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LATIN AMERICA

WESTERN EUROPE

ASIA PACIFIC

NORTH AMERICA

MEA

EASTERN EUROPE

Presented by

Zaenal ABIDINNimas Kharismamurti

Yendra BUDIANA

GROUP 1OPERATIONS

PERFORMANCE

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Introduction Operations performance can make or break

any organization The stakeholder’s perspective on operation

performance Corporate social responsibility ( CSR ) The Five Generic Performance Objectives The Internal & External effects of the

performance objectives What is a trade off ? Targeting and operation focus

Type of Focus Benefit and risk in focus Drifting out of focus

Case Study Q & A

Agenda

The Five Generic Performance Objectives

Quality Speed

Dependability

Flexibility

How the relative importance of different aspect of performance changes over time?

How performance objectives trade off against each others?

How exceptional performance levels can be reached by focusing on a limited set of objectives and exploiting the trade off between objectives?

THREE RELATED ASPECT OF PERFOMANCE TO UNDERSTANDING OPERATION STRATEGY

Key QuestionsHow can operation performance make or break the organization?

What are operation performance objectives?

Do the role and key performance objectives of operation stay constant or vary over time?

Are trade-off between operations performance objectives inevitable, or can they be overcome?

What are the advantages and disadvantages of focused operations?

Market Requirements

Relative importance of the operation resource perspective

Operations Resources

Operation performance

CapacitySupply networksProcess technologyDevelopment and Organization

QualitySpeedDependabilityFlexibilityCost

Relative importance of the market requirements perspective

Performance Obj A

Perfo

rman

ce O

bj

B Trade OFF

Operation strategy and resulting performance basically will bring either make or break any business, It’s not because the operation function is large and in most business, BUT

The operations function gives the ability to compete by providing the ability to respond to customers and developing capabilities that will keep it ahead of it’s competitors in the future.

Assessing the performance of anything is hardly work

Perceived performance is a function of amongst other things- Who you are ( Customer, employee, stockholder ), your objective ( often disputed )- Timescale ( what is judge as good now may not be appropriate next year )- measurability ( how do you measure trust, relationship, security ect )- how comprehensive you want to be

Operation Performance Impact to Organisation

All operation have stack holders- Stakeholder are the people and

groups who have a legitimate interest in operation strategy – both internal ( operation employee ) and external ( customer, society or community groups and company shareholders )

External stakeholder may have direct commercial relationship with organization, ie suppliers and customers other may not ie. Industry regulators

In non profit organization, these stakeholder groups can overlap, voluntary worker may be employee, shearholders and customers all at once.

The Stackholder Perspective on Operation Performance

Stakeholder What stakeholders wants from the operation

What the operation want from stakeholder

Shareholder ROIStability of earningLiquidity of investment

Investment capitalLong term commitment

Directors / Top Management

Low / acceptable operating costSecure revenueWell targeted investmentLow risk failureFuture innovation

Coherent, consistent, clear and achievable strategic, Appropriate investment

Staff Fair wagesGood working conditionsSafe work environmentPersonal & Career development

Attendance, Diligent / best effort, Honesty and Engagement

Staff representative bodies

Conformance with national agreements, Consultation

Understanding, Fairness, Assistance in problem solving

Suppliers ( Material, Service, Equipment ect )

Early notice of requirements, long term order, fair price, on time payment

Integrity of delivery, quality and volume, Innovation, responsiveness, progressive price reduction

Typical Stakeholder Performance Objectives

Stakeholder What stakeholders wants from the operation

What the operation want from stakeholder

Regulators ( ie, financial regulators )

Conformance to regulationsFeedback on effectiveness of regulations

Consistency of regulationConsistency of application of regulationsResponsiveness to industry concern

Government ( Local, national, regional )

Conformance to legal requirements, contribution to (local / national / regional ) economy

Low / simple taxation, Representation of local concern, Appropriate infrastructure

Lobby groups ( ie, Environment lobby group )

Alignment of the regulation’s activities with what ever the group is promoting

No unfair targeting , practical help in achieving aims

Society Minimize negative effect from the operation ( noise, traffic ), maximize positive effect ( job, sponsorship, ect )

Support for the organization’s plans

The company has responsibility to ensure that it’s own employee are treated well, society at large is not

negatively affected by the operations, minimize vehicle

pollution, minimise wastage of material, energy ect

Typical Stakeholder Performance Objectives

Holcim work with the « triple bottom line « 

Inputs Output

Operations

Resources

Information :Switzerland company

80 K peoples70 countries production site

The world’s leading cement and aggregates industry ( crushed

stone, gravel and sand)

Produced : ready mix concrete supplies, asphalt, offering

consulting, research, trading, engineering, and other services.

