why is operations management important?
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Nigel Slack – Warwick Business School
Why is Operations Management important?
Nigel Slack – Warwick Business School
Operations Management concerns all types of organisation
Nigel Slack – Warwick Business School
Operations management concerns all types of organisation
China Brazil USA Malaysia Romania Germany UK France
30%
16%13%
26%22% 22%
11% 11%
Manufacturing added value as a percentage of GDP
Source: World Bank
Nigel Slack – Warwick Business School
Non-operations processes Process
management
Service organizations
Operations management
Manufacturing organizations
Operations processes
Production manage -
ment
From ‘production’ to ‘operations’ to ‘process’ to process management and management?
Nigel Slack – Warwick Business School
The consultancy services market - % of world revenues of 40 largest consultancy firms
Marketing/sales2
Operations and process management
31
Corporate management
17
IT management17
Benefits/Actuarial16
Organizational design
11
Financial6
Operations management is fashionable!
Nigel Slack – Warwick Business School
Why operations excellence?
Better service
Secure revenue
Lower costs
Process efficiency
Reduced errors, better resilience
Lower ‘operational’ risk
Higher capacity utilisation
Lower capital requirements
Capabilities for future innovation
Process learning
Learning?
Cost
effectiveness? Service?
Capital?Risk?
What we should expect from operations
Less waste
Lower environmental impact
CSR?
Nigel Slack – Warwick Business School
As far as operations excellence is concerned............
Principles are generic
Solutions are not ......
....they depend on circumstances
The task is to build the principles on which operations and processes can be developed
Principles versus solutions
Nigel Slack – Warwick Business School
Principles + Tools Solutions=
Overarching concepts
From examples, theory,
research, etc.
Practitioner-based methods
and others
‘Over to you!’
(Used in context)What’s specific
about the circumstances?
Eg. Lean, Supply networks, BPR, Project mgt. etc
Principles versus solutions
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management can be applied to the resources and processes in any function
Operations management applies to the whole supply network
Operations management has to exploit new technologies
Operations management is the driver of improvement
Operations management has an environmental impact
Nigel Slack – Warwick Business School
Top - down
Operations management
should interpret higher level
managementResources
Operations management should manage resources
appropriately
Operations management should learn
from day-to-day experiencesBottom - up
Customer requirementsOperations
management should satisfy its internal and
external customers
The four perspectives on any Operations strategy
Operations strategy
Nigel Slack – Warwick Business School
The business model
Operations management as an ‘operating model’
Business management
Functional strategies
Operational Operations
Operational Finance
Marketing strategy
Operations strategy
Finance strategy
Technology strategy
Operational Marketing
Operational Technology
The operating model
….sets the overall purpose and objectives for……
…which defines how the business model will be
achieved
Nigel Slack – Warwick Business School
Giordano
Relatively easy to imitate………..
Short-term operations capability
Nigel Slack – Warwick Business School
The Flextronics Industrial park Guadalajara Mexico
More difficult to imitate…………..
Medium-term operations capability
Nigel Slack – Warwick Business School
South African base… spreads north
Expands through Europe and Asia
How will it cope in developed markets?
Almost impossible to imitate…………..Long-term operations capability
South America’s second biggest Brewery
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management can be applied to the resources and processes in any function
Operations management applies to the whole supply network
Operations management has to exploit new technologies
Operations management is the driver of improvement
Operations management has an environmental impact
Nigel Slack – Warwick Business School
To what extent do ethical and financial performance trade-off?
Ethical performance
Fina
ncia
l per
form
ance
Repositioning between ethical and financial performance
The efficient frontier between ethical and financial performance
Changing the balance (trade-off) between ethical and financial performance
Ethical performance
Fina
ncia
l pe
rform
ance
Societal pressure + reputational risk defining minimum ethical standards
Stockholder expectations defining
minimum financial standards
Simultaneously improving both ethical and financial performance , partly because extreme positions on either are becoming less acceptable
Nigel Slack – Warwick Business School
The ‘triple bottom line’ – Holcim cement
The triple bottom line.......• Profit• Planet• People
• Holcim one of the world’s leading manufacturers and distributors of cement• Production sites in over 70 countries.• Cement manufacture has a significant impact on almost every aspect of
sustainability and social responsibility. • We place sustainable development at the core of our business strategy
which aims to enhance value, and safeguards our reputation• Holcim’s strategy and their approach to value creation attempts to integrate
economic, environmental and social impacts. • Holcim have established a set of Group-wide CSR performance targets.• But CSR related performance measurement should not be separate from
the more conventional business systems.
