowledge and the application oftechnology
PRODUCTIVITY IN THE SERVICE
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PRODUCTIVITY IN THE SERVICESECTOR
Productivity of the service sector has provendifficult to improve because service sector work is:
Typically labor intensiveFrequently individually processedOften an intellectual task performed by
professionalsOften difficult to mechanizeOften difficult to evaluate for quality