Chapter 2 PRODUCTIVITY, COMPETITIVE AND STRATEGY Productivity.

A measure of the effective use of resources, usually expressed as the ratio of output (goods and services) to input (labor, materials, energy, and other resources). Productivity = Output/Input Productivity measures can be based on a single input (partial productivity) on more than one input (multifactor productivity), or on all inputs (total productivity). Calculations of multifactor productivity measure inputs and outputs using a common unit of measurement, such as cost or value. Quantity of production at standard price/Labor cost + Materials Cost + Overhead Productivity measures can be used to track performance over time. Productivity measurements serve as scorecards of the effective use of resources. Productivity as it relates to competitiveness. Cite negative impacts on productivity: 1. A lower propensity to save and a higher propensity to consume, which slows capital formation and attracts foreign goods. 2. Increasing government regulations add to the administrative burden of many companies. 3. There is an increasing demand for services, which are often less productive than manufacturing operations. 4. An emphasis on short-run performance reduces the incentive to develop long-term solutions to problems. Factors that Affect Productivity Numerous factors affect productivity. Among them are methods, capital, quality, technology, and management. Improving Productivity 1. Develop productivity measures for all operations; measurement is the first step in managing and controlling an operation. 2. Look at the system as a whole in deciding which operations are most critical; it is overall productivity that is important. The capacity of the bottleneck operation is less than the combined capacities of the operations that provide input, so units queue up waiting to be processed. 3. Develop methods for achieving productivity improvements, such as soliciting ideas from workers, studying how other firms have increased productivity, and reexamining the way work is done. 4. Establish reasonable goals for improvements. 5. Make it clear that management supports and encourages productivity improvement. Consider incentives to reward workers for contributions. 6. Measure improvements and publicize them. 7. Dont confuse productivity with efficiency. Efficiency is a narrower concept that pertains to getting the most out of a given set of resources; productivity is a broader concept that pertains to effective use of overall resources. Competitiveness. How effectively an organization meets the needs of customers relative to others that offer similar goods or services. Key among them are:

1. Price is the amount a customer must pay for the product or service. 2. Quality refers to materials and workmanship as well as design. 3. Product differentiation refers to any special features that cause a product or service to be perceived by the buyer as more suitable than a competitors product or service. Such as design, cost, quality, easy of use, convenient location and warranty. 4. Flexibility is the ability to respond to changes. 5. Time refers to a number of different aspects of an organizations operations Mission. The reason for existence of an organization. Mission Statement. A clear statement of purpose that serves as a guide for a strategy and decision making. A mission statement provides a general direction for an organization and gives rise to organization goals; which provide substance to all overall missions. Strategy. A plan for achieving organizational goals. Organizations have overall strategies called organization strategies, which relate to the entire organization, and they also have functional strategies, which relate to each of the functional areas of the organization. Tactics. The methods and actions taken to accomplish strategies. Operations strategy. The approach, consistent with the organizational strategy, that is used to guide the operations function. Strategy Formulation To formulate an effective strategy, senior management must take into account the distinctive competencies of the organizations, and they must scan the environment. Distinctive competencies. The special attributes or abilities that give an organization a competitive edge. These can include price, quality, time, flexibility, and location. Environmental scanning. The considering of events and trends that presents threats or opportunities for a company. These include competitors activities, changing consumer needs, legal, economic, political, and environmental issues, the potential for new markets, and technological change. All of these factors are external factors. 1. Economic conditions 2. Political conditions 3. Legal conditions 4. Technology 5. Competition 6. Markets Account various internal factors. 1. Human resources 2. Facilities and equipment 3. Financial resources 4. Customers 5. Products and services 6. Technology 7. Suppliers 8. Other factors New Strategies 1. Quality-based strategy. Strategy that focuses on quality in all phases of an organization. 2. Time-based strategy. Strategy that focuses on reduction of time needed to accomplish tasks. Organization have achieved time reduction in some of the following:

a. Planning time. Time needed to react to a competitive threat, to strategies and select tactic. b. Product/service design time. Time needed to develop and market redesigned products or services. c. Processing time. Time needed to produce goods and provide services. d. Changeover time. Time needed to change from producing one type of or service to another. e. Delivery time. Time needed to fill orders. f. Response time for complaints. Might be customer complaints about timing of deliveries, and incorrect shipments.

develop new or product quality,

Craft production. System in which highly skilled workers use simple flexible tools to produce small quantities of customized goods. Mass production. System in which lower-skilled workers use specialized machinery to produce high volumes of standardized goods. Lean production. System that uses minimal amounts of resources to produce a high volume of high-quality goods with some variety.