Lesson 2 Operations Performance

2.
Chapter 2 Operations performance
2.1
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010
2.2
Slack et al.s model of operations management
Operations performance Operations strategy Operations management Operations strategy
Design
Improvement
Planning and control
2.2
2.3
Key teaching objectives

1. To demonstrate that there is a whole range of performance criteria, which can be used to judge an operation and which operations managers influence apart from cost 2. To demonstrate that for each performance objective there are internal and external benefits. 3. To introduce the idea of trade-offs between operations objectives
2.3
2.4
Key operations questions

In Chapter 2 Operations performance Slack et al. identify the following key questions:
Why is operations performance important in any organization? How does the operations function incorporate all stakeholders objectives? What does top management expect from the operations function? What are the performance objectives of operations and what are the internal and external benefits which derive from excelling in each of them? How do operations performance objectives trade off against each other?
2.4
2.5
Operations management can make or break any organization
2.5
2.6
Stakeholder groups with a legitimate interest in the operations activities
Lobby / interest groups
Shareholders
Society
Directors / top management Suppliers
Staff Staff representative bodies

Regulatory bodies
Customers
Government
2.6
2.7
Operations and process management contribution to strategy

Capabilities for future innovation Opportunities for process learning
Process efficiency
Lower costs
Operations and processes excellence
Enhanced service
Secure revenue
Reduced errors, better resilience
Higher capacity utilization Lower capital requirements
Lower operational risk

2.7
2.8
The five competitive objectives
Quality Speed Dependability Flexibility Cost
Being RIGHT Being FAST Being ON TIME Being ABLE TO CHANGE
Being PRODUCTIVE
2.8
2.9
The benefits of excelling at the five objectives

Minimum price, highest value
Cost Quick delivery Speed Minimum cost, maximum value Fast throughput Internal benefits Reliable operation Dependable delivery Dependability
Error-free processes Quality Error-free products and services
Ability to change
Flexibility Frequent new products, maximum choice External benefits
2.9
2.10
What does Quality mean in
a hospital ?
Patients receive the most appropriate treatment. Treatment is carried out in the correct manner. Patients are consulted and kept informed.
Staff are courteous, friendly and helpful.

2.10
2.11
What does Quality mean in (Continued)
an automobile plant?
All assembly is to specification. Product is reliable. All parts are made to specification.
The product is attractive and blemish-free.

2.11
2.12
a bus company?
The buses are clean and tidy. The buses are quiet and fume-free. The timetable is accurate and user-friendly.

2.12
2.13
a supermarket?
The store is clean and tidy. Dcor is appropriate and attractive. Goods are in good condition.

2.13
2.14
Two common meanings of Quality Quality

Quality as the specification of a product or service e.g. Lower Hurst Farm produces organic meat raised exclusively on its own farm.
Quality as the conformance with which the product or service is produced e.g. Quick service restaurants like McDonalds may buy less expensive meat, but its conformance must be high.
2.14
2.15
External and internal benefits of conformance quality

Irrespective of a product or services specification quality, producing it in a way that it conforms to its specification consistently brings benefits to any operation Externally it enhances the product or service in the market, or at least avoids customer complaints. Internally it brings other benefits to the operation. It prevents errors slowing down throughput speed. It prevents errors causing internal unreliability and low dependability. It prevents errors causing wasted time and effort, therefore saving cost.
2.15
2.16
External and internal benefits of conformance quality Quality (Continued)
Cost
Speed
Dependability
Internal benefits
Quality On-specification products and services
Flexibility
External benefits
2.16
2.17
What does Speed mean in
a hospital ?
The time between requiring treatment and receiving treatment is kept to a minimum.
The time for test results, X-rays, etc. to be returned is kept to a minimum.
2.17
2.18
What does Speed mean in (Continued)
Time between dealers requesting a vehicle of a particular specification and receiving it is minimized. Time to deliver spares to service centres is minimized.
2.18
2.19
a bus company?
The time between customer setting out on the journey and reaching his or her destination is kept to a minimum.
2.19
2.20
a supermarket?
The time for the total transaction of going to the supermarket, making the purchases and returning is minimized.
The immediate availability of goods.
2.20
2.21
External and internal benefits of speed

Speed again has different interpretations externally and internally Externally it means the elapsed time between a customer asking for a product or service and getting it (in a satisfactory condition).
It often enhances the value of the product or service to customers.

Internally it brings other benefits to the operation.
It helps to overcome internal problems by maintaining dependability.

