2 -1 Competitiveness Strategy and Productivity CHAPTER 2

2 -1 Competitiveness, Strategy, and Productivity CHAPTER 2 Competitiveness, Strategy, and Productivity Operations Management BUS ADM 370 Dr. Xiang Fang

2 -2 Competitiveness, Strategy, and Productivity Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services

2 -3 Competitiveness, Strategy, and Productivity Businesses Compete Using Operations · · · · · Cost Location Quality Quick response Flexibility Inventory management Supply chain management Service and service quality Managers and workers Product and service design

2 -4 Competitiveness, Strategy, and Productivity Mission/Goals/Strategy/Tactics · Mission · · Mission Statement · · Answers the question “What business are we in? ” Provide detail and scope of mission Strategies · · Nike: To bring inspiration and innovation to every athlete in the world Goals · · The reason for existence for an organization Plans for achieving organizational goals Tactics · The methods and actions taken to accomplish strategies

2 -5 Competitiveness, Strategy, and Productivity 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: · Goal: · Strategy: · Tactics: · Operations: Live a good life Successful career, good income Obtain a college education Select a college and a major Register, buy books, take courses, study, graduate, get job

2 -6 Competitiveness, Strategy, and Productivity Planning and Decision Making Figure 2. 1 Mission Goals Organizational Strategies Functional Goals Finance Strategies Tactics Operating procedures Marketing Strategies Tactics Operating procedures Operations Strategies Tactics Operating procedures

2 -7 Competitiveness, Strategy, and Productivity Examples of Operations Strategies Table 2. 2 Price Low Cost U. S. first-class postage Motel-6, Red Roof Inns Quality High-performance design Motorola, Sony TV or high quality Consistent Lexus, Cadillac quality Pepsi, Kodak, Time Rapid delivery On-time delivery Express Mail, Fedex, One-hour photo, UPS Flexibility Variety Volume Burger King Supermarkets Service Superior customer service Disneyland Nordstroms, BMW Location Convenience Banks, ATMs

2 -8 Competitiveness, Strategy, and Productivity · A measure of the effective use of resources, usually expressed as the ratio of output to input Productivity = Outputs Inputs

2 -9 Competitiveness, Strategy, and Productivity · Partial measures · output/(single · input) Multi-factor measures · output/(multiple · inputs) Total measure · output/(total inputs)

2 -10 Competitiveness, Strategy, and Productivity Measures of Productivity Table 2. 5 Partial measures Multifactor measures Total measure Output Labor Output Machine Capital Output Labor + Machine Output Energy Output Labor + Capital + Energy Goods or Services Produced All inputs used to produce them

2 -11 Competitiveness, Strategy, and Productivity Examples of Partial Productivity Measures Table 2. 6 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 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 -12 Competitiveness, Strategy, and Productivity Example 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 multifactor productivity?

2 -13 Competitiveness, Strategy, and Productivity Example Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units)*($1. 10) $1000 + $520 + $2000 MFP = 2. 20

2 -14 Competitiveness, Strategy, and Productivity Growth = Current Period Productivity – Previous Period Productivity E. g. If current MFP = 2. 20, previous MFP = 2, then Multi-factor productivity growth = (2. 20 -2)/2= 10%

2 -15 Competitiveness, Strategy, and Productivity Questions True/False 1. The mission of a firm should be designed to support the firm’s overall strategy. F 2. Operations managers measure productivity as the ratio of output to input. T 3. Productivity can be measured only on workers. F 4. A company can compete with other companies manufacturing a similar product only by reducing its price. F Multiple-choice 1. If inputs decrease while output remains constant, what will happen to productivity? a. It will increase. b. It will decrease. c. It will remain the same. d. It is impossible to tell. e. It depends on which input decreases. a.

2 -16 Competitiveness, Strategy, and Productivity Factors Affecting Productivity Capital Quality Technology Management

2 -17 Competitiveness, Strategy, and Productivity Other Factors Affecting Productivity Standardization · Use of Internet · Computer viruses · Searching for lost or misplaced items · Scrap rates · New workers ·

2 -18 Competitiveness, Strategy, and Productivity Other Factors Affecting Productivity Safety · Shortage of IT workers · Layoffs · Labor turnover · Design of the workspace · Incentive plans that reward productivity ·

2 -19 Competitiveness, Strategy, and Productivity Improving Productivity · Develop productivity measures · Determine critical (bottleneck) operations · Develop methods for productivity improvements · Establish reasonable goals · Get management support · Measure and publicize improvements

2 -20 Competitiveness, Strategy, and Productivity Bottleneck Operation Figure 2. 3 Machine #1 Machine #2 10/hr 30/hr 10/hr Machine #3 Machine #5 10/hr Machine #4 Bottleneck Machine 10/hr System productivity =30/hr

2 -21 Competitiveness, Strategy, and Productivity Problem 1 The manager of a crew that installs carpeting has tracked the crew’s output over the past several weeks, obtaining these figures: Week Crew Size Yards Installed Labor Productivity 1 4 960 240 yards 2 3 702 234 3 4 968 242 4 2 500 250 5 3 696 232 6 2 500 250 Compute the labor productivity for each of the weeks. On the basis of your calculations, what can you conclude about crew size and productivity? Answer: Possibly even-sized crews are better than odd sizes, and a crew of 2 works the best.