om331 chapter 2

8/9/2019 OM331 Chapter 2

1/34

8/9/2019 OM331 Chapter 2

2/34

8/9/2019 OM331 Chapter 2

3/34

*etter +uaity, higher productivity, ower costs,and the abiity to respond +uic&y to customerneeds are more important than ever and

the bar is getting higher

EM/OM331 - Fall 2013 2-3

8/9/2019 OM331 Chapter 2

4/34

-his chapter "ocuses on three separate, butreated that are vitay important to businessorganizations

Competitiveness – Operations &

MarketingStrategy – Operations Decision-

Makingroductivity – Operations

Management

EM/OM331 - Fall 2013 2-4

Operations

MarketingFinance

8/9/2019 OM331 Chapter 2

5/34

Competitiveness:

/ow e0ectivey an organization meets the

wants and needs o" customers reative to others

that o0er simiar goods or servicesrganizations compete through some

combination o" their mar&eting and operations

"unctions

• What do customers want?• How can these customer needs best be

satisfed?

EM/OM331 - Fall 2013 2-5

8/9/2019 OM331 Chapter 2

6/34

denti"ying consumer wants and3or needs*asic input to decision4ma&ing process5

Centra to competitivenessdea 6 achieve a per"ect match

Price and 7uaitympact consumer buying decisions 8trade4

o0s9

:dvertising and Promotion:ttract buyers, in"orm potentia customers

about product and service "eatures

EM/OM331 - Fall 2013

2-6

8/9/2019 OM331 Chapter 2

7/34

!" roduct and service design ; match !nancia resources,operations capabiities, suppy chain capabiities, consumer wantsand needs

#" Cost and productivity ; a0ects pricing decisions and pro!ts

$" %ocation ; cost and convenience

" 'uality ; materias, wor&manship, design, service

(" 'uick response ; new3improved products to mar&et, orderdeivery, customer compaints

)" *le+ibility ; response to changes 8agiity9

," nventory management ; match suppies o" goods with demand

." Supply chain management ; coordinate interna3externaoperations to achieve timey and cost4e0ective deivery o" goods

/" Service ; a"ter sae or wor& in progress

!0" Managers and 1orkers ; competent, motivated, s&ied, ideageneration

EM/OM331 - Fall 2013 2-7

8/9/2019 OM331 Chapter 2

8/34

1. ?$

%. -oo much emphasis in product and service designand not enough on process design andimprovement

'.

8/9/2019 OM331 Chapter 2

9/34

Mission - 2he reason 3or an organi4ation5s e+istence

States the purpose o" the organization Shoud answer the +uestion “What business are we in?”

Serves as the basis "or organizationa goas

6oals - rovide detail and the scope o3 the mission

@oas can be viewed as organizationa destinations Serve as the basis "or organizationa strategies

Strategy - 7 plan 3or achieving organi4ational goals Serves as a roadmap "or reaching the organizationa destinations # basic business strategies

Low cost>esponsiveness$i0erentiation "rom competitors

EM/OM331 - Fall 2013 2-9

8/9/2019 OM331 Chapter 2

10/34

“FedEx Corporation will produce superior fnancialreturns or its shareowners by providing highvalue-added logistics, transportation and relatedinormation services through ocused operating

companies. Customer reuirements will be met inthe highest uality manner appropriate to eachmar!et segment served. FedEx Corporation willstrive to develop mutually rewarding relationshipswith its employees, partners and suppliers. "aety

will be the frst consideration in all operations.Corporate activities will be conducted to thehighest ethical and proessional standards.# http33ir."edex.com3documentdispay.c"mA$ocument$612'

EM/OM331 - Fall 2013 2-10

http://ir.fedex.com/documentdisplay.cfm?DocumentID=125http://ir.fedex.com/documentdisplay.cfm?DocumentID=125

