Total Quality Management and Operations Management

Copyrighted material – 9781137526564
Contents in brief
Part one – Introduction

1 Managing Operations 1
2 Operations Strategy 27
Part two – Designing and delivering services and products

3 Designing Services and Products 55
4 Delivering Services 86
5 Making Products 118
6 Location and Layout 140
Part three – Managing operations

7 Managing Capacity 173
8 Scheduling and Executing Operations 207
9 Managing Inventory 243
10 Managing Quality 273
11 Managing the Supply Chain 303
Part four – Improving operations

12 Improving Operations 343
iii

Contents
List of figures x
Grid of case studies xiv
Preface to Second Edition xvii
Websitexx
About the authors xxi
How to use each chapter xxii
Acknowledgementsxxiv
Part one – Introduction 1

1 Managing Operations 1
Introduction2
What does operations management do? 2
How operations management fits into an organization 4
The role of operations management 5
Inputs and outputs 10
The mix of sectors in different economies 10
Variations in the operations management role 14
Variation in complexity 14
Variation in output: services versus products 15
Corporate social responsibility 19
Critical reflections 21
Summary22
Study activities 23
Exploring further 23
Companion website 24
Notes and references 24
2 Operations Strategy 27
Introduction28
What is strategy? 28
The evolution of strategy within a business 28
Levels of strategy 28
Developing a strategy 33
Understanding customer requirements 34
Understanding markets 36
The process of strategy development 40
Implementing an operations strategy 47

Operations strategy – an illustration 47
Summary50
Study activities 51
iv

Essential Operations Management Contents v
Part two – Designing and delivering services and products 55

3 Designing Services and Products 55
Introduction56
Designing and developing services and products 56
The research and development process 56
The design and development process 59
Reviewing the service and product mix 63
Developing a specification 66
Techniques for improving design 67

Standardization 67
Modular design 67
Mass customization 68
Taguchi methods 71
Quality function deployment and the house of quality 71
Value analysis 74
Simultaneous engineering 75
Variety reduction 76
Summary81
Study activities 82
4 Delivering Services 86
Introduction87
Factors affecting service delivery system design 87
Characteristics of service operations 88
Understanding how services differ 90
Designing the service delivery system 94

Overall design of service delivery systems 94
Detailed design of service delivery systems 95

Phase 1 – the point of customer interface: back office or front office? 95
Phase 2 – the delivery system 96
IT-based service delivery system designs 102
Further aspects of service delivery 107

Enhancing services 107
Customer participation in service delivery 108
Improving operations 109

Lean service operations 110
Tools and methods 111

Summary113
Study activities 114

vi Essential Operations Management Contents
5 Making Products 118

Introduction119
Factors affecting the design of the manufacturing process 119
Categories of product 119
Types of manufacturing process 120
Designing the manufacturing process 124

Implications of process design 128
Hybrid processes 130

Cells130
Improving operations 132

Lean operations 132

Summary135
6 Location and Layout 140
Introduction141
Choosing a location 141
Levels of decision 142
Background factors influencing location decisions 143
Site location techniques 149
Choosing a layout 151

Factors influencing layout 151
Basic types of layout 153
Detailed layout design 160

Summary166
Part three – Managing operations 173

7 Managing Capacity 173
Introduction174
An overview of managing capacity 174
Defining and measuring capacity 175
Factors affecting capacity management 183

How do the service delivery system and manufacturing process design affect
capacity? 183
Determining the level of capacity 187

Essential Operations Management Contents vii
Planning and managing capacity 189

Resource planning 190
Types of capacity plan 194
Managing demand and capacity 195

Summary201
8 Scheduling and Executing Operations 207
Introduction208
What is operations scheduling? 208
The role of scheduling in managing operations 208
Operations scheduling systems 210

Project management 210
Informal scheduling systems 210
Scheduling systems for complex services or products 212
Scheduling systems for repeat services and products 216

Summary234
9 Managing Inventory 243
Introduction244
What is inventory? 244
The role of inventory 244
Types of inventory 245
Functions of inventory 247
Models and approaches for managing inventory 252

Background issues and approaches 252
Key inventory decisions – what to stock and when to order 256
Deciding how much inventory to hold, how much material to order,
and when 257
Inventory control systems and analysis 262

Inventory control systems 263
Inventory analysis 264

Summary267

viii Essential Operations Management Contents

10 Managing Quality 273
Introduction274
Defining quality and its role 274
Quality philosophies: the work of Deming, Juran and Crosby 277
W. Edwards Deming 277
Joseph M. Juran 278
Philip B. Crosby 278
The steps to effectively managing quality 278

Tools and techniques 283
Approaches to managing quality 292

Total quality management 292
Quality management frameworks: ISO 9000, Baldrige Award an
EFQM Excellence Award 294

Summary297
11 Managing the Supply Chain 303
Introduction304
What is a supply chain? 304
Designing the supply chain 305

Deciding whether to make or buy 306
Advantages and disadvantages of make or buy 309

Advantages of making in-house 309
Disadvantages of making in-house 310
Advantages of deciding to buy/outsource 310
Disadvantages of deciding to buy/outsource 311
Outsourcing – managing the risks 315

Insourcing or reshoring 316
Alternatives to outsourcing 316
Managing supply chains 317

Types of supplier relationship 319
Corporate social responsibility 320
Digital supply 321
Developing supply chains 324

Stages of development 325
Tools and techniques for developing supply chains 327
The benefits of improving supply chains 333
Reverse logistics – handling returns in an online world 325

Summary337

Essential Operations Management Contents ix

Books 340
Part four – Improving operations 343
12 Improving Operations 343
Introduction 344
Why improve operations? 344
Releasing cash 344
Improving market support 345
Reducing costs 345
The process of improving operations 348

Approaches to improving operations 349
Improvement tools and techniques 356
Making improvements 363

Summary 373
Index 378

PART ONE – INTRODUCTION
Managing Operations 1
Learning objectives Chapter outline
After completing this chapter, you should be able to: Introduction
• Explain the role of operations management in an What does operations management do?
organization
• How operations management fits into an
• Appreciate the dimensions that make up the organization
operations management task
• The role of operations management
• Identify where the operations function fits within
an organization • Inputs and outputs
• Illustrate the crucial role of operations • The mix of sectors in different economies
management in organizational success
Variations in the operations management role
• Understand how companies must integrate
corporate social responsibility with their business • Variations in complexity
operations
• Variations in output: services versus products
• Appreciate how the chapters that follow will help
you build your operations management Corporate social responsibility
knowledge
Critical reflections
Summary

2 Introduction
Operations Introduction
O
function – the
perations management embraces the tasks, responsibilities and decisions that
function in an
organization that transform inputs (such as materials, people, energy and information) into outputs
is responsible (services and products) and, consequently, is central to what an organization does.
for the resources Whether it provides or produces insurance, ice-cream, jeans, haircuts or hospital check-
necessary to deliver ups, an operations function has a core role in how efficient and effective an organization
services and/or is, the level of sales and profitability it achieves and how well it meets its short- and long-
make products
term objectives. If managed well, the operations function contributes hugely to business
success; if it is not managed well it can impact the short-term performance of an organiza-
tion and even its very existence going forward.
But what is operations management? What do operations managers do? How do they
do it? And why is it all so important? This book sets out to answer these questions, giving
you an understanding of this interesting and varied role so that you will be ready to go into
Operations
management – the business world fully equipped for the challenges you will face. This introductory chapter
the activities, will give you a broad overview of the ‘what’ and the ‘why’ of operations management and
responsibilities set the scene for the rest of the book, which looks in more detail at different elements of the
and decisions ‘how’. In brief, however, the following key functions of operations should give you a sense
that make up the of why it is so important:
task of managing
of the process of • Typically, the operations function spends 60–70 per cent of costs, uses 60–70 per cent
transforming inputs
of investment funds and manages 60–70 per cent of the staff employed. How well it
such as materials,
people, energy manages its short- and long-term tasks will determine whether companies meet both
and information their short-term and long-term targets.
into services • Operations handles a sale once it has been made. If this is done well, customers come
and products
back. If not, customers go elsewhere.
For more resources, including a video interview with the authors about the
subjects discussed in this chapter, please go to the companion website at
www.palgravehighered.com/hill-eom-2e
What does operations management do?

A good place to begin our investigation of the subject is to take a look at the role of, and
tasks undertaken by, the operations function (also referred to as ‘operations’). This will
provide an overview of what is involved in managing this function, and what is covered by
Services – intangible this book. Let’s start by considering what organizations (both commercial and non-
items (i.e. you commercial) actually do. In essence, they provide services and/or products to custom-
cannot touch them) ers. In a commercial organization (such as a shop, insurance company or steel plant), the
that are consumed at services and products are likely to be exchanged for money; in a non-commercial organiza-
the time of provision
tion (such as a state hospital, government agency or charity), there may be no financial
Products (also exchange with customers, but they nevertheless receive services or products. The task of
known as goods) – operations is to provide these services and products through a mix of the skills of the people
tangible items employed by the organization, the equipment in place and the service delivery systems
(i.e. you can touch
them) purchased
or manufacturing processes used. In addition to this central task, operations is responsible
by individuals or for putting systems and procedures in place – for example, negotiating the purchase and
organizations for supply of services and products from suppliers, scheduling customers or products through
subsequent use the operations process and distributing the completed items to customers (where this is
Service delivery required). The complexity of this ‘processing’ phase varies, as the examples shown in
systems – the Case 1.1 illustrate.
processes used
to deliver services
to customers
>> KEY IDEA
Operations’ task is to provide the services or make the products sold to
customers

CASE 1.1 OPERATIONS TASKS IN DIFFERING ORGANIZATIONS

• Large retail organization The opera- • Garment manufacturer A garment
tions task within a large retailer with manufacturer buys in fabrics in a
several outlets would typically be range of material types and colours,
handled partly centrally and partly in together with threads, trims, buttons,
each store. Central operations would zips and other accessories. The
negotiate purchasing and supply con- materials are then cut in line with
tracts with suppliers, while opera- delivery schedules to meet different Back office – the
tions in each store would be style and size requirements, and sewn area of a service
responsible for agreeing delivery together with relevant trim, buttons, delivery system
in which there is
schedules, staffing rotas and arrange- zips and other accessories. After normally no contact
ments, managing commercial trans- pressing and final inspection, the gar- with customers
actions with customers, organizing ments are packed and despatched to
Front office – the
security and handling banking different customers. As with other area of a service
arrangements. Decisions on the businesses, operations would be delivery system in
range of products to sell would, how- responsible for material and acces- which contact with
ever, fall outside operations’ remit. sory supply contracts, arranging customers normally
deliveries from suppliers, fixing staff- takes place
• Restaurant A restaurant buys in food
ing requirements in line with cus-
and prepares it into a range of menus.
tomer demand, and scheduling,
In addition it purchases various types
making and despatching garments to
of soft drinks, bottled water, wines
meet customer delivery agreements.
and other alcoholic drinks, stores and
then serves them with relatively little
additional processing. Operations
activities here would be split between
the kitchen (referred to as ‘back
office’ or ‘back stage’) and dining
area (referred to as ‘front office’ or
‘front stage’) and would involve
arranging food and beverage sup-
plies, agreeing staffing rotas, estab-
lishing and managing procedures for
greeting and serving customers, pre-
paring food in line with acceptable
customer lead-times, serving drinks
and contracting laundry services. Jonathan Harris
Question
Select a service business other than
those used above and complete a simi-
lar overview.
Jonathan Harris
Visit www.palgravehighered.com/hill-eom-2e for more

on this case, plus additional resources.

