2. Market potential Intended market position Market strategy Operation’s capabilities Operation’s resources and processes Operations Resources Market Requirements The ‘Direct’, ‘Develop’, ‘Deploy’ strategic improvement cycle DEVELOP operations capabilities through learning DEPLOY operation’s contribution DIRECT performance and prioritization The Strategic Operations Improvement Cycle

3. Continuous improvement at a strategic level Market Requirements Operations Resources Intended competitive position in the market place D EPLOY operation’s contribution by exploiting superior capabilities Potential competitive position in the market place MARKET STRATEGY DEVELOP operations capabilities through learning The operation’s capabilities and performance Getting the fit right The operation’s resources and processes DIRECT performance

4. DIRECT – getting the fit right ‘ Fit’ means that the operations resources and processes are aligned with the requirements of its markets. Line of fit Market requirements Operations resource capability

5. Intended market position Operation’s resources and processes Targets Performance DIRECT Directing improvement is a cycle of comparing targets with performance

6. Customer Satisfaction Productivity Quality Dependability Speed Flexibility Cost Agility Market Objectives Financial Objectives Overall Strategy Detailed performance targets Increasing aggregation Increasing strategic relevance Increasing diagnostic power Increasing frequency of measurement Performance targets can involve different levels of aggregation Intended market position Operation’s resources and processes

7. 40 50 60 70 80 90 100 X X X X X X Time Last year’s average performance = 60% Actual performance = 83% Performance by historical standards is GOOD Different standards of comparison give different messages 40 50 60 70 80 90 100 X X X X X X Time Last year’s average performance = 60% Actual performance = 83% Performance by historical standards is GOOD Performance against improvement goal is POOR Improvement goal = 95%

8. 40 50 60 70 80 90 100 X X X X X X Time Last year’s average performance = 60% Actual performance = 83% Performance by historical standards is GOOD Performance against improvement goal is POOR Performance against competitors is GOOD Different standards of comparison give different messages 40 50 60 70 80 90 100 X X X X X X Time Last year’s average performance = 60% Actual performance = 83% Performance by historical standards is GOOD Performance against improvement goal is POOR Performance against competitors is GOOD Absolute performance is POOR Improvement goal = 95% Improvement goal = 95% Competitor performance = 75% Competitor performance = 75% Absolute performance = 100%

9. 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 I mportance for customers LOW HIGH P erformance against competitors GOOD BAD URGENT ACTION IMPROVE APPROPRIATE EXCESS? F E A C D B The importance-performance matrix

10. 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 I mportance for customers LOW HIGH P erformance against competitors GOOD BAD The importance-performance matrix for TAG’s ‘overnight temperature-controlled’ service X X X X X X X X X X Volume flexibility Delivery Drop quote Window quote Distribution quality Documentation service Delivery flexibility Enquiry lead-time Order/dispatch quality Price/Cost

11. Cost Flexibility Speed Dependability Quality Quality + dependability Quality Quality + dependability + speed Quality + dependability + speed + flexibility Quality + dependability + speed + flexibility + cost The sandcone model of improvement; cost reduction relies on a cumulative foundation of improvement in the other performance objectives

12. Key Indicators All staff are able to explain the operation’s strategic objectives Individuals and groups use the strategic objectives to focus improvement activity All proposed changes are assessed against strategic objectives All improvement is monitored and measured against strategic objectives DIRECT – getting the fit right

13. DEVELOP Knowledge Control Operation’s capabilities Operation’s resources and processes Developing operations capabilities is encouraged by a cycle of attempting to control processes which enhances process knowledge which, in turn, makes control easier

14. It isn’t just a matter of being given the right resources Operations with the same resources will not all give the same performance So what makes the difference? How they are able to learn DEVELOP – through learning

15. Process performance variable Upper bound of acceptability Upper bound of variation Lower bound of variation Lower bound of acceptability TIME A process performance chart

16. Process performance variable Upper bound of acceptability Upper control limit Lower control limit Lower bound of acceptability TIME A statistical process control chart Distribution of ‘normal’ variation in process performance

17. Lower control limits Upper control limits TIME TIME Low process variation allows changes in process performance to be readily detected

18. Systematic learning You can’t learn about a process when it’s out of control If things are in control you notice changes so you can investigate them so you can identify root causes so you can put things right and improve the process and learn more about it

19. Process Control Learning Process Knowledge Process control starts the learning which develops process knowledge

20. “ Knowledge is power” 1 Complete ignorance Nowhere 2 Awareness Tacit 3 Measurement Written 4 Control of mean Written and in hardware 5 Process capability Hardware and operating manual 6 Process characterization Empirical equations 7 Know why Scientific models 8 Complete knowledge None Full Stage Term Knowledge Typical form of knowledge DEVELOP – through learning

21. DEVELOP Knowledge Control Operation’s capabilities Operation’s resources and processes Understanding process limits Better products and services Wide product/service range Less costly flexibility Enhanced quality Customer loyalty Retain best staff Staff job satisfaction Understanding of process inputs Higher process efficiency Enhanced supplier relationships Lower costs Process control may be one of the most operational of tasks, but it can bring strategic benefit

22. Building on learning Key Indicators Learning is made explicit, “What have you learned at work today?” Process knowledge is seen as a key operations objective Individuals and groups share their learning Individuals seek out opportunities to actively learn and experiment Learning is captured and debated Designated individuals are responsible for learning from other operations

23. DEPLOY – the c ontribution and role of Operations In everyday life we all switch roles How we see our role shapes how we behave and interact with others So critical to success operations strategy is changing how operations management see themselves and are seen by others The key issues is “What should we expect from operations management?”

24. DEPLOY Contribution Expectations Market potential Operation’s capabilities Deploying operation’s capabilities to create market potential means ensuring that the operations function is expected to contribute to market positioning

25. Link s trategy w ith o perations Give an o perations a dvantage Externally supportive Adopt best p ractice Correct the w orst p roblems Increasing contribution of operations Internally supportive Externally neutral Internally neutral STAGE 1 STAGE 2 STAGE 3 STAGE 4 Stop holding the organi z ation back Be as good as competitors Be clearly the best in the industry Redefine the industry’s expectations Challenges for operations Operations are expected to be ……. Hays and Wheelwright’s 4-stage model

26. Correct the Worst Problems Internally neutral The role of operations can be defined by its aspirations STAGE 1 STAGE 2 STAGE 3 STAGE 4 Stop holding the organi z ation back Increasing contribution of operations Adopt best Practice Externally neutral Be as good as competitors The ability to Implement strategy Link Strategy With Operations Internally supportive Be clearly the best in the industry The ability to Support strategy Give an Operations Advantage Externally supportive Redefine the industry’s expectations The ability to Drive strategy

27. Contribution and Role Key Indicators Staff cooperate and contribute in areas other than their own Staff understand their role in the internal and external supply chain The concept of internal supplier development is established Staff have visited and talked with their internal and external customers Staff are capable of making a contribution two organi z ational levels above their own

28. 9 8 7 6 5 4 3 2 1 9 8 7 6 5 4 3 2 1 Staff attitude Knowledge of staff Getting to right person Time to resolution Kept informed Completeness Staff understanding LOW HIGH IMPORTANCE BAD GOOD PERFORMANCE Importance-performance matrix for the New Jersey survey Slide 11.17

29. 0.1 1.0 0.01 1000 100000 100000 1000000 10000000 Cumulative volume of calls processed Log-log experience curve for KPG Atlanta call center Associate hours per call 10.0 Slide 11.18