Operations strategy 3rd edition

Third Edition Third Edition Nigel Slack Michael Lewis Ideal for Advanced Undergraduate and Postgraduate students, this book builds on concepts from Strategic Management, Operations Management, Marketing and HRM to give students a comprehensive understanding of Operations Strategy Features • Comprehensive and accessible with authoritative authorship and an excellent blend of theory and practice • A European context • Engaging case studies • Teaching resources including an Instructor’s Manual with extensive case notes and PowerPoint slides at www.pearsoned.co.uk/slack New to this edition • This new edition has once more focused on the most significant topics in the subject The 10 chapters have been slightly rearranged to give a clearer tour through the subject New material has been added and coverage of some of the older topics has been refreshed • New topics include: the relevance of the operations strategy approach to any functional strategy, the importance of operations leadership, and the concept of ‘operating models’ • Many of the popular case studies have been retained with new cases added • Similarly, new examples have been included, although the most popular of the existing ones have been retained • The final two chapters on operations strategy implementation have been restructured around a clearer stage model Front cover image: © Getty Images CVR_SLAC0445_03_SE_CVR.indd Operations Strategy Operations Strategy Third Edition Operations Strategy Nigel Slack Michael Lewis Slack Lewis www.pearson-books.com 24/11/2010 14:19 operations strategy We work with leading authors to develop the strongest educational materials in operations management, bringing cutting-edge thinking and best learning practice to a global market Under a range of well-known imprints, including Financial Times Prentice Hall, we craft high-quality print and electronic publications which help readers to understand and apply their content, whether studying or at work To find out more about the complete range of our publishing please visit us on the World Wide Web at: www.pearsoned.co.uk operations strategy third edition nigel slack Michael Lewis Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published 2002 Second edition 2008 Third edition 2011 © Nigel Slack and Michael Lewis 2002, 2008, 2011 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 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners Pearson Education is not responsible for the content of third party internet sites ISBN: 978-0-273-74044-5 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Slack, Nigel Operations strategy / Nigel Slack, Michael Lewis 3rd ed p cm Includes index ISBN 978-0-273-74044-5 (pbk.) Production management I Lewis, Michael, 1969- II Title TS155.S563 2011 658.5 dc22 2010039430 10 14 13 12 11 10 Typeset in 9.5/12 by Printed and bound by Ashford Colour Press Ltd in Gosport Brief Contents List of figures and tables, and exhibits from case studies preface acknowledgements publisher’s acknowledgements operations strategy – developing resources for strategic impact xi xix xxiii xxiv operations performance 41 substitutes for strategy 82 Capacity strategy 113 purchasing and supply strategy 144 process technology strategy 181 improvement strategy 215 product and service development and organisation 246 the process of operations strategy – formulation and implementation 280 10 the process of operations strategy – monitoring and control Case studies index 312 341 423 Contents List of figures and tables, and exhibits from case studies preface acknowledgements publisher’s acknowledgements Chapter operations strategy – developing resources for strategic impact Introduction Key questions Why is operations excellence fundamental to strategic success? What is strategy? What is operations strategy? What is the content of operations strategy? The operations strategy matrix What is the process of operations strategy? Summary answers to key questions Further reading Appendix: the resource-based view of the firm Notes on the chapter Chapter operations performance Introduction Key questions 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 xi xix xxiii xxiv 1 22 29 32 35 37 38 39 41 41 42 42 47 59 65 71 79 80 80 Chapter substitutes for strategy 82 Introduction ‘New’ approaches to operations Key questions Total quality management Lean operations Business process reengineering Six stigma Some common threads 82 82 83 84 89 96 99 104 viii Content s Summary answers to key questions Further reading Notes