Compromise Management Strategic TradeOffs in Operations Management Michel

Compromise Management Strategic Trade-Offs in Operations Management Michel Leseure School of Business Administration Al Akhawayn University, Ifrane, Morocco

Introduction & Key Terminology Operations management: the design and operations of productive systems n Operations strategy: all long-term decisions related to the nature of investment in productive systems (capacity, facilities, equipment, staffing, etc. ) n Four key generic strategies: cost, quality, flexibility, and speed/time n

Trade-offs and Compromise n Trading-off means to balance two situations against each other in order to get an acceptable result n A compromise is an agreement between two people or groups in which both sides agree to accept less than they first asked for and to give up something they value

Trade-offs in Operations Strategy n When making decisions relative to operations strategy: – Decisions makers have to reach a compromise – Example: cost vs. quality – Double trouble: • 1 – How should we trade-off one strategic performance dimension for another? • 2 - How do we agree on this trade-off, i. e. reach a compromise?

Example

Why Care About Trade-Offs? Trade-offs decisions are central to operations strategy n Trade-offs are a form of common knowledge: – Embedded in systems and practices – Encultured – Contingent n Trade-offs are important: – To discuss and agree on strategic alternatives – To implement strategic decision in operational systems n

Trade-offs in Operations Strategy Dealt with qualitatively n Controversy regarding their existence n – Primarily a UK-based academic debate – Traditionalists vs. new fundamentalists Case study based research led by Nigel Slack n The marginal rate of substitution is never quantified n Different trade-offs are considered simultaneously n

Resolving the Conflict

Hurdles to Applying Quantitative Techniques n Cost n Time n Contextual sensitivity of trade-offs n Time sensitivity of trade-offs n Connectivity of trade-offs n Implicit, latent nature of some trade-offs Trade-offs decision require managerial insight

Example n Case study – Experiment in TBC competition – Experiment was a success in terms of competing for speed – But a total failure quality wise n Broke a latent, unspoken trade-off: – Always prefer quality to leadtime n Use configuration tables to represent and discuss an issue

Configuration Table

Configuration Table