Islamic University of Gaza - Palestine Department of Industrial Engineering

Chapter 2
Competitiveness, Strategy, and Productivity

Assistant Prof. Abed Schokry Operations and Productions Management First Semester 2010 2011

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Chapter 2: Learning Outcomes

After completing this chapter You should be able to: Discuss and list briefly the primary ways that business organizations compete List many reasons for the poor competitiveness of some companies Define the terms mission, goals, strategy, and tactics and explain why strategy is important for competitiveness Describe and give examples of time-based strategies Discuss and compare organization strategy and operations strategy, and explain why it is important to link the two Define the term productivity and explain why it is important to organizations and to countries List a few of the reasons for reduced productivity and some ways of improving it

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Competitiveness Competitiveness:
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services Organizations compete through some combination of their marketing and operations functions
What do customers want? How can these customer needs best be satisfied?

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Hierarchical Planning
Mission

Goals

Organizational Strategies

Functional Strategies

Tactics

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Mission, Goals, and Strategy Mission

The reason for an organizations existence

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

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Tactics and Operations

Tactics
The methods and actions taken to accomplish strategies The how to part of the process

Operations
The actual doing part of the process

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Strategy Formulation
Effective strategy formulation requires taking into account:
Core competencies Environmental scanning
SWOT (Strengths, Weaknesses, Opportunities, threats)

Successful strategy formulation also requires taking into account: Order qualifiers
characteristics that customers perceive as minimum standards of acceptability for products or services to be considered as a potential purchase.

Order winners
characteristics of an organization's goods or services that cause them to be supposed as better than the competition's goods or services.

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Operations Strategy
Operations strategy
The approach, consistent with organization strategy, that is used to guide the operations function. Decision Area
Product and service design Capacity Process selection and layout Work design Location Quality Inventory Maintenance Scheduling Supply chains Projects

What the Decisions Affect

Costs, quality, liability, and environmental issues Cost, structure, flexibility Costs, flexibility, skill level needed, capacity Quality of work life, employee safety, productivity Costs, visibility Ability to meet or exceed customer expectations Costs, shortages Costs, equipment reliability, productivity Flexibility, efficiency Costs, quality, agility, shortages, vendor relations Costs, new products, services, or operating systems

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Time- and Quality-Based Strategies

Time-based strategies
Strategies that 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

Quality-based strategy
Strategy that focuses on quality in all phases of an organization
Pursuit of such a strategy is rooted in a number of factors:
Trying to overcome a poor quality reputation Desire to maintain a quality image A part of a cost reduction strategy

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Agile Operations
Agile operations
A strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and grow in an environment of change
Involves the combination of several core competencies:
Cost Quality Reliability Flexibility

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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 among the various perspectives Finance Customer Internal business processes Learning and growth Monitor results
http://www.balancedscorecard.org/BSCResources/ExamplesSuccessStories/tabid/57/Default.aspx

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The Balanced Scorecard Approach

Department Areas

Finance

Internal Business Processes

Learning & Growth

Customer

Return On Investment Cash Flow Return on Capital Employed Financial Results (Quarterly/Yearly) Number of activities per function Duplicate activities across functions Process alignment (is the right process in the right department?) Process bottlenecks Process automation Is there the correct level of expertise for the job? Employee turnover Job satisfaction Training/Learning opportunities Delivery performance to customer Quality performance for customer Customer satisfaction rate Customer percentage of market Customer retention rate

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The Balanced Scorecard Approach

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Productivity
Productivity
A measure of the effective use of resources, usually expressed as the ratio of output to input

Productivity measures are useful for

Tracking an operating units performance over time Judging the performance of an entire industry or country

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Productivity Measures
Productivity = Output Input Output ; Single Input Ouput ; Labor Output Capital Output Labor + Capital + Energy

Partial Measures

Multifactor Measures

Output ; Multiple Inputs

Ouput ; Labor + Machine

Total Measure

Goods or services produced All inputs used to produce them

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Improving Productivity
1. 2. 3. 4. 5. 6. Develop productivity measures for all operations Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Make it clear that management supports and encourages productivity improvement Measure and publicize improvements Dont confuse productivity with efficiency

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End of Chapter 2