Problem : give significant impact on the sustainability and social

responsibility

Holcim strategy : to integrate economic, environment, and social impact through the 3 bottom line

projects

HOLCIM INDUSTRY

To achieve that goal’s Holcim has established a set of group wide performance

targets, but before that, the company aim’s to

understand the current performance

Corporate Social Responsibility (CSR)

Stakeholder perspective

CSR essentially tell us about how business take into account of it’s economic, social and environmental impacts in the way it’s operate.

Maximising the benefits and minimising the downsides

More specifically, CSR as the voluntary action that business can take over

Compliance with minimum legal requirements.

To address both competitive interests and interests of wider society

Marks & Spencer CSR is defined as listening and responding

the needs of company’s stakeholder which is include as well the sustainability development.

There is also the believe that having a good relationship between employees, suppliers and wider society is the best guarantee for long term success

• CSR berpotensi turut memperkuat value chain sebagai basis keunggulan bisnis

• CSR juga sebagai upaya perbaikan kondisi lingkungan usaha

Membangun keunggulan

berbasis value chain

• Membangun kepercayaan investor (meminimalkan resiko bisnis atau bagian dari manajemen resiko)

• Memudahkan akses pada sumberdaya dan Penganekaragaman sumber daya

• Memperkuat jaringan perusahaan dan dukungan stakeholder

Meningkatkan nilai

perusahaaan

Peran Strategis CSR

Quality•Specification

Quality •Conformance

Quality

SpeedTime between beginning to the end of the process

Dependability •Due delivery

time •Actual

delivery time

Flexibility •Product or

service flexibility

•Mix flexibility•Volume

flexibility•Delivery

flexibility

Cost•Operating

expenditure•Capital

expenditure•Working

capital

Five Generic Performance Objectives

The five generic performance objectives is the basic task which is at the end, how we can satisfying our customer

requirement.

In Operation requires more Tightly defined set up of objectives

Quality Quality can be define as Refer to the

specification of product or service. Quality mean appropriate specification or

the products and services are fit for purpose, they do what they are suppose to do. Fit for purpose -> contains two concepts the 1st is the level of product or service specificationthe 2nd is whether the operation achieves conformance to that specification.

Quality mean meet the customer need Quality mean meet customer satisfaction

Specification of Quality also a multidimensional issue.

There are two dimension Hard dimension –is concern with the evident

and largely objective aspects of the product or service

Soft dimension- is associated with aspect of personal interaction between customers and product or more usually service

Explanation

Hard dimensions of specification

Quality

Soft dimension of specification

Quality

Feature Helpfulness

Performance Attentiveness

Reliability Communication

Aesthetics Friendliness

Security / safety Courtesy

Integrity

Example of Hard and Soft specification Quality

Speed Can be defined as time between

when customer request a product or service to the time when the customer receives it.

In another operation can be defined the time between when material enters an operation and when it leaves fully processed.

It may also include the time to clarify customers exact need’s ( ie. Designing a product or service )the queuing time before operations resources become available and after the core processing, the time to deliver, transport and or install the product or service.

Explanation

Dependability

The term is use to mean keeping delivery promises, honouring the delivery time given to customer.

It’s the other half of total delivery performance along with delivery speed.

Dependability = due delivery time – actual delivery time

When delivery is on time, the equation should equal with zero, positive means it’s early and negative means it’s late delivery

Explanation

Flexibility Flexibility meaning “ the ability to be bent “, this is the useful concept that tranlates into operational terms as the ability to adopt different states, take up different positions or do different things,One operation define as flexible than the other if it can do more things-exhibit a wide range of abilities

Cost Cost is the most important performance objective which is showing whether the organization is efficient or not, profit or loss

There are 3 main things which is contribute with cost :a. Operating expenditureb. Capital expenditurec. Working Capital

Explanation

Net profitLosses ???

Total operation flexibility

Range flexibility Response flexibility

Product / Service flexibility

The range products and services that the company has the design, purchasing and operations capability

to produced

The time necessary to develop or modify the

products or services and processes that produce them to the point where regular production can

start

Mix Flexibility The range product and

services that the company produces within a given

time period

The time necessary to adjust the mix of

products and services being produced

Volume flexibility

The absolute level of aggregated output that

the company can achieve for a given products or

service time

The time taken to change the aggregated

level of output

Delivery flexibility

The extent to which delivery dates can be

brought forward

The time taken to recoganize the

operation so as to re plan for the new

delivery date

The Range and Response dimensions of Operations Flexibility

Internal and External effect of Performance Objective

The performance objective clearly related to some aspect of external market positioning and clearly connected to the internal decisions that are made concerning the operation resources.

