Marketing's Influence
Identifying consumer wants and/or needs, Pricing and quality, Advertising and promotion
A Cold Hard Fact
Better quality, higher productivity, lower costs, and the ability to respond quickly to customer needs is more important than ever. Bar getting higher.
Competitive Priorities
Quality (Including Service)
Delivery (speed, place)
Flexibility (customized)
Cost or Price
V = ( f ( Q , T ) / C )
Competitiveness
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
Competitiveness 2
Organizations compete through some combination of their marketing and operations functions
Businesses Compete Using Operations
1. Product and Service Design
2. Cost
3. Location
4. Quality
5. Quick Response
6. Flexibility
7. Inventory Management
8. Supply Chain Management
9. Service
10. Managers and Workers
Why Some Organizations Fail
Neglecting operations strategy
Failing to take advantage of strengths and opportunities and/or failing to recognize competitive threats
Too much emphasis on short-term financial performance at the expense of R&D
Failing to consider customer wants and need
Why Some Organizations Fail
Too much emphasis in product and service design and not enough on process design and improvement
Neglecting investments in capital and human resources
Failing to establish good internal communications and cooperation
Strategy Process
Customer Needs -> Corporate Strategy -> SBU Operations Strategy -> Decisions on Processes and Infrastructure
Strategy Process Example
More Product -> Increase Org. Size -> Increase Production Capacity -> Build New Factory
Hierarchical Planning
Mission, Goals, Organizational Strategies, Functional Strategies, Tactics
Mission
The reason for an organization's existence.
Mission Statement
States the purpose of the organization. It answers the question "What business are we in?
Goals
Provide detail and the scope of the mission. Goals can be viewed as organizational destinations
Strategy
A plan for achieving organizational goals. Serves as a roadmap for reaching the organizational destinations. Guides the organization by providing direction for, and alignment of, the goals and strategies of the functional units. The organizational strateg
Organization Strategies
Overall strategies that relate to the entire organization. Support the achievement of organizational goals and mission.
Functional level strategies
Strategies that relate to each of the functional areas and that support achievement of the organizational strategy.
Service "relationship
Delivery Reliability (from globalization)
Coping with Changes in Demand (from Web)
Flexibility and New Product Introduction Speed
Tactics
The methods and actions taken to accomplish strategies. The "how to" part of the process.
Operations
The actual "doing" part of the process
Dealing with Trade-Offs 1
If we reduce costs by reducing product quality inspections, we might reduce product quality
Dealing with Trade-Offs 2
If we improve customer service problem service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less effective at dealing with commonly occurring problems
Core Competencies
The special attribute or abilities that give an organization a competitive edge. To be effective core competencies and strategies need to be aligned
Effective Strategy Formulation
Requires taking into account:
Core competencies,
Environmental scanning - SWOT
Successful Strategy Formulation
Also requires taking into account:
Order qualifiers,
Order winners
Order qualifiers
Characteristics that customers perceive as minimum standards of acceptability for a product or service to be considered as a potential for purchase
Order winners
Characteristics of an organization's goods or services that cause it to be perceived as better than the competition
Order qualifiers 1
World-class operations no longer view cost, quality, speed of delivery, and even flexibility as trade-offs
Distinctive compentency
A strength that sets a business apart from its competition: quality, cost, deliver, flexibility, and service
Order winner in a computer market
Personal use, small business, large corporations
Service
Can be an "order winner
Environmental Scanning
Necessary to identify
Internal Factors
- Strengths and Weaknesses
External Factors
- Opportunities and Threats
Key External Factors
1. Economic conditions
2. Political conditions
3. Legal environment
4. Technology
5. Competition
6. Markets
Key Internal Factors
1. Human Resources
2. Facilities and equipment
3. Financial resources
4. Customers
5. Products and services
6. Technology
7. Suppliers
8. Other
Quality-Based Strategy
Strategy that focuses on quality in all phases of an organization
- Trying to overcome a poor quality rep
- Desire to maintain a quality image
- To catch up with the competition
- Part of a cost reduction strategy
Time Based Strategies
Focus on the reduction of time needed to accomplish tasks. It is believed that by reducing time, costs are lower, quality is higher, productivity is higher, time-to-market is faster, and customer service is improved
Organizations have achieved time reductions:
Planning time, Product/service design time, Processing time, Changeover time, Delivery time, Response time for complaints
Agile Operations
A strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and prosper in an environment of change.
Blending of core competencies:
Cost
Quality
Reliability
Flexibility
The Balanced Scorecard Approach
A top-down management system that organizations can use to clarify their vision and strategy and transform them into action
- Develop objectives
- Develop metrics and targets for each objective
- Develop initiatives to achieve objectives
- Identify links
Productivity
A measure of the effective use of resources usually expressed as the ratio of output to input.
Productivity = Output/Input
Productivity Measures
Useful for tracking an operating unit's performance over time. Judging the performance of an entire industry or country
Why Productivity Matters
High productivity is linked to higher standards of living
- As an economy replaces manufacturing jobs with lower productivity service jobs, it is more difficult to maintain high standards of living
Higher productivity relative to the competition leads to
Productivity Measures
Productivity = Output/Input
Partial Measures:
Output/Single Input
Output/Labor
Output/Capital
Multi-factor Measures:
Output/Multiple Inputs
Output/Labor+Machine
Output/Labor+Capital+Energy
Total Measures:
Goods or services produced/all inputs to produce t
Total" Measure Productivity
#NAME?
Multifactor" Measure Productive
Output/Labor+Capital+Energy
Output/Labor+Capital+Materials
Partial" Measure Productivity
Output/Labor
Output/Capital
Output/Materials
Output/Energy
Productivity Growth
0
Service Sector Productivity
Difficult to measure and manage because
- It involves intellectual activities
- It has a high degree of variability
A useful measure related to productivity is process yield
- Where products are involved
-- Ratio of output of good product to the quantity
Example of Productivity Measurement
You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 tax forms. Last week the same crew used only 2000 hours of labor to process 480 forms.
Which productivity measure should be used?
Answer
Productivity Measures
Need to be tracked over time
Need to include all possible inputs
Are difficult to compare between companies or industries
Do not (directly) include measures of timeliness or quality
Factors Affecting Productivity
Methods, Capital, Quality, Technology, Management
What methods can be used to improve productivity?
Develop productivity measures
- Measurement is necessary to control the operations
Look at overall productivity
Determine critical (bottleneck) operations
Develop methods for achieving productivity improvements
Establish reasonable goals for improvements