OPERATIONS AND SUPPLY CHAIN SUMMARY BY ASH
Chapter 2 Operations performance
Why is operations performance important?
- operations management is concerned with doing things better. Improvements, that
can potentially make operations the driver of improvements for the whole
organizations.
- Through the continual learning that can come from its improvement activities.
- Operations management is very much concerned with ‘process’ relationship between
process and outcome. Good operations management is the best way to produce good
products and services.
- Economic, social, political and technological environmental changes. Invest in new
technology, do suppliers treat their staff fairly, are we doing enough to reduce our
carbon footprint.
3 levels of operations performance:
1. Societal level – operations sustainability (people, planet, profit> 3BL approach).
Using the idea of the ‘triple bottom
line’
2. Strategic level – operations
strategic impact. How an operation
can contribute to the organization’s
strategy
3. Operational level – operations
performance objectives. Using the
5 operations ‘performance
objectives’
1) Quality (e.g. customer
complaints)
2) Speed (e.g. order lead time)
3) Dependability (e.g. mean time
between failures)
4) Flexibility (e.g. time to market)
5) Cost (e.g. transaction costs)
Societal level
Stakeholders are the people and groups who have a legitimate interest in the operation’s
activities. Some stakeholders are internal (operation’s employees), others are external
(society, community, companies shareholder).
Some of the stakeholder groups who would have an interest in how an organization’s
operations function performs but each group will have a different views of which aspect
of performance is important.
Corporate social responsibility (CSR) =
essentially about how business takes account
if its economic social and environmental
,impacts in the way it operates – maximizing the benefits and minimizing the downsides…
specifically, we see CSR as the voluntary actions that business can take, over interests
and the interests of wider society.
Another definition is: listening and responding to the needs of a company’s stakeholders.
This includes the requirements of sustainable development. We believe that building
good relationships with employees, suppliers and wider society is the best guarantee of
long-term success.
The triple bottom line (TBL/3BL) also known as people planet and profit
Organizations should measure themselves on the traditional economic profit that they
generate for their owners and on the impact their operations have on society and the
ecological impact on the environment. This triple bottom line approach is that of
‘sustainability’.
Sustainable business = one that creates an acceptable profit for its owners but minimizes
the damage to the environment and enhances the existence of the people with whom it
has contact. A sustainable business is more likely to remain successful in the long term.
People
Businesses should accept that they bear responsibility for the impact they have on the
society and businesses should help local communities to promote their economic and
social well-being. At a group level, it means recognizing and dealing honestly with
employee representatives.
- customers safety from products and services
- employment impact of an operation’s location
- employment implications of outstanding
- repetitive or alienating work
- staff safety and workplace stress
- non-exploitation of developing country suppliers.
Planet
Operations manager cannot avoid responsibility for environmental performance. It is
often operational failures which are at the root of pollution disasters and operations
decisions. Some business activities have negative Impact on the natural environment
such as hazardous waste, air and noise pollution and issues around global warming.
Some ways that operations can impact the environmental bottom line in a better way:
- recycling of materials, energy consumption, waste material generation
- reducing transport-related energy
- noise pollution, fume and emission pollution
- obsolescence and wastage
- environmental impact of process failure
- recovery to minimize impact of failure
Profit
,Operation managers must use the operation’s resources effectively. Some ways that
operations can impact the financial bottom line performance in a better way:
- cost of producing products and services
- revenue from the effects of quality, speed, dependability and flexibility
- effectiveness of investment in operations resources
- risk and resilience of supply
- building capabilities for the future
Strategic level
Operations managers deal with relatively immediate, detailed and local issues. There are
five aspects of operations performance that we identified as contributing to the
‘economic’ aspect of the triple bottom line that can have a significant impact (see picture
above). Profit is the difference between the costs of producing products and services and
the revenue the organization secures from its customers in exchange.
1. Operations management affects costs
Costs are for many operations managers the most important aspect of how they
judge their performance.
2. Operations management affects revenue
Operations managers are directly responsible for quality, speed of delivery,
dependability and flexibility. Operations activities can have an effect on the
organization’s profitability. Even relatively small improvements in cost and
revenue can have a greater effect on profitability.
Net promotor score (NPS)
Is to measure the underlying levels of customer satisfaction. This is computed by
surveying customers and asking them how likely they are to recommend the
company’s service or product. Customer likelihood to recommend the company
scale from 1-10 (1 = not at all likely, 10 = extremely likely)
- 1-6: detractors
- 7-8: passives
- 9-10: promoters
The NPS is calculated by ignoring passives so NPS = promoters – detractors
, 3. Operations management affects the required level of investment
Strategic effect is to produce the required type and quantity of its products and
services. Producing more output with the same resources or producing the same
output with fewer resources will affect the required level of investment.
4. Operations management affects the risk of operational failure
5. Operations management affects the ability to build the capabilities on which future
innovation is based
Operations managers learn from their experience of operation their processes.
Knowledge will build into skills, knowledge and experience that allow the business
to improve.
All operations should be expected to contribute to their business at a strategic level by
controlling costs, increasing revenue, making investment more effective, reducing risks,
and growing long-term capabilities.
Operational level
The things you would want to do to satisfy your customers and contribute to
competitiveness:
- You would want to do things right = QUALITY
- You would want to do things fast = SPEED
- You would want to do things on time = DEPENDABILITY
- You would want to be able to change what you do = FLEXIBILITY
- You would want to do things cheaply = COST
Quality
Quality is consistent conformance to customer’s expectations. Quality is easy to judge by
the customers. A customer perception of high quality products and services means
customer satisfaction and return of customers in the future.
