MODULE 3

COMPETITIVENESS, STRATEGY AND

PRODUCTIVITY
Companies must be competitive to sell their goods and services in the marketplace.
Competitiveness is an important factor in determining whether a company prospers, barely gets
by, or fails. Marketing influences competitiveness in several ways, including;

1. Identifying consumer wants and/or needs is a basic input in an organization’s decision-

making process, and central to competitiveness.
2. Pricing is usually a key factor in consumer buying decisions. It is important to understand
the trade-off decision consumers make between price and other aspects of a product.
3. Advertising and promotion are ways organizations can inform potential customers about
features of their products or services, and attract buyers.

Operations have a major influence on competitiveness through;

 Product and service design

 Cost
 Location
 Quality
 Quick response
 Flexibility
 Inventory management
 Supply chain management
 Service
 Managers and workers

Why some organizations fail?

 Neglecting operations strategy

 Failing to take advantage of strengths/opportunities, and/or failing to recognize
competitive threats
 Putting too much emphasis on short-term financial performance at the expense of
research and development
 Placing too much emphasis on product and service design and not enough on process
design and improvement
 Neglecting investments in capital and human resources
 Failing to consider customer wants and needs

MISSION AND STRATEGIES

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 An organization’s mission is the reason for its existence. It is expressed in its’ mission
statement, which state the purpose of an organization. A mission statement serves as the basis
for organizational goals, which provide more detail and describe the scope of the mission. Goals
serve as a foundation for the development of organizational strategies.

Strategies are plans for achieving organizational goals. Strategies can be long term,
intermediate term, or short term. To be effective, strategies must be designed to support the
organization’s mission and its organizational goals.
STRATEGIES AND TACTICS

Strategies provide focus for decision making. Generally speaking organizations have
overall strategies called organizational strategies, which relate to the entire organization. They
also have functional strategies, which relate to each of the functional areas of the organization.

Tactics are the methods and actions used to accomplish strategies. They are more specific
than strategies, and they provide guidance and direction for carrying out actual operations, which
need the most specific and detailed plans and decision making in an organization.

STRATEGY FORMULATION

In formulating a successful strategy, organizations must take into account both order
qualifiers and order winners.

 Order qualifiers are those characteristics that potential customers perceive as minimum
standards of acceptability for a product to be considered for purchase.
 Order winners are those characteristics of an organization’s goods or services that cause
them to be perceived as better than the competition.

ENVIRONMENTAL SCANNING is the considering of events and trends that present either
threats or opportunities for the organization. Generally these include competitors’ activities;
changing consumer needs; legal, economic, political, and environmental issues; the potential for
new markets; and the like.

QUALITY AND TIME STRATEGIES

QUALITY-BASED STRATEGIES focus on maintaining or improving the quality of an

organization’s product or services.
TIME-BASED STRATEGIES focus on reducing the time required to accomplish various
activities. By doing so, organizations seek to improve service to the customer and to gain a
competitive advantage over rivals who take more time to accomplish the same task.

Organizations have achieved time reduction in some of the following;

1. Planning time – the time needed to react to a competitive threat

2. Product/service design time – the time needed to develop and market nee or redesigned
products or services

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 3. Processing time – the time needed to produce goods or provide services
4. Changeover time – the time needed to change from producing one type of product or
service to another
5. Delivery time – the time needed to fill orders
6. Response time for complaints – these might be customer complaints about quality, timing
of deliveries, and incorrect shipments.

PRODUCTIVITY

One of the primary responsibilities of a manager is to achieve productive use of an

organization’s resources. The term productivity is used to describe this. Productivity is an index
that measures output (goods and services) relative to the input (labor, materials, energy and other
resources) used to produce it.

Product = Output
Input

A productivity ratio can be computed for a single operation, a department, an

organization or an entire country. In business organizations, productivity ratios are used in
planning workforce, scheduling equipment, financial analysis, and other important tasks.

Productivity Growth = Current productivity – Previous productivity x 100

Previous productivity

FACTORS THAT AFFECT PRODUCTIVITY

Numerous factors affect productivity. Generally they are;

 Methods
 Capital
 Quality
 Technology
 Management
MODULE 4
FORECASTING

INTRODUCTION

FORECAST –. A statement about the future value of a variable of interest Forecast are a basic
input in the decision making processes of operations management because they provide
information on future demand.

