unit 5 - chapter 1 Flashcards

Question

what are the service process types?

Answer 1

Schmenner (1986): classified by the degree of customisation and labour intensity (instead of volume). * professional service * service shop * mass service * service factory

Answer 2

* provided by highly trained specialists, such as medical doctors or lawyers. * tailored to each client or customer * very labour intensive.

Answer 3

* provided by trained specialists, * with less customisation and less labour intensity * examples:universities and travel shops, where each individual is treated slightly differently but the range of services is much more standardised.

Answer 4

* same basic service to every customer (banks or supermarkets) * much less interaction with the service provider.

Answer 5

* very little customisation (public transport) * individual client or customer has very little interaction with the service provider.

Answer 6

* relay race; sequential approach * Responsibility for the project passes from department to department in turn like a baton – from research and development people who design the product, to operations people who produce it, to sales who sell it. * problems - each department concentrates on its own priorities which can lead to: * products being designed without regard to how they will be manufactured * technological overkill (designers seek perfectionist solutions no regard for cost or the performance) * time lost in seeking solutions to problems originating from earlier stages in the process, * Further costs and delays accumulate as people seek to place the blame on other departments.

Answer 7

* a football team where the ball – the project – is interchanged between team members to make best use of their skills at the appropriate times. * A project team is made up of players from research and development, operations and sales. * Departmental barriers are removed * players from the different departments can ensure that others are aware of relevant issues (sales people ensuring a customer focus, operations ensuring manufacturability in design, etc.). * When well managed, this concurrent approach – often termed ‘simultaneous engineering’ – offers faster and better new product design and development.

Answer 8

* **layout** - the arrangement of physical facilities for producing goods and services, * **flow** describes how materials, information or customers move through the operations system.

Answer 9

1. **Fixed** layout 2. **Process** layout 3. **Cell** layout 4. **Product** layout

Answer 10

Operation takes place in one position, where all necessary resources are located, including staff and equipment * High flexibility * High variety of tasks for staff * Little disturbance for the product or customers * Likely to incur high unit costs * Difficult to schedule * Involves lots of movement of staff and equipment examples: * Construction projects, e.g., motorways and bridges * Large manufactured items, e.g., oil tankers and aeroplanes * Entertainment, catering and other activities associated with special events, e.g., weddings,country fairs or music festivals

Answer 11

* Equipment and operators are arranged according to common processes; work travels between them * High flexibility * Varied and hence more interesting work for operators * Not easily disrupted * Often hard to control * Associated with low utilisation and high work-in-progress (leading to high material stock costs in manufacturing and unhappy customers in services) * A school where students travel between classrooms, the library and other facilities

Answer 12

* Resources (e.g., equipment and operators) for each particular type of product are grouped together in cells * Offers a good tradeoff between cost and flexibility * Can be used to achieve high throughput, as well as providing more interesting work for operators * Can be costly to initiate * Needs higher investment in equipment * Offers minimal inventory levels within its operations * High stocks of the cell’s raw materials and finished goods if its input and output aren’t coordinated with other operations * Many automated factories use the cell layout, as do some cafeterias

Answer 13

* Equipment and operators are arranged in order of the stages of the process and the product travels between them * Offers lowest unit cost for high volume * Facilitates the use of specialised equipment, with correspondingly specialist jobs designed to minimise movements * Not very flexible * Very repetitive jobs; workers can be bored and frustrated * In manufacturing, work-in-progress inventory is minimised, but needs a continuous supply of raw material (from a high level of input material or frequent deliveries from suppliers) or the line will quickly halt * car assembly plant; arrivals facilities at airports

Answer 14

Decisions about layout and flow will affect performance through their impact on: * cost and flexibility of the process * time and distance that materials or customers travel in the process * flow of materials, information and customers through the operation

Answer 15

**‘process-focused operations’,** * emphasis is on the **flexibility of the process** in order to produce customised goods or services for customers (supermarket - customers can map their own path through the system to minimise time spent in unnecessary activities and focus on the areas that they wish to visit) * **flow is ‘jumbled’** – the materials, information or customers being transformed can take many different paths between activities **product-focused operations** * emphasis is on **standardising the process** in order to produce standardised outputs at the lowest possible cost * **single predetermined route** through the factory, mass immunisation, * line flows- only a single path between activities for materials, information or customers

Answer 16

equipment, machine, device or system that helps the creation and/or delivery of goods and services (Slack et al., 2007).

Answer 17

Some process technologies **contribute directly to the production and delivery of goods and services** (Harrison, 1996). For example, a coating machine that uses a precise amount of chocolate to make a chocolate bar is contributing directly to the production of the final product.

Answer 18

* technologies that assist in the production process rather than contribute directly to the creation and delivery of goods and services * peripheral to the actual creation of goods and services, plays an important role in facilitating and supporting the infrastructure for those processes that directly contribute to their creation and delivery (Slack and Lewis, 2002). * Examples include computer systems which run stock control systems and can be used to help managers control and improve the operations

Answer 19

process one or more types of material such as chemicals, fabric, metals, plastics, etc. operations activities involve * **material transformation** (transformation of raw materials into finished goods), * **material movement** (movement of materials from one place to another) and/or material storage (automated storage, location and retrieval of stored items). * more commonly used in manufacturing than in services.

