chapter 1 quick review…

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Chapter 1

Quick Review…


Transformed resources …

Materials Information Customers

Transforming resources …

Facilities Staff

Customers

Output products

and services

Input resources

Some inputs are transformed resources

Some inputs are transforming resources

Outputs are products and services that add value for customers

Transformation process


Operations can be analyzed at three levels

Flow between operations

The level of the supply network

The level of the operation

Flow between processes

The level of the process Flow between resources


A Typology of OperationsImplications Implications

Changing capacityAnticipationFlexibility

In touch with demandHigh unit costs

StableRoutine

PredictableHigh utilizationLow unit costs

Variation in demand

High Low

VisibilityHigh Low

Short waiting toleranceSatisfaction governed by

customer perceptionCustomer contact skills

neededReceived variety is high

High unit costs

Time lag between production and consumption

StandardizationLow contact skills

High staff utilizationCentralizationLow unit costs

FlexibleComplex

Match customer needsHigh unit costs

Well definedRoutine

StandardizedRegular

Low unit costs

VarietyHigh Low

High

Low repetitionEach staff member

performs more of jobLess systemization

High unit costs

High repeatabilitySpecialization

Capital intensiveLow unit costs

VolumeLow High


Key Terms Test

Operations managementThe activities, decisions and responsibilities of managing the

production and delivery of products and services.

Operations functionThe arrangement of resources that are devoted to the production

and delivery of products and services.

Operations managersThe staff of the organization who have particular responsibility

for managing some or all of the resources which comprise the operation’s function.


Key Terms TestTransformed resourcesThe resources that are treated, transformed or converted in a process,

usually a mixture of materials, information and customers.

Input resourcesThe transforming and transformed resources that form the input to

operations.

Transforming resourcesThe resources that act upon the transformed resources, usually

classified as facilities (the buildings, equipment and plant of an operation) and staff (the people who operate, maintain and manage the operation).


Chapter 2

The strategic role and objectives of operations

Source: Honda Motor Company


Key teaching objectives

• To stress to students the importance of how the operations function sees its role and contribution within an organization

• To show students that there is a progression of operations excellence (using Hayes and Wheelwright’s nomenclature) from Stage 1 to Stage 4.

• To demonstrate that there is a whole range of performance criteria, which can be used to judge an operation and which operations managers influence

• To demonstrate that for each performance objective there are internal and external benefits.


What is the role of the Operations function?Operations as implementer

Operations implements strategy

Strategy

Operations

Operations drives strategy

Operations as driver

Strategy

Operations

Operations supports strategy

Operations as

supporter

Strategy

Operations


The 3 key attributes of Operations

Operations contribution

Implementing Be dependable

Operationalize strategy

Explain practicalities

Supporting Be appropriate

Understand strategy

Contribute to decisions

Driving Be innovative

Provide foundation of strategy

Develop long-term capabilities

The strategic role of the Operations function


Internally neutral

STAGE 1 Correct the

worst problems

Holding the organization back

Increasing contributio

n of operatio

ns

The four-stage model of Operations contribution

Externally neutral

As good as the competitors

STAGE 2 Adopt best

practice

Implementin

g

strategy

Internally supportive

Clearly the best in the industry

STAGE 3 Link strategy

with operations

Supporting

strategy

Externally supportive

Redefining industry expectations

STAGE 4 Give an

operations advantage

Driving

strategy

Incr

easi

ng s

trat

egic

impa

ct

Increasing operations capabilities


Broad strategic objectives for an operation applied to stakeholder groups

SocietyIncrease employmentEnhance community well-beingProduce sustainable productsEnsure clean environment

CustomersAppropriate product or service specificationConsistent qualityFast deliveryDependable deliveryAcceptable price

SuppliersContinue businessDevelop supplier capabilityProvide transparent information

ShareholdersEconomic value from investmentEthical value from investment

EmployeesContinuous employmentFair payGood working conditionsPersonal development


Com

petit

iven

ess

The Operations function can provide a competitive advantage through its performance at the five competitive objectives

Quality Being RIGHT

Speed Being FAST

Dependability Being ON TIME

Cost Being PRODUCTIVE

Being ABLE TO CHANGEFlexibility


What do the terms quality, speed, dependability, flexibility and cost mean in the context of operations?

Which enables you to do things cheaply (cost advantage)?

Which enables you to change what you do (flexibility advantage)?

Which enables you to do things quickly (speed advantage)?

Which enables you to do things on time (dependability advantage)?

Which enables you to do things right (quality advantage)?


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

Dependability

Cost

Speed

Quality Flexibility


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



… an automobile plant?

All assembly is to specification

Product is reliable

All parts are made to specification

The product is attractive and blemish-free


… a bus company?


The buses are clean and tidy

The buses are quiet and fume-free

The timetable is accurate and user-friendly



… a supermarket?


