an introduction to operations management - health & · pdf filethis ﬁrst chapter is an...

This first chapter is an introduction to operations management. It provides both newand experienced students with some key and basic concepts that they will carry withthem throughout the rest of the book.

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3

An introduction to operations management

Chapter 1

LEARNING OBJECTIVES

After considering this chapter, the reader will be able to:

� Appreciate the importance of operational management for all firms, whether they

offer services or manufacture tangible goods

� Identify operational activities both from a narrow and broad perspective using the

three definitions provided

� Be able to locate modern operations management perspectives and have an

understanding of their historical evolution and the various important trends

� Explain the main differences between, and classifications of, products and services

� Understand the various types of operation that are used and the strong link between

them and the demands upon the organization for flexibility

� Understand the main theoretical frameworks used to study operational management

as well as appreciating their advantages and disadvantages

INTRODUCTION

The value that is added by both operations management and operations strategy is funda-mental to most organizations. Operational activities are central to the provision of servicesand/or goods. Every organization provides a product and service combination. A meal ina restaurant, a visit to the hospital, buying a pair of Levi 501s, making a pair of Levi 501s,Woodstock Festival, insuring an automobile, staying in an hotel, going to the cinema, eventhe workings of a prison; all have operations activities and their management is central tothe successful provision of goods and services. Even Government departments can drawheavily upon operational initiatives and strategies when they talk about supply chain manage-ment, lean supply, just in time and total quality management.

This first chapter sets the scene for the rest of the book. It aims to offer the reader aninsight into the importance of operations management and gives a firm platform for thestudy of operations strategy. Those with a comprehensive understanding of the main tenetsof operations management might like to skim through this first section and then movedirectly to chapter 2.

THE CONTRIBUTION OF OPERATIONS MANAGEMENT

Operations management has its origins in the study of ‘production’ or ‘manufacturingmanagement’. These terms still very much apply to manufacturing organizations that willhave distinct operational activities that convert say, beans and rich tomato sauce into cansof baked beans to be sold by a retailer. Thus, we can initially think of operations manage-ment as being part of a distinct function producing a product and service combination, justas we have marketing and accounting functions in many organizations. Our first definitionof operations management is therefore:

Definition 1The design, operation and improvement of the systems that create and deliver thefirm’s primary product and service combinations.

4

UNDERSTANDING

KEY TERMS

� Operations management

� Supply and demand

� Product and service combinations and ‘servitization’

� Consumer demand, variety, diversity, flexibility, responsiveness and operational types

Every organization that offers goods or services has an operations activity. As far as theorganization structure is concerned, some firms will have a discrete operations function. Thismight be called a manufacturing department, an operations system, or have no identifiablename at all. However, like marketing and accounting, it is a fundamental function of the firmwith professionally trained operations or production managers responsible for conversion of resources into the required product and service combinations. In some organizations suchmanagers will have different titles, a store manager for a retailer, administrative managerswithin a hospital or distribution managers in a logistics company. This first definition tendsto be rather narrow as it applies to core conversion processes (mostly manufacturing). Weneed therefore to widen the definition of operations management to a second level:

Definition 2The design, operation and improvement of the internal and external systems,resources and technologies that create and deliver the firm’s primary product andservice combinations.

This definition expands the operations management concept beyond just internal production or manufacturing. Now it will encompass other activities such as purchasing,distribution, product and process design, etc. Further, there will also be external manage-rial responsibilities at a supply network level, covering a number of interconnectionsbetween external firms.

Increasingly, however, modern economies are built around services and experiences, andhere operations management is no less important. As Slack et al. (2001) point out, thereshould be a broader viewpoint that will take into account all activities throughout the firmthat have any connection with delivery of a service on a day-to-day, ‘make it happen’ basis.This brings us to the third definition of operations management:

Definition 3The design, operation and improvement of the internal and external systems,resources and technologies that create product and service combinations in anytype of organization.

This definition has subtly changed from the second. It now includes both manufacturingand non-manufacturing firms (the service sector – whether profit or non-profit making) andmore importantly, covers operational activities and systems throughout the organization,whether performed by an individual, group, unit or department. For example, a marketingor sales function can also be viewed as an operational activity – this also gives us the notionof internal consumers and suppliers. All activities in an organization will create a productand service combination (the latter might include information) supplied to either an internalor external consumer. Similarly, other internal/external suppliers will also support these activities. We can now see that the broad definition of operations management covers themain activities throughout a firm and its supply network contributing to the delivery of aproduct and service. These activities and their various interfaces can best be viewed as a number of consumer/supplier linkages.

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5

AN INTRODUCTION TO OPERATIONS MANAGEMENT

Now, if one accepts the above definitions, it becomes clear that operations has a strategiccontribution to make in supporting the needs of customers and consumers: the purpose ofthis book. We now examine the nature of operations management in more depth and expandon the need for an operations strategy; partly, an integrating system between these opera-tional activities and the wider business strategy.

THE STUDY OF OPERATIONS MANAGEMENT

We now build on the contribution of operations management to an organization. In partic-ular, more detail is given regarding the development of the subject, the types of operationand product and service combinations, and the main frameworks that can be used to analyseoperational activities.

The history of operations strategy and management

The study of operations management and operations strategy is a relatively new discipline,when compared with many of the social and natural sciences. However, as Meredith andAmaoaka-Gyampah (1990) remark, when it comes to the study of organizations, businessand management, ‘We in the field of operations management consider our field to be oneof the oldest in business schools pre-dating the emergence of finance and accounting bydecades’. Despite some amazing production feats in ancient civilizations and early modernepochs – the building achievements of the Romans, the pyramids of Egypt and the GreatWall of China – operations management as a discipline is more usually associated with theproduction of consumer goods. As we can see in Table 1.1, the growth of the subject andits major influences can be traced back to the late eighteenth and early nineteenth centuries.The table shows only the major operations-related concepts during this time (some of whichare not always original ideas!).

6

UNDERSTANDING

TIME OUT BOX I

Traditionally, economic activity is described in stages:

� Primary (extractive)

� Secondary (goods producing)

� Tertiary (domestic services)

� Quarternary (trade and commerce services)

� Quinary (refining and extending human capacities)

To which we can now add:

� Experience

Can you provide examples for each of these, demonstrating the main operational

activity?

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Tab

le 1

.1T

he h

isto

rica

l gr

owth

of

oper

atio

ns m

anag

emen

t an

d st

rate

gy

Per

iod

Con

cept

Ori

gina

tor

and/

or i

nflue

nce

Indu

stri

al R

evol

utio

n F

acto

ry m

anag

emen

t an

d th

e ch

ange

fro

m c

raft

wor

king

to

Dev

elop

ed d

urin

g th

e on

set

of t

he I

ndus

tria

l du

ring

lat

e ei

ghte

enth

ce

ntra

lized

, m

echa

nica

lly p

ower

ed f

acto

ry s

yste

ms

Rev

olut

ion

in t

he p

erio

d w

hen

fact

orie

s w

ere

and

earl

y ni

nete

enth

cr

eate

dce

ntur

ies

1769

Ste

am e

ngin

eJa

mes

Wat

t

1776

Div

isio

n of

lab

our.

