Introduction to Operations
Dr Michael Sony
Operations • Operations management is the activity of managing the
resources that create and deliver services and products.
management
Porters Value
Chain
Value System
Input–
transformation–
output process
SIPOC – suppliers, inputs, process, outputs and
customers
• Paint production process
Source: http://dx.doi.org/10.1108/17410400910938850
Process
hierarchy
Services and products
are merging Service
Product or Service or Both - IHIP dominant logic
Co-creation or co-
production
Servitisation
Pure
Product Pure
Service
Intangibility - Intangibility -
Some significant No tangible
tangible element elements
Heterogeneity - Heterogeneity -
Largely Not at all
standardised standardised
Inseparability - Inseparability -
Production and Production and
consumption can consumption totally
be separated simultaneous
Perishability -
Storage possible Perishability -
No storage
possible
How do
operations
differ? 4 V’s
A four Vs analysis of two hotel operations
Low Volume High
High Variety Low
High Variation Low
High Visibility Low
Luxury lodges Budget hotels
It is important to understand how different operations are positioned on the 4 Vs.
Is their position where they want to be?
Do they understand the strategic implications of their position?
(Source: Slack et al., 2017)
Operations Performance
Operations Performance
• Operations are judged by the way they perform.
• Operations management as being able to either ‘make or break’ any
business.
• Performance at three levels
• The broad, societal level, using the idea of the ‘triple bottom line’.
• The strategic level of how an operation can contribute to the organization's
overall strategy
• The operational level, using the five operations ‘performance objectives’.
Operations
Performance
Operational
performance at
Societal Level
• Operations affect
stakeholders
• The triple bottom line –
People, planet profit
• Environmental, social and
governance (ESG)
Operations performance judged at a
strategic level
• It affects costs
• It affects revenue
• It affects the required level of
investment
• It affects the risk of operational
failure
• Ability to build the capabilities
(VRIO)
Operations
performance
judged at an
operational
level
Polar representation of Operational
Performance
• Polar representation because the scales that represent the
importance of each performance objective have the same
origin.
• A line describes the relative importance of each performance
objective.
• The closer the line is to the common origin, the less
important is the performance objective to the operation.
• Used
• Compare operations
• Actual vs required performance
• Sector vs firm performance
• Competitor vs firm performance
Balanced
scorecard
approach
Operations performance
objectives trade off
against each other?
• Improving the performance of one
performance objective might only
be achieved by sacrificing
performance in another.
• There are compromises or trade-
offs
Operations Strategy
Operations Strategy
• Operations is a major area of strategy implementation.
• Functional aspects of strategy
• Apple to Zara, use their operations resources to gain long-term
strategic success
• Operations strategy is defined as the ‘pattern of decisions and actions
that shape the long-term vision, objectives and capabilities of the
operation and its contribution to the overall strategy of the business’
Operations
contribution to
the
organization:
Hayes and
Wheelwright’s
four-stage
model
Four Perspectives on Operations Strategy
Operations strategy should align with what the whole group or business wants – sometimes called
the ‘top-down’ perspective.
Operations strategy should translate the enterprise’s intended market position so as to provide
the required objectives for operations decisions – sometimes called the ‘outside-in’ perspective.
Operations strategy should learn from day-to-day activities so as to cumulatively build strategic
capabilities – sometimes called the ‘bottom-up’ perspective.
Operations strategy should develop the business’s resources and processes so that its capabilities can
be exploited in its chosen markets – sometimes called the ‘inside-out’ perspective
Top-down
perspective
Outside-in’
perspective
How market requirements influence operations
strategy performance objectives?
• Order winners, qualifiers and less important
factors
• The impact of product/service differentiation on
market requirements
• Operation differentiates its services based
on different customer segments, it will
need to determine the performance
objective for each segment (e.g. retail and
corporate banking)
• Impact of the product/service life cycle on
market requirements
Bottom up
Inside out
• Long-term competitive advantage can come from the capabilities of the
operation’s resources and processes, and these should be developed over
the long term to provide the business with a set of capabilities or
competences.
• Strategic resources and sustainable competitive advantage- RBV
• Understanding existing capabilities and constraints
• VRIO
• Structural and infrastructural decisions :
• An operation’s structural decisions are those that we have classed as primarily
influencing design activities,
• Infrastructural decisions are those that influence the work-force organisation, the
planning and control, and improvement activities.
Structural and
infrastructural
decisions
How to use four
perspectives of
operations Strategy?
Line of fit’ between market
requirements and operations
capabilities
How to use four
perspectives of
operations Strategy?
Line of fit’ between market
requirements and operations
capabilities
How to use four
perspectives of
operations Strategy?
Use of importance –performance
matrix to determine operations
strategy improvement priorities
Improvement priorities are determined by
importance for customers and performance
against competitors or similar operations.
Process of operations strategy
Operations
strategy
formulation
Operations
Operations
strategy
strategy control
implementation
Operations
strategy
monitoring
Additional reading
• Nigel Slack et al (2017) , Operations Management: Global and South
African Perspective, Chapter 1,2 and 3
