2 1 MGT 563 OPERATIONS STRATEGIES Operations Performance

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2. 1 MGT 563 OPERATIONS STRATEGIES Operations Performance Dr. Aneel SALMAN Department of Management

2. 1 MGT 563 OPERATIONS STRATEGIES Operations Performance Dr. Aneel SALMAN Department of Management Sciences COMSATS Institute of Information Technology, Islamabad 2. 1 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 2 Recap Lecture 05 • Define the role of Business Strategy • Explain

2. 2 Recap Lecture 05 • Define the role of Business Strategy • Explain how a Business strategy is developed • Explain the role of Operations Strategy in the organization • Explain the relationship between business strategy and operations strategy • Describe how an operations strategy is developed 2. 2 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 3 Recap Lecture 05 • Identify competitive priorities for of the operations function

2. 3 Recap Lecture 05 • Identify competitive priorities for of the operations function • Explain the strategic role of technology • Define productivity and identify productivity measures • Compute productivity measures 2. 3 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 4 Slack et al. ’s model of operations management Operation’s performance Operations strategy

2. 4 Slack et al. ’s model of operations management Operation’s performance Operations strategy Design Operations management Operations strategy Improvement Planning and control 2. 4 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 5 Key operations questions In Chapter 2 – Operations performance – Slack et

2. 5 Key operations questions In Chapter 2 – 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? 2. 5 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 6 Operations management can make or break any organization Slack, Chambers and Johnston,

2. 6 Operations management can make or break any organization Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 7 Stakeholder groups with a …’legitimate interest in the operation’s activities’ Lobby /

2. 7 Stakeholder groups with a …’legitimate interest in the operation’s activities’ Lobby / interest groups Shareholders ‘Society’ Directors / top management Staff Suppliers Customers Staff representative bodies Government 2. 7 Regulatory bodies Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 8 Operations and process management contribution to strategy Capabilities for future innovation Lower

2. 8 Operations and process management contribution to strategy Capabilities for future innovation Lower costs Opportunities for process learning Process efficiency Operations and processes excellence Reduced errors, better resilience Lower ‘operational’ risk 2. 8 Enhanced service Secure revenue Higher capacity utilization Lower capital requirements Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

The five competitive objectives Quality Being RIGHT Speed Being FAST Dependability Flexibility Cost 2.

The five competitive objectives Quality Being RIGHT Speed Being FAST Dependability Flexibility Cost 2. 9 Being ON TIME Being ABLE TO CHANGE Competitiveness 2. 9 Being PRODUCTIVE Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 10 The benefits of excelling at the five objectives Minimum price, highest value

2. 10 The benefits of excelling at the five objectives Minimum price, highest value Cost Quick delivery Speed Minimum cost, maximum value Fast throughput Quality Error-free products and services 2. 10 Internal benefits Error-free processes Dependable delivery Dependability Reliable operation Ability to change Flexibility Frequent new products, maximum choice External benefits Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 11 What does Quality mean in… … a hospital ? Patients receive the

2. 11 What does Quality mean in… … a hospital ? Patients receive the most appropriate treatment. Treatment is carried out in the correct manner. Patients are consulted and kept informed. Staff are courteous, friendly and helpful. 2. 11 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 12 What does Quality mean in… (Continued) … an automobile plant? All assembly

2. 12 What does Quality mean in… (Continued) … an automobile plant? All assembly is to specification. Product is reliable. All parts are made to specification. The product is attractive and blemish-free. 2. 12 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 13 What does Quality mean in… (Continued) … a bus company? The buses

2. 13 What does Quality mean in… (Continued) … 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. 2. 13 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 14 What does Quality mean in… (Continued) … a supermarket? The store is

2. 14 What does Quality mean in… (Continued) … a supermarket? The store is clean and tidy. Décor is appropriate and attractive. Goods are in good condition. Staff are courteous, friendly and helpful. 2. 14 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 15 Two common meanings of ‘Quality’ Quality as the specification of a product

2. 15 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 Mc. Donalds may buy less expensive meat, but its conformance must be high. 2. 15 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 16 External and internal benefits of conformance quality Irrespective of a product or