 The importance of forecasting to operations management cannot be overstated. The

primary goal of operations management is to match supply to demand.

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  Having a forecast of demand is essential for determining how much capacity or supply
will be needed to meet demand.
 Forecast are the basis for budgeting, planning, capacity, sales, production and inventory,
personnel, purchasing and more.
 Forecasts play an important role in the planning process because they enable managers to
anticipate the future so they can plan accordingly.

Two Aspects of Forecast

1. The expected level of demand can be a function of some structural variations, such as a
trend or seasonal variation.
2. The degree of accuracy that can be assigned to forecast. Forecast accuracy is a function
of the ability of forecasters to correctly model demand, random variation, and sometimes
unforeseen events.

 SHORT-TERM FORECAST – pertain to ongoing operations. The time horizon maybe

fairly short or somewhat longer.
 LONG RANGE FORECAST – pertain to new product or services, new equipment, new
facilities, or something else that require a somewhat long lead time to develop, construct,
or otherwise implement.

Here are some examples of uses of forecasts in business organizations;

1. ACCOUNTING – new product/process cost estimates, profit projections, cash

management.
2. FINANCE – equipment/equipment replacement need, timing and amount of
funding/borrowing needs.
3. HUMAN RESOURCES – hiring activities, including recruitment, interviewing, training,
layoff planning, including outplacement counseling.
4. MARKETING – pricing and promotion, e-business strategies, global competition
strategies.
5. MIS – new/revised information systems, internet services
6. OPERATIONS – schedules, capacity planning, work assignments and workloads,
inventory planning, make-or-buy decisions, outsourcing, project management.
7. PRODUCT/SERVICE DESIGN – revision of current features, design of new products or
services.

FORECASTING is also an important component of yield management, which relates to the

percentage of capacity being used. Accurate forecasts can help managers plan tactics to match
capacity with demand, thereby achieving high yield levels.

TWO USES FOR FORECASTS:

o One is to help managers plan the system. Planning the system generally involves long
range plans about the types of products and services to offer, what facilitates and
equipment to have, where to locate, and so on.

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 o To help them plan the use of the system. Planning the use of the systems refers to short-
range and intermediate-range planning which involve tasks such as planning inventory
and workforce levels, planning purchasing and production, budgeting, and scheduling.

FEATURES COMMON TO ALL FORECASTS

A wide variety of forecasting techniques are in use. In many respects, they are quite
different from each other, as you shall soon discover. Nonetheless, certain features are common
to all, and it is important to recognize them.

1. Forecasting techniques generally assume that the same underlying casual system that
existed in the past will continue to exist in the future.
2. Forecasts are not perfect; actual results usually differ from predicted values; the presence
of randomness precludes a perfect forecast.
3. Forecast for groups of items tend to be more accurate that forecasts for individual items
because forecasting errors among items in a group usually have a canceling effect.
4. Forecast accuracy decreases as the time period covered by the forecast – the time horizon
increases.

ELEMENTS OF A GOOD FORECAST

1. The forecast should be timely

2. The forecast should be reliable
3. The forecast should be expressed in meaningful units
4. The forecast should be in writing
5. The forecast should be simple to understand and use
6. The forecast should be cost-effective

STEPS IN FORECASTING PROCESS

1. Determine the purpose of the forecast

2. Establish time horizon
3. Select a forecasting techniques
4. Obtain, clean, and analyze appropriate data
5. Make the forecast
6. Monitor the forecast

FORECAST ACCURACY

Accuracy and control forecasts are a vital aspect for forecasting, so forecasters want to
minimize forecast errors.

Forecast errors is the difference between the value that occurs and the value that was
predicted for a given time period. Hence, Error = Actual – Forecast:

et = At – Ft
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 o Positive errors results when the forecast is too low, negative errors when the forecast is
too high.
o Forecast errors influence decisions in two somewhat different ways.
o One is making a choice between various alternatives;
o Evaluating the success or failure of a technique in use

APPROACHES TO FORECASTING

There are two general approaches in forecasting: qualitative and quantitative.

