L2OperationsPerformance

Performanceisbasedinmeasurementtheory• Assigningavaluetoaphenomenaofinterest• Howvaluesareassignedtoobjectsandphenomena.Itsconcernsinclude

o Whatcanbemeasured?o Howmeasuresrelatetoeachother?o Errorinthemeasurementprocess

• Threebasicproblemsariseo Errorcaninfluencethemeaningofameasureo Representation(inotherwords,thejustificationforthevalueassignment)o Uniqueness(ismetricXtheonlywaytomeasurephenomenaY?)

• Measurementbeginswithadefinitionofthevaluethatistobemeasured• Inbusiness,measurementsareaimedatcapturingtheefficiencyandeffectivenessof

pastactions

Performancemetrics• Ametricisaverifiablemeasure,statedineitherquantitativeorqualitativetermsand

definedwithrespecttoareferencepoint• Ideally,metricsareconsistentwithhowtheoperationdeliversvaluetoitscustomersas

statedinmeaningfulterms

Whatpurposedoesperformanceserve?• Control

o Metricsenablemanagerstoevaluateandcontroloperations• Communication

o Metricscommunicateperformance,providingasenseofwhatneedstobedone,withoutneedingtounderstandtheintricaciesofoperations

• Improvemento Metricsidentifygapsbetweencurrentandexpectedperformance

Operationsmanagementcanmakeorbreakanyorganisation

• Operationsfunctiongivestheabilitytocompetebyprovidingtheabilitytorespondtocustomersandbydevelopingthecapabilitiesthatwillkeepitaheadofitscompetitorsinthefuture

Stakeholdergroupswitha…‘legitimateinterestintheoperation’sactivities’

• Createperformancejudgments

Thetriplebottomline• Organisationsshouldmeasurethemselvesnotjustonthetraditionaleconomicprofit

thattheygeneratefortheirownersbutalsoontheimpacttheiroperationshaveonsociety

• Sustainableàbalanceseconomic,environmentalandsocietalinterests• Sustainablebusinessismorelikelytoremainsuccessfulinthelongtermthanonewhich

focusesoneconomicgoals

SOCIALBOTTOMLINE

• Businessesshouldacceptthatthybearsomeresponsibilityfortheimpacttheyhaveonsocietyandbalancetheexternal‘societal’consequencesoftheiractionswiththemoredirectinternalconsequences

• Individuallevel–devisingjobs&workpatternswhichallowindividualstocontributetheirtalentswithoutunduestress

• Grouplevel–recognizinganddealinghonestlywithemployeerepresentatives• Largercommunity–recognizingtheirresponsibilitytolocalcommunityby

helpingtopromotetheireconomicandsocialwell-being

ENVIRONMENTALBOTTOMLINE• Extenttowhichbusinessactivitynegativelyimpactsonthenaturalenvironment• Hazardouswaste,air&noisepollution,globalwarming• Operationalfailuresrootofpollutiondisastersandoperationsdecisions(e.g.

productdesign)whichimpactonlongertermenvironmentalissues

ECONOMICBOTTOMLINE• Useresourceseffectively• Alloperationsshouldbeexpectedtocontributetotheirbusinessby

o Controllingcostso Increasingrevenueo Reducingriskso Makinginvestmentmoreeffectiveo Growinglongtermcapabilities

Operationsandprocessmanagementcontributiontostrategy

Thefivecompetitiveobjectives

• Meandifferentthingstodifferentorganisations

Thebenefitsofexcellingatthefiveobjectives

QUALITY• Qualityasthespecificationofaproductorservice

o E.g.LowerHurstFarmproducesorganicmeatraisedexclusivelyonitsownfarm

• Qualityastheconformancewithwhichtheproductorserviceisproducedo E.g.QuickservicerestaurantslikeMcDonaldsmaybuylessexpensivemeat,but

itsconformancemustbehigh• Consistentconformancetocustomers’expectations

• Irrespectiveofaproductorservice’sspecificationquality,producingitinawaythatit

conformstoitsspecificationconsistentlybringsbenefitstoanyoperation• Externally

o Enhancestheproductorserviceinthemarket,oratleastavoidscustomer• Internally

o Itpreventserrorsslowingdownthroughputspeedo Itpreventserrorscausinginternalunreliabilityandlowdependabilityo Itpreventserrorscausingwastedtimeandeffort,thereforesavingcosto Reducescosts,increasesdependability