Wor

ker

spec

ializ

atio

n an

d th

e br

eaki

ng d

own

Ada

m S

mit

h, W

ealt

h of

Nat

ions

of t

he p

rodu

ctio

n pr

oces

s in

to s

mal

l ta

sks

perf

orm

ed b

y di

ffer

ent

wor

kers

. A

lso

enco

urag

es s

peci

aliz

ed m

achi

nery

1790

sIn

terc

hang

eabl

e pa

rts.

A m

ove

to v

olum

e pr

oduc

tion

wit

h E

li W

hitn

eyst

anda

rdiz

ed p

arts

rat

her

than

cus

tom

ized

one

-at-

a-ti

me

oper

atio

n.

Led

to

the

need

for

sys

tem

of

mea

sure

men

t an

d in

spec

tion

, st

anda

rd

prod

ucti

on m

etho

ds a

nd s

uper

viso

ry q

ualit

y ch

ecki

ng

Sci

enti

fic m

anag

emen

t P

rinc

iple

s of

sci

enti

fic m

anag

emen

t19

10s–

1920

s

1911

The

bes

t m

etho

ds o

f pe

rfor

min

g ea

ch j

ob b

ased

on

obse

rvat

ion,

F

rede

rick

W.

Tay

lor

mea

sure

men

t an

d an

alys

is.

Sta

ndar

diza

tion

of

prac

tice

s an

d ec

onom

ic i

ncen

tive

s

1911

Indu

stri

al p

sych

olog

y. T

ime

and

mot

ion

stud

ies

– th

e ef

ficie

ncy

Fra

nk a

nd L

illia

n G

ilbre

thex

pert

s

1912

Act

ivit

y sc

hedu

ling

met

hods

and

cha

rts

Hen

ry G

antt

1913

App

licat

ion

of s

cien

tific

man

agem

ent.

The

mov

ing

asse

mbl

y lin

e H

enry

For

dan

d hi

gh v

olum

e, m

ass

prod

ucti

on

Qua

lity

cont

rols

193

0sS

ampl

ing

and

insp

ecti

on.

Sta

tist

ical

con

trol

met

hods

Wal

ter

She

war

t

Hum

an r

elat

ions

Im

port

ance

of

wor

ker

mot

ivat

ion

mov

emen

t 19

30s–

1960

s

1930

sH

awth

orne

Stu

dies

. W

orke

r m

otiv

atio

n an

d te

chni

cal

aspe

cts

of

Elt

on M

ayo

wor

k af

fect

ed p

rodu

ctiv

ity

cont

inue

d

Tab

le 1

.1co

ntin

ued

Per

iod

Con

cept

Ori

gina

tor

and/

or i

nflue

nce

1940

sM

otiv

atio

n th

eori

es –

hie

rarc

hy o

f ne

eds

Abr

aham

Mas

low

1950

sM

otiv

atio

n th

eori

es –

hyg

iene

fac

tors

Fre

deri

ck H

erzb

erg

1960

sM

otiv

atio

n th

eori

es –

the

ory

X a

nd Y

Dou

glas

MG

rego

r

Man

agem

ent

scie

nce

Ear

ly c

ompu

teri

zati

on a

nd c

yber

neti

csN

orbe

rt W

iene

r, J

ohn

von

Neu

man

n,

1940

s–19

60s

Gre

gory

Bat

eson

1940

sM

ulti

disc

iplin

ary

team

app

roac

hes

to c

ompl

ex s

yste

ms

prob

lem

s.

Var

ious

ope

rati

ons

rese

arch

gro

ups.

Lin

ear

prog

ram

min

g (s

impl

ex m

etho

d)G

eorg

e D

antz

ig

1950

s–19

60s

Ext

ensi

ve d

evel

opm

ent

of o

pera

tion

s re

sear

ch t

ools

(si

mul

atio

n,

Man

y re

sear

cher

s in

Eur

ope

and

the

US

wai

ting

-lin

e th

eory

, m

athe

mat

ical

pro

gram

min

g, p

roje

ct s

ched

ulin

g te

chni

ques

Pro

gram

me

Eva

luat

ion

and

Rev

iew

Tec

hniq

ue (

PE

RT

) an

d C

riti

cal

Pat

h A

naly

sis

(CP

A)

1951

Dig

ital

com

pute

rR

emin

gton

Ran

d

1960

sM

RP

Jose

ph O

rlic

ky,

IBM

Qua

lity

revo

luti

on

Ser

vice

qua

lity

and

prod

ucti

on q

ualit

y in

a t

otal

qua

lity

man

agem

ent

1970

s–19

90s

etho

s

1970

sM

ass

prod

ucti

on i

n th

e se

rvic

e se

ctor

McD

onal

d’s

Res

taur

ants

1980

s–19

90s

Tot

al Q

ualit

y M

anag

emen

t (T

QM

) an

d T

otal

Qua

lity

Con

trol

(T

QC

)W

. E

dwar

ds D

emin

gJo

seph

Jur

an

Man

ufac

turi

ng s

trat

egy

Man

ufac

turi

ng a

s a

com

peti

tive

wea

pon

para

digm

19

70s–

1990

s

1970

s–19

90s

The

infl

uenc

e of

jus

t in

tim

e (J

IT)

and

othe

r Ja

pane

se

Tai

ichi

Ohn

o an

d th

e T

oyot

a P

rodu

ctio

n m

anuf

actu

ring

met

hods

: K

anba

n, P

oka-

yoke

s, e

mpo

wer

men

t,

Sys

tem

flexi

ble

man

ufac

turi

ng s

yste

ms,

etc

.L

ean

Pro

duct

ion

1980

sO

pera

tion

al c

ontr

ibut

ion

to c

ompe

titi

ve s

trat

egy

Wic

kham

Ski

nner

Hay

es a

nd W

heel

wri

ght

1980

sC

ompu

ter-

inte

grat

ed M

anuf

actu

ring

(C

IM)

and

pers

onal

com

pute

rs

1980

s–19

90s

Sup

ply

chai

n m

anag

emen

t V

ario

us c

onsu

ltan

ts a

nd c

ompa

nies

1990

sO

pera

tion

s st

rate

gies

are

app

lied

to a

ll or

gani

zati

ons

(not

jus

t m

anuf

actu

ring

)

