lesson 2 operations performance

Slack, Chambers and Johnston, Operations Management, 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 20102.1

2.1

Chapter 2

Operations performance


2.2

Design

Planning and control

Operation’s performance

Operations strategy

Improvement

Operations management

Operations strategy

Slack et al.’s model of operations management


2.3

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

Key teaching objectives


2.4

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?

Key operations questions


2.5 Operations management can make or break any organization


2.6

Shareholders

Directors / top management

Staff

Staff representative bodies

Regulatory bodiesGovernment

Suppliers

Lobby / interest groups

Customers

Stakeholder groups with a …’legitimate interest in theoperation’s activities’

‘Society’


2.7

Operations and processes excellence

Operations and process management contribution to strategy

Enhanced service

Secure revenue

Lower costs Process

efficiency

Reduced errors, better resilience

Lower ‘operational’ risk

Higher capacity utilization

Lower capital requirements

Capabilities for future innovation

Opportunities for process learning


2.8

Co

mp

etit

ive

nes

s

The five competitive objectives

Quality Being RIGHT

Speed Being FAST

Dependability Being ON TIME

Cost Being PRODUCTIVE

Being ABLE TO CHANGEFlexibility


2.9

Minimum cost, maximum value

Minimum price, highest value

Fast throughput

Quick delivery

Reliable operation

Dependable delivery

Error-free processes

Error-free products and

services

Ability to change

Frequent new products, maximum

choice

The benefits of excelling at the five objectives

Dependability

Cost

Speed

Quality Flexibility

Internal benefits

External benefits


2.10

What does Quality mean in…

Patients receive the most appropriate treatment.

… a hospital ?

Treatment is carried out in the correct manner.

Patients are consulted and kept informed.

Staff are courteous, friendly and helpful.


2.11

… an automobile plant?

All assembly is to specification.

Product is reliable.

All parts are made to specification.

The product is attractive and blemish-free.

What does Quality mean in… (Continued)


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.




2.13

… a supermarket?

The store is clean and tidy.

Décor is appropriate and attractive.

Goods are in good condition.




2.14

QualityTwo common meanings of ‘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.


2.15

Irrespective of a product or service’s 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.

External and internal benefits of conformance quality


2.16

QualityExternal and internal benefits of conformance quality (Continued)

On-specification products and services

Internal benefits

External benefits

Dependability

Cost

Speed

Quality Flexibility


2.17

The time between requiring treatment and receiving treatment is kept to a minimum.

… a hospital ?

What does Speed mean in…

The time for test results, X-rays, etc. to be returned is kept to a minimum.


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.


2.19

… a bus company?

The time between customer setting out on the journey and reaching his or her destination is kept to a minimum.



2.20

… 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.



2.21

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.


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.

External and internal benefits of speed


2.22

QualityExternal and internal benefits of speed (Continued)

Internal benefits

External benefits

Dependability

Cost

Speed

Quality Flexibility

Quick delivery


2.23 What does Dependability mean in… (Continued)

Proportion of appointments that are cancelled is kept to a minimum.

… a hospital ?

Keeping appointment times.

Test results, X-rays, etc. are returned as promised.


2.24


On-time delivery of vehicles to dealers.

On-time delivery of spares to service centres.

What does Dependability mean in… (Continued)


2.25

… a bus company?

Keeping to the published timetable at all points on the route.

Constant availability of seats for passengers.



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.



2.27

Externally – it enhances the product or service in the market, or at least avoids customer complaints.


It prevents late delivery slowing down throughput speed.

It prevents lateness causing disruption and wasted time and effort, thereby saving cost.

External and internal benefits of Dependability


2.28

QualityExternal and internal benefits of Dependability (Continued)

Internal benefits

External benefits

Dependability

Cost

Speed

Quality Flexibility

Dependable delivery


2.29

Flexibility has several distinct meanings but is always associated with an operation’s 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

Flexibility – What does it mean?


2.30

What does flexibility mean in…

Introducing new treatments

…. a hospital ?

A wide range of treatments

The ability to adjust the number of patients treated

The ability to reschedule appointments.


2.31


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.

What does flexibility mean in… (Continued)


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.



2.33

… 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.



2.34

Depend-ability

FlexibilityQuality

Speed

Cost

External and internal benefits

External and internal benefits of flexibilityExternal and internal benefits

Depend-ability

FlexibilityQuality

Cost


Short delivery lead-time

Reliable deliverySpeed

Frequent new products/servicesWide rangeVolume and delivery changes


2.35

QualityExternal and internal benefits of flexibility (Continued)

Internal benefits

External benefits

Dependability

Cost

Speed

Quality Flexibility



2.36

… a hospital ?