Answer 20

* Robots – machines or devices that can be programmed to perform a variety of tasks. In operations, they are used mainly for moving and manipulating materials. * suitable performing repetitive tasks, such as paint spraying, loading and unloading, welding, etc. for long periods. * in the car industry, programmed once and then repeat the same task for years. cannot perform tasks that require sophisticated judgement and sensory feedback, especially useful in reaching places that are difficult for humans to reach or for handling hazardous substances, such as hot steel ingots, explosives or radioactive materials.

Answer 21

* where separate machines or devices are under the **control of a central computer** that coordinates the operations and finds the best timetables for specific tasks (Waters, 2002). * The central computer also controls the movement of materials between machines. * Once an FMS is programmed, the system can work with very little human intervention. advantages . * can work continuously and consistently, allowing high scale and quality * allows high flexibility in managing manufacturing resources, such as time and effort * The high utilisation of resources allows low operating costs. disadvantages . * expensive to buy and set up * needs programming skills * designed to match current production * major product changes might cause problems

Answer 22

the use of computers and devices (hardware) as well as computer programs or applications (software) that are combined together to form information systems that can securely process information the internet electronic business

Answer 23

main type of technology used by many service firms. 1. **directly operated by the customers** (direct booking of theatre tickets, in-flight entertainment) 2. those **operated by an intermediary** (booking agent)

Answer 24

* **market requirement evaluation**, which takes into account the importance of satisfying customer needs . * **operations resource evaluation**, which focuses on building operations capabilities * **financial evaluation**, which assesses the financial value of the investment on technology.

Answer 25

* evaluating the potential impact of a process technology on the operations’ ability to fulfil customer needs. * assess how a specific technology would affect the performance of the operations in terms of quality, speed, dependability, flexibility and cost. (warehouse example )

Answer 26

assessing the potential (or capabilities) that a new process technology will bring to the organisation, as well as its effects (or constraints) on the operations. two dimensions: * assessment of the **capabilities** enabled by the process technology being considered * assessment of the **constraints** the process technology may impose on the operations.

Answer 27

* feasibility, acceptability and vulnerability of the process technology being assessed. **Feasibility** refers to the difficulties involved in acquiring the technology; * **acceptability** refers to the benefits the technology will bring to the organisation; * **vulnerability** refers to the risks involved in acquiring the technology. Allows managers to generate initial insights that will help them to make their decision on whether or not to adopt a process technology

Answer 28

* **long-term** plans for the total capacity needed to produce their outputs, often over a period of five to ten years into the future, sometimes called ‘aggregate capacity’ plans. (hospital example - total no. of beds) * **Medium-term planning** - making resources available to meet the requirements of the long-term plan, typically two to five years into the future; breaks down the aggregate capacity plan into time periods, resource categories and types of good or service, to show how operations will meet the forecast demands for goods or services. * **short term,** the operations function needs to have a detailed schedule of all the activities that will be required to achieve its objectives over the next one or two years. likely that priorities will need to be changed and activities rescheduled to deal with unexpected variations from the plan. operations may have to respond to a higher or lower demand for goods

Answer 29

* understanding and measuring the level of – and fluctuations in – the **capacity** of the operation to produce outputs * understanding and measuring the level of – and fluctuations in – the **demand** for the operation’s outputs * establishing a strategy for **matching capacity and demand**

Answer 30

* **capability** of the organisation’s transformation process and the **throughput** of that process. * capacity is expressed in terms of the **available staff and/or facilities** and **equipment**, (consultancy - availability of skilled personnel) * In operations that produce large quantities of standardised goods or provide standardised services to a mass market, the factor limiting capacity is the **availability of facilities and equipment** to produce outputs

Answer 31

* **dependent**: demand is **known prior to the delivery**, planning for the delivery capacity can be done with a high degree of certainty. * **independent**: demand can only be estimated; independent of control of operation (Galloway et al., 2000) [example of hospital]

Answer 32

* aimed at identifying **variations** or **fluctuations** in demand that usually have seasonality patterns. * always a degree of **uncertainty** in demand forecasting. * predictable seasonal fluctuations may be affected by unexpected variations in the weather and changing economic conditions (Slack et al., 2007). * seasonality of demand occurs over the period of a year (businesses in which shorter seasonality cycles are also taken into account: banks, public transport) * demand also affected by the actions of competitors, as well as by development of the goods or services being offered.

Answer 33

* **level capacity** (keeping capacity constant despite demand fluctuations) [can be at minimum/maximum level] * **chase demand** (adjusting capacity to meet demand). * sometimes possible to use a third strategy, **demand management** (changing demand to match capacity). * strategy may help to minimise operating costs, especially if capacity is set at the minimum level of demand. However, if capacity is set at the maximum level of demand, the resulting resources will often be under-utilised, leading to high costs and waste.

Answer 34

* changes output in response to changes in customer demand; * involves adjusting the number of staff working to produce outputs. Common strategy in service operations (tourist attractions ) Some manufacturing operations chase demand by increasing or decreasing their volume of output (often supplemented by drawing on stocks of finished products). Chase demand strategies often include: . * hiring and firing staff . * training staff to perform more than one job . * using part-time or temporary staff . * sub-contracting on a temporary basis.

