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Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 2.1 Chapter 2 Operations performance.

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Presentation on theme: "Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 2010 2.1 Chapter 2 Operations performance."— Presentation transcript:

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2 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston Chapter 2 Operations performance

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

4 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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? Key operations questions

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

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

7 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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

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

9 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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

10 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston What does Quality mean in… 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.

11 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston … 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)

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

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

14 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston Quality 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.

15 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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

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

17 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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.

18 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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.

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

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

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

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

23 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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.

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

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

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

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

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

29 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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?

30 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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.

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

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

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

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

35 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston Quality 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

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

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

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

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

40 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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

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

42 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston 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 Dependa- bility Speed

43 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston Polar diagrams for a taxi service versus a bus service Cost Quality Flexibility DependabilitySpeed Taxi service Bus service

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

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

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

47 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston A X C D Cost efficiency Variety B The new ‘efficient frontier’ B1 X Variety A C D B The ‘efficient frontier’ Cost efficiency The ‘efficient frontier’ view of trade-offs All performance objectives, to some extent, trade-off against each other

48 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston Cost efficiency Variety Improvement through increasing ‘focus’ on cost efficiency Q Q1 Improvement through increasing ‘focus’ on variety P P1 Improvement through overcoming the trade- off between variety and cost efficiency Improvement through focus… …or improvement through overcoming trade-offs Process principle – Focusing on one (or a narrow set of) performance objective(s) can enable superior performance in that/those objectives The ‘efficient frontier’ view of trade-offs (Continued)

49 Slack, Chambers and Johnston, Operations Management, 6 th Edition, © Nigel Slack, Stuart Chambers, and Robert Johnston Cost efficiency Variety Focus strategies can change the trade-off curve from convex to concave Process principle – Highly focused operations can be especially sensitive to any changes in requirements The ‘efficient frontier’ view of trade-offs (Continued)


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