4 Introduction
>> KEY IDEA

Operations provides and delivers services and products to customers by
managing the people, materials, resources and delivery systems involved
As you can see from these examples, operations management is responsible for providing
and delivering services and products to customers by managing the people, materials,
resources and delivery systems involved, together with the other activities that support
these core tasks.
How operations management fits into an organization

We have seen that organizations exist to provide services and products to customers, and
that in order to achieve this, certain tasks must be completed. Now let’s look more closely
at what these tasks are. Essentially, organizations need to:
• Design the services or products
• Purchase materials and/or services from others
• Create the services or make the products to meet the needs of customers (for example,
by adding to them in some way, providing diagnostic services, changing the shape of
materials, assembling parts, giving advice and processing information or requests)
• Sell services and products to customers
• Account for the cash or credit transactions involved.
When an organization is small, several of these tasks are typically completed by one person.
As the organization grows, the tasks it must perform remain the same (albeit on a larger
and more complex scale), but the organizational structure required to manage and provide
them is altered. Sets of tasks are typically separated off into departments or functions and
managed by different people. For example, the sales and marketing function would be
responsible for selling services and products to customers, the operations function would
be responsible for providing the services and products that were being sold, while the
accounting and finance function would send out the invoices for the services and products
sold, collect payment, categorize costs and revenues and prepare financial statements. In
addition, these ‘executive’ or ‘line’ functions, as they are called, will be supported by
specialist departments (for example, IT) that provide advice and expertise within a given
field to help improve the running of these ‘executive’ or ‘line’ functions and the organiza-
tion overall (Figure 1.1).
Figure 1.1 Some typical functions within a business
Task Function responsible Type of function

•• Generating new service and product ideas Services Sales and marketing
•• Designing and developing new services
Research and
and products Products
development
•• Promoting services and products
Sales and marketing
•• Selling services and products
Executive/line
•• Delivering the services and making the
Operations
products sold to customers
•• Sending out invoices
•• Collecting payment Accounting and finance
•• Preparing financial statements
•• Introducing new systems
•• Developing existing systems Information technology
•• Supporting the IT infrastructure Specialist support
•• Recruiting staff
Human resources
•• Employee relations

The role of operations management

As the function responsible for providing the services and products sold to customers, opera-
tions plays a key role in any organization, no matter what its size. But what does operations
management actually involve? There are two distinct – but complementary – aspects to the role:
1 Content – what an operations manager does, that is, the tasks and responsibilities involved:
• The day-to-day or operational role This involves managing the tasks and responsi-
bilities within operations necessary to provide the required services or products – for
example, managing capacity and controlling costs.
• The strategic role This concerns meeting the order-winners and qualifiers within
a company’s markets for which operations is solely or jointly responsible – for example, Capacity –
comprises the
providing a service right first time and delivering a service on time. staff, equipment
2 Style – how an operations manager manages people: and processes that
• The internal role This concerns managing the people within the operations function make up the value-
itself and also the interaction of employees in operations with those in other func- adding activities
tions within an organization, so as to meet the personal needs of employees within to meet a certain
level of demand in
the operations function and overall business. a given time period
• The external role This involves managing the people interface outside the organiza-
Order-winners –
tion at both the suppliers’ and customers’ ends of the supply chain. features of a
service or product
>> KEY IDEA that contribute
directly to its being
Day-to-day aspects of the operations role include managing within budgets, chosen over that of
scheduling, serving customers, meeting output targets, and communicating other competitors
and liaising with other functions in the organization (who also meet the
minimum customer
requirements)
>> KEY IDEA Qualifiers –
Strategic aspects of the operations role involve providing those order-winners features of a
service or product
and qualifiers for which it is solely or jointly responsible in an effective manner
that mean a
in order to make the company competitive customer will
shortlist it for
The breadth of the tasks and range of skills involved make operations management a purchase. They do
not in themselves
demanding and, at the same time, fascinating area. It links strategy to action, requires
win orders but
coordination across functions and involves managing the largest part of an organization. provide or create
To accomplish this, operations manages most of the people, assets, costs and other the opportunity to
resources necessary to produce and deliver the services and products sold to consumers or compete against
other organizations. In the area of strategy, the operations role is equally critical. For other service/
example, an organization’s competitiveness may depend on delivering its services and product providers
who are also
products quickly (known as delivery speed), to the right requirements (known as quality shortlisted by
conformance) and at the right price – and the achievement of each of these competitive a customer
factors depends crucially on successful operations management.
The operations role is best described as exciting, rich in issues and challenges, central to Delivery speed –
the process of a business and about managing through and with people. The day-today role the customer’s
is full of interest and variety, while its strategic contribution is key to maintaining and lead-time (the
growing sales and profits. length of time a
customer expects
We have looked so far at the operations role in broad terms. Now let’s begin to examine in or is prepared to
wait) needs to
more detail the kinds of task that operations management might fulfil. As a taster, take a
be matched by
look at Case 1.2, which discusses Portioli’s, a sandwich and coffee bar located in London’s the operations
financial centre. lead-time. Short
customer lead-
As the Portioli’s case shows, operations is usually responsible for a whole range of tasks times create a
within an organization. These tasks will, of course, differ depending upon the type of delivery speed
organization and the nature of its services and products. Figure 1.2 illustrates this diversity requirement
by showing three different organizations and outlining the core operations tasks, support Quality
functions involved, and range of specialist functions on hand. conformance –
providing a
As you would expect, the role of the operations manager reflects the aspects of the operations service or product
function we have already identified above – so some tasks relate to managing the day-to-day to the design
specification
tasks and some to the strategic tasks, while others highlight the key role of managing people.

6 Introduction
CASE 1.2 OPERATIONS MANAGEMENT TASKS AT PORTIOLI’S

SANDWICH AND COFFEE BAR
Jonathan Harris
Opening at 7am to catch the early break- affect the smooth running of the business
fast and coffee demands of nearby office include layout, procedures and the move-
staff, Portioli’s remains open through- ment of staff between different sets of
out the day until 5.30pm, when customer tasks. As food preparation starts at 6am
demand falls away. A customer visiting and staff typically work an eight-hour day,
Portioli’s will expect the full product scheduling appropriate levels of staff in
range to be available, for these products terms of the mix of skills needed at differ-
to be of an appropriate quality (in terms ent times is a key operations task, espe-
of taste and freshness) and not to have cially given the need for occasional
to wait too long in a queue to be served. overtime working to cover for holidays and
How does operations meet these expec- absence. Scheduling staff to ensure that
tations while ensuring that the business the necessary skills are available is an
meets its profit targets? integral part of managing food quality
and service levels at all times.
Capacity management Customer num-
bers and ordering habits/quantities can The market Demand has increased year
be predicted using past experience of on year over the last decade. The competi-
demand: operations will look at how tive criteria that are considered key fea-
demand fluctuates in terms of the hour tures in Portioli’s sales growth include
of the day, the day of the week and the the quality and freshness of the food and
week of the year, and use these insights beverages sold, the range of products on
to determine staff levels and to ensure sale, short waiting times, prices that are
that queue lengths are in line with wait- in line with nearby competitors and a no-
ing time targets, while keeping staff quibble refund should customers feel
costs to a minimum. dissatisfied. The outlet itself is well located
in relation to underground (metro) and
Supply chain and inventory manage- bus services and, while some seating is
ment Operations also uses demand fore- available, most customers prefer the take-
casts to manage the supply of beverages away service on offer.
and food while taking existing stock into
account. This role includes ensuring that
product specifications (for example,
Questions
taste, freshness and appearance) are met 1 Review Portioli’s sandwich and coffee
by Portioli’s suppliers and maintained bar and identify, using the contents
using appropriate storage and refrigera- list at the beginning of this chapter,
tion provision. To this end, daily deliveries the key day-to-day tasks within opera-
of a range of breads, pastries, food ingre- tions and how they meet the needs of
dients and salads are scheduled before the business.
7am, while other food and beverages (such 2 Which chapter topics in the book
as butter, coffee, tea and some sandwich are reflected in the details provided
fillings) are held in stock, with deliveries about Portioli’s?
arranged once, twice or sometimes three
times a week. Working with suppliers to 3 Thinking critically: Imagine you are
guarantee that ingredients meet agreed the manager of Portioli’s. What might
specifications and that deliveries are on be some of the day-to-day challenges
time is a key task for this outlet. that could disrupt the smooth run-
ning of the sandwich bar?
Scheduling, delivery systems and man- Visit www.palgravehighered.com/hill-eom-2e for
aging quality Other aspects that directly more on this case, plus additional resources.

Figure 1.2 Operations jobs and specialist functions in three organizations
Some typical jobs in operations Typical specialist functions

Organization that report elsewhere in the
Core tasks Support functions organization
Hospital director Reception Microbiology
Medical staff Maintenance Pathology
Hospital – Doctors Cleaning Pharmacy
– Ward sisters Porters Physiotherapy
– Nurses Accounting
V-P operationsa Ink manager Design
Print manager Plate production Pay office
Finishing manager Scheduling Accounts
Print company
Supervisors Quality assurance
Team leaders
Operators
V-P operationsa Vehicle maintenance Building and equipment
Transport Depot managers Scheduling maintenance
Asset investment –
company Drivers Pay office the purchase of a
Accounting range of valuable
or useful items,
Note: a Vice-president of operations; also termed operations director. including land,
buildings,
equipment and
The features of the operations tasks and their size and importance create a demanding and inventory
absorbing management role. It is concerned with detail, yet must address corporate issues of
Cost centre – a
significant size and importance. The key aspects of the job are now outlined below. group of costs
controlled by a part
Managing a large cost centre of the business
Operations accounts for a large part of the asset investment (typically 60–70 per cent) and (such as a function)
usually has the largest budget within an organization (again, typically 60–70 per cent). One
consequence is that operations managers are responsible for a large cost centre. If opera-
tions meets its budget and output targets, the cost structure of a business will be in place.
• Assets With regard to fixed assets (assets held long term for business use and not to be
converted into products or services to be sold), operations is usually accountable for
land, buildings and equipment. With regard to current assets (assets that are held short
term and are intended to be sold or transformed into products and/or services), opera- Inventory – also
tions is responsible for managing and controlling inventory. known as stock,
comprises the
• Costs The operations function accounts for the major portion of an organization’s expend- inputs (materials)
iture. The majority of the direct costs, such as staff and materials, are incurred here, together into the delivery
with much of the overhead costs involved (for example, managers’ and supervisors’ sala- system or
ries, power and utilities expenditure and maintenance of buildings and equipment). manufacturing
process, part-
finished items
Managing people (services or
As most employees are usually involved in providing services and/or making products, the products) within
task of managing people – in terms of the needs of customers and of the organization itself, the service
as well as the personal development needs of the individuals involved – falls within the delivery system
operations manager’s remit and emphasizes this key element of the operations manage- or manufacturing
process and outputs
ment job. Added to this, operations managers and their staff are likely to interact with
(finished items) to
other people, both within and outside the organization – and must do so professionally and be sold or supplied
effectively. So the ‘people management’ aspect of the operations manager’s role is both to customers
sizeable and critical to the well-being of an organization. Creating a working environment
Overhead costs –
that taps into the innate capability of individuals and groups is essential if real, lasting those costs
changes and improvements are to be made and maintained. (for example,
management
Managing the short and long term salaries, building
Operations managers need to think in terms of both short- and long-term timescales. Obvi- and equipment
maintenance and
ously, it is important that operations is managed efficiently in the short term, so let’s begin
interest on loans)
by investigating this aspect. A key short-term goal is to provide services or products effi- incurred in the
ciently and effectively: a day’s lost output will never be recovered without additional costs general running
being incurred, and customers who go elsewhere are lost business, sometimes for ever. of a business or
That is the nature of the short-term operations task. It is thus essential that operations organization