1990

sB

usin

ess

proc

ess

re-e

ngin

eeri

ngH

amm

er a

nd C

ham

pney

Info

rmat

ion

revo

luti

on

1980

s–20

00s

1970

sE

lect

roni

c D

ata

Inte

rcha

nge

(ED

I),

Ele

ctro

nic

Fun

ds T

rans

fer

Num

erou

s in

divi

dual

s an

d co

mpa

nies

(EF

T)

and

Ele

ctro

nic

Poi

nt o

f S

ale

(EP

oS)

1990

sIn

tern

et,

WW

W,

elec

tron

ic e

nter

pris

eL

earn

ing

orga

niza

tion

Glo

baliz

atio

n 19

90s–

2000

s

1990

s–20

00s

Wor

ldw

ide

mar

kets

and

ope

rati

ons

Ele

ctro

nic

com

mer

ce a

nd e

lect

roni

c en

terp

rise

s

Info

rmat

ion

and

Agi

lity,

flex

ibili

ty a

nd r

espo

nsiv

enes

sco

nsum

er r

evol

utio

n T

ime

as a

com

peti

tive

wea

pon

2000

s–S

uppl

ier

netw

ork

man

agem

ent

Mas

s cu

stom

izat

ion

E-c

omm

erce

and

V-b

usin

ess,

E-t

ailin

g an

d E

-ope

rati

ons

Cus

tom

izin

g op

erat

ions

str

ateg

ies

by d

eman

d be

havi

our

Low

son

The

nex

t er

a???

??

We can see the large number of influences and significant events, many of them over-lapping, upon the discipline of operations management.

Types of product

When discussing a definition of operations management, we used the term ‘product andservice combinations’. This is an important point. The type of product and/or service hasimportant implications for operations management, as we shall see in chapter 3, on oper-ations strategy. Types of product and/or service and their different behaviours drive manyactivities and strategies in an organization. In addition, for the study of operations manage-ment, there are clear distinctions between goods and services (although these will in futurebecome increasingly blurred). For example:

� Services are mostly intangible (an insurance package, a flight between two cities,advice from a lawyer, etc.);

� Services are normally produced and consumed simultaneously (a visit to the doctor, ahaircut), there is no inventory involved;

� Services are often unique and one-off (each medical operation is different, financialpackages such as pensions and investments are individualized);

� Services have a high consumer interaction, and this involves uniqueness (try havingyour hair styled or your teeth polished without being there!);

� Services are often difficult to define and are dynamic. Services are inconsistent and change rapidly (each meal in a restaurant is subtly different and unique, theservice on your car or the visit to the doctor is different every time, a motor vehicle insurance policy may look the same but it changes as your car matures);

� Services often have a large knowledge-base and are hard to automate (education,medicine and legal services for example);

� Services are widely dispersed; they are brought to the clients/consumers at theirhome or a central purchasing point (a retailer for example).

In Table 1.2 we detail some more distinctions.

10

UNDERSTANDING

TIME OUT BOX II

Forecasting, especially longer term, proves increasingly difficult for organizations.

Sometimes we can extrapolate trends, but the future is not always a continuation of

the past. Two questions:

1 What operational trends might continue into the next 2–3 decades?

2 What methods can organizations use to attempt to understand future influences,

particularly external ones?

The astute reader will note the use of the term ‘possible’ in Table 1.2. It is true to saythat most goods will contain service elements and some services contain tangible goods.We can think about this in terms of a continuum as in Fig. 1.1.

Services (and in chapter 12 we discuss the various types), now constitute the largesteconomic sector in many western economies. For example, as a percentage of grossdomestic product (GDP), services have risen from 48 per cent to 69 per cent in the UKand 60 per cent to 75 per cent in the USA (The Economist, 1999). In addition, the serviceelement (often in the form of information – the information content) of most tangible prod-ucts is becoming more important, hence our reference to product and service combinations.As Vandermerwe and Rada (1988) suggest:

More and more corporations throughout the world are adding value to their corecorporate offerings through services. The trend pervading almost all industries, isconsumer demand-driven, and perceived by corporations as sharpening theircompetitive edges.

Modern corporations are increasingly offering fuller market packages or‘bundles’ of consumer-focused combinations of goods, services, support, self-service, and knowledge. But services are beginning to dominate.

The movement is termed the ‘servitization of business’ . . . and is clearly apowerful new feature of total market strategy being adopted by the best compa-nies. It is leading to new relationships between them and their consumers.

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Table 1.2 Some possible differences between services and goods

Service attributes Goods attributes

Tend to be intangible Tend to be tangible

Reselling is unusual Products can be resold

Most services cannot be stored as an Inventories can be built and the product inventory stored

Many aspects of quality are hard to measure Most aspects of quality are measurable

Selling is a crucial part of the service Sales are at a distance (temporally) from the production

The provider rather than the product is Product can be transportedtransportable

Site of service is important for customer Site of facility has cost implications, contact rather than customer

Services are often difficult to automate Production processes can be automated

Response time is shorter as customer is part Longer response time due to separation of of the process – markets are thus often local production from consumption or sale –

markets are global

Labour intensive Capital intensive

Generally, smaller facilities needed Generally, larger facilities

12

UNDERSTANDING

C A S E VIGNETTE DULUX PAINTS

Dulux paints (part of Imperial Chemicals Industries plc) no longer manufacture and sell

paint for room decoration; their value added product is now atmosphere. You can buy, for

example, Heritage Colours. These can be Georgian, Art Deco and Edwardian, Victorian,

etc. to evoke a period atmosphere in a home of any age. Historical research has revealed

the types of paint used, its effect, and its composition – Dulux tries to faithfully recreate

these. In addition, free information helplines and a web site can be contacted for inquiries

about stockists, the products, advice on product specifications, advice on creating themes

and schemes, a local decorator service, and even recommended reading about restoration

of period properties, the paint makers and historical figures responsible for particular

interior designs.

TIME OUT BOX III

Seeking an example of ‘serivitization’, we examined what many people would naturally

think of as a tangible purchase: the motor vehicle. If buying from Vauxhall motors, these

are the options under the ‘Vauxhall Experience’:

� Finance. Hire purchase, lease purchase, personal leasing and choices 1, 2, 3.

� Masterfit. While-you-wait, book-in-advance servicing, with advance quotations,

twelve month warranty, courtesy car and special viewing areas to watch repairs.

100% 0%

Pure goods

Crude oil production

Motor vehicle

Machine tool manufacture

Hospital care

Management consultancy

Counselling

Pure services

100%

Fast food restaurant

Restaurant meal

Motor vehicle repair

Computer support services

Laying or installing a carpet

Figure 1.1 The goods–services continuum

In later chapters we return to the importance of product and service combinations for orga-nizations and their strategies. We now turn to the nature of operations. Just as organizationsproduce products and services they also use different types of operations.

