Post on 30-Sep-2020
transcript
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Lecture 2
MBF2213 | Operations ManagementPrepared by Dr Khairul Anuar
L2: Operations Performance
Slack et al.’s model of operations management
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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
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Operations management can make or break any organization
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Three levels of operations performance
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Stakeholder groups with typical operations objectives
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People – The social
account, measured by
the impact of the
operation on the quality
of people’s lives
Planet – The environmental account,
measured by environmental impact of
the operation
Profit – The economic
account, measured by
profitability, return on
assets, etc. of the
operation
Sustainability
How operations can impact TBL* performance (1 of 3)
• Recyclability of materials, energy consumption and waste material
generation
• Reducing transport-related energy
• Noise pollution, fume and emission pollution
• Obsolescence and wastage
• Environmental impact of process failures
• Recovery to minimize impact of failures
* A plastic moulding company 7
People – The social
account, measured by
the impact of the
operation on the quality
of people’s lives
Planet – The environmental account,
measured by environmental impact of
the operation
Profit – The economic
account, measured by
profitability, return on
assets, etc. of the
operation
Sustainability
How operations can impact TBL* performance (1 of 3)
• Customer safety from products and services
• Employment impact of an operation’s location
• Employment implications of outsourcing
• Repetitive or alienating work
• Staff safety and workplace stress
• Non-exploitation of developing country suppliers
* A plastic moulding company8
People – The social
account, measured by
the impact of the
operation on the quality
of people’s lives
Planet – The environmental account,
measured by environmental impact of
the operation
Profit – The economic
account, measured by
profitability, return on
assets, etc. of the
operation
Sustainability
How operations can impact TBL* performance (1 of 3)
• Cost of producing products and services
• Revenue from the effects of quality, speed,
dependability, and flexibility
• Effectiveness of investment in operations resources
• Risk and resilience of supply
• Building capabilities for the future
* A plastic moulding company9
Stakeholder What stakeholders want from the
operation
What the operation wants from
stakeholders
Shareholders Return on investment
Stability of earnings
Liquidity of investment
Investment capital
Long-term commitment
Directors/top
management
Low/acceptable operating costs
Secure revenue
Well-targeted investment
Low risk of failure
Future innovation
Coherent, consistent, clear and
achievable strategies
Appropriate investment
Staff Fair wages
Good working conditions
Safe work environment
Personal and career development
Attendance
Diligence/best efforts
Honesty
Engagement
Staff representative
bodies (e.g. trade
unions)
Conformance with national
agreements
Consultation
Understanding
Fairness
Assistance in problem solving
Suppliers (of
materials, services,
equipment, etc.)
Early notice of requirements
Long-term orders
Fair price
On-time payment
Integrity of delivery, quality and
volume
Innovation
Responsiveness
Progressive price reductions
Typical stakeholders’ performance objectives (1 of 2)
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Stakeholder What stakeholders want from
the operation
What the operation wants
from stakeholders
Regulators
(e.g. financial
regulators)
Conformance to regulations
Feedback on effectiveness of
regulations
Consistency of regulation
Consistency of application of
regulations
Responsiveness to industry
concerns
Government
(local, national,
regional)
Conformance to legal
requirements
Contribution to
(local/national/regional)
economy
Low/simple taxation
Representation of local
concerns
Appropriate infrastructure
Lobby groups
(e.g.
environmental
lobby groups)
Alignment of the organization’s
activities with whatever the
group are promoting
No unfair targeting
Practical help in achieving aims
(if the organization wants to
achieve them)
Society Minimize negative effects from
the operation (noise, traffic, etc.
and maximize positive effects
(jobs, local sponsorship, etc).
Support for organization’s
plans
Typical stakeholders’ performance objectives (2 of 2)
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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
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The five competitive objectives
Quality Being RIGHT
Speed Being FAST
Dependability Being ON TIME
Cost Being PRODUCTIVE
Being ABLE TO CHANGEFlexibility
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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
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What does Quality mean in…
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Quality
Speed
Dependability
Flexibility
Cost
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.
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… 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)
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… 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)
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… 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)
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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.
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Quality of conformance is the ability of a product, service, or process to meet its design specifications.
Design specifications are an interpretation of what the customer needs.
Quality of conformance is measured within an acceptable tolerance range. Eg. if passengers expect a flight to leave within 10 minutes of its scheduled departure date, then any departure time within that time frame has a high quality of conformance, while any longer interval does not.Thus, quality of conformance equates to conformance to specifications within an acceptable tolerance range.
It is possible for a product to be of extremely high quality in terms of being produced within a tight tolerance range, using premium materials, and including all possible features. However, if the design specifications call for a less expensive product with fewer features, then the product is considered to have a low quality of conformance. This means that a high cost does not necessarily equate to a high quality of conformance.
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
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External and internal benefits of conformance quality (Continued)
On-specification products and services
Internal
benefits
External
benefits
Dependability
Cost
Speed
Quality Flexibility
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What does Quality mean in…
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Quality
Speed
Dependability
Flexibility
Cost
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.
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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.
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… 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)
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… 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)
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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
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External and internal benefits of speed (Continued)
Internal
benefits
External
benefits
Dependability
Cost
Speed
Quality Flexibility
Quick delivery
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What does Quality mean in…
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Quality
Speed
Dependability
Flexibility
Cost
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.
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… an automobile plant?
On-time delivery of vehicles to dealers.
On-time delivery of spares to service centres.
What does Dependability mean in… (Continued)
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… 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)
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… 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)
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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
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External and internal benefits of Dependability (Continued)
Internal
benefits
External
benefits
Dependability
Cost
Speed
Quality Flexibility
Dependable delivery
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What does Quality mean in…
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Quality
Speed
Dependability
Flexibility
Cost
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?
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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.
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… 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)
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… 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)
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… 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)
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Depend-ability
FlexibilityQuality
Cost
External and internal benefits
External and internal benefits of flexibilityExternal and internal benefits
Depend-ability
FlexibilityQuality
Cost
On-specification products and services
Short delivery lead-time
Reliable delivery
Speed
Frequent new products/services
Wide range
Volume and delivery changes
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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
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What does Quality mean in…
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Quality
Speed
Dependability
Flexibility
Cost
… a hospital ?
Bought-in materials and services
What does Cost mean in…
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… an automobile plant?
Bought-in materials and services
What does Cost mean in… (Continued)
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… a bus company?
Staff costs
Technology and facilities costs
Bought-in materials and services
What does Cost mean in… (Continued)
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… a supermarket?
What does Cost mean in… (Continued)
Staff costs
Technology and facilities costs
Bought-in materials and services
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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
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External and internal benefits of performance objectives
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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
DependabilitySpeed
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Polar diagrams for a taxi service versus a bus service
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Polar diagrams for police performance
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Cost
Quality Flexibility
Speed
Newspaper collectionservice
General recyclingservice
Dependability
Polar diagrams for newspaper collection and generalrecycling services
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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’.
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Summary