8 Introduction
activities are well controlled and coordinated, and meet budgeted outputs. Achieving
monthly targets requires that each day’s target is met. Other departments may work on
different timescales: for example, in sales and marketing, no one would expect the period
sales target to be met pro rata each day. As a consequence, substantial pressure is, and has
to be, exerted to meet short-term operations targets. At no time can the pressure to meet
short-term goals be lifted, as costs and schedules are set in line with available capacity and
meeting these ensures that customers’ expectations, output schedules and profit targets
are met.
>> KEY IDEA

Operations managers need to think and work in terms of both short- and long-
term timescales
So what are some of the consequences of needing to meet these short-term goals, in terms
of the operations manager’s role?
• The job is problem-oriented and solution-driven. Operations managers need to react
quickly to resolve problems at source. Handling the symptoms as they appear will only
bring temporary respite: the causes need to be identified and handled.
• It is a job that requires practical outcomes.
• ‘Pressure is also a distinctive feature’1 of the job due to the tasks involved, the time
constraints imposed and the dependency upon a whole range of activities, some of
which are outside the direct control of the operations function, either because of the
organization’s reporting system or because they are externally sourced.
The time pressures on operations managers often result in them having to make as good a
decision as possible in any given situation. Thinking of a better decision at a later date is of
little value – the consequences of the delay usually outweigh the gains involved. It is essen-
tial, therefore, that operations managers use their experience to good effect.
Sitting alongside these short-term considerations is the equally important long-term

dimension of the job. Given the size of the day-to-day element of operations, managers
need to be careful that the short term does not dominate the role and that adequate time
and attention are given to the effective management of long-term objectives, which can
lead to sizeable benefits. For example, improving the ways in which tasks are completed
will typically reduce the time taken and the staff costs involved, while redesigning a service
or product to reduce material costs will result in sizeable gains over time. Similarly,
improving the layout, for example of a restaurant, will increase the available space, allow-
ing more customers to be served from existing facilities.
Managing the strategic contribution

Whereas operations’ day-to-day task concerns essential activities such as managing within
budgets, scheduling and communicating with other functions, its strategic task concerns
providing those order-winners and qualifiers for which it is wholly or jointly responsible.
For example, operations has a sizeable strategic role in retaining and growing market share
– we will explore this in more detail in the next chapter. In brief, however, it is essential to
the short- and long-term success of an organization that operations moves from being
good in itself to being a front runner in meeting the needs of customers by creating competi-
tive advantage. For example, in some markets, such as a fast-food chain, delivering prod-
ucts extremely fast (known as delivery speed) could lead to a competitive advantage over
neighbouring outlets; in others, price might be the key factor in the market, and operations
would be responsible for delivering products and services at a level of cost that allows them
to be competitively priced. As Figure 1.3 illustrates, operations has a role both in gaining
the first sale and securing the second. Whether or not customers return depends largely on
how well their needs were met on their previous visit or how well their order was fulfilled,
and this falls within the remit of operations. As you can see from this, it is the development
and implementation of both the day-to-day and strategic activities that characterize the
key role of the operations manager.
>> KEY IDEA

Operations contributes to gaining the first sale, and procures the second sale

Figure 1.3 Operations’ role in gaining the first and securing the second sale
Phase Principal contributor(s)

Sales and marketing – customer relationships, advertising and selling
Gaining Operations – creating a business’s reputation through successfully
the first sale meeting customer needs
Fulfilling Operations – meets customer needs
Securing the second sale Operations – meeting customer needs results in repeat orders
Managing technology
The operations manager is responsible for managing the technology involved in delivering
a service or making a product. The degree of technology will differ from sector to sector and
one organization to the next but, in many situations, the level of technology involved can
be quite low. Irrespective of the level, the operations manager needs not so much to under-
stand the technology itself, but instead (and more importantly) to understand how well the
technology in place or being proposed can meet the service or product specification (what
the service or product comprises) as well as the other dimensions (such as low costs under-
pinning price or quick turnaround underpinning delivery speed) that make up the sale. In
this way, operations managers use technology to provide services or make products for a
company’s markets, but the technical expertise is provided by support staff rather than
operations managers themselves.
Using the common denominators of time and money

In order to run a business, managers need to be able to ‘compare like with like’ to find a way
of expressing the activities involved that everyone can understand. Many activities use
money as the base. So, for example, sales are expressed in terms of their monetary value
and not in terms of the number of services or products sold. Using a restaurant as an
example, we can see why this makes sense: if a restaurant measured its level of activity by
the number of meals provided, it would take no account of the number or type of course
selected and served, and an output of 20 sandwiches would appear equivalent to an output
of 20 three-course meals.
Money, however, is not always the best way of comparing like with like. Operations typically
uses time as a more appropriate common denominator by which to express its activities.
The reason is that the monetary value of the services and products provided does not
adequately relate to the operations task involved. Returning to our restaurant, for example,
it takes longer to produce a lasagne than to prepare a fillet steak, but the menu price for each
would suggest the reverse. And as operations needs to assess, for example, the level of
capacity needed at different times of the day and week, it has to work out the number of
hours involved to meet forecast sales and what this means in terms of different types of staff.
Linking the ‘thinking’ and ‘doing’ ends of a business

The operations function forms the interface between the ‘thinking’ end (strategic direc-
tion) and the ‘doing’ end (meeting the needs of customers) of a business. Without action,
strategic discussion and debate has little value: translating strategy into action is funda-
mental to the ongoing success of a business, and operations has a key role in this. Opera-
tions managers must develop and implement a strategy for the operations function as part
of the corporate task of identifying and agreeing strategic direction – and then they must
ensure that they meet these requirements in those markets in which a company chooses to
compete. It is essential, therefore, to link the top and bottom of a business and so create the
coherence and cooperation essential for the success of the enterprise.
Managing complexity
The perspective that best captures the essence of the operations tasks we have been
discussing is that operations concerns the management of complexity. The decisions
operations managers make have significant implications for investment, costs and people.
The challenge of the job comes from the number and range of tasks and decisions to be
completed, the interrelationships between these and their fundamental nature in terms of
the business.

10 Introduction
>> KEY IDEA

Operations concerns the management of complexity
This mix results in a demanding job that requires that, on the one hand, the fast, day-to-
Inputs – the
day pace of the short term is supported and delivered while, on the other hand, the long-
materials, staff,
energy and other term direction is secured – and all this within the context of providing appropriate interface
‘ingredients’ and cooperation within the overall business. Add to this the essential need to manage the
necessary to service delivery systems or manufacturing processes and the interface with customers
provide a service or through the key resource of people, and the outcome is a job that is fascinating in its chal-
make a product lenge and complex in its execution.
Outputs – the
services or products Inputs and outputs
produced by a
delivery system Taking a step back from the detail of the operation manager’s role, we are now in a position
or manufacturing to take an overview of the operations function. Broadly speaking, we can say that opera-
process tions concerns the transformation process that involves taking inputs and converting
them into outputs (with the support of the various specialist functions closely associated
with this basic task). Figure 1.4 provides a simplified overview of what is involved in this
transformation process.
>> KEY IDEA

Operations concerns the transformation process that involves taking ‘inputs’
and converting them into ‘outputs’
Figure 1.4 Overview of the operations process – transforming inputs into outputs
INPUTS OUTPUTS
People
Materials Services
Energy Products
OPERATIONS PROCESS
Capital Information
Data
RESOURCES SERVICES/
PRODUCTS
Some organizations provide services such as medical care, the processing of information
and requests, banking facilities and retail sales, while others produce physical items such
as furniture, building materials and stationery. The operations task, however, is common
to all the diverse range of services and products that make up a national economy. To
illustrate this, Figure 1.5 gives examples from both the service and manufacturing sectors.
The mix of sectors in different economies

National economies are made up from a mix of three key sectors:
• Primary sector: agricultural (production of food, fuel and fibre)
• Secondary sector: industrial (production of products including fuels and fertilizers)
• Tertiary sector: services (economic activity not resulting in ownership).

Figure 1.5 An overview of the operations process in a selection of organizations
Delivery system/
Sector Organization Inputs Outputs
process
People Receiving calls Customer queries,
Telephone systems Processing requests and information requests and
IT equipment and support queries transactions completed
Buildings and furniture Updating records accurately, within
Call centre
Rest and refreshment areas Staff scheduling acceptable timescales
Washroom facilities Mail services and with appropriate
Maintenance levels of service
Energy
People Commercial transactions Completed personal
Banking procedures Updating records banking transactions
Processing equipment Processing requests and Completed business
Buildings and furniture queries banking transactions
Rest areas Providing general and Provision of regular, or
Bank branch
Washroom facilities specific advice on-demand, up-to-date
Services Meeting rooms Technical services personal and businesses
Office areas IT support information and financial
Stationery Equipment maintenance advice
Energy
People Train schedules Trains provided in line
Tracks, trains and carriages Ticket purchasing with schedules reflecting
Signalling and other support Passenger processing the demand profiles
systems equipment/procedures throughout the day and
Traffic flows Train maintenance and evening
Metro or
Passenger procedures cleaning Customers transported to
underground
Ticket offices and machines Station maintenance and their destinations safely
Staff rest areas cleaning and on time
Washroom facilities Security
Maintenance
Energy
People Drug formulation/mixing Range of drugs prepared,
Buildings and equipment Equipment setting packed and delivered in
Chemicals Liquid, tablet and capsule line with customers’
Pharmaceuticals Packaging preparation orders and schedules
Utilities and energy Packaging
Warehousing
Distribution
People Receipt and storage of Refining crude oil into
Docking facilities crude oil and other various products and
Crude oil and other chemicals chemicals distributing to customers
Manufacturing
Oil refining Equipment Refining processes in line with schedules
Process monitoring Distribution
Buildings Equipment monitoring and
Energy maintenance
People Material storage Range of products
Equipment Mixing prepared and packed in
Food ingredients Packaging line with customer
Ice-cream products
Packaging Equipment maintenance schedules and to meet
Buildings Warehousing the variable pattern of
Energy Distribution seasonal demand
As economies develop, the balance between these different sectors changes, as illustrated
in Figure 1.6. The differences in the split across the three sectors reflect the general activi-
ties associated with the individual countries involved. For example, the relatively high
percentage of gross domestic product (GDP) in the Chinese and Norwegian industrial
sectors reflects a growth in manufacturing, and the North Sea oil and gas explorations,
respectively. Similarly, the high percentage of GDP in the industrial sector for Singapore

12 Introduction
Figure 1.6 Percentage of gross domestic product (GDP) by sector for selected
countries (2001 and 2015)
Country Percentage of gross domestic product by sector

2001 2015
Agriculture Industrial Service Agriculture Industrial Service
USA a
2 18 80 2 21 77
France a
3 26 71 2 19 79
Belgium 2 24 74 1 22 77
UK b
1 25 74 1 20 79
Italy 2 30 68 2 24 72
Singapore 0 33 67 0 24 76
Japan 1 31 68 1 27 72
Australia 3 26 71 4 29 67
Canada 2 27 71 1 29 70
Spain b
4 31 65 2 23 75
Germany 1 31 68 1 30 69
India a
24 28 48 16 30 54
Norway b
2 31 67 2 39 59
China 15 51 34 9 43 48
Notes: Agriculture – process of producing food, fuel and fibre by raising plants and animals
Industrial – Production of goods (including fuels and fertilizers)
Service – economic activity not resulting in ownership
a
‘2001’ data for these countries is for 2002
b
‘2001’ data for these countries is for 2000
Source:
CIA – The World Factbook (https://www.cia.gov/library/publications/download/)
signals its role as a major manufacturing nation. On the other hand, the growing size of
India’s service sector GDP has been fuelled by the subcontracting of banking and other
service activities from countries such as the US and the UK. However, the overall change
from 2001 to 2008 shows a broad pattern: the service sector continues to grow as a percent-
age of GDP in most developed countries.
Although it is useful to separate activities into agriculture, industrial and service sectors in
order to help identify trends, each sector is in reality dependent on and interacts with other
sectors to form part of a ‘total’ economy. Each sector is an integral part of one economy in
its own right, but its performance will often also have an impact on other sectors. Argu-
ments suggesting that developed nations can rely on the tertiary sector (services) as a way
of sustaining standards of living or improving below-average trade performance are
without foundation. For example, a large part of many service sales is made up of a product
provided by activities in the primary and/or secondary sectors (for example, foodstuffs and
IT equipment).
The operations management role, no matter what sector is involved, is similar in terms of
its overall aim, the nature of the task and its central importance. Growing foodstuffs,
extracting minerals, making products and providing services are parts of the basic task of
any business and central to its continued success. Therefore, whether or not you are or
intend to be involved in operations management, it is essential that you understand the
concepts and approaches involved, the interfaces this function has within a business and
its key role in helping to grow sales and meet an organization’s short- and long-term finan-
cial goals.

