Chapter 2 Productivity, Competitiveness, and Strategy
Productivity • Partial measures • output/(single input) • Multi-factor measures • output/(multiple inputs) • Total measure • output/(total inputs)
Partial Output Output Output Outputmeasures Labor Machine Capital Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure All inputs used to produce them Measures of Productivity Table 2-1
Example 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr Cost of raw material: $5,000 Cost of purchased material: $25,000 What is the labor productivity?
Example--Labor Productivity • 10,000 units/500hrs = 20 units/hour or we can arrive at a unitless figure • (10,000 unit* $10/unit)/(500hrs* $9/hr) =22.22 Can you think of any advantages or disadvantages of each approach?
Example--Multifactor Productivity MFP = Output Labor + Materials MFP = (10,000 units)*($10) (500)*($9) + ($5000) + ($25000) MFP = 2.90
Capital Quality Technology Management Factors Affecting Productivity
Improving Productivity • Develop productivity measures • Determine critical operations • Develop methods for productivity improvements • Establish reasonable goals • Get management support • Measure and publicize improvements • Don’t confuse productivity with efficiency
Operation Operation Bottleneck Operation Operation Operation Bottleneck Operation Figure 2-2
Competitiveness Price Flexibility Quality Differentiation Time
Mission/Strategy/Tactics Mission Strategy Tactics How does mission, strategies and tactics relate to decision making and distinctive competencies?
Strategy • Mission • The reason for existence for an organization • Mission Statement • A clear statement of purpose • Strategy • A plan for achieving organizational goals • Tactics • The actions taken to accomplish strategies
Strategy Example Example 3 Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably Mission: Live a good life • Goal: Successful career, good income • Strategy: Obtain a college education • Tactics: Select a college and a major • Operations: Register, buy books, take courses, study, graduate, get job
Planning and Decision Making Figure 2-3 Mission Goals Organizationalstrategy Functional strategies Finance Marketing Operations Tactics Tactics Tactics Operations operations Finance operations Marketing operations
Strategy Formulation • Distinctive Competencies • The special attributes or abilities that give an organization a competitive edge. • Environmental Scanning • The considering of events and trends that present threats or opportunities for a company.
New Strategies • Quality-based strategies • Focuses on quality in all phases of an organization • Quality at the source • Time-based strategies • Focuses on reduction of time needed to accomplish tasks
JAN FEB MAR APR MAY JUN Changeover Time-based Strategies Planning Designing Processing On time! Delivery
Production • Craft Production - Highly skilled workers use simple flexible tools to produce small quantities of customized goods. • Mass Production - Lower-skilled workers use specialized machinery high volumes of standardized goods. • Lean Production - Uses minimal amounts of resources high volume of high-quality goods.