The strategic role and objectives
of operations
Source: Honda Motor Company
What is the role of the Operations function?
Operations as
implementer
Operations
as
supporter
Operations
as driver
Operations
Strategy
Operations
Strategy
Operations
Strategy
Operations
implements strategy
Operations supports
strategy
Operations
drives strategy
1
The strategic role of the Operations function
The 3 key attributes
of Operations
Operations contribution
Implementing
Be dependable
Operationalize strategy
Explain practicalities
Supporting
Be appropriate
Understand strategy
Contribute to decisions
Driving
Be innovative
Provide foundation of strategy
Develop long-term capabilities
The four-stage model of Operations contribution
Increasing strategic impact
Redefining industry
expectations
Clearly the best in
the industry
As good as the
competitors
Holding the
organization back
re
In c
as
i ng
n
co
trib
o
u ti
no
fo
STAGE 2
Adopt best
practice
STAGE 1
Correct the
worst
problems
Internally
neutral
g
tin
en y
m
g
ple te
Im stra
Externally
neutral
ra
pe
ti o
ns
STAGE 3
Link strategy
with operations
STAGE 4
Give an
operations
advantage
ng
ivi y
Dr ateg
str
g
rtin
po egy
p
Su trat
s
Internally
supportive
Externally
supportive
Increasing operations capabilities
2
Broad strategic objectives for an operation
applied to stakeholder groups
Society
Increase employment
Enhance community well-being
Produce sustainable products
Ensure clean environment
Suppliers
Customers
Continue business
Develop supplier
capability
Provide transparent
information
Appropriate product or
service specification
Consistent quality
Fast delivery
Dependable delivery
Acceptable price
Shareholders
Employees
Economic value from
investment
Ethical value from
investment
Continuous employment
Fair pay
Good working conditions
Personal development
Quality
Being RIGHT
Speed
Being FAST
Dependability
Flexibility
Cost
Being ON TIME
Being ABLE TO CHANGE
Competitiveness
The Operations function can provide a competitive advantage
through its performance at the five competitive objectives
Being PRODUCTIVE
3
What do the terms quality, speed, dependability, flexibility
and cost mean in the context of operations?
Which enables you to do things cheaply (cost advantage)?
Which enables you to change what you do (flexibility advantage)?
Which enables you to do things quickly (speed advantage)?
Which enables you to do things on time (dependability advantage)?
Which enables you to do things right (quality advantage)?
The benefits of excelling
Minimum price, highest value
Cost
Quick
delivery
Minimum cost,
maximum value
Speed
Fast
throughput
Error-free
processes
Quality
Error-free
products and
services
Dependable
delivery
Dependability
Reliable
operation
Ability to
change
Flexibility
Frequent new
products, maximum
choice
4
What does Quality mean in …
… a hospital?
Patients receive the most appropriate treatment
Treatment is carried out in the correct manner
Patients are consulted and kept informed
Staff are courteous, friendly and helpful
What does Quality mean in …
… an automobile plant?
All assembly is to specification
Product is reliable
All parts are made to specification
The product is attractive and blemish-free
5
What does Quality mean in …
… a bus company?
The buses are clean and tidy
The buses are quiet and fume-free
The timetable is accurate and user-friendly
Staff are courteous, friendly and helpful
What does Quality mean in …
… a supermarket?
The store is clean and tidy
Décor is appropriate and attractive
Goods are in good condition
Staff are courteous, friendly and helpful
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Quality
‘Quality’ has several meanings. The two most common are …
Quality as the specification of
a product or service
e.g. Lower Hurst Farm
produces organic meat raised
exclusively on its own farm
Quality as the conformance
with which the product or
service is produced
e.g. Quick-service restaurants
like McDonald’s may buy less
expensive meat, but its
conformance must be high
Quality
Irrespective of a product or service’s specification quality, producing it so it
conforms to its specification consistently brings benefits to any operation
Externally – it enhances the product or service in the market, or at least
avoids customer complaints
Internally – it brings other benefits to the operation:
It prevents errors slowing down throughput speed
It prevents errors causing internal unreliability and low
dependability
It prevents errors causing wasted time and effort, therefore saving
cost
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Quality
External and
internal benefits
Cost
Dependability
Speed
Quality
Flexibility
On-specification
products and
services
What does Speed mean in …
… a hospital?
The time between requiring treatment and receiving
treatment is kept to a minimum
The time for test results, X-rays, etc. to be returned
is kept to a minimum
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What does Speed mean in …
… an automobile plant?
The time between dealers requesting a vehicle of a
particular specification and receiving it is minimized
The time to deliver spares to service centres is
minimized
What does Speed mean in …
… a bus company?
The time between a customer setting out on the
journey and reaching his or her destination is kept
to a minimum
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What does Speed mean in …
… a supermarket?
The time for the total transaction of going to the
supermarket, making the purchases and returning
is minimized
Goods are immediately available
Speed
Speed again has different interpretations, externally and internally
Externally – it means the elapsed time between a customer asking for a
product or service and getting it (in a satisfactory condition)
It often enhances the value of the product or service to customers
Internally – it brings other benefits to the operation:
It helps to overcome internal problems by maintaining dependability
It reduces the need to manage transformed resources as they pass
through the operation, therefore saving cost
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Speed
External and
internal benefits
Cost
Short delivery
lead-time
Dependability
Speed
Quality
Flexibility
On-specification
products and
services
What does Dependability mean in …
… a hospital?
