Competitiveness, Strategy, and Productivity - BSA 1A PDF

COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY Presentation of Group 1 - BSA 1A What comes to your mind when you hear the word "COMPETITIVESS"?  COMPETITIVENESS Greater competitiveness creates more productivity and better quality of products and services. Companies can satisfy consumer prefere...

COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY Presentation of Group 1 - BSA 1A What comes to your mind when you hear the word "COMPETITIVESS"?  COMPETITIVENESS Greater competitiveness creates more productivity and better quality of products and services. Companies can satisfy consumer preferences and, consequently, attain a better position in the market. The market grows steadily, and consumers benefit from lower prices and a more comprehensive range of goods and services. Operations has a major influence on competitivenesss through: Product and Service Design, Cost of an Organization's Output Location Quality Quick response Flexibility Inventory Management Supply Chain Management Service Managers and Workers Why some Organizations fail? Organizations fail, or perform poorly, for a variety of reasons. Being aware o hose reasons can help managers avoid making similar mistakes. Among the chief reasons are the following: 1. Putting too much emphasis on short-term financial performance at the expense of research and development 2. Failing to take advantage of strengths and opportunities, and/or failing to ecognize competitive threats 3. Neglecting Operation Strategy. 4. Placing too much emphasis on product and service design and not enough on process design and improvement. 5. Neglecting investments in capital and human resources. 6. Failing to establish good internal communications and cooperation among different functional areas. 7. Failing to consider customer wants and needs.  WHAT IS STRATEGY? STRAT EGY A strategy gives an organisation the appropriate course to follow in order to meet its objectives. It provided a clear and detailed action plan for The company receives achieving the targeted position in the comprehensive guidance on future. how things will be done and goals will be met.  An organization’s mission is the reason for its existence. It is expressed in its mission statement, which states the purpose of an MISSION organization. A mission statement serves AND as the basis for organizational goals, GOALS which provide more detail and describe the scope of the mission. Goals serve as a foundation for the development of organizational strategies.  Strategies & Tactics STRATEGIES TACTICS 1. Strategies are the roadmaps for reaching 1. Tactics are the methods and actions used the destinations. to accomplish strategies. 2. Strategies provide focus for decision 2. They are more specific than strategies, and making. they provide guidance and direction for Organizational Strategies carrying out actual operations, which need Functional Strategies the most specific and detailed plans and decision making in an organization.  Exampes of different strategies an Organization might choose from: Low Cost – Outsource operation to the third-world countries that have low labor costs. Scale-based strategies – Use capital-intensive methods to achieve high output volume and low unit costs. Specialization – Focus on narrow product lines or limited service to achieve higher quality. Flexible Operations – Focus on quick response and/or customization. High Quality – Focus on achieving higher quality than competitors. Service – Focus on various aspects of service (e.g., helpful, courteous, reliable, etc.)  ORGANIZATION STRATEGY OPERATIONS STRATEGY EXAMPLES U.S. first-class postage LOW PRICE LOW COST Walmart, Southwest Airlines McDonald's restaurants RESPONSIVENESS SHORT PROCESSING TIME Express Mail, UPS, FedEx One-hour photo ON TIMR DELIVERY Domino's Pizza, FedEx Sony TV, Lexus, Disneyland HIGH PERFORMANCE DESIGN OR HIGH QUALITY DIFFERENTIATION: HIGH QUALITY Five-star restaurants or PROCESSING hotels Coca-Cola, PepsiCo CONSISTENT QUALITY Wegmans Electrical power ORGANIZATION STRATEGY OPERATIONS STRATEGY EXAMPLES ЗМ, Apple DIFFERENTIATION: NEWNESS INNOVATION Google Burger King, Hospital DIFFERENTIATION: VARIETY FLEXIBILITY Emergency Room VOLUME McDonald's, Toyota DIFFERENTIATION: SERVICE SUPERIOR CUSTOMER SERVICE Disneyland, Amazon DIFFERENTIATION: LOCATION CONVENIENCE Supermarket, Dry Cleaners STRATEGY FORMULATION To formulate an effective strategy, senior managers must take into account the distinctive competencies of the organizations, and they must scan the environment. They must determine what competitors are doing, or planning to do, and take that into account. They must critically examine other factors that could have either positive or negative effects. This is sometimes referred to as the SWOT approach (strengths, weaknesses, opportunities, and threat).  