Nigel Slack Alistair Brandon-Jones Robert Johnston

Seventh Edition

OpeRAtiONS MANAgeMeNt

Seventh Edition

OpeRAtiONS MANAgeMeNt Nigel Slack Alistair Brandon-Jones Robert Johnston

www.pearson-books.com

Seventh EditionO

peRAtiO N

S M A

N A

g eM

eN t

Slack Brandon-Jones Johnston

Operations management is important, exciting, challenging … and everywhere you look!

• Important, because it enables organizations to provide services and products that we all need

• Exciting, because it is central to constant changes in customer preference, networks of supply and demand, and developments in technology

• Challenging, because solutions must be must be financially sound, resource-efficient, as well as environmentally and socially responsible

• And everywhere, because in our daily lives, whether at work or at home, we all experience and manage processes and operations.

Operations Management focuses on the sustainable and socially responsible imperatives of operations management, using over 120 cases and illustrations of real-life operations around the world, including Apple, Médecins Sans Frontières, Amazon, Ecover, Dyson, Disneyland Paris, Google, The North Face, and many more.

use with

Front cover image: © Lewis Mulatero/Getty Images

Join over 10 million students benefiting from pearson MyLabs.

This title can be supported by MyOMLab, an online homework and tutorial system designed to test and build your understanding. MyOMLab provides a personalized approach, with instant feedback and numerous additional resources to support your learning.

A student access code card may have been included with this textbook at a reduced cost. If you do not have an access code, you can buy access to MyOMLab and the eText – an online version of the book – online at www.myomlab.com.

CVR_SLAC6208_07_SE_CVR.indd 1 15/04/2013 14:14

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Welcome to OPERATIONS MANAGEMENT

Operations Management – it’s important, it’s exciting, it’s challenging, and everywhere you look!

Important, because it’s concerned with creating all of the products and services upon which we depend. Exciting, because it’s at the centre of so many of the changes affecting the world of business. Challenging, because the solutions that we fi nd need to work globally and responsibly within society and the environment. And everywhere, because every service and product that you use – the cereal you eat at breakfast, the chair you sit on, and the radio station you listen to while you eat – is the result of an operation or process.

Our aim in writing Operations Management is to give you a comprehensive understanding of the issues and techniques of operations management, and to help you get a great fi nal result in your course. Here’s how you might make the most of the text:

● Get ahead with the latest developments – from the up-to-the-minute Operations in practice features in every chapter to the focus on corporate social responsibility in the fi nal chapter – these put you at the cutting edge .

● Use the Worked examples and Problems and applications to improve your use of key quantitative and qualitative techniques, and work your way to better grades in your assignments and exams .

● Follow up on the recommended readings at the end of each chapter. They’re specially selected to enhance your learning and give you an edge in your course work.

And in particular, look out for the references to MyOMLab in the text, and log on to www.myomlab.com * where you can

● check and reinforce your understanding of key concepts using self-assessment questions, video clips and more;

● practise your problem-solving with feedback, guided solutions and an almost limitless supply of questions!

We want Operations Management to give you what you need: a comprehensive view of the subject, an ambition to put that into practice, and – of course – success in your studies. So, read on and good luck!

Nigel Slack Alistair Brandon-Jones

Robert Johnston

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OPERATIONS MANAGEMENT Seventh edition

Nigel Slack Alistair Brandon-Jones Robert Johnston

A01_SLAC6208_07_SE_FM.indd 3 15/04/13 1:55 PM

Pearson Education Limited Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Fax: +44 (0)1279 431059 Web: www.pearson.com/uk

First published under the Pitman Publishing imprint 1995 Second edition (Pitman Publishing) 1998 Third edition 2001 Fourth edition 2004 Fifth edition 2007 Sixth edition 2010 Seventh edition 2013

© Nigel Slack, Stuart Chambers, Christine Harland, Alan Harrison, Robert Johnston 1995, 1998 © Nigel Slack, Stuart Chambers, Robert Johnston 2001, 2004, 2007, 2010 © Nigel Slack, Alistair Brandon-Jones, Robert Johnston 2013

The rights of Nigel Slack, Alistair Brandon-Jones and Robert Johnston to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS.

The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law. Any unauthorised distribution or use of this text may be a direct infringement of the author’s and the publishers’ rights and those responsible may be liable in law accordingly.

All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners.

Pearson Education is not responsible for the content of third-party internet sites.

ISBN: 978-0-273-77620-8 (print) 978-0-273-77628-4 (PDF) 978-0-273-77621-5 (eText)

British Library Cataloguing-in-Publication Data A catalogue record for the print edition is available from the British Library

Library of Congress Cataloging-in-Publication Data A catalog record for the print edition is available from the Library of Congress

10 9 8 7 6 5 4 3 2 1 17 16 15 14 13

Print edition typeset in 9.25/12 by Charter ITC Std by 75 Print edition printed and bound in Italy by L.E.G.O. S.p.A

NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

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Guide to ‘operations in practice’, examples, short cases and case studies xii

Making the most of this book and MyOMLab xvi

Preface xx

To the Instructor . . . xxii

To the Student . . . xxiii

Ten steps to getting a better grade in operations management xxiv

About the authors xxv

Acknowledgements xxvi

Part One INTRODUCTION 3

1 Operations management 4

2 Operations performance 36

3 Operations strategy 68

Part Two DESIGN 95

4 Process design 96

5 Innovation and design in services and products 125

6 Supply network design 152 Supplement to Chapter 6 – Forecasting 183

7 Layout and flow 191

8 Process technology 223

9 People, jobs and organization 251 Supplement to Chapter 9 – Work study 279

Part Three DELIVER – PLANNING AND CONTROLLING OPERATIONS 287

10 The nature of planning and control 288

11 Capacity management 322 Supplement to Chapter 11 – Analytical

queuing models 361

12 Inventory management 368

13 Supply chain management 404

14 Enterprise resource planning (ERP) 439 Supplement to Chapter 14 – Materials

requirements planning (MRP) 456

15 Lean synchronization 464

16 Project management 495

17 Quality management 534 Supplement to Chapter 17 – Statistical

process control (SPC) 562

Part Four IMPROVEMENT 577

18 Operations improvement 578

19 Risk management 610

20 Organizing for improvement 640

Part Five CORPORATE SOCIAL RESPONSIBILITY 671

21 Operations and corporate social responsibility (CSR) 672

Notes on chapters 693 Glossary 700 Index 713

Brief contents

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Why is flexibility important? 52 Why is cost important? 55 Trade-offs between performance objectives 60

Summary answers to key questions 62 Case study: Operations objectives at the

Penang Mutiara 64 Problems and applications 65 Selected further reading 66 Useful websites 67

Chapter 3 Operations strategy 68 Introduction 68

What is strategy and what is operations strategy? 70 The ‘top-down’ and ‘bottom-up’ perspectives 73 The market requirements and operations resources

perspectives 77 How can an operations strategy be put together? 86

Summary answers to key questions 89 Case study: Long Ridge Gliding Club 91 Problems and applications 92 Selected further reading 93 Useful websites 93

Contents

Guide to ‘operations in practice’, examples, short cases and case studies xii

Making the most of this book and MyOMLab xvi

Preface xx

To the Instructor . . . xxii

To the Student . . . xxiii

Ten steps to getting a better grade in operations management xxiv

About the authors xxv

Acknowledgements xxvi

Part One

Part Two

INTRODUCTION 3

Chapter 1 Operations management 4 Introduction 4

What is operations management? 6 Operations management is important in all

types of organization 8 The input–transformation–output process 13 The process hierarchy 18 Operations processes have different characteristics 23 What do operations managers do? 26

Summary answers to key questions 30 Case study: Design house partnerships at Concept

Design Services 31 Problems and applications 34 Selected further reading 34 Useful websites 35

Chapter 2 Operations performance 36 Introduction 36

Operations performance is vital for any organization 38

Why is quality important? 46 Why is speed important? 47 Why is dependability important? 49

DESIGN 95

Chapter 4 Process design 96 Introduction 96

What is process design? 97 What objectives should process design have? 98 Process types – the volume–variety effect

on process design 101 Detailed process design 109

Summary answers to key questions 120 Case study: The Action Response Applications

Processing Unit (ARAPU) 121 Problems and applications 123 Selected further reading 124 Useful websites 124

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Chapter 5 Innovation and design in services and products 125 Introduction 125

How does innovation impact on design? 127 Why is good design so important? 130 The stages of design – from concept

to specification 131 What are the benefits of interactive design? 141

Summary answers to key questions 147 Case study: Chatsworth – the adventure

playground decision 148 Problems and applications 150 Selected further reading 150 Useful websites 151

Chapter 6 Supply network design 152 Introduction 152

The supply network perspective 153 Configuring the supply network 155 Where should an operation be located? 160 Long-term capacity management 168 Break-even analysis of capacity expansion 174

Summary answers to key questions 175 Case study: Disneyland Resort Paris (abridged) 176 Problems and applications 180 Selected further reading 182 Useful websites 182

Supplement to Chapter 6 Forecasting 183 Introduction 183

Forecasting – knowing the options 183 In essence forecasting is simple 184 Approaches to forecasting 185 Selected further reading 190

Chapter 7 Layout and flow 191 Introduction 191

What is layout? 193 The basic layout types 193 What type of layout should an operation choose? 200 How should each basic layout type be

designed in detail? 204

Summary answers to key questions 217 Case study: North West Constructive Bank (abridged) 218 Problems and applications 220 Selected further reading 222 Useful websites 222

Chapter 8 Process technology 223 Introduction 223

Operations management and process technology 225

What do operations managers need to know about process technology? 225

How are process technologies evaluated? 237 How are process technologies implemented? 242

Summary answers to key questions 246 Case study: Rochem Ltd 247 Problems and applications 249 Selected further reading 249 Useful websites 250

Chapter 9 People, jobs and organization 251 Introduction 251

People in operations 253 Human resource strategy 253 Organization design 256 Job design 259 Allocate work time 271

Summary answers to key questions 273 Case study: Service Adhesives try again 274 Problems and applications 276 Selected further reading 277 Useful websites 277

Supplement to Chapter 9 Work study 279 Introduction 279

Method study in job design 279 Work measurement in job design 282

Part Three

DELIVER – PLANNING AND CONTROLLING OPERATIONS 287

Chapter 10 The nature of planning and control 288 Introduction 288

What is planning and control? 290 The effect of supply and demand on

planning and control 293 Planning and control activities 299 Controlling operations is not always routine 314

Summary answers to key questions 316

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Case study: subText Studios, Singapore (abridged) 317

Problems and applications 320 Selected further reading 321 Useful websites 321

Chapter 11 Capacity management 322 Introduction 322

What is capacity management? 324 How is capacity measured? 326 Coping with demand fluctuation 334 How can operations plan their capacity level? 343 How is capacity planning a queuing problem? 348

Summary answers to key questions 353 Case study: Blackberry Hill Farm 354 Problems and applications 358 Selected further reading 360 Useful websites 360

Supplement to Chapter 11 Analytical Queuing Models 361 Introduction 361

Notation 361 Variability 361 Incorporating Little’s law 363 Types of queuing system 363

Chapter 12 Inventory management 368 Introduction 368

What is inventory? 370 Why should there be any inventory? 372 How much to order – the volume decision 376 When to place an order – the timing decision 388 How can inventory be controlled? 392

Summary answers to key questions 398 Case study: supplies4medics.com 400 Problems and applications 401 Selected further reading 402 Useful websites 402

Chapter 13 Supply chain management 404 Introduction 404

What is supply chain management? 406 The activities of supply chain management 409 Single- and multi-sourcing 413

Relationships between operations in a supply chain 419

How do supply chains behave in practice? 424 How can supply chains be improved? 426

Summary answers to key questions 433 Case study: Supplying fast fashion 434 Problems and applications 437 Selected further reading 438 Useful websites 438

Chapter 14 Enterprise resource planning (ERP) 439 Introduction 439

What is ERP? 440 How did ERP develop? 441 Implementation of ERP systems 449

Summary answers to key questions 451 Case study: Psycho Sports Ltd 452 Problems and applications 454 Selected further reading 455 Useful websites 455

Supplement to Chapter 14 Materials requirements planning (MRP) 456 Introduction 456