Nigel Slack – Warwick Business School
Eliminating waste can also save costs
Example –Marmite (a popular spread in the UK)
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management can be applied to the resources and processes in any function
Operations management applies to the whole supply network
Operations management has to exploit new technologies
Operations management is the driver of improvement
Operations management has an environmental impact
Nigel Slack – Warwick Business School
Technical expertise Leadership expertise
Process expertise
Being the trusted advisor to the business and representing your function’s perspective
Contributing to the leadership team and
aligning business and functional visions
Delivering your expertise through your
service processes
Operations management as functional leadership – The ‘C-suite agenda’
Nigel Slack – Warwick Business School
Top - down
Functional management
should interpret higher level
managementResources
Functional management should manage resources
appropriately
Functional management should learn
from day-to-day experiencesBottom - up
Customer requirements
Functional management should satisfy its internal and
external customers
The four perspectives on any Functional strategy
Functional management
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management can be applied to the resources and processes in any function
Operations management applies to the whole supply network
Operations management has to exploit new technologies
Operations management is the driver of improvement
Operations management has an environmental impact
Nigel Slack – Warwick Business School
The Zara Supply Chain
ZARA
Nigel Slack – Warwick Business School
ZARA Located at La Coruna
An unlikely place for the fastest growing apparel company in the world!
Nigel Slack – Warwick Business School
30.6%
16.3%14.6%
12.6%10.2% 9.4%
0%
5%
10%
15%
20%
25%
30%
35%
Vogele Benetton H&M Gap Matalan Inditex
Zara keeps less inventory than its peers
Inventory as % of Annual Sales
Zara is the largest division of Inditex (78% of sales)
Nigel Slack – Warwick Business School
ZARA
ZaraLa Caruna, Spain
RetailShopsRetail
ShopsRetailShopsRetail
Shops
10,000 New Items/Year(~300,000 SKUs)
Almost No Advertising, Little Markdowns
Replenishes >1800 Shops in > 54 Countries Twice Per Week
Makes half of its clothes, 40% of its fabrics,
Designs new collections in 4-5 weeks
Produces in one week
“Catwalk to rack in as little as 2 weeks”
Nigel Slack – Warwick Business School
A fancy, huge, expensive warehouse! Why expand it when it is currently at 50% capacity utilization?
All shipments from a Central Distribution Centre
Nigel Slack – Warwick Business School
Design
Distribute
ProduceRetail
Zara’s “Closed Loop”
Zara closely controls the entire supply cycle much better than its peers
Nigel Slack – Warwick Business School
0 20% 40% 60% 80% 100%
Capacity Utilization
Low
X
X
X
High utilization but long throughput times
Low utilization but short throughput times Reduce process
variability
High
Ave
rage
leng
th o
f que
ue
X X
X
X
Pro
cess
thro
ughp
ut ti
me
(or i
nven
tory
)
The Operations Management triangle
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management can be applied to the resources and processes in any function
Operations management applies to the whole supply network
Operations management has to exploit new technologies
Operations management is the driver of improvement
Operations management has an environmental impact
Nigel Slack – Warwick Business School
Some of the elements that go to make up improvement approaches
Emphasis on solutions - what to do
Emphasis on methods -
how to do it
Emphasis on gradual change
Emphasis on rapid change
Bring doers and controllers together
Integrate data Visibility
across dataEnd-to-end processes
Radical rethinking
Evidence-based decisions
Systems and procedures
Business-wide
Improvement cycles
Perfection is the goal
Reduce variation
Customer centric
Emphasis on education
Include all people
Customer relationships
Waste identification
Synchronised flow
Process based analysis
Nigel Slack – Warwick Business School
Some of the elements that go to make up improvement approaches
Emphasis on solutions - what to do
Emphasis on methods -
how to do it
Emphasis on gradual change
Emphasis on rapid change
Bring doers and controllers together
Integrate data Visibility
across dataEnd-to-end processes
Radical rethinking
Evidence-based decisions
Systems and procedures
Business-wide
Improvement cycles
Perfection is the goal
Reduce variation
Customer centric
Emphasis on education
Include all people
Customer relationships
Waste identification
Synchronised flow
Process based analysis
TQMLean
BPR Six Sigma
Nigel Slack – Warwick Business School
Six Sigma
Notwithstanding some common elements improvement approaches do differ
Emphasis on rapid change
Emphasis on gradual change
BPR
Lean CI
Emphasis on solutions - what
to do
Emphasis on methods - how
to do it
Nigel Slack – Warwick Business School
How is the idea of Operations Management developing?
Operations management has strategic impact
Operations management can be applied to the resources and processes in any function
Operations management applies to the whole supply network
Operations management has to exploit new technologies
Operations management is the driver of improvement
Operations management has an environmental impact
Nigel Slack – Warwick Business School
Technology makes everything uncertain…. ..new operations issues emerge almost overnight
Technology– Impacts on OM development
3D Printing
Nigel Slack – Warwick Business School
Supply networks are changing faster …… and its changing the context of operations
Technology– Impacts on OM development
Nigel Slack – Warwick Business School
Disk/tape manufacturer
Recording studio
Songwriter Physical distribution
Retailer
Engineer
Arranger
Singer
Instrumentalists
Consumer
Producer
The Recorded Music Business Supply Network from the Classic 1940s-1950s Periodeg. Frank Sinatra
Strong vertical integration
Nigel Slack – Warwick Business School
Music production now largely in the control of the artists. Music distribution mixed.
Arranger
Instrumentalists
Consumer
ProducerEngineer
SingerSongwriter
Recording studio
On-line retailers
Conventional CDs
Artist’s download
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