ECONOMIC CONDITIONS These include the general health and direction of the economy, inflation and deflation, interest rates, tax laws, and tariffs. POLITICAL CONDITIONS These include favourable or unfavourable attitudes toward business, political EXTERNAL stability or instability, and wars. LEGAL ENVIRONMENT FACTORS This includes antitrust laws. Government regulations, trade restrictions, minimum wage laws, product liability laws and recent court experience, labor laws, and patents. TECHNOLOGY This can include the rate at which product innovations are occurring, current and future process technology (equipment, materials handling), and design technology. COMPETITION This includes the number and strength of competitors, the basis of competition (price, quality, special features), and the ease of market entry. MARKET This includes size, location, brand loyalties, ease of entry, potential for growth, long-term stability, and demographics.  HUMAN RESOURCES These include the skills and abilities of managers and workers; special talents (creativity, designing, problem solving); loyalty INTERNAL to the organization; expertise; dedication; and experience. FACILITIES AND EQUIPMENT FACTORS Capabilities, location, age, and cost to maintain or replace can have a significant impact on operations. FINANCIAL RESOURCES Capabilities, location, age, and cost to maintain or replace can have a significant impact on operations. CUSTOMERS Loyalty, existing relationships, and understanding of wants and needs are important.  PRODUCTS AND SERVICES These include existing products and services, and the potential for new products and services. INTERNAL TECHNOLOGY FACTORS This includes existing technology, the ability to intergrate new technology, and the probable impact of technology on current and future operations. SUPPLIERS Supplier relationships, dependability of suppliers, quality, flexibility, and service are typical considerations. OTHER Other factors include patents, labor relations, company or product image, distribution channels, relationships with distributors, maintenance of facilities and equipment, access to resources, and access to markets. GLOBAL STRATEGY Globalization has necessitated strategic decisions for companies, considering factors like regional variations, political or social upheaval, and coordination challenges. Companies must adapt to international competition, as the world is often present in their operations, making it crucial to adapt and manage operations effectively. ORGANIZATION STRATEGY Organization strategy provides broad direction, covering entire organization, while operations strategy focuses on operations aspects like products, processes, methods, resources, quality, costs, lead times, and scheduling.  STRATEGIC OPERATIONS MANAGEMENT DECISION AREAS  DECISION AREA WHAT THE DECISION AFFECT 1. Product and service design 1. Costs, quality, liability and environmental issues 2. Capacity 2. Cost structure, flexibility 3. Process selection and layout 3. Costs, flexibility, skill level needed, capacity 4. Work design 4. Quality of work life, employee safety, productivity 5. Location 5. Costs, visibility 6. Quality 6. Ability to meet or exceed customer expectations 7. Inventory 7. Costs, shortages 8. Maintenance 8. Costs, equipment reliability, productivity 9. Scheduling 9. Flexibility, efficiency 10. Supply chains 10. Costs, quality, agility, shortages, vendor relations 11. Projects 11. Costs, new products, services, or operating systems  Traditional strategies of business organizations have tended to emphasize cost minimization or product QUALITY differentiation. AND Quality-based strategies aim to enhance an organization's products or TIME services, attracting and retaining customers. STRATEGY Motivated by factors like overcoming poor image, competition, or maintaining high quality, these strategies can be part of other strategies like cost reduction, increased productivity, or time.  Time-based strategies aim to reduce time spent on activities like product development, customer QUALITY demand response, and service delivery to enhance customer service and gain a AND competitive advantage. TIME Time-based strategies focus on reducing the time needed to STRATEGY conduct the various activities in a process. The rationale is that by reducing time, costs are generally less, productivity is higher, quality tends to be higher, product innovations appear on the market sooner, and customer service is improved Organizations have achieved time reduction in some of the following: Planning time: The time needed to react to a competitive threat, to develop strategies and select tactics, to approve proposed changes to facilities, to adopt new technologies, and so on. Product/service design time: The time needed to develop and market new or redesigned products or services. Processing time: The time needed to produce goods or provide services. This can involve scheduling, repairing equipment, methods used, inventories, quality, training, and the like. Changeover time: The time needed