CASE 1.3 THE ROLE OF THE OPERATIONS MANAGER IN RETAIL

SUCCESS
and long opening hours involved. Tied to

this is the management of a sizeable
budget that reflects the costs of running
a large store. The job concerns manag-
Getty Images/iStockphoto
ing a large investment in the form of the
buildings, car parks and delivery areas,
as well as the storage of products and
their management in terms of waste and
obsolescence. Knowing what goes on in
both the store and the back office
(including supply chain, logistics and
Store managers of large companies are inventory management) is essential to
crucial appointments. When handed the running the operation, as well as being
keys to their own store, managers take good with customers and alert to actual
on a task that is characterized by big and potential service issues.
numbers, typically with up to 700 staff,
weekly sales revenues of £1 million and Although overall the skill range may be
200,000 customers entering the door in similar, the type of store and its location
an average week. Store managers hold a will alter the task. Hypermarkets versus
pivotal role in the retail sector. Buyers convenience stores, general retailing
can source products at competitive versus out-of-town shopping centres,
prices, and distribution can be fine- self-service outlets versus those requir-
tuned to efficiently meet the varying pat- ing a high level of personal service, rural
terns of demand, but the key to customer location versus inner-city environment
retention is what happens inside the place a different emphasis on the skills
store. It is customers’ experiences while needed.
shopping that affect whether or not they
come back. Layout, presentation, queue
Attracting the right calibre of people is
lengths, availability and, above all, ser-
difficult, as the long, unsocial hours and
vice throughout the delivery system are
weekend working are unattractive
the factors that most influence a cus-
dimensions of the job. But on the plus
tomer’s decision of where to shop.
side, the job is people-centred, rich in
content, and full of energy and buzz, and
According to many retailing experts, a addresses real problems, the solutions
‘good’ store manager can increase the to which are fast and rewarding.
sales revenue of self-service outlets
(such as supermarkets) by up to 5 per
cent, while in stores heavily dependent
Questions
on service (such as the electrical sector), 1 What makes the store manager of a
the improvement can be as high as 15 retail company a classic example of
per cent, and the best managers carry an operations manager?
these increases down to the bottom line 2 From the facts given here, assess the
and vice versa. With stores’ weekly sales size of the operations task and its impact
of up to £1 million (and with the biggest on corporate financial performance.
stores in large national chains averaging
well above this figure), the essential 3 How is the store manager a key link
contribution made by store managers in in the supply chain?
driving improvements through frontline 4 Thinking critically: The case men-
operations and into higher retail perfor- tions that a manager can improve rev-
mance is fundamental. enue in an electrical store by as much
as 15 per cent. What might be some of
Retailers agree that managing the oper- the positive operations improvements
ations units (the stores themselves) has a manager could make that would
all the ingredients of what makes a com- improve a store’s performance?
plex job. Staff management is funda-
mental, especially given the fast-moving Visit www.palgravehighered.com/hill-eom-2e for
environment, changing demand levels more on this case, plus additional resources.

14 Introduction
Variations in the operations management role

So far in this chapter, we have looked in detail at the operations manager’s role and at the
main tasks that the operations function will perform in all organizations. Now we shift the
focus to look at how and why the operations function might vary in different types of
organization.
Variation in complexity
The level of complexity within the operations function will vary depending upon several
factors, including:
Customer • The size of an organization and the associated service/product volumes

surrogates – when • The range of services and products sold
the item being
processed represents • The technology levels embodied in both the services/products themselves and the
the customer; for processes used to provide them
example, where • The extent to which the services and products are made in-house
clothes are being
cleaned, the • The nature of what is processed.
clothes represent
the customer Most of these factors are fairly self-explanatory: for example, it is easy to see how manag-
within the service ing operations for a business with only one service or product would be simpler than for
delivery system a business with hundreds. However, the final factor – the nature of what is processed –
benefits from further investigation. In a service organization, the operations function
may process customers, customer surrogates or information, while in a manufactur-
ing organization the operations function would make products. Which of these makes up
the business will have a significant effect on the design and management of the opera-
tions delivery system. As Figure 1.7 shows, the presence of the customer in the system
will impact its design and the operations management task involved, an aspect that is
examined more fully in Chapter 4. The examples given in Figure 1.7 have been chosen to
illustrate these differences, whereas in reality the operations function must often process
a combination of customers, information and products. For example, car servicing will
involve contact with the customer as well as processing the car itself (the customer surro-
gate), updating the vehicle’s records, and invoice preparation and payment (informa-
tion). Similarly, purchasing furniture will involve advising the customer and completing
the relevant paperwork for the invoice and guarantee (information), as well as the
product itself.
>> KEY IDEA

The operations function may process customers, customer surrogates, infor-
mation and/or products
This variation in the nature of what is processed has significant implications for operations
management, and we now examine these in more detail.
Figure 1.7 Examples of service and product processing
What is Customer involvement in the

Sector Examples
processed process or delivery system
Beauty salons, hospitals, health
Customers farms, physiotherapists and Present in the delivery system
restaurants
Customer Garages, repair shops and dry
Service
surrogates cleaning outlets
Tax accountants, passport
Information offices, lawyers, computing Detached from the delivery system
centres and insurance or process
Chemicals, furniture, motor
Manufacturing Products vehicles, personal computers,
food and pharmaceuticals

Variation in output: services versus products

You will have noticed throughout this chapter that we have referred repeatedly to the
output of the operations function as ‘services’ and ‘products’. We turn now to look at these
two ideas in more detail, and to investigate their consequences for the operations
function.
Products are tangible items (that is, you can touch them) purchased by individuals or
organizations for subsequent use – for example, an iPad or a piece of sheet metal. Services
are intangible items (that is, you cannot touch them) that are consumed at the time of provi-
sion, with a customer taking away or retaining the benefits of that service – for example, a
carwash or a night at the cinema. However, in many situations what is provided or produced
by an organization can be a mix of both services and products. In some instances, there will
be a heavy accent on service, and in others the reverse. To help illustrate this, Figure 1.8
shows a range of items sold and gives an idea of the mix between the service and product
content provided. The purpose, however, is to illustrate that what we buy is a mix of both a
service and a product, and the mix will differ depending upon the offering.
>> KEY IDEA

The operations output can be in the form of services (intangible) or products
(tangible)
Figure 1.8 Service/product mixes in a range of purchases
Mix
The purchase
100% service 100% product
Health farm
Management consultancy
Computer bureau
Car breakdown maintenance
Regular car maintenance
High-quality restaurant meal
Meal in a fast-food restaurant
Make-to-order, high-cost products
Low-cost consumable products
Vending machines
Note: The purchase mix represented here is meant as a broad indication only; others may consider
the balance to differ from that shown.
Take, for example, the difference between ‘regular car maintenance’ and ‘breakdown main-
tenance’ shown in Figure 1.8. The ‘product’ content in a breakdown is typically less than for
regular maintenance, whereas the ‘service’ content is more – if you break down, a skilled
mechanic comes to you, thus offering a greater proportion of ‘service’ in the ‘service/
product mix’ than for regular service maintenance, when you take your car to a garage.
Similarly, a high-quality restaurant will offer a higher service element than a fast-food
alternative.
But what does all this mean for the operations function? Well, broadly speaking, its aim
remains the same (its objective is always to make the products or provide the services that
are sold), but the nature and characteristics of the operations function vary significantly
depending on whether it is required to make a product, process information on behalf of a
customer, provide a service for a customer or some combination of these. Embodied in
these alternatives are different characteristics that either facilitate or restrict what opera-
tions can or cannot do in the processing task. For example, in services the opportunity to
store capacity is limited. If a retail outlet (say) is not busy, the assistants’ time cannot in
some way be transferred to a future time period when customers are waiting. In

16 Introduction
manufacturing, however, a company may decide to make products in times of low demand
to sell in a future period when sales are higher. Similarly, in a service organization, the
presence of a customer necessitates the system to respond as quickly as possible, whereas
in a manufacturing company the product eliminates the need for an immediate response
(as the customer is not physically present), which allows the process to be managed to best
meet the output and efficiency targets set by the business.
Such differences are fundamental and are investigated in more detail in subsequent chap-
ters. This section is designed to alert you to the key points so that you get a better feel for
the types of issue that operations has to manage in one type of organization compared with
another.
Takeaway – what Serving customers, processing customer information and making products all have differ-
customers take ent features and different sets of requirements. Figure 1.9 gives an overview of some key
away from their
dimensions that are then briefly explained.
experience of a
service, including
the recollection Nature of the offering
of how well they The services received by customers are considered to be intangible and are consumed at
were served
the time of delivery. The recollection of how well they were served forms part of the
customer’s takeaway. On the other hand, the processing of customer information or the
making of products changes the nature of the offering to one that is tangible, with the
outcome being retained for use following delivery. These features place different sets of
demands on operations: in each case, operations must ensure customer satisfaction – but
Figure 1.9 Aspects of customer, information and product processing
Processing
Aspects
Customers Information Products
Nature of the offering Intangible Tangible
Level of customer involvement in
High Low
the operations process
Operations capacity Perishable Can be stored
Organizational arrangements Front office Back office
Quality control Level of server discretion Highly specified
Typical competitive environment Sheltered Traded
CASE 1.4 A CUP OF COFFEE: PRODUCT OR SERVICE?

Compare a cup of coffee provided by a terms of higher-specification beans),
vending machine with one provided in better presentation, comfort and prob-
the lounge of a good hotel: ably a slower, ‘more leisurely’ service,
albeit delivered at a higher price.
• The vending machine offers conveni-
ent, 24-hour, fast delivery of coffee. The In the former coffee provision, the ratio
product specification is controlled of products to service in the total pack-
by the service delivery system, and age mix would be considerably higher
hence the product range offered is than in the latter.
limited: coffee is provided in a num-
ber of combinations (for example,
Questions
regular or decaffeinated, with or with-
out milk and sugar) and in a dispos- 1 What factors might contribute to the
able cup. The price is likely to be low. fact that the hotel coffee is more
• On the other hand, coffee provided in expensive?
the lounge of a good hotel involves 2 Now think about the last cup of tea or
significantly different service factors – coffee you drank. How did it compare
better choice, superior coffee (in with the two scenarios outlined above?

CASE 1.5 APPLE: PRODUCT OR SERVICE?