It reduces the need to manage transformed resources as they pass through the operation, therefore saving cost.
2.21
2.22
External and internal benefits Quality of speed (Continued)
Cost
Quick delivery
Speed Internal benefits Dependability
Quality
Flexibility
External benefits
2.22
2.23
What does Dependability mean in (Continued)
a hospital ?
Proportion of appointments that are cancelled is kept to a minimum. Keeping appointment times.
Test results, X-rays, etc. are returned as promised.
2.23
2.24
On-time delivery of vehicles to dealers.
On-time delivery of spares to service centres.
2.24
2.25
a bus company?
Keeping to the published timetable at all points on the route. Constant availability of seats for passengers.
2.25
2.26
a supermarket?
Predictable opening hours

Proportion of goods out of stock kept to a minimum Keeping to reasonable queuing times Constant availability of parking.
2.26
2.27
External and internal benefits of Dependability

Externally it enhances the product or service in the market, or at least avoids customer complaints.
Internally it brings other benefits to the operation.

It prevents late delivery slowing down throughput speed. It prevents lateness causing disruption and wasted time and effort, thereby saving cost.
2.27
2.28
External and internal benefits of Dependability (Continued) Quality
Cost Dependable delivery Speed Internal benefits Dependability
Quality
Flexibility
External benefits
2.28
2.29
Flexibility What does it mean?

Flexibility has several distinct meanings but is always associated with an operations ability to change Change what ? The products and services it brings to the market Product/service flexibility The mix of products and services it produces at any one time Mix flexibility
The volume of products and services it produces Volume flexibility

The delivery time of its products and services Delivery flexibility
2.29
2.30
What does flexibility mean in
. a hospital ?
Introducing new treatments A wide range of treatments The ability to adjust the number of patients treated The ability to reschedule appointments.
2.30
2.31
What does flexibility mean in (Continued)
The introduction of new models A wide range of options The ability to adjust the number of vehicles manufactured
The ability to reschedule manufacturing priorities.

2.31
2.32
a bus company?
The introduction of new routes and excursions A large number of locations served The ability to adjust the frequency of services The ability to reschedule trips.
2.32
2.33
a supermarket?
The introduction of new goods
A wide range of goods stocked The ability to adjust the number of customers served
The ability to get out-of-stock items.
2.33
2.34
External and internal benefits of flexibility

External and internal benefits
Short delivery lead-time
Cost
Speed Dependability
Reliable delivery
Quality
On-specification products and services
Flexibility
Frequent new products/services Wide range Volume and delivery changes
2.34
2.35
External and internal benefits Qualityof flexibility (Continued)
Cost
Speed
Dependability
Internal benefits
Quality
Flexibility
External benefits
Frequent new products/services Wide range Volume and delivery changes
2.35
2.36
What does Cost mean in
a hospital ?
Bought-in materials and services
Technology and facilities costs
Staff costs
2.36
2.37
What does Cost mean in (Continued)
Staff costs
2.37
2.38
a bus company?
Bought-in materials and services Staff costs
2.38
2.39
a supermarket?

Staff costs
2.39
2.40
Cost
The cost of producing products and services is obviously influenced by many factors such as input costs, but two important sets are The 4 Vsvolume variety variation visibility The internal performance of the operation at quality speed dependability flexibility
2.40
2.41
External and internal benefits of performance objectives Quality

Low price, high margin, or both
Short delivery lead-time Speed
Cost
Reliable delivery Dependability
Quality
Internal benefits
External benefits Flexibility Frequent new products/services Wide range Volume and delivery changes
On-specification products and services
2.41
2.42
Polar diagrams
Polar diagrams are used to indicate the relative importance of each performance objective to an operation or process.
They can also be used to indicate the difference between different products and services produced by an operation or process. Cost
Speed Dependability
Quality
Flexibility
2.42
2.43
Polar diagrams for a taxi service versus a bus service
Taxi service
Cost
Bus service
Speed
Dependability
Quality
Flexibility
2.43
2.44
Polar diagrams for a proposed police performance method
Required performance Actual performance Reassurance
Efficiency
Crime reduction
Working with Criminal justice agencies
Crime detection
2.44
2.45
Polar diagrams for newspaper collection and general recycling services
Newspaper collection service
General recycling service Cost
Speed
Dependability
Quality
Flexibility
2.45
2.46
Trade-offs
Do you want it good, or do you want it Tuesday? No such thing as a free lunch. You cant have an aircraft which flies at the speed of sound, carries 400 passengers and lands on an aircraft carrier. Operations are just the same. (Skinner) Trade-offs in operations are the way we are willing to sacrifice one performance objective to achieve excellence in another.
2.46
2.47
The efficient frontier view of trade-offs

Variety
The efficient frontier
Variety
The new efficient frontier B1 B
X
D
D
Cost efficiency
Cost efficiency
2.47
2.48
The efficient frontier view of trade-offs (Continued)
Improvement through focus or improvement through overcoming trade-offs