Answer 35

* Reserving a capacity in advance: * requiring customers or clients to reserve their use of capacity in advance * changing the pattern of demand (price differentiation, advertising, complementary goods) * example of greetings card industry

Answer 36

concerned with matching the flow of inputs and outputs on a short-term, often day-to-day, basis.

Answer 37

Push * operations managers begin with a plan for the quantity of output to be produced in some future period detailed schedule of what must be done, and when (central control mechanism) * Production process is pushed through successive stages until the finished product has been completed. * if difficulties arise at any stage in the production process - build-up of stocks or components, or partly finished work. Pull scheduling, * production of a component or initiation of an activity is only authorised when it is needed for the next stage of the process (Japanese just-in-time (JIT) concept - Toyota Production System), * minimising the amount of just-in-case or wasted stock

Answer 38

* operation does not acquire resources or begin work until it receives a customer order (catering at special events, food is ordered only after contract is in place * minimises the chance of investing in inappropriate resources or resources that will spoil before they are used. * often used in the production of specialised products (e.g., building a cyclotron particle accelerator) or in major construction projects (e.g., building a bridge).

Answer 39

* resources are acquired but no work is done until a customer order is received * (custom made bicycles - stock of frames, wheels etc; sandwich shop).

Answer 40

* resources are acquired and all the work necessary to complete a product is performed prior to a customer order being received * (stereo equipment, supermarket sandwiches)

Answer 41

* What level of capacity is needed to provide adequate customer service? * How can the queue be managed to avoid a negative impact on customer satisfaction? * How should the queue be physically managed? * 70/30 rule for staff serving customers

Answer 42

* customers experience boredom, frustration, anger or anxiety, which they will associate with the organisation. * they may either ‘**baulk**’ (refuse to join it) or ‘**renege**’ (leave the queue before they are served). * business may be permanently lost to the organisation, especially if there are competitors

Answer 43

* A Single server, single queue, single stage * B Single server, single queue, multiple stage * C Multiple server, single queue, single stage * D Multiple server, multiple queue, single stage

Answer 44

* Sequencing is concerned with assigning priority to tasks. * Operations function can set priorities for the order in which customers or clients are dealt with, or tasks are performed, in a variety of ways.

Answer 45

* the stored accumulation (stock) of resources that are necessary in a specific transformation system (operation). * Manufacturing companies usually hold stocks of the materials required for the production of their goods. * service companies typically hold ‘stocks’ of customer databases. * Intangible resources such as ‘information’ can also be the main transformed resource ‘stocked’ by companies, (accounting or tax offices).

Answer 46

* storage, administrative and insurance **costs** for the inventory . * inventory may become **obsolete**, be **damaged** or **deteriorate** over time . * inventory **uses space** that could be used by adding-value processes

Answer 47

* Inventory **volume decisions**, which are decisions about ‘**how much**’ to order. (attempts to balance the costs associated with placing an order with the costs of holding stock. * Inventory **timing decisions**, which are decisions about ‘**when**’ to order. (influenced by the uncertainty of demand, replenishment orders timed to allow a certain average safety stock)

Answer 48

* concerned with operations that involve continuing relationships across organisational boundaries. * Supply chain management takes a systems perspective by considering the totality of relationships that include **all of the activities required to create and deliver products (goods and/or services) to the end customer**

Answer 49

* **‘the network of suppliers and customers that have a relationship with an operation’** (Slack et al., 2007). * sets the consideration of an operation in its wider operating context * increasingly important in recent years as there has been a tendency for organisations to outsource more of their activities. * also been a trend for organisations to reduce the number of suppliers they deal with * the internet has allowed to ‘cut out the middleman’ and deal directly with their customers (disintermediation) emergence of new kinds of intermediaries

Answer 50

* **- acquisition, storage and movement of resources within an organisation and between the organisation and its environment** * - fundamental to operations management. * - concerned with how inputs are acquired as well as how the outputs are supplied to the customers.

Answer 51

* Purchasing should ensure that inputs are * of the right quality, * are available when needed * have an appropriate cost. * any cost savings achieved can significantly affect how well the whole operation performs. * Purchasing will seek to achieve the specified quality level through inspecting incoming goods or services, or through careful selection and certification of suppliers. * organisations based on JIT approach will need to find appropriate partners * Purchasing responsibilities are generally considered to end once the purchased inputs have been delivered.

Answer 52

* responsible for the activities that take place between the delivery of materials by suppliers and their use in the transformation process. * manages: * the receipt of incoming materials * their storage * handling their provision to the transformation process. * Once the transformation process has taken place, materials management may also be responsible for * testing, * packaging * storing finished products before they are shipped out of the production facility.

Answer 53

* transporting the organisation’s physical outputs * managing the movement of goods and services to customers and clients.

Answer 54

* extension of physical distribution management * includes all of the processes involved in the physical distribution, both into (inbound logistics) and from (outbound logistics) the organisation, * also associated services such as credit and insurance.

