1/11/2018 Operations Management Competitiveness, Operations strategy and Productivity
Session 2 Leaning outcome Understand the importance of Competitiveness, Strategy, and Productivity in todays global business environment. Explain the relationships of Competitiveness, Strategy, and Productivity in todays business Explain the Key factors to be considered when developing winning operations strategy in an organization.
Session 2 - Coverage 1. Overall Business Strategy to Operations Strategy 2. Operations Decisions 3. Competitive Dimensions 4. Order Qualifiers and Winners 5. Productivity as a Measure of Competitiveness
The three separate but related topics that are vitally important to business organizations. Competitiveness - The effectiveness of an organization in the marketplace relative to other organizations that offer similar products or services Strategy - The plans that determine how an organization pursues its goals. Productivity - the effective use of resources
What is Competitiveness? Competitiveness - How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services.
How do organizations compete? 1. Identifying consumer wants and/or needs in an organization s decision-making process in providing goods and/or services. 2. Understand the trade-off decision consumers make between price and quality (The key factors in consumer buying decisions) 3. Effective advertising and promotion for their products or services to attract and retain customers.
What is strategy? Organizational strategy is providing direction for, and alignment of, the goals and strategies of the functional units. Define the position of the organization relative to its environment Move the organization closer to its long-term goals.
There are three basic business strategies Low cost. Responsiveness. Differentiation from competitors.
Strategic Planning Mission and Vision Corporate Strategy Marketing Strategy Operations Strategy Financial Strategy The mission statement answers the question What business are we in?
Hierarchical organizational decision making process
Operations Strategy Involves decisions that relate to design of a process and infrastructure needed to support the process. the decisions which shape the long-term capabilities of the company s operations and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources
The Operations function can provide a competitive advantage through its performance at the five competitive objectives Cost Dependability Flexibility Speed Quality
Different competitive factors imply different performance objectives Competitive factors If the customers value these... Low price High quality Fast delivery Reliable delivery Innovative products and services Wide range of products and services Performance objectives Then, the operations will need to excel at these... Cost Quality Speed Dependability Flexibility (products and services) Flexibility (mix) Ability to change the timing or quantity of products and services Flexibility (volume and/or delivery)
Market Competitive Priorities Corporate strategy Goals Core competencies Environmental responses New products/services Global strategies Market analysis Segmentation Needs assessment New Product SWOT & Porter s 5 Forces Existing New New Product for New Market Existing product for New Market Existing New product for existing market Existing product existing market
Strategy and Decisions Corporate strategy Market analysis Competitive priorities Capabilities Operations strategy Services Standardized services Assemble-to-order Customized services Manufacturing Make-to-stock Assemble-to-order Make-to-order Process decisions Quality decisions Capacity, location, and layout decisions Operating decisions
Strategic Operations Management Decisions
Examples of operations strategies
Examples of operations strategies
Two important factors the organizations must take into account in formulating a successful strategy: 1. Order qualifiers 2. Order winners.
Order Qualifiers Defined Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers A brand name car can be an order qualifier
Order Winners Defined Order winners are the criteria that differentiates the products and services of one firm from another Repair services can be order winners Examples: Warranty, Roadside Assistance, Leases, etc
Productivity Defined Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio: Outputs Inputs
Total Measure Productivity Total Measure Productivity = Outputs Inputs or = Goods and services produced All resources used
Partial Measure Productivity Partial measures of productivity = Output or Output or Output or Output Labor Capital Materials Energy
Multifactor Measure Productivity Multifactor measures of productivity = Output. Labor + Capital + Energy or Output. Labor + Capital + Materials
Example 1 2014 2015 Output: Sales value of production 82000 95000 Input: Labour Raw materials and supplies Capital Other 22000 8000 7000 3500 35000 15000 12000 5000 Calculate, 1. Total productivity 2. Partial Measurement 3. Multifactor ratios
Example 2 A garment manufacturing company has provided the following data. 2016 - (Rs 000) Material 50000 Labour 65000 Energy 25000 Other expenses 10000 By -Products 15000 Sales value of the main production 185000 Calculate, 1. Total productivity ratio 2. Material, Labour and Energy partial productivity ratios 3. Multifactor productivity ratios Operations Management
Factors that affect Productivity Methods Capital Quality Technology Management
Improving Productivity Develop productivity measures Look at the system as a whole Develop methods for productivity improvements Establish reasonable goals Measure improvements
Session Title :Competitiveness, Operations strategy and Productivity 1. Overall Business Strategy to Operations Strategy 2. Operations Decisions 3. Competitive Dimensions 4. Order Qualifiers and Winners 5. Productivity as a Measure of Competitiveness
Essential Reading Chapter 2 Operations Management 12 th Edition by William J. Stevenson Published by McGraw-Hill Education (2015)
Review Questions 1. Define the competitiveness of an organization. 2. List several ways that business organizations compete in the market 3. Name several reasons why business organizations fail.
Review Questions Identify various operations management activities carried out in an organization. Discuss the how these activities are affected by the operations strategy of the organization. (Use an organization like Cargill in your answer.)