Download Decision Making

Competitiveness, Strategy,
and Productivity
Y.-H. Chen, Ph.D.
International College
Ming-Chuan University
Business Goals
Better quality
 Higher productivity
 Lower cost
 The ability to quickly respond to
customer needs
How to achieve these goals?
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Competitiveness, Strategy,
and Productivity
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Competitiveness: How effective an
organization is in the marketplace compared
with other organizations that offer similar
products or services.
Strategy: The plans that determine the
direction an organization takes in pursuing its
goals.
Productivity: The effective use of resources.
Competitiveness
How to achieve competitiveness?
 Identifying consumer wants and / or
needs
 Pricing and quality
 Advertising and promotion
Operations and
Competitiveness
How do operations affect competitiveness?
 Product and service design
 Cost
 Location
 Quality
 Quick response
 Flexibility
 Inventory management
 Supply chain management
 Service
 Managers and workers
Why some organizations fail?
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Too much emphasis on short-term financial
performance
Failing to take advantage of strengths and
opportunities
Failing to recognize competitive threats
Neglecting operations strategy
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
Competitiveness Summary
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What customers want?
What is the best way to satisfy those
wants?
Strategies
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Plans for achieving organizational goals.
Can be long term, intermediate term, or
short term.
Must be designed to support the
organization’s missions and its goals.
Mission, Strategy, and Tactic
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Mission: The reason for existence for an
organization. The basis for organizational goals.
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Mission Statement: A clear statement of purpose.
(Table 2.1, p.39)
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Strategy: A plan (roadmap) for achieving
organizational goals.
Tactics: The methods or actions taken to
accomplish strategies.
Mission, Strategy, and Tactics in
Production / Operations Management
Mission
Goals
Organizational strategy
Functional strategies
Finance
Marketing
Operations
Tactics
Tactics
Tactics
Finance
operations
Marketing
operations
Operations
operations
Mission, Strategy, and Tactic
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/Mission:
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
Strategy Formulation

Take into account the
realities of operations'
strength and weakness.
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Capitalizing on strength and
dealing with weakness. (This
is generally ignored in a
business.)
SWOT approach (strength,
weakness, opportunity, and
threat) critically examines
factors that could have
either positive or negative
effects.
SWOT Analysis
Strength
Domain knowledge.
Breadth of solution.
Business strategy.
Opportunity
Service to existing customers.
Improve resource util. by
integrating products.
Strengths are our best weapons.
Weakness
Lack of trans. knowledge.
Frequent change of strategy.
Lack of customer references.
Overlapped products.
Threat
Network effect of company X.
Lack of product compatibility to
legacy products.
Multiple business acquisition
consumes resource.
Strategy Examples
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Distinctive competencies
Environmental scanning
Technological change
Order qualifiers and order winners
Quality and time
Price
Outsourcing
Quality
Globalization
Time
Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.
 Price
 Quality
 Time
 Flexibility
 Service
 Location
Distinct Competitiveness
Examples
Price
Low Cost
U.S. first-class postage
Motel-6, Red Roof Inns
Quality
High-performance
design or high quality
Consistent quality
Rapid delivery
On-time delivery
Variety
Volume
Superior customer
service
Convenience
Sony TV
Lexus, Cadillac
Pepsi, Kodak, Motorola
Express Mail, Fedex,
One-hour photo, UPS
Burger King
Supermarkets
Disneyland
Nordstroms
Banks, ATMs
Time
Flexibility
Service
Location
Environmental Scanning
Strategy
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External factors
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Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
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Internal factors
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Human Resources
Facilities and
equipment
Financial resources
Customers
Products and
services
Technology
Suppliers
Technological Change Strategy
Technological changes occur in
 Products
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Services
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High-definition TV, improved computer chips,
improved cellular telephone systems, and
improved design of earthquake structures.
Fast order processing and fast delivery.
Processes
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Robotics, automation, computer-assisted
processing, point-of-sale scanners, and flexible
manufacturing systems.
