OPERATIONS STRATEGY OPERATIONS STRATEGY Fourth Edition Nigel Slack Michael Lewis Pearson Education Limited Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk First published 2002 (print) Second edition published 2008 (print) Third edition published 2011 (print and electronic) This edition published 2015 (print and electronic) © Pearson Education Limited 2002, 2008 (print) © Pearson Education Limited 2011, 2015 (print and electronic) The rights of Nigel Slack and Michael Lewis 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 authors’ 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 authors 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: 978-1-292-01779-2 (print) 978-1-292-01782-2 (PDF) 978-1-292-01780-8 (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 Slack, Nigel Operations strategy / Nigel Slack, Michael Lewis – Fourth edition pages cm Includes bibliographical references and index ISBN 978-1-292-01779-2 (paperback) – ISBN 978-1-292-01782-2 (PDF – ISBN 978-1-292-01780-8 (eText) Production management I Lewis, Michael, 1969- II Title TS155.S563 2015 658.5–dc23 2014036012 10 19 18 17 16 15 Print edition typeset in 9.5/12 and Stone Serif ITC Pro by 73 Printed by Ashford Colour Press Ltd, Gosport NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION Brief Contents List of figures, tables and exhibits from case studies Preface Acknowledgements Publisher’s acknowledgements Operations strategy – developing resources and processes for strategic impact xi xix xxiii xxiv Operations performance 43 Substitutes for strategy 85 Capacity strategy 117 Purchasing and supply strategy 148 Process technology strategy 189 Improvement strategy 225 Product and service development and organisation 264 The process of operations strategy – formulation and implementation 298 10 The process of operations strategy – monitoring and control Case studies Index 329 357 443 This page intentionally left blank Contents List of figures, tables and exhibits from case studies Preface Acknowledgements Publisher’s acknowledgements Chapter 1 Operations strategy – developing resources and processes for strategic impact Introduction Why is operations excellence fundamental to strategic success? What is strategy? What is operations strategy and how is it different from operations management? What is the ‘content’ of operations strategy? The operations strategy matrix What is the ‘process’ of operations strategy? How is operations strategy developing? Summary answers to key questions Further reading Notes on the chapter Chapter 2 Operations performance Introduction Operations performance can make or break any organisation The five generic performance objectives The relative importance of performance objectives changes over time Trade-offs – are they inevitable? Targeting and operations focus Summary answers to key questions Further reading Notes on the chapter Chapter 3 Substitutes for strategy Introduction Fads, fashion and the ‘new’ approaches to operations Total quality management (TQM) Lean operations Business process reengineering (BPR) Six Sigma Some common threads Summary answers to key questions xi xix xxiii xxiv 1 24 31 33 34 39 41 41 43 43 44 50 62 68 75 82 83 84 85 85 86 87 94 100 104 110 114 viii C ontents Further reading Notes on the chapter Chapter 4 Capacity strategy 115 115 117 Introduction What is capacity strategy? The overall level of operations capacity The number and size of sites Capacity change Location of capacity Summary answers to key questions Further reading Notes on the chapter 117 118 119 127 130 137 145 146 147 Chapter 5 Purchasing and supply strategy 148 Introduction What is purchasing and supply strategy? Do or buy? The vertical integration decision Contracting and relationships Which type of arrangement? Supply network dynamics Managing suppliers over time Purchasing and supply chain risk Summary answers to key questions Further reading Notes on the chapter 148 148 159 163 173 174 179 182 185 186 187 Chapter 6 Process technology strategy Introduction What is process technology strategy? Process technology should reflect volume and variety The product–process matrix The challenges of information technology (IT) Evaluating process technology Summary answers to key questions Further reading Notes on the chapter Chapter 7 Improvement strategy Introduction Operations improvement Setting the direction Importance–performance mapping Developing operations capabilities Deploying capabilities in the market Summary answers to key questions 189 189 190 194 199 205 209 221 223 224 225 225 225 232 238 243 255 260 C ontents Further reading Notes on the chapter Chapter 8 Product and service development and organisation Introduction The strategic importance of product and service development Key questions Product and service development as a process A market requirements perspective on product and service development An operations resources perspective on product and service development Summary answers to key questions Further reading Notes on the chapter Chapter 9 The process of operations strategy – formulation and implementation Introduction Formulating operations strategy What is the role of alignment? What analysis is needed for formulation? The challenges to operations strategy formulation How we know when the formulation process is complete? What is operations strategy implementation? Summary answers to key questions Further reading Notes on the chapter Chapter 10 The process of operations strategy – monitoring and control Introduction What are the differences between operational and strategic monitoring and control? How is progress towards strategic objectives tracked? How can the monitoring and control process attempt to control risks? How