SPEED• Theelapsedtimebetweencustomersrequestingproductsorservicesandthem

receivingthem• Differentinterpretationsexternallyandinternally• Externally

o Itmeanstheelapsedtimebetweenacustomeraskingforagoodorserviceandgettingit(inasatisfactorycondition)

o Itoftenenhancesthevalueoftheproductorservicetocustomers• Internally

o Ithelpstoovercomeinternalproblemsbymaintainingdependabilityo Itreducestheneedtomanagetransformedresourcesastheypassthroughthe

operation,thereforesavingcosto Reducesinventorieso Reducesrisks–thefurtheraheadcompaniesforecast,themorelikelytheyare

togetitwrong.Thefasterthethroughputtimeofaprocess,thelaterforecastingcanbeleft

DEPENDABILITY• Doingthingsintimeforcustomerstoreceivetheirgoodsorserviceswhentheyareneeded,

oratleastwhentheywerepromised• Overtime,dependabilitycanoverrideallothercriteria• Externally

o Enhancestheproductorserviceinthemarketoratleastavoidscustomercomplaints

• Internallyo Itpreventslatedeliveryslowingdownthroughputspeedo Itpreventslatenesscausingdisruptionandwastedtimeandeffort,therebysaving

costo Savestimeo Savesmoney–ineffectiveuseoftimecostsmoneyo Givesstability–eachpartoftheoperationcanconcentrateonimprovingtheirown

areaofresponsibilitywithouthavingitsattentioncontinuallydivertedbyalackofdependableservicefromtheotherparts

FLEXIBILITY• Anoperation‘sabilitytochange• Product/serviceflexibility–changetheproductsandservicesitbringstothemarket• Mixflexibility–changethemixofproductandservicesitproducesatanyonetime• Volumeflexibility–changethevolumeofproductsandservicesitproduces• Deliveryflexibility–changethedeliverytimeofitsproductandservices• Externalbenefit–masscustomization• Agility

o Combinationofallfiveperformanceobjectives,butespeciallyflexibilityandspeed

o Impliesthatanoperationandthesupplychainofwhichitisapartcanrespondtotheuncertaintyinthemarket

o Meansrespondingtomarketrequirementsbyproducingnewandexistingproductsandservicesfastandflexibly

• Internalo Speedsupresponse–fastserviceo Savestime–adaptquicklyo Maintainsdependability–onschedulewhenunexpectedeventsdisruptplans

COST• Costsarisefrom

o Staff–themoneyspentonemployingpeopleo Facilities,technology,andequipment–themoneyspendonbuying,caringfor,

operatingandreplacingtheoperation’shardwareo Materials–themoneyspentonthebought-inmaterialsconsumedor

transformedintheoperation• Hospitalvsupermarket

• Alloperationshaveaninterestinkeepingtheircostsaslowasiscompatiblewiththe

levelsofquality,speed,dependability,andflexibilitythattheircustomersrequire• Costisalwaysanimportantobjective,eveniftheorganisationdoesnotcompetedirectly

onprice

• Thecostofproducingproductsandservicesisobviouslyinfluencedbymanyfactorssuchasinputcosts,buttwoimportantsetsare

• The4V’so Volumeo Varietyo Variationo Visibility

• Theinternalperformanceoftheoperationato Qualityo Speedo Dependabilityo Flexibility

COSTSANDPRODUCTIVITY

ImprovingProductivity

• Reducethecostofinputswhilemaintainingoutputlevel• Makingbetteruseofinputs• Cuttingoutwaste

CostReductionthroughInternalEffectiveness

• Allperformanceobjectivesaffectcost–improvecostperformancebyimprovingtheperformanceofotheroperationsobjectives

• Highquality–don’twastetimeoreffecthavingtore-dothings,internalcustomersnotinconveniencedbyflawedservice

• Fast–reducethelevelofin-processinventorybetweenprocessesaswellasreducingadminoverheads

• Dependable–canbereliedontodeliverexactlyasplanned,eliminateswastefuldisruptionandallowstheotherprocessestooperateefficiently

• Flexible–adapttochangingcircumstancesquicklyandwithoutdisruptingtherestoftheoperation,canalsochangeoverbetweentasksquicklyandwithoutwastingtimeandcapacity

EXTERNALANDINTERNALBENEFITSOFPERFORMANCEOBJECTIVES

PolarRepresentationofPerformanceObjectives• Polardiagramsareusedtoindicatetherelativeimportanceofeachperformance

objectivetoanoperationorprocess• Theycanalsobeusedtoindicatethedifferencebetweenproductsandservices

producedbyanoperationorprocess

Polardiagramsforaproposedpoliceperformancemethod

TRADEOFFS• Thewaywearewillingtosacrificeoneperformanceobjectivetoachieveexcellencein

another• The‘efficientfrontier’viewoftrade-offs• Twoviewsoftrade-offs

o ‘Repositioning’performanceobjectivesbytrading-offimprovementsinsomeobjectivesforareductioninperformanceinothers

o Increasingthe‘effectiveness’oftheoperationbyovercomingtrade-offssothatimprovementsinoneormoreaspectsofperformancecanbeachievedwithoutanyreductionintheperformanceofothers

§ Extendingthefrontier• Operationsthatlieonthe‘efficientfrontier’haveperformancelevelsthatdominate

thosewhichdonot