OMPT 303 Ch 2

Sustainability Strategy

That requires elevating sustainability to the level of organizational governance; formulating goals for products and services, for processes, and for the entire supply chain; measuring achievements and striving for improvements; and possibly linking executive compensation to the achievement of sustainability goals.

Marketing influences

1. Identifying consumer wants and/or needs. 2. Price and quality. 3. Advertising and promotion.

Efficiency

a narrower concept that pertains to getting the most out of a fixed set of resources; productivity is a broader concept that pertains to effective use of overall resources. For example, an efficiency perspective on mowing a lawn given a hand mower would focus on the best way to use the hand mower; a productivity perspective would include the possibility of using a power mower.

Agile Operations

a strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and prosper in an environment of change. Agility involves a blending of several distinct competencies such as cost, quality, and reliability along with flexibility. Processing aspects of flexibility include quick equipment changeovers, scheduling, and innovation. Product or service aspects include varying output volumes and product mix.

Numerous factors affect productivity.

capital, quality, technology, and management.

Tactics

methods and actions used to accomplish strategies.

Environmental Scanning

monitoring of events and trends that present either threats or opportunities for the organization.

Supply Chain Strategy

specifies how the supply chain should function to achieve supply chain goals. The supply chain strategy should be aligned with the business strategy. Creates value.

A company or a department can take a number of key steps toward 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. Managers need to reflect on the value of potential productivity improvements before okaying improvement efforts. The issue is effectiveness. There are several aspects of this. One is to make sure the result will be something customers want. For example, if a company is able to increase its output through productivity improvements, but then is unable to sell the increased output, the increase in productivity isn't effective. Second, it is important to adopt a systems viewpoint: A productivity increase in one part of an operation that doesn't increase the productivity of the system would not be effective. For example, suppose a system consists of a sequence of two operations, where the output of the first operation is the input to the second operation, and each operation can complete its part of the process at a rate of 20 units per hour. If the productivity of the first operation is increased, but the productivity of the second operation is not, the output of the system will still be 20 units per hour. 3. Develop methods for achieving productivity improvements, such as soliciting ideas from workers (perhaps organizing teams of workers, engineers, and managers), studying how other firms have increased productivity, and reexamining the way work is done. 4. Establish reasonable goals for improvement. 5. Make it clear that management supports and encourages productivity improvement. Consider incentives to reward workers for contributions. 6. Measure improvements and publicize them.

External Factors

1. Economic conditions. These include the general health and direction of the economy, inflation and deflation, interest rates, tax laws, and tariffs. 2. Political conditions. These include favorable or unfavorable attitudes toward business, political stability or instability, and wars. 3. Legal environment. This includes antitrust laws, government regulations, trade restrictions, minimum wage laws, product liability laws and recent court experience, labor laws, and patents. 4. Technology. This can include the rate at which product innovations are occurring, current and future process technology (equipment, materials handling), and design technology. 5. Competition. This includes the number and strength of competitors, the basis of competition (price, quality, special features), and the ease of market entry. 6. Markets. This includes size, location, brand loyalties, ease of entry, potential for growth, long-term stability, and demographics.

Why Organizations Fail

1. Neglecting operations strategy. 2. Failing to take advantage of strengths and opportunities, and/or failing to recognize competitive threats. 3. Putting too much emphasis on short-term financial performance at the expense of research and development. 4. Placing too much emphasis on product and service design and not enough on process design and improvement. 5. Neglecting investments in capital and human resources. 6. Failing to establish good internal communications and cooperation among different functional areas. 7. Failing to consider customer wants and needs.

SWOT

Analysis of strengths, weaknesses, opportunities, and threats.

Competitiveness

How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services.

3 Basic Business Strategies

Low cost. Responsiveness. Differentiation from competitors.

Goals

Provide detail and scope of the mission.

In the late 1980s and early 1990s

They recognized that they were less competitive than other companies. This caused them to focus attention on operations strategy. A key element of both organization strategy and operations strategy is strategy formulation.

Balanced Score Card (BSC)

a top-down management system that organizations can use to clarify their vision and strategy and transform them into action. It was introduced in the early 1990s by Robert Kaplan and David Norton, he idea was to move away from a purely financial perspective of the organization and integrate other perspectives such as customers, internal business processes, and learning and growth. Using this approach, managers develop objectives, metrics, and targets for each objective and initiatives to achieve objectives, and they identify links among the various perspectives. Results are monitored and used to improve strategic performance results. has no role in strategy formulation.

Order Winners

are those characteristics of an organization's goods or services that cause them to be perceived as better than the competition.

Process Yield

defined as the ratio of output of good product (i.e., defective product is not included) to the quantity of raw material input.

Quality-based strategies

focus on maintaining or improving the quality of an organization's products or services

Time-based strategies

focus on reducing the time required to accomplish various activities (e.g., develop new products or services and market them, respond to a change in customer demand, or deliver a product or perform a service)

Database

is a collection of statistically documented experiences drawn from thousands of businesses, designed to help understand what kinds of strategies (e.g. quality, pricing, vertical integration, innovation, advertising) work best in what kinds of business environments.

Productivity

is an index that measures output (goods and services) relative to the input (labor, materials, energy, and other resources) used to produce it.

Operations Strategy

narrower in scope, dealing primarily with the operations aspect of the organization. Operations strategy relates to products, processes, methods, operating resources, quality, costs, lead times, and scheduling. Table 2.3.

Primary Role

of the PIMS Program of the Strategic Planning Institute is to help managers understand and react to their business environment. PIMS does this by assisting managers as they develop and test strategies that will achieve an acceptable level of winning as defined by various strategies and financial measures.