on the chapter Chapter Capacity strategy 110 111 111 113 Introduction What is capacity strategy? Key questions The overall level of operations strategy The number and size of sites Capacity change Location of capacity Summary answers to key questions Further reading Notes on the chapter 113 113 114 115 124 126 133 141 142 143 Chapter purchasing and supply strategy 144 Introduction Key questions 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 144 144 144 152 157 166 167 172 175 178 179 180 Chapter process technology strategy Introduction Key questions What is process technology strategy? Scale/scalability – the capacity of each unit of technology Degree of automation/’analytical content’ – what can each unit of technology do? Degree of coupling/connectivity – how much is joined together? The product–process matrix The challenges of information technology Evaluating process technology Summary answers to key questions Further reading Notes on the chapter 181 181 182 182 185 187 188 190 196 201 212 214 214 Contents Chapter improvement strategy Introduction Key questions Development and improvement Setting the direction Importance–performance mapping Developing operations capabilities Deploying capabilities in the market Summary answers to key questions Further reading Notes on the chapter Chapter 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 ix 215 215 215 215 220 227 231 239 243 244 245 246 246 246 247 255 263 268 277 278 278 Chapter the process of operations strategy – formulation and implementation 280 Introduction Key questions Formulating operations strategy What is the role of alignment? Analysis for formulation The challenges to operations strategy formulation How we know when the formulation process is complete? Implementing operations strategy Summary answers to key questions Further reading Notes on the chapter 280 280 281 281 290 293 295 298 308 310 311 Chapter 10 the process of operations strategy – monitoring and control 312 Introduction Key questions Strategic monitoring and control 312 312 313 Index Accenture 149 acceptability in process technology 208–9, 211 activities, configuration of adjustment cost risks 327, 328 adverse selection risks 159 AESSEAL 4–5 Airbus 380 249–51 Albertson’s 416 Aldi 20–1 alignment in strategy formulation 281–90 direction of 282 maintaining over time 282–4 market requirements with operations resources 283 role of 281–2 tight and loose 322–3 timing 284–5 Alkatel 137 Amazon.com 18–19 AMR 144 Amtrak 401–3 analytical content in process technology strategy 187–8 apf Energy 393, 394 Apple 254, 284 supply strategy 144 apprenticeship mode of user participation 306 Arend, Rene 349 Asda 417 Aston Martin 147 AT&T mMode 407–9 Auchan 416 Audi 62, 147 automation in process technology 187–8 automobile industry, over-capacity in 131 Bohn, Roger 234–6 bonding trust in partnerships 162 Bose customer involvement 272 supplies relationships 332 bottom up perspective on operations strategy 11, 12–13 Brandenburger, A.M 148 Branton, Tom 372, 373, 374, 375 break-even points in capacity strategy 119 breakthrough improvement 217, 218 British Airports Authority (BAA) 45 British Airways 284 First Class, marketing 69–70 Terminal opening 45–6 Brown, Tim 397, 398 Bungay, S 321 Burger King 350, 352 business growth and loss of focus 78 business model and operating model 7–9 business process reengineering 96–9 criticisms of 98 defined 96 elements of 96–7 decision points 97 improvement 97 process and output 97 processes, rethinking 96–7 lessons learned 98–9 in operations strategy 99, 100 common threads 104, 106–10 improvement fashion, avoiding 109–10 positioning 107 senior management in 105 as strategic decisions 108 Balanced Scorecard approach 222 to implementation 319–20 balancing capacity change 132–3 Barton, Harry 365, 367, 368, 369–70 ‘Be a bill’ exercise (IDEO) 403–4 benchmarking 225–7 objectives 227 types 226 Bezos, Jeff 18–19 Black & Decker 254 BMW 147 Boeing design changes 259–60 flexibiliity of 266, 273 product changes 251 ‘C-suite’ perspective 9–10 Cadbury’s 326–7 calculative trust in partnerships 162 Cambridge University 259–60 capabilities in operations resources perspective 17–21 capacity lagging in product/service development 268 capacity strategy 113–41 changes in capacity 126–33 balancing change 132–3 leading, lagging or smoothing 129–30 magnitude of change 130–1 over-capacity 131 timing of 126–7 424 Index timing strategies 127–30 as decision area 25 defined 113–15 distribution operation 125–6 levels 114–15 location 133–41 clustering 137–8 community