Chapter 3Operations strategySlack, Brandon-Jones and Joh.docx

Chapter 3
Operations strategy
Slack, Brandon-Jones and Johnston, Operations Management
PowerPoints on the Web, 7th edition © Nigel Slack, Alistair
Brandon-Jones and Robert Johnston 2014
Slide 3.‹#›
1
Slack et al.’s model of operations management
Operations performance
Operations strategy
Topic covered in this chapter
Direct
Design
Develop
Deliver

Operations management
What is operations management?
Figure 3.1 This chapter examines operations strategy
Slide 3.‹#›
2
In Chapter 3 – Operations strategy – Slack et al. identify the
following key questions…
What is strategy and what is operations strategy?
What is the difference between a ‘top-down’ and a ‘bottom-up’
view of operations strategy?
What is the difference between a ‘market requirements’ and an
‘operations resources’ view of operations strategy?
How can an operations strategy be put together?
Key operations questions
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3

Setting broad objectives that direct an enterprise towards its
overall goal.
Planning the path (in general rather than specific terms) that
will achieve these goals.
Stressing long-term rather than short-term objectives.
Dealing with the total picture rather than stressing individual
activities.
Being detached from, and above, the confusion and distractions
of day-to-day activities.
What is strategy?
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4
Strategic decisions are those decisions which are widespread in
their effect on the organization to which the strategy refers,
define the position of the organization relative to its
environment, and move the organization closer to its long-term
goals.
Strategic decisions
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5
‘Operations’ is not the same as ‘operational’
‘Operations’ are the resources that create products and
services.
‘Operational’ is the opposite of strategic, meaning day-to-
day and detailed.
So, one can examine both the operational and the strategic
aspects of operations.
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6
What is the role of the operations function?
Operations as implementer of strategy
Operations as driver of strategy
Operations as supporter of strategy
Operations implements strategy
Operations drives strategy

Operations supports strategy
Strategy
Operations
Strategy
Operations
Strategy
Operations
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7
The three key attributes
of operations strategy
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

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8
The four-stage model of operations contribution
Increasing contribution of operations
Increasing strategic impact
Increasing operations capabilities
Externally supportive
Redefining industry expectations
STAGE 4
Give an operations advantage
Driving strategy
After Hayes and Wheelwright
Internally supportive
Clearly the best in the industry
STAGE 3
Link strategy with operations
Supporting strategy
Externally neutral
As good as competitors
STAGE 2

Adopt best practice
Implementing strategy
Internally neutral
STAGE 1
Correct the worst problems
Holding the organization back
Figure 3.2 The four-stage model of operations contribution
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9
Top-down Perspective
What the business wants operations to do
Operations resources perspective
What operations resources can do
What day-to-day experience suggests operations should do
Bottom-up perspective
Market requirement perspective
What the market position requires operations to do

Operations strategy
The four perspectives on operations strategy
Figure 3.3 The four perspectives on operations strategy
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1
Corporate strategy
Business strategy
Emergent sense of what the strategy should be
Operational experience

Top-down and bottom-up perspectives of strategy
Operations strategy
Figure 3.5 The bottom-up perspective of operations strategy
and its application to the printing services group
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The strategy hierarchy
Key strategic decisions

Influences on decision making
Business strategy
What is the mission?
What are the strategic
objectives of the firm?
How to compete?
Customer/market dynamics
Competitor activity
Core technology dynamics
Financial constraints
Corporate strategy

What business to be in?
What to acquire?
What to divest?
How to allocate cash?
Economic environment
Social environment
Political environment
Company values and ethics
Functional strategy
How to contribute to the
strategic objectives?
How to manage the
function’s resources?
Skills of function’s staff
Current technology
Recent performance of the
function
Figure 3.4 The top-down perspective of operations strategy and
its application to the printing services group

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Different competitive factors and performance objectives
Competitive factors
If the customers value these...
Performance objectives
Then, 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
services

Flexibility (volume and/or delivery)
Figure 3.6 Different competitive factors imply different
performance objectives
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13
3
Order-winning competitive factors
Neutral
+ve
Performance
Competitive benefit
Order-winning factors
Figure 3.7 Order-winning, qualifying and less important

competitive factors
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Qualifying competitive factors
Neutral
+ve
Performance
Competitive benefit
Qualifying factors
competitive factors (Continued)
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15
Less important competitive factors
Neutral
+ve
Performance
Competitive benefit
Less important factors
competitive factors (Continued)
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16
Retail bankingCorporate bankingProductsPersonal financial
services such as loans and credit cardsSpecial services for
corporate customersCustomersIndividualsBusinessesProduct
rangeMedium but standardized, little need for special termsVery
wide range, many need to be customizedDesign
changesOccasionalContinualDeliveryFast decisionsDependable
serviceQualityMeans error-free transactionsMeans close

relationshipsVolume per service Most service are high
volumeMost services are low volumeProfit marginsMost are low
to medium, some highMedium to highCompetitive factorsOrder
winnersPriceCustomizationAccessibilityQuality of
serviceSpeedReliabilityQualifiersQualitySpeedRangePriceLess
importantAccessibilityInternal performance
objectivesCostFlexibilitySpeedQualityQualityDependability
Different banking services require different performance
objectives
Table 3.1 Different banking services require different
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The effects of the product/service life cycle
Sales volume
Likely order winners
Likely qualifiers
Dominant performance objectives
Customers
Competitors
Introduction
Product/ service characteristics
Quality
Range
Flexibility
Quality
Innovators
Few/none
Growth
Availability Quality

