Why is Operations
Management important?
Nigel Slack – Warwick Business School
Operations Management concerns all types of
organisation
Nigel Slack – Warwick Business School
Operations management concerns all types of
organisation
Manufacturing added value as a percentage of GDP
30%
26%
22%
16%
China
Brazil
22%
13%
USA
Malaysia Romania Germany
11%
11%
UK
France
Source: World Bank
Nigel Slack – Warwick Business School
From ‘production’ to ‘operations’ to ‘process’ to
process management and management?
Non-operations
processes
Production
Operations processes manage ment
Manufacturing
organizations
Process
management
Operations
management
Service organizations
Nigel Slack – Warwick Business School
Operations management is fashionable!
The consultancy services market - % of world
revenues of 40 largest consultancy firms
Financial
6
Organizational
design
11
Marketing/sales
2
Operations and process
management
31
Benefits/Actuarial
16
IT management
17
Corporate
management
17
Nigel Slack – Warwick Business School
What we should expect from operations
Capabilities for
future innovation
Process learning
Lower
costs
Process
efficiency
Lower environmental
impact
Less waste
Why operations
excellence?
Reduced errors,
better resilience
Lower ‘operational’ risk
Better
service
Secure
revenue
Higher capacity
utilisation
Lower capital
requirements
Nigel Slack – Warwick Business School
Principles versus solutions
As far as operations excellence is concerned............
Principles are generic
Solutions are not ......
....they depend on circumstances
The task is to build the principles on which operations and
processes can be developed
Nigel Slack – Warwick Business School
Principles versus solutions
Overarching concepts
Eg. Lean, Supply networks, BPR, Project mgt. etc
From examples,
theory,
research, etc.
Practitionerbased methods
and others
Principles + Tools = Solutions
(Used in context)
What’s specific
about the
circumstances?
‘Over to you!’
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management has an environmental impact
Operations management can be applied to the resources and
processes in any function
Operations management applies to the whole supply
network
Operations management is the driver of improvement
Operations management has to exploit new technologies
Nigel Slack – Warwick Business School
The four perspectives on any Operations strategy
Top - down
Operations
management
should interpret
higher level
management
Resources
Operations
management should
manage resources
appropriately
Customer
requirements
Operations
strategy
Operations
management should
satisfy its internal and
external customers
Operations
management
should learn
from day-to-day
experiences
Bottom - up
Nigel Slack – Warwick Business School
Operations management as an ‘operating model’
Business
management
The business
model
Functional strategies
Marketing
strategy
Operations
strategy
Finance
strategy
Technology
strategy
Operational Operational Operational Operational
Technology
Marketing Operations
Finance
….sets the
overall
purpose and
objectives
for……
…which
defines how
the business
model will be
achieved
The operating
model
Nigel Slack – Warwick Business School
Giordano
Relatively easy to imitate………..
Short-term operations capability
Nigel Slack – Warwick Business School
The Flextronics Industrial park Guadalajara Mexico
More difficult to imitate…………..
Medium-term operations capability
Nigel Slack – Warwick Business School
South America’s second
biggest Brewery
South African base… spreads north
Expands through Europe and Asia
How will it cope in developed markets?
Almost impossible to imitate…………..
Long-term operations capability
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management has an environmental impact
Operations management can be applied to the resources and
processes in any function
Operations management applies to the whole supply
network
Operations management is the driver of improvement
Operations management has to exploit new technologies
Nigel Slack – Warwick Business School
Societal pressure +
reputational risk defining
minimum ethical
standards
The efficient frontier
between ethical and
financial performance
Repositioning
between ethical
and financial
performance
Financial
performance
Financial performance
To what extent do ethical and financial performance
trade-off?
Stockholder
expectations defining
minimum financial
standards
Ethical performance
Ethical performance
Changing the balance (trade-off)
between ethical and financial
performance
Simultaneously improving both
ethical and financial
performance , partly because
extreme positions on either are
becoming less acceptable
Nigel Slack – Warwick Business School
The ‘triple bottom line’ – Holcim cement
The triple bottom line.......
•Profit
•Planet
•People
•Holcim one of the world’s leading manufacturers and distributors of cement
•Production sites in over 70 countries.
•Cement manufacture has a significant impact on almost every aspect of
sustainability and social responsibility.
•We place sustainable development at the core of our business strategy
which aims to enhance value, and safeguards our reputation
•Holcim’s strategy and their approach to value creation attempts to integrate
economic, environmental and social impacts.
•Holcim have established a set of Group-wide CSR performance targets.
•But CSR related performance measurement should not be separate from the
more conventional business systems.
