Module 2 Productivity Strategy PDF

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Module on Productivity & Strategy...

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xAt the completion of this module, you will be able to: ● ● ● ● ● ● ● ● ● ●

Explain the difference between production and productivity Compute single-factor productivity Compute multifactor productivity Identify the critical variables in enhancing productivity Define mission and strategy Explain three strategic approaches to competitive advantage Explain the significant key success factors and core competencies Apply SWOT Analysis Explain the focus of OM strategy as it relates to the product life cycle Explain four global operations strategy options

Productivity: Represents output related to input ● Partial Measures ○ Single Factor(one input resource) ■ Labor Productivity=output/labor ● Labor Productivity=(units produced)/(labor-hours used) ■ Capital productivity=output/capital ■ Materials productivity=output/materials ■ Energy productivity=output/energy ○ “Multi-factor” productivity aka total factor productivity ■ outputs/inputs often expressed in dollars ■ =(output)/(labor+material+energy+capital+miscellaneous) ○ Comparing these: ■ Absolute Change= (new)-(original) ■ Relative Change= (difference or absolute)/(original) ● Total Measure ○ Output/all inputs

● Productivity most useful when measuring process improvements ○ When increases, standard of living improves ■ U.S. increases bu average of 2.5% per year ● Labor is 10% of this: provides people ● Capital is 38% of this: provides tools ● Management is 58% of this: ensures labor & capital used to best ability ○ Only way to increase total welfare of closed system is to increase productivity ■ Hard to measure productivity in service sectors ● Labor intensive ● Hard to automate ○ Highest productivity cannot be reached without quality inputs, processes, & products ■ Quality of Life=(“quality” inputs)+(“quality” processes)+ (“quality” outputs) ● Improvement requires strategy ○ Needed for systematic measurement, management, and goal setting ○ Mission Statement: purpose, tells an organization where it is going ■ Purpose for being ■ Answers: “what do we contribute to society?” aka benefit to society ■ Provides boundaries and focus ■ Factors affecting mission ● Customers ● Environment

● Philosophy & values ● Profitability & growth ● Public Image ○ Strategy: tells organization plan to achieve mission ■ Action plan to achieve mission ● Focuses ○ Quality ○ Products ○ Processes ○ Location ○ Inventory ○ Layout ○ Purchasing ■ Based on competitive priorities & distinct competencies ■ Functional areas have strategies ■ Development Process ● Analyze environment (SWOT) ● Determine corporate mission ● Form a strategy

○ SWOT ANALYSIS: for competitive advantage ■ Competitive priorities ● Differentiation(better) ○ Can use 5 senses: experience differentiation

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○ Provides uniqueness Quick response(faster) ○ Reliability ○ Adapts to market changes ○ Quickness in design, production, delivery Cost Leadership(Cheaper) ○ Maximum value as perceived by customer ○ Low overhead HOW TO USE SWOT TO FORM STRATEGY w/ MISSION ○ Internal Strengths ■ Identify and implement key success factors for each core competency in OM ○ Internal Weaknesses ○ External Opportunities ■ Jump on opportunity ○ External Threats ■ Try to eliminate Activity Mapping: choose a goal & include things in the strategy that it would change/encompass

● Product Life Cycle ○ Introduction ■ Product design/development ■ Short production runs w/ high costs ■ Attention to quality ■ Frequent design changes ■ Limited models ○ Growth ■ Enhance distribution ■ Competitive product improvements: capitalize on niche ■ forecasting ■ Increase Capacity ○ Maturity ■ Standardization ■ More minor changes ■ Optimum capacity ■ Long production runs ■ Cost cutting ○ Decline

■ Little product differentiation ■ Cost minimization ■ Reduce capacity ● Globalization ○ World trade growth constantly increasing ■ Hard to keep ethics consistent ○ Reasons to globalize ■ Improve supply chain ● Locating facilities closer to area unique resources ○ shoes=china ○ perfume=france ○ auto=california ■ Reduce costs & exchange rate risks ● Risks with currency exchange rates ● Reduce direct & indirect costs ● Trade agreements can lower tariffs ○ EU, NAFTA, WTO, etc. ■ Improve operations ● Understand differences between business in countries ○ Japanese: inventory management ○ Germany: robots ○ Scandanavians: ergonomics ● International operations improves response time/customer service ■ Understand markets ● Interacting w/ foreign customers, suppliers, competition can lead to opportunities ○ Extend product life cycle ■ Ex. cell phone design from Europe>Japan ■ Improve products ● Remain open to free flow of ideas ● Joint research & development(ex. Toyota & BMW) ○ Samsung & Bosch jointly produce batteries ○ Reduced risk, lower costs, best design ■ Attract/retain global talent ● Better growth opportunities>insulation against unemployment ● Relocate unneeded personnel to more prosperous locations ○ Global Operations Strategy Options ■ International Strategy: import/export or license existing products ● Example: U.S. Steel, Harley-Davidson

● Low Cost Reduction ● Low Local Responsiveness ■ Global Strategy: standardize product, economies of scale, crosscultural learning ● Examples: T.I., Caterpillar, Otis Elevator ● High Cost Reduction ● Low local responsiveness ■ Multi-Domestic Strategy: using existing domestic model globally, franchise/joint ventures/subsidiaries ● Examples: Heinz, McDonalds, The Body Shop, Hard Rock Cafe ● High Local Responsiveness ● Low Cost Reduction ■ Transnational Strategy: move material/people/ideas across national boundaries, economies of scale, cross-cultural learning ● Examples: Nestle, Coca-cola ● High cost Reduction ● High Local Responsiveness

Regal Marine: ● Family based ● CEO Tim Cook ○ Want to provide value, quality, & satisfaction ○ Want to operate w/ integrity, honesty, character, more than just building boats ■ Be profitable, share profits & success with company ● Differentiation: distinctive, luxury performance, 22 different boats, strategy: best in class products ○ Features and benefits that consumer believes adds value ● Response ● Cost Leadership: consumers get better boat each way ○ Reduce cycle times, alternative products, improving processes ● Distribution: a lot in US and out of US, caliber of their products ● Operation: as many models ● Manufactured: separate lines in separate buildings...