Staff costs

Technology and facilities costs

Bought-in materials and services

What does Cost mean in…


2.37



Staff costs


What does Cost mean in… (Continued)


2.38

… a bus company?

Staff costs





2.39

… a supermarket?


Staff costs




2.40

The cost of producing products and services is obviously influenced by many factors such as input costs, but two important sets are

The 4 V’s–volume – variety – variation – visibility

The internal performance of the operation at – quality – speed – dependability – flexibility

Cost


2.41

QualityExternal and internal benefits of performance objectives

Dependability

Cost

Speed

Quality Flexibility

External benefits


Short delivery lead-time

Reliable delivery


Low price, high margin, or both

Internal benefits


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

Quality Flexibility

Dependa-bility

Speed


2.43

Polar diagrams for a taxi service versus a bus service

Cost

Quality Flexibility

DependabilitySpeed

Taxiservice

Busservice


2.44

Reassurance

Crimereduction

CrimedetectionWorking with

Criminal justiceagencies

Efficiency

Actualperformance

Required performance

Polar diagrams for a proposed police performance method


2.45

Cost

Quality Flexibility

Speed

Newspaper collectionservice

General recyclingservice

Dependability

Polar diagrams for newspaper collection and generalrecycling services


2.46

Trade-offs

‘Do you want it good, or do you want it Tuesday?’

‘No such thing as a free lunch’.

‘You can’t 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’.


2.47

A

X C

D

Cost efficiency

Va

riet

y

B

The new ‘efficient frontier’

B1

X

Va

riet

y

A

C

D

B

The ‘efficient frontier’

Cost efficiency

The ‘efficient frontier’ view of trade-offs

All performance objectives, to some extent,

trade-off against each other


2.48

Cost efficiency

Va

riet

y

Improvement through increasing ‘focus’ on

cost efficiencyQ

Q1

Improvement through increasing ‘focus’ on variety

P

P1 Improvement through overcoming the trade-

off between variety and cost efficiency

Improvement through focus… …or improvement through overcoming trade-offs

Process principle –

Focusing on one (or a

narrow set of)

performance

objective(s) can enable

superior performance in

that/those objectives

The ‘efficient frontier’ view of trade-offs (Continued)


2.49

Cost efficiency

Va

riet

y

Focus strategies can change the trade-off curve from convex to concave

Process principle –

Highly focused

operations can be

especially sensitive to

any changes in

requirements

The ‘efficient frontier’ view of trade-offs (Continued)


2.50

Introduction Growth Maturity Decline

Sa

les

volu

me

Volume

Customers

Competitors

Variety of product/ service design

Slow growth in sales

Innovators

Few/none

Customization or frequent

design changes

Rapid growth in sales volume

Early adopters

Increasing numbers

Increasingly standardized

Sales slow and level off

Bulk of market

Stable number

Emerging dominant types

Market needs largely met

Laggards

Declining numbers

Possible move to commodity

standardization

The effects of the product / service life cycle

Time


2.51

Introduction Growth Maturity Decline

Sa

les

volu

me

The effects of the product / service life cycle (Continued)

Time

Likely order winners

Likely qualifiers

Dominant performance

objectives

Product/ service

characteristics

Qualityrange

Flexibilityquality

Availability quality

Price range

Speeddependability

quality

Low pricedependable

supply

Qualityrange

Costdependability

Low price

Dependable supply

Cost


2.52 Different competitive factors imply different performance objectives

Competitive factorsIf the customers value these …

Performance objectivesThen, the operations will need to

excel at these …

Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (products/services)

Wide range of products and services Flexibility (mix)

The ability to change the timing or quantity of products and

servicesFlexibility (volume and/or delivery)


2.53 Order-winning, qualifying and less importantcompetitive factors

Neutral

+ve

–ve

Performance

Competitive benefit

Order-winning factors


2.54 Order-winning, qualifying and less importantcompetitive factors (Continued)

Neutral

+ve

–ve

Performance

Competitive benefit

Qualifying factors


2.55

Neutral

+ve

–ve

Performance

Competitive benefit

Less important factors

Order-winning, qualifying and less importantcompetitive factors (Continued)


2.56

Questions

Operations objectives at the Penang Mutiara

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?

lesson 2 operations performance

Documents

operations performance

stuart chambers

robert johnston

operations function

operations performanceslack

operations managers

nigel slack

key operations questionsslack