On the face of it, Apple is a product busi- Apple stores, characterized by open plan
ness. As the makers of the iconic iPad, product display areas with lots of seat-
iPhone, MacBook Air and other high ing for customers to stay and play, or to
tech devices, it has carved a strong talk to support staff.
brand out of its role as an innovator, pro-
ducing design-led, intuitive products Apple prides itself on employing highly
which are designed to work straight out trained, enthusiastic and knowledgea-
of the box. ble store employees who are also ‘super-
users’ of the company’s products. Staff
But what if your device doesn’t work? also run free in-store workshops for cus-
tomers. Compare this to the manufac-
turers of other smart devices such as
Samsung or Microsoft, who do not have
retail outlets, and do not offer in-store
repairs or support. The ratio of service to
Getty Images/Westend61
product in the total package would be
considerably higher in Apple’s business.
Questions
1 What competitive advantages does
Apple gain from its retail service oper-
Apple’s brand also encompasses a high ations?
level of customer support. Via the Apple 2 Consider a recent device you have
website (https://support.apple.com/) you bought (smartphone, laptop, or simi-
can access a range of services – lar). How does the aftercare or sup-
troubleshoot common problems, chat port for a product affect your decision
live online to support staff or via email or to purchase?
phone.
Visit www.palgravehighered.com/hill-eom-2e for more
You can also book a repair or a Genius on this case, plus additional resources.
bar appointment at one of its many sleek
what this entails can be very different depending on the nature of the offering. In the case
of services, the delivery system must create the features that make up a customer’s view of
good service/experience, whereas in the case of a product, product quality (design and
being made to specification) is typically a principal factor influencing customer choice and
satisfaction.
Level of customer involvement in the operations process

As services involve customers, then, by definition, they are involved in the operations
process and central to its design. In fact, service delivery systems are often designed to use
customers to deliver part or all of the service and they are thus an integral part of the deliv-
ery system design (for example, getting money from cash machines, and selecting, paying
for and taking food to a table in a self-service restaurant). On the other hand, information
is processed and products are usually made without the customers being present – it is not
essential that customers are involved, and indeed operations can be more easily managed
where customers are not involved in the service delivery system or manufacturing process.
In instances such as self-assembly furniture, companies design the process to involve
customers in the final build stage in order to reduce transport (as flat packs take up less
space) and assembly costs. In this way, making the furniture has no customer involvement,
whereas delivery from the store and final assembly is provided by the customer.
Operations capacity
Services are consumed by the customer at the point of provision. This means that the
capacity in the process (for example, an empty seat on a passenger airline, or an unbooked

18 Introduction
appointment slot in a hairdressing salon) is perishable – that is, it cannot be held over to
another time or stored in the form of inventory. In contrast, a typical manufacturing
company can make products ahead of demand: for example, ice-cream can be made and
stored during times of lower demand, which means that ice-cream-making capacity does
not go to waste and that high demand (for example, during the summer months) can be
met when necessary. For this reason, a manufacturing company producing a tangible
product typically finds it easier to handle the imbalances that occur between the levels of
demand and capacity.
Information-processing and customer surrogate businesses also have some opportunity

to control the point at which tasks are completed. For example, information-processing
tasks can be pulled together, handled as a total and then scheduled to be completed at the
most suitable time, thus enabling demand to be spread in line with available capacity, or
to accumulate volumes to help lower processing costs. Similarly, the timing of a vehicle
or other repair can, to some extent, be managed to better meet the scheduling needs of a
business. Even so, the length of time over which scheduling alterations can be made in a
service organization will normally be limited in scale compared with manufacturing.
With products, inventory can be made, if required, ahead of time and independent of
demand profiles, whereas information processing will invariably be an integral part of
the overall service or procedure for a customer. The processing task can only commence
on receipt of relevant data and needs to be completed to fit in with a customer’s own
requirements.
Take, for example, a data-processing unit that does work on behalf of a high-street bank.
The processing unit updates the transactions of the bank’s customers and then sends them
their bank statements. The necessary data will be delivered to the processing unit from the
bank on a given day each month, with agreed lead-times for completing the updates and
sending out statements to the bank’s customers. Within this time frame, the unit is able to
schedule the job to best fit its own total workload. Similarly, a garage can schedule the work
within its repair shop on a given day around factors such as the skills available, spare part
deliveries and the efficient use of staff.
Economies of >> KEY IDEA

scale – the decrease Services are consumed by the customer at the point of provision, whereas many
in cost per unit of a
products can be made in advance and stored
product or service as
a result of processing
high volumes
within a large- Organizational arrangements
scale operations
facility that is
As Figure 1.9 shows, the operations process is largely, and often totally, separated from
geared up (including the customer at the product end, whereas in the service sector customers are often
investment in involved in the provision. In a service company, the delivery system is, where possible,
processes and split between the front office and back office. The front office interfaces with customers
equipment) to handle and, for example, handles requests or provides a given service. However, systems and
such volume levels
procedures are designed so that certain tasks are undertaken in the back office and, in
that way, processing can be delayed until a more convenient time and activities cumu-
lated in order to gain economies of scale and so justify investment as part of the way
Server discretion – to reduce costs. Being separated from customers in the back office also allows procedures
the extent to which a and tasks to be undertaken without making essential responses to customers’ immediate
server may interpret
his or her role in
requirements.
the delivery of a
service and what the Quality control
specification of that The presence or absence of customers in the system also brings the aspect of server inter-
service involves
pretation into the delivery of a service – known as server discretion. As a server typically
interfaces with customers in the delivery of a service, there are elements of the delivery that
are open to a server’s interpretation, such as personal manner, approach and advice or
assistance offered. As a result, it is more difficult to control quality as it is more difficult to
establish service levels and to measure performance against these. For example, think of
the variation in service you might receive from two different waiters in a bar – they might
both deliver the same drink to you in the same time and at the same price, but their indi-
vidual manner might make your overall experience quite different. In the provision of

products, the making and purchasing events are separated, so the issues of quality control
and measuring performance against a product’s specification are more easily and objec-
tively managed, making it easier to control how a product is made.
Competitive environment
The tangible nature of products enables the work and supporting technologies that go
into making them to be easily transferred, in product form, from the place of manufac-
ture to markets throughout the world. In this way, products are referred to as being
traded. As a result, the manufacturing sector has been increasingly competitive from
the latter half of the twentieth century, highlighting the truly global nature of these
markets. Many services, on the other hand, are classed as being sheltered, highlighting
the fact that the extent of competition is restricted by the geographical boundaries of
Traded – refers
such markets – the ‘you do not go to Hong Kong for a Chinese takeaway’ syndrome. For
to a product or
example, individual retail outlets compete only with other high-street outlets within service that can
their own town or city. be transferred
from the place of
In recent years, however, the format of competition for many service firms has changed. provision to be
One source of this change has been the increasing use of technology. Online services for the sold in markets
purchase of items such as books, clothes, banking, holidays, flights and theatre tickets has throughout
the world
increasingly moved many service sectors into the ‘traded’ category, with a resulting increase
in competition. The role of operations in such instances has needed to reflect these new Sheltered – refers
dynamics and business conditions, reinforcing its core contribution to the continued to a product or
success of a business. service for which
the extent of
competition is
restricted by the
Corporate social responsibility geographical
boundaries of
Corporate social responsibility (CSR), also known as ‘corporate conscience’, ‘corporate its markets
citizenship’ or ‘responsible business’ is a form of corporate self-regulation integrated into
a model of managing an organization that has appropriately gained prominence over the
last 40 years.
It is in essence a self-regulating mechanism used by businesses to guide and check how

well they comply with their own ethical standards that, in turn, are set against national and
international norms.
The logic underpinning CSR is that companies need to meet the social, environmental and
economic responsibilities of all their various stakeholders including employees, customers,
suppliers, owners and the societies in which they operate. Part of the commitment is that
organizations should report not only their financial performance but also their social and
environmental performance using a framework such as the ‘triple bottom line’ as explained
below:
• Social – monitoring the impact of a business on its employees and the communities
within which it operates. For example, paying a fair wage, asking employees to work
reasonable hours, ensuring safe working conditions, not using child labour and paying
suppliers a fair price for their services and products.
• Environmental – checking the environmental impact of a business on its immediate
surroundings and also on a wider scale. For example, its use of energy and non-
renewable resources, the level and toxicity of waste products and the ‘cradle to grave’
impact of its services and products.
• Economic – ensuring an organization creates a positive economic value for society
which differs from the traditional accounting definition of profit as it looks at the real
economic benefit to the society in which it operates.
Case 1.6 illustrates Nike’s pursuit of these triple bottom line goals. As highlighted through-
out this chapter, operations is a core function in most organizations. As such its responsi-
bilities and activities impact or impinge performance on all three triple bottom line
dimensions of corporate performance. Consequently, CSR needs to be integrated into the
way operations is managed. Throughout the book, therefore, we will include elements on
CSR-related aspects that need to be reflected in the task of managing the operations
function.

20 Introduction
CASE 1.6 THE TRIPLE BOTTOM LINE: MEASURING

SUSTAINABILITY AT NIKE
Nike is one of the world’s best-known for its running shoes that have a lower
sportswear brands. In 2015–16 it environmental impact, use less mate-
recorded sales of over $32.4 billion and rial, and yet still offer a superior light-
was rated sixth in Fortune’s ‘Change the weight product to customers. In 2012 it
World’ list, a register of billion dollar unveiled its Flyknit technology. Over a
companies who, in addition to their decade in development, the Flyknit pro-
superior business performance, had cess involves precision engineering
demonstrated an innovative approach to every stitch of the shoe upper to deliver
sustainability that makes a measurable maximum performance for athletes
social impact. while producing 60 per cent less waste
than traditional cut-and-sew methods.
Nike has adopted the ‘triple bottom line’ In 2016, Nike announced it had reached
approach to its corporate social respon- a further milestone by using recycled
sibilty ethos, making a commitment to polyester as the core yarn in all its Flyk-
promote and protect not only its own nit models, thus reusing the equivalent
profits, but also people and the planet. to date of 182 million plastic bottles in
In a sustainable business report pub- materials that would otherwise have
lished in May 2016, it declared its ambi- gone to landfill.
tion to double its sales revenues while
halving the company’s environmental Cynics might ask how much of Nike’s
impact. This bold goal is to be achieved stated emphasis on CSR issues is
by adhering to three strategic aims: ‘greenwash’ – environmental marketing
to rebrand the company as socially
• Minimizing its environmental foot- responsible – given that Nike and its
print competitors have previously been
• Transforming manufacturing exposed and condemned, like many
• Unleashing its human potential. other high-profile Western corporations,
for making use of cheap labour under
Nike has already made headway with its poor working conditions in developing
ambitious sustainability plans. It has economies. There is no doubt that it has
invested heavily in developing new done Nike no harm to espouse these
materials and manufacturing processes aims, as reflected in its 6 per cent growth
http://www.jupiterimages.com

in revenue and a net annual profit of (a)

Suggest a corporate social
$3,760 million in 2015–2016. However, in responsibility (CSR) initiative
addition to its Flyknit technology, Nike that your university could intro-
has set itself some tough future goals in duce, and
its manufacturing process, suggesting (b) Ouline how your initiative might
real commitment to progress. To make benefit the university operations
its shoes Nike today uses about half the in terms of the triple bottom line
energy, and generates around half the measurements of profitability,
emissions, as it did eight years ago. Hav- people and the planet.
ing already ensured its contracted foot-
wear manufacturers have cut energy Sources
use per unit by around 50 per cent since Fortune.com ‘Change the World’ index, http://
2008, it aims to use 100 per cent renewa- beta.fortune.com/change-the-world/nike-6,
ble energy in its owned and operated accessed 5 Dec 2016.
facilities by 2025. As well as seeking
Nike website, Sustainable innovation report,
suppliers committed to its lean and
http://news.nike.com/news/sustainable-innova-
green ethos, it has also announced its tion, accessed 5 Dec 2016.
intention to ensure any factories used by
Nike are equitable and empowering Flyknit, http://news.nike.com/news/four-years-
places for workers to operate. of-nike-flyknit, accessed 4 Dec 2016.
Climate change, http://news.nike.com/news/

