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Nigel Slack – Warwick Business School Why is Operations Management important?

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Presentation on theme: "Nigel Slack – Warwick Business School Why is Operations Management important?"— Presentation transcript:

1 Nigel Slack – Warwick Business School Why is Operations Management important?

2 Nigel Slack – Warwick Business School Operations Management concerns all types of organisation

3 Nigel Slack – Warwick Business School Operations management concerns all types of organisation ChinaBrazilUSAMalaysiaRomaniaGermanyUKFrance 30% 16% 13% 26% 22% 11% Manufacturing added value as a percentage of GDP Source: World Bank

4 Nigel Slack – Warwick Business School Non-operations processes Process management Service organizations Operations management Manufacturing organizations Operations processes Production manage - ment From ‘production’ to ‘operations’ to ‘process’ to process management and management?

5 Nigel Slack – Warwick Business School The consultancy services market - % of world revenues of 40 largest consultancy firms Marketing/sales 2 Operations and process management 31 Corporate management 17 IT management 17 Benefits/Actuarial 16 Organizational design 11 Financial 6 Operations management is fashionable!

6 Nigel Slack – Warwick Business School Why operations excellence? Better service Secure revenue Lower costs Process efficiency Reduced errors, better resilience Lower ‘operational’ risk Higher capacity utilisation Lower capital requirements Capabilities for future innovation Process learning Learning? Cost effectiveness? Service? Capital? Risk? What we should expect from operations Less waste Lower environmental impact CSR?

7 Nigel Slack – Warwick Business School As far as operations excellence is concerned Principles are generic Solutions are not they depend on circumstances The task is to build the principles on which operations and processes can be developed Principles versus solutions

8 Nigel Slack – Warwick Business School Principles + Tools Solutions = Overarching concepts From examples, theory, research, etc. Practitioner- based methods and others ‘Over to you!’ (Used in context) What’s specific about the circumstances? Eg. Lean, Supply networks, BPR, Project mgt. etc Principles versus solutions

9 Nigel Slack – Warwick Business School How is the idea of Operations Management developing? Operations management has strategic impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management has to exploit new technologies Operations management is the driver of improvement Operations management has an environmental impact

10 Nigel Slack – Warwick Business School Top - down Operations management should interpret higher level management Resources Operations management should manage resources appropriately Operations management should learn from day-to-day experiences Bottom - up Customer requirements Operations management should satisfy its internal and external customers The four perspectives on any Operations strategy Operations strategy

11 Nigel Slack – Warwick Business School The business model Operations management as an ‘operating model’ Business management Functional strategies Operational Operations Operational Finance Marketing strategy Operations strategy Finance strategy Technology strategy Operational Marketing Operational Technology The operating model ….sets the overall purpose and objectives for…… …which defines how the business model will be achieved

12 Nigel Slack – Warwick Business School Giordano Relatively easy to imitate……….. Short-term operations capability

13 Nigel Slack – Warwick Business School The Flextronics Industrial park Guadalajara Mexico More difficult to imitate………….. Medium-term operations capability

14 Nigel Slack – Warwick Business School South African base… spreads north Expands through Europe and Asia How will it cope in developed markets? Almost impossible to imitate………….. Long-term operations capability South America’s second biggest Brewery

15 Nigel Slack – Warwick Business School How is the idea of Operations Management developing? Operations management has strategic impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management has to exploit new technologies Operations management is the driver of improvement Operations management has an environmental impact

16 Nigel Slack – Warwick Business School To what extent do ethical and financial performance trade-off? Ethical performance Financial performance Repositioning between ethical and financial performance The efficient frontier between ethical and financial performance Changing the balance (trade-off) between ethical and financial performance Ethical performance Financial performance Societal pressure + reputational risk defining minimum ethical standards Stockholder expectations defining minimum financial standards Simultaneously improving both ethical and financial performance, partly because extreme positions on either are becoming less acceptable

17 Nigel Slack – Warwick Business School The ‘triple bottom line’ – Holcim cement The triple bottom line Profit Planet People Holcim one of the world’s leading manufacturers and distributors of cement Production sites in over 70 countries. Cement manufacture has a significant impact on almost every aspect of sustainability and social responsibility. We place sustainable development at the core of our business strategy which aims to enhance value, and safeguards our reputation Holcim’s strategy and their approach to value creation attempts to integrate economic, environmental and social impacts. Holcim have established a set of Group-wide CSR performance targets. But CSR related performance measurement should not be separate from the more conventional business systems.