Price Range
Speed
Dependability
Quality
Early adopters
Increasing
Maturity
Low price
Dependable supply
Quality
Range
Cost
Dependability
Bulk of market
Stable
Decline
Time
Low price
Dependable supply
Cost
Laggards
Declining
Figure 3.8 The effects of the product/service life cycle on
operations performance objectives
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6
Structural strategic decisionsTypical questions which the
strategy should help to answerNew product/service designHow
should the operation decide which products or services to
develop and how to manage the development process? Supply
network designShould the operation expand by acquiring its
suppliers or its customers? If so, what customers and suppliers
should it acquire?
How should it develop the capabilities of its customers and
suppliers
What capacity should each operation in the network have?
What number of geographically separate sites should the
operation have and where should they be located?
What activities and capacity should be allocated to each
plantProcess technology What types of process technology
should the operation be using?
Should it be at the leading edge of technology or wait until the
technology is established?
Structural and infrastructural strategic decision areas
Table 3.3 Structural and infrastructural strategic decision areas
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Infrastructural strategic decisionsTypical questions which the
strategy should help to answerJob design and organizationWhat
role should the people who staff the operation play in its
management?
How should responsibility for the activities of the operations
function be allocated between different groups in the operation?
What skills should be developed in the staff of the
operation?Planning and controlHow should the operation

forecast and monitor the demand for its products and services?
How should the operation adjust its activity levels in response
to demand fluctuations?
What systems should the operation use to plan and control its
activities?
How should the operation decide the resources to be allocated
to its various activities?
(Continued)
(Continued)
Slide 3.‹#›
strategy should help to answerInventoryHow should the
operation decide how much inventory to have and where it is to
be located?
How should the operation control the size and composition of
its inventories?Supplier development How should the operation
choose its suppliers?
How should it develop its relationship with its suppliers?
How should it monitor its suppliers’ performance?
(Continued)
(Continued)
Slide 3.‹#›
strategy should help to answerImprovement How should the

operation’s performance be measured?
How should the operation decide whether its performance is
satisfactory?
How should the operation ensure that its performance is
reflected in its improvement priorities?
Who should be involved in the improvement process?
How fast should the operation expect improvement in
performance to be?
How should the improvement process be managed?Failure
prevention risk and recovery How should the operation maintain
its resources so as to prevent failure?
How should the operation plan to cope with a failure if one
occurs?
(Continued)
(Continued)
Slide 3.‹#›
Strategic resources and sustainable competitive advantage
Operations resources can give sustainable competitive
advantage if they are...
Scarce
Not very mobile
Difficult to imitate
Difficult to substitute for
Slide 3.‹#›

The four stages of the process of operations strategy
Operations strategy
formulation
Operations strategy
implementation
Operations strategy
monitoring
Operations strategy
control
Figure 3.9 The four stages of the process of operations strategy
Source: Operations Strategy, 3rd ed., pearson education Limited
(slack, n. and Lewis, M.a. 2011) p.33, Figure 1.12, © nigel
slack and Michael Lewis 2002, 2008, 2011
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The challenge of operations strategy formulation
An operations strategy should be pass the following questions…
Does it identify critical issues?
Is it comprehensive?
Is it coherent?
Does it correspond with strategic objectives?

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25
Long Ridge Gliding Club
Chapter 3 ‘end-of-chapter’ case
Source: Alamy Images/Corbis Bridge
Slide 3.‹#›
Club membersCasual flyersProduct
CustomersProduct range
Design changesDelivery
Quality
Volume per service typeProfit margins
Evaluate the service to club members and casual flyers
Provision of facilities and instruction to pursue the sport
Enthusiasts
Novice to competition gliding
None
Club/team activity, co-producer of product
Good flying conditions
300 members
Negligible
The experience of gliding
Thrill seekers
Short introductory flights

Variety of packages
Dependable flight
Support, care and attention
750 trial flights
Mostly profit
Slide 3.‹#›
Club membersCasual flyersCompetitive factorsOrder
winnersQualifiersLess importantInternal performance objectives
Evaluate the service to club members and casual flyers
(Continued)
Location
Price
Flexibility
Dependability
Cost
Flexibility
Dependability
Price
Availability
Range of products
Quality of service
Location
Speed
Dependability
Flexibility
Quality
Slide 3.‹#›
0 5CostHigh

priceLow priceDepend-abilityNot likely to be able to flyAble to
fly as arrangedFlexibilitySingle productDo anything
anytimeProduct qualityDangerous gliders and poor
instructionWell maintained gliders and excellent
instructionQuality of facilitiesVery basic facilities5*
facilitiesService qualityNon-existent serviceHelpful, attentive
and available staffSpeedWait all dayFly immediately
Chart the five performance objectives
Developing a scale for the performance objectives...
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Club member expectationCasual flyer expectationsService
deliveredCost313Dependability352Flexibility524Product
quality555Quality of facilities141Service quality252Speed353
Chart the five performance objectives (Continued)
Using the scale to rate the performance objectives for...
Slide 3.‹#›
5
4