 QUALITATIVE – methods is consist mainly of subjective inputs, which is often defy

precise numerical description.
 QUANTITATIVE – methods involves either the projection of historical data or the
development of associate models that attempt to utilize casual (explanatory) variables to
make a forecast.

The following pages present a variety of forecasting techniques that are classified as
judgmental, time-series or associative.

- Judgmental forecast – this are forecast that use subjective inputs such as opinion from
consumer surveys, sales staff, managers, executives, and experts.
 Executive opinions – a small group of upper-level managers may meet and
collectively develop a forecast. This approach is often used as a part of long-range
planning and new product development.
 Sales force opinions – members of the sales staff or the customer service staff are
often good sources of information because of their direct contact with consumers.
They are often aware of any plans the customer may be considering for the future.
 Consumer surveys – because it is the consumers who ultimately determine
demand, it seems natural to solicit input from them. In some instances, every
customer or potential customer can be contacted.
 Delphi method – It is an iterative process intended to achieve a consensus
forecast. This method involves circulating a series of questionnaires among
individuals who possess the knowledge and ability to contribute meaningfully.
- Time-series forecast – forecast that project patterns identified in recent time-series
observations.
 Trend – refers to a long-term upward or downward movement in the data.
 Seasonality – refers to short-term, fairly regular variations generally related to
factors such as the calendar or time of the day.
 Cycles – are wavelike variations of more than one year’s duration.
 Irregular variation – are due to unusual circumstances such as severe weather
conditions, strikes, or a major change in a product or service.
 Random variations – are residual variations that remain after all other behaviors
have been accounted for.
- Associative model – forecasting technique that uses explanatory variables to predict
future demand.

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 MODULE 5
PRODUCT AND SERVICE DESIGN

WHAT DOES PRODUCT AND SERVICE DESIGN DO?

The various activities and responsibilities and service design include the following
(functional interactions are shown in parentheses):

1. Translate customer wants and needs into products and service requirements. (marketing,
operations)
2. Refine existing products and services. (marketing)
3. Develop new products and/or services. (marketing, operations)
4. Formulate quality goals. (marketing, operations)
5. Formulate cost targets. (accounting, finance, operations)
6. Construct and test prototypes. (operations, marketing, engineering)
7. Document specifications.
8. Translate product and service specifications into process specifications (engineering,
operations)

REASONS FOR PRODUCT AND SERVICE DESIGN OR REDESIGN

Product and service design has typically had strategic implications for the success and
prosperity of an organization. The main forces that initiate design or redesign are market
opportunities and threats. The factors that give rise to market opportunities and threats can be
one or more changes.

 Economic – (low demand, excessive warranty claims, the need to reduce cost)
 Social and demographic – (aging baby boomers, population shifts)
 Political, liability, or legal – government changes, safety issues, new regulations)
 Competitive – (new or changed products or services, new advertising/promotions
 Cost or availability – (raw materials, components, labor)
 Technological – (in product components, processes)

LEGAL AND ETHICAL CONSIDERATIONS

 PRODUCT LIABILITY – the responsibility of a manufacturer for any injuries or

damages caused by faulty product.
 UNIFORM COMMERCIAL CODE – products carry an implication of merchantability
and fitness.

Organizations generally want designers to adhere to guidelines such as the following;

 Produce designs that are consistent with the goals of the organization.

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  Give customers the value they expect.
 Make health and safety a primary concern.

SUSTAINABILITY
Product and service design is a focal point in the quest for sustainability. Key aspects
include life cycle assessment, reduction of costs and materials used, reuse of parts of returned
products, and recycling.

1. LIFE CYCLE ASSESSMENT (LCA) – also known as life cycle analysis, is the
assessment of the environmental impact of a product or service throughout its useful life.
2. THE THREE Rs – REDUCE, REUSE AND RECYCLE – designers often reflect on
three particular aspects of potential cost saving and reducing environmental impact:
reducing the use of materials through value analysis; refurbishing and then reselling
returned goods that are deemed to have additional useful life, which is referred to as
remanufacturing; and reclaiming parts of unusable products for recycling.
3. REDUCE: VALUE ANALYSIS – value analysis refers to an examination of the
function parts and materials in an effort to reduce the cost and/or improve the
performance of a product.
4. REUSE: REMANUFACTURING – remanufacturing refers to refurbishing used
products by replacing worn-out or defective components, and reselling products.
5. RECYCLE – recycling is sometimes consideration for designers. Recycling means
recovering materials for future use. Companies recycle for a variety of reason including;
 Cost saving
 Environment concerns
 Environment regulation

The pressure to recycle has given rise to the term design for recycling (DFR),
referring to product design that takes into account the ability to
disassemble a used product to recover the recyclable parts.