18 Nigel Slack – Warwick Business School Eliminating waste can also save costs Example – Marmite (a popular spread in the UK)

19 Nigel Slack – Warwick Business School How is the idea of Operations Management developing? Operations management has strategic impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management has to exploit new technologies Operations management is the driver of improvement Operations management has an environmental impact

20 Nigel Slack – Warwick Business School Technical expertise Leadership expertise Process expertise Being the trusted advisor to the business and representing your function’s perspective Contributing to the leadership team and aligning business and functional visions Delivering your expertise through your service processes Operations management as functional leadership – The ‘C-suite agenda’

21 Nigel Slack – Warwick Business School Top - down Functional management should interpret higher level management Resources Functional management should manage resources appropriately Functional management should learn from day-to-day experiences Bottom - up Customer requirements Functional management should satisfy its internal and external customers The four perspectives on any Functional strategy Functional management

22 Nigel Slack – Warwick Business School How is the idea of Operations Management developing? Operations management has strategic impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management has to exploit new technologies Operations management is the driver of improvement Operations management has an environmental impact

23 Nigel Slack – Warwick Business School The Zara Supply Chain ZARA

24 Nigel Slack – Warwick Business School ZARA Located at La Coruna An unlikely place for the fastest growing apparel company in the world!

25 Nigel Slack – Warwick Business School Zara keeps less inventory than its peers Inventory as % of Annual Sales Zara is the largest division of Inditex (78% of sales)

26 Nigel Slack – Warwick Business School ZARA Zara La Caruna, Spain Zara La Caruna, Spain Retail Shops Retail Shops Retail Shops Retail Shops Retail Shops Retail Shops Retail Shops Retail Shops 10,000 New Items/Year (~300,000 SKUs) 10,000 New Items/Year (~300,000 SKUs) Almost No Advertising, Little Markdowns Replenishes >1800 Shops in > 54 Countries Twice Per Week Makes half of its clothes, 40% of its fabrics, Designs new collections in 4-5 weeks Produces in one week “Catwalk to rack in as little as 2 weeks”

27 Nigel Slack – Warwick Business School A fancy, huge, expensive warehouse! Why expand it when it is currently at 50% capacity utilization? All shipments from a Central Distribution Centre

28 Nigel Slack – Warwick Business School Design Distribute ProduceRetail Zara’s “Closed Loop” Zara closely controls the entire supply cycle much better than its peers

29 Nigel Slack – Warwick Business School 020%40%60%80%100% Capacity Utilization Low X X X High utilization but long throughput times Low utilization but short throughput times Reduce process variability High Average length of queue X X X X Process throughput time (or inventory) The Operations Management triangle

30 Nigel Slack – Warwick Business School How is the idea of Operations Management developing? Operations management has strategic impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management has to exploit new technologies Operations management is the driver of improvement Operations management has an environmental impact

31 Nigel Slack – Warwick Business School Some of the elements that go to make up improvement approaches Emphasis on solutions - what to do Emphasis on methods - how to do it Emphasis on gradual change Emphasis on rapid change Bring doers and controllers together Integrate data Visibility across data End-to-end processes Radical rethinking Evidence-based decisions Systems and procedures Business- wide Improvement cycles Perfection is the goal Reduce variation Customer centric Emphasis on education Include all people Customer relationships Waste identification Synchronised flow Process based analysis

32 Nigel Slack – Warwick Business School Some of the elements that go to make up improvement approaches Emphasis on solutions - what to do Emphasis on methods - how to do it Emphasis on gradual change Emphasis on rapid change Bring doers and controllers together Integrate data Visibility across data End-to-end processes Radical rethinking Evidence-based decisions Systems and procedures Business- wide Improvement cycles Perfection is the goal Reduce variation Customer centric Emphasis on education Include all people Customer relationships Waste identification Synchronised flow Process based analysis TQM Lean BPR Six Sigma

33 Nigel Slack – Warwick Business School Six Sigma Notwithstanding some common elements improvement approaches do differ Emphasis on rapid change Emphasis on gradual change BPR LeanCI Emphasis on solutions - what to do Emphasis on methods - how to do it

34 Nigel Slack – Warwick Business School How is the idea of Operations Management developing? Operations management has strategic impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management has to exploit new technologies Operations management is the driver of improvement Operations management has an environmental impact

35 Nigel Slack – Warwick Business School Technology makes everything uncertain…...new operations issues emerge almost overnight Technology– Impacts on OM development 3D Printing

36 Nigel Slack – Warwick Business School Supply networks are changing faster …… and its changing the context of operations Technology– Impacts on OM development

37 Nigel Slack – Warwick Business School Disk/tape manufacturer Recording studio Songwriter Physical distribution Retailer Engineer Arranger Singer Instrumentalists Consumer Producer The Recorded Music Business Supply Network from the Classic 1940s- 1950s Period eg. Frank Sinatra Strong vertical integration

38 Nigel Slack – Warwick Business School Music production now largely in the control of the artists. Music distribution mixed. Arranger Instrumentalists Consumer Producer Engineer Singer Songwriter Recording studio On-line retailers Conventional CDs Artist’s download


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