Order Qualifiers and Order
Winners Strategies
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Order qualifiers
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Characteristics that customers perceive as
minimum standards of acceptability to be
considered as a potential purchase
Order winners
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Characteristics of an organization’s goods
or services that cause it to be perceived as
better than the competition
Quality and Time Strategies
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Quality-based strategies focus on satisfying
customers by integrating quality into all
phases of the organization.
Time-based strategies focus on reducing the
time required to accomplish various activities.
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The rationale is that, by reducing time, cost is
generally less, productivity is higher, quality tends
to be higher, product innovation appears on the
market sooner, and customer service is improved.
A company that can bring out new products three
times faster than its competitors enjoys a huge
advantage.
Outsourcing Strategy
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Reduce overhead
Gain flexibility
Take advantage of suppliers’ expertise
Globalization
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Increased market share
Risks
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May work only locally
Political or social upheaval
Coordination and management
Productivity
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Effective use of resources.
An index that measures output relative to
the input.
Outputs
Productivity =
Inputs
Productivity Reality Check?
Productivity gains involves getting employees to work harder.
False. The fact is that many productivity gains in the past have
come from technological improvements.
Productivity is the same as efficiency.
Efficiency is a narrow concept that pertains to getting the most
out of a given set of resources; productivity is a broader concept
that pertains to effective use of overall resources.
Example: An efficiency perspective on mowing a lawn given a
hand mower would focus on the best way to use the hand
mower; a productivity perspective would include the possibility
of using a power mower.
Productivity
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Quality
Technology
Management
Productivity is directly related to
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Capital
Competitiveness
Standard of living
Inflation
Productivity measures can be used to
track performance over time.
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When improvements are needed.
Factors Affect Productivity
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methods, capital, quality, technology,
and management.
Examples:
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Standardization, Internet, computer
viruses, scrap rate, new worker, safety,
short of IT skill, layoff, labor turnover,
workplace design, training, equipment
breakdown, material shortage.
Productivity Improvement
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Establish reasonable goals
Develop productivity measures
Look at the system as a whole
Develop methods for achieving
productivity improvement (e.g. quality
circle)
Management support
Measure and publish results
Productivity Measures
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Partial measures
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Multi-factor measures
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output/(single input)
output/(multiple inputs)
Total measure
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output/(total inputs)
Productivity Measures
Partial
measures
Output
Labor
Multifactor
measures
Output
Labor + Machine
Total
measure
Output
Machine
Output
Capital
Output
Energy
Output
Labor + Capital + Energy
Goods or Services Produced
All inputs used to produce them
Productivity Measure
Example
10,000 Units Produced
Sold for $10/unit
500 labor hours
What is the
labor productivity?
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
Productivity Measure
Example, Labor Productivity
10,000 units/500hrs = 20 units/hour
or we can arrive at a unitless figure
(10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22
Productivity Measure
Example, Multifactor Productivity
MFP =
Output
Labor + Materials
MFP =
(10,000 units)*($10)
(500)*($9) + ($5000) + ($25000)
MFP =
2.90
Productivity Measure
Example #1
Determine the productivity for these
cases :
a.
Four workers installed 720 square
yards of carpeting in eight hours.
b.
A machine produced 68 usable pieces
in two hours.
Productivity Measure
Example #1 Solution
a.
Four workers installed 720 square yards of
carpeting in eight hours.
Productivity=
720 square yards
4 workers
or
720 square yards
4 workers x 8 hours/worker
= 180 square yards/worker or 22.5 square yards/hour
b.
A machine produced 68 usable pieces in two hours.
Productivity=
68 pieces
2 hours
= 34 pieces/hour
Productivity Measure
Example #2
Determine the multifactor productivity for
the combined input using the following
data:
Output: 1760 units
Input: Labor $1000, Material $520,
Overhead $2000.
Productivity Measure
Example #2 Solution
Output: 1760 units
Input: Labor $1000, Material $520, Overhead $2000.
Multifactor Productivity
=
=
Output
Labor + Material + Overhead
1760 units
$1000 + $520 + $2000
= 0.50 units/dollar
Productivity Measure
Summary
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Calculation of multifactor productivity
requires a common unit of
measurement.
It is best to treat productivities as
approximate indicators rather than
precise measurements.