The strategic role and objectives of operations Source: Honda Motor Company What is the role of the Operations function? Operations as implementer Operations as supporter Operations as driver Operations Strategy Strategy Operations Operations Operations implements strategy Operations supports strategy Strategy Operations drives strategy 1
The strategic role of the Operations function The 3 key attributes of Operations Implementing Supporting Driving Operations contribution Be dependable Operationalize strategy Explain practicalities Be appropriate Understand strategy Contribute to decisions Be innovative Provide foundation of strategy Develop long-term capabilities The four-stage model of Operations contribution Increasing strategic impact Redefining industry expectations Clearly the best in the industry As good as the competitors Holding the organization back Increasing contribution of operations STAGE 1 Correct the worst problems Internally neutral STAGE 2 Adopt best practice Implementing strategy Externally neutral STAGE 3 Link strategy with operations Supporting strategy Internally supportive Increasing operations capabilities STAGE 4 Give an operations advantage Driving strategy Externally supportive 2
Suppliers Continue business Develop supplier capability Provide transparent information Broad strategic objectives for an operation applied to stakeholder groups Society Increase employment Enhance community well-being Produce sustainable products Ensure clean environment Customers Appropriate product or service specification Consistent quality Fast delivery Dependable delivery Acceptable price Shareholders Economic value from investment Ethical value from investment Employees Continuous employment Fair pay Good working conditions Personal development The Operations function can provide a competitive advantage through its performance at the five competitive objectives Quality Being RIGHT Speed Being FAST Competitiveness Dependability Being ON TIME Flexibility Being ABLE TO CHANGE Cost Being PRODUCTIVE 3
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)? The benefits of excelling Minimum price, highest value Quick delivery Speed Fast throughput Cost Minimum cost, maximum value Reliable operation Dependability Dependable delivery Error-free products and services Quality Error-free processes Ability to change Flexibility Frequent new products, maximum choice 4
What does Quality mean in a hospital? Patients receive the most appropriate treatment 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 5
What does Quality mean in 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 a supermarket? The store is clean and tidy Décor is appropriate and attractive Goods are in good condition Staff are courteous, friendly and helpful 6
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 7
External and internal benefits Quality Cost Speed Dependability Quality Flexibility On-specification products and services What does Speed mean in a hospital? The time between requiring treatment and receiving treatment is kept to a minimum The time for test results, X-rays, etc. to be returned is kept to a minimum 8
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 9
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 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 10
External and internal benefits Speed Short delivery lead-time Speed Cost Dependability Quality Flexibility On-specification products and services What does Dependability mean in a hospital? The proportion of appointments that are cancelled is kept to a minimum Keeping appointment times Test results, X-rays, etc. are returned as promised 11
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 12
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 Dependability 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 13
External and internal benefits Dependability Short delivery lead-time Speed Cost Dependability Reliable delivery Quality Flexibility On-specification products and services Flexibility has several distinct meanings but is always associated with an operation s ability to change Change what? Flexibility 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 14
What does Flexibility mean in a hospital? Introducing new treatments 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 15
What does Flexibility mean in 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 a supermarket? 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 16
External and internal benefits Flexibility Short delivery lead-time Speed Cost Dependability Reliable delivery On-specification products and services Quality Flexibility Frequent new products/services Wide range Volume and delivery changes What does Cost mean in a hospital? Bought-in materials and services Technology and facilities costs Staff costs 17
What does Cost mean in an automobile plant? Bought-in materials and services Technology and facilities costs Staff costs What does Cost mean in a bus company? Bought-in materials and services Technology and facilities costs Staff costs 18
What does Cost mean in a supermarket? Bought-in materials and services Technology and facilities costs Staff costs Cost 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 in terms of quality speed dependability flexibility 19
External and internal benefits Cost Low price, high margin, or both Short delivery lead-time Speed Cost Dependability Reliable delivery On-specification products and services Quality Flexibility Frequent new products/services Wide range Volume and delivery changes 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 20
Polar diagrams for a taxi service versus a bus service Taxi service Cost Bus service Speed Dependability Quality Flexibility Polar diagrams for a proposed police performance method Required performance Reassurance Actual performance Efficiency Crime reduction Working with criminal justice agencies Crime detection 21
Polar diagrams for newspaper collection and general recycling services Newspaper collection service Cost General recycling service Speed Dependability Quality Flexibility Key Terms Test The four-stage model of operations contribution A model devised by Hayes and Wheelwright that categorizes the degree to which operations management has a positive influence on overall strategy. Quality There are many different approaches to defining this. We define it as consistent conformance to customers expectations. Speed The elapsed time between customers requesting products or services and receiving them. 22
Key Terms Test Dependability Delivering, or making available, products or services when they were promised to the customer. Flexibility The 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 flexibility The operation s ability to introduce new or modified products and services. Key Terms Test Mix flexibility The operation s ability to produce a wide range of products and services. Volume flexibility The operation s ability to change its level of output or activity to produce different quantities or volumes of products and services over time. Delivery flexibility The operation s ability to change the timing of the delivery of its services or products. 23
Key Terms Test Mass customization The ability to produce products or services in high volume, yet vary their specification to the needs of individual customers or types of customer. Agility The ability of an operation to respond quickly and at low cost as market requirements change. Productivity The 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. 24