2. 16 External and internal benefits of conformance quality 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. 2. 16 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 17 External and internal benefits of conformance quality Quality (Continued) Cost Speed Dependability

2. 17 External and internal benefits of conformance quality Quality (Continued) Cost Speed Dependability Internal benefits Quality On-specification products and services 2. 17 Flexibility External benefits Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 18 What does Speed mean in… … a hospital ? The time between

2. 18 What does Speed mean in… … a hospital ? The time between requiring treatment and receiving treatment is kept to a minimum. The time for test results, X-rays, etc. to be returned is kept to a minimum. 2. 18 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 19 What does Speed mean in… (Continued) … an automobile plant? Time between

2. 19 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. 2. 19 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 20 What does Speed mean in… (Continued) … a bus company? The time

2. 20 What does Speed mean in… (Continued) … a bus company? The time between customer setting out on the journey and reaching his or her destination is kept to a minimum. 2. 20 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 21 What does Speed mean in… (Continued) … a supermarket? The time for

2. 21 What does Speed mean in… (Continued) … 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. 2. 21 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 22 External and internal benefits of speed Speed again has different interpretations externally

2. 22 External and internal benefits of speed 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. 2. 22 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 23 External and internal benefits Quality of speed (Continued) Cost Quick delivery Speed

2. 23 External and internal benefits Quality of speed (Continued) Cost Quick delivery Speed Dependability Internal benefits Quality Flexibility External benefits 2. 23 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 24 What does Dependability mean in… (Continued) … a hospital ? Proportion of

2. 24 What does Dependability mean in… (Continued) … a hospital ? Proportion of appointments that are cancelled is kept to a minimum. Keeping appointment times. Test results, X-rays, etc. are returned as promised. 2. 24 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 25 What does Dependability mean in… (Continued) … an automobile plant? On-time delivery

2. 25 What does Dependability mean in… (Continued) … an automobile plant? On-time delivery of vehicles to dealers. On-time delivery of spares to service centres. 2. 25 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 26 What does Dependability mean in… (Continued) … a bus company? Keeping to

2. 26 What does Dependability mean in… (Continued) … a bus company? Keeping to the published timetable at all points on the route. Constant availability of seats for passengers. 2. 26 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 27 What does Dependability mean in… (Continued) … a supermarket? Predictable opening hours

2. 27 What does Dependability mean in… (Continued) … a supermarket? Predictable opening hours Proportion of goods out of stock kept to a minimum Keeping to reasonable queuing times Constant availability of parking. 2. 27 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 28 External and internal benefits of Dependability Externally – it enhances the product

2. 28 External and internal benefits of Dependability 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. 2. 28 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 29 External and internal benefits of Dependability (Continued) Quality Cost Dependable delivery Speed

2. 29 External and internal benefits of Dependability (Continued) Quality Cost Dependable delivery Speed Dependability Internal benefits Quality Flexibility External benefits 2. 29 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 30 Flexibility – What does it mean? Flexibility has several distinct meanings but

2. 30 Flexibility – What does it mean? 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 2. 30 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 31 What does flexibility mean in… …. a hospital ? Introducing new treatments

2. 31 What does flexibility mean in… …. a hospital ? Introducing new treatments A wide range of treatments The ability to adjust the number of patients treated The ability to reschedule appointments. 2. 31 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 32 What does flexibility mean in… (Continued) … an automobile plant? The introduction

2. 32 What does flexibility mean in… (Continued) … 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. 2. 32 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 33 What does flexibility mean in… (Continued) … a bus company? The introduction

2. 33 What does flexibility mean in… (Continued) … 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. 2. 33 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 34 What does flexibility mean in… (Continued) … a supermarket? The introduction of

2. 34 What does flexibility mean in… (Continued) … 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. 2. 34 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 35 External and internal benefits of flexibility External and internal benefits Short delivery

2. 35 External and internal benefits of flexibility External and internal benefits Short delivery lead-time Cost Dependability Speed Quality On-specification products and services 2. 35 Flexibility Reliable delivery Frequent new products/services Wide range Volume and delivery changes Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 36 External and internal benefits Qualityof flexibility (Continued) Cost Speed Dependability Internal benefits