Questions nike-inc-and-mit-climate-colab-materials-inno-
vation-to-combat-climate-change, accessed 4
1 How has Nike addressed sustainabil- Dec 2016.
ity in its business operations?
Financial information, http://s1.q4cdn.com/
2 Thinking critically: Consider the day- 806093406/files/doc_financials/2016/ar/mark_
to-day operations of your university parker_letter.html.
campus, such as refuse collection,
catering or transportation and: Visit www.palgrave.com/business/hillessential for more
on this case, plus additional resources.
Critical reflections
Few operations managers would consider developments through others, to manage
their role to be other than demanding, high levels of complexity and to provide
challenging, absorbing and satisfying. support for their customers’ many differ-
They would also tell of its frustrations and ent needs. All this requires both intellect
complexity; this is inevitable given the and experience, the former to appreciate
large number of variables and the many the issues and perspectives involved, and
diverse and complicated short- and the latter to be alert to potential problem
longer-term objectives involved. areas. Figure 1.10 underlines this point:
as you will see, management concerns the
To manage such a task effectively requires higher levels of learning, from application
a range of executive qualities, as outlined through to evaluation.
earlier in the chapter. To this specific list
need to be added the more general attrib- The operations manager’s task is a classic
utes of diligence, intellect, experience and example of these demands, a fact gaining
energy. Completing the day-to-day tasks increasing recognition not least because
requires much physical effort. To manage of the success that some developed
the operations function effectively and nations have had as a result of placing
efficiently, operations managers have to great emphasis upon the management of
be able to understand the whole, take it the operations function. For example, by
apart, fix the parts required and put it the early 1980s, it was becoming clear
back together again. They need to be able that Japanese success was based upon a
to instigate appropriate initiatives and greater investment not in processes but

22 Introduction
in management, particularly operations. intellectually able of all corporate manag-

Similarly, the successful growth of ers’.2 The competencies identified include
international retailers such as Wal-Mart ‘a knowledge of technology ... as well as
and IKEA has been built on world-class every business function ... a thinking style
operations capability. Some believe that that includes the ability to conceptualize
the managers needed to convert opera- as well as analyse complex tradeoffs ...
tions into ‘a competitive resource may [and] managers who are architects of
have to be the best rounded and most change not house-keepers’.3
Figure 1.10 The levels of learning
Increasingly higher Levels of

Description
levels learning
of learning Evaluation Appraise, compare, conclude, contrast, interpret and explain
Classify, compile, design, modify, reorganize, formulate,
Synthesis
reconstruct and substitute
Analysis Select, discriminate, illustrate, separate and distinguish
Application Demonstrate, relate, use, complete and prepare
Understanding Explain, extend, generalize, infer, summarize and estimate
The task of
management Knowledge Know, identify, list, name, outline and state
Source: Adapted from Benjamin S. Bloom et al. Taxonomy of Educational Objectives. Boston:
Allyn & Bacon. © Pearson Education 1984.
Recognition of these operations manage- elsewhere. The sound management of

ment qualities is a prerequisite for both operations has a key contribution to
the service and manufacturing sectors. make in the success of companies, sectors
Those nations that failed to carry out the and hence nations.
operations tasks effectively in their
manufacturing industries have stood by This chapter has illustrated in general
and watched this sector diminish dramat- terms the crucial role of operations
ically in a few years. Next on the list are management for organizational success,
parts of the service sector. Passenger with the aim of setting the scene for the
airlines, data processing, call centre rest of the book. The next chapter, on
provision, banking and other parts of the operations strategy, completes this over-
financial services sector have already view. The rest of this book then reviews
experienced the full weight of global the essential tasks involved and some of
competition. It will not abate in these the important perspectives that need to
sectors and is already surfacing be understood by an operations manager.
Summary
••
The operations process transforms wide range of functions and support
inputs into outputs that the organiza- roles, examples of which are given in
tion then sells in its chosen markets. Figure 1.2.
Figure 1.4 overviews this core task,
while Figure 1.5 provides examples from ••
Most companies deliver a mix of both
service and product, as illustrated in
both the service and manufacturing
Figure 1.8. Where an organization
sectors.
chooses to position itself on this
••
As operations typically accounts for service–product mix continuum will
60–70 per cent of the people, assets and influence its competitive position and
costs within an organization, its sheer the operations task involved.
size makes it a demanding manage-
ment task. In addition to undertaking ••
While most offerings are a combination
of services and products, there are
these activities, operations comprises a

important distinctions in managing long-term needs of the business, as

operations in the service and manufac- well as the development needs and
turing sectors. These are outlined and personal expectations of those involved.
overviewed in Figure 1.9.
••
Operations has a significant strategic
••
Most of the people within a typical contribution to make in retaining and
organization work within the operations growing market share. It is responsible
function and reflect a wide range of jobs, for meeting the requirements of the sale
skills and personal needs. A critical part and this, in turn, affects whether
of the operations role is to manage the customers purchase a second time (see
operations process through people in Figure 1.3).
such a way as to meet the short- and
Study activities
Discussion questions
1 What is operations management? From an operations perspective, what
What are the key elements of the oper- are the similarities and differences
ations task? Illustrate your answer with that exist?
examples.
4 Select two functions other than oper-
2 Identify an operations system in your ations within a service or manufactur-
own life. What are the inputs, opera- ing business. For each, identify three
tions process activities and outputs links to operations and explain the key
involved? dimensions of the activities involved
and how they would assist operations
3 Select two service and two manufac- to complete its tasks and
turing businesses of your own choice. responsibilities.
Assignments
1 Analyse the operations function in the Identify the inputs, operations process
university or college department in and outputs involved.
which you are registered or in the
company in which you work in terms of: 3 Look through McDonald’s website
(www.mcdonalds.com) and list the
• The key operations responsibilities
dimensions that concern operations.
• The size of the operations task How many outlets are there through-
• The operations function in the out the world, and how do you think
context of the rest of the univer- the company ensures effective
sity/college department or control over the operations task in
organization order to maintain its desired stand-
• Four factors that illustrate the ards within the service delivery
complexity of the operations task. system?
Give reasons for your choices.
4 Make a list of the top 10 companies in
2 Consider the following processes that the Fortune 500 (http://fortune.com/
you frequently encounter when you: fortune500; use the drop down menu
in the tool bar to select different
• Enrol on a course
years) from 1986, 1996, 2006 and 2016.
• Buy lunch Identify the fundamental differences
• Buy a ticket for a concert or the and give reasons for these changes.
cinema.
Exploring further well worth the effort of reading it. The

approaches that Henry Ford developed have
been acknowledged as the basis of Japanese
Books
approaches today. The text is fun to read,
Ford, H. (2002) Today and Tomorrow. and you could benefit from looking at chap-
Cambridge, MA: Productivity Press. This is a ters 1–4, which provide a general context for
reprint of Henry Ford’s 1926 book, and its business as a whole and operations in
direct style and insights into business are particular.

24 Introduction
Hill, A. and Hill, T. (2012) Operations Companion website

Management. Basingstoke: Palgrave
Macmillan. The text provides a useful
www.palgravehighered.com/hill-eom-2e
supplement to this book by offering a more
comprehensive explanation and further For extra resources, including a video inter-
examples (including long case studies) view with the authors about the subjects
showing how service and manufacturing discussed in this chapter, and to explore the
companies have applied these concepts. OM in Film feature.
Hill, T. (1998) The Strategy Quest: Releas-

ing the Energy of Manufacturing Within a Notes and references
Market Driven Strategy: a Dynamic Busi-
ness Story. Available from AMD Publishing, 1 Lawrence, P.A. (1983) Operations
Sandon House, Gentleman’s Lane, Ullenhall, Management: Research and Priorities.
Henley-in-Arden, UK, B95 5RR. This book Report to the Social Services Research
(written as a novel) describes how an art Council, April, p. 14.
business and manufacturing organization
2 Meyer, R. (1987) ‘Wanted: a new breed of
restructure themselves to meet the changing
manufacturing manager’. In Manufac-
demands of their customers.
turing Issues 1987. New York: Booz
Meredith, J. and Shafer, S. (2012) Operations Allen, pp. 26–9.
Management for MBAs: 5e. New York: John
3 Meyer, R. (1987) ‘Wanted: a new breed of
Wiley & Sons. This book includes a useful,
manufacturing manager’. In Manufac-
easy-to-read opening chapter setting out the
turing Issues 1987. New York: Booz
activities and dimensions of operations
Allen, p. 28.
management as a function, within organiza-
tions and in an increasingly global economy.
END OF CHAPTER CASE:

TOO SHORT THE DAY
Jonathan Harris

Giles Chamberlain, the Production Manager of the Sons of Light. ‘There’s a problem fitting the rostrum
Playhouse Theatre, set out for work on Monday morn- onto the stage,’ explained Ian, ‘but Fred’s working on
ing. Over the weekend, he had drawn up a list of tasks an idea to get around it.’ Giles went with Ian to meet
to look at that day that would help reduce the ever- Fred, and together they came up with another idea,
increasing production costs. ‘I really need to find new Giles staying and watching until a satisfactory solu-
suppliers for our high-cost and high-volume materi- tion had been reached. Before leaving the stage area,
als,’ he thought. ‘I also need to speak to Lois [Produc- he also checked the casual labour time sheet queries
tion Administrator] to work out how to plan the with Ian and asked him to get overtime authorized in
production of our shows better so we can reduce the future to help control production costs. He then went
overtime and casual labour costs. Better planning to see Jennifer to discuss current wardrobe produc-
would also allow us to order in materials earlier, rather tion costs and a proposed trip with Charles (Head of
than paying the high prices we currently have to in Design) to buy new costumes for the upcoming pro-
order to get them in the next day. I also need to speak duction of The Play What I Wrote. After that, Giles dis-
to Susan [Deputy Stage Manager] to create a proposal cussed costs, costume resale policies and budget
for some new stage facilities that would help reduce limits for the new costumes, and checked out an
the designers’ workload, and discuss with Fred [Head invoice query he had identified that morning. Return-
of Carpentry] how we can create modular stage ing to his office, he made a few notes on the points
designs to reduce timber costs and make the sets agreed that morning and went to lunch.
quicker to build.’
After lunch, Giles found a note on his desk saying that
By the time Giles had reached the theatre, he had his meeting with Jason (Theatre Director) would have
decided he should look for some new suppliers first to be put back to 3.30pm. He placed an online order
and then speak to Lois, Susan and Fred. As he entered with a supplier for a smoke gun needed in a future pro-
the building, Ian (Stage Manager) called him to duction and then checked the emails that Mary had
explain that he needed more casual labour than highlighted for his attention, made some notes and
planned due to the changes agreed last Friday for prepared his replies. He then texted Mary to come to
the forthcoming play Joseph and the Amazing Techni- his office at about 3pm. As he got up, he received a call
colour Dreamcoat. They discussed the proposed from a company enquiring about a shower unit it had
increases, and Giles asked Ian to advise him on the lent to the theatre for a production earlier in the year.
outcome and email his secretary, Mary, with the costs
involved. In the conversation, Ian also reminded Giles On leaving the office, Giles bumped into Gerald (Head
of several items that needed either purchasing or pro- of Scenic Paint) who asked him to order some paints
gressing from suppliers. As he entered his office, Giles he needed urgently. Giles agreed to do this and went
found on his desk some invoices and the time sheets down to the stage area to check that the problem he
for the casual labour employed the previous week. He had discussed earlier with Ian and Fred was now
checked the wage claims, made one or two notes and resolved. Ian asked if he could use the theatre’s large
authorized those without queries for payment. He van to pick up some props for the next production.
then checked the invoices and telephoned Fred, Jim Giles agreed and then went over to see Jim about
(Head of Electrics), Martin (Head of Sound) and Jen- some queries on invoices for electrical equipment and
nifer (Head of Wardrobe) to confirm that the items and consumables. Giles then continued on to the carpen-
quantities on the invoices had been received. Neither try shop to discuss the props and scenery deadlines
Jim nor Jennifer answered, so he texted them with the for the next production with Fred, who gave him some
queries. He then made several phone calls to either urgent tool and timber purchase requisitions.
purchase or chase the materials requested by Ian
before calling Mary to ask her to come up to his office. As Giles returned to his office, Lois called to ask if he
While he waited, he called the local fire officer to could meet next week with the agent of a touring com-
check on an issue raised by Assistant Director Matt pany that was due to put on a show at the theatre the
last week. Following the discussion, he checked his following month. Just then, Mary entered the room to
file containing details of the local fire regulations and let him know it was soon time for his scheduled
marked the appropriate section. Just then, Mary 3.30pm meeting and asked if he could call in to see
arrived. He discussed some administrative details Matt about an employee later that afternoon.
with her and handed over the signed invoices and
authorized casual labour time sheets. Mary gave him Giles met with the theatre’s director Jason at least
the morning mail and explained one or two points and twice a week to discuss a number of issues. Today, he
highlighted several emails he needed to check. updated Jason on the progress of the current produc-
tion, the rehearsal plans for the next two productions
At this point, Giles grabbed a coffee and then went and the forward plans for both in-house and touring
down to the stage area to check with Ian on the pro- shows. Like most meetings, this one lasted about 45
gress of the alterations for the current production The minutes, and Giles left with a list of points to check or