Master production schedule 456 The bill of materials (BOM) 458 Inventory records 459 The MRP netting process 459 MRP capacity checks 461

Summary 463

Chapter 15 Lean synchronization 464 Introduction 464

What is lean synchronization? 465 How does lean synchronization

eliminate waste? 471 Lean synchronization applied throughout

the supply network 484 Lean synchronization compared with

other approaches 486

Summary answers to key questions 489 Case study: The National Tax Service (NTS) 490 Problems and applications 492 Selected further reading 493 Useful websites 494

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Chapter 16 Project management 495 Introduction 495

What is project management? 497 How are projects planned and controlled? 500 What is network planning? 514

Summary answers to key questions 526 Case study: United Photonics Malaysia Sdn Bhd 527 Problems and applications 531 Selected further reading 532 Useful websites 533

Chapter 17 Quality management 534 Introduction 534

What is quality and why is it so important? 536 How can quality problems be diagnosed? 540 Conformance to specification 541 Achieving conformance to specification 541 Total quality management (TQM) 548

Summary answers to key questions 556 Case study: Turnround at the Preston plant 557 Problems and applications 559 Selected further reading 560 Useful websites 560

Supplement to Chapter 17 Statistical process control (SPC) 562 Introduction 562

Control charts 562 Variation in process quality 563 Control charts for attributes 568 Control chart for variables 569 Process control, learning and knowledge 573

Summary 574 Selected further reading 574 Useful websites 574

The key elements of operations improvement 584

The broad approaches to managing improvement 588

What techniques can be used for improvement? 598

Summary answers to key questions 603 Case study: GCR Insurance 605 Problems and applications 608 Selected further reading 609 Useful websites 609

Chapter 19 Risk management 610 Introduction 610

What is risk management? 612 Assessing the potential causes of and

risks from failure 613 Preventing failure 624 How can operations mitigate the effects

of failure? 631 How can operations recover from the

effects of failure? 632

Summary answers to key questions 635 Case study: Slagelse Industrial

Services (SIS) 636 Problems and applications 638 Selected further reading 638 Useful websites 639

Chapter 20 Organizing for improvement 640 Introduction 640

Why the improvement effort needs organizing 642

Linking improvements to strategy 643 What information is needed

for improvement? 645 What should be improvement priorities? 652 How can organizational culture affect

improvement? 657 Key implementation issues 659

Summary answers to key questions 664 Case study: Re-inventing Singapore’s

libraries 666 Problems and applications 667 Selected further reading 668 Useful websites 668

Part Four

IMPROVEMENT 577

Chapter 18 Operations improvement 578 Introduction 578

Why is improvement so important in operations management? 580

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Part Five

CORPORATE SOCIAL RESPONSIBILITY 671

Chapter 21 Operations and corporate social responsibility (CSR) 672 Introduction 672

What is corporate social responsibility? 674 The wider view of corporate social responsibility 679

How can operations managers analyse CSR issues? 686

Summary answers to key questions 689 Case study: CSR as it is presented 690 Problems and applications 691 Selected further reading 691 Useful websites 691

Notes on chapters 693

Glossary 700

Index 713

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Guide to ‘operations in practice’, examples, short cases and case studies

Chapter Location Company/example Region Sector/activity Company size

Chapter 1 Operations management

p. 5 IKEA Global Retail Large p. 11 Torchbox UK Web design Small p. 12 MSF Global Charity Large p. 15 First Direct UK Banking Large p. 18 Pret A Manger Europe/USA Retail Medium p. 24 Formule 1 Europe Hospitality Large p. 25 Anantara Bangkok Riverside

Resort & Spa Thailand Hospitality Medium

p. 28 To be a great operations manager you need to . . .

General General N/A

p. 31 Concept Design Services UK Design/manufactur- ing/distribution

Medium

Chapter 2 Operations performance

p. 37 A tale of two terminals UK Airport Medium p. 44 Patagonia, a B Corp Global Garment

manufacturing Large

p. 49 Organically good quality UK Agricultural Small p. 50 When speed means life or

death General Health care Medium

p. 51 How UPS maintains its dependability

Global Distribution Large

p. 53 566 quadrillion individual muesli mixes

German Web retail Small

p. 56 Everyday low prices at Aldi Europe Retail Large p. 57 Can cost cutting go too far? China Manufacturing Large p. 64 The Penang Mutiara Malaysia Hospitality Medium

Chapter 3 Operations strategy

p. 69 Flextronix and Ryanair Europe MSC/airline Large p. 76 Apple’s retail operations

strategy Global Retail Large

p. 83 Amazon, so what exactly is your core competence?

Global Web retail Large

p. 85 Apple’s supply operations strategy

Global Manufacturing Large

p. 89 Sometimes any plan is better than no plan

European Military Large

p. 91 Long Ridge Gliding Club UK Sport Small

Chapter 4 Process design

p. 97 Fast-food drive-throughs USA Quick service restaurant Large p. 101 Ecover’s ethical operation

design Belgium/ France

Manufacturing Large

p. 109 Space4 housing processes UK Construction Medium p. 119 Heathrow delays caused by

capacity utilization UK Airport Large

p. 121 The Action Response Appli- cations Processing Unit

UK Charity Small

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Chapter Location Company/example Region Sector/activity Company size

Chapter 5 Innovation and design in services and products

p. 126 Innovative design from Dyson Global Design/manufacturing Large p. 129 The sad tale of Kodak and its

digital camera Global Manufacturing Large

p. 133 Square watermelons! Global Agriculture/retail Large p. 136 Daniel Hersheson Blow Dry

Bar UK Hairdresser Small

p. 138 Customizing for kids UK Media Small p. 144 The troubled history of the

Airbus A380 Global Aerospace Large

p. 148 Chatsworth UK Tourism Medium

Chapter 6 Supply network design

p. 153 Dell Global Computer manufacturing

Large

p. 159 HTC Taiwan Design/telecoms Large p. 162 Tata Nano India Car manufacturing Large p. 164 Counting clusters Global Various Various p. 170 Economies of scale in heart

surgery and shipping Various Health care/shipping Medium/Large

p. 176 Disneyland Resort Paris France Entertainment Large

Chapter 7 Layout and flow

p. 192 Tesco UK Retail Large p. 195 ‘Factory flow’ helps surgery

productivity UK Health care Medium

p. 199 Apple’s shop-within-a-shop in Harrods

UK Retail Large

p. 201 Cadbury’s UK Entertainment/ manufacturing

Large

p. 204 The transparent factory Germany Manufacturing Large p. 218 North West Constructive

Bank UK Financial services Medium

Chapter 8 Process technology

p. 224 I, Robot All Various Various p. 228 Customers are not always

human Netherlands Agriculture Medium

p. 229 QB House Asia Hairdressing Medium p. 244 Who’s in the cockpit? All Airlines Large p. 247 Rochem Ltd UK Food processing Medium

Chapter 9 People, jobs and organization

p. 252 W.L. Gore Global Manufacturing Large p. 255 Google Global Internet Large p. 266 McDonald’s UK Restaurants Large p. 268 Lloyds TSB UK Banking Large p. 274 Service Adhesives Europe Manufacturing Large

Chapter 10 The nature of planning and control

p. 289 BMW dealership UK Service and repair Medium p. 293 Air France Global Airline Large p. 297 Taxi App replaces dispatch-

ing office Germany Software development Medium

p. 302 Can airline passengers be sequenced?

Global Airlines Large

p. 304 The hospital triage system All Health care Large p. 309 Chicken salad sandwich –

part one All Food processing Large

p. 317 subText Studios Singapore CGI Small

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Chapter Location Company/example Region Sector/activity Company size

Chapter 11 Capacity management

p. 323 Amazon’s ‘Cyber Monday’ UK Web retailing Large p. 328 Raining on their parade Global Various Various p. 334 The London Eye UK Tourism Medium p. 335 Panettone Italy Manufacturing Medium p. 339 Annualized hours help

Lowaters to retain its core team

UK Horticulture Small

p. 342 Getting the message All Design Large p. 354 Blackberry Hill Farm UK Tourism Small

Chapter 12 Inventory planning and control

p. 369 UK’s National Blood Service UK Health care Large p. 378 Mountains of grit UK Local government Medium p. 386 Howard Smith Paper Group UK Distribution service Large p. 400 supplies4medics.com Belgium Distribution Medium

Chapter 13 Supply chain management

p. 405 Ocado UK Web retail Large p. 412 The North Face Global Manufacturing Large p. 417 Levi Strauss Global Garment design/

retailing Large

p. 418 TDG Europe Logistics services Large p. 430 Seven-Eleven Japan Japan Retail Large p. 432 Tsunami disrupts Japan’s

global supply chains Japan/ global

Various Large

p. 434 Supplying fast fashion: H&M, Benetton and Zara

Global Design/manufactur- ing/distribution/retail

Large

Chapter 14 Enterprise resource planning

p. 440 Butcher’s Pet Care UK Pet food Medium p. 443 SAP and its partners Global Various Various p. 444 Chicken salad sandwich –

part two All Food processing Large

p. 447 SAP at Rolls-Royce Global Aerospace Large p. 449 Waste management USA Waste disposal Large p. 452 Psycho Sports All Manufacturing Small

Chapter 15 Lean synchro- nization

p. 465 Toyota Global Auto manufacturing Large p. 477 Bolton Hospitals NHS Trust UK Health care Large p. 479 Torchbox UK Web design Small p. 490 The National Tax Service

(NTS) Not specified

Government Large

Chapter 16 Project management

p. 496 The Millau bridge France Construction Large p. 503 The National Trust UK Heritage Various p. 513 Imagineering projects at

Disney Global Leisure Large

p. 527 United Photonics Malaysia Sdb Bgd

Malaysia Research and development

Medium

Chapter 17 Quality management

p. 535 Four Seasons Hotel Global/UK Hospitality Large p. 538 Tea and Sympathy USA Hospitality Small p. 539 Magic Moments Not speci-

fied Photography services Small

p. 544 The Swiss Army Knife Switzerland Mfg Large p. 546 Surgical statistics USA Healthcare Medium p. 547 What a giveaway Various Food processing Various p. 551 Google Global Internet Large p. 553 Deliberate defectives Canada/

Japan Computer hardware Large

p. 557 Preston plant Canada Paper processing Medium

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Chapter Location Company/example Region Sector/activity Company size

Chapter 18 Operations improvement

p. 579 TNT Global Logistics Large p. 583 The Checklist Manifesto Global Health care Various p. 589 Heineken International Netherlands Brewery Large p. 595 Six Sigma at Xchanging UK Financial services Medium p. 605 GCR Insurance Global Insurance Large

Chapter 19 Risk management

p. 611 Cadbury UK Food Large p. 614 Risk and human error All Airlines Large p. 630 Otis Maintenance

Management System Global Facilities services Large

p. 636 Slagelse Industrial Services (SIS)

Denmark Manufacturing Large

Chapter 20 Organizing for improvement

p. 641 Sonae Corporation Portugal Retail Large p. 649 Taxing quality Denmark Government service Large p. 660 Learning from Formula 1 Global Distribution Large p. 662 Work-Out at GE Global Various Large p. 666 Re-inventing Singapore’s

Libraries Singapore Government services Large

Chapter 21 Corporate social responsibility

p. 673 Marmite UK Food processing Large p. 676 Holcim Global Quarrying Large p. 679 Hewlett-Packard USA Information systems Large p. 684 The Gap Global Retail Large p. 690 CSR as it is presented:

HSBC, Orange, John Lewis Partnership and Starbucks

Various Various Large

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Making the most of this book and MyOMLab

Check your understanding Each chapter opens with a set of Key questions to identify major topics. Summary answers conclude the chapter. You can check your understanding of each chapter by taking the Sample tests of self-assessment questions on MyOMLab at www.myomlab.com .

Figure 3.1 ygetarts snoitarepo senimaxe retpahc sihT

3 ygetarts snoitarepO INTRODUCTION

ro tnerruc sti fo tcepsa yreve liated ni nalp nac noitazinagro oN future actions, but all organizations need some strategic direction and so can benefit from some idea of where they are heading and how they could get there. Once the operations function has understood its role in the business and after it has articulated its performance objectives, it needs to formulate a set of general principles which will guide its decision making. This is the operations strategy of the company. Yet the concept of ‘strategy’ itself is not straightforward; neither is operations strategy. Here we consider four perspectives, each of which goes partway to

1.3 erugiF .ygetarts snoitarepo epahs taht secrof eht gnitartsulli shows the position of the ideas described in this chapter in the general model of operations management.