2. 36 External and internal benefits Qualityof flexibility (Continued) Cost Speed Dependability Internal benefits Quality Flexibility External benefits 2. 36 Frequent new products/services Wide range Volume and delivery changes Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 37 What does Cost mean in… … a hospital ? Bought-in materials and

2. 37 What does Cost mean in… … a hospital ? Bought-in materials and services Technology and facilities costs Staff costs 2. 37 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 38 What does Cost mean in… (Continued) … an automobile plant? Bought-in materials

2. 38 What does Cost mean in… (Continued) … an automobile plant? Bought-in materials and services Technology and facilities costs Staff costs 2. 38 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 39 What does Cost mean in… (Continued) … a bus company? Bought-in materials

2. 39 What does Cost mean in… (Continued) … a bus company? Bought-in materials and services Technology and facilities costs Staff costs 2. 39 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 40 What does Cost mean in… (Continued) … a supermarket? Bought-in materials and

2. 40 What does Cost mean in… (Continued) … a supermarket? Bought-in materials and services 2. 40 Technology and facilities costs Staff costs Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 41 Cost The cost of producing products and services is obviously influenced by

2. 41 Cost 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 2. 41 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 42 External and internal benefits of performance objectives Quality Low price, high margin,

2. 42 External and internal benefits of performance objectives Quality Low price, high margin, or both Short delivery lead-time Cost Speed Quality On-specification products and services 2. 42 Reliable delivery Dependability Internal benefits External benefits Flexibility Frequent new products/services Wide range Volume and delivery changes Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 43 Polar diagrams are used to indicate the relative importance of each performance

2. 43 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 Speed Quality 2. 43 Dependability Flexibility Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 44 Polar diagrams for a taxi service versus a bus service Taxi service

2. 44 Polar diagrams for a taxi service versus a bus service Taxi service Cost Speed Dependability Quality 2. 44 Bus service Flexibility Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 45 Polar diagrams for a proposed police performance method Required performance Actual performance

2. 45 Polar diagrams for a proposed police performance method Required performance Actual performance Reassurance Crime reduction Efficiency Working with Criminal justice agencies 2. 45 Crime detection Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 46 Polar diagrams for newspaper collection and general recycling services General recycling service

2. 46 Polar diagrams for newspaper collection and general recycling services General recycling service Newspaper collection service Cost Dependability Speed Quality 2. 46 Flexibility Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 47 Trade-offs ‘Do you want it good, or do you want it Tuesday?

2. 47 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’. 2. 47 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

A X B The ‘efficient frontier’ Variety The ‘efficient frontier’ view of trade-offs Variety

A X B The ‘efficient frontier’ Variety The ‘efficient frontier’ view of trade-offs Variety 2. 48 A The new ‘efficient frontier’ B 1 B X C C D D Cost efficiency nt, e t x e e m s, to so ve i t c e j b o ce n a m r o f r her t o h All pe c a e inst a g a f f o trade 2. 48 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

2. 49 The ‘efficient frontier’ view of trade-offs (Continued) Variety Improvement through focus… …or

2. 49 The ‘efficient frontier’ view of trade-offs (Continued) Variety Improvement through focus… …or improvement through overcoming trade-offs – e l p i c in r p s ra s o e ( c e o Improvement r n o P n o g in through increasing Focus set of) ‘focus’ on variety narrow ance le b a m r n o e Improvement through perf P 1 an c ) s ( e in c n overcoming the trade- objective a m r o f r P e rp off between variety o i es r v i e t p c u e j s ob e and cost efficiency s o that/th Q Improvement through increasing ‘focus’ on Q 1 cost efficiency Cost efficiency 2. 49 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010

The ‘efficient frontier’ view of trade-offs (Continued) Variety 2. 50 Focus strategies can change

The ‘efficient frontier’ view of trade-offs (Continued) Variety 2. 50 Focus strategies can change the trade-off curve from convex to concave – e l p i c rin p s s e Proc ocused f y l h be g i n H a c ns to o i t e a v r i t i e s p o en s y l l a i espec nges in a h c y n a ts n e m e requir Cost efficiency 2. 50 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010