2.

Chapter 2 Operations performance

2.1

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.2

Slack et al.s model of operations management

Operations performance Operations strategy Operations management Operations strategy

Design

Improvement

Planning and control

2.2

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.3

Key teaching objectives

1. To demonstrate that there is a whole range of performance criteria, which can be used to judge an operation and which operations managers influence apart from cost 2. To demonstrate that for each performance objective there are internal and external benefits. 3. To introduce the idea of trade-offs between operations objectives

2.3

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.4

Key operations questions

In Chapter 2 Operations performance Slack et al. identify the following key questions:
Why is operations performance important in any organization? How does the operations function incorporate all stakeholders objectives? 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?

2.4

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.5

Operations management can make or break any organization

2.5

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.6

Stakeholder groups with a legitimate interest in the operations activities

Lobby / interest groups

Shareholders

Society

Directors / top management Suppliers

Staff Staff representative bodies

Regulatory bodies

Customers

Government

2.6

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.7

Operations and process management contribution to strategy

Capabilities for future innovation Opportunities for process learning
Process efficiency

Lower costs

Operations and processes excellence

Enhanced service

Secure revenue

Reduced errors, better resilience

Higher capacity utilization Lower capital requirements

Lower operational risk

2.7

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.8

The five competitive objectives

Quality Speed Dependability Flexibility Cost

Being RIGHT Being FAST Being ON TIME Being ABLE TO CHANGE

Being PRODUCTIVE

2.8

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.9

The benefits of excelling at the five objectives

Minimum price, highest value

Cost Quick delivery Speed Minimum cost, maximum value Fast throughput Internal benefits Reliable operation Dependable delivery Dependability

Error-free processes Quality Error-free products and services

Ability to change
Flexibility Frequent new products, maximum choice External benefits

2.9

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.10

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.

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.10

2.11

What does Quality mean in (Continued)

an automobile plant?

All assembly is to specification. Product is reliable. All parts are made to specification.

The product is attractive and blemish-free.

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.11

2.12

What does Quality mean in (Continued)

a bus company?

The buses are clean and tidy. The buses are quiet and fume-free. The timetable is accurate and user-friendly.

Staff are courteous, friendly and helpful.

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.12

2.13

What does Quality mean in (Continued)

a supermarket?

The store is clean and tidy. Dcor is appropriate and attractive. Goods are in good condition.

Staff are courteous, friendly and helpful.

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.13

2.14

Two common meanings of Quality 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.

2.14

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.15

External and internal benefits of conformance quality

Irrespective of a product or services specification quality, producing it in a way that 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.

2.15

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.16

External and internal benefits of conformance quality Quality (Continued)

Cost

Speed

Dependability

Internal benefits

Quality On-specification products and services

Flexibility

External benefits
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.16

2.17

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.

2.17

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.18

What does Speed mean in (Continued)

an automobile plant?

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

2.18

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.19

What does Speed mean in (Continued)

a bus company?

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

2.19

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.20

What does Speed mean in (Continued)

a supermarket?

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

The immediate availability of goods.

2.20

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.21

External and internal benefits of 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.

Internally it brings other benefits to the operation.

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.

2.21

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.22

External and internal benefits Quality of speed (Continued)

Cost

Quick delivery
Speed Internal benefits Dependability

Quality

Flexibility

External benefits
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.22

2.23

What does Dependability mean in (Continued)

a hospital ?

Proportion of appointments that are cancelled is kept to a minimum. Keeping appointment times.
Test results, X-rays, etc. are returned as promised.
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.23

2.24

What does Dependability mean in (Continued)

an automobile plant?

On-time delivery of vehicles to dealers.

On-time delivery of spares to service centres.

2.24

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.25

What does Dependability mean in (Continued)

a bus company?

Keeping to the published timetable at all points on the route. Constant availability of seats for passengers.

2.25

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.26

What does Dependability mean in (Continued)

a supermarket?

Predictable opening hours

Proportion of goods out of stock kept to a minimum Keeping to reasonable queuing times Constant availability of parking.
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.26

2.27

External and internal benefits of Dependability

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 late delivery slowing down throughput speed. It prevents lateness causing disruption and wasted time and effort, thereby saving cost.

2.27

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.28

External and internal benefits of Dependability (Continued) Quality

Cost Dependable delivery Speed Internal benefits Dependability

Quality

Flexibility

External benefits
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.28

2.29

Flexibility What does it mean?

Flexibility has several distinct meanings but is always associated with an operations 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
2.29

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.30

What does flexibility mean in

. a hospital ?

Introducing new treatments A wide range of treatments The ability to adjust the number of patients treated The ability to reschedule appointments.
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.30

2.31

What does flexibility mean in (Continued)

an automobile plant?

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.

