1/20/2013

Competitiveness, Strategy and Productivity

Chapter 2

Ravi Behara @ FAU

What has Operations got to do with Competitiveness?

1/20/2013

Lets Recap... What is Operations? The part of a business organization that is responsible for producing goods or services How do we define Operations Management? The management of systems or processes that create goods and/or provide services
3

Ravi Behara @ FAU

Competitiveness

How effectively an organization meets the wants and needs of customers relative to others that offer similar goods and services In other words....why should customers come to your firm instead of going to your competitor?
Ravi Behara @ FAU 4

1/20/2013

Competitiveness through Marketing

Identify customer wants and needs

Leading firms identify latent needs

Understand the price-quality tradeoff

Remember that Value = Quality/Price

Advertising and promotion

Informs customers...it also creates expectations

Ravi Behara @ FAU

Competitiveness through Operations

Product & Service Design Apply financial resources, operational capabilities supply chain capabilities to meet/exceed customer/consumer wants & needs nice to haves & must haves Apple, which will release the LTE-friendly iPad Mini and iPad 4 in China starting Friday, Jan. 18, 2013...at US prices!
http://ca.ibtimes.com/articles/424444/20130115/apple-ipad-4-mini-releasedate-china-price-features-2013.htm 6

1/20/2013

Competitiveness through Operations

Cost
Higher productivity => lower costs Lower costs => higher profits Outsource to reduce costs...doe snot work in long run unless there is higher productivity and higher quality Outsourcing is NOT identical to Offshoring
Ravi Behara @ FAU 7

Competitiveness through Operations

Location...location...location Customer access and convenience Transportation costs Delivery time
McDonalds River Boat on the Mississippi River, St. Louis, MO, USA

Route 66 McDonalds in Vinita, Oklahoma, USA

http://twistedsifter.com/2012/09/the-most-unusual-mcdonalds-locations-in-the-world/ 8

1/20/2013

Competitiveness through Operations

Quality of goods and services customer satisfaction => loyalty => profits

No. 1 Singita Grumeti Reserves, Serengeti National Park, Tanzania

Service Quality: a key differentiator even for goods

http://www.travelandleisure.com/articles/worlds-best-hotels/2 9

Competitiveness through Operations

Quick response delivery, time to market Flexibility changing demand volume, changing product mix, changing features Inventory management matching supply with demand Its the People
Ravi Behara @ FAU 10

1/20/2013

Reasons for Failure

No operations strategy: 3 functional strategies: marketing, operations and financial Dont recognize competitive threats Not focusing on Research & Development (R&D) Focus on product (what), not process (how) Not investing in infrastructure: capital and human Poor communication & coordination among business functions Lack of Customer focus: not identifying and delivering on customer wants and needs
Ravi Behara @ FAU 11

Definitions
Vision: the inspiration, the framework for all your strategic planning Mission: reason for existence of an organization Mission Statement: purpose of the organization Goals: details and scope of mission Strategies: plans to achieve goals Tactics: methods and actions to accomplish strategies Operating procedures: a procedure for operating something or for dealing with a given situation (SOP)
Ravi Behara @ FAU 12

1/20/2013

Vision Statements at Non-Profits

Oxfam: A just world without poverty (5 words) Feeding America: A hunger-free America (4 words) Human Rights Campaign: Equality for everyone (3) National Multiple Sclerosis Society: A World Free of MS (5) Alzheimers Association: Our vision is a world without Alzheimers (7) Habitat for Humanity: A world where everyone has a decent place to live (10) Oceana seeks to make our oceans as rich, healthy and abundant as they once were (14) Make-A-Wish: Our vision is that people everywhere. will share the power of a wish (13)

Ravi Behara @ FAU

13

Mission Statement
FedEx Corporation will produce superior financial returns for its shareowners by providing high value-added logistics, transportation and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx Corporation will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.
Ravi Behara @ FAU 14

1/20/2013

Honda Philosophy
Basic Principles Respect for the individual. The Three Joys (buying, selling and creating) Company Principle (Mission Statement) Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction. Management Policies Proceed always with ambition and youthfulness. Respect sound theory, develop fresh ideas, and make the most effective use of time. Enjoy work and encourage open communication. Strive constantly for a harmonious flow of work. Be ever mindful of the value of research and endeavor.
Ravi Behara @ FAU 15

Dreams inspire us to create innovative products that enhance mobility and benefit society. To meet the particular needs of customers in different regions around the world, we base our sales networks, research and development centers and manufacturing facilities in each region. Furthermore, as a socially responsible corporate citizen, we strive to address important environmental and safety issues.
Ravi Behara @ FAU 16

1/20/2013

Ravi Behara @ FAU

17

Customer Needs Alignment

Corporate Strategy

Operations Strategy

Core Competencies Special attributes or abilities that give an organization a competitive edge

Decisions Processes, Infrastructure, and Capabilities

Ravi Behara @ FAU

18

1/20/2013

Strategy Formulation
Scan the environment SWAT Order winners & qualifiers

Order Winners

Order Losers

Order Qualifiers
19 Ravi Behara @ FAU

Operations strategy

The approach, consistent with organization strategy, that is used to guide the operations function

Ravi Behara @ FAU

20

10

1/20/2013

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 desire to catch up with the competition A part of a cost reduction strategy
21

Ravi Behara @ FAU

Some strategies
Low Cost Scale-based Specialization Newness Flexible Operations High Quality Service Sustainability
Ravi Behara @ FAU 22

11

1/20/2013

Organizational Strategy and OM

Low price: low variety, high volume, standardized work/materials High quality: design, process, supplier quality Quick response: flexibility, extra capacity, higher inventory Innovation: R&D investment, adapt operations and supply processes Variety: resource variety, high skills, complex design, scheduling, supply and inventory Sustainability: design, location, waste management
Ravi Behara @ FAU 23

BSC: Balanced Score Card

Financial
How do we appear to our shareholders? How do we appear to our customers? What business processes must we excel at? How will we sustain our ability to change and improve?

Customer

Internal Business Process Learning and Growth

Ravi Behara @ FAU

24

12

1/20/2013

Productivity
Measure of effective use of resources Ratio of output to input Partial and Multifactor measures Methods, capital, quality, technology and management affect productivity Related to competitiveness, inflation, and standards of living Efficiency is narrow is scope, Productivity is a broader concept
Ravi Behara @ FAU 25

13