Answer 55

* - In the **passive stage**, purchasing primarily reacts to requests from other functional areas, but has no strategic direction of its own. - * In the **independent stage**, purchasing has adopted strategic practices, but has not aligned these with the organisation’s corporate strategy. * - In the **supportive stage,** purchasing has adopted strategic practices and is supporting the organisation’s corporate strategy through their use. - * i**ntegrative stage**, purchasing has become an integral part of the organisation’s corporate strategy and is actively working with other functional areas to implement that strategy.

Answer 56

McDonald’s - radical changes to the normal restaurant supply chain developed its own supply network - perfect specification for potatoes; /beef

Answer 57

* Strategic supply made possible by developments in computer and communications technologies (previously POs dispatched by post/phone) 1980s, electronic data interchange (EDI) systems development - routine transactions could be handled electronically, reduction in clerical errorts * Dependent on supplier having computing systems compatible with those of the purchaser (investment required; recouped by prospect of continuing business) Technology reinforced the trend towards a smaller supplier base, with much closer and deeper relationships between the buyer and its suppliers. * Impact of internet on B2B transactions: cheap and virtually unlimited connectivity, suppliers can be linked to any employee with PC. * Allows * delegation/dispersal of purchasing activity * ability to aggregate more purchases * maximising volume discounts * reducing rogue buying (online approved supplier lists)

Answer 58

* **Vertical integration** - perform as many activities in the supply chain as possible (top and bottom) * provides managers with the maximum amount of control over performance and cost * Ford’s River Rouge car factory - * fully integrated; * raw materials delivered to one end of the production process and a fully finished car driven out at the other; * own iron and steel on site, * plant produced its own electricity etc.) * Drawback - organisations cannot excel at all activities

Answer 59

* drawback to vertical integration - organisations cannot excel at all activities along supply chain * From the 1980s onwards - belief that organisations would improve performance if concentrated on ‘core competencies’; * build a sustainable competitive advantage and use outside suppliers to perform all other ‘non-core’ activities (ex advertising and use of agencies; also catering, information services etc.) * - incl activities traditionally seen as "core" (HR, IT)

Answer 60

* Recently move towards the "buy" end * computer industry - initially IBM did everything now PCs assembled from purchased components * Benetton: short shelf life; reliance on a network of textile firms and garment manufacturers

Answer 61

* ‘virtual organisation’ : * organisation that has outsourced the maximum conceivable level of activities. * It coordinates and directs the activities of other organisations, which perform all the transformations of materials and customers. * Its growth has been facilitated by the internet because access to the physical facilities/physical location of the organisation itself, is often irrelevant to the provision of services to customers or other businesses (ex. www. lastminute.com) * Nike as a virtual manufacturer - * does not make any of its own products, * outsources all of its manufacturing operations (suppliers in developing countries - low labour rates); * only retains design and marketing of its products as its key in-house activities.

Answer 62

Womack et al., 1990: relationships between Japanese suppliers and customers were very different from those in North America and Europe Western companies tended to view their suppliers as adversaries; * negotiations as a battle ("squeezing" concessions from suppliers; no concern re: impact on suppliers); * contracts based on price and delivery; * threat of losing business as incentive. * Focus on cost per unit as the primary objective, each contract with suppliers as an independent transaction Japan: * Toyota worked together with suppliers to create long-term partnerships, * focus on achieving mutually beneficial collaboration; * achieving genuine cost reductions also possible to improve the quality, flexibility, dependability and speed of supply to the purchaser; * focus on building and sustaining relationships which made the JIT system work

Answer 63

‘supplier base’ = number of suppliers with which an organisation deals. Approach in the West: large base (to foster competition, achieve lowest price, back up for any problems) Japan: fewer suppliers, often single supplier; expected to be much more responsive to customer needs (reduce inventory) Rationalising supplier base: 1. reduce number of suppliers: In response, Western companies began rationalising their supplier base - risks: . increases the power of an individual supplier . makes the customer vulnerable in case of supply disruptions (natural disasters, strikes, transportation problems and fuel shortages). 2. reorder relationship with suppliers into a tiered structure (example of Volksvagen in its Brazilian car assembly plant, where cars are assembled from a number of distinct modules - purchased from lead suppliers, responsible for a particular module)

Answer 64

* if number of suppliers is reduced - purchasers can then devote more time and effort to developing relationships with the remaining ‘first-tier’suppliers. * Increased commitment by each party can create a partnership between buyer and supplier. * Suppliers can then be involved in planning for the future * Purchasers could work with suppliers to develop the most appropriate specification, using the supplier’s specialist expertise. * Suppliers can also be involved in new product design and development. Purchasers can access their suppliers’ in-house technologies and expertise, which can lead to more cost-effective and higher-quality designs.

Answer 65

* For **bottleneck items**, it is important to ensure that supplies are not interrupted * For **critical items**, the emphasis should be on cooperation with suppliers * For **routine items**, the imperative is to find the most efficient way to procure the product * For **leverage items**, it is important to find the best deal. Establishing more strategic relationships between purchasers and suppliers requires honesty and commitment from both parties; issues around trust (prisoner's dilemma).

