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Resource usage

Amity Business School

Quality
Speed Dependability Flexibility Cost Supply network Process technology

Issues include, Big radical improvement projects or small continuous improvements. Performance measurement used for setting the direction of improvement. Benchmarking against other operators. Prioritising improvements. Learning and enhancing process knowledge through control. Expectations on, and contributions from, the operations function.

Performance objectives

Capacity

Development and Organisation (Operations development and improvement)

Decision areas

Issues covered

Market competitiveness

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Operations resources
Operations capabilities DEPLOY operations contribution

Market requirements
Market potential

DEVELOP operations capabilities through learning Operations resources and processes

The strategic operations improvement cycle

Market strategy

DIRECT performance and prioritisation

Intended market position

The Direct, Develop, Deploy strategic improvement cycle

Amity Business School

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

Market requirements
Potential competitive position in the market place

DEVELOP operations capabilities through learning

MARKET STRATEGY

The operations resources and processes

DIRECT performance

Getting the fit right

Intended competitive position in the market place

Continuous improvement at a strategic level

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

Market requirements

Operations resource capability

DIRECT getting the fit right

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Directing improvement is a cycle of comparing targets with performance


Performance Operations resources and processes

DIRECT
Targets

Intended market position

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Broad strategic measures

Overall strategic objectives

Functional strategic measures, e.g. Composite performance measures, e.g. Generic operations performance measures, e.g. Detailed performance measures, e.g.

Market strategic objectives Customer Satisfaction Dependability Mean time between failures Lateness complaints

Operations strategic objectives Agility

Financial strategic objectives Resilience

Quality

Speed Customer query time Order leadtime Throughput time

Flexibility Time to market Product range

Cost Transaction costs Labour productivity Machine efficiency

Defects per unit Level of customer complaints Scrap level

Performance targets can involve different levels of aggregation

Amity Business School High strategic relevance and aggregation

Broad strategic measures

Functional strategic measures


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

Detailed performance measures

Performance targets can involve different levels of aggregation

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Different standards of comparison give different messages


100 90 80 70 60 50 40 X X X X Time Performance by historical standards is GOOD X Last years average performance = 60% X Actual performance = 83%

Amity Business School

Different standards of comparison give different messages


100
90 80 70 60 50 X X X X Time Performance by historical standards is GOOD Performance against improvement goal is POOR X Last years average performance = 60% X

Improvement goal Actual performance

= 95% = 83%

40

Amity Business School

Different standards of comparison give different messages


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

Amity Business School

Different standards of comparison give different messages


100
90 80 70 60 50 40 X X X X Time
Performance by historical standards is GOOD Performance against improvement goal is POOR Performance against competitors is GOOD Absolute performance is POOR

X X

Absolute performance Improvement goal Actual performance Competitor performance

=100% = 95% = 83% = 75%

Last years average performance = 60%

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The importanceperformance matrix


GOOD F

1
2 3 E EXCESS? APPROPRIATE

Performance against competitors

4
5 6 IMPROVE D

A 7 8 URGENT ACTION 9 8 7 6 5 4 3 2 1

BAD

C
LOW

Importance for customers

HIGH

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GOOD

1 2 3 4 5 6 7 8 9 Price/Cost Volume flexibility

Delivery

Performance against competitors

Drop quote

Window quote Distribution

Xquality X X

Documentation X service Delivery flexibility

Order/dispatch X quality

Xlead-time
3 2
1

Enquiry

BAD

LOW

Importance for customers

HIGH

The importanceperformance matrix for a 3PLs overnight temperature-controlled service

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Cost Flexibility Speed Dependability Quality

Quality Quality + dependability Quality + dependability + speed Quality + dependability + speed + flexibility Quality + dependability + speed + flexibility + cost The sand cone model of improvement; cost reduction relies on a cumulative foundation of improvement in the other performance objectives

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Key Indicators
All staff are able to explain the operations strategic objectives

Individuals and groups use the strategic objectives to focus improvement activity
All proposed changes are assessed against strategic objectives

All improvement is monitored and measured against strategic objectives

DIRECT getting the fit right

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Operations capabilities

Knowledge

DEVELOP

Operations resources and processes

Developing operations capabilities is encouraged by a cycle of attempting to control processes which enhances process knowledge which, in turn, makes control easier

Control

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How they are able to learn DEVELOP through learning


It isnt just a matter of being given the right resources.
Operations with the same resources will not all give the same performance.

So what makes the difference?

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Systematic learning
You cant learn about a process when its out of control. If things are in control you notice changes you can investigate them

you can identify root causes


you can put things right and improve the process and learn more about it

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Learning

Process Knowledge Process Control

Process control starts the learning which develops process knowledge

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

Term

Knowledge
None

Typical form of knowledge


Nowhere Tacit Written Written and in hardware Hardware and operating manual Empirical equations Scientific models

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

Full

DEVELOP through learning

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Enhanced supplier relationships Understanding of process inputs Better products and services

Operations capabilities Knowledge

Understanding process limits

DEVELOP

Retain best staff

Staff job satisfaction

Control

Enhanced quality

Customer loyalty

Higher process efficiency

Operations resources and processes

Less costly flexibility

Lower costs

Wide product/service range

Process control may be one of the most operational of tasks, but it can bring strategic benefit

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Key Indicators Learning is made explicit, What have you learned at work today? Process knowledge is seen as a key operations objective Individuals and groups share their learning Individuals seek out opportunities to learn actively and experiment Learning is captured and debated Designated individuals are responsible for learning from other operations

Building on learning

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In everyday life we all switch roles How we see our role shapes how we behave and interact with others So critical to success operations strategy is changing how operations management see themselves and are seen by others The key issues is What should we expect from operations management?

DEPLOY the contribution and role of operations

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

Market potential

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Redefining industry expectations

Increasing strategic impact

STAGE 4 Give an operations Advantage

Clearly the best in the industry As good as competitors Holding the organisation back STAGE 1 Correct the worst problems Internally neutral STAGE 2 Adopt best practice

STAGE 3 Link strategy with operations

Externally neutral

Internally supportive

Externally supportive

Increasing operations capabilities

The four- stage model of operations contribution

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Contribution and role


Key Indicators Staff cooperate and contribute in areas other than their own Staff understand their role in the internal and external supply chain The concept of internal supplier development is established Staff have visited and talked with their internal and external customers Staff are capable of making a contribution to organisational levels above their own

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Financial performance measures To achieve strategic impact, how should we be viewed by shareholders? Internal process performance measures To achieve strategic impact, what aspects of performance should business process excel at?
Overall strategic objectives

Customer performance measures To achieve strategic impact, how should we be viewed by customers?

Learning and growth performance measures To achieve strategic impact, how will we build capabilities over time?

The measures used in the balanced scorecard

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100

Unit cost (cents)

10

1
10,000 100,000 1,000,000 10,000,000

100,000,00 0

Cumulative volume of vouchers processed Log-log experience curve for a voucher processing centre