Introduction to Operations
Management
Chapter 1 and 2
Operations Management
Slack and el
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management defined
Operations management is the activity
of managing the resources which are
devoted to the production and delivery of
products and services.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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 strategy
17
Corporate strategy
17
The operations function is fashionable!
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Back office operation
in a bank
Retail operation
Kitchen unit
manufacturing
operation
They are
all
operations
Take-out / restaurant
operation
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The best way to start understanding the nature of
‘operations’ is to look around you
Everything you can see around you (except the flesh and
blood) has been processed by an operation
Every service you consumed today (radio station, bus
service, lecture, etc.) has also been produced by an
operation
Operations Managers create everything you buy, sit on,
wear, eat, throw at people, and throw away
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A general model of
operations
management
Transformed
resources …
The operation’s
strategic
objectives
Operations
strategy
Operations
strategy
Materials
Information
Customers
Improvement
Design
Input
resources
Transforming
resources …
The operation’s
competitive role
and position
Operations
management
Output
products
and
services
Customers
Planning
and
control
Facilities
Staff
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
• Transformed resources – the resources
that are treated, transformed or
converted in some way
– Materials; information and customers
• Transforming resources – the resources
that act upon the transformed resources
– Facilities; staff
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management at IKEA
Design elegant
products which can be
flat-packed efficiently
Design a store layout
which gives smooth
and effective flow
Site stores of an
appropriate size in
the most effective
locations
Maintain cleanliness
and safety of storage
area
Ensure that the jobs of
all staff encourage
their contribution to
business success
Continually examine
and improve
operations practice
Monitor and enhance
quality of service to
customers
Arrange for fast
replenishment of
products
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Prêt a Manger
‘High-end’ sandwich and snack retailer
Uses only ‘wholesome’ ingredients
All shops have own kitchens, which make fresh
sandwiches every day
Fresh ingredients delivered early every morning
The same staff who serve you at lunch made the
sandwiches that morning
“We don’t work nights, we wear jeans, we party …”
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The three basic functions at Prêt a Manger
Nutritional ‘mechanical’ and
aesthetic design of the
sandwiches and snacks
Product /
Service
Development
Marketing
Promotional
activities,
market
research, etc.
Operations
Design, location
and management of
stores and in-store
processes and the
network that supplies
them
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
All operations are transformation processes …
Inputs
Transformation process
Outputs
that transform inputs …
into outputs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Some inputs are transformed resources
Some inputs are transforming resources
Transformed
resources …
Materials
Information
Customers
Input
resources
Transformation process
Output
products
and
services
Customers
Transforming
resources …
Facilities
Staff
Outputs are products and services that add
value for customers
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Transformation Process
• Materials processing
– Transform physical properties
– Change location – parcel delivery
– Change possession – retail operations
– Storage - warehouse
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
• Information Processing
– Transform informational properties –
Accountants,
– Possession of information – libraries;
archives
– Location of information telecommunications
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
• Customer Processing –
– Change physical properties – hairdressers
– Accommodation – hotels
– Psychological state – music, theatre
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Outputs from transformation process
• Tangible - goods/intangible -services
• Storability – goods storable; services not storable
• Transportability – goods can be transported;
services – produced simultaneously
• Customer contact – low contract – good production;
high contact – customer and operation
• Quality – goods – judgment based on final product;
services – both outcome of service, and the way it
was produced.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations can be analyzed at three levels
Flow between operations
The level of the supply network
Flow between processes
The level of the operation
The level of the process
Flow between resources
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Flow between operations
Operations management is
concerned with the flow of