to change from producing one type of product or service to another. This may involve new equipment settings and attachments, different methods, equipment, schedules, or materials. Delivery time: The time needed to fill orders. Response time for complaints: These might be customer complaints about quality, timing of deliveries, and incorrect shipments. These might also be complaints from employees about working conditions (e.g., safety, lighting, heat or cold), equipment problems, or quality problems. PRODUCTIVITY 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 of output to input: Productivity= Output/Input A productivity ratio can be computed for a single operation, a department, an organization, or an entire country. In business organizations, productivity ratios are used for planning workforce requirements, scheduling equipment, financial analysis, and other important tasks. For non-profit organizations, higher productivity means lower costs; for profit- based organizations, productivity is an important factor in determining how competitive a company is. Productivity growth = [(Current productivity - Previous productivity)/Previous productivity] X 100 Computing 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 primarily on the purpose of the measurement. If the purpose is to track improvements in labor productivity, then labor becomes the obvious input measure. Partial measures are often of greatest use in operations management.  Labor productivity Units of output per labor hour Units of output per shift Value-added per labor hour Dollar value of output per labor hour Machine productivity Units of output per machine hour Dollar value 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 50 Productivity in Service Sector 40 30 Service productivity is more challenging to measure and 20 manage due to its high variability and intellectual 10 activities in fields like medical diagnoses, surgery, consulting, and customer service. 0 1 2 3 4 5 Factors affecting productivity include methods, capital, quality, technology, and management. Misconceptions suggest workers are key, but past productivity gains have often been attributed to technological advancements.  OTHER FACTORS THAT AFFECT PRODUCTIVITY Standardizing processes and procedures wherever possible to reduce variability can have a significant benefit for both productivity and quality. Quality differences may distort productivity measurements. One way this can happen is when comparisons are made over time, such as comparing the productivity of a factory now with one 30 years ago. Quality is now much higher than it was then, but there is no simple way to incorporate quality improvements into productivity measurements. Use of the Internet can lower costs of a wide range of transactions, thereby increasing productivity. It is likely that this effect will continue to increase productivity in the foreseeable future. Computer viruses can have an immense negative impact on productivity. Searching for lost or misplaced items wastes time, hence negatively affecting productivity. Scrap rates have an adverse effect on productivity, signaling inefficient use of resources. New workers tend to have lower productivity than seasoned workers. Thus, growing companies may experience a productivity lag. Safety should be addressed. Accidents can take a toll on productivity. A shortage of technology-savvy workers hampers the ability of companies to update computing resources, generate and sustain growth, and take advantage of new opportunities. Layoffs often affect productivity. The effect can be positive and negative. Initially, productivity may increase after a layoff, because the workload remains the same but fewer workers do the work—although they have to work harder and longer to do it. However, as time goes by, the remaining workers may experience an increased risk of burnout, and they may fear additional job cuts. The most capable workers may decide to leave. Labor turnover has a negative effect on productivity; replacements need time to get up to speed. Design of the workspace can impact productivity. For example, having tools and other work items within easy reach can positively impact productivity.  IMPROVING PRODUCTIVITY 1. Develop productivity measures for all operations. Measurement is the first step in managing and controlling an operation. 2. Look at the system as a whole in deciding which operations are most critical. It is overall productivity that is important. 3. Develop methods for achieving productivity improvements, such as soliciting ideas from workers (perhaps organizing teams of workers, engineers, and managers), studying how other firms have increased productivity, and reexamining the way work is done. 4. Establish reasonable goals for improvement. 5. Make it clear that management supports and encourages productivity improvement. Consider incentives to reward workers for contributions. 6. Measure improvements and publicize them.