Slide 7.

Chapter 7
Improvement strategy

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Slide 7.2

Improvement strategy
Resource usage

Issues include:
• Big radical improvement
projects, or small, continuous
improvements
Quality
• Performance measurement

Market competitiveness
used for setting the direction
of improvement
Speed • Benchmarking against other
Performance

operators
objectives

• Prioritising improvements
Dependability • Learning and enhancing
process knowledge through
control
Flexibility • Expectations of, and
contributions from, the
operations function
Cost
Development
and organisation (operations
Supply Process development and
Capacity improvement)
network technology

Decision areas

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Slide 7.3

Continuous improvement

Breakthrough improvements

Exploration and Exploitation

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Slide 7.4

Structural
ambidexterity’

Organizationa
l
ambidexterity’

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Slide 7.5

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Slide 7.6

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Slide 7.7

Directing improvement is a cycle of

comparing targets with performance

Performance
Operation’s
DIRECT Intended market
resources and
position
processes
Targets

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Slide 7.8

Performance targets can involve different

levels of aggregation
Broad strategic measures Overall strategic
objectives

Functional strategic Market Operations Financial

measures strategic strategic strategic
objectives objectives objectives
Composite performance Customer
measures Agility Resilience
Satisfaction

Generic operations
performance Quality Dependability Speed Flexibility Cost
measures
•Defects per •Mean time •Customer •Time to •Transaction
Detailed unit between query time market costs
•Level of failures •Order lead- •Product •Labour
performance
customer •Lateness time range productivity
Measures, e.g. complaints complaints •Machine
•Throughput
•Scrap level time efficiency

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Slide 7.9

Performance targets can involve different

levels of aggregation (Continued)
High strategic
Broad strategic relevance and
measures aggregation

Functional strategic
measures

Composite performance
measures

Generic operations
performance measures
High
diagnostic
Detailed performance power and
measures frequency of
measurement

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Slide 7.10

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Slide 7.11

The ‘direct’, ‘develop’, ‘deploy’

strategic improvement cycle

Operations resources Market requirements

DEPLOY operation’s
Operation’s contribution Market
capabilities potential

DEVELOP operations The strategic

Market
capabilities through operations
strategy
learning improvement
cycle

Operation’s
Intended
resources
DIRECT performance market
and
and prioritisation position
processes

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Slide 7.12

Different standards of comparison give

different messages

100
90
Actual performance = 83%
80 X

70
60 X Last year’s average performance = 60%
X
50 X X X

40 Time

Performance by historical standards is GOOD

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Slide 7.13

Different standards of comparison give

different messages (Continued)

100
Strategic goal = 95%
90
Actual performance = 83%
80 X

70
60 X Last year’s average performance = 60%
X
50 X X X

40 Time

Performance by historical standards is GOOD

Performance against improvement goal is POOR

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Slide 7.14

Different standards of comparison give

different messages (Continued)

100
Strategic goal = 95%
90
Actual performance = 83%
80 X
Competitor performance = 75%
70
60 X Last year’s average performance = 60%
X
50 X X X

40 Time

Performance by historical standards is GOOD

Performance against improvement goal is POOR
Performance against competitors is GOOD

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Slide 7.15

Different standards of comparison give

different messages (Continued)

100 Absolute performance =100%

Strategic goal = 95%
90
Actual performance = 83%
80 X
Competitor performance = 75%
70
60 X Last year’s average performance = 60%
X
50 X X X

40 Time

Performance by historical standards is GOOD

Performance against improvement goal is POOR
Performance against competitors is GOOD
Absolute performance is POOR

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Slide 7.16

The importance–performance matrix

F
GOOD 1
2 EXCESS?

3 APPROPRIATE B
E
Performance

4
competitors

‘lower boundary of acceptability

against

5 D
6 IMPROVE
A 7

8 URGENT
ACTION
9
BAD

9 8 7 6 5 4 3 2 1
C
Importance for
LOW customers HIGH
the needs and importance preferences of customers and
● the performance and activities of competitors.
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Slide 7.17

The importance–performance matrix for

TAG’s ‘overnight temperature-controlled’ service
GOOD
1 Delivery
Volume X
2 flexibility
X Drop quote Window
3 quote
X X
Performance against

4
Distribution
Xquality
competitors

5 Documentation
service X
6 Price/cost Delivery flexibility
X X
7
Order/dispatch
X
8 quality Enquiry lead-
Xtime
9
BAD

9 8 7 6 5 4 3 2 1

Importance for customers

LOW HIGH

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Slide 7.18

The sandcone model of improvement; cost

reduction relies on a cumulative foundation of
improvement in the other performance objectives
Two ideas:
Cost
• best sequence in which to
improve operations Flexibility
performance;
Speed
• effort expended in improving
each aspect of performance Dependability
must be cumulative. Stability of operations achieved

Quality
minimum desirable level :
precondition to all lasting improvement.

