Chap11

© Nigel Slack and Michael Lewis 2003

Quality

Per

form

ance

o

bje

ctiv

es

Dependability

Developmentand Organization

(Operations development and improvement)

Speed

Flexibility

Cost

Resource Usage

Mar

ket

Co

mp

etit

iven

ess

Decision areas

Issues covered in this chapter

Capacity Supply Network

Process Technology

Issues include:• Organizational structure and

operations effectiveness• Performance measurement used for setting the direction of improvements• Benchmarking against other operators • Prioritising improvements• Learning and enhancing process knowledge through control• Expectations on, and contributions from, the operations function


Market potential

Intended market

position

Market strategy

Operation’s capabilities

Operation’s resources and

processes

Operations Resources Market Requirements

The ‘Direct’, ‘Develop’, ‘Deploy’ strategic improvement cycle

DEVELOP operations capabilities through learning

DEPLOY operation’s contribution

DIRECT performance and prioritization

The Strategic Operations

Improvement Cycle


Continuous improvement at a strategic level

Market RequirementsOperations Resources

Intended competitive

position in the market place

DEPLOY operation’s contribution by exploiting

superior capabilitiesPotential

competitive position in the market place

MARKET STRATEGY

DEVELOP operations capabilities through learning

The operation’s capabilities

and performance

Getting the fit right

The operation’s

resources and processes

DIRECT performance


DIRECT – getting the fit right

‘Fit’ means that the operations resources and processes are aligned with the requirements of its markets.

Line of f

it

Mar

ket

req

uir

emen

ts

Operations resource capability


Intended marketposition


processes

Targets

Performance

DIRECT

Directing improvement is a cycle of comparing targets with performance


Customer Satisfaction

Productivity

Quality

Dependability

Speed

Flexibility

Cost

Agility

Market Objectives

Financial Objectives

Overall Strategy

Detailed

performance

targets

Increasing aggregation

Increasing strategic relevance

Increasing diagnostic power

Increasing frequency of measurement

Performance targets can involve different levels of aggregation

Intended market

position

Operation’s resources

and processes


405060708090

100

X XX

XX

X

Time

Last year’s average performance = 60%

Actual performance = 83%

Performance by historical standards is GOOD

Different standards of comparison give different messages

405060708090

100

X XX

XX

X

Time



Performance by historical standards is GOODPerformance against improvement goal is POOR

Improvement goal = 95%


405060708090

100

X XX

XX

X

Time



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

Different standards of comparison give different messages

405060708090

100

X XX

XX

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%


1

2

3

4

5

6

7

8

9123456789

Importance for customersLOW HIGH

Per

form

ance

ag

ain

st

com

pet

ito

rsG

OO

DB

AD

URGENTACTION

IMPROVE

APPROPRIATE

EXCESS?

F

E

A

C

D

B

The importance-performance matrix


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2

3

4

5

6

7

8

9123456789

Importance for customersLOW HIGH

Per

form

ance

ag

ain

st

com

pet

ito

rsG

OO

DB

AD

The importance-performance matrix for TAG’s ‘overnight temperature-controlled’ service

X

X X

X

X

X

X

X

X

XVolume flexibility

Delivery

Drop quote

Window quote

Distribution quality

Documentation service

Delivery flexibility

Enquiry lead-time

Order/dispatch quality

Price/Cost


Cost

Flexibility

Speed

Dependability

Quality

Quality + dependabilityQuality

Quality + dependability + speed

Quality + dependability + speed + flexibility

Quality + dependability + speed + flexibility + cost

The sandcone model of improvement; cost reduction relies on a cumulative foundation of improvement in the other performance objectives


Key Indicators

All staff are able to explain the operation’s 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


DE

VE

LO

P

Kn

ow

led

ge

Co

ntr

ol



processes

Developing operations capabilities is encouraged by a cycle of attempting to control processes which enhances process

knowledge which, in turn, makes control easier


It isn’t 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


Pro

cess

per

form

ance

var

iab

le

Upper bound of acceptability

Upper bound of variation

Lower bound of variation

Lower bound of acceptability

TIME

A process performance chart


Pro

cess

per

form

ance

var

iab

le

Upper bound of acceptability

Upper control limit

Lower control limit

Lower bound of acceptability

TIME

A statistical process control chart

Distribution of ‘normal’ variation in process

performance


Lower control limits

Upper control limits

TIME TIME

Low process variation allows changes in process performance to be readily detected


Systematic learning

You can’t learn about a process when it’s 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


Process Control

Learning

Process Knowledge

Process control starts the learning which develops process knowledge


“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


DE

VE

LO

P

Kn

ow

led

ge

Co

ntr

ol



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


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 operations objective


DEPLOY – the contribution and role of Operations

In 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?”


DEPLOY

Contribution

Expectations

Market potential


Deploying operation’s capabilities to create market potential means ensuring that the operations function is

expected to contribute to market positioning


Link strategy with operations

Give an operations advantage

Externally supportive

Adopt best

practice

Correct the worst

problems

Increasing contri

bution of o

peratio

ns

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 industry’s

expectations

Challenges for

operations

Operations are expected to be …….

Hays and Wheelwright’s 4-stage model


Correct the Worst

Problems

Increasing contri

bution of o

peratio

ns

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 good as

competitors

The ability

to Implement

strategy

Link Strategy With

OperationsInternally supportive

Be clearly the best in

the industry

The ability

to Support strategy

Give an Operations Advantage

Externally supportive

Redefine the industry’s

expectations

The ability

to Drive

strategy


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


9 8 7 6 5 4 3 2 1

9

8

7

6

5

4

3

2

1

Staff attitude Knowledge

of staff

Getting to right person

Time to resolution

Kept informed

Completeness Staff understanding

LOW HIGHIMPORTANCE

BA

DG

OO

DP

ER

FO

RM

AN

CE

Importance-performance matrix for the New Jersey survey

Slide 11.17


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

Ass

oci

ate

ho

urs

per

cal

l

10.0

Slide 11.18

Chap11

Business

Transcript of Chap11