Operations performance

Operations strategy

Operations management

Topic covered in this chapter

Operations management

Direct

Design Develop

Deliver

❯ si tahw dna ygetarts si tahW ?ygetarts snoitarepo

❯ neewteb ecnereffid eht si tahW a ‘top-down’ and a ‘bottom-up’

?ygetarts snoitarepo fo weiv

❯ neewteb ecnereffid eht si tahW a ‘market requirements’ and an ‘operations resources’ view of

?ygetarts snoitarepo

❯ ygetarts snoitarepo na nac woH ?rehtegot tup eb

Key questions

Check and improve your understanding of this chapter using self-assessment questions and a personalized study plan, a video case study, and an eText – all at www.myomlab.com .

● tcudorp fo seitivitca yratnemelpmoc eht fi lufsseccus eb ot ylekil erom si ytivitca ngised sihT .detanidrooc era ngised ssecorp dna ngised ecivres ro

❯ ?evah ngised ssecorp dluohs sevitcejbo tahW

● gniveihca hguorht sremotsuc fo sdeen eht teem ot si ngised ssecorp fo esoprup llarevo ehT .tsoc dna ytilibixe fl ,ytilibadneped ,deeps ,ytilauq fo slevel etairporppa

● -imaxe edulcni esehT .seussi latnemnorivne fo tnuocca ekat osla tsum ytivitca ngised ehT nation of the source and suitability of materials, the sources and quantities of energy consumed, the amount and type of waste material, the life of the product itself, and the

.tcudorp eht fo etats efil-fo-dne

❯ ?ngised ssecorp tceffa yteirav dna emulov od woH

● ti tahw fo yteirav dna emulov eht yb decneu flni ylgnorts si ssecorp yna fo erutan llarevo ehT .ssecorp ot sah

● ssecorp llarevo tceffa yteirav dna emulov woh sezirammus sepyt ssecorp fo tpecnoc ehT .ngised

● gnisaerced dna emulov gnisaercni fo redro ni( era sepyt ssecorp eseht ,gnirutcafunam nI variety) project, jobbing, batch, mass and continuous processes. In service operations, although there is less consensus on the terminology, the terms often used (again in order of increasing volume and decreasing variety) are professional services, service shops and mass

.secivres

❯ ?liated ni dengised sessecorp era woH

● netfO .seitivitca laudividni rieht otni nwod meht gnikaerb yb yllaitini dengised era sessecorP common symbols are used to represent types of activity. The sequence of activities in a process is then indicated by the sequence of symbols representing activities. This is called ‘process mapping’. Alternative process designs can be compared using process maps and

.sevitcejbo ecnamrofrep snoitarepo rieht fo smret ni deredisnoc sessecorp devorpmi

● era emit elcyc dna ,ssergorp-ni-krow ,emit tuphguorht fo smret ni ecnamrofrep ssecorP related by a formula known as Little’s law: throughput time equals work-in-progress multi-

.emit elcyc yb deilp

● -noitaler eht ylralucitrap ,sessecorp fo ecnamrofrep eht no tceffe tnac fiingis a sah ytilibairaV .noitazilitu dna emit gnitiaw neewteb pihs

120 PART TWO DESIGN

SUMMARY ANSWERS TO KEY QUESTIONS

a dna snoitseuq tnemssessa-fles gnisu retpahc siht fo gnidnatsrednu ruoy evorpmi dna kcehC ta lla – txeTe na dna ,yduts esac oediv a ,nalp yduts dezilanosrep www.myomlab.com .

❯ ?ngised ssecorp si tahW

● dna stcudorp htob fo esoprup dna mrof lacisyhp eht sepahs hcihw ytivitca eht si ngiseD .meht ecudorp taht sessecorp eht dna secivres

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xvii

Practice makes perfect Worked examples show how quantitative and qualitative techniques can be used in operations management. Problems and applications at the end of the chapter allow you to apply these techniques, and you can get more practice as well as guided solutions from the Study plan on MyOMLab at www.myomlab.com .

CHAPTER 20 ORGANIZING FOR IMPROVEMENT 655

Worked example

-leved dna hcraeser tuo seirrac tI .ynapmoc scinortcele na fo yraidisbus a si seirotarobaL LXE opment as well as technical problem-solving work for a wide range of companies, including companies in its own group. It is particularly keen to improve the level of service which it gives to its customers. However, it needs to decide which aspect of its performance to improve first. It has devised a list of the most important aspects of its service:

● snoitulos lacinhcet sti fo ytilauq ehT .sremotsuc yb ssenetairporppa deviecrep eht – ● The quality of its communications with customers fo ssenlufesu dna ycneuqerf eht –

.noitamrofni ● The quality of post-project documentation hcihw noitatnemucod eht fo ssenlufesu eht –

.troper lanif eht htiw seog ● Delivery speed .troper lanif eht fo yreviled eht dna tseuqer remotsuc neewteb emit eht – ● ytilibadneped yrevileD .etad desimorp eht no reviled ot ytiliba eht – ● Delivery flexibility .etad desiver a no troper eht reviled ot ytiliba eht – ● ytilibixelf noitacificepS .noitagitsevni eht fo erutan eht egnahc ot ytiliba eht – ● Price .remotsuc eht ot egrahc latot eht –

dna 8.02 erugiF ni debircsed elacs 9–1 eht gnisu srotcaf eseht fo hcae ot erocs a dengissa LXE then turned their attention to judging the laboratory’s performance against competitor organi- zations. Although they have benchmarked information for some aspects of performance, they

. 01.02 erugiF ni nwohs era serocs eseht htoB .srehto eht rof setamitse ekam ot evah fo hcae ot nevig dah ti sgnitar ecnamrofrep dna ecnatropmi eht dettolp seirotarobaL LXE tI . 11.02 erugiF ni nwohs si sihT .xirtam ecnamrofrep–ecnatropmi na no srotcaf evititepmoc sti

shows that the most important aspect of competitiveness – the ability to deliver sound tech- nical solutions to its customers – falls comfortably within the appropriate zone. Specification flexibility and delivery flexibility are also in the appropriate zone, although only just. Both delivery speed and delivery dependability seem to be in need of improvement as each is below the minimum level of acceptability for their respective importance positions. However, two competitive factors, communications and cost/price, are clearly in need of immediate improvement. These two factors should therefore be assigned the most urgent priority for improvement. The matrix also indicates that the company’s documentation could almost be regarded as ‘too good’.

Figure 20.10 ’srotitepmoc tsniaga ecnamrofrep‘ dna ’sremotsuc ot ecnatropmi‘ gnitaR seirotarobaL LXE rof selacs tniop-enin eht no

608 PART FOUR IMPROVEMENT

erom dnif nac uoY .snoitarepo fo sisylana ruoy evorpmi ot pleh lliw snoitacilppa dna smelborp esehT practice problems as well as worked examples and guided solutions on MyOMLab at www.myomlab.com .

1 hcum os dneps ot evah I dluohs‘ thguoht ehs ,’yhW‘ .etummoc yliad reh fo kcis saw eihpoS time in a morning stuck in traffic listening to some babbling halfwit on the radio? We can work flexi-time after all. Perhaps I should leave the apartment at some other time?’ So resolved, Sophie deliberately varied her time of departure from her usual 8.30. Also, being an organ- ized soul, she recorded her time of departure each day and her journey time. Her records are

.1.81 elbaT ni nwohs (a) .tnemtrapa reh evael ot emit tseb eht no ediced eihpoS pleh lliw taht margaid rettacs a warD (b) ot netsil ot gnivah morf devas eb ot tcepxe ehs dluohs keew )yad 5( rep emit hcum woH

?tiwflah gnilbbab a

SNOITACILPPA DNA SMELBORP

Table 18.1 )setunim ni( semit yenruoj s’eihpoS

Day gnivaeL time

yenruoJ time

yaD gnivaeL time

yenruoJ time

yaD gnivaeL time

yenruoJ time

1 51.7 91 6 54.8 04 11 53.8 64

2 51.8 04 7 55.8 32 21 04.8 54

3 03.7 52 8 55.7 13 31 02.8 74

4 02.7 91 9 04.7 22 41 00.8 43

5 04.8 64 01 03.8 94 51 54.7 72

2 stcudorp ytilauq-hgih rof noitatuper sti fo duorp saw ynapmoc retnirp resaL deepsotnirP ehT and services. Because of this it was especially concerned with the problems that it was hav- ing with its customers returning defective toner cartridges. About 2,000 of these were being returned every month. Its European service team suspected that not all the returns were actu- ally the result of a faulty product, which is why the team decided to investigate the problem. Three major problems were identified. First, some users were not as familiar as they should have been with the correct method of loading the cartridge into the printer, or in being able to solve their own minor printing problems. Second, some of the dealers were also unaware of how to sort out minor problems. Third, there was clearly some abuse of Printospeed’s ‘no-questions-asked’ returns policy. Empty toner cartridges were being sent to unauthorized refilling companies who would sell the refilled cartridges at reduced prices. Some cartridges were being refilled up to five times and were understandably wearing out. Furthermore, the toner in the refilled cartridges was often not up to Printospeed’s high quality standards. (a) yna dna ,denoitnem sesuac elbissop eht htob sedulcni taht margaid tceffe–esuac a warD

.gnitagitsevni htrow kniht uoy taht sesuac elbissop rehto (b) ycilop snruter ’deksa-snoitseuq-on‘ eht fo esuba degella eht fo noinipo ruoy si tahW

?deepsotnirP yb detpoda

3 -nevnocni fo eerged emos uoy desuac taht eruliaf ecivres ro tcudorp tsal eht ot kcab knihT ience. Draw a cause–effect diagram that identifies all the main causes of why the failure could have occurred. Try to identify the frequency with which such causes happen. This could be done by talking with the staff of the operation that provided the service. Draw a Pareto dia- gram that indicates the relative frequency of each cause of failure. Suggest ways in which the

.eruliaf fo secnahc eht ecuder dluoc noitarepo

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xviii

Analyse operations in action The Operations in practice and Case study features in each chapter illustrate and encourage you to analyse operations management in action. You can see and hear more about how theory is applied in practice in the video clips in the Multimedia library in MyOMLab at www.myomlab.com .