does learning contribute to strategic control? Summary answers to key questions Further reading Notes on the chapter Case studies McDonald’s: half a century of growth Disneyland Resort Paris Carglass®: building and sustaining a customer-centric organisation Hartford Building Society: to measure, or not to measure? Ocado versus Tesco.com ix 262 262 264 264 265 265 273 281 286 295 296 296 298 298 299 299 308 311 312 315 326 327 328 329 329 330 333 339 346 353 355 356 357 359 365 376 390 396 c a s e s t u dy • I DEO : SE RV ICE DESI G N 437 Exhibit 3 IDEO method cards IDEO Method Cards show some of the ways that IDEO puts people at the centre of the design process These methods are typically used at the earliest stages of the design process to support observation-based research and learning consistent with the firm’s user-centred design process The techniques are not proprietary and have been adapted from various established human and social research methods Initially compiled to inspire and inform IDEO’s own design teams, the cards are now available publicly to inspire creative teams in almost any context Shadowing How: Tag along with people to observe and understand their day-to-day routines, interactions and contexts Why: This is a valuable way to reveal design opportunities and show how a product might affect or complement users’ behaviour Extreme User Interviews How: Identify individuals who are extremely familiar or completely unfamiliar with the product and ask them to evaluate their experience using it Why: These individuals are often able to highlight key issues of the design problem and provide insights for design improvements Draw the Experience How: Ask the participants to visualise an experience through drawings and diagrams Why: This can be a good way to debunk assumptions and reveal how people conceive of and order their experiences or activities Fly on the Wall How: Observe and record behaviour within its context, without interfering with people’s activities Why: It is useful to see what people actually within real contexts and time frames, rather than accept what they say they did after the fact Role Playing How: Identify stakeholders involved in the design problem and assign those roles to members of the team Why: By enacting the activities within a real or imagined context, the team can trigger empathy for actual users and raise other relevant issues 438 case study • IDEO : SE RV ICE DESI G N Exhibit 3 Continued Character Profiles How: Based on the observations of real people, develop character profiles to represent archetypes and the details of their behaviour or lifestyles Why: This is a useful way to bring a typical customer to life and to communicate the value of different concepts to various target groups Bodystorming How: Set up a scenario and act out roles, with or without props, focusing on the intuitive responses prompted by the physical enactment Why: This method helps to quickly generate and test out many context and behaviour-based concepts Camera Journal How: Ask potential users to keep a written and visual diary of their impressions, circumstances, and activities related to the product Why: This rich, self-conducted notation technique is useful for prompting users to reveal points of view and patterns of behaviour Narration How: As they perform a process or execute a specific task, ask participants to describe aloud what they are thinking Why: This is a useful way to reach users’ motivations, concerns, perceptions and reasoning Quick-and-Dirty Prototyping How: Using any materials available, quickly assemble possible forms or interactions for evaluation Why: This is a good way to communicate a concept to the team and evaluate how to refine the design Source: IDEO Method Cards deck This case was written by Ritesh Bhavnani, Research Associate and INSEAD MBA (July 2004), and Manuel Sosa, Assistant Professor of Technology and Operations Management at INSEAD, as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation The information in this case has been obtained from both public sources and company interviews © 2006 INSEAD c a s e s t u dy • I DEO : SE RV ICE DESI G N 439 Notes on the case In 2004, the company won 10 Industrial Design Excellence Awards (IDEA), double the number of the next two firms, Smart Design and fuseproject, each of which won five Christopher Hawthorne (2002) ‘The IDEO Cure’, Metropolis Magazine, October, pp 3–7 Bruce Nussbaum (2004) ‘The Power of Design’, BusinessWeek, 17 May, p 75 Laura Weiss (2002) ‘Developing Tangible Strategies’, Design Management Journal, Winter, p 34 Harold Greenberg (2004) ‘Building a Better mMode’, mMode Magazine, Fall, p 34 For details on IDEO’s brainstorming refer to Kelley, T., The Art of Innovation (chapter 4), 2002 Catherine Fredman (2002) ‘The IDEO Difference’, Hemispheres Magazine, August, p 56 http://www.livework.co.uk/home/research0/glossary.html ‘Acela’, @ Amtrak Magazine, p 25 10 Human factors specialists, according to IDEO’s website, employ a range of observational and empathic techniques to understand the issues people face and are an integral part of interdisciplinary design teams 11 ‘Acela’, @ Amtrak Magazine, p 27 12 Dr Bill Hollins, ‘About: Service Design’, www.designcouncil.org.uk, p 11 13 Foam core is also a sheet material, like cardboard, and is used extensively in art and design projects 14 GPRS stands for General Packet Radio Service, and is traditionally considered as 2.5G, enabling data to be transferred wirelessly at speeds of up to approximately 500 Kbps 15 Harold Greenberg (2003) ‘Building a Better mMode’, mMode Magazine, Fall, p 34 case study 10 Slagelse Industrial Services (SIS)1 Nigel Slack and Michael Lewis Slagelse Industrial Services (SIS) had