factors 139–40 decision making 140–1 image of site 135–6 land and facilities 136–7 resource costs 138–9 service level 136 site suitability 135 spatially variable factors 135–7 overall level 115–24 capital, availability of 118–19 changes in demand 117–18 economies of scale 119–21, 122 flexibility 123–4 forecast demand 116 long-term 118 short-term 118 uncertain demand 117 in product/service development 268–9 capacity utilisation in lean operations 92–3 capital cost of technology 185 capital expenditure 52 capital for capacity change, availability of 118–19 Carlsen Custom (case study) 362–70 ‘Big One’ 362–3 capacity 364 co-location options 368–9 customer relationships 369–70 flexibility of 365–6 and Phanchem 368–9 supply relationships 367–8 technology 364–5 work organisation 366 work teams, recruiting 367 Carrefour 416 Carroll, Lewis 319 Cemex 121 central operations functions in strategy implementation 300–3 as curator 302 as facilitator 302–3 as governor 301–2 and information networks 303 as trainer 302 Chambers, S 140, 168 checklist manifesto 236–7 chemical industry, over-capacity in 131 Chicken McNuggets (McDonald’s) 346 Chilli’s 352 China Research Lab (CRL) 270 Chopra, S 176–7 Christensen, Clayton 333 Cisco 137 Citroen 147 Clark, K.B 276 closeness in partnerships 161 clustering 137–8 co-development mode of user participation 306 Coase, R 156 Coca-Cola 149 Coch, L 304 codification in contracts 159 cognitive trust in partnerships 162 coherence in formulation process 296–7 Collis, D.J 292, 293 communication in partnerships 163 community factors in capacity location 139–40 company-wide changes and loss of focus 78 Competing Values Framework 34–5 competitive benefits of innovation 331–2 competitive factors in performance objectives 56–9 and resources 24 competitors of McDonald’s 349–51 complementors 148 comprehensiveness in formulation process 296 computer chip industry, over-capacity in 131 concept generation in product and service development 258 concept screening in product and service development 258–9 conformance quality 48 connectivity in process technology strategy 188–9 consortium e-marketplace 165 consultancy mode of user participation 306 Contact Utilities (case study) 389–95 background 389–90 challenges 393–5 Croydon Operations Centre 391–2 distributed sales 392–3 operations 390–1 retail service 391 continuous improvement 217, 218 control of strategy dynamics of 322 operational control 314 risks, controlling 325–6 strategic control 313–16 type I and II errors in 328–9 types of control 315 Convergys 145 core capabilities core competencies 293 corporate social responsibility (CSR) and operations performance 46 trade-offs in 70–1 in purchasing and supply strategy 150 correspondence in formulation process 297 cost plus contracts 158 cost structure I n d e x 425 costs control of at Rendall Graphics 374 in improvement strategy 223, 225 as performance objective 15, 51–2 of product/service development 267–8 coupling in process technology strategy 188–9 criticality in formulation process 297–8 Croydon Operations Centre (Contact Utilities) 391–2 curator in central operations functions 302 customer processing technology 183–4 customer requirements management (CRM) 199 customer segments, targeting customers and Carlsen Custom 369–70 and lean operations 91 in product/service development 272 and Six Sigma 100–1 in total quality management 84 Davenport, T 96 David Kelley Design 397 de Meyer, A 231 decision making on location 140–1 in Six Sigma 108 in TQM 108 in vertical integration 152–7 balance of 155 direction of 154 do/buy analysis 155–6 extent of 154 outsourcing 155 and performance objectives 154 transaction cost economics in 156–7 decision points in BPR 97 dedicated assets in partnerships 164 delights 56–7 delivery dependability 15, 50 delivery flexibility 51 delivery mode of user participation 305 Dell, Michael 138, 238–9 Dell Computers 289–90 Delta Synthetic Fibres (DSF, case study) 355–61 Britlene and Britlon 356 capital costs 361 forecasts for 360 Britlon capability 358 capacity working group 359 current facilities 356–7 flexibility 358–9 market volumes 360 markets 357 demand forecast updating 170 Deming, W.E 88 dependability in improvement strategy 223, 225 as performance objective 15, 50 in process technology 207 in product/service development 265 deploy improvement 219–20 Design Continuum 400 design evaluation in product and service development 259 design improvement in product and service development 259 develop improvement 219–20 development and organisation as decision