Quality
Quality + dependability
Quality + dependability + speed Mostly seen in manufacturing

Quality + dependability + speed + flexibility

Quality + dependability + speed + flexibility + cost

Arnoud de Meyer and Kasra Ferdows. © 2017, 2015, 2012 Pearson education, Inc. All Rights Reserved
Slide 7.19

Developing operations capabilities is encouraged by a

cycle of attempting to control processes which enhances
process knowledge which, in turn, makes control easier

Operations
capabilities

Knowledge

DEVELOP

Operations Control
resources and
processes

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Slide 7.20

Knowledge management systems exploit the ability

of e-technologies to collect knowledge and connect
individuals and knowledge in order to encourage
collaboration

Collect Connect

KM should codify and KM should link codified and

classify knowledge holders of tacit knowledge
• Databases • Subject matter experts
• Content architecture • Search routines
• Data mining • Knowledge events

Collaborate
KM can encourage effective cooperation
leading to the generation of further insights
• Communities of practice
• Cultural support

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Slide 7.21

Process control may be one of the most operational

tasks, but it can bring strategic benefit

Enhanced supplier Better products

relationships and services

Understanding of
Operations Understanding
process inputs capabilities process limits

Knowledge

DEVELOP

Control
Retain best Staff job Enhanced Customer
staff satisfaction quality loyalty

Higher process Operations Less costly

efficiency resources and flexibility
processes

Lower costs Wide

product/service
range

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Slide 7.22

The Nonaka and Takeuchi knowledge model

Tacit Dialogue Tacit
knowledge Knowledge
Creating tacit Codifying tacit
knowledge through knowledge to create
shared direct explicit knowledge
experience Socialization Externalization
Tacit Explicit
knowledge knowledge

Field building Linking explicit knowledge

Explicit
Tacit knowledge
knowledge
Internalization Combination
Building tacit Organisation and
knowledge through application of
application of explicit explicit knowledge
knowledge Explicit Learning by Explicit
knowledge doing knowledge

Source: Adapted from Nonaka I and Takeuchi (1995) The Knowledge-creating Company. New York: Oxford University Press.

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Slide 7.23

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Slide 7.24

Deploying operations capabilities to create market

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

Contribution

Operations Market
DEPLOY
capabilities potential

Expectations

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Slide 7.25

Deploying external ideas

• Strategic type of imitators:

– The pioneer importer

– The fast second

– The come from behind

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Slide 7.26

The four-stage model of operations contribution

Manufacturing capabilities- proactive
Difficult to imitate
Organization Process and product in tandem
competitivene
ss nor
capability is still
Redefining industry operation
acting in a reactive STAGE 4
competitive
expectations disadvantage manner Give an
Manufacturing - operations
Increasing strategic impact

reactive advantage
Clearly the best in STAGE 3
Link strategy
the industry with
operations
As good as STAGE 2
competitors Adopt best
Operations
practice are better
than
STAGE 1 competitors
Holding the Correct the on broader
organisation back worst aspects not
problems on all

Internally Externally Internally Externally

neutral neutral supportive supportive
Compares with outside market competitors

Increasing operations capabilities

the manufacturing function can determine how best to apply their capabilities to the opportunities
present in the market, allowing it to redefine the market through product innovations that are led by manufacturing
Hayes and wheelright capabilities.
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Slide 7.28

Frameworks and approaches to

operations strategy implementation:
• Hoshin kanri :
– much deeper than simply being a process of
educating all within the company about the
operating procedures.

– Specified goals and targets to achieve

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Slide 7.29

Hoshin Kanri

• Culture:
– Western and Japanese
– Knowing – doing gap is less in Japan ( Pfeffer
and Sutton (2000)

– Gap existed in Western culture - failure

• Hoshin Kanri allows those within a company to eff ectively
integrate their specific abilities into the system, allowing upper
management to tailor their goals to the abilities present in the
system
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Slide 7.30

Hoshin Kanri

• Foundation:
• TQM
• Plan, Do, Check, Act (PDCA) cycle proposed
by W. Edward Deming.
• Joseph Juran – Breakthrough improvement

"Do things right in the first place, and you won't have to pay to fix them or do them over.
Book by Crosby- Quality is free

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Slide 7.31

• Buy in through system such as Hoshin Kanri if

not there
• TQM could be a failure

• Limited application / acceptance among

western culture

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Slide 7.32

Ferdows and De Meyer Approach

• Trade offs in performance measures

• Applicability of sandcone theory

• Quality as basis was understood

• But slack and lewis – not quality but process
knowledge
• Process control rather quality as base level for
sandcone © 2017, 2015, 2012 Pearson education, Inc. All Rights Reserved