operation management
Hsc
9780273776239_pp03.pptx
Chapter 3
Operations strategy
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Slack et al.’s model of operations management
Operations performance
Operations strategy
Topic covered in this chapter
Direct
Design
Develop
Deliver
Operations management
What is operations management?
Figure 3.1 This chapter examines operations strategy
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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In Chapter 3 – Operations strategy – Slack et al. identify the following key questions…
What is strategy and what is operations strategy?
What is the difference between a ‘top-down’ and a ‘bottom-up’ view of operations strategy?
What is the difference between a ‘market requirements’ and an ‘operations resources’ view of operations strategy?
How can an operations strategy be put together?
Key operations questions
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Setting broad objectives that direct an enterprise towards its overall goal.
Planning the path (in general rather than specific terms) that will achieve these goals.
Stressing long-term rather than short-term objectives.
Dealing with the total picture rather than stressing individual activities.
Being detached from, and above, the confusion and distractions of day-to-day activities.
What is strategy?
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Strategic decisions are those decisions which are widespread in their effect on the organization to which the strategy refers, define the position of the organization relative to its environment, and move the organization closer to its long-term goals.
Strategic decisions
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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‘Operations’ is not the same as ‘operational’
‘Operations’ are the resources that create products and services.
‘Operational’ is the opposite of strategic, meaning day-to-day and detailed.
So, one can examine both the operational and the strategic aspects of operations.
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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What is the role of the operations function?
Operations as implementer of strategy
Operations as driver of strategy
Operations as supporter of strategy
Operations implements strategy
Operations drives strategy
Operations supports strategy
Strategy
Operations
Strategy
Operations
Strategy
Operations
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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The three key attributes
of operations strategy
Operations contribution
Implementing
be Dependable
Operationalize strategy
explain Practicalities
Supporting
be Appropriate
Understand strategy
Contribute to decisions
Driving
be Innovative
provide Foundation of strategy
Develop long-term Capabilities
The strategic role of the operations function
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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The four-stage model of operations contribution
Increasing contribution of operations
Increasing strategic impact
Increasing operations capabilities
Externally supportive
Redefining industry expectations
STAGE 4
Give an operations advantage
Driving strategy
After Hayes and Wheelwright
Internally supportive
Clearly the best in the industry
STAGE 3
Link strategy with operations
Supporting strategy
Externally neutral
As good as competitors
STAGE 2
Adopt best practice
Implementing strategy
Internally neutral
STAGE 1
Correct the worst problems
Holding the organization back
Figure 3.2 The four-stage model of operations contribution
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Top-down Perspective
What the business wants operations to do
Operations resources perspective
What operations resources can do
What day-to-day experience suggests operations should do
Bottom-up perspective
Market requirement perspective
What the market position requires operations to do
Operations strategy
The four perspectives on operations strategy
Figure 3.3 The four perspectives on operations strategy
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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1
Corporate strategy
Business strategy
Emergent sense of what the strategy should be
Operational experience
Top-down and bottom-up perspectives of strategy
Operations strategy
Figure 3.5 The bottom-up perspective of operations strategy and its application to the printing services group
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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The strategy hierarchy
Key strategic decisions
Influences on decision making
Business strategy
What is the mission?
What are the strategic
objectives of the firm?
How to compete?
Customer/market dynamics
Competitor activity
Core technology dynamics
Financial constraints
Corporate strategy
What business to be in?
What to acquire?
What to divest?
How to allocate cash?
Economic environment
Social environment
Political environment
Company values and ethics
Functional strategy
How to contribute to the
strategic objectives?
How to manage the
function’s resources?
Skills of function’s staff
Current technology
Recent performance of the
function
Figure 3.4 The top-down perspective of operations strategy and its application to the printing services group
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Different competitive factors and performance objectives
Competitive factors
If the customers value these...
Performance objectives
Then, the operations will need to excel at these...