transformed resources between
operations, processes and
transforming resources, where …
Flow between processes
External operations interact
with internal processes to form
the external supply network
Flow between resources
Processes form an internal
‘supply network’ and become
each other’s customers and
suppliers
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Three levels of operations management analysis: the supply
network, the operation, and the process
The supply network – Flow between operations
Studios
Casting
agency
Creative
agency
Promotion
agency
Broadcasting
company
The programme and
video supply network
Programme /
video maker
The operation – Flow between processes
The programme and
video operation
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Three levels of operations management analysis: the supply
network, the operation, and the process
The programme and
video supply network
Programme /
video maker
The operation – Flow between processes
The programme and
video operation
Engineering
Marketing
and sales
Finance and
accounting
Production
unit
Post
production
Set and props
manufacture
The ‘Set and props
manufacturing’
process
Processes – Flow between resources (people and facilities)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Three levels of operations management analysis: the supply
network, the operation, and the process
Programme /
video maker
The programme and
video supply network
The programme and
video operation
Set and props
manufacture
Set
construction
The ‘Set and props
manufacturing’
process
Set
design
Set
finishing
Props
acquisition
Processes – Flow between resources (people and facilities)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Three levels of operations management analysis: the supply
network, the operation, and the process
The supply network – Flow between operations
Studios
Promotion
agency
Broadcasting
Casting
company
agency
Programme /
The programme and
video supply network
video maker
Creative
agency
The operation – Flow between processes
The programme and
video operation
Engineering
Marketing
and sales
The ‘Set and props
manufacturing’
process
Finance and
accounting
Set and props
manufacture
Production
unit
Post
production
Set
construction
Set
design
Set
finishing
Props
acquisition
Processes – Flow between resources (people and facilities)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Differences within sectors are often greater than the
differences between sectors
Financial services
An account
management centre at
a large retail bank
Financial analyst
advising a client at an
investment bank
Furniture manufacturing
Mass production of
kitchen units
Craft production of
reproduction
‘antique’ furniture
Hotels
Value-for-money
hotel
Lobby of an
international
luxury hotel
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Low
Volume
High
High
High
Variety
Low
High
Variation in
demand
Low
High
Visibility
Low
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Implications
Low
Volume
High
High
High repeatability
Specialization
Capital intensive
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Flexible
Complex
Match customer needs
High unit costs
Implications
High
Variety
Low
Well defined
Routine
Standardized
Regular
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Implications
High
Variation in
demand
Low
Stable
Routine
Predictable
High utilization
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Implications
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit costs
Implications
High
Visibility
Low
Time lag between
production and
consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Implications
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Flexible
Complex
Match customer needs
High unit costs
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit costs
A Typology of Operations
Low
High
High
High
Volume
Variety
Variation in
demand
Visibility
Implications
High
High
High repeatability
Specialization
Capital intensive
Low unit costs
Low
Well defined
Routine
Standardized
Regular
Low unit costs
Low
Stable
Routine
Predictable
High utilization
Low unit costs
Low
Time lag between
production and
consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Examples
Generator Factory
Gourmet Restaurant
Pioneering surgery
Tax service
University tutorials
Corporate tax advice
Department store
Electricity Utility
Financial Audits
Emergency service
City metro service
A Typology of Operations
Low
High
High
Volume
Variety
Variation in
demand
High
High
Low
Low
Most health care
Dentist
Music teacher
High
Visibility
Low
Examples
Television Factory
Fast Food Restaurant
Routine Surgery
Mass rapid transport
University lectures
Financial audits
Jeans shop
Bread bakery
Consultancy advice
Shopping mall security
Trucking operation
Most manufacturing
Prepackaged sandwich
maker
Dental Technician
Distance learning
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
4 V’s profile of two operations
Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Visibility
Low
Mwagusi
Safari Lodge
Formule 1
Hotel
Important to understand how different operations are positioned
on the 4 V’s.
Is their position where they want to be?