In the 1970s and early 1980s,

operations strategy in the United States was often neglected in favor of marketing and financial strategies. Mergers and acquisitions were common; leveraged buyouts were used, and conglomerates were formed that joined dissimilar operations.

Differentiation

relate to product or service features, quality, reputation, or customer service.

Responsiveness

relates to ability to respond to changing demands.

Core Competencies

those special attributes or abilities possessed by an organization that give it a competitive edge.

Internal Factors

1. Human resources. These include the skills and abilities of managers and workers, special talents (creativity, designing, problem solving), loyalty to the organization, expertise, dedication, and experience. 2. Facilities and equipment. Capacities, location, age, and cost to maintain or replace can have a significant impact on operations. 3. Financial resources. Cash flow, access to additional funding, existing debt burden, and cost of capital are important considerations. 4. Customers. Loyalty, existing relationships, and understanding of wants and needs are important. 5. Products and services. These include existing products and services, and the potential for new products and services. 6. Technology. This includes existing technology, the ability to integrate new technology, and the probable impact of technology on current and future operations. 7. Suppliers. Supplier relationships, dependability of suppliers, quality, flexibility, and service are typical considerations. 8. Other. Other factors include patents, labor relations, company or product image, distribution channels, relationships with distributors, maintenance of facilities and equipment, access to resources, and access to markets.

Operations

1. Product and service design. Other key factors include innovation and the time-to-market for new products and services. 2. Cost of an organization's output is a key variable that affects pricing decisions and profits. Organizations with higher productivity rates than their competitors have a competitive cost advantage. 3. Location. 4. Quality refers to materials, workmanship, design, and service. 5. Quick response can be a competitive advantage. One way is quickly bringing new or improved products or services to the market. Another is being able to quickly deliver existing products and services to a customer after they are ordered, and still another is quickly handling customer complaints. 6. Flexibility is the ability to respond to changes. 7. Inventory management can be a competitive advantage by effectively matching supplies of goods with demand. 8. Supply chain management involves coordinating internal and external operations (buyers and suppliers) to achieve timely and cost-effective delivery of goods throughout the system. 9. Service. Service quality can be a key differentiator; and it is one that is often sustainable. 10. Managers and workers are the people at the heart and soul of an organization, and if they are competent and motivated, they can provide a distinct competitive edge by their skills and the ideas they create.

Order Qualifiers

Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential for purchase.

Different Strategies

Low cost. Outsource operations to third-world countries that have low labor costs. Scale-based strategies. Use capital-intensive methods to achieve high output volume and low unit costs. Specialization. Focus on narrow product lines or limited service to achieve higher quality. Newness. Focus on innovation to create new products or services. Flexible operations. Focus on quick response and/or customization. High quality. Focus on achieving higher quality than competitors. Service. Focus on various aspects of service (e.g., helpful, courteous, reliable, etc.). Sustainability. Focus on environmental-friendly and energy-efficient operations.

Global Strategy

One issue companies must face is that what works in one country or region will not necessarily work in another, and strategies must be carefully crafted to take these variabilities into account. Another issue is the threat of political or social upheaval. Still another issue is the difficulty of coordinating and managing far-flung operations. Indeed, "In today's global markets, you don't have to go abroad to experience international competition. Sooner or later the world comes to you.

Organizations have achieved time reduction in some of the following:

Planning time: The time needed to react to a competitive threat, to develop strategies and select tactics, to approve proposed changes to facilities, to adopt new technologies, and so on. Product/service design time: The time needed to develop and market new or redesigned products or services. Processing time: The time needed to produce goods or provide services. This can involve scheduling, repairing equipment, methods used, inventories, quality, training, and the like. Changeover time: The time needed to change from producing one type of product or service to another. This may involve new equipment settings and attachments, different methods, equipment, schedules, or materials. Delivery time: The time needed to fill orders. Response time for complaints: These might be customer complaints about quality, timing of deliveries, and incorrect shipments. These might also be complaints from employees about working conditions (e.g., safety, lighting, heat or cold), equipment problems, or quality problems.

Two factors that tend to have universal strategic operations importance relate to

Quality and Time

Other factors that affect productivity include the following:

Standardizing processes and procedures wherever possible to reduce variability can have a significant benefit for both productivity and quality. Quality differences may distort productivity measurements. One way this can happen is when comparisons are made over time, such as comparing the productivity of a factory now with one 30 years ago. Quality is now much higher than it was then, but there is no simple way to incorporate quality improvements into productivity measurements. Use of the Internet can lower costs of a wide range of transactions, thereby increasing productivity. It is likely that this effect will continue to increase productivity in the foreseeable future. Computer viruses can have an immense negative impact on productivity. Searching for lost or misplaced items wastes time, hence negatively affecting productivity. Scrap rates have an adverse effect on productivity, signaling inefficient use of resources. New workers tend to have lower productivity than seasoned workers. Thus, growing companies may experience a productivity lag. Safety should be addressed. Accidents can take a toll on productivity. A shortage of technology-savvy workers hampers the ability of companies to update computing resources, generate and sustain growth, and take advantage of new opportunities. Layoffs often affect productivity. The effect can be positive and negative. Initially, productivity may increase after a layoff, because the workload remains the same but fewer workers do the work—although they have to work harder and longer to do it. However, as time goes by, the remaining workers may experience an increased risk of burnout, and they may fear additional job cuts. The most capable workers may decide to leave. Labor turnover has a negative effect on productivity; replacements need time to get up to speed. Design of the workspace can impact productivity. For example, having tools and other work items within easy reach can positively impact productivity. Incentive plans that reward productivity increases can boost productivity.

Mission

The reason for the existence of an organization. Stated in Mission Statement.