126 PART TWO DESIGN

OPERATIONS IN PRACTICE

a rehtegot tup relgnapS yarruM dellac rotinaj a 7091 nI pillowcase, a fan, an old biscuit tin, and a broom han- dle. It was a great innovation – the world’s first vacuum cleaner – but not one that he ever capitalized on. One year later he had sold his patented idea to William Hoover whose company went on to dominate the vac- uum cleaner market for decades, especially in its United States homeland. Yet between 2002 and 2005 Hoover’s market share dropped from 36 per cent to 13.5 per cent. Why? Because a futuristic-looking and comparatively expensive rival product, the Dyson vacuum cleaner, had jumped from nothing to over 20 per cent of the mar- ket. In fact, the Dyson product dates back to 1978 when James (now Sir James) Dyson noticed how the air filter in the spray-finishing room of a company where he had been working was constantly clogging with power parti- cles ( just like a vacuum cleaner bag clogs with dust). So he designed and built an industrial cyclone tower, which removed the powder particles by exerting centrifugal

‘ ,saw mih gniugirtni noitseuq ehT .secrof Could the same principle work in a domestic vacuum cleaner? ’

evif dna sraey eviF thousand eh retal sepytotorp had a working design, since praised for its ‘uniqueness and functionality’. However, existing vacuum cleaner manufacturers were not as impressed – two rejected the design outright. So Dyson started making his new design himself. Within a few years Dyson cleaners were, in the UK, outselling the rivals who had once rejected them. The aesthetics and functionality of the design help to keep sales growing in spite of a higher retail price. To

‘ ngised doog ,nosyD is about looking at everyday things with new eyes and working out how they can be made bet- ter. It’s about challenging existing technology. ’

eno ygolonhcet eht koot neht sreenigne nosyD ehT stage further and developed core separator technology to capture even more microscopic dirt. Dirt now goes through three stages of separation. Firstly, dirt is drawn into a powerful outer cyclone. Centrifugal forces fling larger debris such as pet hair and dust particles into the clear bin at 500Gs (the maximum G-force the human body can take is 8Gs). Second, a further cyclonic stage, the core separa- tor, removes dust particles as small as 0.5 microns from the airflow; particles so small you could fit 200 of them on this full stop. Finally, a cluster of smaller, even faster cyclones generate centrifugal forces of up to 150,000G – extracting particles as small as mould and bacteria.

eht emac 6002 nI .dewollof snoitavonni rehtO Dyson Airblade TM naht rehtaR .reyrd dnah cirtcele na , using a broad, relatively unfocused hot air jet, the Dyson engineers decided to use a ‘blade’ of cool air that emerges from the dryer at around four hundred miles per hour (643 km/hr). The advantage of this

innovation is that it dries hands quicker (around 10 seconds) and uses less electricity than conventional hand dryers. Then came the Dyson Air Multiplier™. These are fans and fan heaters that work very differ- ently to conventional fans and electric heaters. They don’t have fast-spinning blades that chop the air and cause uncomfortable buffeting. Instead, they use Air Multiplier™ technology to draw in air and amplify it up to 18 times, producing an uninterrupted stream of smooth air. Sir James, who remains chief engineer and sole shareholder in Dyson, is enthusiastic about the Air Multiplier™. ‘ This ]sretaeh cirtcele[ business is at least as large as the vacuum cleaner sector and I hope we will do as well in this as we have done in floor cleaners’, eh said. ‘ One of the benefits of the new device is that it will heat all the air in the room to reduce the effect of hot and cold spots. Sensors measure the temperature of the surrounding air so that once the desired temperature is reached, the system cuts out, making the product much more efficient and useful than comparable heaters. eH ’ said the new heater was part of the company’s effort to turn itself into a ‘ broad-line technology company rehtar ’

‘ .rekam ecnailppa na ylno sa nees gnieb naht I would not limit the company to particular areas of technology or markets. We are developing a range of technologies to improve both industrial and consumer products so that the people using them get a better experience than with the comparable items that currently exist.’

nosyD morf ngised evitavonnI 1

So ur

ce : D

ys on

L td

.

CASE STUDY Rochem Ltd

‘ .repmet sih gnisol saw sedohR rD It should be a simple enough decision. There are only two alternatives. You are only being asked to choose a machine! ’

dekool eettimmoC tnemeganaM ehT abashed. Rochem Ltd was one of the largest independent companies supplying the food- processing industry. Its initial success had come with a food preservative used mainly for meat- based products and marketed under the name of ‘Lerentyl’. Other products were subsequently developed in the food colouring and food container coating fields, so that now Lerentyl accounted for only 25 per cent of total company sales, which were now slightly over £10 million.

The decision detaler ysrevortnoc hcus saw ereht hcihw revo melborp ehT

to the replacement of one of the process units used to manufacture Lerentyl. Only two such units were used; both were ‘Chemling’ machines. It was the older of the two Chemling units which was giving trouble. High breakdown figures, with erratic quality levels, meant that output-level requirements were only just being reached. The problem was: should the company replace the ageing Chemling with a new Chemling, or should it buy the only other plant on the market capable of the required process, the ‘AFU’ unit? The Chief Chemist’s staff had drawn up a comparison of the

. 5.8 elbaT ni nwohs ,stinu owt ylwen eht saw melborp eht gniredisnoc ydob ehT

formed Management Committee. The committee consisted

of the four senior managers in the firm: the Chief Chemist and the Marketing Manager, who had been with the firm since its beginning, together with the Production Manager and the Accountant, both of whom had joined the com- pany only six months before.

noitamrofni eht fo noisrev desnednoc a si swollof tahW presented by each manager to the committee, together

.noisiced eht ot sedutitta rieht htiw

The Marketing Manager dehcaer dah evitavreserp fo epyt siht rof tekram tnerruc ehT

a size of some £5 million, of which Rochem Ltd supplied approximately 48 per cent. There had, of late, been signifi- cant changes in the market – in particular, many of the users

Table 8.5 senihcam evitanretla owt eht fo nosirapmoc A

CHAPTER 8 PROCESS TECHNOLOGY 247

GNILMEHC UFA

Capital cost 000,095£ 000,088£

Processing costs htnom/000,51£ :dexiF htnom/000,04£ :dexiF

gk/057£ :elbairaV gk/006£ :elbairaV

Design capacity htnom/gk 501 htnom/gk 041

89 ; 0.7% purity 5.99 ; 0.2% purity

Quality gnitset launaM gnitset citamotuA

Maintenance gnicivres sdeen tub etauqedA doog ylbaborp – nwonk toN

After-sales services doog yreV doog eb ot ylekilnu – nwonk toN

Delivery shtnom eerhT etaidemmI

So ur

ce : P

re ss

A ss

o ci

at io

n Im

ag es

(P A

P h

o to

s)

Making the most of this book and MyOMLab (continued)

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xix

Take a different view Critical commentaries , together with Selected further reading and Useful websites at the end of each chapter, show a diversity of viewpoint and encourage you to think critically about operations management. You can link to the Useful websites in the Multimedia library of MyOMLab at www.myomlab.com .

332 PART THREE DELIVER – PLANNING AND CONTROLLING OPERATIONS

-liava ni noitcuder eht fo emoS .retpahc suoiverp eht ni 4.01 erugiF ni desu erew sa emit ’tsol‘ able capacity of a piece of equipment (or any process) is caused by time losses such as set-up and changeover losses (when the equipment or process is being prepared for its next activity), and breakdown failures when the machine is being repaired. Some capacity is lost through speed losses such as when equipment is idling (for example, when it is temporarily waiting for work from another process) and when equipment is being run below its optimum work rate. Finally, not everything processed by a piece of equipment will be error free. So some capacity is lost through quality losses.

: 4.11 erugiF ni noitaton eht gnikaT

OEE = a * p * q

yratnemmoc lacitirC

si yticapac woh ni noitazidradnats elttil ylgnisirprus si ereht ,cipot tnatropmi na hcus roF measured. Not only is a reasonably accurate measure of capacity needed for operations planning and control, it is also needed to decide whether it is worth investing in extra physical capacity such as machines. Yet not all practitioners would agree with the way in which design and effective capacity have been defi ned or measured in the previous worked example. For example, some would argue that the fi rst fi ve categories do not .’secnerrucco dennalp ,elbadiovanu ylbanosaer fo ecneuqesnoc a‘ sa rucco Product changeover set-ups can be reduced, allocating work in a different manner between processes could reduce the amount of time when no work is scheduled, even re-examining preventative maintenance schedules could lead to a reduction in lost time. One school of thought is that whatever capacity effi ciency measures are used, they should be useful as diagnostic measures which can highlight the root causes of ineffi cient use of capacity. The idea of overall equipment effectiveness (OEE) described next is often put forward as a useful way of measuring capacity effi ciencies.

Figure 11.4 ssenevitceffe tnempiuqe gnitarepO

360 PART THREE DELIVER – PLANNING AND CONTROLLING OPERATIONS

SELECTED FURTHER READING

Brandimarte, P. and Villa, A. (1999) Modelling Manufacturing Systems: From Aggregate Planning to Real Time Control, Springer, New York. Very academic, although it does contain some interest- ing pieces if you need to get ‘under the skin’ of the subject.

Hopp, W.J. and Spearman, M.L. (2000) Factory Physics, 2nd edn, McGraw-Hill, New York. Very mathematical indeed, but includes some interesting maths on queuing theory.

Olhager, J., Rudberg, M. and Wikner, J. (2001) Long-term capacity management: linking the per- spectives from manufacturing strategy and sales and operations planning, International Journal of Production Economics, vol. 69, issue 2, 215–225. Academic article, but interesting.

Vollmann, T., Berry, W., Whybark, D.C. and Jacobs, F.R. (2004) Manufacturing Planning and Control Systems for Supply Chain Management: The Definitive Guide for Professionals, McGraw- Hill Higher Education, New York. The latest version of the ‘bible’ of manufacturing planning and control. It’s exhaustive in its coverage of all aspects of planning and control, including aggregate planning.

USEFUL WEBSITES

www.bis.gov.uk/policies/employment-matters/strategies Website of the Employment Relations Directorate who have developed a framework for employers and employees which promotes a skilled and flexible labour market founded on principles of partnership.

www.worksmart.org.uk/index.php This site is from the Trades Union Congress. Its aim is ‘to help today’s working people get the best out of the world of work’.

www.dol.gov/index.htm US Department of Labor’s site with information regarding using part- time employees.

www.downtimecentral.com Lots of information on operational equipment efficiency (OEE).

www.myomlab.com Test which sections you have mastered and which you need to review, with questions, a personalized study plan, video clips, guided solutions, and cases.

www.opsman.org Useful materials.

http://operationsroom.wordpress.com Stanford University’s take on topical operations stories.

www.iomnet.org The Institute of Operations Management site. One of the main professional bod- ies for the subject.

www.poms.org A US academic society for production and operations management. Academic, but some useful material, including a link to an encyclopedia of operations management terms.

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Preface

Introduction Operations management is important . It is concerned with creating the services and products upon which we all depend. And all organizations produce some mixture of services and products, whether that organization is large or small, manufacturing or service, for profit or not for profit, public or private. Thankfully, most companies have now come to understand the importance of opera- tions. This is because they have realized that effective operations management gives the potential to improve both efficiency and customer service simultaneously. But more than this, operations management is everywhere , it is not confined to the operations function. All manag- ers, whether they are called Operations or Marketing or Human Resources or Finance, or whatever, manage pro- cesses and serve customers (internal or external). This makes at least part of their activities ‘operations’.

Operations management is also exciting . It is at the centre of so many of the changes affecting the business world – changes in customer preference, changes in supply networks brought about by internet-based technologies, changes in what we want to do at work, how we want to work, where we want to work, and so on. There has rarely been a time when operations management was more topi- cal or more at the heart of business and cultural shifts.

Operations management is also challenging . Pro- moting the creativity which will allow organizations to respond to so many changes is becoming the prime task of operations managers. It is they who must find the solutions to technological and environmental chal- lenges, the pressures to be socially responsible, the increasing globalization of markets and the difficult- to-define areas of knowledge management.

The aim of this book This book provides a clear, authoritative, well-structured and interesting treatment of operations management as it applies to a variety of businesses and organizations. The text provides both a logical path through the activi- ties of operations management and an understanding of their strategic context.

More specifically, this text is:

● Strategic in its perspective. It is unambiguous in treating the operations function as being central to competitiveness.

● Conceptual in the way it explains the reasons why operations managers need to take decisions.

● Comprehensive in its coverage of the significant ideas and issues which are relevant to most types of operation.

● Practical in that the issues and challenges of making operations management decisions in practice are dis- cussed. The ‘Operations in practice’ feature, which starts every chapter, the short cases that appear through the chapters and the case studies at the end of each chapter all explore the approaches taken by operations managers in practice.

● International in the examples which are used. There are over 120 descriptions of operations practice from all over the world.

● Balanced in its treatment. This means we reflect the balance of economic activity between service and manufacturing operations. Around seventy-five per cent of examples are from service organizations and twenty-five per cent from manufacturing.

Who should use this book? Anyone who is interested in how services and products are created.

● Undergraduates on business studies, technical or joint degrees should find it sufficiently structured to provide an understandable route through the subject (no prior knowledge of the area is assumed).

● MBA students should find that its practical discus- sions of operations management activities enhance their own experience.

● Postgraduate students on other specialist masters degrees should find that it provides them with a well-grounded and, at times, critical approach to the subject.

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Distinctive features

Clear structure The structure of the book uses a model of opera- tions management which distinguishes between direct, design, deliver and develop.

Illustrations-based Operations management is a practical subject and can- not be taught satisfactorily in a purely theoretical manner. Because of this, we have used examples and ‘boxed’ short cases which explain issues faced by real operations.

Worked examples Operations management is a subject that blends quali- tative and quantitative perspectives; ‘worked examples’ are used to demonstrate how both types of technique can be used.