Types of operation and the flexibility needed

Organizations undertake many diverse activities in providing different types of product andservice. Often they will have numerous suppliers and customers. Our point is that modernorganizations are complex entities and there will be many different types of operation, bothin individual firms as well as across different industries. Clearly types of operation will varyacross different sectors. Aluminium smelting is markedly different to a call centre or dealingwith insurance claims. We need to think about the various operational types generically andhow we can offer a taxonomy of operational forms.

One way of classifying the different types of operation witnessed in any organization isto equate them to the activities undertaken and the degree of flexibility sought. Activities,as we have seen, can take place within a distinct operational function, throughout the wholeorganization and encompass other organizations in a supply and demand network. Likewise,the degrees of flexibility can be viewed at different levels.

Before going further, we need to spend a little time thinking about the concept of flex-ibility. It is a subject to which we will return throughout the book and one that is exercisingthe minds of many managers in today’s organizations. Flexibility can be examined from theviewpoint of three particular issues: the stimuli for greater variety, the various classifica-tions of flexibility, and the measurement of flexibility.

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13


� Accident support. Free roadside recovery and repair.

� Insurance coverage.

� Safeguard. A protection scheme for all faults over 1, 2 or 3 years.

� Mobility. Special help for drivers with disabilities.

� A car!

According to Vauxhall Motors: ‘The package reflects consumer desires for life-time

satisfaction and support.’

Can you provide other examples of more tangible goods that have increasingly important

service elements?

TIME OUT BOX IV

What is the difference between a taxonomy and a typology?

The stimuli for greater flexibility

Flexibility in operational systems is as a response to the need for variety and its attendantuncertainty. The former can be viewed as being demand driven, while the latter are a supplydilemma.

CONSUMER DEMAND FOR VARIETY

In the last four decades consumer tastes have altered radically. Consumer demand in manysectors for both goods and services is displaying piecemeal, disjointed and unsystematictendencies and thus becoming increasingly difficult to satisfy. Consumer purchases are morethan ever a reflection of a lifestyle or fashion statement rather than the satisfaction of a basicneed, and this is only the beginning. To this has to be added the complexity of instanta-neous, electronic, worldwide communication, and an information explosion that has servedto educate the average shopper beyond any level seen to date. To meet these changingdemand patterns, organizations are having to react more speedily, while at the same timeavoiding the penalties associated with increasingly volatile demand. In the fashion-clothingsector, this drive for variety has reached almost chaotic proportions as we can see in thefollowing case.

Empirical research data also confirms some of these trends. In a 1999/2000 survey ofUK retailers and manufacturers in fast-moving consumer goods (FMCG) industries wasconducted by the Strategic Operations Management Research Centre at the University ofEast Anglia. Eighty-five per cent of retail respondents agreed that ‘for sale’ seasons werebecoming much shorter. In addition, 93 per cent of respondents to the survey witnessed atrend towards greater product volatility, fashion influence, difference and customizationover the last three years. Similar questions were posed to a separate survey of manufac-turers. Here, 81 per cent agreed that seasons were much shorter, 87 per cent saw more

14

UNDERSTANDING

C A S E VIGNETTE ARCADIA GROUP

According to the Operations Director of Arcadia, a leading UK clothing retailer:

Consumer demand is today more fragmented. The consumer is more discerning

about quality and choice and with an increasing fashion influence: no single style

or fashion has dominated for any length of time. The importance of increased

consumer purchasing power and a search for individuality has added to the multi-

dimensionality that consumer goods and services organizations have to contend

with. Traditional seasons overlap as summer/winter clothes are demanded

throughout the year. Style changes, once predictable and linked to formal

changeover times, are now fluid and constantly changing; replaced at the slightest

hint of fashion preference. “Basics”, those staid garments without seasonality

and volatility, now are subject to even shorter seasons.

volatility in style introductions, and 93 per cent believed unique and customized goods tobe of increasing importance (Lowson et al., 1999).

These changes in the business environment are bringing about unprecedented reconfig-uration of consumer demand, as witnessed by many organizations supplying product andservice combinations. In turn, these forces are being passed along supply and demandsystems. Unfortunately, the further away from the point of sale, and indication of demandpreference, the harder it becomes to react in an effective and efficient manner. Recourseto long term forecasting becomes virtually useless as complexity and dynamism continueto grow. This brings us to the second problematical area when considering the driving forcesfor variety, the inherent uncertainty that this brings.

DEMAND UNCERTAINTY

If we accept the picture of increasing variety in both goods and services and the search for ways to customize products at an individual level, we can see that many industries are characterized by difficult trading conditions. Unfortunately, modern organizations are ill-equipped to deal with such uncertainty. First a short history lesson.

At the beginning of the twentieth century, manufacturing, for example, was character-ized by an emphasis on mass-markets, high volume, and the use of interchangeable parts.When the principles of scientific management, as promulgated by Frederick Taylor and hisdisciples, were also adopted, it produced a new era of industrial power that was eagerlyexploited by the likes of Henry Ford, Isaac Singer and Andrew Carnegie.

The dogma was clear. For utmost efficiency in any factory: divide work into the smallestpossible components; assign the tasks to specialists; appoint managers to supervise and make decisions, leaving workers free to concentrate on manual tasks; reduce variation to aminimum; standardize all inputs and outputs to reduce defects; exercise control through a rigid hierarchy which channels communication in the form of exception reports upwardand directives downward; measure performance by cost, scale, experience, and length ofproduction run; and employ forecasting systems in order to anticipate any possible changes.

In 1974, Wickham Skinner proposed the idea that manufacturers have to learn to focustheir plants (or even departments within plants) on a limited range of technologies, volumes,markets and products, and that strategies, tactics, and services should all be arranged tosupport that focus. The maxim was that a factory that succeeds in focusing its activities willoutperform one that does not. Costs would be lower than in unfocused operations due toexperience curve and scale benefits; consequently focus provides competitive advantage(Skinner, 1974).

There are, however, always trade-offs with such an approach; for example, low cost andflexibility are inappropriate bedfellows. If the market demands greater variety and diversi-fication, the focused factory comes under considerable strain, often alleviated only at theexpense of high inventory levels.

As we reached the 1980s, it soon became apparent that organizations operating in thismanner were unable to cope with one particular demand: variety. Fundamental and radicalnew methods of organization and management were needed once the demand for diversityreached a critical level. We are still searching for these new approaches (many of which wenow call operations strategies) and this is the subject of this book.

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15


We will return to these ideas later. Those interested in the debate regarding flexibilityas a response to uncertainty are recommended to consider an early research paper:Swamidass and Newell (1987).

The next factor we need to consider is the changes that these stimuli have engenderedin organizational structure.

THE ORGANIZATIONS RESPONSE TO CHANGING CONSUMER DEMAND

Today’s commercial environment requires businesses to seek greater product and processvariation (flexibility) through agility and responsiveness; a possible rejection of the Fordistprinciples of mass manufacturing, and a move towards mass customization (see Piore andSabel, 1984 and Pine et al., 1993).

