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Stevenson11e sample ch02

Nov 15, 2014




  • 1. 2CHAPTER Competitiveness, Strategy, and Productivity1 Introduction to Operations CHAPTER OUTLINETransforming Strategy into Action:ManagementThe Balanced Scorecard, 54 Introduction, 422 Competitiveness,Productivity, 56 Competitiveness, 42Strategy, and Why Some Organizations Fail, 43 Computing Productivity, 57Productivity Mission and Strategies 44 Productivity in the Service Sector, 60 Factors That Affect Productivity, 60 3 ForecastingStrategies and Tactics, 45 Improving Productivity, 62 4 Product and Service Design Strategy Formulation, 47Cases: An American Tragedy: How a Good 5 Strategic Capacity Planning forSupply Chain Strategy, 51Company Died, 66 Products and ServicesSustainability Strategy, 51Home-Style Cookies, 67 6 Process Selection and Facility Global Strategy, 51 Layout Hazel Revisited, 69 Operations Strategy, 52 7 Work Design and MeasurementYour Garden Gloves, 69Strategic Operations Management Decision 8 Location Planning and Analysis Areas, 53 Operations Tour: The U.S. PostalQuality and Time Strategies, 53 Service, 70 9 Management of Quality10 Quality Control Implications of Organization Strategy for Operations Management, 5411 Aggregate Planning and Master Scheduling12 MRP and ERP LEARNING OBJECTIVES13 Inventory ManagementAfter completing this chapter,6 Define the term productivity and explain14 JIT and Lean Operations you should be able to:why it is important to organizations and1List the three primary ways that business to countries.15 Supply Chain Management organizations compete.7Provide some of the reasons for poor pro-16 Scheduling ductivity and some ways of improving it.2Explain five reasons for the poor competi-17 Project Managementtiveness of some companies.18 Management of Waiting Lines3Define the term strategy and explain why19 Linear Programmingstrategy is important.4Discuss and compare organization strat- egy and operations strategy, and explain why it is important to link the two.5Describe and give examples of time- based strategies.