become one of Europe’s most respected zinc, aluminium and magnesium die-cast parts suppliers, serving hundreds of companies in many industries, especially automotive and defence The company cast and engineered precision components by combining the most modern production technologies with precise tooling and craftsmanship Slagelse Industrial Services (SIS) began life as a classic family firm when Erik Paulsen opened a small manufacturing and die-casting business in his hometown of Slagelse – a town in east Denmark, about 100 km southwest of Copenhagen He had successfully leveraged his skills and passion for craftsmanship over many years, whilst serving a variety of different industrial and agricultural customers His son, Anders, had spent nearly 10 years working as a production engineer for a large automotive parts supplier in the UK, but eventually returned to Slagelse to take over the family firm Exploiting his experience in mass manufacturing, Anders spent years building the firm into a larger-scale industrial component manufacturer, but retained his father’s commitment to quality and customer service After 20 years he sold the firm to a UK-owned industrial conglomerate, and within 10 years it had doubled in size again and employed in the region of 600 people, with a turnover approaching £200 million Throughout this period the firm had continued to target its products into niche industrial markets where its emphasis upon product quality and dependability meant it was less vulnerable to price and cost pressures However, in 2009, in the midst of difficult economic times and widespread industrial restructuring, the company had been encouraged to bid for higher-volume, lower-margin work This process was not very successful but eventually culminated in a tender for the design and production of a core metallic element of a child’s toy (a ‘transforming’ robot) Interestingly, the client firm, Alden Toys, was also a major customer for other businesses owned by SIS’s corporate parent It was adopting a preferred-supplier policy and intended to have only one or two purchase points for specific elements in its global toy business Alden Toys had a high degree of trust in the parent organisation, and on visiting the SIS site was impressed by the firm’s depth of experience and commitment to quality In 2010, Alden Toys selected SIS to complete the design and begin trial production: ‘Some of us were really excited by the prospect . but you have to be a little worried when volumes are much greater than anything you’ve done before I guess the risk seemed okay because in the basic process steps, in the type of product if you like, we were making something that felt very similar to what we’d been doing for many years.’ (SIS Operations Manager) ‘Well obviously we didn’t know anything about the toy market but then again we didn’t really know all that much about the auto industry or the defence sector or any of our cas e s t u dy • S l ag e l s e I n d u s t ri a l S e rv i c e s ( S I S ) 441 traditional customers before we started serving them Our key competitive advantage, our capabilities, call it what you will, they are all about keeping the customer happy, about meeting and sometimes exceeding specification.’ (SIS Marketing Director) The designers had received an outline product specification from Alden Toys during the bid process and some further technical detail afterwards Upon receipt of this final brief, a team of engineers and managers confirmed that the product could and would be manufactured using an up-scaled version of current production processes The key operational challenge appeared to be accessing sufficient (but not too much) capacity Fortunately, for a variety of reasons, the parent company was very supportive of the project and promised to underwrite any sensible capital expenditure plans Although this opinion of the nature of the production challenge was widely accepted throughout the firm (and shared by Alden Toys and SIS’s parent group), it was left to one specific senior engineer to actually sign both the final bid and technical completion documentation By early 2011, the firm had begun a trial period of full-volume production Unfortunately, as would become clear later, during this design validation process SIS had effectively sanctioned a production method that would prove to be entirely inappropriate for the toy market, but it was not until 12 months later that any indication of problems began to emerge Throughout both North America and Europe, individual customers began to claim that their children had been ‘poisoned’ whilst playing with the end product The threat of litigation was quickly levelled at Alden Toys and the whole issue rapidly became a ‘full-blown’ child health scare A range of pressure groups and legal damage specialists supported and acted to aggregate the individual claims Although similar accusations had been made before, the litigants and their supporters focused in on the recent changes made to the production process at SIS and, in particular, the role of Alden Toys in managing its suppliers ‘… it’s all very well claiming that you trust your suppliers but you simply cannot have the same level of control over another firm in another country I am afraid that this all comes down to simple economics, that Alden Toys put its profits before children’s health Talk about trust … parents trusted this firm to look out for them and their families and have every right to be angry that boardroom greed was more important!’ (Legal spokesperson for US litigants when being interviewed on UK TV consumer rights show) Under intense media pressure, Alden Toys rapidly convened a high-profile investigation into the source of the contamination It quickly revealed that an ‘unauthorised’ chemical had been employed in an apparently trivial metal cleaning and preparation element of the SIS production process Although when interviewed by the US media, the parent firm’s legal director emphasised there was ‘no causal link established or any admission of liability by either party’, Alden Toys immediately withdrew its order and began to signal an intent to bring legal action against SIS and its parent This action brought an immediate end to production in this part of the operation and the inspection (and subsequent official and legal visits) had a crippling impact upon the productivity of the whole site The competitive impact of the failure was extremely significant After over a year of production, the new product accounted for more than a third (39 per cent) of the factory’s output In addition to major cash-flow 442 case study • S l ag e l s e I n d u s t ri a l S e rvi c e s ( S I S ) implications, the various investigations took up lots of managerial time and the reputation of the firm was seriously affected As the site operations manager explained, even their traditional customers expressed concerns: ‘It’s amazing but people we had been supplying for thirty or forty years were calling me up and asking “[Manager’s name] what’s going on?” and that they were worried about what all this might mean for them . these are completely different markets!’ Note on the case This case originally appeared in Slack, N., Brandon-Jones, A., Johnston, R and Betts, A (2012) Operations and Process Management, 3rd edition Harlow, UK: Pearson Education i n d e x 443 Index adjustment cost risk 344 Airbus 380 (example) 268–9 aircraft industry (example) 73–4 alignment in operations strategy 299–308 direction of 300–1 maintenance over time 301–2 strategic sustainability 306–8 tight and loose in monitoring and control 339–40 time and timing 302–5 Amazon (example) 18 analytical content in process technology 196–7 Apple iPhone (example) 277–8 apprenticeship mode in operations strategy implementation 323 appropriate zone on importance-performance matrix 240 ARM (example) 160–1 asymmetric information in contracting 165 automation in process technology 196–7 automobile industry customer satisfaction in 46–7 manufacturing: decision areas 29–30 nationality of products 152 scale, importance of 125–6 balanced matrix structures for product/service development 294 balancing capacity change 135–7 BBC: Digital Media Initiative (example) 220 best practice in operations strategy 110 Birkinshaw, Julian 315 Black and Decker 272 BMW and Toyota (example) 288–9 Bohn, R 245–6 bonding trust in contracting 167 Bose speakers 291 bottom-up perspective on strategy 12–13 Brandenburger, A.M 153 break-even points in capacity demand 123–4 breakthrough improvement 226–7, 229–30 Bungay, Stephen 338 business growth, drifting out of focus 82 business process reengineering (BPR) 100–4 criticisms of 102–3 elements of 101–2 lessons from 103 in operations strategy 103–4 what it is 100–1 what changes in 112 business processes in BPR 101 Cadbury’s (example) 343–4 calculative trust in contracting 167 capabilities, developing 243–55 knowledge management 248–52 knowledge model, importance of 254–5 learning/experience curve 244–5 Nonaka and Takeuchi knowledge model 252–4 process knowledge 245–8 capacity, location of 137–46 clusters 141 community factors 143 image 140 importance of 137–41 land and facilities 140–1 nature of location decisions 144–5 offshoring 143–4 re-shoring 143–4 resource costs 142 service level 140 site suitability 140 spatially variable factors 139 capacity change 130–7 cost structure of increments 123–4 generic strategies 130–3 lagging demand 130–3 leading demand 130–3 smoothing 131–3 issues in 146 magnitude of 133–7 balancing change 135–7 excess capacity 134–5 over-capacity 134–5 timing of 130 capacity strategy 26–7, 117 capital, availability of 122–3 cost structure of 123–4 defined 118–19, 145 demand, changes in 121–2 long-term lower than short 122 short-term lower than long 122 economies of scale in 120–1, 124–7 flexibility of provision 127 forecast demand 119–20 future demand, uncertainty of 121 levels of how much is needed? 145 medium-term decisions 119 short-term capacity decisions 119 strategic capacity decisions 119 sites, number and size 127–9, 146 distribution operation 128–9 444 index capacity utilisation in lean operation 97 capital availability 122–3 capital cost of process technology 195 Carglass® (case study) 376–89 Carroll, Lewis 336 central functions in operations strategy implementation 318–21 as curator 319–20 as facilitator 320 as governor 319 and information networks 320–1 as trainer 320 Chase, R.B 258 Checklist Manifesto 247–8 Chew, Bruce 344 ‘Choose and Book’ (example) 219–20 Chopra, S 184 Christensen, C.M 350–1 Clean and Green (CAG) recycling services (example) 304–5 clusters, location of 141 Coase, Ronald 162 Coch, L 323 co-development mode 323 codification in contracting 164 cognitive trust in contracting 167 coherence in operations strategy 313–14 Collis, D.J 310 communities of practice (CoPs) 250–1 community factors in location of capacity 143 company-wide solutions, drifting out of focus 82 competencies and improvement 229 competitive benchmarking 237 competitive factors in performance objectives 59–60 delights 60 order-winners 59–60 qualifiers 59–60 comprehensiveness in operations strategy 313 concept generation 276 concept screening 276 confidence and involvement in operations strategy implementation 324–5 connectivity in process technology 197–8 consultancy mode in operations strategy 323 content in operations strategy 23–30 decision areas 26–30 performance objectives 24–6 continuous improvement 226–7, 229–30 contracting