Critical commentaries Not everyone agrees about what is the best approach to the various topics and issues with operations man- agement. This is why we have included ‘critical com- mentaries’ that pose alternative views to the one being expressed in the main flow of the text.

Summary answers to key questions Each chapter is summarized in the form of a list of bullet points. These extract the essential points which answer the key questions posed at the beginning of each chapter.

Case studies Every chapter includes a case study suitable for class discussion. The cases are usually short enough to serve as illustrations, but have sufficient content also to serve as the basis of case sessions.

Problems and applications Every chapter includes a set of problem-type exercises. These can be used to check out your understanding of the concepts illustrated in the worked examples. There are also activities that support the learning objectives of the chapter that can be done individually or in groups.

Selected further reading Every chapter ends with a short list of further reading which takes the topics covered in the chapter further, or treats some important related issues. The nature of each further reading is also explained.

Useful websites A short list of web addresses is included in each chapter for those who wish to take their studies further.

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Teaching and learning resources for the 7th edition

To the Instructor . . .

New for the seventh edition Our users have been, as usual, very generous in answer- ing our questions as to how we can improve the book. Our research for the 7th edition resulted in maintaining the successful structure of previous editions and incor- porating the following key changes:

● The topic of Corporate Social Responsibility (CSR) has been emphasized further, both in the final chapter and throughout the book.

● We have further strengthened the emphasis on the idea that ‘operations management’ is relevant to every functional area of the organization.

● The ‘Operations in Practice’ that are used to introduce the topic at the beginning of each chapter and the ‘Short case’ sections have been substantially refreshed.

● New ideas in operations management have been included in order to keep the text up to date with

the latest trends while retaining its emphasis on the foundations of the subject.

● Several of the cases at the end of the chapter are new (but the old ones are still available on the website), and provide an up-to-date selection of operations issues.

● The book has been visually redesigned to aid learning.

Instructor’s resources A completely new instructor’s manual is available to lec- turers adopting this textbook, together with PowerPoint presentations for each chapter and a Testbank of assess- ment questions. Visit www.pearsoned.co.uk/slack to access these.

Most importantly, a new set of online resources to enable students to check their understanding, practise key tech- niques and improve their problem-solving skills now accom- panies the book. Please see below for details of MyOMLab.

The key to greater understanding and better grades in Operations Management!

MyOMLab for instructors

MyOMLab is designed to save you time in preparing and delivering assignments and assessments for your course, and to enable your students to study independently and at their own pace. Using MyOMLab, you can take advantage of:

● A wide range of engaging resources, including PowerPoint slides and video.

● Hundreds of self-assessment questions, including algorithmically-generated quantitative values which generate a different problem every time.

● A Homework feature, allowing you to assign work for your students to prepare for your next class or seminar.

● A Gradebook which tracks students’ performance on sample tests as well as assessments of your own design.

If you’d like to learn more or fi nd out how MyOMLab could help you, please contact your local Pearson representative at www.pearsoned.co.uk/replocator or visit www.myomlab.com .

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Making the most of this book

To the Student . . .

All academic textbooks in business management are, to some extent, simplifications of the messy reality which is actual organizational life. Any book has to separate topics, in order to study them, which in reality are closely related. For example, technology choice impacts on job design which in turn impacts on quality control; yet we have treated these topics individually. The first hint therefore in using this book effectively is to look out for all the links between the individual topics. Similarly with the sequence of topics, although the chapters fol- low a logical structure, they need not be studied in this order. Every chapter is, more or less, self-contained. Therefore, study the chapters in whatever sequence is appropriate to your course or your individual interests. But because each part has an introductory chapter, those students who wish to start with a brief ‘overview’ of the subject may wish first to study Chapters 1, 4, 10 and 18 and the chapter summaries of selected chapters. The same applies to revision – study the introductory chapters and summary answers to key questions.

The book makes full use of the many practical exam- ples and illustrations which can be found in all opera- tions. Many of these were provided by our contacts in companies, but many also come from journals, maga- zines and newspapers. So if you want to understand the importance of operations management in everyday busi- ness life, look for examples and illustrations of operations

management decisions and activities in newspapers and magazines. There are also examples which you can observe every day. Whenever you use a shop, eat a meal in a restaurant, borrow a book from the library or ride on public transport, consider the operations management issues of all the operations for which you are a customer.

The case exercises and study activities are there to provide an opportunity for you to think further about the ideas discussed in the chapters. Study activities can be used to test out your understanding of the specific points and issues discussed in the chapter and discuss them as a group, if you choose. If you cannot answer these you should revisit the relevant parts of the chap- ter. The case exercises at the end of each chapter will require some more thought. Use the questions at the end of each case exercise to guide you through the logic of analysing the issue treated in the case. When you have done this individually, try to discuss your analy- sis with other course members. Most important of all, every time you analyse one of the case exercises (or any other case or example in operations management), start off your analysis with the two fundamental questions:

● How is this organization trying to compete (or satisfy its strategic objectives if a not-for-profit organization)?

● What can the operation do to help the organization compete more effectively?

The key to greater understanding and better grades in Operations Management!

MyOMLab for students

MyOMLab has been developed to help students make the most of their studies in operations management. Visit MyOMLab at www.myomlab.com to fi nd valuable teaching and learning material including:

● Self-assessment questions and a personalized Study Plan to diagnose areas of strength and weakness, direct students’ learning, and improve results.

● Unlimited practice on quantitative techniques and solving problems.

● Flashcards to aid exam revision.

● Video clips and short cases to illustrate operations management in action.

● Questions that are mapped to learning objectives (rather than just to chapters).

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Ten steps to getting a better grade in operations management

We could say that the best rule for getting a better grade is to be good. We mean really, really good! But, there are plenty of us who, while fairly good, don’t get as good a grade as we really deserve. So, if you are studying operations management, and you want a really good grade, try following these simple steps:

Step 1 Practise, practise, practise. Use the Key ques- tions and the Problems and applications to check your understanding. Use the Study plan feature in MyOMLab and practise to master the topics which you find difficult.

Step 2 Remember a few key models , and apply them wherever you can. Use the diagrams and models to describe some of the examples that are contained within the chapter. You can also use the revision pod casts on MyOMLab.

Step 3 Remember to use both quantitative and quali- tative analysis. You’ll get more credit for appropri- ately mixing your methods: use a quantitative model to answer a quantitative question and vice versa, but qualify this with a few well-chosen sentences. Both the chapters of the book, and the exercises on MyOMLab, incorporate qualitative and quantitative material.

Step 4 There’s always a strategic objective behind any operational issue. Ask yourself, ‘Would a similar opera- tion with a different strategy do things differently?’ Look at the Short cases, Case studies, and Operations in practice pieces in the book.

Step 5 Research widely around the topic. Use websites that you trust – we’ve listed some good websites at the end of each chapter and on MyOMLab. You’ll get more credit for using references that come from genuine aca- demic sources.

Step 6 Use your own experience. Every day, you’re experiencing an opportunity to apply the principles of operations management. Why is the queue at the airport check-in desk so long? What goes on behind the ‘hole in the wall’ of your bank’s ATM machines? Use the videos on MyOMLab to look further at operations in practice.

Step 7 Always answer the question. Think ‘What is really being asked here? What topic or topics does this question cover?’ Find the relevant chapter or chapters, and search the Key questions at the beginning of each chapter and the Summary at the end of each chapter to get you started.

Step 8 Take account of the three tiers of accumulating marks for your answers.

(a) First, demonstrate your knowledge and under- standing. Make full use of the text and MyOMLab to find out where you need to improve.

(b) Second, show that you know how to illustrate and apply the topic. The Short cases, Case studies and ‘Operations in practice’ sections, combined with those on MyOMLab, give you hundreds of different examples.

(c) Third, show that you can discuss and analyse the issues critically. Use the Critical commentaries within the text to understand some of the alterna- tive viewpoints.

Generally, if you can do (a) you will pass; if you can do (a) and (b) you will pass well, and if you can do all three, you will pass with flying colours!

Step 9 Remember not only what the issue is about, but also understand why! Read the text and apply your knowledge on MyOMLab until you really understand why the concepts and techniques of operations man- agement are important, and what they contribute to an organization’s success. Your new-found knowledge will stick in your memory, allow you to develop ideas, and enable you to get better grades.

Step 10 Start now! Don’t wait until two weeks before an assignment is due. Log on ( www.myomlab.com ), read on, and GOOD LUCK!

Nigel Slack Alistair Brandon-Jones

Robert Johnston

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xxv

About the authors

Nigel Slack is the Professor of Operations Management and Strategy at Warwick University. Previously he has been Professor of Service Engineering at Cambridge University, Professor of Manufacturing Strategy at Brunel University, a University Lecturer in Management Studies at Oxford University and Fellow in Operations Management at Templeton College, Oxford.

He worked initially as an industrial apprentice in the hand-tool industry and then as a production engi- neer and production manager in light engineering. He holds a Bachelor’s degree in Engineering and Master’s and Doctor’s degrees in Management, and is a char- tered engineer. He is the author of many books and papers in the operations management area, including The Manufacturing Advantage , published by Mercury Business Books, 1991, and Making Management Dec- isions (with Steve Cooke), 1991, published by Prentice Hall, Service Superiority (with Robert Johnston), pub- lished in 1993 by EUROMA and Cases in Operations Management (with Robert Johnston, Alan Harrison, Stuart Chambers and Christine Harland) third edition published by Financial Times Prentice Hall in 2003, The Blackwell Encyclopedic Dictionary of Operations Management (with Michael Lewis) published by Blackwell in 2005, Operations Strategy together with Michael Lewis, the third edition published by Financial Times Prentice Hall in 2011 and Perspectives in Operations Management (Volumes I to IV) also with Michael Lewis, published by Routledge in 2003, Operations and Process Management , with Alistair Brandon-Jones, Robert Johnston and Alan Betts, now in its 3 rd edition, 2012. He has authored numerous academic papers and chap- ters in books. He also acts as a consultant to many international companies around the world in many sectors, especially financial services, transport, leisure and manufacturing. His research is in the operations and manufacturing flexibility and operations strategy areas.

Alistair Brandon-Jones is a Reader in Operations and Supply Management at Manchester Business School, , Visiting Research Fellow at the University of Bath, and Visiting Lecturer at Warwick Medical School. Prior to his move, he was a Senior Lecturer (Associate Professor) and Lecturer (Assistant

Professor) at the University of Bath, a Teaching Fellow at Warwick Business School, and worked in a number of operations and logistics roles. He has a PhD and Bachelor’s degree from the University of Warwick and is widely published in leading operations and sup- ply management journals. In addition to Operations Management, Alistair has three other co-authored books, Operations and Process Management, Essentials of Operations Management and Quantitative Analysis in Operations Management, published by Pearson. He has been nominated for the Times Higher Education Most Innovative Teacher of the Year Award, is a University of Bath Mary Tasker Teaching Prize winner, and has received a number of other awards for teaching innova- tion at both Bath and Warwick. Alistair has consulting and executive development experience with a range of organizations around the world including Eni S.p.A Oil & Gas, Italy, Crompton Greaves, India, The Royal Bank of Scotland, Schroders Investment Management, QinetiQ Defense & Security, NHS Purchasing & Supply Agency, The Welsh Assembly, Bahrain Olympic Association, and the Improvement & Development Agency .

Robert Johnston was Professor of Operations Manage- ment at Warwick Business School and its Deputy Dean. He was the founding editor of the International Journal of Service Industry Management and he also served on the editorial board of the Journal of Operations Management and the International Journal of Tourism and Hospitality Research . He was the author of the market leading text, Service Operations Management (with Graham Clark), now in its 4th edition (2012), published by Financial Times Prentice Hall. Before moving to academia Dr Johnston held several line management and senior management posts in a number of service organizations in both the public and private sectors. As a specialist in service operations, his research interests included service design, service recovery, per- formance measurement and service quality. He was the author or co-author of many books, as well as chapters in other texts, numerous papers and case studies.

We very much regret that our friend and colleague Bob Johnston passed away shortly after the manu- script for this edition was completed. He will be greatly missed by all his many friends, colleagues and students.