Answer 66

* **Past performance** – comparing current performance with past performance is quite common. Example of accounting systems; easy to determine, historical data normally available. Excessive reliance may lead to inward culture that ignores the demands of customers * **Internal performance targets** – internally generated targets based on consideration of what seems fair and reasonable (budgets set on this basis); problems in determining what is ‘fair and reasonable’; what is undemanding vs. ambitious, can reinforce political behaviour and inward perspective ignoring customer requirements . * **Benchmark standards** – derived from comparison with some external source. **Competitive benchmarking** - competitor, other organisation. ‘**best practice benchmarking’**, exemplars in specific operations is taken as the standard. can encourage an external perspective and a desire to learn from others. Access to comparative data can be problematic, difficult to choose, may not involve any direct consideration of what customers require. * **Absolute standards** – taken to their limits, such as zero defects, zero lead time and zero inventory. may not be achievable in practice, can be used as the ideal against which actual performance is measured. Using absolute standards as working goals may be self-defeating, as it can be very demotivating to know you have an unattainable target.

Answer 67

criticised for not explicitly taking the needs of customers into account.

Answer 68

Hill (2005) **- Market-qualifying criteria** – characteristics of an operation’s outputs that entitle it to be considered by a customer (flight - airlines that have tickets; yes/no proposition) .If an operation’s performance falls below the qualifying level, it will not be considered as a potential supplier of a good or service. The amount by which it might exceed the qualifying level is irrelevant; it will make the user no more likely to choose the supplier. . **Order-winning criteria** – are those characteristics of an operation’s outputs that win orders in the marketplace. Final decision which airline - price of ticket. Level of performance is important; improvement will increase the likelihood of the purchaser choosing the product.

Answer 69

pictorial representation of how the operation performs against key performance criteria, and how much those criteria matter to the organisation’s customers. five objectives of cost, quality, dependability, speed and flexibility. (rated as ‘worse than’, ‘the same as’ or ‘better than’ the performance of key competitors or benchmark standard)

Answer 70

decide on appropriate action for improvement, according to the advice given in each square. * **Appropriate** – performance is currently satisfactory. It is better than the competition in criteria that customers think are important, or as good as the competition in criteria that customers think are not important * **Improve** – in these squares, performance could be improved. It need not be given top priority, as it is the same as the competition in criteria that customers think are important and worse than the competition only in criteria that customers think are not important * **Urgent action** – these squares call for prompt action to achieve improvement. Here, the operations function’s performance is significantly worse than competitors in criteria that customers consider as important * **Excess** – in excess of what is required. Performance is better than competitors, but in criteria that customers do not consider important, valuable resources might be being consumed that could be better directed towards improving some other aspect of performance

Answer 71

Relentless pursuit of improvements through a process of small, ongoing changes; bottom-up, people-driven continuous improvement based on the belief that one should never be satisfied and should always seek to do better. Some techniques include **- quality circles**: regular meetings of groups of workers to tackle quality problems and undertake improvement activities in their immediate work area **- employee suggestion schemes**: encouraging, recognising and rewarding employees’ suggestions for improving products and processes. approach underpinned by a conviction that all employees have natural creativity that must be tapped into. acknowledges that the people who are closest to the organisation’s operating processes generally know more about processes than anyone else.

Answer 72

* underpinned by the so-called ‘**best practice mentality**’, based on the idea that there is ‘one best way’ to manage operations (similar to scientific management approach of Frederick Taylor). * dangers and drawbacks in a ‘one best way’ approach to improving operations. * belief that there can be one solution for particular problems in all circumstances in all organisational contexts seems highly simplistic, if not misguided. * impossible to achieve a competitive advantage merely by doing the same things in the same way as your competitors.

Answer 73

Radical improvements are designed to provide a **one-off, major advance in performance.** * Often associated with significant changes in design, operating processes and practices, and with big investments of money and other resources * rely on the introduction of new technology. * managers in Western organisations have an over-reliance on radical improvement to achieve performance improvements * tend to seek a technological ‘fix’ to achieve operations improvement. Hayes and Wheelwright (1984) contrasted this technological approach with the operations management approach (focusing on managing and improving the operations system as a whole) and the operations strategy (focusing on the long term) * Easy to be seduced by technological approach * Radical improvement is likely to be effective when an organisation needs to completely change its performance to compete effectively, or even just to survive. * some operations are not amenable to gradual change and improvement may only be possible through radical solutions.

Answer 74

* radical improvement approach based on the complete redesign of business processes * involves the introduction of new working practices and new technology. BPR can be defined as: * the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed. (Source: Hammer and Champny, 1993) * based on the central tenet of operations management that processes are the key to understanding business performance * takes a radical approach to performance improvement by re-examining business processes – that is, attempts to improve performance need to be based on a sound analysis of business processes, whether these processes transform materials, customers or information. * shares a key idea with general operations improvement: while customers or clients purchase or use the outputs of operations, the processes that create and deliver these outputs are generally cross-functional rather than functional. I * focus on improving operations needs to be cross-functional and process focused, rather than narrowly focusing on outputs. * advocates that organisations should be structured around processes rather than the functions that have become the basis for most organisational structures, and that all business processes should be designed to add value from the customer’s perspective, starting and ending with the customer. * misuse and misrepresentation has given BPR a bad press (especially when large-scale job losses were involved), when used properly its techniques can provide a means for fundamental reassessment of business operations, which can lead to dramatic improvements in performance * Radical improvement is often much more risky than continuous improvement, since it disrupts established ways of managing operations. * management often engages in such initiatives for more reasons than simply because they expect to achieve radical improvements- sometimes they have ulterior motives – they may wish to demonstrate to stakeholders that they are taking decisive action and that they are progressive (e.g., in using modern technology and management techniques).