in purchasing and supply 163–73 and contracts 164–5 e-procurement 169–71 electronic marketplaces 170–1 first/second/third/fourth party logistics 171–3 Cooper Bikes (example) 172–3 corporate social responsibility (CSR) 49–50 and trade-offs in performance 74–5 correspondence in operations strategy formulation 314 cost in BPR 104 in-house or outsourced decision 160 of investment in process technology 215 in lean operations 100 market requirements perspective on product/ service development 285–6 operations strategy analysis and 275 as performance objective 26, 55–6 reputational risks 56 performance targets 235 and quality in TQM 89, 93 sandcone model of improvement 243 cost structure of capacity strategy 123–4 coupling in process technology strategy 197–8 criticality in operations strategy 314 culture of improvement 229 curator as central function in operations strategy 319–20 customer objectives in Six Sigma 105 customers demand triggers in lean operation 95 needs and expectations in TQM 88 processing process technology 191 Davenport, T 100 de Meyer, A 242 decision areas in operations strategy 26–30 capacity 26–7 development and organisation 27 process technology 27 structural and infrastructural 30 supply network 27 decision points in BPR 102 Define, Measure, Analyse, Improve, Control cycle 106 delights 60, 62 delivery mode in operations strategy 323 Dell Computers 302 change at (example) 307–8 Delta Synthetic Fibres (DSF) (case study) 407–12 demand and capacity change future, uncertainty of 121 lagging 130–3 leading 130–3 smoothing 131–3 demand forecast updating 179, 180 demand matching process technology 195 Deming, W.E 92 dependability in BPR 104 in in-house or outsourced decision 159 investment in process technology 214 in lean operations 100 market requirements perspective on product/ service development 283, 285 operations strategy analysis and 275 as performance objective 25, 53 i n d e x 445 performance targets 234 sandcone model of improvement 243 in TQM 93 deploy improvement operations 231–2 design evaluation in product/service development 277 develop improvement operations 231–2 development and organisation strategy 27 digital camera (example) 272 Digital Equipment Corporation 350 direct improvement operations 231–2 direct process technology strategy 190–1 direction setting in improvement strategy 232–8 Disneyland Resort Paris (case study) 365–75 do/buy analysis 161–2 Dubai Terminal 45–6 Duhigg, C 198–9 dyads 150–2 Dyson, James (example) 273–4 economies of scale 120–1, 124–7 education and involvement in operations strategy implementation 325 efficient frontier in trade-offs of performance 71–2 electronic marketplaces 170–1 EMI 348 energy costs in location of capacity 142 enterprise IT in process technology 205 enterprise resource planning (ERP) 205–8 criticisms of 207–8 lessons from 208 supply network ERP 207 what it is 206–7 e-procurement 169–71 Eureka Knowledge Management System (example) 251–2 European Foundation for Quality Management (EFQM) 91–2 excellence in operations strategy 2–9 different operations 4–6 levels of analysis 3–4 networks 3–4 excess capacity, change 134–5 ‘excess?’ zone on importance–performance matrix 241 explicit knowledge 249 exploitation/exploration improvement operations 227–9 external benchmarking 238 external effects of performance objectives 56–7 facilitator as central function 320 failure costs 89 Ferdows, K 242 financial services, clustered 141 financial terms in process technology 211–12 life cycle costs 212 limitations on 213 on market requirements 213–15 net present value 213 Fisher, M.C 182 flexibility in BPR 104 of capacity provision 127 in in-house or outsourced decision 159 in lean operations 100 market requirements perspective on product/service development 283–5 incremental commitment 284 newspaper metaphor 284 operations strategy analysis and 275 as performance objective 25, 53–4 performance targets 235 in process technology strategy 202–3 on investment 214 sandcone model of improvement 243 in TQM 93 focused operations 75–82 benefits and risks of 80, 81 concept of 76–8 drifting out of focus 81–2 as operations segmentation 76–7 operation-within-an-operation concept 77 types of 78–80 forecast demand and capacity strategy 119–20 Formula One (example) 257–8 formulation of operations strategy 298, 299–314 alignment, role of see alignment analysis required 308–11 capabilities 310–11 market requirements 308 resource capabilities 308–10 challenges to 311–12 completion of 312–14 four-stage model of developing market capabilities 258–60 Foxconn (example) 56 French, J.P.R Jr 323 function IT in process technology 205 functional benchmarking 238 functional matrix structures for product/service development 293–4 functional strategy model of operations 35–6 functional structures for product/service development 293 future of jobs 198–9 Galvin, R 192 General Electric (GE) 105 geographic focus 78 Goold, Michael 338 governor as central function in operations strategy implementation 319 Hartford Building Society (case study) 390–4 Hayes, R 200, 258–60 446 index heart surgery: economies of scale in (example) 120–1 Heathrow Terminal 44–6 high-tech industries, clustered 141 Hofstede, G 331–3 Holcim (example) 50 Hoover, William (example) 273 hotel chain: decision areas 29–30 IBM 312 Idea: service design (case study) 420–39 IKEA (examples) 21, 285 importance–performance mapping for improvement strategy 238–43 matrix for 239–42 improve zone on importance–performance matrix 240 improvement in BPR 102 enhanced in lean operation 96 of process in Six Sigma 107 structured cycles in Six Sigma 106 structured training in Six Sigma 107 supporting 89 improvement cycles 230–1 improvement strategy 225 capabilities see capabilities