26 Introduction
confirm in the next 24 or 48 hours, which would then productions to ensure they could meet their dead-
be discussed at the next meeting. lines. He then went back to the stage area to supervise
a trial costume fit for the next production and discuss
He then called in to see Matt to check through the the new deadlines with the heads of the departments
employment terms and conditions for a new employee involved. Just as he was leaving the stage area, the
starting next week and discussed the fire regulation Front of House Manager came over to ask if Giles
query. Next he talked to Paul (Head of Props), who could arrange cover for two people for tomorrow’s
explained that the shower unit had been broken dur- matinee and evening performance as one was on hol-
ing the production and had been thrown away some iday and the other was ill. Giles agreed to do this, and
weeks previously. Giles clarified exactly what had went back to his office to make notes following the
happened, went back to his office and texted Martin afternoon’s discussions.
and Jim, asking them to come to his office. He then
called the company about the shower unit, explained He glanced at his watch and saw it was 6.40pm. ‘Time
the problem, asked the price involved and agreed for to go home,’ he thought. ‘Phew, that was a busy day!
them to send an invoice for the replacement cost. Too busy, in fact … I managed to get all the day-to-day
When Martin and Jim arrived, he asked them about tasks done but didn’t have time to look at the some of
the special sound and electrical effects required for the longer-term issues. Everyone thinks I’m doing a
the next two productions and made a note of the good job, but I’m not really sure what that is. It all
expected completion dates in order to update Jason seemed so clear this morning, but now I am not so
later. Giles then texted Charles asking him to come up sure.’
to his office.
Questions
Between Jim and Martin leaving and Charles arriving,
1 What do you think of Giles Chamberlain’s day?
Giles phoned the artistic paints supplier and made an
appointment with an agent for the one-man show 2 Comment on the situation described in the case
booked in three weeks’ time. Then Charles arrived to study and be prepared to propose any changes that
update Giles on the design progress for the next three you think would be beneficial.
future productions: The Irresistible Rise of Arturo Ui,
Visit www.palgravehighered.com/hill-eom-2e for more on this case,
The Miser and Oliver Twist. As a result of this discus-
plus additional resources.
sion, Giles decided to meet everyone involved in these

INDEX Copyrighted material – 9781137526564

Index 379
Reader – please note that page references in bold highlight the principal coverage of that topic within
the book.
A
ABC analysis, 253–5. See also Annualised hours, 199 Assemble-to-order, 252,
Pareto analysis Annual requirement value 256–7
Absenteeism, 188–9 (ARV), 253–5, 257, 262, ATMs, 102, 108, 199
Airbus, 355 264 Au Bon Pain, 147–8
Air travel, see Passenger Anstruther Fish Bar, 275 Autodesk, 223
airlines Apple, 17, 52–4, 59, 105–6, Automotive sector, 58, 127–8,
Aldi, 43 323–4, 365, 367–9 143–7, 189, 226, 228, 313–4,
Amazon, 336, 323 Asaki Breweries, 57 337, 353–4
Andon, 134 Ash Electric, 241–2
B
Back office, 3, 95–8, 184. Benchmarking, 283, 256 BP, 336
See also Front office Benefits explicit and implicit, Brainstorming, 361–2
Baldrige Award, 294–5 66–7 Brand name, 29
Banking, see Financial Bill of materials, 217. See also British Airways, 115–7, 358
services Material requirements Business unit strategy,
Bar charts, 211–2 planning 29–32
Barclays, 316 BMW, 144, 147, 199–200 Buy, see Make-or-buy
Batch, 121–5, 128–31, 155, Bottlenecks, 164, 186–7, 228,
177, 186–7 233
C
Cable & Wireless, 336 service, 359 objectives, 43
Call centres, 104, 160, 308 videoing( see Videoing) social responsibility, 19–20,
Call-offs, 256 Check lists, 284–5 46, 59, 61, 75, 78–9, 144,
Caiyx Flowers, 332–3 Chiquita, 318–9 146, 304, 320–1
Capacity (including Choice of site, see Location strategy, 29
Management of capacity), Cine World, 198 Co-sourcing, 316–7
5–6, 17–18, 33, 42, 78, 89, Competitive clustering, 147 Cost reduction, 33–4, 64, 80,
174–202, 255 Competitors (including 89, 134, 183, 333, 344–73.
Capital One, 308 Competition), 35–6, 72–3, 147 See also Lean operations
Carrefour, 104, 191 Complaints, see Service and Operations
Cars, see Vehicles recovery improvement
Cash, 221, 344 Complexity levels of within Costs, 7, 33, 75, 145, 255, 278,
Caterpillar, 133, 330 operations, 9, 14 310, 326. See also Cost
Causal analysis of inventory, Computer-aided reduction
264–6 Design, 76, 223 (See also Critical path, 216. See also
Cause and effect diagrams, see Design) Network analysis
Diagrams Cause and effect engineering, 76 Crosby, 278
Cells, 159–60 Consignment stock/inventory, Crown Hotel, 301–2
Changeovers, 78, 121, 124, see Inventory consignment Customer
129, 232. See also Set-ups Constraints theory of, see involvement in delivery
and Make-readies Theory of constraints system, 17, 369
Charts. See also Diagrams and Continuous journey mapping, 356–8
Mapping Improvement, 112, 229 Customers, 14, 16, 29, 34–6,
control, 288–9 (See also Cost reduction 56, 61, 72, 89–90, 93–6, 98,
information and materials, and Operations 107–9, 113, 146, 183, 208.
359 improvement) See also Customer relations
movement frequency, 161–2 processing, 123–5, 128–9, and Customer service; see
person flow, 359 155, 177, 186–9 Markets
process, 358–9 Core capabilities, 307 Customer surrogates, 14, 93, 251
relationship, 162–3 Corporate Customisation, 33, 42, 68–70, 99
379
380 Index
D
Delivery Production processes Deming, 277
lead times, 96, 256, 315 and Service delivery improvement cycle, 348–9
on-time (see Delivery systems) Design (including Product and
reliability) Delivery system service design, 56–82, 283
reliability, 29, 34, 36, 40, multi-step, 101–2 and development, 59–63
129, 346–7 single-step, 101–2 Diagrams, cause and effect,
speed, 5, 29, 34, 36, 40, Dell, 54, 224–5, 270–2, 331–4, 286–7, 360. See also Charts
91, 108, 129, 221, 326, 336 flow, 164
346–7 Delta Airlines, 308, 355 Disney, 142
systems, 6, 14, 42, 44, Demand Distribution, 113
87–104, 113, 174, 184, dependent, 217, 252 Dow Chemicals, 224
231, 283, 332 (See also independent, 217, 252 Dyson, 84–5
E
Easy Jet, 103 EFQM, see European Manufacturing resource
Eastman Chemicals, 334 Foundation of Quality planning
E-bookers, 103 Management Enviroment, see Corporate
E-commerce, 103, 329 Eighty/twenty (80/20) rule, 75, social responsibility
Economic 77, 253, 257. See also Pareto Esso/Exxon, 224
batch quantity/size, 253, analysis European Foundation of
262 Electronic point of sale (EPOS), Quality Management
lot size, 253, 262 112, 329, 332–3 (EFQM), 195–6
order quantity, 253, 262–3 EMI, 105 Expedia, 103
Economies of scale, 18 Emirates, 311 Expediting, 217
Efficiency, 175, 180–3. See also Employee involvement, 366. Explicit services, see Services
Effective performance See also Staff explicit
Effective performance, see Enterprise resource planning
Efficiency (ERP), 221–5, 234. See also
F
Fairphone, 79 Financial services, 47–8, 102, Ford, 119, 127–8, 226, 314, 358
Fast food outlets, see 108, 112–3, 148, 316–7. Ford, Henry, 132
Restaurants See also Banking Front office, 3, 95–8, 184.
Federal Express (Fed Ex), 295, Fixed assets, 244 See also Back office
367, 371–2 Flexibility, 99, 126, 131, 184–7, Fujitsu Electronics, 223
Fender International, 198, 313 Functional strategy, 29–30, 32.
312 Flow diagrams, see Diagrams See also Marketing strategy
Fiat, 226, 314 flow and Operations strategy
G
GAP, 330 General Electric (GE), 290–1, Groceries, see Retailing
Gap analysis, 287–8 314 Gross domestic product (GDP),
Gemba, 134 Google, 364 11–12, 101
H
Hampton Inns, 276 Healthcare, 7, 100–1, 112, Hospitals, see Healthcare
Harley-Davidson, 156–7, 174, 347 Hotels, 97, 142, 276, 290
375–7 Hewlett-Packard, 54, 225 HSBC, 148
Hasbro, 81 Honda, 126, 227 Hybrid processes, 130–2
I
IBM, 223 cycle, 348–9 (See also process, 376 (See also Cost
IKEA, 22, 333–4 Operations reduction)
Improvement improvement) Implicit services, see Services
Breakthrough, 344, 349–52, 354 incremental, 344, 349–52 implicit