Answer 75

* continuous improvement and radical improvement are entirely compatible. * Many companies adopt both approaches in combination. * An obvious advantage of continuous improvement is that it creates both a culture of change that permeates the organisation from bottom to top and a mindset in which people will embrace change. * incremental improvement can be used as a foundation for more radical change, making it seem more natural and less traumatic. * advantages to be gained in adopting an incremental approach in order to seek continuous improvement after the introduction of new technology or some other radical change. Unless this is done, performance is likely to drop off as complacency slips in

Answer 76

* philosophy of continuous organisational improvement. * places quality at the centre of all activities within an operation. * The ‘total’ in TQM embraces every person in an organisation as well as everyone involved in the business as a whole, from suppliers to customers. * focuses on the impact that every individual staff member of an organisation has on quality. * stresses the notion that each person in an organisation is responsible for getting quality right (Slack et al., 2007). * concept of ‘internal customer’ and ‘internal supplier’. * everyone within a company can be both a consumer of goods and services provided by other people within the same company as well as a supplier of goods and services to other people within the same company. * internal customer is any individual (or group of individuals) working in a transformation process that will transform the inputs provided by another individual (or group of individuals) working in other transformation processes within the company * internal supplier is any individual (or group of individuals) providing the outputs that will be transformed by another individual (or group of individuals) working in other transformation processes within the company. * requires a clear understanding of the relationships between the processes within an organisation. * all organisations comprise several processes that directly or indirectly contribute to the provision of the final good or service to the customers * many processes of an organisation are internal transformation processes interacting (receiving inputs/feedback and/or providing outputs/feedback) with other internal transformation processes. * Each smaller process contributes to part of the overall transformation process of the organisation, transforming or producing something that will contribute or add value to the overall transformation process that produces the final good or service.

Answer 77

Lean production has its historical roots in Japan in the aftermath of the Second World War. At that time the country was struggling to re-establish its industrial base under conditions of great privation and severe shortages of resources of all kinds. Lean production also owes much to the unique character and context of Japan, a country with limited usable land and natural resources. Lean practices took many years to emerge and are continuing to develop today. However, they are credited as being behind the undoubted success of the Japanese manufacturing industry in the latter half of the twentieth century. The managerial practices behind lean production were pioneered by Toyota in its innovative Toyota Production System, in which workers are organised in small teams or work groups. Each team is responsible for working on a particular phase of the production process and each team member is also responsible for continuously finding ways to increase quality and reduce costs and waiting times. An important innovation in the Toyota system was the development of the JIT concept, which is a ‘pull’-based system in which inventory is moved (‘pulled’) downstream only when it is required by the next stage in the production. JIT allowed the elimination of buffer inventories, which are typical of traditional ‘push’-based systems in which inventory is moved (‘pushed’) downstream according to a planned production forecast (Figure 3.5)

Answer 78

The lean approach to managing operations is based on three fundamental principles (Russell and Taylor, 2006): . * eliminating waste . * involving staff in the operation . * driving for continuous improvement of the operations function. * Eliminating waste concentrates on the elimination of all forms of waste, which, in general terms, is any activity that does not add value. Table 3.1 shows the seven types of waste that were identified by Toyota. These forms of waste have been found to apply to several different types of operations in both the manufacturing and the service sectors, and they are central to lean philosophy (Slack et al., 2007). * Involvement of staff is about developing an organisational culture that encourages staff to take on much more responsibility, engagement and ownership of their job. Usual practices to increase the degree of personal responsibility and engagement include team-based problem solving, job rotation, multi-skilling, autonomy and quality of working life * . Finally, continuous improvement is an essential element of the lean philosophy. Continuous improvement was discussed earlier in Section 3.2.

Answer 79

Three important ways of improving manufacturing performance might be through * factory focus, * process flexibility and * information technology. It is worth noting that although these initiatives were originally developed in a manufacturing context, they can also be applied to service organisations. They are described in more detail below.

Answer 80

* A common problem with manufacturing operations is that they often evolve away from their original design, without proper consideration of how the various elements in the production evolve together. * It has been argued that performance would be improved if each operations facility were to focus on a single task (Skinner, 1974). * Where an organisation requires its manufacturing operations to perform multiple tasks, this could be done either by dividing operations between different facilities or by creating ‘plants within a plant’, in which each plant focuses on a single task. * This approach is based on the belief that every manufacturing operation needs to be configured to meet a specific market need. * This requires managers to make a fundamental trade-off between different performance objectives, choosing one (e.g., low cost, fast throughput time, high flexibility) as its principal objective. * This is in stark contrast to recent concepts of ‘world-class manufacturing’, which imply that an operation can