area 26 development trajectories in operations strategy 332–3 Digital Equipment Corporation 333 Dignan, Larry 19 direct improvement 219–20 direct process technology strategy 182–3 Disney, Roy 384 Disney World 182 Disneyland Paris (case study) 378–88 background and development 381–5 design of 382–4 locational decisions 382 locations 381–2 commitment 378–9 opening 384–5 service delivery 379–80 success of 385–8 and Tokyo Disneyland 380–1 disruptive technologies 333, 334 distributed sales (Contact Utilities) 392–3 distribution channels diversification and resource cycles 285 do/buy analysis 155–6 double-loop learning 330–1 ‘Draw your money’ exercise (IDEO) 404–5 Dubai International Airport, Terminal 45–6 Dupont 145 Dyson, James 255–6 e-procurement 164–6 early market launch of products/services 264 economies of scale and capacity strategy 119–21, 122 limited 77–8 The Economist 86, 149 efficient frontier in operations performance 67–8 Egg McMuffin (McDonald’s) 346, 348–9 Eisermann, Richard 400, 402 Eisner, Michael 386 Elastic Compute Cloud (Amazon) 18–19 electronic marketplaces 165–6 Elfers, Jürgen 20 Elkington, John 47 emergent strategies, concept of 12–13 EMI 331 Emirates Airline 46 energy costs of capacity location 139 426 Index enterprise resource planning (ERP) 197–201 criticisms of 200 elements of 198–9 lessons from 200–1 supply networks in 199–200 Erdlington Group 109 ethical performance 70–1, 72 European Foundation for Quality Management (EFQM) 87 European Quality Awards (EQA) 87 experience architecture (IDEO) 405–6 expert control 314–15 expertise mode of user participation 306 external performance objectives 52–3 facilitator in central operations functions 302–3 fast cycle of product/service development 285 feasibility in process technology strategy 201–3 Ferdows, K 231 Fiat 147 Filet-o-Fish (McDonald’s) 346 financial acceptability in process technology 203–4 financial performance 70–1, 72 financial requirements of process technology 203–4 financing contracts 159 Fingleton, John 74 Fitzpatrick, Robert 382 fixed price contracts 158 Flaherty, Liam 358 flexibility in capacity strategy 123–4 of Carlsen Custom 365–6 of Delta Synthetic Fibres 358–9 in improvement strategy 223, 225 of McDonald’s 351–3 as performance objective 15, 50–1 in process technology 207 focus on operations performance 71–8 as concept 72–3 losing focus 78 operation-within-an-operation concept 73 as segmentation 72–3 types 74–5 Foregeard, N 250 formulation of strategy 281–98 alignment 281–90 direction of 282 maintaining over time 282–4 role of 281–2 tight and loose 322–3 timing 284–5 analysis for 290–8 market requirements 290 operational resources 291–2 challenges to 293–5 completing 295–8 sustainability 287–90 defensive approaches 288 offensive approaches 288–9 SWOT analysis for 291–2 Fourmont, Francois 303–4 franchises of McDonald’s 346 freelancing 160 Freeman, Milton 70–1 French, J.P.R 304 Friendly’s 352 Frost, Sarah 105 Fujimoto, T 276 functional strategy 9–10 funnel, product/service development as 260–2 Gap 151–2 Gates Bill and IBM 294 on resources 18 Gawande, A 236–7 General Electric (GE) service revenues and Six Sigma 100 General Foods 293 General Motors 98 geographic focus 75, 76 Gittler, K.-P 240 Global Insight 304 globalisation and sourcing 149–50 Goold, M 321 Gorton 349 governor in central operations functions 301–2 Griffiths, Paul 46 Gustavson, Todd 254 Hall, Sam 407 Hamel, G 293 Hammer, Michael 96 Hayes, Robert 190, 240–2 Heinen, M 250 Heinken 321–2 Hewlett-Packard product change 284 and Rendall Graphics 371–3, 375 TQM in 86 Hofstede, Geert 314, 316 Holcim 47 hold up risks 159 Hollins, Dr W 400, 402 Hoover, William 255 hotel industry, over-capacity in 131 Humbert, G 250 IBM 293–4, 295 in China 270 innovation and alignment 293–4, 295 process technology 189 ID Two 397 IDEO (case study) 396–415 and Amtrak 401–3 I n d e x 427 and AT&T 407–9 history of 397 Innovation Process 398–400 and Juniper Financial 403–7 method cards 413–14 and Portland General Health Center 410 practice areas 410 product development process 411–12 service design 400–1 in 2005 397–8 IKEA 116–17 importance-performance mapping 227–31 sandcone theory 231 improvement fashion, avoiding 109–10 improvement strategy 215–42 breakthrough improvement 217, 218 continuous improvement 217, 218 cycles of 218–19 deploying capabilities in market 239–42 model for 240–2 development of 215–20 direct, develop, deploy 219–20 importance-performance mapping 227–31 sandcone theory 231 importance-performance matrix 228–9 operations capabilities, developing 