8/9/2019 OM331 Chapter 2

11/34

Organi4ational strategiesvera strategies that reate to the entire

organizationSupport the achievement o" organizationa goas

and mission

*unctional level strategiesStrategies that reate to each o" the "unctiona

areas and that support achievement o" the

organizationa strategy

EM/OM331 - Fall 2013 2-11

8/9/2019 OM331 Chapter 2

12/34

2actics -he methods and actions ta&en to accompish

strategies -he Bhow to part o" the process

Operations -he actua Bdoing part o" the process

EM/OM331 - Fall 2013 2-12

8/9/2019 OM331 Chapter 2

13/34

Mission

Goals

Organizational Strategies

Tactics

Functional Strategies

EM/OM331 - Fall 2013 2-13

8/9/2019 OM331 Chapter 2

14/34

Core Competencies

-he specia attributes or abiities that give an

organization a competitive edge -o be e0ective, an organizationDs core

competencies and strategies need to bealigned

EM/OM331 - Fall 2013 2-14

8/9/2019 OM331 Chapter 2

15/34

OrganizationalStrategy Operations Strategy Examples of Companies or Services

Low Price o! "ost #$S$ %irst-class &ostage

'al-Mart

Responsiveness S(ort &rocessing ti)es

On-ti)e *eli+er,

Mconal*.s restaurants

Fe*/

Differentiation!ig" #$ality

ig( &er%or)ance *esignan*or (ig( ualit,&rocessing

"onsistent ualit,

Son, T

"oca-"ola

Differentiation

%ewness

nno+ation 3M &&le

Differentiation

&ariety

Fleiilit,

olu)e

:urger ;ing

Mconal*.s

8/9/2019 OM331 Chapter 2

16/34

E0ective strategy "ormuation re+uires ta&ing intoaccount Core competencies Environmenta scanning ; monitoring o" events and

trends that present threats or opportunities S- ; in&s organizationa and operationa strategies

Strengths ? ea&nesses ; nterna, perationspportunities ? -hreats ; Externa, Far&eting

Success"u strategy "ormuation aso re+uiresta&ing into accountOrder 8uali9ers 4 Characteristics that customers

perceive as minimum standards o" acceptabiity "ora product or service to be considered as a potentia"or purchase

Order 1inners 4 Characteristics o" anorganizationDs goods or services that cause it to beperceived as better than the competition

EM/OM331 - Fall 2013 2-16

8/9/2019 OM331 Chapter 2

17/34

1. Economic conditions

2. Poitica conditions

#. Lega environment%. -echnoogy

'. Competition

(. Far&ets

1. /uman >esources

2. =aciities and e+uipment

#. =inancia resources%. Customers

'. Products and services

(. -echnoogy

). SuppiersG. ther ; patents, abor

reations, companyimage, etc.

ey nternal *actors

EM/OM331 - Fall 2013 2-17

8/9/2019 OM331 Chapter 2

18/34

-he approach, consistent with organizationstrategy, that is used to guide theoperations "unction.

>eates to products, processes, methods,operating resources, +uaity, costs, eadtimes, and scheduing.

-o be e0ective, must be in&ed to and

consistent with overa organizationstrategy


8/9/2019 OM331 Chapter 2

19/34

Decision 'rea ("at t"e Decisions 'ffect

Bro*uct an* ser+ice *esign "osts ualit, liailit, an* en+iron)ental issues

"a&acit, "ost structure %leiilit,

Brocess selection an*la,out "osts %leiilit, s@ill le+el nee*e* ca&acit,

'or@ *esign ualit, o% !or@ li%e e)&lo,ee sa%et, &ro*ucti+it,

ocation "osts +isiilit,

ualit, ilit, to )eet or ecee* custo)er e&ectations

n+entor, "osts s(ortages

Maintenance "osts eui&)ent reliailit, &ro*ucti+it,

Sc(e*uling Fleiilit, e%%icienc,

Su&&l, c(ains "osts ualit, agilit, s(ortages +en*or relations

BroCects "osts ne! &ro*ucts ser+ices or o&erating s,ste)s

EM/OM331 - Fall 2013 2-19

8/9/2019 OM331 Chapter 2

20/34

Strategy that 3ocuses on 8uality in allphases o3 an organi4ationPursuit o" such a strategy is rooted in a

number o" "actors -rying to overcome a poor +uaity reputation$esire to maintain a +uaity image

$esire to catch up with the competition

Part o" a cost reduction strategy


2-20

8/9/2019 OM331 Chapter 2

21/34

Strategies that 3ocus on the reduction o3 time needed

to accomplish taskst is beieved that by reducing time, costs are ower, +uaity is

higher, productivity is higher, time4to4mar&et is "aster, andcustomer service is improved

7reas 1here organi4ations have achieved time

reductions:Panning timeProduct3service design time

Processing time

Changeover time

$eivery time

>esponse time "or compaints


2-21

8/9/2019 OM331 Chapter 2

22/34

: strategic approach "or competitive advantage thatemphasizes the use o" Hexibiity to adapt and prosper in anenvironment o" change

nvoves the bending o" cost, +uaity, and reiabiity withHexibiity Processing aspects +uic& e+uipment changeovers,

scheduing, innovation

Product3Service aspects varying output voumes and productmix

>e+uires care"u panning to achieve a system that

incudes peope, Hexibe e+uipment, in"ormationtechnoogy

>educing the time needed to per"orm wor& is one o" theways an organization can improve productivity.