2. THE COLD HARD FACTSThe name of the game is competition. The playing field isThis chapter discusses competitiveness, strategy, and productiv-global. Those who understand how to play the game willity, three separate but related topics that are vitally importantsucceed; those who dont are doomed to failure. And dontto business organizations. Competitiveness relates to the effec-think the game is just companies competing with each other.tiveness of an organization in the marketplace relative to otherIn companies that have multiple factories or divisionsorganizations that offer similar products or services. Operationsproducing the same good or service, factories or divisionsand marketing have a major impact on competitiveness. Strategysometimes find themselves competing with each other.relates to the plans that determine how an organization pursuesWhen a competitoranother company or a sister factoryits goals. Operations strategy is particularly important in thisor division in the same companycan turn out productsregard. Productivity relates to the effective use of resources, andbetter, cheaper, and faster, that spells real trouble for theit has a direct impact on competitiveness. Operations manage-factory or division that is performing at a lower level. Thement is chiefly responsible for productivity.trouble can be layoffs or even a shutdown if the managerscant turn things around. The bottom line? Better quality,higher productivity, lower costs, and the ability to quicklyrespond to customer needs are more important than ever,and the bar is getting higher. Business organizations needto develop solid strategies for dealing with these issues.41 3. 42Chapter Two Competitiveness, Strategy, and ProductivityINTRODUCTIONIn this chapter you will learn about the different ways companies compete and why somefirms do a very good job of competing. You will learn how effective strategies can lead tocompetitive organizations, and you will learn what productivity is, why it is important, andwhat organizations can do to improve it.COMPETITIVENESSCompanies must be competitive to sell their goods and services in the marketplace.Competitiveness How Competitiveness is an important factor in determining whether a company prospers, barelyeffectively an organization gets by, or fails.meets the wants and needs of Business organizations compete through some combination of their marketing and opera-customers relative to others that tions functions. Marketing influences competitiveness in several ways, including identifyingoffer similar goods or services.consumer wants and needs, pricing, and advertising and promotion. 1. Identifying consumer wants and/or needs is a basic input in an organizations decision-making process, and central to competitiveness. The ideal is to achieve a perfect matchbetween those wants and needs and the organizations goods and/or services. 2. Price and quality are key factors in consumer buying decisions. It is important to under-stand the trade-off decision consumers make between price and quality. 3. Advertising and promotion are ways organizations can inform potential customersabout features of their products or services, and attract buyers. Operations has a major influence on competitiveness through product and service design,cost, location, quality, response time, flexibility, inventory and supply chain management, andservice. Many of these are interrelated. 1. Product and service design should reflect joint efforts of many areas of the firm toachieve a match between financial resources, operations capabilities, supply chain capa-bilities, and consumer wants and needs. Special characteristics or features of a productor service can be a key factor in consumer buying decisions. Other key factors includeinnovation and the time-to-market for new products and services. 2. Cost of an organizations output is a key variable that affects pricing decisions and prof-its. Cost-reduction efforts are generally ongoing in business organizations. Productivity(discussed later in the chapter) is an important determinant of cost. Organizations withhigher productivity rates than their competitors have a competitive cost advantage. Acompany may outsource a portion of its operation to achieve lower costs, higher produc-tivity, or better quality. 3. Location can be important in terms of cost and convenience for customers. Location nearinputs can result in lower input costs. Location near markets can result in lower transpor-tation costs and quicker delivery times. Convenient location is particularly important inthe retail sector. 4. Quality refers to materials, workmanship, design, and service. Consumers judge qualityin terms of how well they think a product or service will satisfy its intended purpose.Customers are generally willing to pay more for a product or service if they perceive theproduct or service has a higher quality than that of a competitor. 5. Quick response can be a competitive advantage. One way is quickly bringing new orimproved products or services to the market. Another is being able to quickly deliverexisting products and services to a customer after they are ordered, and still another isquickly handling customer complaints. 6. Flexibility is the ability to respond to changes. Changes might relate to alterations indesign features of a product or service, or to the volume demanded by customers, or the 4. Chapter Two Competitiveness, Strategy, and Productivity 43Indian employees at a callcenter provide service supportto international customers. Thehiring frenzy in India is the flipside of the United States andBritain, where thousands ofsoftware and back-office jobsare being cut as companiestake advantage of cheapcommunications offshoreto drive down costs. Thisindustry in India alreadyprovides one million jobs.mix of products or services offered by an organization. High flexibility can be a competi-tive advantage in a changeable environment. 7. Inventory management can be a competitive advantage by effectively matching suppliesof goods with demand. 8. Supply chain management involves coordinating internal and external operations (buy-ers and suppliers) to achieve timely and cost-effective delivery of goods throughout thesystem. 9. Service might involve after-sale activities customers perceive as value-added, such asdelivery, setup, warranty work, and technical support. Or it might involve extra attentionwhile work is in progress, such as courtesy, keeping the customer informed, and attention S serviceser-viceto details. Service quality can be a key differentiator; and it is one that is often sustain-SERVICEable. Moreover, businesses rated highly by their customers for service quality tend to bemore profitable, and grow faster, than businesses that are not rated highly.10. Managers and workers are the people at the heart and soul of an organization, and ifthey are competent and motivated, they can provide a distinct competitive edge by theirskills and the ideas they create. One often overlooked skill is answering the telephone.How complaint calls or requests for information are handled can be a positive or a nega-tive. If a person answering is rude or not helpful, that can produce a negative image. Con-versely, if calls are handled promptly and cheerfully, that can produce a positive imageand, potentially, a competitive advantage.Why Some Organizations FailOrganizations fail, or perform poorly, for a variety of reasons. Being aware of those rea-sons can help managers avoid making similar mistakes. Among the chief reasons are thefollowing: 1. Neglecting operations strategy. 2. Failing to take advantage of strengths and opportunities, and/or failing to recognize com-petitive threats. 3. Putting too much emphasis on short-term financial performance at the expense ofresearch and development. 5. 44Chapter Two Competitiveness, Strategy, and Productivity4. Placing too much emphasis on product and service design and not enough on proc