Resource Usage

Quality

Speed Dependability Flexibility Cost

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

Development and Organization Process Capacity Supply Network Technology (Operations development and improvement)

Decision areas

Issues covered in this chapter

Nigel Slack and Michael Lewis 2003

Market Competitiveness

Issues include: Organizational structure and

Performance objectives

Operations Resources DEPLOY operations contribution

Market Requirements

Operations capabilities

Market potential

DEVELOP operations capabilities through learning Operations resources and processes

The Strategic Operations Improvement Cycle

Market strategy

DIRECT performance and prioritization

Intended market position

The Direct, Develop, Deploy strategic improvement cycle

Nigel Slack and Michael Lewis 2003

Continuous improvement at a strategic level

Operations Resources
The operations capabilities and performance DEPLOY operations contribution by exploiting superior capabilities

Market Requirements
Potential competitive position in the market place

DEVELOP operations capabilities through learning

MARKET STRATEGY

The operations resources and processes

DIRECT performance Getting the fit right

Intended competitive position in the market place

Nigel Slack and Michael Lewis 2003

DIRECT getting the fit right

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

Market requirements

Operations resource capability

Nigel Slack and Michael Lewis 2003

Performance Operations resources and processes Intended market position

DIRECT

Targets

Directing improvement is a cycle of comparing targets with performance

Nigel Slack and Michael Lewis 2003

Increasing strategic relevance Increasing aggregation

Quality Dependability Operations Detailed resources performance Speed and processes targets Flexibility Cost Customer Satisfaction

Market Objectives Overall Strategy Financial Objectives

Agility

Intended market position

Productivity

Increasing frequency of measurement Increasing diagnostic power

Performance targets can involve different levels of aggregation

Nigel Slack and Michael Lewis 2003

100 90 80 70 60 50 40

X Actual performance = 83% X X X X X Last years average performance = 60% Time Performance by historical standards is GOOD

100 90 80 70 60 50 40

Improvement goal = 95% X Actual performance = 83% X X X X X Last years average performance = 60% Time Performance by historical standards is GOOD Performance against improvement goal is POOR

Different standards of comparison give different messages

Nigel Slack and Michael Lewis 2003

100 90 80 70 60 50 40

X X X X

Improvement goal = 95% X Actual performance = 83% Competitor performance = 75% Last years average performance = 60% Time

Performance by historical standards is GOOD Performance against improvement goal is POOR Performance against competitors is GOOD 100 90 80 70 60 50 40 Absolute performance = 100% Improvement goal = 95% X Actual performance = 83% Competitor performance = 75% Last years average performance = 60% Time Performance by historical standards is GOOD Performance against improvement goal is POOR Performance against competitors is GOOD Absolute performance is POOR

X X X X

Different standards of comparison give different messages Nigel Slack and Michael Lewis 2003

GOOD

F 1 2 3 E 4 5 6 A 7 8 URGENT ACTION 9 8 C LOW Importance for customers HIGH 7 6 5 4 3 2 1 IMPROVE D EXCESS? APPROPRIATE B

Performance against competitors

BAD

The importance-performance matrix

Nigel Slack and Michael Lewis 2003

GOOD

1 2 3 4 5 6 7 8 Volume flexibility X Drop quote X

Delivery Window quote X

Performance against competitors

XDistribution quality Documentation X service Price/Cost X Delivery X flexibility X Order/dispatch Enquiry quality Xlead-time 9 8 7 6 5 4 3 2 1

BAD

LOW

Importance for customers

HIGH

The importance-performance matrix for TAGs overnight temperature-controlled service

Nigel Slack and Michael Lewis 2003

Cost Flexibility Speed Dependability Quality

Quality Quality + dependability 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
Nigel Slack and Michael Lewis 2003

DIRECT getting the fit right

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
Nigel Slack and Michael Lewis 2003

Operations capabilities

Knowledge

DEVELOP

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
Nigel Slack and Michael Lewis 2003

Control

DEVELOP through learning

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

Nigel Slack and Michael Lewis 2003

Upper bound of acceptability

Process performance variable

Upper bound of variation

Lower bound of variation

Lower bound of acceptability

TIME

A process performance chart

Nigel Slack and Michael Lewis 2003

Upper bound of acceptability Distribution of normal variation in process performance

Process performance variable

Upper control limit

Lower control limit

Lower bound of acceptability

TIME

A statistical process control chart

Nigel Slack and Michael Lewis 2003

Upper control limits

Lower control limits TIME TIME

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

Nigel Slack and Michael Lewis 2003

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
Nigel Slack and Michael Lewis 2003

Process control starts the learning which develops process knowledge

Learning

Process Knowledge Process Control

Nigel Slack and Michael Lewis 2003

DEVELOP through learning

Knowledge is power
Stage
1 2 3 4 5 6 7 8

Term

Knowledge Typical form of knowledge

None Nowhere Tacit Written Written and in hardware Hardware and operating manual Empirical equations Scientific models Full

Complete ignorance Awareness Measurement Control of mean Process capability Process characterization Know why Complete knowledge

Nigel Slack and Michael Lewis 2003

Enhanced supplier relationships Understanding of process inputs Knowledge Operations capabilities

Better products and services Understanding process limits

DEVELOP

Retain best staff

Staff job satisfaction

Control

Enhanced quality

Customer loyalty

Higher process efficiency

Operations resources and processes

Less costly flexibility

Lower costs

Wide product/service range

Process control may be one of the most operational of tasks, but it can bring strategic benefit
Nigel Slack and Michael Lewis 2003

Building on learning
Key Indicators Learning is made explicit, What have you learned at work today? Process knowledge is seen as a key operations objective 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
Nigel Slack and Michael Lewis 2003

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?

Nigel Slack and Michael Lewis 2003

Contribution Operations capabilities DEPLOY Market potential

Expectations

Deploying operations capabilities to create market potential means ensuring that the operations function is expected to contribute to market positioning

Nigel Slack and Michael Lewis 2003

Challenges for operations Give an operations advantage Link strategy with operations Adopt best practice Correct the worst problems Stop holding the organization back STAGE 1 STAGE 2 STAGE 3 STAGE 4 Be as good as competitors Be clearly the best in the industry Redefine the industrys expectations

Operations are expected to be . Externally supportive

Internally supportive

Externally neutral

Internally neutral

Hays and Wheelwrights 4-stage model

Nigel Slack and Michael Lewis 2003

The role of operations can be defined by its aspirations

Give an Operations Advantage Link Strategy With Operations Be as good as competitors Stop holding the organization back STAGE 1
The ability to Implement strategy
Nigel Slack and Michael Lewis 2003

Redefine the industrys expectations Be clearly the best in the industry

Externally supportive

Internally supportive

Adopt best Practice

Externally neutral

Correct the Worst Problems

Internally neutral STAGE 2 STAGE 3 STAGE 4

The ability to Drive strategy

The ability to Support 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
Nigel Slack and Michael Lewis 2003

GOOD

1 2

3 4 PERFORMANCE 5 6 7 8 9 BAD 9 LOW 8 7 6 5 IMPORTANCE 4 3 2 1 HIGH Staff attitude Knowledge of staff

Time to resolution

Getting to right person

Staff understanding Completeness Kept informed

Importance-performance matrix for the New Jersey survey

Nigel Slack and Michael Lewis 2003 Slide 11.17

10.0

Associate hours per call

1.0

0.1

0.01 1000 100000 100000 1000000 10000000

Cumulative volume of calls processed Log-log experience curve for KPG Atlanta call center
Nigel Slack and Michael Lewis 2003 Slide 11.18