EM/OM331 - Fall 2013 2-22

8/9/2019 OM331 Chapter 2

23/34

7 top-do1n management system that organi4ationscan use to clari3y their vision and strategy and

trans3orm them into action

1. $eveop obIectives

2. $eveop metrics and targets "or each obIective

#. $eveop initiatives to achieve obIectives

%. denti"y in&s among the various perspectives

=inance

Customer

nterna business processes

Learning and growth

'. Fonitor resuts to improve strategic per"ormance

EM/OM331 - Fall 2013 2-23

8/9/2019 OM331 Chapter 2

24/34


2-24

8/9/2019 OM331 Chapter 2

25/34

7 measure o3 the e;ective use o3resources< usually e+pressed as the ratioo3 output to input

roductivity measures are use3ul 3or:trac&ing an operating unitDs per"ormance over

time Iudging the per"ormance o" an entire industry or

nation

EM/OM331 - Fall 2013 2-25

8/9/2019 OM331 Chapter 2

26/34

/igh productivity is in&ed to higher standards o"iving :s an economy repaces manu"acturing Iobs with ower

productivity service Iobs, it is more diJcut to maintainhigh standards o" iving

/igher productivity reative to the competitioneads to competitive advantage in themar&etpace Pricing and pro!t e0ects

=or an industry, high reative productivity ma&es itess i&ey it wi be suppanted by "oreign industry

EM/OM331 - Fall 2013 2-26

8/9/2019 OM331 Chapter 2

27/34

Capital

Output ;

Labor

Output ;

InputSingle

Output MeasuresPartial

Energy+Capital+Labor

Output ;

Machine+Labor

Output ;

InputsMultiple

Output MeasuresrMultifacto

Total MeasureGoods or services produced

All inputs used to produce them

InputOutput=tyProductivi

EM/OM331 - Fall 2013 2-27

Output

Machine

Output

Energy

8/9/2019 OM331 Chapter 2

28/34

What is themultifactor

productivity?

Knits produced ',Standard price M#3unitLabor input ' hoursCost o" abor M2'3hour

Cost o" materias M',Cost o" overhead 2x abor cost

EM/OM331 - Fall 2013 2-28

8/9/2019 OM331 Chapter 2

29/34

Multifactor Productivity = Output

Labor +Material +Overhead

!"#hour$$hours%!%"&&+"'&&&+!"#hour$hours%"&&

(unitunits"'&&&=

××

×

()"!*+=

What is the implication of an unitless measure of productivity?

"&&'!

,"&'&&&=

EM/OM331 - Fall 2013 2-29

"alculations o% )ulti%actor &ro*ucti+it, )easure in&uts an* out&uts

using a co))on unit o% )easure)ent suc( as cost$ T(e #OM

)ust e sa)e %or all %actors in t(e *eno)inator$

8/9/2019 OM331 Chapter 2

30/34

Productivity Growth =Current productivity - Previous productivity

Previous productivity×100%

Productivity Growth =

23-25

25×

100%= −

8%

/a)&leD aor &ro*ucti+it, on t(e :" asse)l, line !as 25 units &er (our in

2009$ n 2010 laor &ro*ucti+it, !as 23 units &er (our$ '(at !as t(e

&ro*ucti+it, gro!t( %ro) 2009 to 2010E

EM/OM331 - Fall 2013 2-30

8/9/2019 OM331 Chapter 2

31/34

Service sector productivity is diJcut to measure andmanage because t invoves inteectua activities t has a high degree o" variabiity

: use"u measure reated to productivity is processyield here products are invovedratio o" output o" good product to the +uantity o" raw materia

input.here services are invoved, process yied

measurement is o"ten dependent on the particuarprocessratio o" cars rented to cars avaiabe "or a given dayratio o" student acceptances to the tota number o" students

approved "or admission.

EM/OM331 - Fall 2013 2-31

8/9/2019 OM331 Chapter 2

32/34

Capital

Met"o)s

*ec"nology Management

#$ality

EM/OM331 - Fall 2013 2-32

8/9/2019 OM331 Chapter 2

33/34

Standardi4ation'uality

nternet =sage

Computer virusesSearching

Scrap rates

>e1 1orkers

?ducation level

?mployee health

Sa3etyShortage o3 skilled

1orkers

%ayo;s

%abor turnover

@orkspace design

ncentive plans

?8uipmentbreakdo1ns

Shortages


8/9/2019 OM331 Chapter 2

34/34

1. $eveop productivity measures "or a operations

2. $etermine critica 8bottenec&9 operations

#. $eveop methods "or productivity improvements

%. Estabish reasonabe goas

'. Fa&e it cear that management supports andencourages productivity improvement

(. Feasure and pubicize improvements

$onDt con"use productivity with eciency!

EM/OM331 - Fall 2013 2 34

om331 chapter 2

Documents