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Nigel Slack and Michael Lewis 2003

Quality

P

erformance

objectives

Dependability

Development

and Organization(Operations developmentand improvement)

Speed

Flexibility

Cost

Resource Usage

Market

Competitiveness

Decision areas

Issues covered in this chapter

Capacity SupplyNetwork

ProcessTechnology

Issues include: Organizational structure and

operations effectiveness

Performance measurementused for setting thedirection of improvements

Benchmarking againstother operators

Prioritising improvements Learning and enhancing

process knowledgethrough control

Expectations on, andcontributions from, theoperations function

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Market

potential

Intended

market

position

Market

strategy

Operations

capabilities

Operations

resources and

processes

Operations Resources Market Requirements

The Direct, Develop, Deploy strategic improvement cycle

DEVELOP operations

capabilities through

learning

DEPLOY operations

contribution

DIRECT performanceand prioritization

The StrategicOperations

Improvement

Cycle

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Continuous improvement at a strategic level

Market RequirementsOperations Resources

Intended

competitive

position in the

market place

DEPLOY operations

contribution by exploiting

superior capabilitiesPotential

competitive

position in the

market place

MARKET

STRATEGY

DEVELOP

operations

capabilities

through learning

The operations

capabilities

and

performance

Getting the fit

right

The

operations

resources and

processes

DIRECT performance

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DIRECT getting the fit right

Fit means that the operations resources and processes are

aligned with the requirements of its markets.

Marketr

equirements

Operations resource capability

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Intended market

position

Operations

resources and

processes

Targets

Performance

DIRECT

Directing improvement is a cycle of comparing targets

with performance

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Customer

Satisfaction

Productivity

Quality

Dependability

Speed

Flexibility

Cost

Agility

Market

Objectives

Financial

Objectives

OverallStrategy

Detailed

performance

targets

Increasing aggregation

Increasing strategic relevance

Increasing diagnostic power

Increasing frequency of measurement

Performance targets can involve different

levels of aggregation

Intended

marketposition

Operations

resources

andprocesses

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40

50

6070

80

90

100

X XX

X

X

X

Time

Last years averageperformance = 60%

Actual performance = 83%

Performance by historical standards is GOOD

Different standards of comparison

give different messages

4050

60

70

80

90

100

X XX

X

X

X

Time



Performance by historical standards is GOODPerformance against improvement goal is POOR

Improvement goal = 95%

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40

50

6070

80

90

100

X XX

X

X

X

Time



Performance by historical standards is GOODPerformance against improvement goal is POORPerformance against competitors is GOOD

Different standards of comparison

give different messages

4050

60

70

80

90

100

X XX

X

X

X

Time



Performance by historical standards is GOODPerformance against improvement goal is POORPerformance against competitors is GOODAbsolute performance is POOR



Competitor performance = 75%

Competitor performance = 75%

Absolute performance = 100%

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1

2

3

4

5

6

7

8

9

123456789

Importance for customersLOW HIGH

Perform

anceagainst

competitors

GOOD

BAD

URGENT

ACTION

IMPROVE

APPROPRIATE

EXCESS?

F

E

A

C

D

B

The importance-performance matrix

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1

2

3

4

5

6

7

8

9

123456789

Importance for customersLOW HIGH

Perform

anceagainst

competitors

GOOD

BAD

The importance-performance matrix for TAGs

overnight temperature-controlled service

X

X X

X

X

X

X

X

X

XVolume

flexibility

Delivery

Dropquote

Windowquote

Distributionquality

Documentationservice

Deliveryflexibility

Enquirylead-time

Order/dispatchquality

Price/Cost

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Cost

Flexibility

Speed

Dependability

Quality

Quality + dependability

Quality

Quality + dependability + speed

Quality + dependability + speed + flexibilityQuality + dependability + speed + flexibility + cost

The sandcone model of improvement; cost reduction relies on a cumulative

foundation of improvement in the other performance objectives

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Key Indicators

All staff are able to explain the operations

strategic objectives

Individuals and groups use the strategic

objectives to focus improvement activity

All proposed changes are assessed against

strategic objectives

All improvement is monitored and measured

against strategic objectives

DIRECT getting the fit right

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DEV

ELOP

Kno

wledge

Control

Operations

capabilities

Operations

resources and

processes

Developing operations capabilities is encouraged by a cycle

of attempting to control processes which enhances process

knowledge which, in turn, makes control easier

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It isnt just a matter of being given the

right resources

Operations with the same resources will

not all give the same performance

So what makes the difference?