Do they understand the strategic implications?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
• Formula 1 – arranged operations to
minimize cost
• Island resort hotel – high levels of
service but provides them at a high cost
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Some interfunctional relationships between the operations
function and other core and support functions
Engineering/
technical
function
Understanding of the
capabilities and
constraints of the
operations process
Product/service
development
function
Analysis of new
technology options Understanding of
process technology
needs
New product and
Accounting
service ideas
Provision
and finance
Understanding of the
of relevant
function
capabilities and
data
Operations
constraints of the
Financial analysis
operations
process
function
for performance
Market
and decisions
requirements
Understanding of human
resource needs
Recruitment
development
and training
Human
resources
function
Understanding Provision of systems for
design, planning and
of
control,
and improvement
infrastructural
and system
needs
Marketing
function
Information
technology
(IT) function
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Separate operations processes
Function 3
Function 4
Customer needs fulfilled
Function 2
Business processes
Customer needs
Function 1
Conventionally, organizational boundaries are drawn around functional processes
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Separate operations processes
Function 3
Function 4
Customer needs fulfilled
Function 2
Business processes
Customer needs
Function 1
BPR advocates reorganizing (reengineering) micro operations to reflect the natural
customer-focused business processes
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Marketing
and Sales
Set and
props
manufacture
Engineering
Production
units
Finance
and
costing
Promotional and advertising contracts
Technical support contracts
Music videos
Example of how each micro operation contributes
to the business processes which fulfil external needs
Customer needs fulfilled
Customer needs
Programme production
Business processes
Preparing quotations
Size of each micro operation’s
continuation to each process
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The Role of the operations
function
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
business strategy
Operations supports
business strategy
Operations drives
business strategy
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The four-stage model of Operations contribution
STAGE 4
Give an
operations
advantage
Increasing strategic impact
Redefining industry
expectations
STAGE 3
Link strategy
with operations
Clearly the best in
the industry
STAGE 2
Adopt best
practice
As good as the
competitors
Holding the
organization back
STAGE 1
Correct the
worst
problems
Internally
neutral
Externally
neutral
Internally
supportive
Externally
supportive
Increasing operations capabilities
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Internal neutrality
• Poorest level of contribution
• Operation is considered a necessary
evil
• Inward looking and reactive
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
External neutrality
• Comparing itself with similar companies
or organisations in the outside market
• Take the best ideas and norms of
performance from the rest of its industry
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Internally supportive
• Reached the first division in their market
• May not be better than competitors but
they are broadly up with the best
• Developing appropriate strategies while
at the same time they are taking on the
role of implementers of strategy
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Externally supportive
• Sees the operation function as a
foundation for its future competitive
success
• Looks to the long term
• Forecasts likely changes in markets and
supply and develops operation based
strategies allowing it to compete in
future market conditions.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Broad strategic objectives for an operation
applied to stakeholder groups
Society
Increase employment
Enhance community well-being
Produce sustainable products
Ensure clean environment
Suppliers
Continue business
Develop supplier
capability
Provide transparent
information
Shareholders
Economic value from
investment
Ethical value from
investment
Customers
Appropriate product or
service specification
Consistent quality
Fast delivery
Dependable delivery
Acceptable price
Employees
Continuous employment
Fair pay
Good working conditions
Personal development
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The Operations function can provide a competitive advantage
through its performance at the five competitive objectives
Quality
Being RIGHT
Speed
Being FAST
Dependability
Flexibility
Cost
Being ON TIME
Being ABLE TO CHANGE
Being PRODUCTIVE
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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)?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The benefits of excelling
Minimum price, highest value
Cost
Quick
delivery
Minimum cost,
maximum value
Speed
Fast
throughput
Quality
Dependability
Reliable
operation
Error-free
processes
Error-free
products and
services
Dependable
delivery
Ability to
change
Flexibility
Frequent new
products, maximum
choice
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Quality
External and
internal benefits
Cost
Dependability
Speed
Quality
Flexibility
On-specification
products and
services
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Speed
External and
internal benefits
Cost
Short delivery
lead-time
Dependability
Speed
Quality
Flexibility
On-specification
products and
services
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What does Dependability mean in …
… an automobile plant?