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xxvi

Acknowledgements

During the preparation of the seventh edition of this book, the authors conducted a number of ‘ faculty workshops’ and the many useful comments from these sessions have influenced this and the other books for the ‘Warwick group’. Our thanks go to everyone who attended these sessions and other colleagues. We thank Pär Åhlström of Stockholm School of Economics and Alan Betts of ht2.org for case writing help and support, Dr Ran Bhamra, Lecturer in Engineering Management, Loughborough University and Shirley Johnston for case writing help and support. Also, Dr Maggie Zeng of Gloucestershire University, Dr Abhijeet Ghadge, Heriot Watt University, Professor Sven Åke Hörte of Lulea University of Technology, Eamonn Ambrose of University College, Dublin, Colin Armistead of Bournemouth University, Ruth Boaden of Manchester Business School, Emma Brandon-Jones of Manchester Business School, Peter Burcher of Aston University, John K. Christiansen of Copenhagen Business School, Philippa Collins of Heriot- Watt University, Henrique Correa of Rollins College, Florida, Paul Coughlan, Trinity College Dublin, Simon Croom, University of San Diego, Stephen Disney, Cardiff University, Doug Davies of University of Technology, Sydney, Tony Dromgoole of the Irish Management Institute, Dr J.A.C. de Haan of Tilburg University, Carsten Dittrich, University of Southern Denmark, David Evans of Middlesex University, Paul Forrester of Keele University, Keith Goffin, Cranfield University, Ian Graham of Edinburgh University, Alan Harle of Sunderland University, Norma Harrison of Macquarie University, Catherine Hart of Loughborough Business School, Chris Hillam of Sunderland University, Ian Holden of Bristol Business School, Matthias Holweg, Cambridge University, Mickey Howard, Exeter University, Tom Kegan of Bell College of Technology, Hamilton, Denis Kehoe, Liverpool University, Mike Lewis, Bath University, John Maguire of the University of Sunderland, Charles Marais of the University of Pretoria, Roger Maull, Exeter University, Bart McCarthy, Nottingham University, Harvey Maylor of Cranfield University, John Meredith Smith of EAP,

Oxford, Michael Milgate of Macquarie University, Keith Moreton of Staffordshire University, Chris Morgan, Cranfield University, Adrian Morris of Sunderland University, Steve New, Oxford University, John Pal of Manchester University, Peter Race of Henley College, Reading University, Ian Sadler of Victoria University, Richard Small, Supply Network Solutions, Andi Smart, Exeter University, Amrik Sohal of Monash University, Alex Skedd of Northumbria Business School, Martin Spring of Lancaster University, Dr Ebrahim Soltani of the University of Kent, R. Stratton of Nottingham Trent University, Dr Nelson Tang of the University of Leicester, David Twigg of Sussex University, Helen Valentine of the University of the West of England, Professor Roland van Dierdonck of the University of Ghent, Dirk Pieter van Donk of the University of Groningen and Peter Worthington.

Our academic colleagues in the Operations Manage- ment Group at Warwick Business School, Bath Univer- sity and Manchester Business School also helped, both by contributing ideas and by creating a lively and stimu- lating work environment. We are also grateful to many friends, colleagues and company contacts. In particular, thanks for help with this edition goes to Philip Godfrey and Cormac Campbell and their expert colleagues at OEE, David Garman and Carol Burnett of The Oakwood Partnership, Clive Buesnel of Xchanging, Hans Mayer of Nestlé, Peter Norris of the Royal Bank of Scotland, Joanne Cheung of Synter BMW, Tom Dyson of Torchbox, Michael Purtill of Four Seasons Hotel Group, John Mat- thew of HSPG.

We were lucky to receive continuing professional and friendly assistance from a great publishing team. Especial thanks to Rufus Curnow, Kate Brewin, Philippa Fiszzon, Colin Reed, Rhian McKay, Alison Prior, Kay Holman and Annette Abel.

Finally, all seven editions were organized, and largely word processed, by Angela Slack. It was, yet again, an heroic e� ort. To Angela – our thanks.

Nigel Slack Alistair Brandon-Jones

Robert Johnston

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We are grateful to the following for permission to repro- duce copyright material:

Figures Figure 2.11b from Spidergram to check on police forces, The Times (Miles, A. and Baldwin, T.), 10 July 2002; Figure 3.9 from Operations Strategy, 3rd ed., Pearson Education Limited (Slack, N. and Lewis, M.A. 2011) p. 33, Figure 1.12, © Nigel Slack and Michael Lewis 2002, 2008, 2011; Figure 7.6 from For Toyota, pat- riotism and profits may not mix, Wall Street Journal (Dawson, C.), 29 November 2011, republished with permission of Dow Jones & Company, Inc., permission conveyed through Copyright Clearance Center; Figure 9.7 adapted from A new strategy for job enrichment, California Management Review, Vol. 17 (3) (Hackman, J.R., Oldham, G., Janson, R. and Purdy, K. 1975), repub- lished with permission of University of California Press, permission conveyed through Copyright Clearance Center; Figure 10.10 from Northamptonshire Police incident grading; Figure 13.7 adapted from What is the right supply chain for your product?, Harvard Business Review, March-April, pp. 105–16 (Fisher, M.C. 1997); Figure 15.13 from C.A. Voss and A. Harrison, Strategies for implementing JIT, in Just-in-Time Manufacture ( Voss, C.A. (ed.) 1987), IFS/Springer-Verlag, Copyright © 1987 Springer; Figure 16.2 adapted from Project Management for Engineering, Business and Technology, 4th ed., Routledge (Nicholas, J.M. and Steyn, H. 2012) p. 6, Figure 1.3, © 2012 Routledge, used with permis- sion of Taylor & Francis Books (UK); Figure 16.13 adapted from Collaboration, Integrated Information, and the Project Life Cycle in Building Design and Construction and Operation, Construction Users Roundtables (CURT); Figure 17.4 adapted from A conceptual model of service quality and implications for future research, Journal of Marketing, Vol. 49, Fall, pp. 41–50 (Parasuraman, A., Zeithaml, V.A. and Berry, L.B. 1985), American Marketing Association; Figure 21.2 Marmite image, reproduced with kind permission of PLC and group companies.

Tables Table 8.1 after E-commerce and its impact on opera- tions management, International Journal of Production Economics, Vol. 75, pp. 185–97 (Gunasekaran, A., Marri, H.B., McGaughey, R.E. and Nebhwani, M.D. 2002), Elsevier; Table S9.2 adapted from Principles of Motion Economy: Revisited, Reviewed and Restored, Proceedings of the Southern Management Association Annual Meeting (Atlanta, GA 1983) (Barnes, F.C. 1983)

p. 298; Table 15.1 adapted from What is the theory of constraints, and how does it compare to lean think- ing? (Rattner, S. 2009) The Lean Enterprise Institute, Copyright © 1999 Sergio Rattner, all rights reserved; Table 21.1 from How Corporate Social Responsibility is Defined: an Analysis of 37 Definitions, Corporate Social Responsibility and Environment Management, Vol. 12, No. 2 (Dahlsrud, A. 2006) p. 4, Table 1, John Wiley and Sons.

Text Case Study on pages 148–9 from Operations and Process Management, 2nd ed., Pearson Education (Slack, N., Chambers, S., Johnston, R. and Betts, A. 2009) p. 204, © Pearson Education Limited 2006, 2009; Case Study on pages 218–20 adapted from Operations and Process Management, Pearson Education Limited (Slack, N., Chambers, S., Johnston, R. and Betts, A. 2005) © Pearson Education Limited 2006; Case Study on pages 274–6 by Dr Ran Bhamra, Lecturer in Engineering Management, Loughborough University; Case Study on page 317 adapted from Operations and Process Management, 3rd ed., Pearson Education (Slack, N., Brandon-Jones, A., Johnston, R. and Betts, A. 2012) © Pearson Education Limited 2006, 2009, 2012; General Displayed Text on page 440 from My way – IT at Butcher’s Pet Care, Engineering and Technology Magazine, Vol. 4 (13) (Allan, K. 2009), 21 July; Case Study on pages 490–2 by Robert Johnson and Zoe Radnor, with the help of Giovanni Bucci; General Displayed Text on pages 641–2 adapted from a case study by Professors Rui Sousa and Sofia Salgado Pinto, Católica Porto Business School, Portugal, with permission from the authors; Case Study on pages 666–7 by Professors Robert Johnson, Warwick Business School, Chai Kah Hin and Jochen Wirtz, National University of Singapore, and Christopher Lovelock, Yale University; Case Study on page 690 includes extract from Responsible Sourcing Supplier Workbook, John Lewis plc © Copyright John Lewis plc.

Photographs (Key: b-bottom; c-centre; l-left; r-right; t-top)

Alamy Images: Apex News & Pictures Agency 83, 579, Art Kowalsky 477, Candy Box Images 136, Clivestock 101, Corbis Bridge 91, Hannu Liivaar 465, Helen Sessions 417, Hugh Threlfall 31, Ingram Publishing 605, Itar-Tass Photo Agency 144, Jack Sullivan 51, Justin Kase 405, 418, Lucia Lanpur 673, M4OS Photos 323, Numb 444, Paul Marriot 201, Roger Bamber 119, Stephen Woods 252, Thomas Jackson 86, Vario images GmbH & Co.KG 204; Alistair Brandon-Jones: 44, 89, 148,

Publisher’s acknowledgements

xxvii

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105b, Ingrid W 195, InnervisionArt 435, Ioana Davies 649, Jacqueline Abromeit 37, Jimmi 224, jl661227 218, Jordan Tan 289, justasc 432, Kencko Photography 297, Kzenon 56, 595, Light & Magic Photography 328cl, 335tl, 337tl, Losevsky Photo and Video 97, Luciano Mortula 9 (e), Lucky Photo 328cr, 336br, 337br, Mama- Mia 232, March Cattle 630, Markus 29, Massimiliano Pieraccini 335b, Matusciac Alexandru 387, Max Photographer 611, Michael Rolands 47cl, 48cl, 50cl, 53cl, 55cl, Minerva Studio 129, Mironov 164, Monkey Business Images 443, Montebasso 269, Natursports 660, nostal6ie 104b, Nui7711 76, PENGYOU91 104cl, PeterPhoto123 69r, Pics Five 53b, Prill 662, PT Images 9 (b), RA2 Studio 679, Richard Semik 496, Rob Wilson 69l, Robyn Mackenzie 583, Ronen 64, Santiago Cornejo 15, Scott Cornell 513, Silver John 103t, Silver-John 666, Sinisa Botas 275, Stuart Monk 199, StudioSmart 302, Suzanne Tucker 12, SV Luma 304, Toria 11, Tupungato 430, Valentyn Volkov 133, 589, Viorel Sima 684, Yeko Photo Studio 309, Yuri Acurs 105t, yuyangc 328tr, 335tr, 337tr, 341, zhangyang13576997233 121, Zurijeta 9 (d), 266t.

Cover images: Front: Getty Images.

In some instances we have been unable to trace the owners of copyright material, and we would appreciate any information that would enable us to do so.

170r, 228, 339, 356, 440, 503, 540; Andy Maluche/ Photographers Direct: 229; Corbis: 50b, Ultraf 690; Courtesy of Dyson: 126; Digital Vision: 378; Getty Images: 24l, 57, 162, Jasper James 2, 94, 286, 576, 670; Imagemore Co., Ltd: 400, 546; Imagestate Media: John Foxx 553, John Foxx Collection 535, John Foxx Images 354, Michael Duerinckx 334; Pearson Education Ltd: Sozaijiten 614; PhotoDisc: Don Farrell 328b, Kim Steele 557, Mitch Hrdlicka 538, Nick Rowe 369, Ryan McVay 266b, Tracy Montana 449; Photolibrary.com: Tetra Images 491; Press Association Images: 247; Rex Features: Voisin Phanic 268; Shutterstock.com: Aaron Amat 527, Adisa 641, Ahmad Faizal Yahya 255, Ajay Bhaskar 170l, Alhovik 293, alphaspirit 480, Anna Subbotina 24r, Annette Shaff 551, antipathique 138, anyunov 637, aodaodaodaod 676, Archman 109, 231, Argus 235, Blaz Kure 47tr, 48tr, 50tr, 53tr, 55tr, Buruhtan 47cr, 48cr, 50cr, 53cr, 55cr, cappi thompson 412, Chen WS 452, Cuiphoto 328tl, 336bl, 337bl, Daniel M. Nagy 38, Derek Audette 318, Deymos 176, Diego Cervo 5, 9 (c), Dmitry Kalinovsky 103b, Dragon Images 160, Ecliptic Blue 49, Eimantas Buzas 106, Evgeny Varlamov 9 (a), Filipchuk Oleg Vasiliovich 153, Food Pics 18, Food Pictures 104t, Francisco Amaral Leitão 244, Gyn9037 192, Hadrian 47tl, 48tl, 50tl, 53tl, 55tl, Hana 545, Hannamariah 342, Highviews 547, ID1974 448, ifong

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OPERATIONS MANAGEMENT

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2 Operations performance

1 Operations management

3 Operations strategy

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Part One INTRODUCTION

This part of the book introduces the idea of the operations function in different types of organization. It identifies the common set of objectives to which operations managers aspire in order to serve their customers, and it explains how operations can have an important strategic role.