RELIABILITY

Reliability is a measure of the ability of a product, a part, a service, or an entire system to

perform its intended function under a prescribed set of conditions. The importance of reliability
is underscored by its’ use by prospective buyers in comparing alternatives and by sellers as one
determinant of price.

Failure is used to describe a situation in which an item does not perform as intended.
This includes not only instances in which an item does not function at all, but also instances in
which the item’s performance is substandard or it functions in a way not intended.

Reliabilities are always specified with respect to certain conditions, called normal operation
conditions. This can include load, temperature and humidity ranges as well as operating
procedures and maintenance schedules.

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IMPROVING RELIABILTY

1. Improve component design

2. Improve production and/or assembly techniques
3. Improve testing
4. Use backups
5. Improve preventive maintenance procedures
6. Improve user education
7. Improve system design

PHASES IN PRODUCT DESIGN

1. IDEA GENERATION – product development begins with idea generation.

2. FEASIBILITY ANALYSIS – entails market analysis (demand), economic analysis,
(development cost and production cost, profit potential), and technical analysis (capacity
requirements and availability and the skills needed)
3. PRODUCT SPECIFICATIONS – once product specification have been set, attention
turns to specification for the process that will be needed to produce the product.
4. PROCESS SPECIFICATIONS – once product specifications have been set, attention
turns to specifications for the process that will be needed to produce the product.
5. PROTOTYPE DEVELOPMENT – with product and process specifications complete,
one (or a few) units are made to see if there are any problems with the product or process
specification.
6. DESIGN REVIEW – make any necessary changes or abandon.
7. MARKET TEST – a market test is used to determine the extent of consumer acceptance.
8. PRODUCT INTRODUCTION – promote the product
9. FOLLOW-UP EVALUATION – determine if changes are needed and redefine forecasts.

DESIGNING FOR PRODUCTION

 Concurrent engineering – bringing design and manufacturing engineering people together

early in the design phase to simultaneously develop the product and the process of
creating the product.
 Computer-aided design (CAD) – product design using computer graphics
 Design for manufacturing (DFM) – the designing of products that are compatible with an
organization’s capabilities.
 Design for assembly (DFA) – design the focuses on reducing the number of parts in a
product and on assembly methods and sequence.
 Quality function deployment (QFD) – an approach that integrates the “voice of the
customer” into both products and service development.

SERVICE DESIGN

Service refers to an act, something that is done to or for a customer is provided by a

service delivery system, which includes the facilities, processes, and skill needed to provide the

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service. Many services are not pure services, but part of a product bundle – the combination of
goods and services provided to a customer.

System design involves development or refinement of the overall service package:

1. The physical resources needed

2. The accompanying goods that are purchased or consumed by the customer, or provided
with the service
3. Explicit services
4. Implicit services

DIFFERENCES BETWEEN SERVICE DESIGN AND PRODUCT DESIGN

1. Products are generally tangible; services are generally intangible

2. In many instances services are created and delivered at the same time
3. Services cannot be inventoried
4. Services are highly visible to consumers and must be designed with that in mind
5. Some services have low barriers to entry and exit
6. Location is often important to service design, with convenience as a major factor.
7. Service systems range from those with little or no customer contact to those that have a
very high degree of customer contact.
8. Demand variability alternately creates waiting lines or idle service resources.

CHARACTERISTICS OF WELL-DESIGNED SERVICE SYSTEMS

 Being consistent with the organization mission

 Being user friendly
 Being robust id variability is a factor
 Being easy to sustain
 Being cost-effective
 Having value that is obvious to customers

CHALLENGES OF SERVICE DESIGN

 Requirements are variable

 Services can be difficult to describe
 Customer contact is usually much higher in services
 Service design must take into account the service-customer encounter.

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