Nigel Slack – Warwick Business School
Eliminating
waste can also
save costs
Example –
Marmite (a
popular spread
in the UK)
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management has an environmental impact
Operations management can be applied to the resources and
processes in any function
Operations management applies to the whole supply
network
Operations management is the driver of improvement
Operations management has to exploit new technologies
Nigel Slack – Warwick Business School
Operations management as functional leadership –
The ‘C-suite agenda’
Technical expertise
Leadership expertise
Being the trusted
advisor to the business
and representing your
function’s perspective
Contributing to the
leadership team and
aligning business and
functional visions
Process expertise
Delivering your
expertise through your
service processes
Nigel Slack – Warwick Business School
The four perspectives on any Functional strategy
Top - down
Functional
management
should interpret
higher level
management
Resources
Functional
management should
manage resources
appropriately
Customer
requirements
Functional
management
Functional
management should
satisfy its internal and
external customers
Functional
management
should learn
from day-to-day
experiences
Bottom - up
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management has an environmental impact
Operations management can be applied to the resources and
processes in any function
Operations management applies to the whole supply
network
Operations management is the driver of improvement
Operations management has to exploit new technologies
Nigel Slack – Warwick Business School
The Zara Supply Chain
ZARA
Nigel Slack – Warwick Business School
ZARA Located at La Coruna
An unlikely place for the fastest growing apparel company
in the world!
Nigel Slack – Warwick Business School
Zara keeps less inventory than its peers
35 %
30 .6 %
30 %
Inventory as % of Annual Sales
25 %
20 %
16 .3 %
14 .6 %
15 %
12 .6 %
1 0. 2%
9. 4%
M a ta la n
Indit ex
10 %
5%
0%
V o gele
B e net t on
H&M
G ap
Zara is the largest division of Inditex (78% of sales)
Nigel Slack – Warwick Business School
ZARA
Almost No Advertising, Little Markdowns
Zara
La Caruna, Spain
10,000 New Items/Year
(~300,000 SKUs)
Retail
Retail
Shops
Retail
Shops
Retail
Shops
Shops
Replenishes >1800 Shops in > 54 Countries Twice Per Week
Makes half of its clothes, 40% of its fabrics,
Designs new collections in 4-5 weeks
Produces in one week
“Catwalk to rack in as little as 2 weeks”
Nigel Slack – Warwick Business School
All shipments from a Central Distribution Centre
A fancy, huge, expensive warehouse!
Why expand it when it is currently at 50% capacity
utilization?
Nigel Slack – Warwick Business School
Zara’s “Closed Loop”
Design
Retail
Produce
Distribute
Zara closely controls the entire supply cycle
much better than its peers
Nigel Slack – Warwick Business School
The Operations Management triangle
X
time
Process throughput
length of queue
Average
(or inventory)
High
High utilization but
long throughput times
X
Low utilization but
short throughput times
X
Reduce process
variability
X
Low
0
20%
X
40%
X
60%
80%
X
100%
Capacity Utilization
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management has an environmental impact
Operations management can be applied to the resources and
processes in any function
Operations management applies to the whole supply
network
Operations management is the driver of improvement
Operations management has to exploit new technologies
Nigel Slack – Warwick Business School
Some of the elements that go to make up improvement
approaches
Emphasis on
rapid change
Integrate
data
Emphasis on
solutions what to do
Radical
rethinking
Visibility
across data
End-to-end
Bring doers and processes
controllers
together
Process based
analysis
Synchronised
flow
Waste
identification
Customer
relationships
Customer
centric
Emphasis on
education
Include all
people
Evidence-based
decisions
Emphasis on
methods how to do it
Reduce
variation Systems and
procedures
Businesswide
Perfection Improvement
cycles
is the goal
Emphasis on
gradual change
Nigel Slack – Warwick Business School
Some of the elements that go to make up improvement
approaches
Emphasis on
rapid change
Integrate
data
Emphasis on
solutions what to do
Radical
rethinking
Visibility
across data
End-to-end
Bring doers and processes
controllers
together
Process based
analysis
Synchronised
flow
Waste
identification
Lean
Customer
relationships
Customer
centric
Emphasis on
education
Include all
people
BPR
Six Sigma
Evidence-based
decisions
Emphasis on
methods how to do it
Reduce
variation Systems and
procedures
Businesswide
Perfection Improvement
cycles
is the goal
TQM
Emphasis on
gradual change
Nigel Slack – Warwick Business School
Notwithstanding some common elements
improvement approaches do differ
Emphasis on
rapid change
BPR
Six
Sigma
Emphasis on
solutions - what
to do
Lean
Emphasis on
methods - how
to do it
CI
Emphasis on
gradual change
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management has an environmental impact
Operations management can be applied to the resources and
processes in any function
Operations management applies to the whole supply
network
Operations management is the driver of improvement
Operations management has to exploit new technologies
Nigel Slack – Warwick Business School
Technology– Impacts on OM development
3D Printing
Technology makes everything uncertain…. ..new operations
issues emerge almost overnight
Nigel Slack – Warwick Business School
Technology– Impacts on OM development
Supply networks are changing faster …… and its changing the
context of operations
Nigel Slack – Warwick Business School
The Recorded Music
Business Supply Network
from the Classic 1940s1950s Period
eg. Frank Sinatra
Strong vertical
integration
Arranger
Producer
Engineer
Recording
studio
Songwriter
Singer
Instrumentalists
Disk/tape
manufacturer
Physical
distribution
Retailer
Consumer
Nigel Slack – Warwick Business School
Music production now largely
in the control of the artists.
Music distribution mixed.
Arranger
Engineer
Singer
Producer
Artist’s
download
Recording
studio
Conventional
CDs
Songwriter
Instrumentalists
Consumer
On-line
retailers
Nigel Slack – Warwick Business School