Answer 81

* Process flexibility Since the original ‘Fordist’ (Henry Ford, car manufacturer) era of mass production in stable environments, the competitive challenges facing manufacturers in most markets have changed dramatically. This creates the need for flexible operations. Flexibility is the ability of a process to change or react with little penalty in time, effort, cost or performance. Flexibility might involve changes in a set of tasks, in a set of customised products or across a broad product range. The dimensions in which a process may be expected to be flexible include: . volume – the ability of the process to adjust to changes in the amount of output, whether higher or lower, without penalty. . * product range – the ability of the process to add to or take away from the number of outputs, without penalty * Flexibility is important because organisations often find themselves having to use their operations for purposes for which they were not originally designed, or have hitherto been used. * These shifts in the demands on operations may be internal, perhaps brought on by product proliferation, or external, probably due to changing customer needs or wants. * A problem for many manufacturers and service providers that compete on low cost and standardised outputs is the inflexibility of their processes. * For example, McDonald’s fast-food hamburger restaurants are very good at producing variations in the elements surrounding the hamburger (e.g., special toppings), but less good at producing meals that are not cooked on a griddle. * A number of different terms are used to describe attempts to achieve flexible operations, including agile production and mass customisation.

Answer 82

In the early 1980s, many operations management professionals predicted that, by the turn of the century, production would be taking place in fully automated factories. While we have not yet reached that stage, the use of information technology of all kinds, ranging from bar codes to robotics, has become commonplace in many operations processes. An information system that has been widely deployed by many companies is the enterprise resource planning (ERP) system. ERP systems are designed to provide a fully integrated organisation-wide information system to control all activities, including purchasing, inventory, manufacturing, finance and personnel. While they can be expensive, it is claimed that they achieve major improvements in performance across the organisation. However, there have been a number of notable failures, in among many successes, in implementing major IT projects. It is therefore wise to exercise some caution when seeking IT-based performance improvements. Major disappointment has often occurred when IT-driven change has been designed for implementation across the entire enterprise. A number of such projects

Answer 83

increased customer involvement in the service process increased use of customer feedback to improve service quality

Answer 84

a way of improving service operations’ performance. doubly beneficial, increasing both efficiency and customer satisfaction. In many services, back-office operations (e.g., cheque-clearing in banks) are already run at extremely high levels of efficiency, it has become difficult to further significantly improve their performance. front office - limit to how much work can be loaded on to those delivering the service to waiting customers. incorporation of customers in all or part of the service delivery process may improve the efficiency of front-office operations. Customers can become involved in various aspects of the service delivery process: . Specification – productcan be customised to meet their particular needs and requirements (e.g., kitchen design). . Co-production – customers can perform some or all of the activities, (serving themselves from a salad bar) . Quality control – providing feedback or trying new developments examples of improving efficiency: McDonald’s, IKEA (where customer can generally perceive the value of their contribution - lower prices) Criticism: involuntary unpaid labour. growing ‘McDonaldisation’ of society, customers provide a significant labour component of increasingly standardised services, services exploit their customer (self-service checkput)

Answer 85

perceptions of quality are often highly subjective and difficult to measure. providers need to rely much more on customer feedback to identify problem areas in which performance improvement actions should be initiated. Useful tools - SERVQUAL gap model, self-completed customer questionnaires, face-to-face and telephone interviews, and customer focus groups. Improvement activities - physical design of the service facility - empowerment of employees - split of activities between front and back offices.

Answer 86

According to the International Monetary Fund (IMF), from an economic perspective the term ‘globalisation’ refers to ‘the inm different perspectives of the macro (or far) environment of organisations, addressing social, technological, economic, environmental and political dimensions. creasing integration of economies around the world, particularly through the movement of goods, services and capital across borders’ (IMF, 2008, p. 2). many companies have developed overseas operations. even companies that do not have international operations (SME) can now sell and source products on a global dimension,

Answer 87

Globalisation brings significant challenges for organisations producing goods and services with and for global partners. cultural and economic particularities of different countries around the world do influence strategic and operational decisions concerning operations management.

Answer 88

Theodore Levitt: companies must learn to operate as if the world were one large market – ignoring superficial regional and national differences. Many companies now adopt a policy which some refer to as ‘glocalisation’ – thinking on a global world market scale, but adapting to local wants as appropriate (McDonaldS)

Answer 89

offshoring, the strategy of transferring specific operations to other countries with lower location costs. Usually, the lower costs are due to fewer regulatory controls and significantly lower wages (Mangan et al., 2008), globalisation seen as one of the causes of labour exploitation and corruption in developing countries or: a way of spreading prosperity to many people and companies throughout the world. According to Mangan et al. (2008), some of the reasons why companies decide to offshore include: . lower location costs . less stringent regulatory controls . lower communication and IT costs . improved capabilities of offshoring regions . ability to cluster specific capabilities in certain regions.

Answer 90

offshoring is not the same as outsourcing outsourcing: ownership of the operations transferred to a provider company is also handed over to the provider. Global outsourcing is when the provider company is located abroad. offshoring, the ownership of the specific operations functions transferred abroad remain with the company transferring them to the lower cost location.