231–9 checklist manifesto 236–7 learning-experience curves 232–3 process knowledge 234–6 strategic importance of 237–8 performance targets 221–7 and actual performance 224–5 benchmarking 225–7 factors included 222 importance of 222–4 measurement of 224 target aggregation 222, 223 process improvement 216 degree of 217–19 in-house product/service development 270–1 indirect process technology strategy 182–3 information networks in central operations functions 303 information processing technology 183–4 information technology in process technology strategy 196–201 information transparency in partnerships 163–4 Infosys 146 infrastructural decisions 29 innovation and competitive benefits 331–2 opportunities for in product/service development 265 and resource cycles 285 Innovation Process in IDEO 398–400 innovator’s dilemma 333, 334 intangible resources 19 in process technology strategy 208 Intel innovation and alignment 294, 295 product change 285 in technical clusters 137 InterContiental Hotels Group 54 internal performance objectives 52–3 internet 164–6 intervention risks 327–8 intuitive control 315, 316 investment investment bias and structural inertia 295 Jensen, Michael 43 John Lewis Partnership 417 Johnston, R 140, 168 joint coordination in partnerships 163 joint learning in partnerships 163 joint problem solving in partnerships 164 Julienne, R 387 Juniper Financial 403–7 just-in-time approach 93 Kamata, S 93 Kamprad, Ingvar 116–17 Kaplan, R.S 222, 319 Kasparov, Gary 189 Kelleher, Herb 33 Keller-Birrer, Valérie 416–21 Kelley, David 397, 399, 401 Kentucky Fried Chicken 349, 350 key performance indicators (KPIs) in improvement strategy 222–4 in operations strategy Keystone Meats 349, 351 Klauke, S 250 knowledhe management in product/service development 272–3 Komatsu 54 Kraft Foods 293 Kroc, Ray 344, 345, 346, 347 labour costs of capacity location 138 Lacroix, André 387 lagging capacity change 128–30 Lands’ End 54 late development of products/services 264 lead users in product/service development 272 leading capacity change 128–30 Leahy, Terry 416 lean operations 89–95 criticisms of 93 defined 89–90 elements of 90–3 capacity utilisation 92–3 customers 91 involvement 91–2 synchronised flow 91 waste elimination 92 lessons learned 93–4 428 Index in operations strategy 95 common threads 104, 106–10 improvement fashion, avoiding 109–10 positioning 107 senior management in 105 as strategic decisions 108 Learmont, David 45 learning 329 enhanced 77 single and double-loop 330–1 learning-experience curves 232–3 limits to 233 Leonard, D 294, 305–6 LeShop 416 Levi Strauss & Co 150–1 Lidl 20–1 life-cycle cost of process technology 204–5 Lindsay, Kevin 389, 390, 394–5 live*work 400 location in capacity strategy 133–41 clustering 137–8 community factors 139–40 decision making 140–1 image of site 135–6 land and facilities 136–7 resource costs 138–9 service level 136 site suitability 135 spatially variable factors 135–7 long-term capacity strategy 118 long-term expectations in partnerships 162–3 loose alignment 322–3 López, JoséIgnacio 62 lump sum contracts 158 McAlindon, Roseann 109 McDonald, Dick and Mac 343 McDonald’s 284 case study 343–57 breakfasts 348–9 chicken 349 competitors 349–51 consistency 344–5 flexibility 351–3 franchises 346 fries 346–8 Speedee Service System 343–4 suppliers 345–6 McDonnell, J.F 294 McDonnell Douglas Corporation 294 McIvor, R 157 McNamara, Stephen 74 market changes and operations performance 59–60 market positioning 14 market requirements operations risk in 323–4 perspective on operations strategy 11, 13–17 internal customers in 16–17 performance objectives 15–16 positioning 14 of process technology strategy 206–8 in product and service development 263–8 and strategy formulation 283, 290 market stimulation of products/services 264 marketplace, shifts in 77 Marks & Spencer 46 Marshall, Stan 109 mass customisation in product and service development 253–4 Massachusetts Institute of Technology 259–60 material processing technology 183–4 materials requirements planning in process technology 197–8 Matrix Product Design 397 Matsushita 137 Matsushito, Konosuke 85 Mayer, Paul 355, 356, 358–9 Melville, Kenneth 304 Mercedes 147 Microsoft product change 284 technical change 294, 295 mitigation strategies against risks 326 mix flexibility 51 modular design in product and service development 252–3 Moggridge, Bill 397 Moggridge Associates 397 monitoring of contracts 159 monitoring operations strategy 312–22 dynamics of 322 strategic monitoring 313–16 tracking performance 316–22 