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T1: Operations and Process Management (Strategic impact of Ops and Process…
T1: Operations and Process Management
Core to a functioning organisation
Finance
Operations
Define: The management of the resources and processes that produce products and services (Slack)
Marketing
Define: An organisational function used to create and deliver value to consumers to satisfy their needs and wants, and also manage customer relationships.
HR
Define: The pattern of planned human resources deployments and activities intended to enable an organisation to achieve its goals.
Changing environment
Once 'Operations' Managers were responsible for production management
Now there is growth of the 'Supply Chain and Logistics' manager, who has a much wider perspective and strategic objective
KEY CONCEPT: The 4 Vs (Demand characteristics)
- p.21
What are they?
Variation
Across day, week, month, year, etc
Stable and reliable or highly fluctuating
Variation of demand levels
Volume
How people are managed
How quality is managed
Choice of technology
Unit cost
Visibility
How visible is the actual process to the customer?
Eg, hairdresser = high visibility
Eg, production of a can of soup = low visibility
Influences the need for customer service and preparation of customer facing aspects of the organisation
Lag time relates to the response time required, I.e. immediately as with high visibility or within a few days as with less visible processes. This impacts the ability to achieve high utilisation by being able to dictate when things happen.
Most organisations will have 'front office' processes and 'back office' processes.
Variety
E.g. low variety bus service v high variety taxi service - impacts on the cost per unit (km)
Product or service range
Implications on cost (Fig 1.9, p.23)
Low cost
Low variety
Low variation
High volume
Low visibility
High cost
Low volume
High variety
High variation
High visibility
What is a process?
Model
Output
Input
Transformation (intending to add value along the way)
#
Multiple processes make up the overreaching function of operations
Strategic impact of Ops and Process Management
Revenue - enhance orgs ability to generate revenue through increased customer satisfaction and increased flexibility
Investment - especially enhancing ROI and innovation
Cost - especially cost controls through efficiency
Capabilities - enhancing long-term competitive edge
Risk - through reduced failure rates and increased recovery (resilience)
The 'Process Perspective'
Levels p.12
Supply network
Characteristics
Wide - vast actual boundaries, artificial ones often decided on to focus attention (i.e. does the org take responsibility for the waste connected to it's products)
Ever changing - suppliers / customers changing all the time
Complex - multiple suppliers / customers
An arrangement of operations
Individual processes
Often grouped on a functional level, i.e. finance, HR, production, etc
Multitude of possible ways processes can be grouped, i.e. end-to-end customer needs is one option, example of this p. 17/18
An arrangement of resources
Operation
'Service-dominant logic' p.14
Service-dominant logic posits that all operations offer 'value propositions' through service
The service is the basis of every exchange and any physical goods are simply the distribution mechanism
The distinction between product and service providers is bluring
Also posits that the customer is always the co-creator of value
All operations are a mixture of both products and services
An arrangement of processes
One way of viewing, analysing and understanding an organisation, but not the only way and not to the exclusion of other ways.
Four broad operations activities
Designing
the operations products, services and processes (Ch3-6)
Planning and control process
delivery
(Ch7-11)
Directing
the overall strategy of the operation (Ch1-2)
Developing
process performance (Ch12-15)
Does the operation have a strategy?
Operations performance objectives
Flexibility
Speed
Cost
Quality
Dependability
Hayes and Wheelwright four-stage model (p.44)
Stage 3: Internally supportive
Aiming to be top of the industry in whatever metrics they value
Focus is on developing ops capabilities to excel in areas that achieve competitive advantage
Among the industry top performers but not the best
Stage 2: External neutrality
Aiming to be 'up to speed' and 'externally neutral'
Focuses on adopting 'best practices' gleaned from other orgs
Ops starts looking up, considering competitive environment
Stage 4: Externally supportive
Becomes the foundation of competitive advantage
True industry leader - influences its market and industry
Strategy-making, innovative and adaptable
Long-term, future focused, one-step ahead
Stage 1: Internal neutrality
Not considered a source of any drive/strategic initiative
Inward looking with little contribution to competitive advantage
All about keeping head down and avoiding mistakes
Very poor contribution to org
Models (p.50)
'Busines model' (the core)
'Operations model'
KPIs
Core financial structure
The nature of accountabilities for products, geographies, assets, etc
The structure of the organisation - sometimes expressed as capability areas rather than traditional functional roles
Systems and technologies
Process responsibilities and interactions
Key knowledge and competence
Integrated CSR - The Triple Bottom Line (p.42)
Environmental
Social
Economic
Strategic and operations considerations
Strategic techniques (p.52)
'Bottom-up'
'Top-down'
In the market (p.54)
'Order-winners'
High performance will add value
The key reasons in the purchase decision
'Qualifiers'
High achievement here doesn't add much
The minimum you must achieve to be considered by customers
PLC influence on performance objectives (p.56) see table
Growth stage
Maturity stage
Introduction stage
Decline stage
The Resource-based view - RBV (p.57)
Controls the resource while other views try to control the market, i.e. building barriers to entry
RBV rests on 'barriers to imitation'
Imperfectly mobile
Imperfectly imitable or substitutable
Scarce
Takes a resource view of competitive advantage
Improvement path (p.59)
'Trade-off'
Some view an unavoidable, so must be strategic and conscious
Some view as a challenge to be overcome through ambition and innovation
Efficient frontier
The current optimum efficiency between any two of the five performance objectives
Can be pushed out by:
Trade-offs - reduce one objective while increasing the other
Overcoming trade-offs to increase both and efficiency all together (development of car manufacturing is an example of this)