direction, setting 232–8 performance measurement 233–8 importance–performance mapping 238–43 matrix for 239–42 sandcone theory 242–3 market capabilities, developing 255–60 external ideas 256–8 four-stage model 258–60 operations improvement 225–32 continuous and breakthrough 226–7, 229–30 direct, develop, deploy 231–2 exploitation or exploration 227–9 improvement cycles 230–1 incremental commitment in product/service development 284 indirect process technology strategy 190–1 information networks as central function in operations strategy 320–1 information processing process technology strategy 191 information technology (IT) in process technology strategy 205–8 infrastructural decision areas in operations strategy 30 in-house networks in product/service development 289–90 in-house or outsourced decision 159–60 innovator’s dilemma 350 instability in supply networks 178–9 intangible resources in process technology strategy 215–16 Intel 302 example 160–1 internal benchmarking 238 internal customers and suppliers in BPR 102 in TQM 88 internal effects of performance objectives 56–7 international benchmarking 238 intervention risk 344–6 type I and type II errors 345–6 investment, improvement by 229 jobs, future of 198–9 Johnson, David 303 Johnson, Dr Mark 155–6 just-in-time see lean operations Kaplan, R.S 337 knowledge management 248–52 technologies 291–2 knowledge model 252–4 combination 254 externalisation 253 importance of 254–5 internalisation 254 socialisation 253 Kodak (example) 272 Kroc, Ray 257 labour costs in location of capacity 142 lagging demand and capacity change 130–3 leading demand and capacity change 130–3 lean health care (example) 98–9 lean operations 94–100 criticisms of 97 elements of 95–7 lessons from 97–8 in operations strategy 99–100 what it is 94–5 what changes in 112 learning/experience curve 244–5 Lee, H.L 180 Leonard, Dorothy 311, 323 life cycle costs in process technology strategy 212 line operations in strategy implementation 317–18 location decisions importance of 137–41 nature of 144–5 McDonald’s (case study) 359–64 McDonnell, John F 311 McIvor, R 163 mapping strategies in performance objectives 64–8 market capabilities, developing 255–60 market requirements formulation of operations strategy 308 perspective on operations strategy 13–16 i n d e x 447 and internal customers 36 performance objectives 16 perspective on product/service development 281–6 cost of 285–6 dependability of 283, 285 flexibility of 283–5 incremental commitment 284 newspaper metaphor 284 quality of 282, 285 speed of 282–3, 285 in process technology strategy 213–15 markets in process technology strategy 217–18 vulnerability of 218–19 mass customisation in product/service development 271–2 material processing process technology strategy 191 Matsushito, K 89 medium-term capacity decisions 119 metrology instruments (example) 12, 13 mitigation strategies 343 modular design in product/service development 271 monitoring and control 329 controlling risks see under risks dynamics of 339–40 tight and loose alignment 339–40 learning, contribution of 346–53 appropriating competitive benefits 348–9 development trajectories 349–50 innovator’s dilemma 350 organisational learning 346–8 path dependencies 349–50 resource and process distance 350–1 single- and double-loop learning 347–8 stakeholders in 351–3 power–interest grid 352–3 operational and strategic, differences 330–3 expert control 331–2 intuitive control 333 negotiated control 333 trial-and-error control 332–3 tracking progress 333–8 appropriate elements 334–7 process objectives 335 project objectives 334–5 ‘Red Queen’ effect 336 balanced scorecard approach 337–8 monitoring in contracting 164 Monsanto 349 Montgomery, C.A 310 Motorola 104, 192 Nalebuff, B.J 153 network IT in process technology strategy 205 networks in product/service development 287–91 customers’ involvment 290–1 in-house and subcontracted 289–90 suppliers’ involvement 290 in purchasing and supply 152–9 and business relationships 154 competitive and cooperative forces 153–4 globalisation and sourcing 155–6 and CSR 156–7 inter-operations arrangements 158–9 strategic resource options 154 new products/services, drifting out of focus 82 newspaper metaphor in product/service development 284 Nokia (example) 315 Nonaka, I 252, 253 Norton, D.P 337 Ocado vs Tesco (case study) 396–402 offshoring 143–4 Ohno, T 98 operating model model of operations 36–8 operational, not operations operational and strategic monitoring and control, differences 330–3 expert control 331–2 intuitive control 333 negotiated control 333 trial-and-error control 332–3 operational focus 75–82 benefits and risks of 81 concept of 76–8 drifting out of focus 81–2 as operations segmentation 76–7 operation-within-an-operation concept 77 types of 78–80 operations improvement 225–32 continuous and breakthrough 226–7, 229–30 direct, develop, deploy 231–2 exploitation or exploration 227–9 improvement cycles 230–1 operations performance 43–4 making or breaking organisations 44–50 stakeholder perspective on 46–9 objectives see performance objectives trade-offs see under trade-offs operations resource perspective on operations strategy 15, 16–18 on product/service development 286–95 development capacity 286–7 networks 287–91 uneven demand for 287 operations strategy content and process 23–4 defined 8–9 development of 34–8 as functional strategy 35–6 as operating model 36–8 as strategy execution 38 as supply strategy 34–5 448 index operations strategy (continued) excellence in 2–9 different operations 4–6 levels of analysis 3–4 networks 3–4 formulation of see formulation implementation 298, 315–26 participation in 323–6 responsibility for 317–22 central functions 318–21 staff and line operations 317–18 