Chapter 03 essentials final

Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011
Chapter 3
Social, environmental and
economic performance

Design
Deliver
Direct
Develop
Operations
Management
Slack et al’s model of operations management
Operations
strategy
Social,
environmental
and economic
performance

In Chapter 3 - Social, environmental and economic
performance – Slack et. al. identify the following key questions
Why is operations performance important in any
organization?
How should the operations function judge itself?
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

The opening day at Terminal 5 at Heathrow Airport
London
Unfamiliarity
with security
log-in
Unfamiliarity
with new
process
Unfamiliarity
with baggage
system
Loaders can’t
find new parking
spaces
Loaders late
in arriving Aircraft loading
under-capacity
Baggage
handling
system slows
Baggage backs-
up in system
New signage
confusing
Poor
communication
Passenger
queues
backing-up
Relatively fast
ramp-up
Passengers
can’t drop bags

The triple bottom line
People – The social
account, measured
by the impact of the
operation on the
quality of people’s
lives
Planet – The environmental
account, measured by
environmental impact of the
operation
Profit – The economic
account, measured by
profitability, return on
assets, etc of the
operation.
Sustainability

People
Planet
Profit
Some ways in which operations can impact each
element of the triple bottom line - Planet
•Recyclability of materials, energy
consumption, waste material
generation
•Reducing transport-related energy
•Noise pollution, fume and emission
pollution
•Obsolescence and wastage
•Environmental impact of
process failures
•Recovery to minimize impact
of failures

People
Planet
Profit
element of the triple bottom line – People
•Customer safety from products and services
•Employment impact of an operation’s location
•Employment implications of outsourcing
•Repetitive or alienating work
•Staff safety and workplace stress
•Non-exploitation of developing country suppliers

People
Planet
Profit
element of the triple bottom line - Profit
•Cost of producing products and services
•Revenue from the effects of quality, speed, dependability, and
flexibility
•Effectiveness of investment in operations resources
•Risk and resilience of supply
•Building capabilities for the future

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
utilisation
Lower capital
requirements
Capabilities for future
innovation
Opportunities for
process learning

The five competitive objectives
Quality Being RIGHT
Speed Being FAST
Dependability Being ON TIME
Cost Being PRODUCTIVE
Being ABLE TO CHANGEFlexibility

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

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

Two 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

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
External and internal benefits of conformance quality

External and internal benefits of conformance quality
On-specification
products and
services
Internal
benefits
External
benefits
Dependability
Cost
Speed
Quality Flexibility

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

Time between dealers requesting a vehicle of a
particular specification and receiving it is minimized
Time to deliver spares to service centres minimized

…. a bus company?
The time between 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
minimized
The immediate availability of goods

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

External and internal benefits of speed
Internal
benefits
External
benefits
Dependability
Cost
Speed
Quality Flexibility
Quick
delivery

What does Dependability mean in………
Proportion of appointments that are cancelled kept
to a minimum
…. a Hospital ?
Keeping appointment times
Test results, X-rays, etc. 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
External and internal benefits of Dependability

External and internal benefits of dependability
Internal
benefits
External
benefits
Dependability
Cost
Speed
Quality Flexibility
Dependable
delivery

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

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

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 goods
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 benefitsExternal and internal benefits
Depend-
ability
FlexibilityQuality
Cost
On-specification
products and
services
Short delivery
lead-time
Reliable
delivery
Speed
Frequent new
products/services
Wide range
Volume and delivery
changes

External and internal benefits of flexibility
Internal
benefits
External
benefits
Dependability
Cost
Speed
Quality Flexibility
Frequent new
products/services
Wide range
Volume and delivery
changes

…. a Hospital ?
Staff
costs
Technology
and facilities
costs
Bought-in
materials
and
services
What does Cost mean in………

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

…. a bus company?
Staff
costs
Technology
and facilities
costs
Bought-in
materials
and
services

…. a supermarket?
Staff
costs
Technology
and facilities
costs
Bought-in
materials
and
services

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

External and internal benefits of performance objectives
Dependability
Cost
Speed
Quality Flexibility
External
benefits
On-specification
products and
services
Short delivery
lead-time
Reliable
delivery
Frequent new
products/services
Wide range
Volume and delivery
changes
Low price, high
margin, or both
Internal
benefits

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

Polar diagrams for a taxi service versus a bus service
Cost
Quality Flexibility
DependabilitySpeed
Taxi
service
Bus
service

Reassurance
Crime
reduction
Crime
detectionWorking with
Criminal justice
agencies
Efficiency
Actual
performance
Required performance
Polar diagrams for a proposed police performance
method

Cost
Quality Flexibility
Speed
Newspaper Collection
service
General Recycling
service
Dependability
Polar diagrams for Newspaper Collection and General
Recycling services

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.”

A
X C
D
Cost efficiency
Variety
B
The new ‘efficient
frontier’
B1
X
Variety
A
C
D
B
The ‘efficient
frontier’
Cost efficiency
The ‘efficient frontier’ view of trade-offs

Cost efficiency
Variety
Improvement through
increasing ‘focus’ on
cost efficiency
Q
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

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

Chapter 03 essentials final

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Chapter 03 essentials final