balanced scorecard approach 319–20 process objectives 318 project objectives 317–18 Red Queen effect 319 Montgomery, C.A 292, 293 moral hazard risks 159 Moritz, Michael J 137 Motorola product and service development 275 Six Sigma in 99, 100 Nalebuff, B.J 148 negotiated control 315, 316 net present value (NPV) in process technology 205–6 Netza, Jeanette 389–90, 392, 394 new products/services and loss of focus 78 newspaper metaphor of product/service development 266 Nike 149 Nissan 147 Nokia 285 Nordhoff, Heinrich 61–2 Norton, D.P 222, 319 I n d e x 429 Ocado (case study) 416–21 data overview 420 marketing 418 operations 417–18 value 418 Ohno, Taiichi 94 oil industry, over-capacity in 131 O’Leary, Michael 74 Olive Garden 352 Online Grocery market, UK 416–17 operating expenditure 52 operating model 8–9 operation to operation business 149 operations expectations 3–5 hierarchy of plans and process management operations capabilities, developing 231–9 checklist manifesto 236–7 learning-experience curves 232–3 process knowledge 234–6 strategic importance of 237–8 operations excellence and strategic success 2–5 analysis 3, operations performance 41–78 generic objectives 47–59 competitive factors 56–9 cost 51–2 dependability 50 flexibility 50–1 internal and external effects 52–3 polar representation of 54–5 quality 48 relative priorities 53–4 speed 48–9 impact of 42–7 corporate social responsibility 46 stakeholder perspective 42–6 relative importance of change 59–64, 66 mapping strategies 61–4 market changes 59–60 in resource base 60–1 targeting and operations focus 71–8 benefits and risks 75–8 focus, as concept 72–3 types of 74–5 targets in process improvement 221–7 and actual performance 224–5 benchmarking 225–7 factors included 222 importance of 222–4 measurement of 224 target aggregation 222, 223 trade-offs 65–71 and corporate social responsibility 70–1 defined 65 effectiveness, improving 69 and efficient frontier 67–8 importance of 66 real or imagined 66–7 operations-related risk operations resources 1–39 business model and operating model 7–9 competitive factors 24 content vs process 22 decision areas 25–9 defined 21–2 and formulation of strategy 283, 291–2 and functional strategy 9–10 performance objectives 23–5 perspectives on 11–21, 17–21 bottom-up 11, 12–13 interactions 21–2 market requirements 11, 13–17 operations resources 11, 17–21 processes, routines and capabilities 17–21 top-down 11, 12, 13 and process technology 208, 209 in product and service development 268–76 development capacity 268–9 in-house or subcontracted development 270–1 networks 269–72 suppliers in 271–2 uneven demand 268–9 and structural inertia 295 operations strategy in business process reengineering 99, 100 common threads 104, 106–10 improvement fashion, avoiding 109–10 positioning 107 senior management in 105 as strategic decisions 108 common threads 104, 106–10 control see control of strategy development trajectories 332–3 formulation see formulation of strategy implementation see strategy implementation and leadership 33–5 monitoring see monitoring operations strategy new approaches to 82–111 business process reengineering 96–9 lean operations see lean operations Six Sigma 99–104, 106 total quality management 84–9 operations risk 323–4 path dependencies 332–3 and performance see operations performance process for 32–5 resources for see operations resources strategy mix 29–32 order batching 170 order-winning factors 56–7 benefits from 56–8 criticisms of concept 58–9 430 Index organisation of product and service development 273–6 alternative structures, effectiveness of 276 project-based structures 273–4 organisational learning 329 organisational structures and structural inertia 295 outsourcing 155, 160, 238 over-capacity 131 part to participation (IDEO) 406 partners partnerships in purchasing and supply 160–4 limitations of 164–6 path dependencies in operations strategy 332–3 PepsiCo 350 performance measurement 317 performance objective focus 75, 76 clarity of 75 performance targets in process improvement 221–7 and actual performance 224–5 benchmarking 225–7 factors included 222 importance of 222–4 measurement of 224 target aggregation 222, 223 Perkin’s 352 Peugeot 147 Phanchem 352 and Carlsen Custom 368–9 Phelps, John 393 Pierer, Heinrich 240 Pizza Hut 350, 352 Porsche 147 Porsche, Ferdinand 61 Portland General Health Center Project 410 positioning in lean operations 107 market, translation logic of 15 market requirements 14 power-distance grid of stakeholders 335–6 Prahalad, C.K 293 preliminary design