OPERATIONS STRATEGY
For
- The organization strategy provides the overall
direction for the organization. It is broad in scope, covering
the entire organization.
- Operations strategy is 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.
COMMONLY USED STRATEGIES
- Quality-based strategies focus on maintaining or
improving the quality of an organization’s products or
services. Quality-based strategies may be motivated by a
variety of factors. They may reflect an effort to overcome an
image of poor quality, a desire to catch up with the
competition, a desire to maintain an existing image of high
quality, or some combination of these and other factors.
- 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).
PRODUCTIVITY
Productivity – a measure of the effective use of
resources, usually expressed as the ratio of output to input.
Productivity A measure of the effective use of resources,
usually expressed as the ratio of output to input. Output
(goods and services) relative to the input (labor, materials,
energy, and other resources)
Output
Productivity = Input
FACTORS AFFECTING PRODUCTIVITY
- 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.
- Use of the Internet can lower costs of a wide range of
transactions, thereby increasing productivity.
- 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 information technology workers and other
technical 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.
- Labor turnover has a negative effect on productivity;
replacements need time to get up to speed.
- Design of the workspace can impact productivity.
example, having tools and other work items within easy reach
can positively impact productivity.
- Incentive plans that reward productivity increases can
boost productivity.
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.
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.
FORECASTING
Forecasts are a basic input in the decision 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. Having
a forecast of demand is essential for determining how much
capacity or supply will be needed to meet demand.
TWO ASPECTS OF FORECAST
1. The expected level of demand can be a function of
some structural variation, such as a trend or seasonal
variation.
2. Forecast accuracy is a function of the ability of
forecasters to correctly model demand, random
variation, and sometimes unforeseen events.
TIME HORIZON
1. Short-term forecasts pertain to ongoing operations.
2. Long-range forecasts can be an important strategic
planning tool.
3. Long-term forecasts pertain to new products or
services, new equipment, new facilities, or something
else that will require a somewhat long lead time to
develop, construct, or otherwise implement.
USES OF FORECASTS IN BUSINESS
ORGANIZATIONS:
Accounting. New product/process cost estimates, profit
projections, cash management.
Finance. Equipment/equipment replacement needs timing and
amount of funding/borrowing needs.
Human resources. Hiring activities, including recruitment,
interviewing, and training;layoff planning, including
outplacement counseling.
Marketing. Pricing and promotion, e-business strategies,
global competition strategies.
MIS. New/revised information systems, Internet services.
Operations. Schedules, capacity planning, work assignments
and workloads, inventory
planning, make-or-buy decisions, outsourcing, project
management.
Product/service design. Revision of current features, design
of new products or services.

STEPS IN THE FORECASTING PROCESS

1. Determine the purpose of the forecast. How will it

be used and when will it be needed? This step will
provide an indication of the level of detail required in
the forecast, the amount of resources (personnel,
computer time, dollars) that can be justified, and the
level of accuracy necessary.
2. Establish a time horizon. The forecast must indicate
a time interval, keeping in mind that accuracy
decreases as the time horizon increases.
3. Obtain, clean, and analyze appropriate data.
Obtaining the data can involve significant effort.
Once obtained, the data may need to be “cleaned” to
get rid of outliers and obviously incorrect data before
analysis.
4. Select a forecasting technique.
5. Make the forecast.
6. Monitor the forecast. A forecast has to be monitored
to determine whether it is performing in a satisfactory
manner. If it is not, reexamine the method,
assumptions, validity of data, and so on; modify as
needed; and prepare a revised forecast.