3
2
1
Cost (Low price)
Dependability (reliable flying)
Product quality (high quality gliders and instruction)
Flexibility (change and choice)
Speed (fly immediately)
Service quality (high quality care and attention)
Quality of facilities (high quality facilities)
Club member expectations
Casual flyer expectations
Service delivered
Chart the five performance objectives (Continued)
Using the ‘polar diagram’ format...
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Do nothing
What advice would you give to the club chairman?
End trial flights
Create two processes to look after the two types of customers
Amend the process
Better manage casuals’ expectations

The options...
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Chapter 2
Slide 2.‹#›
1
Slack et al’.s model of operations management
Operations strategy
Direct
Design

Develop
Deliver
Operations management?
Figure 2.1 This chapter covers the role and strategic objectives
of operations management
Slide 2.‹#›
2
In Chapter 2 – Operations performance – Slack et al. identify
the following key questions…
Why is operations performance important in any organization?
Why is quality important?
Why is speed important?
Why is dependability important?
Why is flexibility important?
Why is cost important?
How do operations performance objectives trade-off
against each other?

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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
How operations can impact TBL performance
Figure 2.2 Some ways in which operations management can
impact triple bottom line performance
Slide 2.‹#›
How operations can impact TBL performance (Continued)

Sustainability
Recyclability of materials, energy consumption and 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
impact triple bottom line performance (Continued)
Slide 2.‹#›
Sustainability

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
Slide 2.‹#›
Sustainability
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
Slide 2.‹#›
Operations excellence
OM’s contribution to the ‘economic bottom line’
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
Figure 2.3 Operations can contribute to the economic bottom
line through low costs, high levels of service (securing

revenue), lower operational risk, lower capital requirements and
providing the capabilities that determine future innovation
Slide 2.‹#›
8
Employ skilled, enthusiastic people and encourage them to
contribute ideas for cutting out waste and working more
effectively.
Carefully monitor their customers’ perception of the quality of
service they are receiving and learn from any examples of poor
service and always apologize and rectify any failure to give
excellent service.
Have invested in simply but appropriate systems of their own
that allow the business to plan and control its activities
effectively.
Hold regular meetings where staff share their experiences and
think about how they can build their knowledge of customer
needs, new technologies and how their services will have to
change in the future to add value for their customers and help
the business to remain competitive.
Company A has operations managers who…
Table 2.1 Some operations management characteristics of two
companies

Slide 2.‹#›
Last year’s financial details for Company A.
Sales revenue = €10,000,000
Wage costs = €2,000,000
Supervisor costs = €300,000
General overheads = €1,000,000
Bought-in hardware = €5,000,000
Margin = €1,700,000
Capital expenditure = €600,000
companies (Continued)
Slide 2.‹#›
Employ only people who have worked in similar companies
before and supervise them closely to make sure that they ‘earn
their salaries’.
Have rigid ‘completions of service’ sheets that customers sign
to say that they have received the service, but they never follow
up to check on customers’ views of the service that they have
received.

Have bought an expensive integrative system with extensive
functionality, because ‘you might as well invest in state-of-the
art technology’.
At the regular senior managers’ meeting always have an agenda
item entitled ‘Future business’.
Company B has operations managers who…
Slide 2.‹#›
Sales revenue = €9,300,000
Wages costs = €1,700,000
Supervisor costs = €800,000
General overheads = €1,300,000
Bought-in hardware = €6,500,000
Margin = €700,000
Capital expenditure = €1,500,000
Last year’s financial details for Company B

Slide 2.‹#›
Original
(sales volume = 50,000 units)
(€,000)Option 1 –
Sales campaign
Increase sales volumes by 30% to 65,000 units
(€,000)Option 2 – Operations efficiency
Reduce operating expenses by 20%
(€,000)Option 3 – ‘Speedy service’
Increase price by 10%
(€,000)Sales revenue 5,000 6,500 5,000
5,500Operating expenses 4,500 5,550 3,800
4,500EBIT* 500 1,000 1,200 1,000Investment
required 100 70
The effects of three options at Kandy Kitchens
Table 2.2 The effects of three options for improving earning at
Kandy Kitchens
*EBIT = Earnings before interest and tax = Net sales –
Operating expenses. It is sometimes called ‘operating profit’.
Slide 2.‹#›

Shareholders
Directors/top management
Staff
Staff representative bodies
Regulatory bodies
Government
Suppliers
Lobby/interest groups
Customers
Some typical stakeholder groups for OM
‘Society’
Figure 2.4 Stakeholder groups with a legitimate interest in the
operation’s activities
Slide 2.‹#›
14
StakeholderWhat stakeholders want from the operationWhat the
operation wants from stakeholdersShareholdersReturn on
investment
Stability of earnings
Liquidity of investmentInvestment capital
Long-term commitmentDirectors/top
managementLow/acceptable operating costs
Secure revenue
Well-targeted investment
Low risk of failure
Future innovationCoherent, consistent, clear and achievable
strategies
Appropriate investmentStaffFair wages