The store is clean and tidy

Décor is appropriate and attractive

Goods are in good condition



Quality

‘Quality’ has several meanings. The two most common are …

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 McDonald’s may buy less expensive meat, but its conformance must be high


Quality

Irrespective of a product or service’s specification quality, producing it so 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


Depend-ability

FlexibilityQuality

Speed

Cost

QualityExternal and internal benefits

On-specification products and services


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




The time between dealers requesting a vehicle of a particular specification and receiving it is minimized

The time to deliver spares to service centres is minimized



… a bus company?

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



… a supermarket?

The time for the total transaction of going to the supermarket, making the purchases and returning is minimized

Goods are immediately available


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

Speed


Depend-ability

FlexibilityQuality

Speed

Cost

SpeedExternal and internal benefits


Short delivery lead-time


What does Dependability mean in …

The 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




On-time delivery of vehicles to dealers

On-time delivery of spares to service centres



… a bus company?

Keeping to the published timetable at all points on the route

Constant availability of seats for passengers



… a supermarket?

Predictable opening hours

Proportion of goods out of stock kept to a minimum

Keeping to reasonable queuing times

Constant availability of parking


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, therefore saving cost

Dependability


Depend-ability

FlexibilityQuality

Speed

Cost

DependabilityExternal and internal benefits

Depend-ability

FlexibilityQuality

Speed

Cost



Reliable delivery


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 Flexibility mean in …

Introducing new treatments

… a hospital?

Providing a wide range of treatments

The ability to adjust the number of patients treated

The ability to reschedule appointments




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


… 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


… a supermarket?


The introduction of new lines

A wide range of goods stocked

The ability to adjust the number of customers served

The ability to get out-of-stock items


Depend-ability

FlexibilityQuality

Speed

Cost

External and internal benefits

FlexibilityExternal and internal benefits

Depend-ability

FlexibilityQuality

Cost



Reliable deliverySpeed

Frequent new products/servicesWide rangeVolume and delivery changes


What does Cost mean in …

… a hospital?

Staff costs

Technology and facilities costs

Bought-in materials and services





Staff costs



… a bus company?


Staff costs




… a supermarket?


Staff costs




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 in terms of quality speed dependability flexibility

Cost


Volume

Important to understand how different operations are positioned on the 4 V’s.

Is their position where they want to be?

Do they understand the strategic implications?

Variety

Variation

Visibility

Low

High

High

High

High

Low

Low

Low

Four Star Hotel

4 V’s profile of two operations

Budget Hotel


CostExternal and internal benefits

Depend-ability

FlexibilityQuality

Speed

Cost

Depend-ability

FlexibilityQuality

Cost



Reliable deliverySpeed

Frequent new products/servicesWide rangeVolume and delivery changes

Low price, high margin, or both


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


Polar diagrams for a taxi service versus a bus service

Cost

Quality Flexibility

DependabilitySpeed

Taxiservice

Busservice


Reassurance

Crimereduction

CrimedetectionWorking with

criminal justiceagencies

Efficiency

Actualperformance

Required performance

Polar diagrams for a proposed police performance method


Polar Representation – Organisation D

SpeedCost

Dependability

QualityFlexibility


Polar Representation – Organisation E (Mosaic tiles)

SpeedCost

Dependability

QualityFlexibility


Polar Representation – Organisation E (Outside wall tiles)

SpeedCost

Dependability

QualityFlexibility


SpeedCost

Dependability

QualityFlexibility

Org. A

Org. C

Org. D

Org. B

Org. E

Polar Representation for all Organisations


Key Terms Test

The four-stage model of operations contribution

A model devised by Hayes and Wheelwright that categorizes the degree to which operations management has a positive influence on overall strategy.

Quality

There are many different approaches to defining this. We define it as consistent conformance to customers’ expectations.

Speed

The elapsed time between customers requesting products or services and receiving them.


Key Terms Test

Dependability

Delivering, or making available, products or services when they were promised to the customer.

Flexibility

The degree to which an operation’s process can change what it does, how it is doing it, or when it is doing it.

Product/service flexibility

The operation’s ability to introduce new or modified products and services.


Key Terms Test

Mix flexibility

The operation’s ability to produce a wide range of products and services.

Volume flexibility

The operation’s ability to change its level of output or activity to produce different quantities or volumes of products and services over time.

Delivery flexibility

The operation’s ability to change the timing of the delivery of its services or products.


Key Terms TestMass customization

The ability to produce products or services in high volume, yet vary their specification to the needs of individual customers or types of customer.

Agility

The ability of an operation to respond quickly and at low cost as market requirements change.

Productivity

The ratio of what is produced by an operation or process to what is required to produce it, that is, the output from the operation divided by the input to the operation.

chapter 1 quick review…

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