However, this Holy Grail of mass customization can only be attained once an entiresupply network1 with all various firms, is integrated and data openly shared allowing visi-bility at all stages. A supply/demand system that is fully visible provides the basis forflexibility and responsiveness to real-time demand.

How close are we to achieving such a situation? Figure 1.2 shows the evolution of sucha supply/demand system. The first stage, I, depicts the situation for most goods and servicessectors at the turn of the last century. The participants considered themselves as separateand autonomous industries with no influence, reliance or interconnection with each other.The second stage, II, shows the effect of interdependence and the supply chain is born. Butindustries remain manufacturing- and product-driven. In stage III we see the current situ-ation (theoretically); with Electronic Data Interchange (EDI) beginning to form an interfacebetween industries in a pipeline responding to a consumer pull.

In the light of the changing business environment described above, a fourth more radical and advanced stage is needed for successful competition and the necessary flexibility.

16

UNDERSTANDING

C A S E VIGNETTE MASS CUSTOMIZATION

The aim of mass customization is to provide varied and often individually customized prod-

ucts at the low cost of standardized, mass-produced goods. As Pine et al. (1993) comment:

Mass customization calls for flexibility and quick responsiveness. In an ever-

changing environment, people, processes, units and technology reconfigure to give

consumers exactly what they want. Managers co-ordinate independent, capable

individuals, and an efficient linkage system is crucial. Result: low-cost, high

quality, customized goods and services.

1 Supply/demand networks or systems are our preferred terminology to describe what is often known as the‘supply chain’. We feel that the terms ‘system’ or ‘network’ demonstrate a complex flow of information andproducts, both up and downstream, whereas a ‘chain’ only really represents a linear sequence of activities. Thisis covered in more detail in chapter 13.

Figure 1.3 shows stage IV, what we term the ‘cluster of value’. This is a future vision. Theconsumer group is the nucleus of activity, dictating and driving all demand preferences forvariety. The entities circling (sales processes, operations processes, supplier processes) areall closely linked and responding by providing value in the exact format required. Consumergroups are constantly changing over time and organizations are involved in many differentsimultaneous clusters of value at any given point. This type of structure and interaction isnecessary in response to growing demand variety, including the move to mass customiza-tion of services and goods.

The classification of flexibility

Operational flexibility and the activities that comprise it can be witnessed at three levels inan organization, no matter whether providing a service or a good:

1 At an inter- and intra-organizational level. A strategic choice: both the firm and itssupply and demand systems are concerned with the ability to offer a particular level offlexibility in its product and service combinations.

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17


Stage I

Supplierprocesses

Operationsprocesses

Salesprocesses

Stage II

Stage III

Operationsprocesses

Supplierprocesses

Salesprocesses

Operationsprocesses

Supplierprocesses

SalesprocessesEDI EDI

Figure 1.2 Supply system evolutionSource: adapted from Lowson et al. (1999)

2 At an operations level. Whether in a distinct operations function or throughout theorganization, a concern for whether the operations activities are capable of sufficientproduct and service flexibility.

3 At an individual, resource, process and structure level. Are our human resources(whether as individuals or in teams or groups), other resources (machinery, etc.), ourprocesses (stages or activities necessary to complete a task) and structure (how thesystem is organized and governed) sufficiently flexible to match the variety of tasksrequired to support levels 1 and 2?

The strategic nature of flexibility applies at a total supply and demand system and organ-izational level (1 and 2 above). Thus, we can conceptually think of flexibility as being bothan external and internal response to the value demanded by the customer.

EXTERNAL RESPONSE TO CUSTOMER VALUE DEMANDS

1 Product and service combination flexibility. The ability to introduce and modifyproducts and service combinations according to demand variety.

2 Mix flexibility. An ability to change the range of product and service combinationsbeing produced over a given time period.

18

UNDERSTANDING

Operationsprocesses

Supplierprocesses

Supplierprocesses

Salesprocesses

Supplierprocesses

Operationsprocesses

CUSTOMER

Supplierprocesses

Salesprocesses

Operationsprocesses

Salesprocesses

Supplierprocesses

Operationsprocesses

Salesprocesses

Operationsprocesses

Salesprocesses

Figure 1.3 A cluster of value

Stage IV

3 Volume flexibility. Being able to change the level of an operations output over time.4 Logistics flexibility. An ability to provide the flexibility that determines when and

where and how a product or service is provided.5 Monetary flexibility. A flexibility over when, where, and how payment is made for

the necessary goods and services (including interests rates, instalments, etc.).6 Contact flexibility. The degree of direct contact with customers and the influence this

has upon value and customer satisfaction.

Flexibility requires a firm’s internal and external boundaries to be redrawn. Atkinson(1984), using the flexible firm model, debated the implications for manpower, work andemployment. He identifies three types of flexibility to which we add a further two below.

INTERNAL RESPONSE TO CUSTOMER VALUE DEMANDS

1 Functional flexibility. Redeployment of workers as the product and production tasksrequire.

2 Numerical flexibility. The capacity to make changes in employment levels to matchdemand.

3 Financial flexibility. Pay and other employment costs reflecting the objectives ofnumerical and functional flexibility.

To these we can add:

4 Temporal flexibility. Flexibility in timing work arrangements to match demand needs.5 Technological flexibility. The flexibility of process technology to be used for multiple

purposes.

Given the importance of flexibility, it seems advisable that an organization devisesmethods to ascertain the levels it requires. However, flexibility is a concept that is difficultto quantify and operationalize – to a degree, each business must assess its individual impactin terms of the general benefits and costs it brings.

Types of operations revisited

Having given consideration to the variety of demands placed on an organization and theconsequent flexibility necessary for modern operations, we now return to generic types ofoperations possible. This can be done by expanding upon the various types of flexibilityencountered and addressing the two flexibility classifications: external and internal responseto customer value demands.

EXTERNAL RESPONSE TO CUSTOMER VALUE DEMANDS

� Product and service combination flexibility;� Mix flexibility;� Volume flexibility;� Logistics flexibility;

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19


� Monetary flexibility;� Contact flexibility.

INTERNAL RESPONSE TO CUSTOMER VALUE DEMANDS

� Functional flexibility;� Numerical flexibility;� Financial flexibility;� Technological flexibility;� Temporal flexibility.

The types of operation needed in each of the above instances and the environmentalinfluences necessitating their adoption can be seen in Tables 1.3 and 1.4.

