chapter 2 operations and supply chain management

What is competitiveness?

is how effectively an organization meets the wants and needs of customers relative to other organizations offering similar products or services.

How do companies compete?

• Price / Cost

• Quality

• Time

• Flexibility

• Differentiation

• Service

• Innovation

• Price / Cost

• Offering products at a competitive price.

Quality

Providing products or services that meet customer expectations.

• Time

• Delivering products/services quickly.

• Flexibility

• Being able to change products, volume, or processes when needed.

• Differentiation

• Making your product/service different or more attractive than competitors.

• Service

• Providing good customer service.

• Innovation

• Creating or improving products and processes.

Competitiveness

= How well a company satisfies customers compared with competitors.

Operations has a major influence on competitiveness because operations determines things such as:

• Product and service design

• Cost

• Quality

• Location

• Speed/quick response

• Flexibility

• Inventory management

• Supply chain management

• Service

• Managers and workers

if a company has poor operations, it can become less competitive even if its marketing is good

Reasons companies fail to be competitive

• Failure to understand customer needs

• Poor quality

• High costs

• Slow response

• Poor management

• Lack of innovation

• Poor supply chain management

• Failure to adapt to changes

• Poor employee relations

• Failure to recognize competitors

What is a mission?

A mission explains the organization's reason for existence.

Mission

Why does this organization exist?

What is strategy?

A strategy is a plan for achieving organizational goals. (How are we going to accomplish our goals?)

Tactics

are the specific actions taken to accomplish a strategy

Concept	Ask yourself
Mission	Why do we exist?
Goals	What do we want to accomplish?
Strategy	How will we accomplish it?
Tactics	What specific actions will we take?

Strategy = plan

Tactics = actions

Low Cost

Compete by having lower costs/prices.

Example:

• Walmart

• Low-cost airlines

The company tries to operate efficiently so it can offer lower prices.

Responsiveness

Compete by responding quickly to customer needs.

This can involve:

• Fast delivery

• Quick product development

• Fast response to changes

• Flexibility

Example:

A company can produce a new product very quickly when customer demand changes.

Differentiation

Compete by making the product or service different or better in ways customers value.

Examples:

• Better design

• Higher quality

• Unique features

• Better service

• Strong brand

Operations Strategy

The organization's overall strategy needs to be connected to its operations strategy.

Company strategy:

Low cost

Operations strategy:

• Efficient processes

• Low inventory costs

time-based strategy

focuses on reducing the amount of time needed to accomplish tasks Examples:

• Faster product development

• Faster delivery

• Faster customer response

Productivity

Productivity measures how effectively resources are being used to produce goods or services. Productivity=OutputInput

Why is productivity important?

Higher productivity generally means that an organization can produce more output using the same amount of resources, or the same output using fewer resources.

This can lead to:

• Lower costs

• Greater competitiveness

• Better use of resources

• Higher profitability

• (The book emphasizes that productivity has a direct impact on competitiveness and that operations management is chiefly responsible for productivity. )

Factors that affect productivity

Productivity can be affected by many things, including:

• Labor

• Capital

• Technology

• Management

• Employee skills

How can productivity be improved?

Companies can improve productivity by:

• Improving employee training

• Using better technology

• Improving processes

• Eliminating unnecessary work

• Improving quality

Productivity

Output/Input

Three primary strategies

Low Cost — Responsiveness — Differentiation