Low price
Cost
High quality
Quality
Fast delivery
Speed
Reliable delivery
Dependability
Innovative products and services
Flexibility (products/services)
Wide range of products and services
Flexibility (mix)
The ability to change the timing or quantity of products and services
Flexibility (volume and/or delivery)
Figure 3.6 Different competitive factors imply different performance objectives
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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3
Order-winning competitive factors
Neutral
+ve
ve
Performance
Competitive benefit
Order-winning factors
Figure 3.7 Order-winning, qualifying and less important competitive factors
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Qualifying competitive factors
Neutral
+ve
ve
Performance
Competitive benefit
Qualifying factors
Figure 3.7 Order-winning, qualifying and less important competitive factors (Continued)
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Less important competitive factors
Neutral
+ve
ve
Performance
Competitive benefit
Less important factors
Figure 3.7 Order-winning, qualifying and less important competitive factors (Continued)
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| Retail banking | Corporate banking | |
| Products | Personal financial services such as loans and credit cards | Special services for corporate customers |
| Customers | Individuals | Businesses |
| Product range | Medium but standardized, little need for special terms | Very wide range, many need to be customized |
| Design changes | Occasional | Continual |
| Delivery | Fast decisions | Dependable service |
| Quality | Means error-free transactions | Means close relationships |
| Volume per service | Most service are high volume | Most services are low volume |
| Profit margins | Most are low to medium, some high | Medium to high |
| Competitive factors | ||
| Order winners | Price | Customization |
| Accessibility | Quality of service | |
| Speed | Reliability | |
| Qualifiers | Quality | Speed |
| Range | Price | |
| Less important | Accessibility | |
| Internal performance objectives | Cost | Flexibility |
| Speed | Quality | |
| Quality | Dependability |
Different banking services require different performance objectives
Table 3.1 Different banking services require different performance objectives
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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The effects of the product/service life cycle
Sales volume
Likely order winners
Likely qualifiers
Dominant performance objectives
Customers
Competitors
Introduction
Product/ service characteristics
Quality
Range
Flexibility
Quality
Innovators
Few/none
Growth
Availability Quality
Price Range
Speed
Dependability
Quality
Early adopters
Increasing
Maturity
Low price
Dependable supply
Quality
Range
Cost
Dependability
Bulk of market
Stable
Decline
Time
Low price
Dependable supply
Cost
Laggards
Declining
Figure 3.8 The effects of the product/service life cycle on operations performance objectives
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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6
| Structural strategic decisions | Typical questions which the strategy should help to answer |
| New product/service design | How should the operation decide which products or services to develop and how to manage the development process? |
| Supply network design | Should the operation expand by acquiring its suppliers or its customers? If so, what customers and suppliers should it acquire? How should it develop the capabilities of its customers and suppliers What capacity should each operation in the network have? What number of geographically separate sites should the operation have and where should they be located? What activities and capacity should be allocated to each plant |
| Process technology | What types of process technology should the operation be using? Should it be at the leading edge of technology or wait until the technology is established? |
Structural and infrastructural strategic decision areas
Table 3.3 Structural and infrastructural strategic decision areas
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| Infrastructural strategic decisions | Typical questions which the strategy should help to answer |
| Job design and organization | What role should the people who staff the operation play in its management? How should responsibility for the activities of the operations function be allocated between different groups in the operation? What skills should be developed in the staff of the operation? |
| Planning and control | How should the operation forecast and monitor the demand for its products and services? How should the operation adjust its activity levels in response to demand fluctuations? What systems should the operation use to plan and control its activities? How should the operation decide the resources to be allocated to its various activities? |
Structural and infrastructural strategic decision areas (Continued)
Table 3.3 Structural and infrastructural strategic decision areas (Continued)
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| Infrastructural strategic decisions | Typical questions which the strategy should help to answer |
| Inventory | How should the operation decide how much inventory to have and where it is to be located? How should the operation control the size and composition of its inventories? |
| Supplier development | How should the operation choose its suppliers? How should it develop its relationship with its suppliers? How should it monitor its suppliers’ performance? |
Structural and infrastructural strategic decision areas (Continued)
Table 3.3 Structural and infrastructural strategic decision areas (Continued)
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| Infrastructural strategic decisions | Typical questions which the strategy should help to answer |
| Improvement | How should the operation’s performance be measured? How should the operation decide whether its performance is satisfactory? How should the operation ensure that its performance is reflected in its improvement priorities? Who should be involved in the improvement process? How fast should the operation expect improvement in performance to be? How should the improvement process be managed? |
| Failure prevention risk and recovery | How should the operation maintain its resources so as to prevent failure? How should the operation plan to cope with a failure if one occurs? |
Structural and infrastructural strategic decision areas (Continued)
Table 3.3 Structural and infrastructural strategic decision areas (Continued)
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Strategic resources and sustainable competitive advantage
Operations resources can give sustainable competitive advantage if they are...