Good working conditions
Safe work environment
Personal and career developmentAttendance
Diligence/best efforts
Honesty
EngagementStaff representative bodies (e.g. Trade
Unions)Conformance with national agreements
ConsultationUnderstanding
Fairness
Assistance in problem solvingSuppliers (of materials, services,
equipment, etc.)Early notice of requirements
Long-term orders
Fair price
On-time paymentIntegrity of delivery, quality and volume
Innovation
Responsiveness
Progressive price reductions
Typical stakeholders’ performance objectives
Table 2.3 Typical stakeholders’ performance objectives
Slide 2.‹#›
StakeholderWhat stakeholders want from the operationWhat the
operation wants from stakeholdersRegulators (e.g. Financial
regulators)Conformance to regulations
Feedback on effectiveness of regulationsConsistency of
regulation
Consistency of application of regulations
Responsiveness to industry concernsGovernment (local, national
and regional)Conformance to legal requirements
Contribution to (local/national/regional) economyLow/simple
taxation
Representation of local concerns
Appropriate infrastructureLobby groups (e.g. environmental

Lobby Groups)Alignment of the organization’s activities with
whatever the group are promotingNo unfair targeting
Practical help in achieving aims (if the organization wants to
achieve them)SocietyMinimize negative effects from the
operation (noise, traffic, etc.) and maximize positive effects
(jobs, local sponsorship, etc.)Support for organization’s plans
Typical stakeholders’ performance objectives (Continued)
Table 2.3 Typical stakeholders’ performance objectives
(Continued)
Slide 2.‹#›
Competitiveness
The five operations performance objectives
Quality
Being RIGHT
Speed
Being FAST
Dependability
Being ON TIME
Cost
Being PRODUCTIVE

Being ABLE TO CHANGE
Flexibility
Slide 2.‹#›
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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

Figure 2.10 Performance objectives have both external and
internal effects. Internally, cost is influenced by the other
Slide 2.‹#›
18
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.
Shutterstock/Hadrian
Slide 2.‹#›
19
3
…an automobile plant?
All assembly is to specification.
Product is reliable.

All parts are made to specification.
The product is attractive and blemish-free.
Shutterstock/Blaz Kure
Slide 2.‹#›
20
…a bus company?
The buses are clean and tidy.
The buses are quiet and fume-free.

The timetable is accurate and user-friendly.
Shutterstock/Michael Rolands
Slide 2.‹#›
21
…a supermarket?
The store is clean and tidy.
Décor is appropriate and attractive.

Goods are in good condition.
Shutterstock/Buruhtan
Slide 2.‹#›
22
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.
Slide 2.‹#›
23
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
Slide 2.‹#›
24

External and internal benefits of conformance quality
(Continued)
On-specification products and services
Internal benefits
External benefits
Dependability
Cost
Speed
Quality
Flexibility
Slide 2.‹#›
25
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.
Slide 2.‹#›
26
4
Time between dealers requesting a vehicle of a particular
specification and receiving it is minimized.
Time to deliver spares to service centres minimized.

Slide 2.‹#›
27
…a bus company?
The time between customer setting out on the journey and
reaching his or her destination is kept to a minimum.
Slide 2.‹#›
28
…a supermarket?
The time for the total transaction of going to the supermarket,
making the purchases and returning minimized.
The immediate availability of goods.

Slide 2.‹#›
29
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
Slide 2.‹#›
30

External and internal benefits of speed (Continued)
Internal benefits
External benefits
Dependability
Cost
Speed
Quality
Flexibility
Quick delivery
Slide 2.‹#›
31
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.
Slide 2.‹#›
32
On-time delivery of vehicles to dealers.
On-time delivery of spares to service centres.
Slide 2.‹#›

33
…a bus company?
Keeping to the published timetable at all points on the route.
Constant availability of seats for passengers.
Slide 2.‹#›
34
…a supermarket?
Predictable opening hours.
Proportion of goods out of stock kept to a minimum.
Keeping to reasonable queuing times.

Constant availability of parking.
Slide 2.‹#›
35
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
Slide 2.‹#›
36

Internal benefits
External benefits
Dependability
Cost
Speed
Quality
Flexibility
Dependable delivery
External and internal benefits of dependability
(Continued)
Slide 2.‹#›
37
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?
Slide 2.‹#›
38
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.

‹#›
39
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.
Slide 2.‹#›
40
…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.
Slide 2.‹#›
41
…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.