Improvement through increasing focus on variety P1 P Improvement through overcoming the tradeoff between variety and cost efficiency
Variety
Q Cost efficiency
2.48
Improvement through increasing focus on Q1 cost efficiency
2.49
The efficient frontier view of trade-offs (Continued)

Focus strategies can change the trade-off curve from convex to concave
Variety
Cost efficiency
2.49
2.50
The effects of the product / service life cycle

Sales volume
Time Introduction Volume Customers Competitors Variety of product/ service design Slow growth in sales Innovators Few/none
Growth
Rapid growth in sales volume Early adopters Increasing numbers Increasingly standardized
Maturity Sales slow and level off Bulk of market Stable number
Decline Market needs largely met Laggards Declining numbers Possible move to commodity standardization
Customization or frequent design changes
Emerging dominant types
2.50
2.51
The effects of the product / service life cycle (Continued)

Sales volume
Time Introduction Likely order winners Product/ service characteristics Quality range Flexibility quality
Growth
Availability quality
Maturity Low price dependable supply Quality range Cost dependability
Decline Low price
Likely qualifiers Dominant performance objectives
Price range
Dependable supply Cost
Speed dependability quality
2.51
2.52
Different competitive factors imply different performance objectives

Competitive factors If the customers value these Low price High quality Fast delivery Reliable delivery Innovative products and services Wide range of products and services The ability to change the timing or quantity of products and services Performance objectives Then, the operations will need to excel at these Cost Quality Speed Dependability Flexibility (products/services) Flexibility (mix) Flexibility (volume and/or delivery)
2.52
2.53
Order-winning, qualifying and less important competitive factors
Order-winning factors
+ve
Competitive benefit
Neutral
ve
Performance
2.53
2.54
Order-winning, qualifying and less important competitive factors (Continued)
Qualifying factors
+ve
Competitive benefit
Neutral
ve
Performance
2.54
2.55
Order-winning, qualifying and less important competitive factors (Continued)
Less important factors
+ve
Competitive benefit
Neutral
ve
Performance
2.55
2.56
Operations objectives at the Penang Mutiara
Questions
1. What are the design decisions which the hotel's operations managers must make? 2. What do planning and control mean in an operation such as this? 3. How might an operation such as this improve its performance levels?
2.56

Lesson 2 Operations Performance

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Lesson 2 Operations Performance

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2.

Chapter 2 Operations performance

Slack et al.s model of operations management

Operations performance Operations strategy Operations management Operations strategy

Planning and control

Key teaching objectives

Key operations questions

Operations management can make or break any organization

Stakeholder groups with a legitimate interest in the operations activities

Lobby / interest groups

Directors / top management Suppliers

Staff Staff representative bodies

Operations and process management contribution to strategy

Operations and processes excellence

Reduced errors, better resilience

Higher capacity utilization Lower capital requirements

Lower operational risk

The five competitive objectives

Quality Speed Dependability Flexibility Cost

Being RIGHT Being FAST Being ON TIME Being ABLE TO CHANGE

The benefits of excelling at the five objectives

Error-free processes Quality Error-free products and services

What does Quality mean in

Staff are courteous, friendly and helpful.

What does Quality mean in (Continued)

The product is attractive and blemish-free.

What does Quality mean in (Continued)

Staff are courteous, friendly and helpful.

What does Quality mean in (Continued)

Staff are courteous, friendly and helpful.

Two common meanings of Quality Quality

External and internal benefits of conformance quality

External and internal benefits of conformance quality Quality (Continued)

Quality On-specification products and services

What does Speed mean in

What does Speed mean in (Continued)

What does Speed mean in (Continued)

What does Speed mean in (Continued)

The immediate availability of goods.

External and internal benefits of speed

It often enhances the value of the product or service to customers.

It helps to overcome internal problems by maintaining dependability.

External and internal benefits Quality of speed (Continued)

What does Dependability mean in (Continued)

What does Dependability mean in (Continued)

On-time delivery of vehicles to dealers.

On-time delivery of spares to service centres.

What does Dependability mean in (Continued)

What does Dependability mean in (Continued)

Predictable opening hours

External and internal benefits of Dependability

Internally it brings other benefits to the operation.

External and internal benefits of Dependability (Continued) Quality

Cost Dependable delivery Speed Internal benefits Dependability

Flexibility What does it mean?

The volume of products and services it produces Volume flexibility

What does flexibility mean in

What does flexibility mean in (Continued)

The ability to reschedule manufacturing priorities.

What does flexibility mean in (Continued)

What does flexibility mean in (Continued)

The introduction of new goods

External and internal benefits of flexibility