On-time delivery of vehicles to dealers
On-time delivery of spares to service centres
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Dependability
External and
internal benefits
Cost
Short delivery
lead-time
Dependability
Speed
Quality
Reliable
delivery
Flexibility
On-specification
products and
services
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Flexibility
External and
internal benefits
Cost
Short delivery
lead-time
Dependability
Speed
Quality
On-specification
products and
services
Flexibility
Reliable
delivery
Frequent new
products/services
Wide range
Volume and delivery
changes
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What does Cost mean in …
… a hospital?
Bought-in
materials
and
services
Technology
and facilities
costs
Staff
costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What does Cost mean in …
… an automobile plant?
Bought-in
materials
and
services
Technology
and facilities
costs
Staff
costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What does Cost mean in …
… a bus company?
Bought-in
materials
and
services
Technology
and facilities
costs
Staff
costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What does Cost mean in …
… a supermarket?
Bought-in
materials
and
services
Technology
and facilities
costs
Staff
costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Cost
External and
internal benefits
Low price, high
margin, or both
Cost
Short delivery
lead-time
Dependability
Speed
Quality
On-specification
products and
services
Flexibility
Reliable
delivery
Frequent new
products/services
Wide range
Volume and delivery
changes
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Polar diagrams for a taxi service versus a bus service
Taxi
service
Speed
Cost
Bus
service
Dependability
Quality
Flexibility
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Polar diagrams for a proposed police performance
method
Required performance
Actual
performance
Reassurance
Efficiency
Working with
criminal justice
agencies
Crime
reduction
Crime
detection
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Polar diagrams for newspaper collection and general recycling
services
Newspaper collection
service
General recycling
service
Cost
Dependability
Speed
Quality
Flexibility
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Operations management
The activities, decisions and responsibilities of managing
the production and delivery of products and services.
Operations function
The arrangement of resources that are devoted to the
production and delivery of products and services.
Operations managers
The staff of the organization who have particular
responsibility for managing some or all of the resources
which comprise the operation’s function.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Support functions
The functions that facilitate the working of the core
functions, for example, accounting and finance, human
resources, etc.
Broad definition of operations
All the activities necessary for the fulfilment of customer
requests.
Transformation process model
Model that describes operations in terms of their input
resources, transforming processes and outputs of goods
and services.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Transformed resources
The resources that are treated, transformed or converted in a
process, usually a mixture of materials, information and
customers.
Input resources
The transforming and transformed resources that form the input
to operations.
Transforming resources
The resources that act upon the transformed resources, usually
classified as facilities (the buildings, equipment and plant of
an operation) and staff (the people who operate, maintain and
manage the operation).
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Tangibility
The main characteristic that distinguishes products (usually
tangible) from services (usually intangible).
Facilitating services
Services that are produced by an operation to support its
products.
Facilitating products
Products that are produced by an operation to support its
services.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Processes
An arrangement of resources that produces some mixture
of goods and services.
Supply network
The network of supplier and customer operations that have
relationships with an operation.
Internal supplier
Processes or individuals within an operation that supply
products or services to other processes or individuals
within the operation.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Internal customer
Processes or individuals within an operation that are the
customers for other internal processes or individuals’
outputs.
Hierarchy of operations
The idea that all operations processes are made up of
smaller operations processes.
‘End-to-end’ business processes
Processes that totally fulfil a defined external customer
need.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Business process reengineering
The philosophy that recommends the redesign of
processes to fulfil defined external customer needs.
Volume
The level or rate of output from a process, a key
characteristic that determines process behaviour.
Variety
The range of different products and services produced by a
process, a key characteristic that determines process
behaviour.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Systemization
The extent to which standard procedures are made explicit.
Standardization
The degree to which processes, products or services are
prevented from varying over time.
Customer contact skills
The skills and knowledge that operations staff need to meet
customer expectations.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Front-office
The high-visibility part of an operation.
Back-office
The low-visibility part of an operation.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007