Slide 2.‹#›
42
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
Slide 2.‹#›

43
…a Hospital ?
Staff costs
Technology and facilities costs
Bought-in materials and services
What does cost mean in…
Slide 2.‹#›
44
Staff costs

Slide 2.‹#›
45
…a bus company?
Staff costs
What does Cost mean in………
Slide 2.‹#›
46
…a supermarket?
What does Cost mean in………

Staff costs
Slide 2.‹#›
47
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
Wide range
Volume and delivery changes
Low price, high margin, or both
Internal benefits
Slide 2.‹#›
48
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
Dependability
Speed
Slide 2.‹#›
49
Polar diagrams for a taxi service versus a bus service
Cost
Quality
Flexibility
Dependability

Speed
Taxi
service
Bus
service
Slide 2.‹#›
50
Cost
Quality
Flexibility
Speed
Newspaper collection
service
General recycling
service
Dependability

Polar diagrams for two recycling services
Slide 2.‹#›
51
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’.
Slide 2.‹#›
52

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
All performance objectives, to some extent, trade-off against
each other
Figure 2.12 The efficient frontier identifies operations with
performances that dominate other operations’ performance
(a)
(b)
Slide 2.‹#›
53
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
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)
Slide 2.‹#›
54

Cost efficiency
Variety
Focus strategies can change the trade-off curve from convex to
concave
Highly focused operations can be especially sensitive to any
changes in requirements
The ‘efficient frontier’ view of trade-offs (Continued)
Slide 2.‹#›
55
Operations objectives at the Penang Mutiara
Slide 2.‹#›
How can the hotel's operations management activities be
appropriate for the way it competes for business?
Two key questions...
How does the hotel compete?
How can their operations support this way of competing?

?
Slide 2.‹#›
How can the hotel's operations management activities be
appropriate for the way it competes for business? (Continued)
Two key questions...
How does the hotel compete?
How can their operations support this way of competing?
?
Competes on a global scale against other resort hotels around
the world.
At the 'up-market' end of this business.
Offers high levels of comfort to its guests.
Staff with high customer contact skills.
Guests expect high quality of service.
Decor stylish and well maintained.
Standard of the food and the level of personal attention, should
clearly identify the hotel in the luxury end of the market.
Slide 2.‹#›
Examples of changes in strategy might include...
Moving into the off-season conference market (requiring the

operation to offer different types of service package to
different guests).
Linking with other South-east Asian luxury hotels to offer
multi- location holidays (requiring the operation to co-
ordinate its reservation system with other hotels and tour
operators).
Extending its services to provide specialist sports and activity
holidays (requiring the operation to broaden its range of
activities to include specialist instructors and equipment,
medical services etc.).
How can the hotel implement any change in strategy?
But what are likely to be the main operational issues with
implementing any of these strategies?
Slide 2.‹#›
How can the hotel implement any change in strategy?
(Continued)
The key point is that the hotel is a operation – value is added
while the customer is physically ‘high visibility’ present.
The main concern will be how to implement such changes.
Without on-going operations being disrupted and customers
inconvenienced.
So there are no problems at the start of the new services, so
customers are well served as the operation ‘moves down the
learning curve’.

Slide 2.‹#›
The relationship between performance objectives
Some relationships are clearly ‘trade-offs’ for example...
Specification quality, e.g.
Appearance and decor.
Cleanliness of the hotel.
Appearance and taste of food.
Complimentary 'extras’.
Cost efficiency
In other words...investing in some aspects of the quality of the
appearance and service at the hotel will increase costs
Slide 2.‹#›
The relationship between performance objectives (Continued)
Some relationships do not ‘trade-off’ for example...
Cost efficiency
Other aspects of specification quality, e.g.
Courtesy of staff.
Friendliness of staff.
Expertise of staff.
In other words...investing in other aspects of the quality of
service can increase quality without increasing cost
Slide 2.‹#›

Some relationships have a positive relationship example...
Cost efficiency
Conformance aspects of quality, e.g.
Not making mistakes that have to be corrected
In other words...ensuring conformance aspects of the quality of
service can both increase quality and reduce cost
Slide 2.‹#›
Some relationships can have several positive effects, for
example...
Flexibility – The number of different jobs can staff perform
In other words...flexibility seems to play a central role in
'enabling' the other performance objectives.
Can increase speed – because all staff can respond to
customers’ requests
Can reduce costs – because staff can be moved to where they
are needed, increasing staff utilization
Can increase dependability – because staff can be moved to
compensate for unexpected demand for a service
Can increase quality – because staff can respond to a guest's
needs if something goes wrong

Slide 2.‹#›
Sheet:
Staff costs
Brought-in materials and services
Sheet:
Staff costs
Sheet:
Staff costs
Sheet:
Staff costs
Part one
Introduction
Chapter 1
Source: Shutterstock.com/toria
Slide 1.‹#›
1

Slack et al’.s model of operations management
Operations strategy
Direct
Design
Develop
Deliver
Figure 1.1 This chapter examines operations management
Slide 1.‹#›

2
In Chapter 1 – Operations management – Slack et al. identify
the following key questions…
Why is operations management important in all types of
organization?
What is the input-transformation-output process?
What is the process hierarchy?
How do operations processes have different characteristics?
What do operations managers do?
Slide 1.‹#›
3
Operations management is the activity of managing the
resources which are devoted to the production and delivery of
products and services.
Operations management defined
Slide 1.‹#›
4