what it is 316–17 matrix 31–3 monitoring and control see monitoring and control and operations management 9–24 perspectives on 10–18 bottom-up 12–13 market requirements 13–16 operations resource 15, 16–18 top-down 11–12 process of, stages 33–4 in product/service development 274–5 stages in 275–8 resource-based view of firm 19–23 substitutes 85–7 common threads 110–15 fads and fashion 86–7 see TQM; lean operations; BPR; Six Sigma opportunity and involvement in operations strategy implementation 325–6 order batching 179, 180 order-winners 59–60 benefits from 61–2 criticisms of 62 organisational ambidexterity 227–8 organisational improvement 229 outsourcing or in-house decision 159–60 over-capacity, change 134–5 pace of improvement 229 partnership supply relationships 165–9 closeness 166 dedicated assets 169 information transparency 168 joint coordination 168 joint learning 168 joint problem solving 169 limitations of 169 long-term expectations 167 multiple contacts 168 sharing success 167 trust 166–7 performance measurement 233–8 aggregation of targets 233–4 factors 233 most important targets 234–7 performance objective focus 78 performance objectives 50–62 changes in, importance of 62–8 in firm’s market 62–4 in firm’s resource base 64 mapping strategies 64–8 cost 55–6 dependability 53 flexibility 53–4 internal and external effects of 56–7 polar representation of 59–62 competitive factors 59–60 delights 60 order-winners 59–60 qualifiers 59–60 quality 51 relative priorities of 57–8 speed 52–3 Porter, Michael 306 preliminary design in product/service development 277 Pret A Manger (example) 32 prevention strategies 342 price fluctuation 179, 180 probability improvement 229 process, product/service development as 273–81 concept generation 276 concept screening 276 design evaluation 277 developing 278 as operations strategy analysis 274–5 preliminary design 277 prototyping 278 process benchmarking 237 process capability and control in Six Sigma 107 process change in product/service development 269–72 process design in Six Sigma 107 process in operations strategy 23–4 process knowledge 245–8 process technology strategy 27, 189–90 enterprise resource planning (ERP) 205–8 criticisms of 207–8 lessons from 208 supply network ERP 207 what it is 206–7 evaluation of 209–21 acceptability 211–17 in financial terms 211–13 market and resources 217–18 on market requirements 213–15 on operational resources 215–16 on tangible and intangible resources 215–16 feasibility 209–10 financial requirements 210–11 vulnerability 218–21 financial 221 of markets 218–19 of resources 220–1 i n d e x 449 information technology in 205–8 product–process matrix 199–204 flexibility/cost trade-off 202–3 moving down diagonal 201–2 trends 203–4 volume and variety 194–9 automation/analytical content 196–7 coupling/connectivity, degree of 197–8 scale and scalability 194–6 what it is 190–4 direct or indirect 190–1 material, information and customer processing 191 strategy 191–2 technology planning 192–4 product–process matrix in process technology 199–204 flexibility/cost trade-off 202–3 moving down diagonal 201–2 trends 203–4 product/service development 264–5 as funnel 278–80 market requirements perspective on 281–6 cost of 285–6 dependability of 283, 285 flexibility of 283–5 incremental commitment 284 newspaper metaphor 284 quality of 282, 285 speed of 282–3, 285 operations resource perspective on 286–95 development capacity 286–7 networks 287–91 uneven demand for 287 organisation of 292–5 alternative structures 294–5 project-based structures 292–4 as process 273–81 concept generation 276 concept screening 276 design evaluation 277 developing 278 as operations strategy analysis 274–5 preliminary design 277 prototyping 278 and process change 269–72 processes 266–9 simultaneous development 280–1 specification focus 78 strategic importance of 265–72 technology for 291–2 project matrix structures for product/service development 294 project teams for product/service development 294 prototyping in product/service development 278 purchasing and supply strategy 148 choice of arrangement 173–4 contracting see contracting networks see under networks risks 182–6 categories 184–6 suppliers, managing 179–82 co-ordination 179–80 differentiation 180–1 reconfiguration 181–2 supply network dynamics 174–9 instability in 178–9 qualitative dynamics 176–8 quantitative dynamics 174–6 vertical integration in 159–63 contrasting strategies 160–1 do/buy analysis 161–2 in-house or outsourced decision 159–60 transaction cost economics 162–3 what it is 148–59 dyads 150–2 networks see networks in purchasing and supply triads 150–2 pure and speculative risk 341–2 qualifiers 59–60 benefits from 61–2 criticisms of 62 qualitative supply network dynamics 176–8 quality in BPR 104 designing-in 89 in in-house or outsourced decision 159 on investment in process technology 214 in lean operations 100 market requirements perspective on product/ service development 282, 285 operations strategy analysis and 275 as performance objective 25, 51 performance targets 234 sandcone model of improvement 243 at source in TQM 89, 93 quantitative supply network dynamics 174–6 racing car industries, clustered 141 Rana Plaza (example) 157 rationing 179 recovery strategies 343–4 Renault (example) 321–2 Rendall Graphics, Preston Plant (case study) 413–19 re-shoring 143–4 resource capabilities in operations strategy formulation 308–10 resource costs in location of capacity 142 resource-based view (RBV) of firm 19–23 resources in process technology strategy 217–18 operational 215–16 tangible and intangible 215–16 vulnerability of 220–1 450 index risks controlling in operations strategy 339–46 adjustment cost risk 344 intervention risk 344–6 type I and