in product and service development 259 prevention strategies against risks 325 Price, Vincent 383 price fluctuations 170 private e-marketplace 165 process design in Six Sigma 103 in total quality management 86 process distance 333–4, 335 process improvement 216 in business process reengineering 97 degree of 217–19 in Six Sigma 103 in total quality management 86 process knowledge 234–6 process objectives, tracking 318 process requirements focus 75, 76 process technology strategy 181–212 automation and analytical content 187–8 coupling and connectivity 188–9 as decision area 26 defined 184 direct or indirect 182–3 enterprise resource planning 197–201 criticisms of 200 elements of 198–9 lessons from 200–1 supply networks in 199–200 evaluation of 201–12 acceptability 208–9, 211 feasibility 201–3 financial requirements 203–4 life-cycle cost 204–5 and market requirements 206–8 and operational resources 208, 209 tangible and intangible resources 208 time value of money 205–6 vulnerability 210–12 and information technology 196–201 material, information and customer processing 183–4 product-process matrix 190–6 on the diagonal 192–4 down the diagonal 191–2 flexibility/cost trade-offs 194 trends 194–6 scale and scalability 185–7 volume and variety 184–5 processes in operations resources perspective 17–21 product and service development 246–76 cycles of 284–5 importance of 246–54 modular design and mass customisation 252–4 overlap, managing 252 and product change 248–9 market requirements perspective 263–8 operations resource perspective 268–76 development capacity 268–9 in-house or subcontracted development 270–1 networks 269–72 organisation of 273–6 suppliers in 271–2 uneven demand 268–9 as process 254–63 analysis of 256–7 as a funnel 260–2 simultaneous development 262–3 stages of 257–60 product change in development 248–9 product flexibility 51 I n d e x 431 product life cycle influence on performance 59–60 product-process matrix in process technology 190–6 on the diagonal 192–4 down the diagonal 191–2 flexibility/cost trade-offs 194 trends 194–6 product/service specification focus 75, 76 project management contracts 159 project objectives, tracking 317–18 Prokopoff, Ilya 400, 402 Pronovost, P 236 purchasing and supply strategy 144–77 contracting and relationships 157–66 contracts and contracting 158–9 partnerships 160–4 and corporate social responsibility 150 defined 144–52 globalisation and sourcing 149–50 risks 175–7 categories 176–7 managing 177 suppliers, management of 172–5 coordination 172–3 differentiation 173–4 reconfiguration 174–5 supply networks 147–9 competitive and cooperative forces 147–9 dynamics of 167–72 instability in 170–2 inter-operations in 152 operation to operation business 149 qualitative dynamics 169–70 quantitative dynamics 167–9 strategic resources 149 types of arrangements 166–7 vertical integration decision 152–7 balance of 155 direction of 154 do/buy analysis 155–6 extent of 154 outsourcing 155 and performance objectives 154 transaction cost economics in 156–7 pure risk 324–5 qualifying factors 56–7 benefits from 56–8 criticisms of concept 58–9 qualitative dynamics in supply networks 169–70 quality control of at Rendall Graphics 374 designing-in in TQM 86 in improvement strategy 223, 225 as performance objective 15, 48 in process technology 207 in product/service development 264 quantitative dynamics in supply networks 167–9 Quinlan, Michael 350 Raaijmakers, Wilbert 321 Rally’s 350, 352 ratio analysis 26–7 rationing 171 Rea, Chris 4–5 recovery strategies against risks 326 Red Queen effect 319 reimbursable (cost plus) contracts 158 relational contracts 159 relationships relationships in partnerships 163 Renault 303–4 Rendall Graphics (case study) 371–7 closure threatened 373 costs, control of 374 crisis at 372–3 product development 374–5 productivity 371–2 quality control 374 representative mode of user participation 306 resilience resource base changes and operations performance 60–1 resource costs of capacity location 138–9 resource cycles in innovation 285 resource distance 333–4, 335 resources, appropriate, developing 75–6 retail banking, voucher processing in 192, 193, 232–3 retail service (Contact Utilities) 391 revenue revenue streams Reynolds Porter Chamberlain 327 Richardon, Barbara 401 risks in implementation 322–9 adjustment cost 327, 328 controlling 325–6 intervention risk 327–8 markets and performance out of balance 323–4 mitigation strategies 326 prevention strategies 325 pure and speculative risk 324–5 recovery strategies 326 type I and II