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-inUnfamiliarity

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-upRelatively fast

ramp-upPassengers

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

Some ways in which operations can impact each 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

Some ways in which operations can impact each 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


Com

petit

iven

ess

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


Short delivery lead-time Reliable

deliverySpeed

Frequent new products/servicesWide rangeVolume and delivery changes


External and internal benefits of flexibility

Internal benefits

External benefits

Dependability

Cost

Speed

Quality Flexibility



…. a Hospital ?

Staff costs

Technology and facilities costs

Bought-in materials and services

What does Cost mean in………




Staff costs




…. a bus company?

Staff costs





…. a supermarket?


Staff costs




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


Short delivery lead-time Reliable

delivery


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

Dependability

Speed


Polar diagrams for a taxi service versus a bus service

Cost

Quality Flexibility

DependabilitySpeed

Taxiservice

Busservice


Reassurance

Crimereduction

CrimedetectionWorking with

Criminal justiceagencies

Efficiency

Actualperformance

Required performance

Polar diagrams for a proposed police performance method


Cost

Quality Flexibility

Speed

Newspaper Collectionservice

General Recyclingservice

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

Varie

ty

B

The new ‘efficient frontier’B1

X

Varie

ty

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


Cost efficiency

Varie

ty

Improvement through increasing ‘focus’ on

cost efficiencyQ

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

Process principle –

Focusing on one (or a

narrow set of)

performance

objective(s) can enable

superior performance in

that/those objectives



Cost efficiency

Varie

ty

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

Process principle –

Highly focused

operations can be

especially sensitive to

any changes in

requirements


chapter 03 essentials final

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