Operations Management (MD021)

1
Operations Management (MD021)

• Topic 1
• Competitiveness, Strategy and Productivity

2
Agenda

• Competitiveness Competing via Operations
• Overview of Strategy
• Measuring Productivity

3
Why do organizations fail to survive?
4
Many Organizations Fail Because they Ignore
Operations

• 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

5
Competitiveness
6
Competitiveness
How effectively an organization meets the wants
and needs of customers relative to others that
offer similar goods or services
7
Businesses Can Compete in Many Ways Including
Operations

• Competing with Marketing
• Identify customer wants/needs
• Price appropriately
• Advertise/promote

• Competing with Operations
• Goods/service design
• Cost
• Facility location
• Quality
• Quick response/delivery
• Flexible processes
• Inventory management
• Supply Chain Management
• Stellar service

8
Strategy
9
Strategy

• Strategies
• Plans for achieving organizational goals
• Mission
• The reason for existence for an organization
• Mission Statement
• Answers the question What business are we in?
• Goals
• Provide detail and scope of mission
• Tactics
• The methods and actions taken to accomplish
  strategies

10
Examples of Strategies

• Low cost
• Fast Growth Scale-based strategies
• Specialization
• Flexible operations
• Fastest delivery
• High quality
• Service

11
A Top-Down View of Strategy Formation
12
Operations Strategy

• Operations Strategy the approach, consistent
  with organization strategy, that is used to guide
  the operations function.

13
Operations Strategy Formulation

• How will operations support the organizations
  strategies?
• Identify distinctive competencies
• Environmental scanning
• SWOT
• Identify Order qualifiers
• Identify Order winners

14
Strategy and Tactics

• Distinctive Competencies
• The special attributes or abilities that give an
• organization a competitive edge.
• Price
• Quality
• Time
• Flexibility
• Service
• Location

15
Examples of Distinctive Competencies Employed by
Firms
16
Order Qualifiers Get You In The Door, Order
Winners Win The Order

• Order qualifiers
• Characteristics that customers perceive as
  minimum standards of acceptability to be
  considered as a potential purchase
• Order winners
• Characteristics of an organizations goods or
  services that cause it to be perceived as better
  than the competition

17
How Has Operations Strategy Changed Over Time?
18
Operations Strategy Across the Ages
Strategy
Operations Strategy
Strategy Tradeoffs
Elimination of Tradeoffs
19
Productivity
20
Productivity

• Productivity
• A measure of the effective use of resources
• Usually expressed as the ratio of output to input

21
Many Factors and Decisions Can Affect Productivity

• Capital
• Quality
• Technology
• Management decisions
• Standardization
• Use of Internet
• Computer viruses
• Searching for lost or misplaced items

• Scrap rates
• New workers
• Safety
• Shortage of IT workers
• Layoffs
• Labor turnover
• Design of the workspace
• Incentive plans that reward productivity

22
When Did Productivity Become Important to Manage?
Why?
Strategy
Productivity Analysis
Operations Strategy
Strategy Tradeoffs
Elimination of Tradeoffs
23
There Are Several Ways to Measure Productivity
Partial Output Output Output
Outputmeasures Labor Machine
Capital Energy Multifactor
Output
Output measures Labor Machine
Labor Capital Energy Total
Goods or Services Produced measure
All inputs used to produce them
24
Some Partial Productivity Measures
25
Managerial Tactics for Improving Productivity

• Develop productivity measures
• Determine critical (bottleneck) operations
• Develop methods for productivity improvements
• Establish reasonable goals
• Get management support for productivity programs
• Measure and publicize improvements