Chapter 2 Strategic Role

Chapter 2
The strategic role and objectives

of operations
Source: Honda Motor Company
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 Operations Operations
implementer as as driver
supporter
Operations
Strategy Strategy
Operations Operations
Strategy
Operations Operations supports Operations
implements strategy strategy drives strategy
The strategic role of the Operations function
The 3 key attributes
Operations contribution
of Operations
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
Redefining industry STAGE 4

expectations Give an
operations
advantage
Increasing strategic impact
STAGE 3
Clearly the best in Link strategy
the industry with operations
STAGE 2
As good as the Adopt best
competitors practice
STAGE 1
Holding the Correct the
organization back worst
problems
Internally Externally Internally Externally
neutral neutral supportive supportive
Increasing operations capabilities
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 Appropriate product or
Develop supplier service specification
capability Consistent quality
Provide transparent Fast delivery
information Dependable delivery
Acceptable price
Shareholders Employees
Economic value from Continuous employment
investment Fair pay
Ethical value from Good working conditions
investment Personal development
The Operations function can provide a competitive advantage
through its performance at the five competitive objectives
Quality Being RIGHT
Speed Being FAST
Dependability Being ON TIME
Flexibility Being ABLE TO CHANGE
Cost Being PRODUCTIVE
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 Dependable
delivery delivery
Minimum cost,
Speed maximum value Dependability
Fast Reliable
throughput operation
Error-free Ability to
processes change
Quality Flexibility
Error-free Frequent new
products and products, maximum
services choice
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
… an automobile plant?
All assembly is to specification
Product is reliable
All parts are made to specification
The product is attractive and blemish-free
… a bus company?
The buses are clean and tidy
The buses are quiet and fume-free
The timetable is accurate and user-friendly

… a supermarket?
The store is clean and tidy
Décor is appropriate and attractive
Goods are in good condition

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
Quality
External and
internal benefits
Cost
Speed Depend-
ability
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
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
… a bus company?
The time between a customer setting out on the

journey and reaching his or her destination is kept
to a minimum
… 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
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
Speed
External and
internal benefits
Cost
Short delivery
lead-time
Speed Depend-
ability
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
On-time delivery of vehicles to dealers
On-time delivery of spares to service centres
… a bus company?
Keeping to the published timetable at all points on

the route
Constant availability of seats for passengers
… 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
It prevents late delivery slowing down throughput speed
It prevents lateness causing disruption and wasted time and effort,

therefore saving cost
Dependability
External and
internal benefits
Cost
Short delivery
Reliable
lead-time
delivery
Speed Depend-
ability
Quality 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
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
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
… 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
… 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
Flexibility
External and
internal benefits
Cost
Short delivery
Reliable
lead-time
delivery
Speed Depend-
ability
Quality Flexibility
Frequent new
products/services
On-specification Wide range
products and Volume and delivery
services changes
What does Cost mean in …
… a hospital?
Technology
Bought-in and facilities
materials costs
and
services
Staff
costs
Bought-in Technology
materials and facilities
and costs
services
Staff
costs
… a bus company?
Bought-in
materials Technology
and and facilities
services costs
Staff
costs
… a supermarket?
Technology
Bought-in and facilities
materials costs
and
services
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
4 V’s profile of two operations
Low Volume High
High Variety Low
High Variation Low
High Visibility Low

Four Star Budget Hotel
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?
Cost
External and Low price, high
internal benefits margin, or both
Cost
Short delivery
Reliable
lead-time
delivery
Speed Depend-
ability
Quality Flexibility
Frequent new
products/services
On-specification Wide range
products and Volume and delivery
services 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
Polar diagrams for a taxi service versus a bus service
Taxi Bus
service service
Cost
Speed Dependability
Quality Flexibility
Polar diagrams for a proposed police performance
method
Required performance
Actual
performance
Reassurance
Efficiency Crime
reduction
Crime
Working with detection
criminal justice
agencies
Polar Representation – Organisation D
Dependability
Cost Speed
Flexibility Quality
Polar Representation – Organisation E
(Mosaic tiles)
Dependability
Cost Speed
Flexibility Quality
Polar Representation – Organisation E
(Outside wall tiles)
Dependability
Cost Speed
Flexibility Quality
Polar Representation for all Organisations
Dependability
Org.
Org.
C
E
Cost Speed
Org. Org.
A B
Flexibility Org. Quality

D
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.
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.
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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Chapter 2 Strategic Role

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Chapter 2

The strategic role and objectives

Redefining industry STAGE 4

Increasing operations capabilities

Quality Being RIGHT

Speed Being FAST

Dependability Being ON TIME

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

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)?

Minimum price, highest value

Patients receive the most appropriate treatment

Treatment is carried out in the correct manner

Patients are consulted and kept informed

All assembly is to specification

The product is attractive and blemish-free

The buses are clean and tidy

The buses are quiet and fume-free

The timetable is accurate and user-friendly

The store is clean and tidy

Décor is appropriate and attractive

Goods are in good condition

Quality as the specification of

Quality as the conformance

Irrespective of a product or service’s specification quality, producing it so it

Externally – it enhances the product or service in the market, or at least

It prevents errors slowing down throughput speed

It prevents errors causing internal unreliability and low

It prevents errors causing wasted time and effort, therefore saving

The time between requiring treatment and receiving

The time for test results, X-rays, etc. to be returned

The time between dealers requesting a vehicle of a

The time to deliver spares to service centres is

The time between a customer setting out on the

The time for the total transaction of going to the

Speed again has different interpretations, externally and internally

Externally – it means the elapsed time between a customer asking for a

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

The proportion of appointments that are cancelled

Test results, X-rays, etc. are returned as promised

On-time delivery of vehicles to dealers

On-time delivery of spares to service centres

Keeping to the published timetable at all points on

Constant availability of seats for passengers

Predictable opening hours

Keeping to reasonable queuing times

Constant availability of parking

Externally – it enhances the product or service in the market, or at least

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,

Flexibility has several distinct meanings but is always associated with an

The products and services it brings to the market – Product/service

The volume of products and services it produces – Volume flexibility

The delivery time of its products and services – Delivery flexibility

Introducing new treatments

Providing a wide range of treatments

The ability to adjust the number of patients treated