Kitchen unit manufacturing operation
Retail operation
Take-out/restaurant operation
They are all operations
Back office operation in a bank
Source:Shutterstock/Turner
Source: Nigel Slack
Source: Nigel Slack
Source: Nigel Slack
Slide 1.‹#›
5
Core functional activities
Internet service provider (ISP)
Fast food chain
International aid charity
Furniture manufacturer
Operations
Marketing and sales
Product/service develop-ment
Maintain hardware, software and content
Implement new links and services

Make burgers, etc.
Serve customers
Maintain equipment
Give service to the beneficiaries of the charity
Make components
Assemble furniture
Promote services
to users and get registrations
Sell advertising space
Advertise on TV
Devise promotional materials
Develop funding contracts
Mail out appeals for donations
Advertise in magazines
Determine pricing policy
Sell to stores
Devise new services and commission new information content
Design hamburgers, pizzas, etc.
Design decor for restaurants
Develop new appeals campaigns
Design new assistance programmes
Design new furniture
Coordinate with fashionable colours
The activities of core functions in some organizations
Table 1.1 The activities of core functions in some organizations
Slide 1.‹#›
Design a store layout which gives smooth and effective flow
Design elegant products which can be flat-packed efficiently

Site stores of an appropriate size in the most effective locations
Maintain cleanliness and safety of storage area
Arrange for fast replenishment of products
Monitor and enhance quality of service to customers
Continually examine and improve operations practice
Ensure that the jobs of all staff encourage their contribution to
business success
Operations management at... IKEA
Source: Shutterstock.com/Diego cervo
Slide 1.‹#›
7
The consultancy services market – % of world revenues of 40
largest consultancy firms

Marketing/sales
2
Operations and process management
31
Corporate strategy
17
IT strategy
17
Benefits/actuarial
16
Organizational design
11
Financial
6
Operations management is fashionable!
Slide 1.‹#›
8
The best way to start understanding the nature of ‘Operations’
is to look around you.

Everything you can see around you (except the flesh and blood)
has been produced by an operation.
Every service you consumed today (radio station, bus service,
lecture, etc.) has also been produced by an operation.
Operations managers create everything you buy, sit on, wear,
eat, throw at people and throw away.
Operations are everywhere
Slide 1.‹#›
9
Interfunctional relationships
Engineering/ technical function
Accounting and finance function
Human resources function
Information technology (IT) function
Understanding of the capabilities and constraints of the
operations process
New product and service ideas

Understanding of the capabilities and constraints of the
operations process
Market requirements
Financial analysis for performance and decisions
Provision of relevant data
Recruitment development and training
Understanding of human resource needs
Analysis of new technology options
Understanding of process technology needs
Provision of systems for design, planning and control and
improvement
Understanding of infrastructural and system needs
Marketing function

Product/service development function
Operations function
Figure 1.2 The relationship between the operations function
and other core and support functions of the organization
Slide 1.‹#›
10
The three basic functions of enterprises
Marketing
Operations
Product/service development
Slide 1.‹#›
11
‘High-end’ sandwich and snack retailer.
Use only ‘wholesome’ ingredients.
All shops have own kitchens which makes fresh
sandwiches every day.

Fresh ingredients delivered early every morning.
Same staff who serve you at lunch made the sandwiches
that morning.
‘We don’t work nights, we wear jeans, we party…’
Example – Prêt a Manger
Source: Shutterstock.com/Food Pics
Slide 1.‹#›
12
Nutritional ‘mechanical’ and aesthetic design of the sandwiches
and snacks
Design, location and management of stores and in-store
processes and the network that supplies them
The three basic functions at Prêt a Manger
Promotional activities, market research, etc.
Slide 1.‹#›
13

Product/
Service Development
Operations
Marketing
Automobile assembly factory – operations management uses
machines to efficiently assemble products that satisfy current
customer demands
Operations management in all types of organization
Source: Nataliya Hora /Shutterstock.com
Slide 1.‹#›
14
Operations management in all types of organization (Continued)

Physician (General practitioner) – operations management uses
knowledge to effectively diagnose conditions in order to treat
real and perceived patient concerns
Source: Shutterstock/PT Images
Slide 1.‹#›
15
Management consultant – operations management uses people to
effectively create the services that will address current and
potential client needs
Source: Shutterstock/Diego cervo
Slide 1.‹#›
16
Disaster relief charity – operations management uses ours and
our partners’ resources to speedily provide the supplies and
services that relieve community suffering

Source: Shutterstock/Zurijeta
Slide 1.‹#›
17
Advertising agency – operations management uses our staff’s
knowledge and experience to creatively present ideas that
delight clients and address their real needs
Source: Shutterstock/Luciano Mortula
Slide 1.‹#›
18
Operations management uses…
machines
to
efficiently
assemble
products
effectively
knowledge
to treat real and perceived patient concerns

diagnose conditions
to
people
create
services that will address current and potential client needs
effectively
to
ours and our partners’ resources
speedily
provide
supplies and services that relieve community suffering
to
our staff’s knowledge and experience
creatively
ideas that delight clients and address their real needs
present
to
Figure 1.3 Operations management uses resources to
appropriately create outputs that fulfil defined market
requirements
Slide 1.‹#›
19
The business environment is changing, for example…Prompting
operations responses, for example…Increased cost-based
competition
Higher quality expectations
Demands for better service
More choice and variety
Rapidly developing technologies
Frequent new product/service introduction