type II errors 345–6 mitigation strategies 343 operations out of balance 340–1 prevention strategies 342 pure and speculative risk 341–2 recovery strategies 343–4 in improvement 229 supply-related 182–6 Rolls-Royce in Singapore (example) 137–8 Ryanair (example) 77–8 safeguards in contracting 164 sandcone theory 242–3 scalability and scale in process technology strategy 194–6 Schlumberger (example) 251–2 service development see product/service development service level in location of capacity 140 Shenkar, O 256–7 shipping: economies of scale in (example) 121 shortage gaming 179, 180 short-term capacity decisions 119 Singapore, Rolls-Royce in (example) 137–8 single- and double-loop learning 347–8 site suitability in location of capacity 140 6Wunderkinder (example) 228 Six Sigma 104–10 criticisms of 108 elements of 105–7 lessons from 108 in operations strategy 108–9 what it is 105 what changes in 112 Slack, N 175 Slagelse Industrial Services (case study) 440–2 smoothing demand and capacity change 131–3 Sodhi, M.S 184 Spangler, Murray (example) 273 specialist drift out of focus 82 speed in BPR 104 in in-house or outsourced decision 159 on investment in process technology 214 in lean operations 100 market requirements perspective on product/ service development 282–3, 285 operations strategy analysis and 275 as performance objective 25, 52–3 performance targets 234 sandcone model of improvement 243 in TQM 93 staff operations in strategy implementation 317–18 stakeholders in monitoring and control of operations strategy 351–3 power–interest grid 352–3 on operations performance 46–9 strategic objectives 48–9 statistical evidence in Six Sigma 105–6 strategic benchmarking 237 strategic capacity decisions 119 strategic drift out of focus 82 strategic importance of product/service development 265–72 and process change 269–72 degree of 266–7 mass customisation 271–2 modular design 271–2 overlapping development 270–1 processes 266–9 strategic intention improvement 229 strategic sustainability in operations strategy formulation 306–8 dynamic (offensive) approaches 306–7 static (defensive) approaches 306 strategy execution model of operations 38 strengths/weaknesses/opportunities/ threats (SWOT) approach 19 structural decision areas 30 structured improvement cycles in Six Sigma 106 subcontracted networks in product/service development 289–90 success measured improvement 229 success-enabled inertia 311 supermarket grocery retailing 6–7 suppliers, managing 179–82 co-ordination 179–80 differentiation 180–1 reconfiguration 181–2 supply chain disruption (example) 183–4 supply network dynamics 174–9 instability in 178–9 qualitative dynamics 176–8 quantitative dynamics 174–6 supply network ERP 207 supply network strategy 27 supply strategy model of operations 34–5 supply strategy see purchasing and supply strategy sustainability, trade-offs in 74–5 sustainable competitive advantage (SCA) 19 Suzuki and VW (example) 288–9 Swiss Army Knife (example) 90 SWOT analysis in strategy formulation 309–10 synchronised flow in lean operation 95–6 tacit knowledge 249 TAG transport (example) 241–2 Takeuchi, R 252, 253 tangible resources in process technology strategy 215–16 i n d e x 451 technology roadmap (TRM) 192–3 tennis balls (example) 155–6 Tesco vs Ocado (case study) 396–402 Tesco (example) 336–7 theatre lighting (example) 14–16, 20–1 time and timing in formulation of operations strategy 302–5 fast cycle 303–5 slow cycle 302 standard cycle 302-—303 time-scale of improvement 229 top-down perspective on operations strategy 11–12 Total Quality Management (TQM) 87–93 criticisms of 90–1 elements of 88–9 lessons from 91–2 in operations strategy 92–3 what it is 88 what changes in 112 Toyota Motor Corporation 97, 98, 125–6 and BMW (example) 288–9 trade-offs flexibility/cost in process technology 202–3 in operations performance 68–75 and CSR 74–5 defined 69 and efficient frontier 71–2 importance 69–70 operations effectiveness, improving 72–4 operations strategy 74–5 real or imagined 70–1 trainer as central function 320 transaction cost economics 162–3 transport costs in location of capacity 142 triads 150–2 Tsunami (Japan) disruption (example) 183–4 under-resourcing development capacity as vicious circle 288 Universal Robots (example) 202 urgent action zone on importance–performance matrix 240–1 Van Valen, L 336 variation and operations strategy 5, variety and operations strategy 5, variety focus 78–9 vertical integration in purchasing and supply strategy 159–63 contrasting strategies 160–1 do/buy analysis 161–2 in-house or outsourced decision 159–60 transaction cost economics 162–3 visibility and operations strategy 5, Volkswagen (example) 65–8 volume and operations strategy 4, volume focus 79–80 vulnerability of process technology 218–21 financial 221 of markets 218–19 of resources 220–1 VW and Suzuki (example) 288–9 Wallgren, B 99 waste elimination in lean operation 96 Wheelwright, S.C 200, 258–60 Williams, Jeffrey 302, 303 Williams Technology Centre (example) 257–8 Williamson, O 162 Wipro, Six Sigma at (example) 109–10 Xerox 348 Xerox Corporation 237 Zara’s operating model (case study) 402–6 ... operations strategy and how is it different from operations management? What is the ‘content’ of operations strategy? The operations strategy matrix What is the ‘process’ of operations strategy? ... of operations strategy 28 Figure 1.11 The operations strategy matrix 31 Figure 1.12 The operations strategy matrix for Pret A Manger 33 Figure 1.13 The stages of the process of operations strategy ... operation’s resources influence operations strategy? ●● What is the ‘content’ of operations strategy? ●● What is the ‘process’ of operations strategy? ●● How is operations strategy developing? chapter