How they are able to learn

DEVELOP through learning

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Processperforma

ncevariable

Upper bound of acceptability

Upper bound of variation

Lower bound of variation

Lower bound of acceptability

TIME

A process performance chart

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Processperforma

ncevariable

Upper bound of acceptability

Upper control limit

Lower control limit

Lower bound of acceptability

TIME

A statistical process control chart

Distribution of normalvariation in process

performance

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Lower control limits

Upper control limits

TIME TIME

Low process variation allows changes in process

performance to be readily detected

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Systematic learning

You cant learn about a process when its out

of control

If things are in control

you notice changes

so you can investigate them

so you can identify root causes

so you can put things right

and improve the process

and learn more about it

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ProcessControl

Learning

Process

Knowledge

Process control starts the learning which develops

process knowledge

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Knowledge is power

1 Complete ignorance Nowhere

2 Awareness Tacit

3 Measurement Written

4 Control of mean Written and in hardware

5 Process capability Hardware and operating manual

6 Process characterization Empirical equations

7 Know why Scientific models

8 Complete knowledge

None

Full

Stage Term Knowledge Typical form of knowledge

DEVELOP through learning

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DEV

ELOP

Knowledge

Co

ntrol

Operationscapabilities

Operations

resources and

processes

Understanding

process limits

Better products

and services

Wide

product/service

range

Less costly

flexibility

Enhanced

quality

Customer

loyalty

Retain best

staff

Staff job

satisfaction

Understanding of

process inputs

Higher process

efficiency

Enhanced supplier

relationships

Lower

costs

Process control may be one of the most operational of

tasks, but it can bring strategic benefit

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Building on learning

Key Indicators

Learning is made explicit, What have you

learned at work today?

Individuals and groups share their learning

Individuals seek out opportunities to actively

learn and experiment

Learning is captured and debated

Designated individuals are responsible for

learning from other operations

Process knowledge is seen as a key operationsobjective

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DEPLOY the contribution and role of

OperationsIn everyday life we all switch roles

How we see our role shapes how we

behave and interact with others

So critical to success operations strategy is

changing how operations management see

themselves and are seen by others

The key issues is What should we expect from

operations management?

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DEPLOY

Contribution

Expectations

Market

potentialOperations

capabilities

Deploying operations capabilities to create market

potential means ensuring that the operations function isexpected to contribute to market positioning

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Link strategy

with

operations

Give an

operations

advantage

Externallysupportive

Adopt

best

practice

Correct the

worstproblems

Internally

supportive

Externally

neutral

Internally

neutral

STAGE 1 STAGE 2 STAGE 3 STAGE 4

Stop holding

the

organization

back

Be as good

as

competitors

Be clearly

the best in

the

industry

Redefine the

industrys

expectations

Challenges

for

operations

Operations

are expected

to be .

Hays and Wheelwrights 4-stage model

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Correct the

Worst

Problems

Internally

neutral

The role of operations can be defined by its aspirations

STAGE 1 STAGE 2 STAGE 3 STAGE 4

Stop holding

the

organization

back

Adopt best

Practice

Externally

neutral

Be as goodas

competitors

Theability

toImplementstrategy

Link Strategy

With

Operations

Internally

supportive

Be clearly

the best in

the

industry

Theability

toSupportstrategy

Give an

OperationsAdvantage

Externally

supportive

Redefine the

industrysexpectations

Theability

toDrive

strategy

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Contribution and Role

Key Indicators

Staff cooperate and contribute in areas other

than their own

Staff understand their role in the internal and

external supply chain

The concept of internal supplier development is

established

Staff have visited and talked with their internal

and external customers

Staff are capable of making a contribution two

organizational levels above their own

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9 8 7 6 5 4 3 2 1

9

8

7

6

5

4

3

2

1

Staffattitude Knowledge

of staff

Getting to

right person

Time toresolution

Kept informed

Completeness

Staff understanding

LOW HIGHIMPORTANCEBAD

GOOD

PERFOR

MANCE

Importance-performance matrix for the New Jersey survey

Slide 11.17

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0.1

1.0

0.01

1000 100000 100000 1000000 10000000

Cumulative volume of calls processed

Log-log experience curve for KPG Atlanta call center

Associatehourspercall

10.0

Slide 11.18

Documents

chap11 (1)