Index 381
Improving operations, see buffer, 249–52, 255, 259–62 reduction, 334, 344, 376
Operations improvement capacity-related, 249–52 support, 246–7
Information (processing of), 14, consignment, 257, 262, 332 turns, 330
16, 93 corporate, 9, 247–8, 257, work-in-progress, 110, 122,
Infrastructure, 144. See also 261–3, 265 132–3, 228, 234, 245–9,
Operations infrastructure cycle, 230, 249–51 264
Inshoring, 318. See also decoupling, 230, 249–51 Involvement
Reshoring finished goods, 110, 132, Customer, 17, 369–70
ISO 9000, 294 245–9, 264 staff/employee, 375–6,
Intel, 58, 133 operations, 245–8, 263, 366–7
Intellectual property, 313 265–6 suppliers, 267–9
Inventory, 6–7, 42, 78, 88, pipeline, 249–51 IT, 29, 31, 58, 75, 87, 90, 92,
194–6, 209, 220, 226, 230–1, process (see Inventory 102–6, 111–3, 134, 144–5,
244–67, 330. See also operations) 221, 225, 321–4, 329–30.
Causal analysis raw materials, 110, 132, 228, See also Digital supply
analysis, 264–6 245–9, 264 chains; E-commerce
J
Jefferson Pilot Jobbing, 121, 124–6, 128, 155, Johnson & Johnson, 201
Financial Company, 176–7, 186 Juran, 278, 293–4
112 Joint ventures, 143, 316 Just-in-time(JIT), 134–5,
Jet Blue, 364 Johnson Controls, 226 225–30, 234
K
Kaizen (including Events and Kanban, 112, 226
blitz), 112, 349, 352, 354
L
Land Rover, 313–4 reduce (including Short Line, 123–5, 128–9, 155,
Lastminute.com, 103 lead times), 34, 74–6, 91, 186–7
Layout, 151–66, 228 333 Balancing, 111, 163–5
Batch, 130 Le Clerc, 91 Lloyds, 316–7
Cellular, 131, 159–60 Lego, 322 Location, 33, 90, 141–51.
fixed position, 153, 155, 161 Lean operations (including See also Competitive
process/function, 130, Lean management, Lean clustering
154–5, 158–610 production and Lean centre of gravity method,
service/product, 155, 158–9, Services; See also Cost 150–1
163–5 reduction and Lean supply weighted factor method,
Lead times chain), 110–2, 132–5, 149–50
Customer, 33, 347 229–32, 327 Logistics reverse, see Reverse
material, 255–6, 260 Learning levels of, 22 logistics
operations, 231, 347 Life cycle Service/product, Loss leader, 78
process, 231–2, 255 63–5, 79
M
Make-in-house, see Make-or-buy Mapping. See also Charts and Customisation, 68
Make-or buy, 42, 193, 306–17 Diagrams Products, 120
Make-to-order, 194, 250, 252, service, 359 Services, 93
255–9. See also Assemble- value-stream, 111 Master schedule, 218–9.
to-order Markets, 6, 19, 28, 33–4, 36–42, See also Material
Make-to-stock, 194, 252, 256–7, 47, 49–50, 62, 87, 94–5, requirements planning
259 143–4, 147, 309, 344–5. Material requirements planning
Manufacturing processes, see See also Customers (MRP1), 217–22, 234
Production processes Market driven, 35–6 Mazda, 357
Manufacturing resource driving, 35–6 McDonalds, 94, 170–2, 198
planning (MRP 2), 220–2. Marketing, 9, 29, 31–3, Mercedes-Benz, 144
See also Enterprise resource 42–3, 49 Microsoft, 58
planning Mass Minkies Deli, 204–6

382 Index
Mix, see Service/product mix Moonpig.com, 69–70 Music industry, 105–7

Mobil, 224 Motorola, 290, 295 Mutual Benefit, 364
Modular design, 67 Multi-national corporations
Monsanto, 225 (MNCs), 143
N
National Health Service (NHS), Nike, 20–1, 133 Non-repeat services, see
224–5 Nissan, 189, 226–7 Services-non-repeat
Network analysis, 212–6
O
Ocado, 104 Improvement, 74, 109–12, Order backlog, 194–5. See also
Ohno Taiichi, 132 132–4, 344–73 Forward load
Omnium, 146 infrastructure, 44 Order-winners, 5, 34–5,
On-line retailing see Retailing management, 2–10 38–40, 42–3, 87, 94–5, 99,
On-line shopping, see planning/scheduling, 78, 112, 129, 221, 306–7,
Retailing 126, 132, 189–91, 345–7
Operations. See also Cost 208–235 Outsourcing, 309–17, 344.
reduction, Lead time process, 11–12 See also Make-or-buy
reduction and Lean strategy, 28–51, 129 Owens Corning, 225
operations Optimised production
technology (OPT), 232–3
P
Packaging sector, 78–9 Processes. See also Delivery standard, 120, 156–8
Pareto analysis, 253, 255, 286. systems Production processes
See also Eighty/twenty: Hybrid, see Hybrid (including Manufacturing
80/20 rule processes processes; See also Batch,
Passenger airlines, 97, 99, 103, multi-step, 101–2 Continuous processing,
152, 200, 284, 308, 311, 355, single-step, 101–2 Jobbing, Line and Project),
358, 364 Product design, see Design 119–35, 183, 186
People, see Staff life cycle, see Life cycle Products, 2, 93, 119–35
Pharmaceuticals, 201, 224 service/product new (including Time to
Philips, 367 mass, 124 market), 40, 42, 72, 75–6,
Planning, see Operations mix (see Service/product 126, 346, 348
planning/scheduling mix) Professional services, 93
Poka-Yoke, 135 portfolio, 64–6 Project, 120–1, 125, 128–9,
Porsche, 353 range, 33, 40 155, 176–7, 186
Pret a Manger, 137–9 special, 120, 154–6 management, 210–6
Price, 29, 34, 40, 43, 73, 108, specification (see Purchasing, see Supply
129, 345 Specification) chain
Q
Qualifiers, 5, 34–5, conformance, 5, 29, 34, 40, 113, house of, 71–4
38–40, 42–3, 87, 94–5, 228–9, 231, 274, 315, 346–7 management, 274–98
99, 112, 129, 306–7, Control, 18–19 Queues (including Queueing;
345–7 functional deployment, See also Order backlog), 33,
Quality 71–4 165, 181, 194
R
Radisson, 290 strategy, 57–8 Restaurants, 3, 89, 106, 137–9,
Reorder Research and development 183–4, 275
level, 255–6 (R&D), 29, 56–60, 80–1. Reverse engineering, 60
point, 259–61 See also Design Logistics, 335–6
Repeat services see Services Reshoring, see Inshoring Richo, 353
repeat Retailing, 3, 13, 43–6, 81, 97, Ritz, 94
Research 104, 108–9, 191–2, 198, Rolls-Royce, 311
applied, 56 315, 351 Ryanair, 103
fundamental, 56 Resource planning, 190–1

Index 383
S
Safeway, 104 new: time to market, 40, 42, Southwest Airlines, 103
Sainsbury, 105 72, 75–6, 346, 348 Special products, see
Sales, see Marketing non-repeat, 97–9, 154–6, 176 Products special
Samsung, 58, 281–3 offering, 274 Specification, 56, 66–7,
SAP, 225 package, 278 274, 288. See also Product
Scheduling, see Operations portfolio, 64–6 and service specification
planning/scheduling range, 33, 40, 89 (See also Sports Direct, 198
Scheduling systems demand- Service variety) Spotify, 106–7, 323–4
pull, see Just-in-time (JIT) recovery, 95 (See also Staff, 7, 89–90, 92, 102, 111, 113,
plan-push (see Material Complaints) 144–5, 174, 176, 181, 184,
requirements planning repeat, 99–100, 156–8, 176, 197–8, 210, 295, 313, 366–7
(MRP1)) 185, 216–29 Standard products, see
Self-managed teams, 366–7. shops, 93 Products standard
See also Staff specification (see Statistical process control, 289–90
Server discretion, 18, 89 Specification) Strategy, see Business
Service delivery systems, 2, 74, Set-ups, see Changeovers unit,corporate and
87–114, 183, 185, 251, 280. Simultaneous engineering, 75–6 operations strategy
See also Delivery systems Single minute exchange die Standardisation, 33, 42, 67, 75,
Service design, see Design (SMED), 135 223
Service/product mix, 15–16, Site location/selection, see Subcontracting, 199
63, 66, 88, 95 Location Superdry, 44–7
Service(s), 2, 93–4, 107. See also Six sigma, 290–1 Supply chain, 6, 75, 79, 144,
Service/product mix Skills, see Staff 280, 304–38, 367–9. See also
Complexity, 87 SMART goals, 134 Suppliers
Explicit, 88, 278–9 SMED, see Single minute Supermarkets, see Retailing
Implicit, 88, 278–9 exchange die Suppliers, 144, 305–6, 367.
Levels, 262 Smurfit Kappa, 78–9 See also Supply chain
life cycle (see Life cycle Software Technology Parks of Supporting structural facilities,
service/product) India, 145 89, 279
Sony, 105 Synergies, 35
T
Taguchi, 71 Threadless, 370 production system (TPS),
Teams, see Staff 3M, 81, 290, 293 132–3, 135
TED Talks, 367–9 Total quality Trade-offs, 128, 130
Teleworking, 103 management(TQM),
Tesco, 104, 192 292–4, 297–8
Theory of constraints, 232–3 Toyota, 132–3, 226, 228, 337
U
Uber, 68–9 United Parcel Services (UPS), Utilization, 99, 129, 175,
Unilever, 321–2 276, 312 178–83, 185–6, 230
Unipart, 366
V
Value analysis, 74–5 Videoing, 360 Volume(s), 43, 93–4, 99,
Value stream mapping, 111 Virgin Atlantic, 358 102, 119–20, 123–6, 128–9,
Variety reduction, 76–8 Volkswagen (VW), 58, 127, 226, 132, 155, 164, 174, 176–7, 344
Vehicles, see Automotive 280–1 Volvo, 353
W
Walmart, 22, 191–2 Wetherspoons, 198 Wikipedia, 370
X
Xerox, 295, 336
Z
Zara, 340–2 Zero defects, 278

Total Quality Management and Operations Management

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Total Quality Management and Operations Management

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Copyrighted material – 9781137526564

Part one – Introduction

Part two – Designing and delivering services and products

Part three – Managing operations 

Part four – Improving operations

Copyrighted material – 9781137526564

Part one – Introduction 1

Implementing an operations strategy 47

Copyrighted material – 9781137526564

Part two – Designing and delivering services and products 55

Techniques for improving design 67

Designing the service delivery system 94

Detailed design of service delivery systems 95

Further aspects of service delivery 107

Improving operations 109

Critical reflections 112

Copyrighted material – 9781137526564

5 Making Products 118

Designing the manufacturing process 124

Hybrid processes 130

Improving operations 132

Critical reflections 135

Choosing a layout 151

Critical reflections 165

Part three – Managing operations 173

Factors affecting capacity management 183

Copyrighted material – 9781137526564

Planning and managing capacity 189

Critical reflections 200

Operations scheduling systems 210

Critical reflections 233

Models and approaches for managing inventory 252

Inventory control systems and analysis 262

Critical reflections 266

Copyrighted material – 9781137526564

Companion website 269

The steps to effectively managing quality 278

Approaches to managing quality 292

Critical reflections 296

Designing the supply chain 305

Advantages and disadvantages of make or buy 309

Outsourcing – managing the risks 315

Managing supply chains 317

Developing supply chains 324

Reverse logistics – handling returns in an online world 325

Copyrighted material – 9781137526564

Exploring further 339

The process of improving operations 348

Critical reflections 371

Copyrighted material – 9781137526564

PART ONE – INTRODUCTION

After completing this chapter, you should be able to: Introduction

Copyrighted material – 9781137526564

What does operations management do?

Copyrighted material – 9781137526564

CASE 1.1 OPERATIONS TASKS IN DIFFERING ORGANIZATIONS

Visit www.palgravehighered.com/hill-eom-2e for more

Copyrighted material – 9781137526564

>> KEY IDEA

How operations management fits into an organization

Figure 1.1 Some typical functions within a business

Task Function responsible Type of function

Copyrighted material – 9781137526564

The role of operations management

Part one – Introduction

Part two – Designing and delivering services and products

Part three – Managing operations

Part four – Improving operations

Part one – Introduction 1

Implementing an operations strategy 47

Part two – Designing and delivering services and products 55

Techniques for improving design 67

Designing the service delivery system 94

Detailed design of service delivery systems 95

Further aspects of service delivery 107

Improving operations 109

Critical reflections 112

5 Making Products 118

Designing the manufacturing process 124

Hybrid processes 130

Improving operations 132

Critical reflections 135

Choosing a layout 151

Critical reflections 165

Part three – Managing operations 173

Factors affecting capacity management 183

Planning and managing capacity 189

Critical reflections 200

Operations scheduling systems 210

Critical reflections 233

Models and approaches for managing inventory 252

Inventory control systems and analysis 262

Critical reflections 266

Companion website 269

The steps to effectively managing quality 278

Approaches to managing quality 292

Critical reflections 296

Designing the supply chain 305

Advantages and disadvantages of make or buy 309

Outsourcing – managing the risks 315

Managing supply chains 317

Developing supply chains 324

Reverse logistics – handling returns in an online world 325

in revenue and a net annual profit of (a)