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5.3 (Important for Assessment 1) - Coggle Diagram
5.3
(Important for Assessment 1)
Organisational and Operational Performance
Slack et al.
argues that operations are at the center of the organisation's performance.
Skinner
asserts that once strategic decisions and operations are on the same lane, improving operational performance will elevate the organisational performance
Operations manager must seek improving the operations constantly.
How to assess the operational performance?
Slack et al. (2016)
suggests that operation's performance could be evaluated at three levels of performance
objectives
:
Strategic
(Strategic Objectives)
Slack et al. (2016, p 47) mentioned five major ways Operations could positively contribute to deliver strategic objectives
Reducing capital investment
Reducing the risk of failure and errors
Increasing Revenue
Building capability and innovation
Lowering Costs
Operational
(Operational Objectives)
Dependability
reliably providing precisely what the customer wants at the time they want it
Flexibility
Flexibility allows organisations to adapt quickly
Speed
Speed is essential for meeting demands
Cost
costs in operations management, relates to the financial costs incurred in securing both transforming resources and transformed resources
Quality
Quality is conformance to customer's expectations and doing things right from the first time which reduces cost and time and increases dependability
Social
(Societal Objectives)
e.g. Becoming carbon neutral by 2030
CSR is on the rise and external stakeholders expectations are rising in terms of ESG aspects.
Concepts such as TBL, CSR and ESG aspects proves a point in the organisational performance domain beyond the single monetary bottom line and the organisational duty towards external and internal stakeholders
Story & Neves, (2015
) assert that CSR have become a strategic necessity rather than a moral obligation.
Ethical investing is
attracting attention increasingly
(Tett, 2019
)
Alves (2009)
expressed his concerns that CSR and TBL notions are being utilized for corporate marketing purposes rather than contribute to the society
All three levels of performance objectives are interrelated, feeding into each others
improving operational performance should drive up organisational performance
It is important to monitor and improve the performance at all three levels through effective decision making
Operational performance & Strategic Decision making
Hayes and Wheelwright (1984)
go further, suggesting that operations do not just deliver strategy; a high performing operation is a source of strategic advantage.
Hayes and Wheelwright (1984
) developed a four-stage model that can be used to evaluate the contribution of operations within an organisation
The stages can be arranged in a 2 x 2 matrix with the horizontal axis showing the contribution made by operations to the delivery of strategy and the vertical axis the focus of operations: internal or external.
Internally
Supportive (Stage 3)
Objective: to provide credible support for the business strategy
Neutral (Stage 1)
Objective: to minimise the negative impact of 'operations'
Externally
Neutral (Stage 2)
Objective: to help the business maintain parity with its competitors.
Supportive (Stage 4)
Objective: to provide a source of competitive advantage.
The Four Perspectives of
Operation Strategy
Bottom-up Perspective
What day-to-day experience and learning suggests operations should do
(determine strategy by operational excellence)
It may work against the business strategy
Market Requirement Perspective
What the market position requires operations to do
Operations strategy must understand what the market wants but not lose sight of internal capabilities and what the business is capable of doing effectively
Top-down Perspective
What the business wants operations to do (Operational strategy reflect the strategic objectives)
It may fail to reflect operational constraints
Operations Resources Perspective
What operations resources can do. build capabilities, knowledge (resources-based view)
operational performance is central to meeting strategic objectives, and operations strategy involves taking the long-term decisions that keep the two aligned
Operational Performance & Operational Decision Making
The Quality-Cost-Speed Trade-off
(The Iron Triangle)
Cost
If cost is to be reduced, quality might decrease or time might increase
Quality
Increasing quality might elevate cost and time
Time (Speed)
To speed supply, quality will be sacrificed or cost will increase
The Sandcone Model
Putting quality at the heart of operations
"Right first time" concept
Escaping the Iron Triangle Trilemma by focusing on Quality, a paradigm seen in Japan in the 60s and 70s by Honda and Toyota
This model focuses on building capabilities on top of each other in a cumulative manner