Scarce
Not very mobile
Difficult to imitate
Difficult to substitute for
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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The four stages of the process of operations strategy
Operations strategy
formulation
Operations strategy
implementation
Operations strategy
monitoring
Operations strategy
control
Figure 3.9 The four stages of the process of operations strategy Source: Operations Strategy, 3rd ed., pearson education Limited (slack, n. and Lewis, M.a. 2011) p.33, Figure 1.12, © nigel slack and Michael Lewis 2002, 2008, 2011
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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The challenge of operations strategy formulation
An operations strategy should be pass the following questions…
Does it identify critical issues?
Is it comprehensive?
Is it coherent?
Does it correspond with strategic objectives?
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Long Ridge Gliding Club
Chapter 3 ‘end-of-chapter’ case
Source: Alamy Images/Corbis Bridge
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| Club members | Casual flyers | |
| Product | ||
| Customers | ||
| Product range | ||
| Design changes | ||
| Delivery | ||
| Quality | ||
| Volume per service type | ||
| Profit margins |
Evaluate the service to club members and casual flyers
Provision of facilities and instruction to pursue the sport
Enthusiasts
Novice to competition gliding
None
Club/team activity, co-producer of product
Good flying conditions
300 members
Negligible
The experience of gliding
Thrill seekers
Short introductory flights
Variety of packages
Dependable flight
Support, care and attention
750 trial flights
Mostly profit
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| Club members | Casual flyers | |
| Competitive factors | ||
| Order winners | ||
| Qualifiers | ||
| Less important | ||
| Internal performance objectives | ||
Evaluate the service to club members and casual flyers (Continued)
Location
Price
Flexibility
Dependability
Cost
Flexibility
Dependability
Price
Availability
Range of products
Quality of service
Location
Speed
Dependability
Flexibility
Quality
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| 0 5 | |||
| Cost | High price | Low price | |
| Depend-ability | Not likely to be able to fly | Able to fly as arranged | |
| Flexibility | Single product | Do anything anytime | |
| Product quality | Dangerous gliders and poor instruction | Well maintained gliders and excellent instruction | |
| Quality of facilities | Very basic facilities | 5* facilities | |
| Service quality | Non-existent service | Helpful, attentive and available staff | |
| Speed | Wait all day | Fly immediately |
Chart the five performance objectives
Developing a scale for the performance objectives...
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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| Club member expectation | Casual flyer expectations | Service delivered | |
| Cost | 3 | 1 | 3 |
| Dependability | 3 | 5 | 2 |
| Flexibility | 5 | 2 | 4 |
| Product quality | 5 | 5 | 5 |
| Quality of facilities | 1 | 4 | 1 |
| Service quality | 2 | 5 | 2 |
| Speed | 3 | 5 | 3 |
Chart the five performance objectives (Continued)
Using the scale to rate the performance objectives for...
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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5
4
3
2
1
Cost (Low price)
Dependability (reliable flying)
Product quality (high quality gliders and instruction)
Flexibility (change and choice)
Speed (fly immediately)
Service quality (high quality care and attention)
Quality of facilities (high quality facilities)
Club member expectations
Casual flyer expectations
Service delivered
Chart the five performance objectives (Continued)
Using the ‘polar diagram’ format...
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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Do nothing
What advice would you give to the club chairman?
End trial flights
Create two processes to look after the two types of customers
Amend the process
Better manage casuals’ expectations
The options...
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
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