Chapter 2 Operations performance
Why is operations performance important?
- operations management is concerned with doing things better. Improvements, that
can potentially make operations the driver of improvements for the whole
organizations.
- Through the continual learning that can come from its improvement activities.
- Operations management is very much concerned with ‘process’ relationship between
process and outcome. Good operations management is the best way to produce good
products and services.
- Economic, social, political and technological environmental changes. Invest in new
technology, do suppliers treat their staff fairly, are we doing enough to reduce our
carbon footprint.
3 levels of operations performance:
1. Societal level – operations sustainability (people, planet, profit> 3BL approach).
Using the idea of the ‘triple bottom
line’
2. Strategic level – operations
strategic impact. How an operation
can contribute to the organization’s
strategy
3. Operational level – operations
performance objectives. Using the
5 operations ‘performance
objectives’
1) Quality (e.g. customer
complaints)
2) Speed (e.g. order lead time)
3) Dependability (e.g. mean time
between failures)
4) Flexibility (e.g. time to market)
5) Cost (e.g. transaction costs)
Societal level
Stakeholders are the people and groups who have a legitimate interest in the operation’s
activities. Some stakeholders are internal (operation’s employees), others are external
(society, community, companies shareholder).
Some of the stakeholder groups who would have an interest in how an organization’s
operations function performs but each group will have a different views of which aspect
of performance is important.
Corporate social responsibility (CSR) =
essentially about how business takes account
if its economic social and environmental
,impacts in the way it operates – maximizing the benefits and minimizing the downsides…
specifically, we see CSR as the voluntary actions that business can take, over interests
and the interests of wider society.
Another definition is: listening and responding to the needs of a company’s stakeholders.
This includes the requirements of sustainable development. We believe that building
good relationships with employees, suppliers and wider society is the best guarantee of
long-term success.
The triple bottom line (TBL/3BL) also known as people planet and profit
Organizations should measure themselves on the traditional economic profit that they
generate for their owners and on the impact their operations have on society and the
ecological impact on the environment. This triple bottom line approach is that of
‘sustainability’.
Sustainable business = one that creates an acceptable profit for its owners but minimizes
the damage to the environment and enhances the existence of the people with whom it
has contact. A sustainable business is more likely to remain successful in the long term.
People
Businesses should accept that they bear responsibility for the impact they have on the
society and businesses should help local communities to promote their economic and
social well-being. At a group level, it means recognizing and dealing honestly with
employee representatives.
- customers safety from products and services
- employment impact of an operation’s location
- employment implications of outstanding
- repetitive or alienating work
- staff safety and workplace stress
- non-exploitation of developing country suppliers.
Planet
Operations manager cannot avoid responsibility for environmental performance. It is
often operational failures which are at the root of pollution disasters and operations
decisions. Some business activities have negative Impact on the natural environment
such as hazardous waste, air and noise pollution and issues around global warming.
Some ways that operations can impact the environmental bottom line in a better way:
- recycling of materials, energy consumption, waste material generation
- reducing transport-related energy
- noise pollution, fume and emission pollution
- obsolescence and wastage
- environmental impact of process failure
- recovery to minimize impact of failure
Profit
,Operation managers must use the operation’s resources effectively. Some ways that
operations can impact the financial bottom line performance in a better way:
- cost of producing products and services
- revenue from the effects of quality, speed, dependability and flexibility
- effectiveness of investment in operations resources
- risk and resilience of supply
- building capabilities for the future
Strategic level
Operations managers deal with relatively immediate, detailed and local issues. There are
five aspects of operations performance that we identified as contributing to the
‘economic’ aspect of the triple bottom line that can have a significant impact (see picture
above). Profit is the difference between the costs of producing products and services and
the revenue the organization secures from its customers in exchange.
1. Operations management affects costs
Costs are for many operations managers the most important aspect of how they
judge their performance.
2. Operations management affects revenue
Operations managers are directly responsible for quality, speed of delivery,
dependability and flexibility. Operations activities can have an effect on the
organization’s profitability. Even relatively small improvements in cost and
revenue can have a greater effect on profitability.
Net promotor score (NPS)
Is to measure the underlying levels of customer satisfaction. This is computed by
surveying customers and asking them how likely they are to recommend the
company’s service or product. Customer likelihood to recommend the company
scale from 1-10 (1 = not at all likely, 10 = extremely likely)
- 1-6: detractors
- 7-8: passives
- 9-10: promoters
The NPS is calculated by ignoring passives so NPS = promoters – detractors
, 3. Operations management affects the required level of investment
Strategic effect is to produce the required type and quantity of its products and
services. Producing more output with the same resources or producing the same
output with fewer resources will affect the required level of investment.
4. Operations management affects the risk of operational failure
5. Operations management affects the ability to build the capabilities on which future
innovation is based
Operations managers learn from their experience of operation their processes.
Knowledge will build into skills, knowledge and experience that allow the business
to improve.
All operations should be expected to contribute to their business at a strategic level by
controlling costs, increasing revenue, making investment more effective, reducing risks,
and growing long-term capabilities.
Operational level
The things you would want to do to satisfy your customers and contribute to
competitiveness:
- You would want to do things right = QUALITY
- You would want to do things fast = SPEED
- You would want to do things on time = DEPENDABILITY
- You would want to be able to change what you do = FLEXIBILITY
- You would want to do things cheaply = COST
Quality
Quality is consistent conformance to customer’s expectations. Quality is easy to judge by
the customers. A customer perception of high quality products and services means
customer satisfaction and return of customers in the future.