As we can see, the various flexibility categories will have a direct impact upon the typesof operation involved and their organization. Those firms specializing in highly customizedcustomer flexibility will also have high internal flexibility and will be complex in nature,with much variety and change. An acute understanding of demand and their environmentis important as their markets are also likely to be complex, competitive and fast moving –in short this type of business will often be described as organic and highly contingent uponits environment (Burns and Stalker, 1961). In addition, the styles of operation and organi-zation will also vary between the organizational subunits. Hence the degree of differentiationin operations will alter according to the nature of the industry and its environment. Anappropriate degree of integration will also be required to tie these differentiated operationalactivities together (Lawrence and Lorsch, 1967). Conversely, industries and sectorsrequiring lower levels of flexibility are likely to be populated by firms with more standard-ized, routine operations producing product and service combinations that offer little change.Demand over time is steady and easier to forecast. Firms can specialize in higher volumeoperations to take advantage of economies of scale and experience curve benefits. Moremechanistic in nature, these businesses will utilize regimented and stereotypical operationsthat will change little across the whole organization.

CONCLUSION

In chapter 1 we have described the contribution of operations management to the study ofbusiness, management and organizational theory. Definitions have been provided that will,hopefully, help the reader to gain a clear impression of the discipline. The chapter has also

20

UNDERSTANDING

TIME OUT BOX V

What are the implications for the Kentucky Fried Chicken operation if its consumers

suddenly decide they want individual meals that are unique, high quality, with lots of

variety and variation and served by waiters at the table?

11112345678910123411567892011112345678930123456789401234111

Tab

le 1

.3A

typ

olog

y of

ope

rati

ons:

an

exte

rnal

res

pons

e to

cus

tom

er v

alue

dem

ands

Typ

es o

f fle

xibi

lity*

Ext

erna

l de

man

ds a

nd f

orce

sO

pera

tion

al e

xam

ples

Ram

ifica

tion

s fo

r op

erat

ions

Pro

duct

and

serv

ice

Hig

h le

vels

Hig

h le

vels

Hig

h le

vels

com

bina

tion

�

Rap

idly

cha

ngin

g na

ture

of

dem

and

�F

ashi

on c

loth

ing

reta

iler

�U

nder

stan

ding

com

plex

dem

and

flexi

bilit

y�

Sho

rt p

rodu

ct l

ife

cycl

es�

Foo

d re

taile

r�

Hig

hly

flexi

ble,

cus

tom

ized

ope

rati

ons

�S

peci

aliz

ed s

ervi

ces

�H

igh

cons

umer

con

tact

(leg

al,

med

ical

, et

c.)

�R

apid

pro

duct

dev

elop

men

t/m

odifi

cati

on�

Impo

rtan

ce o

f in

nova

tion

s an

d ch

ange

�S

cope

and

var

iety

mor

e im

port

ant

than

sc

ale

Low

lev

els

Low

lev

els

Low

lev

els

�S

tati

c pr

oduc

t de

man

d�

Uti

lity

serv

ices

�L

ittl

e ch

ange

�S

tand

ardi

zed

good

s an

d se

rvic

es�

Pro

cess

man

ufac

turi

ng (

oil,

�R

outi

ne r

egul

ar,

stan

dard

ized

pro

duct

s ch

emic

als,

etc

.)an

d ac

tivi

ties

�L

ittl

e pr

oduc

t de

velo

pmen

t/m

odifi

cati

on�

Sca

le n

eede

d to

red

uce

cost

Mix

flex

ibili

tyH

igh

leve

lsH

igh

leve

lsH

igh

leve

ls�

Rap

idly

cha

ngin

g ty

pes

of

�E

lect

roni

c go

ods

wit

h ha

rdw

are/

�U

nder

stan

ding

com

plex

dem

and

dem

and

for

mix

ed p

rodu

ct o

ffer

ings

soft

war

e co

mbi

nati

ons

�P

aral

lel

oper

atio

ns n

eces

sary

to

�P

rodu

cts

dem

ande

d in

com

bina

tion

s�

Em

erge

ncy

serv

ices

prod

uce

the

vari

ety

need

ed�

Hig

h su

bsti

tuti

on o

f on

e go

od f

or�

Gou

rmet

foo

ds a

nd r

esta

uran

ts�

Hig

h le

vels

of

inve

ntor

y of

ten

requ

ired

anot

her

�D

epar

tmen

t st

ores

�F

lexi

ble

wor

kfor

ce a

nd t

echn

olog

y�

Abi

lity

to c

hang

e ou

tput

flex

ibly

Low

lev

els

Low

lev

els

Low

lev

els

�D

eman

d fo

r si

ngle

pro

duct

typ

e�

Bak

ery

(sin

gle

type

of

good

sol

d)�

Sta

ndar

diza

tion

and

tas

k sp

ecia

lizat

ion

�L

ittl

e pr

oduc

t su

bsti

tuti

on�

Aut

o ty

re r

epla

cem

ent

serv

ices

�W

ell

defin

ed o

pera

tion

s�

Win

dow

cle

anin

g

Vol

ume

flexi

bilit

yH

igh

leve

lsH

igh

leve

lsH

igh

leve

ls�

Lar

ge p

eaks

and

tro

ughs

in

dem

and

�Ic

e cr

eam

and

sof

t dr

inks

�F

lexi

bilit

y of

ope

rati

ons,

tec

hnol

ogy

�R

esta

uran

t se

rvic

esan

d pe

ople

�M

ass

ente

rtai

nmen

t ev

ents

�A

bilit

y to

alt

er c

apac

ity

and

type

of

oper

atio

nco

ntin

ued

Tab

le 1

.3co

ntin

ued

Typ

es o

f fle

xibi

lity*

Ext

erna

l de

man

ds a

nd f

orce

sO

pera

tion

al e

xam

ples

Ram

ifica

tion

s fo

r op

erat

ions

Vol

ume

flexi

bilit

yL

ow l

evel

sL

ow l

evel

sL

ow l

evel

s�

Reg

ular

and

rep

eata

ble

oper

atio

ns�

Fas

t fo

od r

esta

uran

ts�

Ope

rati

onal

rep

etit

ion

wit

h lit

tle

chan

ge t

o de

man

d �

Man

ufac

ture

of

sock

s�

Lit

tle

chan

ge i

n ca

paci

ty o

r op

erat

ion

volu

me

�P

ublic

tra

nspo

rt s

yste

ms

Log

isti

cs fl

exib

ility

Hig

h le

vels

Hig

h le

vels

Hig

h le

vels

�S

peci

aliz

ed a

nd p

erso

naliz

ed

�H

ome

deliv

ery

logi

stic

sys

tem

s�

Phy

sica

l fle

xibi

lity

need

ed i

n de

liver

y se

rvic

es�

Del

iver

y of

com

pone

nts

to a

noth

erdi

stri

buti

on s

yste

ms

�Ju

st i

n T

ime

deliv

ery

serv

ices

man

ufac

ture

r in

exa

ct q

uant

itie

s �

Oft

en n

eces

sita

tes

outs

ourc

ing

to

�V

endo

r m

anag

ed i

nven

tory

and

whe

n ne

eded

logi

stic

al e

xper

t�

Man

agem

ent

of a

cus

tom

er’s

inve

ntor

y fo

r th

em

Low

lev

els

Low

lev

els

Low

lev

els

�C

onsu

mer

tra

vels

to

colle

ct g

oods

�R

etai

l sh

op�

Lit

tle

flexi

bilit

y in

eit

her

dem

and

or

�C

onsu

mer

des

ires

/nee

ds t

o be

�

Hai

rdre

sser

s, d

enti

st,

doct

or,

etc.