Transformed resources

• Materials • Information • Customers

Transforming resources

• Facilities • Staff

Input resources

Output products and services

Value-added for customers

Operations management

Develop Improving the

operation’s capabilities

Direct Steering operations

and processes

Design Shaping processes,

products and services

Deliver Planning and

controlling ongoing operations

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Check and improve your understanding of this chapter using self-assessment questions and a personalized study plan, a video case study, and an eText – all at www.myomlab.com .

Figure 1.1 This chapter examines operations management

INTRODUCTION Operations management is about how organizations create and deliver services and products. Everything you wear, eat, sit on, use, read or knock about on the sports field comes to you courtesy of the operations managers who organized its creation and delivery. Every book you borrow from the library, every treatment you receive at the hospital, every service you expect in the shops and every lecture you attend at university – all have been created by operations. While the people who supervised their creation and delivery may not always be called operations managers, that is what they really are. And that is what this book is concerned with – the tasks, issues and decisions of those operations managers who have made the services and products on which we all depend. This is an introductory chapter, so we will examine what we mean by ‘operations management’, how operations processes can be found everywhere, how they are all similar yet different, and what it is that operations managers do ( see Fig. 1.1 ).

Operations management 1 ❯ What is operations management?

❯ Why is operations management important in all types of organization?

❯ What is the input– transformation–output process?

❯ What is the process hierarchy?

❯ How do operations processes have different characteristics?

❯ What do operations managers do?

Operations performance

Operations strategy

Operations management

Topic covered in this chapter

Operations management

Direct

Design Develop

Deliver

Key questions

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CHAPTER 1 OPERATIONS MANAGEMENT 5

OPERATIONS IN PRACTICE

(All chapters start with an ‘Operations in practice’ example that illustrates some of the issues that will be covered in the chapter.)

Love it or hate it, IKEA is the most successful furniture retailer ever. With 276 stores in 36 countries, they have managed to develop their own special way of selling fur- niture. Their stores’ layout means customers often spend two hours in the store – far longer than in rival furniture retailers. IKEA’s philosophy goes back to the original busi- ness, started in the 1950s in Sweden by Ingvar Kamprad. He built a showroom on the outskirts of Stockholm where land was cheap and simply displayed suppliers’ furniture as it would be in a domestic setting. Increasing sales soon allowed IKEA to start ordering its own self- designed products from local manufacturers. But it was innovation in its operations that dramatically reduced its selling costs. These included the idea of selling furniture as self-assembly flat packs, which reduced production and transport costs, and its ‘showroom-warehouse’ con- cept, which required customers to pick the furniture up themselves from the warehouse (which reduced retail- ing costs). Both of these operating principles are still the basis of IKEA’s retail operations process today.

Stores are designed to facilitate the smooth flow of customers, from parking, moving through the store itself, to ordering and picking up goods. At the entrance to each store large notice boards provide advice to shop- pers. For young children, there is a supervised children’s play area, a small cinema, and a parent and baby room so parents can leave their children in the supervised play area for a time. Parents are recalled via the loudspeaker system if the child has any problems. IKEA ‘allow cus- tomers to make up their minds in their own time’ but ‘information points’ have staff who can help. All furniture carries a ticket with a code number which indicates its location in the warehouse. (For larger items customers go to the information desks for assistance.) There is also an area where smaller items are displayed, and can be picked directly. Customers then pass through the ware- house where they pick up the items viewed in the show- room. Finally, customers pay at the checkouts, where a ramped conveyor belt moves purchases up to the check- out staff. The exit area has service points, and a loading area that allows customers to bring their cars from the car park and load their purchases.

Behind the public face of IKEA’s huge stores is a complex worldwide network of suppliers, 1,300 direct suppliers, about 10,000 sub-suppliers, and wholesale and transport operations, including 26 distribution centres. This supply network is vitally important to IKEA. From purchasing raw materials, right through to finished products arriving in its customers’ homes, IKEA relies on close partnerships with

its suppliers to achieve both ongoing supply efficiency and new product development. However, IKEA closely controls all supply and development activities from IKEA’s hometown of Älmhult in Sweden.

But success brings its own problems and some cus- tomers became increasingly frustrated with overcrowd- ing and long waiting times. In response IKEA launched a programme ‘designing out’ the bottlenecks. The changes included:

● clearly marked in-store short cuts allowing those cus- tomers who just want to visit one area to avoid having to go through all the preceding areas;

● express checkout tills for customers with a bag only rather than a trolley;

● extra ‘help staff ’ at key points to help customers; ● redesign of the car parks, making them easier to

navigate; ● dropping the ban on taking trolleys out to the car

parks for loading (originally implemented to stop vehicles being damaged);

● a new warehouse system to stop popular product lines running out during the day;

● more children’s play areas.

▼

IKEA 1

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6 PART ONE INTRODUCTION

WHAT IS OPERATIONS MANAGEMENT?

Operations management is the activity of managing the resources that create and deliver ser- vices and products. The operations function is the part of the organization that is responsible for this activity. Every organization has an operations function because every organization creates some type of services and/or products. However, not all types of organization will nec-

essarily call the operations function by this name. (Note in addition that we also use the shorter terms ‘the operation’ or ‘operations’ inter- changeably with the ‘operations function’.) Operations managers are the people who have particular responsibility for managing some, or all, of the resources which comprise the operations function. Again in some organizations, the operations manager could be called by some

other name. For example, he or she might be called the ‘fleet manager’ in a distribution com- pany, the ‘administrative manager’ in a hospital, or the ‘store manager’ in a supermarket.

Operations in the organization The operations function is central to the organization because it creates and delivers services and products, which is its reason for existing. The operations function is one of the three core functions of any organization. These are:

● the marketing (including sales) function – which is responsible for communicating the organization’s services and products to its markets in order to generate customer requests;

IKEA spokeswoman Nicki Craddock said: ‘We know people love our products but hate our shopping experience. We are being told that by customers every day, so we can’t afford not to make changes. We realized a lot of people took offence at being herded like sheep on the long route around stores. Now if you know what you are looking for and just want to get in, grab it and get out, you can.’

Operations management is a vital part of IKEA’s success IKEA shows how important operations management is for its own success and the success of any type of organi- zation. Of course, IKEA understands its market and its customers. But, just as important, it knows that the way it manages the network of operations that design, produce and deliver its products and services must be right for its market. No organization can survive in the long term if it cannot supply its customers effectively. And this is essen- tially what operations management is about – designing, producing and delivering products and services that sat- isfy market requirements. For any business, it is a vitally important activity. Consider just some of the activities that IKEA’s operations managers are involved in:

● Arranging the store’s layout to give a smooth and effective flow of customers (called process design).

● Designing stylish products that can be flat-packed efficiently (called product design).

● Making sure that all staff can contribute to the com- pany’s success (called job design).

● Locating stores of an appropriate size in the most effective place (called supply network design).

● Arranging for the delivery of products to stores (called supply chain management).

● Coping with fluctuations in demand (called capacity management).

● Maintaining cleanliness and safety of storage areas (called failure prevention).

● Avoiding running out of products for sale (called inventory management).

● Monitoring and enhancing quality of service to cus- tomers (called quality management).

● Continually examining and improving operations practice (called operations improvement).

And these activities are only a small part of IKEA’s total operations management effort. But they do give an indication, first of how operations management should contribute to the business’s success, and second, what would happen if IKEA’s operations managers failed to be effective in carrying out any of its activities. Yet, although the relative importance of these activities will vary between different organizations, operations managers in all organizations will be making the same type of decision (even if what they actually decide is different).

✽ Operations principle All organizations have ‘operations’ that produce some mix of services and products.

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CHAPTER 1 OPERATIONS MANAGEMENT 7

● the product/service development function – which is responsible for coming up with new and modified services and products in order to generate future customer requests;

● the operations function – which is responsible for the creation and delivery of services and products based on customer requests.

In addition, there are the support functions which enable the core functions to operate effectively. These include, for example, the accounting and finance function, the technical function, the human resources function, and the information systems function. Remember that different organizations will call their various functions by different names and will have a different set of support functions. Almost all organizations, however, will have the three core functions, because all organizations have a fundamental need to sell their products and services, meet customer requests for services and products, and come up with new services and products to satisfy customers in the future. Table 1.1 shows the activities of the three core functions for a sample of organizations.

In practice, there is not always a clear division between the three core functions or between core and support functions. This leads to some confusion over where the boundaries of the operations function should be drawn. In this book we use a relatively broad definition of operations. We treat much of the product/service development, technical and information systems activities and some of the human resource, marketing, and accounting and finance activities as coming within the sphere of operations management. We view the operations function as comprising all the activities necessary for the day-to-day fulfilment of customer requests. This includes sourcing services and products from suppliers and delivering services and products to customers.

It is a fundamental of modern management that functional boundaries should not hinder efficient internal processes. Figure 1.2 illustrates some of the relationships between operations and other functions in terms of the flow of information between them. Although it is not comprehensive, it gives an idea of the nature of each relationship. However, note that the support functions have a different relationship with operations than the other core functions. Operations management’s responsibility to support functions is primarily to make sure that they understand operations’ needs and help them to satisfy these needs. The relationship with the other two core functions is more equal – less of ‘this is what we want’ and more ‘this is what we can do currently – how do we reconcile this with broader business needs?’

Table 1.1 The activities of core functions in some organizations

Core functional activities

Internet service provider (ISP)

Fast food chain International aid charity

Furniture manufacturer

Operations Maintain hardware, software and content Implement new links and services

Make burgers, etc. Serve customers Maintain equipment

Give service to the benefi ciaries of the charity

Make components Assemble furniture

Marketing and sales

Promote services to users and get registrations Sell advertising space

Advertise on TV Devise promotional materials

Develop funding contracts Mail out appeals for donations

Advertise in magazines Determine pricing policy Sell to stores

Product/service development

Devise new services and commission new information content

Design hamburgers, pizzas, etc. Design decor for restaurants

Develop new appeals campaigns Design new assistance programmes

Design new furniture Co-ordinate with fashionable colours

✽ Operations principle Operations managers need to co-operate with other functions to ensure effective organizational performance.

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8 PART ONE INTRODUCTION

OPERATIONS MANAGEMENT IS IMPORTANT IN ALL TYPES OF ORGANIZATION

In some types of organization it is relatively easy to visualize the operations function and what it does, even if we have never seen it. For example, most people have seen images of an auto-

mobile assembly. But what about an advertising agency? We know vaguely what they do – they create the advertisements that we see in magazines and on television – but what is their operations function? The clue lies in the word ‘create’. Any business that creates something must use resources to do so, and so must have an operations activ- ity. Also the automobile plant and the advertising agency do have one important element in common: both have a higher objective – to make

a profit from creating and delivering their products or services. Yet not-for-profit organiza- tions also use their resources to create and deliver services, not to make a profit, but to serve society in some way. Look at the following examples of what operations management does in five very different organizations and some common themes emerge.

Figure 1.2 The relationship between the operations function and other core and support functions of the organization

✽ Operations principle The economic sector of an operation is less important in determining how it should be managed than its intrinsic characteristics.