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.31

2.32

What does flexibility mean in (Continued)

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.
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.32

2.33

What does flexibility mean in (Continued)

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.
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.33

2.34

External and internal benefits of flexibility

External and internal benefits
Short delivery lead-time

Cost
Speed Dependability
Reliable delivery

Quality
On-specification products and services

Flexibility

Frequent new products/services Wide range Volume and delivery changes

2.34

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.35

External and internal benefits Qualityof flexibility (Continued)

Cost

Speed

Dependability

Internal benefits

Quality

Flexibility

External benefits

Frequent new products/services Wide range Volume and delivery changes

2.35

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.36

What does Cost mean in

a hospital ?

Bought-in materials and services

Technology and facilities costs

Staff costs

2.36

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.37

What does Cost mean in (Continued)

an automobile plant?

Bought-in materials and services

Technology and facilities costs

Staff costs

2.37

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.38

What does Cost mean in (Continued)

a bus company?

Bought-in materials and services Staff costs

Technology and facilities costs

2.38

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.39

What does Cost mean in (Continued)

a supermarket?

Bought-in materials and services

Technology and facilities costs

Staff costs

2.39

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.40

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 Vsvolume variety variation visibility The internal performance of the operation at quality speed dependability flexibility
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.40

2.41

External and internal benefits of performance objectives Quality

Low price, high margin, or both

Short delivery lead-time Speed

Cost

Reliable delivery Dependability

Quality

Internal benefits

External benefits Flexibility Frequent new products/services Wide range Volume and delivery changes

On-specification products and services

2.41

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.42

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
Speed Dependability

Quality

Flexibility

2.42

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.43

Polar diagrams for a taxi service versus a bus service

Taxi service

Cost

Bus service

Speed

Dependability

Quality

Flexibility

2.43

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.44

Polar diagrams for a proposed police performance method

Required performance Actual performance Reassurance

Efficiency

Crime reduction

Working with Criminal justice agencies

Crime detection

2.44

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.45

Polar diagrams for newspaper collection and general recycling services

Newspaper collection service

General recycling service Cost

Speed

Dependability

Quality

Flexibility

2.45

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.46

Trade-offs
Do you want it good, or do you want it Tuesday? No such thing as a free lunch. You cant 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.
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.46

2.47

The efficient frontier view of trade-offs

Variety
The efficient frontier

Variety

The new efficient frontier B1 B

X
D

D
Cost efficiency

Cost efficiency

2.47

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.48

The efficient frontier view of trade-offs (Continued)

Improvement through focus or improvement through overcoming trade-offs

Improvement through increasing focus on variety P1 P Improvement through overcoming the tradeoff between variety and cost efficiency

Variety

Q Cost efficiency
2.48

Improvement through increasing focus on Q1 cost efficiency

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.49

The efficient frontier view of trade-offs (Continued)

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

Variety

Cost efficiency
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.49

2.50

The effects of the product / service life cycle

Sales volume

Time Introduction Volume Customers Competitors Variety of product/ service design Slow growth in sales Innovators Few/none

Growth
Rapid growth in sales volume Early adopters Increasing numbers Increasingly standardized

Maturity Sales slow and level off Bulk of market Stable number

Decline Market needs largely met Laggards Declining numbers Possible move to commodity standardization

Customization or frequent design changes

Emerging dominant types

2.50

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.51

The effects of the product / service life cycle (Continued)

Sales volume

Time Introduction Likely order winners Product/ service characteristics Quality range Flexibility quality

Growth
Availability quality

Maturity Low price dependable supply Quality range Cost dependability

Decline Low price

Likely qualifiers Dominant performance objectives

Price range

Dependable supply Cost

Speed dependability quality

2.51

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.52

Different competitive factors imply different performance objectives

Competitive factors If the customers value these Low price High quality Fast delivery Reliable delivery Innovative products and services Wide range of products and services The ability to change the timing or quantity of products and services Performance objectives Then, the operations will need to excel at these Cost Quality Speed Dependability Flexibility (products/services) Flexibility (mix) Flexibility (volume and/or delivery)

2.52

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.53

Order-winning, qualifying and less important competitive factors

Order-winning factors

+ve

Competitive benefit

Neutral

ve

Performance
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.53

2.54

Order-winning, qualifying and less important competitive factors (Continued)

Qualifying factors

+ve

Competitive benefit

Neutral

ve

Performance
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.54

2.55

Order-winning, qualifying and less important competitive factors (Continued)

Less important factors

+ve

Competitive benefit

Neutral

ve

Performance
Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2.55

2.56

Operations objectives at the Penang Mutiara

Questions
1. What are the design decisions which the hotel's operations managers must make? 2. What do planning and control mean in an operation such as this? 3. How might an operation such as this improve its performance levels?

2.56

Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 2010