Answer 91

86 Decision area Some globalisation issues Product/service design Adaptation of design to fit culture and legislation (e.g., safety requirements) Layout of facilities Cultural reaction to work organisation (e.g., work conditions requirements) Process technology Maintenance of technology (e.g., maintenance costs) Skills availability in different regions Capacity planning and control Differences in seasonality and demand patterns Legislation for part-time and temporary work Inventory planning and control Storage conditions and climatic sensitivity Storage costs Supply chain planning and control Transport costs and infrastructure Supplier conformance to employment standards TQM Cultural view of acceptable quality Cultural view of participation in improvement groups

Answer 92

key driver of globalisation and facilitator of international trade, vital element for delivery of humanitarian and emergency aid. As Mangan et al. (2008) put it: The global economy today is increasingly interconnected with logistics playing an essential ‘lubricating’ role – just as oil lubricates a car engine (without oil the engine would quickly seize up), so too the global economy relies on efficient and effective logistics systems in order to function (just look for example what happens when transport services are delayed or there is industrial action at a port or airport). (Source: Mangan et al., 2008, p. 32)

Answer 93

sourcing of goods and services from overseas countries. It involves identification, evaluation, negotiation and configuration of supply chains across multiple geographies (Slack et al., 2007). major trend of supply chains in recent years. many factors promoting this trend: formation of free trade agreement blocs such as NAFTA (the North American Free Trade Agreement) and MERCOSUR (‘Mercado Común del Sur’, a free trade South American bloc) More efficient transportation infrastructure systems, as well as more sophisticated cross-border operations, Main reason: cost reduction. (Barbie doll example - hair from Japan, plastic from Taiwan. clothing from China and pigments from USA; source: Mangan et al., 2008)

Answer 94

increased complexity of dealing with suppliers from different countries in the world, the risks of delays and ‘hidden-costs’ related to cross-border operations, such as material handling, inspection and storage processes, regulatory and documentation requirements, and transport and freight fees. Decision to adopt global sourcing alternatives should take into account all related costs as well as the potential risks and the performance of the services provided by third parties.

Answer 95

Aspect Issues to consider Purchase price The total price, including transaction and other costs related to the actual good or service delivered Transportation costs Transportation and freight costs, including fuel surcharges and other costs of moving products or services from where they are produced to where they are required Inventory carrying costs Storage, handling, insurance, depreciation, obsolescence and other costs associated with maintaining inventories Cross-border taxes, tariffs and duty costs Sometimes called ‘landed costs’ – costs associated with customs duties, shipping, insurance and other related fees and taxes Supply performance The cost of late or out-of-specification deliveries, which, if not considered properly, can offset any price gains attained by shifting to an overseas source Supply and operational risks Geopolitical factors related to changes in a country’s leadership, trade policy changes or instability caused by war or natural disasters – all of which may disrupt supply (Source: Adapted from Slack et al., 2007, p. 411)

Answer 96

ensuring that the resources necessary for alleviating the suffering of vulnerable people are transported, handled, stored and delivered in the most efficient and effective way possible. Large-scale, unpredicted disasters make the worst scenario for humanitarian logistics. Humanitarian organisations usually have to operate against irregular demand patterns and unusual constraints, characterised by many disruptions and bottlenecks in the transportation, receipt, warehousing, tracking and delivery of relief resources. required to be both fast and agile, usually deals with an undetermined set of suppliers and irregular demand during large-scale emergencies. Logistics play a crucial role in the provision of humanitarian aid, where people with the skills to identify priorities and coordinate transport, storage, handling and deliveries are vital in keeping the relief effort moving (Heaslip, 2008).

Answer 97

Many issues intimately connected to core operations management practices: designing production processes that do not consume large amounts of energy, analysing environmental impact of products that cannot be recycled. achieving sustainability through the reduction of the environmental burden caused by the production of goods and delivery of services. (process design impacts on usage of energy and labour etc)

Answer 98

1. Product and process design: Recyclability of materials, Waste generation, Energy consumption 2. Layout of facilities: Energy efficiency, Heating/refrigeration efficiency Process technology Waste and product disposal Noise pollution Fume and pollution emission Energy efficiency Planning and control Impact of extended operating hours Inventory obsolescence and wastage Packaging policy Supply chain management Efficiency of transport supply/distribution Transport pollution of frequent JIT supply Quality Scrap and wastage of materials Environmental impact of process failure

Answer 99

sustainability is about using resources and materials derived from sustainable or renewable sources. Its main concern is pollution prevention rather than pollution control. It involves three major initiatives: . Pollution prevention (rather than cleaning it up after creation) . Product stewardship – recognising that the environmental impact of a product goes well beyond the organisational boundaries of the company, (not only making the product, but also its sourcing, distribution, use and disposal. . Clean technology – investing in energy-efficient technologies that make better use of energy sources as well as renewable materials, reducing the use of natural resources and minimising (or eliminating) the level of pollution emission.

Answer 100

organisations from the same or different sectors collaborate with each other to ensure that the waste or by-product generated by the operations of one organisation is used as input by another organisation. example: eco-industrial park developed in the town of Kalundborg, Denmark: coal power plant which shares material and energy with the community; surplus heat from the plant is used to heat homes and fish farm; sludge from the fish farm is sold as fertiliser. by-products from the power plant are sold as raw material for road building and the production of wallboard and cement by other manufacturers.