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CHAPTER 1 OPERATIONS MANAGEMENT 9

Automobile assembly factory – operations manage- ment uses machines to e� ciently assemble products that satisfy current customer demands

Physician (general practitioner) – operations manage- ment uses knowledge to e� ectively diagnose conditions in order to treat real and perceived patient concerns

Management consultant – operations management uses people to e� ectively create the services that will address current and potential client needs

Disaster relief charity – operations management uses our and our partners’ resources to speedily provide the supplies and services that relieve community su� ering

Advertising agency – o perations management uses our sta� ’s knowledge and experience to creatively present ideas that delight clients and address their real needs

Start with the statement from the ‘easy to visualize’ automobile plant. Its summary of what operations management does is . . . ‘Operations management uses machines to efficiently assem- ble products that satisfy current customer demands.’ The statements from the other organiza- tions were similar, but used slightly different language. Operations management used not just machines but also . . . ‘knowledge, people, our and our partners’ resources’, and ‘our staff’s experi- ence and knowledge’, to ‘efficiently (or effectively, or creatively) assemble ( or produce, change, sell, move, cure, shape, etc.) products ( or services or ideas) that satisfy ( or match or exceed or delight) customer ( or client or citizens’ or society) demands ( or needs or concerns or even dreams)’. So whatever terminology is used there is a common theme and a common purpose to how we can

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10 PART ONE INTRODUCTION

visualize the operations activity in any type of organization; small or large, service or manu- facturing, public or private, profit or not-for-profit. Operations management uses ‘resources to appropriately create outputs that fulfil defined market requirements’ (see Fig. 1.3). However, although the essential nature and purpose of operations management is the same in any type of organization, there are some special issues to consider, particularly in smaller organizations and those whose purpose is to maximize something other than profit.

Operations management in the smaller organization Operations management is just as important in small organizations as it is in large ones. Irrespective of their size, all companies need to create and deliver their services and products efficiently and effectively. However, in practice, managing operations in a small or medium size organization has its own set of problems. Large companies may have the resources to dedicate individuals to specialized tasks but smaller companies often cannot, so people may have to do different jobs as the need arises. Such an informal structure can allow the company to respond quickly as opportunities or problems present themselves. But decision making can also become confused as individuals’ roles overlap. Small companies may have exactly the same operations management issues as large ones but they can be more difficult to separate from the mass of other issues in the organization. However, small operations can also have significant advantages; the short case on Torchbox illustrates this.

Operations management in not-for-profit organizations Terms such as competitive advantage, markets and business, which are used in this book, are usually associated with companies in the for-profit sector. Yet operations management is also relevant to organizations whose purpose is not primarily to earn profits. Managing the operations in an animal welfare charity, hospital, research organization or govern- ment department is essentially the same as in commercial organizations. Operations have to take the same decisions – how to create and deliver services and products, invest in technology, contract out some of their activities, devise performance measures, improve their operations performance, and so on. However, the strategic objectives of not-for-profit organizations may be more complex and involve a mixture of political, economic, social or environmental objectives. Because of this there may be a greater chance of operations decisions being made under conditions of conflicting objectives. So, for example, it is the

Figure 1.3 Operations management uses resources to appropriately create outputs that fulfil defined market requirements

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CHAPTER 1 OPERATIONS MANAGEMENT 11

operations staff in a children’s welfare department who have to face the conflict between the cost of providing extra social workers and the risk of a child not receiving adequate protection. Nevertheless the vast majority of the topics covered in this book have relevance to all types of organization, including non-profit, even if the context is different and some terms may have to be adapted.

SHORT CASE

We may take it for granted, yet browsing websites, as part of your studies, your job, or your leisure, is an activity that we all do; probably every day, probably many times each day. So it’s important. All organizations need to have a web presence if they want to sell products and services, interact with their customers, or promote their cause. And, not surprisingly, there is a whole industry devoted to designing websites so that they have the right type of impact. In fact, taken over the years, web development has been one of the fastest-growing industries in the world. But it’s also a tough industry. Not every web design company thrives, or even survives beyond a couple of years. To succeed, web designers need technology skills, design capabilities, business awareness and operational professionalism.

One company that has succeeded is Torchbox, an independently owned web design and development company based in Oxfordshire. Founded back in 2000, it now employs 30 people, providing ‘high-quality, cost- effective, and ethical solutions for clients who come primar- ily, but not exclusively, from the charity, non-governmental organizations and public sectors’ .

Co-founder and Technical Director Tom Dyson has been responsible for the technical direction of all major developments. ‘There are a number of advantages about being a relatively small operation’ , he says. ‘ We can be hugely flexible and agile, in what is still a dynamic mar- ket. But at the same time we have the resources and skills to provide a creative and professional service. Any sen- ior manager in a firm of our size cannot afford to be too specialized. All of us here have our own specific responsi- bilities; however, every one of us shares the overall respon- sibility for the firm’s general development. We can also be clear and focused on what type of work we want to do. Our ethos is important to us. We set out to work with clients who share our commitment to environmental sustainabil- ity and responsible, ethical business practice; we take our work, and that of our clients, seriously. If you’re an arms

Torchbox: award-winning web designers 2

dealer, you can safely assume that we’re not going to be interested.’

Nevertheless, straightforward operational effectiveness is also essential to Torchbox’s business. ‘ We know how to make sure that our projects run not only on time and to budget’ , says Olly Willans, also a co-founder and the firm’s Creative Director, ‘ but we also like to think that we provide an enjoyable and stimulating experience – both for our customers’ development teams and for our staff too. High standards of product and service are important to us: our clients want accessibility, usability, performance and security embedded in their web designs, and of course, they want things delivered on-time and on-budget. We are in a cre- ative industry that depends on fast-moving technologies, but that doesn’t mean that we can’t also be efficient. We back everything we do with a robust feature-driven develop- ment process using a kanban project management method- ology which helps us manage our obligations to our clients.’

The ‘kanban’ approach used by the Torchbox web development teams originated from car manufacturers like Toyota (it is fully explained in Chapter 15 ). ‘ Using sound operations management techniques helps us constantly to deliver value to our clients ’, says Tom Dyson. ‘We like to think that our measured and controlled approach to handling and controlling work helps ensure that every hour we work pro- duces an hour’s worth of value for our clients and for us.’

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12 PART ONE INTRODUCTION

SHORT CASE

Médecins Sans Frontières MSF (also called Doctors Without Borders) is an indepen dent humanitarian organization providing medical aid where it is most needed, regardless of race, religion, politics or gender, and raising awareness of the plight of the people it helps in countries around the world. Its core work takes place in crisis situations – armed conflicts, epidemics, famines and natural disasters such as floods and earthquakes. Their teams deliver both medical aid (including consultations with a doctor, hospital care, nutritional care, vaccinations, surgery, obstetrics and psychological care) and material aid (in cluding food, shelter, blankets, etc.). Each year, MSF sends around 3,000 doctors, nurses, logisticians, water-and-sanitation experts, administrators and other profes sionals to work alongside around 25,000 locally hired staff. It is one of the most admired and effective relief organizations in the world. But no amount of fine intentions can translate into effective action without superior oper- ations management. As MSF says, it must be able to react to any crisis with ‘fast response, efficient logistics systems, and efficient project management’ .

MSF makes every effort to respond quickly and effi- ciently to crises around the world. Their response proce- dures are continuously being developed to ensure that they reach those most in need as quickly as possible.

The process has five phases: proposal, assessment, initiation, running the project, and closing. The information that prompts a possible mission can come from govern- ments, the international community, humanitarian organ- izations such as the United Nations, financial bodies such as the Humanitarian Aid Department of the European Commission (ECHO), or MSF teams already present in the region. Once the information has been checked and vali- dated, MSF sends a team of medical and logistics experts to the crisis area to carry out a quick evaluation. The team assesses the situation, the number of people affected, and the current and future needs, and sends a proposal back to the MSF office. When the proposal is approved, MSF staff start the process of selecting personnel, organizing materials and resources and securing project funds.

Initiating a project involves sending technical equip- ment and resources to the area. In large crises, planes fly in all the necessary materials so that the work can begin immediately. Thanks to their pre-planned processes, specialized kits and the emergency stores, MSF can distribute material and equipment within 48 hours, ready for the response team to start work as soon as they arrive. Most MSF projects generally run for somewhere between 18 months and three and a half years. Whether an emer- gency response or a long-term health-care project, the closing process is roughly similar. Once the critical medi- cal needs have been met (which could be after weeks,

MSF operations provide medical aid to people in danger 3

months or years depending on the situation), MSF begins to close the project with a gradual withdrawal of staff and equipment. At this stage, the project closes or is passed on to an appropriate organization. MSF will also close a project if risks in the area become too great to ensure staff safety.

Whether they are dealing with urgent emergencies, when material might need to be on a plane within 24 hours, or a long-running programme where a steady supply of equipment and drugs is vital, everything MSF does on the ground depends on an efficient logistics sys- tem. It is based on the principle that MSF staff should always have exactly the right materials for the job at hand. So MSF has developed and produced pre-packaged disaster kits ready for transport within hours, including a com- plete surgical theatre the size of a small conference table and an obstetrics kit the size of a two-drawer filing cabi- net. There is an ongoing process of revising the kits every time a new drug or medical tool becomes available.

To make sure they are reacting as quickly as possible, MSF have four logistical centres based in Europe and East Africa plus stores of emergency materials in Central America and East Asia. These purchase, test and store equipment so that aircraft can be loaded and flown into crisis areas within 24 hours. The pre-packaged disaster kits are custom-cleared within the logistics centres ready for flight. But not all supplies are needed quickly. If it is not a dire emergency, MSF reduces its costs by shipping the majority of material and drugs by sea. Because of this, it is vital to monitor stock levels and anticipate future needs so that orders can be placed up to three months in advance of expected requirements.

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CHAPTER 1 OPERATIONS MANAGEMENT 13

Table 1.2 Changes in the business environment are shaping a new operations agenda

The business environment is changing . . . Prompting operations responses . . .

For example . . . For example . . . ● Increased cost-based competition

● Higher quality expectations

● Demands for better service

● More choice and variety

● Rapidly developing technologies

● Frequent new product/service introduction

● Increased ethical sensitivity

● Environmental impacts are more transparent

● More legal regulation

● Greater security awareness

● Globalization of operations networking

● Information-based technologies

● Co-creation of service

● Internet-based integration of operations activities

● Supply chain management

● Customer relationship management

● Flexible working patterns

● Mass customization

● Fast time-to-market methods

● Lean process design

● Environmentally sensitive design

● Supplier ‘partnership’ and development

● Failure analysis

● Business recovery planning

The new operations agenda The business environment has a significant impact on what is expected from operations man- agement. In recent years there have been new pressures for which the operations function has needed to develop responses. Table 1.2 lists some of these business pressures and the operations responses to them. These operations responses form a major part of a new agenda for operations. Parts of this agenda are trends which have always existed but have accelerated, such as globaliza- tion and increased cost pressures. Part of the agenda involves seeking ways to exploit new tech- nologies, most notably the internet. Of course, the list in Table 1.2 is not comprehensive, nor is it universal. But very few operations functions will be unaffected by at least some of these concerns.

THE INPUT–TRANSFORMATION–OUTPUT PROCESS

All operations create and deliver services and products by changing inputs into outputs using an ‘input–transformation–output’ process. Figure 1.4 shows this general transformation pro- cess model. Put simply, operations are processes that take in a set of input resources which are used to transform something, or are transformed themselves, into outputs of services and products. And although all operations conform to this general input–transformation–output model, they differ in the nature of their specific inputs and outputs. For example, if you stand far enough away from a hospital or a car plant, they might look very similar, but move closer and clear differences do start to emerge. One is a service operation delivering ‘services’ that change the physiological or psychological condition of patients, the other is a manufactur- ing operation creating and delivering ‘products’. What is inside each operation will also be different. The hospital contains diagnostic, care and therapeutic processes whereas the motor vehicle plant contains metal forming machinery and assembly processes. Perhaps the most important difference between the two operations, however, is the nature of their inputs. The hospital transforms the customers them- selves. The patients form part of the input to, and the output from, the operation. The vehicle plant transforms steel, plastic, cloth, tyres and other materials into vehicles.

✽ Operations principle All processes have inputs of transforming and transformed resources that they use to create products and services.

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14 PART ONE INTRODUCTION