The proportion of appointments that are cancelled
is kept to a minimum
Keeping appointment times
Test results, X-rays, etc. are returned as promised
11
What does Dependability mean in …
… an automobile plant?
On-time delivery of vehicles to dealers
On-time delivery of spares to service centres
What does Dependability mean in …
… a bus company?
Keeping to the published timetable at all points on
the route
Constant availability of seats for passengers
12
What does Dependability mean in …
… a supermarket?
Predictable opening hours
Proportion of goods out of stock kept to a minimum
Keeping to reasonable queuing times
Constant availability of parking
Dependability
Externally – it enhances the product or service in the market, or at least
avoids customer complaints
Internally – it brings other benefits to the operation:
It prevents late delivery slowing down throughput speed
It prevents lateness causing disruption and wasted time and effort,
therefore saving cost
13
Dependability
External and
internal benefits
Cost
Short delivery
lead-time
Dependability
Speed
Quality
Reliable
delivery
Flexibility
On-specification
products and
services
Flexibility
Flexibility has several distinct meanings but is always associated with an
operation’s ability to change
Change what ?
The products and services it brings to the market – Product/service
flexibility
The mix of products and services it produces at any one time – Mix
flexibility
The volume of products and services it produces – Volume flexibility
The delivery time of its products and services – Delivery flexibility
14
What does Flexibility mean in …
… a hospital?
Introducing new treatments
Providing a wide range of treatments
The ability to adjust the number of patients treated
The ability to reschedule appointments
What does Flexibility mean in …
… an automobile plant?
The introduction of new models
A wide range of options
The ability to adjust the number of vehicles
manufactured
The ability to reschedule manufacturing priorities
15
What does Flexibility mean in …
… a bus company?
The introduction of new routes and excursions
A large number of locations served
The ability to adjust the frequency of services
The ability to reschedule trips
What does Flexibility mean in …
… a supermarket?
The introduction of new lines
A wide range of goods stocked
The ability to adjust the number of customers served
The ability to get out-of-stock items
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Flexibility
External and
internal benefits
Cost
Short delivery
lead-time
Dependability
Speed
Quality
Flexibility
On-specification
products and
services
Reliable
delivery
Frequent new
products/services
Wide range
Volume and delivery
changes
What does Cost mean in …
… a hospital?
Bought-in
materials
and
services
Technology
and facilities
costs
Staff
costs
17
What does Cost mean in …
… an automobile plant?
Technology
and facilities
costs
Bought-in
materials
and
services
Staff
costs
What does Cost mean in …
… a bus company?
Bought-in
materials
and
services
Technology
and facilities
costs
Staff
costs
18
What does Cost mean in …
… a supermarket?
Bought-in
materials
and
services
Technology
and facilities
costs
Staff
costs
Cost
The cost of producing products and services is obviously
influenced by many factors such as input costs, but two
important sets are …
The 4 V’s: volume
variety
variation
visibility
The internal performance of the operation in terms of
quality
speed
dependability
flexibility
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Cost
External and
internal benefits
Low price, high
margin, or both
Cost
Short delivery
lead-time
Dependability
Speed
Quality
Flexibility
On-specification
products and
services
Reliable
delivery
Frequent new
products/services
Wide range
Volume and delivery
changes
Polar diagrams
Polar diagrams are used to indicate the relative
importance of each performance objective to an
operation or process
They can also be used to indicate the difference
between different products and services produced by an
operation or process
20
Polar diagrams for a taxi service versus a bus service
Taxi
service
Bus
service
Cost
Speed
Dependability
Quality
Flexibility
Polar diagrams for a proposed police performance
method
Required performance
Actual
performance
Reassurance
Efficiency
Working with
criminal justice
agencies
Crime
reduction
Crime
detection
21
Polar diagrams for newspaper collection and general recycling
services
Newspaper collection
service
General recycling
service
Cost
Dependability
Speed
Quality
Flexibility
Key Terms Test
The four-stage model of operations contribution
A model devised by Hayes and Wheelwright that categorizes the
degree to which operations management has a positive influence
on overall strategy.
Quality
There are many different approaches to defining this. We define it
as consistent conformance to customers’ expectations.
Speed
The elapsed time between customers requesting products or
services and receiving them.
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Key Terms Test
Dependability
Delivering, or making available, products or services when they
were promised to the customer.
Flexibility
The degree to which an operation’s process can change what it
does, how it is doing it, or when it is doing it.
Product/service flexibility
The operation’s ability to introduce new or modified products and
services.
Key Terms Test
Mix flexibility
The operation’s ability to produce a wide range of products and
services.
Volume flexibility
The operation’s ability to change its level of output or activity to
produce different quantities or volumes of products and services
over time.
Delivery flexibility
The operation’s ability to change the timing of the delivery of its
services or products.
23
Key Terms Test
Mass customization
The ability to produce products or services in high volume, yet vary
their specification to the needs of individual customers or types of
customer.
Agility
The ability of an operation to respond quickly and at low cost as
market requirements change.
Productivity
The ratio of what is produced by an operation or process to what is
required to produce it, that is, the output from the operation
divided by the input to the operation.
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