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The strategic role and objectives of operations
Source: Honda Motor Company
What is the role of the Operations function?Operations as implementer
Operations implements strategy
Strategy
Operations
Operations drives strategy
Operations as driver
Strategy
Operations
Operations supports strategy
Operations as
supporter
Strategy
Operations
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The 3 key attributes of Operations
Operations contribution
Implementing Be dependableOperationalize strategyExplain practicalities
Supporting Be appropriateUnderstand strategyContribute to decisions
Driving Be innovativeProvide foundation of strategyDevelop long-term capabilities
The strategic role of the Operations function
Internally neutral
STAGE 1Correct the
worst problems
Holding the organization back
Increasing contribution of operations
The four-stage model of Operations contribution
Externally neutral
As good as the competitors
STAGE 2Adopt best practice
Implementing
strategy
Internally supportive
Clearly the best in the industry
STAGE 3Link strategy
with operations
Supporting
strategy
Externally supportive
Redefining industry expectations
STAGE 4Give an
operations advantage
Driving
strategy
Incr
easi
ng s
trate
gic
impa
ct
Increasing operations capabilities
3
Broad strategic objectives for an operation applied to stakeholder groups
SocietyIncrease employmentEnhance community well-beingProduce sustainable productsEnsure clean environment
CustomersAppropriate product or
service specificationConsistent qualityFast deliveryDependable deliveryAcceptable price
SuppliersContinue businessDevelop supplier
capabilityProvide transparent
information
ShareholdersEconomic value from
investmentEthical value from investment
EmployeesContinuous employmentFair payGood working conditionsPersonal development
Com
petit
iven
ess
The Operations function can provide a competitive advantage through its performance at 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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What do the terms quality, speed, dependability, flexibility and cost mean in the context of operations?
Which enables you to do things cheaply (cost advantage)?
Which enables you to change what you do (flexibility advantage)?
Which enables you to do things quickly (speed advantage)?
Which enables you to do things on time (dependability advantage)?
Which enables you to do things right (quality advantage)?
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
Dependability
Cost
Speed
Quality Flexibility
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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
What does Quality mean in …
… an automobile plant?
All assembly is to specification
Product is reliable
All parts are made to specification
The product is attractive and blemish-free
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… a bus company?
What does Quality mean in …
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
… a supermarket?
What does Quality mean in …
The store is clean and tidy
Décor is appropriate and attractive
Goods are in good condition
Staff are courteous, friendly and helpful
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Quality‘Quality’ has several meanings. The two most common are …
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 McDonald’s may buy less expensive meat, but its conformance must be high
Quality
Irrespective of a product or service’s specification quality, producing it so 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
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Depend-ability
FlexibilityQuality
Speed
Cost
QualityExternal and internal benefits
On-specification products and services
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 …
… an automobile plant?
The time between dealers requesting a vehicle of a particular specification and receiving it is minimized
The time to deliver spares to service centres is minimized
What does Speed mean in …
… a bus company?
The time between a customer setting out on the journey and reaching his or her destination is kept to a minimum
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What does Speed mean in …
… a supermarket?
The time for the total transaction of going to the supermarket, making the purchases and returning is minimized
Goods are immediately available
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 passthrough the operation, therefore saving cost
Speed
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Depend-ability
FlexibilityQuality
Speed
Cost
SpeedExternal and internal benefits
On-specification products and services
Short delivery lead-time
What does Dependability mean in …
The 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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What does Dependability mean in …
… an automobile plant?
On-time delivery of vehicles to dealers
On-time delivery of spares to service centres
What does Dependability mean in …
… a bus company?
Keeping to the published timetable at all points on the route
Constant availability of seats for passengers
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What does Dependability mean in …
… a supermarket?
Predictable opening hours
Proportion of goods out of stock kept to a minimum
Keeping to reasonable queuing times
Constant availability of parking
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, therefore saving cost
Dependability
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Depend-ability
FlexibilityQuality
Speed
Cost
DependabilityExternal and internal benefits
Depend-ability
FlexibilityQuality
Speed
Cost
On-specification products and services
Short delivery lead-time Reliable
delivery
Flexibility has several distinct meanings but is always associated with an operation’s ability to 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
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What does Flexibility mean in …
Introducing new treatments
… a hospital?
Providing a wide range of treatments
The ability to adjust the number of patients treated
The ability to reschedule appointments
What does Flexibility mean in …
… 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
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… a bus company?
What does Flexibility mean in …
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
… a supermarket?
What does Flexibility mean in …
The introduction of new lines
A wide range of goods stocked
The ability to adjust the number of customers served
The ability to get out-of-stock items
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Depend-ability
FlexibilityQuality
Speed
Cost
External and internal benefits
FlexibilityExternal and internal benefits
Depend-ability
FlexibilityQuality
Cost
On-specification products and services
Short delivery lead-time Reliable
deliverySpeed
Frequent new products/servicesWide rangeVolume and delivery changes
What does Cost mean in …
… a hospital?
Staff costs
Technology and facilities costs
Bought-in materials and services
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What does Cost mean in …
… an automobile plant?
Technology and facilities costs
Staff costs
Bought-in materials and services
… a bus company?
What does Cost mean in …
Staff costs
Technology and facilities costs
Bought-in materials and services
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… a supermarket?
What does Cost mean in …
Staff costs
Technology and facilities costs
Bought-in materials and services
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: volumevarietyvariationvisibility
The internal performance of the operation in terms ofqualityspeeddependabilityflexibility
Cost
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CostExternal and internal benefits
Depend-ability
FlexibilityQuality
Speed
Cost
Depend-ability
FlexibilityQuality
Cost
On-specification products and services
Short delivery lead-time Reliable
deliverySpeed
Frequent new products/servicesWide rangeVolume and delivery changes
Low price, high margin, or both
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
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Polar diagrams for a taxi service versus a bus service
Cost
Quality Flexibility
DependabilitySpeed
Taxiservice
Busservice
Reassurance
Crimereduction
CrimedetectionWorking with
criminal justiceagencies
Efficiency
Actualperformance
Required performance
Polar diagrams for a proposed police performance method
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Cost
Quality Flexibility
Speed
Newspaper collectionservice
General recyclingservice
Dependability
Polar diagrams for newspaper collection and general recycling services
Key Terms TestThe four-stage model of operations contributionA model devised by Hayes and Wheelwright that categorizes the
degree to which operations management has a positive influence on overall strategy.
QualityThere are many different approaches to defining this. We define it
as consistent conformance to customers’ expectations.
SpeedThe elapsed time between customers requesting products or
services and receiving them.
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Key Terms TestDependabilityDelivering, or making available, products or services when they
were promised to the customer.
FlexibilityThe degree to which an operation’s process can change what it
does, how it is doing it, or when it is doing it.
Product/service flexibilityThe operation’s ability to introduce new or modified products and
services.
Key Terms TestMix flexibilityThe operation’s ability to produce a wide range of products and
services.
Volume flexibilityThe operation’s ability to change its level of output or activity to
produce different quantities or volumes of products and servicesover time.
Delivery flexibilityThe operation’s ability to change the timing of the delivery of its
services or products.
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Key Terms TestMass customizationThe ability to produce products or services in high volume, yet vary
their specification to the needs of individual customers or types of customer.
AgilityThe ability of an operation to respond quickly and at low cost as
market requirements change.
ProductivityThe ratio of what is produced by an operation or process to what is
required to produce it, that is, the output from the operation divided by the input to the operation.