Increased ethical sensitivity
Environmental impacts are more transparent
More legal regulation
Greater security awarenessGlobalization of operations
networking
Information-based technologies
Co-creation of service
Internet-based integration of operations activities
Supply chain management
Customer relationship management
Flexible working patterns
Mass customization
Fast time-to-market methods
Lean process design
Environmentally sensitive design
Supplier ‘partnership’ and development
Failure analysis
Business recovery planning
Operations management is changing
Table 1.2 Changes in the business environment are shaping a
new operations agenda
Slide 1.‹#›
20
All operations are input-transformation-output processes
Inputs

Outputs
Transformation process
Slide 1.‹#›
21
Customers
Transformed resources
Materials
Information
Customers
Transforming resources
Facilities
Staff
Operations input resources and outputs
Input resources
Output products and services
Transformation process
Outputs are products and services that add value for customers
Figure 1.4 All operations are input–transformation–output
processes

‹#›
22
Customers
Ingredients
Packaging
Customers
Equipment
Fittings
Staff
Inputs and outputs at Prêt a Manger
Input resources
Served and satisfied customers
Slide 1.‹#›
23
Predominantly processing inputs of materialsPredominantly
processing inputs of informationPredominantly processing
inputs of customersAll manufacturing operations
Mining companies
Retail operations

Warehouses
Postal services
Container shipping line
Trucking companiesAccountants
Bank headquarters
Market research company
Financial analysts
News service
University research unit
Telecoms companyHairdressers
Hotels
Hospitals
Mass rapid transports
Theatres
Theme parks
Dentists
Examples of dominant transformed resource inputs
Table 1.3 Dominant transformed resource inputs of various
operations
Slide 1.‹#›
Mixture of products and services – outputs that are a mixture of
the tangible and intangible
Prèt a manger
Acme whistles
Mwagusi Safari Lodge
Crude oil production
Aluminium smelting
Specialist machine tool production
Restaurant

Information systems provider
Management consultancy
Psychotherapy clinic
Pure products –outputs that are exclusively tangible
Pure services – outputs that are exclusively intangible
IKEA
Most operations produce products and services
Figure 1.5 The output from most operations is a mixture of
products and services. Some general examples are shown here
together with some of the operations featured as examples in
this chapter
Slide 1.‹#›
25
OperationSome of the operation’s inputsSome of the operation’s
processesSome of the operation’s outputsAirlineAircraft
Pilots and air crew
Ground crew
Passengers and freightCheck passengers in
Board passengers
Fly passengers and freight around the world
Care for passengersTransported passengers and
freightDepartment storeProducts for sale
Sales staff
Information systems
CustomersSource and store products
Display products
Give sales advice
Sell productsCustomers and products ‘assembled’
togetherPolicePolice officers
Computer systems

Information systems
Public (law-abiding and criminals)Crime prevention
Crime detection
Information gathering
Detaining suspectsLawful society, public with a feeling of
securityFrozen food manufacturerFresh food
Operators
Processing technology
Cold storage facilitiesSource raw materials
Prepare food
Freeze food
Pack and freeze foodFrozen food
Some operations described in terms of their processes
Table 1.4 Some operations described in terms of their processes
Slide 1.‹#›
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
Operations can be analyzed at three levels
Figure 1.6 Operations and process management requires
analysis at three levels: the supply network,
the operation and the process
Slide 1.‹#›
27
The supply network – flow between operations
Broadcasting company

Promotion agency
Studios
Casting agency
Creative agency
A programme and video supply network
Programme/video maker
The programme and video operation
The operation – flow between processes
Example of analysis at three levels
Slide 1.‹#›
28
Example of analysis at three levels (Continued)

Programme and video operation
Production unit
Set and props manufacture
Engineer-ing
Marketing and sales
Finance and accounting
Post production
The programme and video operation
Slide 1.‹#›

29
Example of analysis at three levels (Continued)
Programme and video maker
Set and props manufacture
Set design
Props acquisition
Set construction

Set finishing
The ‘Set and props manufacturing’ process
Slide 1.‹#›
30
Organizational functionSome of its processesOutputs from its
processCustomer(s) for its outputsMarketing and salesPlanning
process
Forecasting process
Order taking processMarketing plans
Sales forecasts
Confirmed ordersSenior management
Sales staff, planners, operations
Operations, financeFinance and accountingBudgeting process
Capital approval processes
Invoicing processesBudgets
Capital request evaluations
InvoicesEveryone
Senior management, requesters
External customersHuman resources managementPayroll
processes
Recruitment processes
Training processesSalary statements
New hires
Trained employeesEmployees
All other processes
All other processesInformation technologySystems review

process
Help desk process
System implementation project processesSystem evaluation
Advice
Implemented working systems and aftercareAll other processes
All other processes
All other processes
Some examples of processes in non-ops functions
Table 1.5 Some examples of processes in non-operations
functions
Slide 1.‹#›
Programme and video maker
End-to-end process for programme production
Programme set and props manufacture
Engineering
Programme marketing and sales
Programme production unit
Programme finance and accounting
Programme post production

