Role of operations, objectives of operations

Chapter 2

The strategic role and objectives
of operations
Source: Honda Motor Company

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

What is the role of the Operations function?
Operations as Operations
strategy
Operations supports
implementer as driver

Operations
Operations

Strategy
Strategy

Operations

supporter
as Strategy
Operations Operations Operations
implements strategy drives strategy


The strategic role of the Operations function
The 3 key attributes
Operations contribution
of Operations
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 four-stage model of Operations contribution

ons
ti
Redefining industry STAGE 4

era
expectations Give an

p
operations

of o
advantage
Increasing strategic impact

tion
STAGE 3
Clearly the best in Link strategy ing

ribu
with operations riv egy
D at
the industry
str

ont
c
STAGE 2
ng
rt i y

ng
As good as the Adopt best o
pp t eg

si
competitors practice
Su tra
rea
Inc s
g
STAGE 1 t in
Holding the Correct the en
m gy
organization back worst ple te
Im stra
problems
Internally Externally Internally Externally
neutral neutral supportive supportive

Increasing operations capabilities


Broad strategic objectives for an operation
applied to stakeholder groups
Society
Increase employment
Enhance community well-being
Produce sustainable products
Ensure clean environment
Suppliers Customers
Continue business Appropriate product or
Develop supplier service specification
capability Consistent quality
Provide transparent Fast delivery
information Dependable delivery
Acceptable price

Shareholders Employees
Economic value from Continuous employment
investment Fair pay
Ethical value from Good working conditions
investment Personal development


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

Quality Being RIGHT

Speed Being FAST Competitiveness

Dependability Being ON TIME

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE


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)?


The benefits of excelling

Minimum price, highest value

Cost
Quick Dependable
delivery delivery
Minimum cost,
Speed maximum value Dependability

Fast Reliable
throughput operation

Error-free Ability to
processes change
Quality Flexibility
Error-free Frequent new
products and products, maximum
services choice


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



… 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


Quality
External and
internal benefits

Cost

Speed Depend-
ability

Quality Flexibility

On-specification
products and
services


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




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

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
External and
internal benefits

Cost
Short delivery
lead-time
Speed Depend-
ability

Quality Flexibility

On-specification
products and
services


What does Dependability mean in …

… a hospital?

The proportion of appointments that are cancelled
is kept to a minimum
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


Dependability

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
External and
internal benefits

Cost
Short delivery
Reliable
lead-time
delivery
Speed Depend-
ability

Quality Flexibility

On-specification
products and
services


Flexibility
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


What does Flexibility mean in …

… a hospital?

Introducing new treatments

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


Flexibility
External and
internal benefits

Cost
Short delivery
Reliable
lead-time
delivery
Speed Depend-
ability

Quality Flexibility
Frequent new
products/services
On-specification Wide range
products and Volume and delivery
services changes


What does Cost mean in …

… a hospital?

Technology
Bought-in and facilities
materials costs
and
services

Staff
costs




Bought-in Technology
materials and facilities
and costs
services
Staff
costs



… a bus company?

Bought-in
materials Technology
and and facilities
services costs

Staff
costs



… a supermarket?

Technology
Bought-in and facilities
materials costs
and
services
Staff
costs


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 V’s: volume
variety
variation
visibility
The internal performance of the operation in terms of
quality
speed
dependability
flexibility


Cost
External and Low price, high
internal benefits margin, or both

Cost
Short delivery
Reliable
lead-time
delivery
Speed Depend-
ability

Quality Flexibility
Frequent new
products/services
On-specification Wide range
products and Volume and delivery
services changes


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

Taxi Bus
service service
Cost

Speed Dependability

Quality Flexibility


Polar diagrams for a proposed police performance
method
Required performance
Actual
performance
Reassurance

Efficiency Crime
reduction

Crime
Working with detection
criminal justice
agencies


Polar diagrams for newspaper collection and general recycling
services

General recycling
Newspaper collection service
service Cost

Speed Dependability

Quality Flexibility


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 Test
Mass 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.


Role of operations, objectives of operations

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