supp

ly s

ide

as t

his

is p

rovi

ded

by

pres

ent

for

prod

uct/

serv

ice

prov

isio

nco

nsum

er

Mon

etar

y fle

xibi

lity

Hig

h le

vels

Hig

h le

vels

Hig

h le

vels

�P

aym

ents

flex

ibili

ty f

or c

redi

t,

�T

his

type

of

flexi

bilit

y in

crea

sing

ly

�F

inan

cial

flex

ibili

ty r

equi

res

a fir

m t

oin

stal

men

ts,

char

ge-b

ack,

pay

men

tw

itne

ssed

for

exp

ensi

ve p

urch

ases

rest

ruct

ure

its

acco

unta

ncy

syst

ems

and

as c

onsu

med

, et

c.(c

ars,

hou

ses,

hol

iday

s)it

s re

lati

onsh

ips

wit

h fin

ance

pro

vide

rs

Low

lev

els

Low

lev

els

Low

lev

els

�P

aym

ent

on p

urch

ase

or o

n de

liver

y�

Tra

diti

onal

ret

ail

tran

sact

ion

�P

aym

ent

mad

e at

poi

nt o

f co

nsum

ptio

n

Con

sum

er c

onta

ctH

igh

leve

lsH

igh

leve

lsH

igh

leve

lsfle

xibi

lity

�H

ow m

uch

tim

e op

erat

iona

l �

Fas

t fo

od r

esta

uran

t�

Hig

h co

ntro

l le

vels

nee

ded

for

effic

ienc

y pe

rson

nel

spen

d w

ith

cons

umer

�M

edic

al s

ervi

ces

and

effe

ctiv

enes

s�

Wai

ting

tim

e is

cru

cial

�Q

ualit

y is

im

med

iate

ly a

ppar

ent

�O

ften

, hi

gher

var

iety

�C

onsu

mer

con

tact

ski

lls n

eede

d

Low

lev

els

Low

lev

els

Low

lev

els

�T

ime

lag

betw

een

prod

ucti

on a

nd�

Pro

cess

man

ufac

turi

ng�

Qua

lity

defe

cts

not

imm

edia

tely

appa

rent

cons

umpt

ion

�D

ista

nce

lear

ning

�L

ow c

onsu

mer

con

tact

�In

tern

et b

anki

ng�

Sta

ndar

dize

d go

ods

�L

ower

lab

our

cost

s

* E

xter

nal

resp

onse

to

cons

umer

val

ue d

eman

ds.

In

this

sec

tion

, ex

tern

al d

eman

ds f

or fl

exib

ility

pro

mpt

cha

nges

in

prod

uct

and

serv

ice

com

bina

tion

s.

11112345678910123411567892011112345678930123456789401234111

Tab

le 1

.4A

typ

olog

y of

ope

rati

ons:

an

inte

rnal

res

pons

e to

cus

tom

er v

alue

dem

ands

Typ

es o

f fle

xibi

lity*

Ext

erna

l de

man

ds a

nd f

orce

sO

pera

tion

al e

xam

ples

Ram

ifica

tion

s fo

r op

erat

ions

typ

e

Fun

ctio

nal

Hig

h le

vels

in

any

of t

he a

bove

�M

anuf

actu

rer

of c

onsu

mer

goo

ds

�T

he fi

rm u

ses

a sm

all

core

gro

up o

f fle

xibi

lity

cate

gori

esw

ith

larg

e pe

aks

and

trou

ghs

inw

orke

rs w

ho a

re g

iven

job

sec

urit

y in

de

man

d (i

ce c

ream

, so

ft d

rink

s)re

turn

for

tas

k an

d ro

le fl

exib

ility

as

�P

roce

ssin

g pl

ants

wit

h se

ason

alre

quir

ed b

y pr

oduc

ts a

nd p

rodu

ctio

nin

fluen

ces

(sug

ar b

eet

proc

essi

ng)

�M

any

auto

mot

ive

firm

s re

quir

e th

at

man

ager

s an

d cl

eric

al s

taff

be

prep

ared

to

wor

k on

pro

duct

ion

lines

if

nece

ssar

y�

Ski

lled

engi

neer

ing

wor

kers

on

oil

or

gas

plat

form

s m

ust

unde

rtak

e se

mi-

skill

ed o

r un

skill

ed w

ork

if t

here

is

no a

vaila

ble

craf

t w

ork

Num

eric

al fl

exib

ility

�S

easo

nal

serv

ice

sect

ors

such

as

�S

urro

undi

ng t

he c

ore

wor

kers

are

ho

liday

res

orts

shor

t-te

rm,

part

-tim

e, j

ob s

hari

ng,

tem

pora

ry w

orke

rs w

ho c

an b

e us

ed t

o ch

ange

the

wor

kfor

ce n

umbe

rs i

n lin

e w

ith

dem

and

leve

ls

Fin

anci

al fl

exib

ility

�P

ay r

ates

and

str

uctu

res

will

refl

ect

�P

ay a

nd o

ther

em

ploy

men

t co

sts

indi

vidu

al p

erfo

rman

ce a

ndre

flect

the

sta

te o

f su

pply

and

dem

and

dem

and

leve

lsin

the

ext

erna

l la

bour

mar

ket

and

supp

ort

the

obje

ctiv

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discussed the types of product and service combinations now supplied by most commercialorganizations. In addition, a link was made between operations and flexibility often requiredin a modern enterprise. Chapter 2 continues to examine the role of operations manage-ment by offering key frameworks necessary for further, more detailed, analytical study.

CASE STUDY – OPERATIONS STRATEGY IN ACTION

Clipper Navigation Inc. – an introduction to operations management(www.victoriaclipper.com)

Victoria Clippers are some of the world’s quickest catamarans; in fact, the Victoria ClipperIV’s turbojet service makes it the fastest passenger ferry in North America. The speed ofthe clipper ships during the 71-mile voyage between Victoria (the capital of VancouverIsland on the north-west coast of Canada) and Seattle is 25 to 45 knots (about 28 to 53miles per hour), enabling them to complete the journey in two to three hours.

