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Lecture 3 MBF2213 | Operations Management

Prepared by Dr Khairul Anuar

L3: Operations Performance

Design

Planning and control

Operation’s performance

Operations strategy

Improvement

Operations management

Operations strategy

Slack et al.’s model of operations management

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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?

Key operations questions

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Operations management can make or break any organization

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Shareholders

Directors / top

management

Staff

Staff representative

bodies

Regulatory

bodies Government

Suppliers

Lobby / interest

groups

Customers

Stakeholder groups with a …’legitimate interest in the operation’s activities’

‘Society’

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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 utilization

Lower capital requirements

Capabilities for future innovation

Opportunities for process learning

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The five competitive objectives

Quality Being RIGHT

Speed Being FAST

Dependability Being ON TIME

Cost Being PRODUCTIVE

Being ABLE TO CHANGE Flexibility

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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

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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.

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… an automobile plant?

All assembly is to specification. Product is reliable.

All parts are made to specification.

The product is attractive and blemish-free.

What does Quality mean in… (Continued)

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… 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.

What does Quality mean in… (Continued)

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… a supermarket?

The store is clean and tidy. Décor is appropriate and attractive.

Goods are in good condition.

Staff are courteous, friendly and helpful.

What does Quality mean in… (Continued)

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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.

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Irrespective of a product or service’s 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.

External and internal benefits of conformance quality

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External and internal benefits of conformance quality (Continued)

On-specification products and services

Internal

benefits

External

benefits

Dependability

Cost

Speed

Quality Flexibility

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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.

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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.

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… a bus company?

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

What does Speed mean in… (Continued)

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… 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.

What does Speed mean in… (Continued)

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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.

External and internal benefits of speed

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External and internal benefits of speed (Continued)

Internal

benefits

External

benefits

Dependability

Cost

Speed

Quality Flexibility

Quick delivery

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What does Dependability mean in… (Continued)

Proportion of appointments that are cancelled is kept to a minimum.

… a hospital ?

Keeping appointment times. Test results, X-rays, etc. are returned as promised.

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… an automobile plant?

On-time delivery of vehicles to dealers. On-time delivery of spares to service centres.

What does Dependability mean in… (Continued)

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… a bus company?

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

What does Dependability mean in… (Continued)

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… a supermarket?

Predictable opening hours Proportion of goods out of stock kept to a minimum Keeping to reasonable queuing times Constant availability of parking.

What does Dependability mean in… (Continued)

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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.

External and internal benefits of Dependability

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External and internal benefits of Dependability (Continued)

Internal

benefits

External

benefits

Dependability

Cost

Speed

Quality Flexibility

Dependable delivery

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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?

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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.

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… 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.

What does flexibility mean in… (Continued)

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… 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.

What does flexibility mean in… (Continued)

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… 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.

What does flexibility mean in… (Continued)

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Depend-ability

Flexibility Quality

Speed

Cost

External and internal benefits

External and internal benefits of flexibility External and internal benefits

Depend-ability

Flexibility Quality

Cost

On-specification products and services

Short delivery lead-time

Reliable delivery Speed

Frequent new products/services

Wide range

Volume and delivery changes

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External and internal benefits of flexibility (Continued)

Internal

benefits

External

benefits

Dependability

Cost

Speed

Quality Flexibility

Frequent new products/services

Wide range

Volume and delivery changes

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… a hospital ?

Bought-in materials and services

What does Cost mean in…

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… an automobile plant?

Bought-in materials and services

What does Cost mean in… (Continued)

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… a bus company?

Staff costs

Technology and facilities costs

Bought-in materials and services

What does Cost mean in… (Continued)

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… a supermarket?

What does Cost mean in… (Continued)

Staff costs

Technology and facilities costs

Bought-in materials and services

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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

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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

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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

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Polar diagrams for a taxi service versus a bus service

Cost

Quality Flexibility

Dependability Speed

Taxi service

Bus service

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Reassurance

Crime reduction

Crime detection Working with

Criminal justice agencies

Efficiency

Actual performance

Required performance

Polar diagrams for a proposed police performance method

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Cost

Quality Flexibility

Speed

Newspaper collection service

General recycling service

Dependability

Polar diagrams for newspaper collection and general recycling services

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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’.

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A

X C

D

Cost efficiency

Var

iety

B

The new ‘efficient frontier’

B1

X

Var

iety

A

C

D

B

The ‘efficient frontier’

Cost efficiency

The ‘efficient frontier’ view of trade-offs

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Cost efficiency

Var

iety

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

The ‘efficient frontier’ view of trade-offs (Continued)

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Cost efficiency

Var

iety

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

The ‘efficient frontier’ view of trade-offs (Continued)

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