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PRODUCTIVITY,
STRATEGY AND
COMPETITION
08/06/16

Management of Operations / MBA


2016-18

Introduction
2

Competitiveness

Effectiveness of organization in
marketplace relative to other organizations
offering similar products
Major

impact: operations management and


marketing

Strategy

Plan for how to pursue goal


Importance of operations strategy
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Introduction (Contd..)
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Productivity

Effective and efficient use of resources


Impact competitiveness
Efficiency of production
Operations management affects
productivity

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Productivity
4

Productivity

Can be of department, organization even


the whole country
For non-profit organization

Measure of effective and efficient use of


resources
Output / Input

Higher productivity > lower cost

For-profit organization

Higher productivity > competitiveness


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Productivity (Contd..)
5

Productivity growth

Computing productivity

(Current productivity previous


productivity)*100/ previous productivity
Partial measures: single input; important in
Ops. Mgm.
Multi-factor measures: more than one input
Total measure: all inputs considered

Used to track performance over time


08/06/16

Pls try:
6

For completing a task of carpeting, firm ABC Ltd. had


to employ 10 of their workers. At the end of the day, it
was observed that carpeting for around 8800 square
feet of area was completed. The manager at ABC
would like to know the productivity in terms of sq. feet/
hour. Assume the workers worked for 8 hours that day.

To increase the coverage manager also rents a


machine @ Rs. 1000 per hour and 2 more labors are
recruited. There are other over head costs of around
Rs. 500. This time the amount of work completed at
the end of the day is 28500 sq. feet. What will be the
multi-factor productivity here in terms of sq. feet per
rupee. Assume a day of 8 hours; wages of workers as
Rs. 250 per day.
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Productivity (Contd..)
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Effect on inflation?
Aggregate measures: for entire organization or
country
Score card for effective use of resources
Competitiveness?
High productivity > high standard of living
Increase in wages and price but not
productivity > inflationary pressure
Manufacturing vs. services
Pressure from foreign industry
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Productivity (Contd..)
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Productivity in service sector

Government statistics
Process yield

Factors affecting productivity :


Standardizing processes, Inventory
management, New workers / turnover etc.
Technological improvements?
Out sourcing / productivity / continuous
improvement
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Productivity (Contd..)
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Improving productivity

Develop productivity measures for all


departments
The whole system should be considered
Ideas from workers
Observing competitors
Establishing reasonable goals
Measuring improvements and publicizing
them

Productivity vs. efficiency


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Finally:
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Productivity growth is a crucial source of growth


in living standards. Productivity growth means
more value is added in production and this means
more income is available to be distributed.

Wikipedia

"Productivity isnt everything, but in the long run


it is almost everything. A countrys ability to
improve its standard of living over time depends
almost entirely on its ability to raise its output per
worker

Paul Krugman (1994). The Age of Diminishing


Expectations. MIT Press.

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Competitiveness
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Competitiveness

Affected by combination of marketing and


operations management

Marketing:

Consumer wants:
Information on consumer wants and needs:
central to competitiveness
Match between needs/wants and offerings
Pricing:
Key factor
Can involve trade-off
Advertising and promotions
Information reaching out to potential customers
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Competitiveness (Contd..)
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Operations Management

Product & Service design


Match

required between requirements, financial


capabilities etc.
Innovation
Time to market

Costs
Productivity
Outsourcing

Location
Near

input / market
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Competitiveness (Contd..)
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Combination of Ops & marketing (contd..)

Operations..
Quality

Consumer can pay more if convinced!

Quick

response

New product, deliveries, customer complaints

Flexibility

Responding to changes

Inventory

management
Scheduling

Timely and cost effective

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Competitiveness (Contd..)
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Failures

If the approach is short term


Failing to do SWOT correctly
Operations strategy is neglected
Focus only on products and services and
not on process improvement
Failure to assess the customer wants and
needs correctly

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Strategy
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Meaning

Plan for achieving organizational goals


Short term / Intermediate / Long term

Support comes from

Mission
Reason

for existence
States the purpose of an organization
Answer for in what business you are in?

Goal
Details

on the scope of mission

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Strategy (Contd..)
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Mission + goal => Positioning


Goals foundation for org. strategy >>
strategies and tactics of functional units
Road
map

Goal
s

Strategies
Focus for decision
making
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Strategy (Contd..)
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Three basic business strategies:

Low cost
Responsiveness
Differentiation from competitors

Functional strategy should be in sync


with organizational strategy and this
should be followed at higher levels as
well

Funct. Stgr. > Org. Stgr. > Goals > Mission


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Strategy (Contd..)
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Tactics

Methods and actions taken to accomplish


strategies
Involves detailed planning and decision making

Tactical Vs. Ops: How to vs. Actual doing


Difference between Strategic / Tactical /
Operational

The time frame


Strategic:

long term
Tactical / operational: Short term
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Strategy (Contd..)
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Different strategies

Low cost: outsourcing


Scale based: volume driven
Specialization: Niche
Flexible
High quality
Service

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Strategy (Contd..)
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Strategy formulation > Competitive


edge
Competitive edge

Distinctive competencies
Competitive edge
Customer and competitor, rest could be
same for all

Marketing + Operations: Customer


needs + operational capabilities
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Strategy (Contd..)
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Strategy formulation

Critical to the success of strategy


Walmart

, Japan; Compaq / Dell; Spice jet / Air

Deccan

Organizational strategy : link SWOT : Ops.


strategy
SWOT
SW:

Operations Management

OT: Marketing
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Strategy (Contd..)
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Order qualifiers
Order winners
Differentiation of the characteristics
should be made by marketing and
communicated to operations
Environmental scanning

Considering events and trends posing


opportunities or threats

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Strategy (Contd..)
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Technological changes

Products / Services / Processes

Competitive disadvantage: in-correct choices


Key external factors : Economic conditions,
political conditions, legal, technology,
competition, markets
Internal factors : HR, facilities and equipment,
Financial resources, customers, products,
technology, suppliers etc.
Global strategy
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Strategy formulation
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The key steps:

Link to organizations mission


Assess SWOT
Identify order winners and qualifiers
Select one or two of the strategies

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Operations Strategy
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Narrow in scope
Organization strategy vs. functional
strategy

Power struggles
Involvement of senior managers

The rise of the Ops Manager to CEO?

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Strategic Operations
Management and decision

making
Traditionally

Cost minimization
Product differentiation

Quality based strategies

Strategy that focus on quality in all phases


of organization
Factor in attracting and retaining customers
Overcome image of poor quality,
competition,
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Contd..
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Time based strategies

Strategies that focus on reduction of time that is


required to accomplish tasks
Service improvement and competitive
advantage
The rationale regarding cost / productivity,
quality, innovation and customer service

Areas

Planning time, product / service design time,


processing time, changeover, delivery, response
to complaints
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08/06/16