These unique Clipper Ferries operate between Seattle, the San Juan Islands, Victoria andVancouver. The service is renowned for not only its speed, but also its comfort, reliability,frequency and low cost. It makes perfect sense for holidaymakers who can leave the carbehind in the gridlock that is sometimes Seattle, and island hop between the beautifulislands. It is also the favoured route of many business travellers and commuters who eitherlive on the many islands or travel between Vancouver City and Seattle. What better waymight there be to arrive at work? Sitting on a ‘float plane’ in the comfort of the vast viewingareas (on the sundeck or inside) watching Orca whales and bald eagles circling the stunningvegetation of the many coves and islands. With towering trees and snow-capped mountRainier as a backdrop, as an attendant serves you in your seat. It is a unique travel experi-ence. And all this for less than a rail commuter would pay to travel from the Home Countiesto London.

Because so little of these aluminium alloy catamarans lies below the water line, they areremarkably easy to handle and provide both a fast and smooth ride. These are also largeships. The latest Clipper IV carries 350 passengers and is 132 feet from stem to stern witha cruising range of 346 nautical miles. There are 12 ferries in the fleet and they sail fourtimes a day between Seattle, Vancouver and Victoria. In addition there are departures twicea day from each of these cities that stop off at the various islands and other coastal towns.

Coordination of these services is vital. All the departures of Clippers ferries have to beclosely coordinated with all the booking services and reservations for both pedestrian andcar passengers. Many of the ferry sailing’s link up with local motor coach companies, smallseaplane services, helijet flights and Amtrak Railways that will drive on and off and takepassengers to destinations further afield such as Portland in Oregon, the Canadian Rockiesand the Whistler Ski Resort.

Operations management is a key concern for Clipper Navigation. As their Vice-Presidentfor Operations, Tom Morris remarks:

24

UNDERSTANDING

The coordination and management of these interconnected operations is vital tous. But it is not just a matter of internal operations, the success of our servicesrelies heavily upon our partners, both horizontal and vertical.

ANSWERS TO TIME OUT BOXES

Time out box I

Economic activities can be classified as:

� Primary or extractive – these are concerned with agriculture, mining, fishing and forestry.

The main operational activity involves transforming natural resources to produce a

product.

� Secondary or goods producing – manufacturing and processing activities that transform

raw materials and components into finished goods.

� Tertiary or domestic services – restaurants, hotels, barber and beauty shops, laundry and

dry cleaning, maintenance and repair for example. Here the transformation involves the

delivery of a product and service combination.

� Quaternary (trade and commerce services) – transportation, retailing, communication,

finance and insurance, real estate, governmental, etc. Again, the delivery of services is the

main transformation.

� Quinary (refining and extending human capacities) – health, education, research, recre-

ation, arts. Transforming and satisfying human self-actualization needs.

� Experience (the experience economy providing entertainment, education, aestheticism and

escapism). The transaction provides an experience in which value is created through

engaging and connecting with the consumer in a memorable way. It is the basis of

operation for Starbucks, Disney World and Planet Hollywood for example. Readers

interested in the concept might consider Pine and Gilmore (1998).

Time out box II

1 The power of the Internet should not be underestimated. It is likely that consumers will

increasingly make purchases in this way. However, as yet, e-fulfilment is far from

satisfactory and the seamless shopping experience is still a long way off. We also believe

the trend for ‘customization’ and ‘personalization’ will continue and this will have

considerable implications for the design of our operating systems

2 A question that has troubled most firms at one time or another. Forecasting is clearly

little help over longer time periods and with regard to events in the wider, macro

environment. Possible answers lie in the education of management and the workforce to

become ‘boundary-spanning’ and develop a collective awareness of change and future

possible change scenarios.

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Time out box III

There are many possible examples, including grocery goods that now carry much more informa-

tion regarding their composition as well as web sites for recipes, food information, recycling

information, etc. Smart tags on apparel also offer similar information and can track the life of

the product, its use and even its geographical location: take care where you leave your jeans!

Time out box IV

A common misconception is that taxonomies are empirical while typologies are conceptual. Yet

taxonomies do not have to be empirically tested, although there are strong reasons for doing so,

and typologies can be tested quite rigorously. Another distinction often suggested is that

taxonomies provide comprehensive classification systems (including ‘good’ and ‘bad’ phenomena)

while typologies only describe ideal types. To a degree this is true: however, it is perhaps better

to think of typology as a branch of knowledge that deals with classes with common characteris-

tics, a study of types, while taxonomy is a systematic approach to classification of individual

examples often relying upon empirical and quantified data.

Time out box V

Like many fast food restaurants, the Kentucky Fried Chicken operation relies upon standardiza-

tion and the division of labour. Each product and process is standardized with little variety. The

various tasks are analysed and well understood and consumer contact is relatively low (there is

no personalized service). This standardized, high volume operation with dedicated technology can

be highly efficient and fast. However, it is not well equipped to cope with variety, as flexibility

levels are low. Just try asking for boiled potatoes instead of fries with your Kentucky Fried

Chicken!

DISCUSSION QUESTIONS, WORK ASSIGNMENTS AND EXAM QUESTIONS

1 How would you define the role of operations management? Apply these definitions to a

manufacturer, a bank and a health centre.

2 Why has the distinction between tangible products and services become increasingly blurred?

3 Discuss why flexibility is important in today’s modern organizational environment.

4 How can flexibility be classified and what implications will each classification have for

operations management?

Reader questions related to Clipper Navigation Inc. case study

1 How would you describe the product and service combination supplied by Clipper Navigation?

2 Describe the main subsystems of the Clipper operations. Can you group the vital activities

under particular headings?

26

UNDERSTANDING

3 Their VP for Operations mentions the importance of horizontal and vertical partners.

What products and services might these provide and what is the essential difference

between the two categories?

4 Think about the need for flexibility necessary for Clipper Navigation. As we have seen,

flexibility is a matter of both an internal and external response. What are the particular

operational activities vital to ensure this flexibility? Can they be improved? Could the

organization use demand data and information to better plan operations?

RECOMMENDED READING

Katz D. and Kahn R.L. (1978) The Social Psychology of Organizations, John Wiley & Sons Inc.,New York.

Meredith J.R. and Amoaka-Gyampah K. (1990) ‘The Genealogy of Operations Management’,Journal of Operations Management 9, 2, 146–67.

Pine II B.J. and Gilmore J.H. (1998) ‘Welcome to the Experience Economy’, Harvard BusinessReview July–Aug 97–105.

Slack N., Chambers S. and Johnston R. (2001) Operations Management, Financial Times andPrentice Hall, Harlow (chapter 1 – for those still unclear about the nature of operationsmanagement).

Swamidass P.M. and Newell W.T. (1987) ‘Manufacturing Strategy, Environmental Uncertaintyand Performance: A Path Analytic Model’, Management Science 33, 4, 509–24.

Vandermerwe S. and Rada J. (1988) ‘Servitization of Business: Adding Value by AddingServices’, European Management Journal 6, 4, 314–24.

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