Due to above reason, it’s worthwhile examining each of performance objective in order to, how they affect market position outside in the operation and operation resources inside the operation

Ie. High performance in term of speed delivery out side the operation give clear benefit to customers who value short delivery time for products or queuing time for service

Operation resourcesPotential internal benefit

includePerformance

objectiveMarket requirement

Potential external benefit include

Error- free lossesLess disruption and complexity

More internal reliabilityLower processing cost

QualityHigh specification product and

servicesError-free products and servicesReliable products and services

Faster through put timesLess queuing and or inventory

Lower overheadsLower processing cost

Speed Short delivery / queuing times

Fast response to requests

Higher confidence in the operation

More internal stability Lower processing cost

DependabilityOn time delivery / arrival of

products and servicesKnowledge of delivery times

Better response to unpredicted event

Better response to variety activities

Lower processing cost

Flexibility

Frequent new products and services

Wide range of products and services

Volume adjustmentsDelivery adjustments

Productive processHigher margins Cost Low price

First / business class Economic class

Services First / Business class cabinAirport lounges, pick up service

Economic cabin

Customers Wealthy people, business peoples. VIP’s

Travellers ( Friend and family ), holiday makers, cost sensitive business travellers

Service range Wide range, may need to be customize

Standardised

Rate of service innovation

Relatively high Relatively low

Volume of activity

Relatively low volume Relatively high volume

Profit margins Medium to high Low to medium

Different Group Require Different Performance Objective

Main competitive factor

Customisation, extra service. Comport feature, convenience

Price, acceptable service

Performance Objective

Quality ( Specification and conformance), flexibility and speed

Cost, Quality ( performance )

Polar means, the scale that represent the important of each performance objective have the same origin

The Polar Representation of Perf OBj

Cost

Dependabilit

y

Flexibility

Quality

Speed

Newspaper collection

New paper collection service

General recycling service

Reassurance

Crime reduction

Crime detectio

nWorking with

criminal justice agency

Efficiency

Actual performanc

eRequired

performance

Police performance method

Order winning factors are the things that directly and significantly contribute to winning business.

They are regarded by customers as key reasons for purchasing the product or services.

The most important aspects of the way a company defines it’s competitive stance is by raising performance in order winning factor will either result in more business or improve the chances of gaining more business

In addition to order winners and qualifiers, some authorities add a third category which is called delight.

Delight are aspects of performance that customers have not yet been made aware of or that are so novel that no one else are aware of them

Order Winning and Qualifying competitive factors

Market is change over time, then operation resource capabilities developing over time,

Therefore not surprising if the nature of reconciliation process also change over time

Then the competitive agenda for the business will be influenced largely by how the organization positions itself in the market.

Change in the firm’s market It’s consist of :a. Introduction stageb. Growth stagec. Maturity staged. Decline stage

The relative importance of performance obj change over time

Trade off Trade Off Concepts are :a. Understanding Operation Strategyb. Improve their performancec. What do we want to be particularly good at ? (particular aspect

or a balance between objectives)What is the trade off ? 1. We can’t have everything2. Sometimes we must sacrifice one to get the others3. We can’t let one objective decrease too far

WHAT INSTINCTIVELY UNDERSTAND :a. 3 objectives are relatedb. Because some resource is finitec. The trade off relationship is not simple and lineard. The nature of the relationship will differ for each individuale. None of us is always totally certain just how own trade offs

operate

Why are the trade off important

Will not have equal importance for an individual operation

Certain aspects of performance will outweigh others (competitive characteristic)

Which will shape our view of the operation (aspects of performance)

The operations have chosen to trade off higher costs or high inventory to achieve fast rresponse and fast delivery

TRADE OFFS AND THE EFFICIENT FRONTIER

Figure 2.10 shows the relative performance of several companies in the same industry in terms of their cost efficiency and the variety of products or services that they offer to customers

Figure 2.10 a is one way of improving cost efficiency is to severely limit the variety on offer to customers.

Figure 2.10 b is a way by adopting a modular product design strategy it improved both its variety and its costs efficiency simultaneously.

IMPROVING OPERATIONS EFFECTIVENESS BY USING TRADE OFFS By pushing out the efficient frontier By improving variety

TRADE OFF, OPERATIONS STRATEGY AND CSR The idea of trade offs and the efficient

frontier can also help with an understanding of how CSR fits into operations strategy.

Multiple Dimensions of Sustainability1. Environmental2. Social3. Economic4. Voluntariness

TARGET AND OPERATIONS FOCUS

THE CONCEPT OF FOCUS1. Focus as operations segmentation (based on

market)2. The operation-within-an operation concept

( set up completely new operations if further products/services are added to the range

TYPE OF FOCUS

Benefit and risk in focuENEFITS AND RISKS IN FOCUS

1. Clarity of performance objectives2. Developong appropriate resources3. Enhanced learning and improvement4. Significant shifts in the marketplace5. Few economies of scale6. Structural vulnerability

DRIFTING OUT OF FOCUSOperation could become drifting out of focus for several reasons:a. New product and services (lack of examining the

specific requirements of that new particular product/service)

b. Strategy drift (the absence of clear a competitve direction)

c. Control by a specialist (the absence of a more of explicit strategy)

d. Company wide solutions (there should be one solution can cure all the problems)

e. Business Growth (to deal with larger volumes, leads to a loss of focus)