End-to-end process for music video production
Music video set and props manufacture
Music video marketing and sales
Music video production unit
Music video finance and accounting
Music video post production
Two ‘end-to-end’ business processes
Figure 1.7 The television and video company divided into two
‘end-to-end’ business processes, one dedicated to creating
programmes and the other dedicated to creating music videos
Slide 1.‹#›
32
Variation in demand
High
Low
Visibility
High
Low

Variety
High
Low
High
Volume
Low
High
A typology of operations and processes
The four Vs...
Slide 1.‹#›
33
High
Implications
Low repetition
Each staff member performs more of each task
Less systemization
High unit costs
Implications
High repeatability
Specialization

Capital intensive
Low unit costs
Volume
Low
High
A typology of operations and processes (Continued)
The implications of high and low Volume in operations and
processes...
Figure 1.8 A typology of operations
Slide 1.‹#›
34
High
Implications
Flexible
Complex
Match customer needs
High unit costs
Implications
Well defined
Routine
Standardized
Regular
Low unit costs

Variety
High
Low
The implications of high and low Variety in operations and
processes...
Slide 1.‹#›
35
High
Implications
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Implications
Stable
Routine
Predictable
High utilization
Low unit costs
Variation in demand
High

Low
The implications of high and low Variation in operations and
processes...
Slide 1.‹#›
36
High
Implications
Short waiting tolerance
Satisfaction governed by customer perception
Customer contact skills needed
Received variety is high
High unit costs
Implications
Time lag between production and consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs
Visibility
High

Low
The implications of high and low Visibility in operations and
processes...
Slide 1.‹#›
37
Volume
It is 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 of their position?
Variety
Variation
Visibility
Low
High
High
High

High
Low
Low
Low
Anatara Bangkok Riverside Resort and Spa
Formule 1 Hotel
A four Vs analysis of two hotel operations
Figure 1.9 The four Vs profiles of two very different hotel
operations
Slide 1.‹#›
38
Input resources
Output products and services
Value-added for customers
Materials

Information
Customers
Facilities
Staff
Direct Steering operations and processes
Design Shaping processes, products and services
Deliver Planning and controlling ongoing operations
Develop Improving the operation’s capabilities
Slack et al.’s general model of operations management
Figure 1.10 A general model of operations management
Slide 1.‹#›
To be a great operations manager you need to...
Enjoy getting things done – operations management is about
doing things.
Understand customer needs – operations management is about
understanding what ‘value’ means for customers.
Communicate and motivate – operations managers must be
‘people people’.

Learn all the time – operations management is about learning,
because without learning there can be no improvement.
Commit to innovation – operations management is about being
creative, imaginative, and (sometimes) unconventional.
Know your contribution – operations management is about
contributing to the effective working of other functions.
Be capable of analysing – operations management is about
evaluating decisions.
Keep cool under pressure – operations managers need to be able
to remain calm no matter what problems occur.
Slide 1.‹#›
Design house partnerships at Concept Design Services
Slide 1.‹#›
41
Questions
The ‘design house partnerships at Concept Design Services’
case study
Why is operations management important in CDS?
How do the company’s products differ?
What would you recommend to the company if they asked you

to advise them in improving their operations?
Slide 1.‹#›
42
Why is operations management important in CDS?
What is important for each type of product/service?
Appearance
Quality conformance
Customer relationship
Speed of service
On-time delivery
Wide range of products/services
Price/cost

Slide 1.‹#›
How do operations and processes differ?
By what they are trying to do…
Market/customer/client positioning?
Operations/process performance objectives
How can operations/processes contribute to achieving
positioning?
Slide 1.‹#›

Sales support services
Dependable deliveries
Quality (specification)
Short lead-times
Fast volume changes
Quality conformance
Low prices
Fast design changes
The Concept Design Services – Polar diagram
Slide 1.‹#›
By whether they produce products or services…
But what is the difference between products and services?
Slide 1.‹#›

The Concept Design Services – Products or Services?
Does CDS produce products or services?
Pure products – little/no service element
Pure services – little/no tangible element
Focus
Concept
Joint ventures
Slide 1.‹#›
By their operating characteristics…
What is the intrinsic nature of the conditions that the
operation/process has to operate under?
How do these conditions affect the performance of
operations/processes
How do we characterize these conditions?
Slide 1.‹#›
Variation in demand
High

Low
Visibility
High
Low
Variety
High
Low
High
Volume
Low
High
The four Vs typology of operations and processes
The four Vs...
Slide 1.‹#›
49
Variation in demand
High

Low
Visibility
High
Low
Variety
High
Low
High
Volume
Low
High
A typology of operations and processes
The four Vs...
Focus
Concept
Joint ventures

Slide 1.‹#›
50

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