lecture 2 mbf2213 |operations management · 2017. 1. 16. · operations performance –slack et al....

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Lecture 2

MBF2213 | Operations ManagementPrepared by Dr Khairul Anuar

L2: Operations Performance

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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Three levels of operations performance

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Stakeholder groups with typical operations objectives

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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


profitability, return on

assets, etc. of the

operation

Sustainability

How operations can impact TBL* performance (1 of 3)

• 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

* A plastic moulding company 7



the impact of the


of people’s lives



the operation




assets, etc. of the

operation

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

* A plastic moulding company8



the impact of the


of people’s lives



the operation




assets, etc. of the

operation

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

* A plastic moulding company9

Stakeholder What stakeholders want from the

operation

What the operation wants from

stakeholders

Shareholders Return on investment

Stability of earnings

Liquidity of investment

Investment capital

Long-term commitment

Directors/top

management

Low/acceptable operating costs

Secure revenue

Well-targeted investment

Low risk of failure

Future innovation

Coherent, consistent, clear and

achievable strategies

Appropriate investment

Staff Fair wages

Good working conditions

Safe work environment

Personal and career development

Attendance

Diligence/best efforts

Honesty

Engagement

Staff representative

bodies (e.g. trade

unions)

Conformance with national

agreements

Consultation

Understanding

Fairness

Assistance in problem solving

Suppliers (of

materials, services,

equipment, etc.)

Early notice of requirements

Long-term orders

Fair price

On-time payment

Integrity of delivery, quality and

volume

Innovation

Responsiveness

Progressive price reductions

Typical stakeholders’ performance objectives (1 of 2)

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Stakeholder What stakeholders want from

the operation

What the operation wants

from stakeholders

Regulators

(e.g. financial

regulators)

Conformance to regulations

Feedback on effectiveness of

regulations

Consistency of regulation

Consistency of application of

regulations

Responsiveness to industry

concerns

Government

(local, national,

regional)

Conformance to legal

requirements

Contribution to

(local/national/regional)

economy

Low/simple taxation

Representation of local

concerns

Appropriate infrastructure

Lobby groups

(e.g.

environmental

lobby groups)

Alignment of the organization’s

activities with whatever the

group are promoting

No unfair targeting

Practical help in achieving aims

(if the organization wants to

achieve them)

Society Minimize 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 (2 of 2)

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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 CHANGEFlexibility

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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…

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Quality

Speed

Dependability

Flexibility

Cost


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.



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… a supermarket?

The store is clean and tidy.

Décor is appropriate and attractive.

Goods are in good condition.



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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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Quality of conformance is the ability of a product, service, or process to meet its design specifications.

Design specifications are an interpretation of what the customer needs.

Quality of conformance is measured within an acceptable tolerance range. Eg. if passengers expect a flight to leave within 10 minutes of its scheduled departure date, then any departure time within that time frame has a high quality of conformance, while any longer interval does not.Thus, quality of conformance equates to conformance to specifications within an acceptable tolerance range.

It is possible for a product to be of extremely high quality in terms of being produced within a tight tolerance range, using premium materials, and including all possible features. However, if the design specifications call for a less expensive product with fewer features, then the product is considered to have a low quality of conformance. This means that a high cost does not necessarily equate to a high quality of conformance.

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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Quality

Speed

Dependability

Flexibility

Cost

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)


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.


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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.


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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.


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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Quality

Speed

Dependability

Flexibility

Cost

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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On-time delivery of vehicles to dealers.

On-time delivery of spares to service centres.


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… a bus company?

Keeping to the published timetable at all points on the route.

Constant availability of seats for passengers.


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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.


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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, 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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Quality

Speed

Dependability

Flexibility

Cost

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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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.


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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.


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Depend-ability

FlexibilityQuality

Cost

External and internal benefits

External and internal benefits of flexibilityExternal and internal benefits

Depend-ability

FlexibilityQuality

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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Quality

Speed

Dependability

Flexibility

Cost

… a hospital ?

Bought-in materials and services

What does Cost mean in…

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What does Cost mean in… (Continued)

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… a bus company?

Staff costs

Technology and facilities costs



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… a supermarket?


Staff costs

Technology and facilities costs


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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

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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

DependabilitySpeed

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Polar diagrams for a taxi service versus a bus service

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Polar diagrams for police performance

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Cost

Quality Flexibility

Speed

Newspaper collectionservice

General recyclingservice

Dependability

Polar diagrams for newspaper collection and generalrecycling 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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Summary

lecture 2 mbf2213 |operations management · 2017. 1. 16. · operations performance –slack et al....

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