errors in 328–9 in purchasing and supply strategy 175–7 categories 176–7 contract relationships 159 managing 177 The Robertson Trust 109 Roddick, Anita 71 Rolls Royce service revenue technological development 259–60 432 Index routine control 315 routines in operations resources perspective 17–21 Rudd, Sir Nigel 45 Ruggier, Paul 105 Russell, Greg 363.364, 366 Ryanair 73–4 safeguards in contracts 159 Sainsbury’s 416 Samalionis, Fran 402, 403–4, 405, 407 sandcone theory 231 Sasson, Steve 254 scalability in process technology strategy 185–7 scale in process technology strategy 185–7 Schweitrer, Louis 303 scientific management 98 senior management in lean operations 105 Serco 146 service design in IDEO 400–1 service development see product and service development service flexibility 51 service level and capacity location 136 service life cycle influence on performance 59–60 service strategy 4–5 Seven-Eleven Japan 30–2 Shell Services International 165 short-term capacity strategy 118 shortage gaming 171 Shostack, G Lynn 400 Siemens 240 Silican Valley 137 Simplot, Jack 347 simultaneous development in product/service development 262–3 single-loop learning 330–1 sites in capacity strategy availability of 124–6 suitability and location 135 Six Sigma 99–104, 106 criticisms of 103 defined 100 elements of 100–3 capability and control 102–3 customers 100–1 evidence, use of 101 improvement, structured 101–2 process design 103 process improvement 103 structured training 102 lessons learned 104 in operations strategy 104 common threads 104, 106–10 improvement fashion, avoiding 109–10 positioning 107 senior management in 105 as strategic decisions 108 Skinner, Wickham 65, 66, 72 Slack, N 140, 168 slow cycle of product/service development 284 Small, Will 362, 363.364, 367, 368, 369 smoothing capacity change 128–30 Sodhi, M.S 176–7 Sonic 350, 352 Sony Corporation 292 sourcing strategies 158 South, Alan 398, 399 Southwest Airlines 73 and BPR 98 process strategy in 33 Spangler, Murray 255 spatially variable factors in capacity location 135–7 specialist control and loss of focus 78 specification quality 48 speculative risk 324–5 speed in improvement strategy 223, 225 as performance objective 15, 48–9 in process technology 207 in product/service development 264–5 Speedee Service System (McDonald’s) 343–4 Squire, B 177 stakeholders perspective on performance 42–6 typical objectives 44 and strategy implementation 334–5 power-distance grid 335–6 standard cycle of product/service development 284–5 steel industry, over-capacity in 131 Stock, U 240 strategic success and operations excellence 2–5 analysis 3, strategy control of dynamics of 322 operational control 314 risks, controlling 325–6 strategic control 313–16 type I and II errors in 328–9 types of control 315 definition 5–6 plans strategy drift 78 strategy implementation 298–308 central operations functions 300–3 as curator 302 as facilitator 302–3 as governor 301–2 and information networks 303 as trainer 302 participation in 304–8 education for 307–8 modes 305–6 I n d e x 433 opportunitiesfor 308 pre-requisites for 307 users 305–6 responsibility for 299–303 market requirements or operations resources 301 ‘staff’ and ‘line’ operations 300 top down or bottom up 301 risks 322–9 adjustment cost 327, 328 controlling 325–6 intervention risk 327–8 markets and performance out of balance 323–4 mitigation strategies 326 prevention strategies 325 pure and speculative risk 324–5 recovery strategies 326 type I and II errors in 328–9 stakeholders and 334–5 structural decisions 29 structural inertia 295 structural vulnerability 78 structured improvement in Six Sigma 101–2 structured training in Six Sigma 102 Stürmer, Christoph 304 subcontracted product/service development 270–1 success, sharing in partnerships 161 Sun Microsystems 137 supply network strategy as decision area 25 supply networks 146, 147–9 of Carlsen Custom 367–8 competitive and cooperative forces 147–9 dynamics of 167–72 in ERP 199–200 instability in 170–2 inter-operations in 152 McDonald’s case study 345–6 operation to operation business 149 in product/service development 271 qualitative dynamics 169–70 quantitative dynamics 167–9 strategic resources 149 sustainability of strategy formulation 287–90 defensive approaches 288 offensive approaches 288–9 sustaining technologies 333 Suzuki, Toshifumi 30–2 synchronised flow in lean operations 91 Taco Bell 350, 352 TAG transport 229–30 tangible resources in process technology 208 targeting operations performance 71–8 Tata, Ratan 134 Tata Nano 134 technology in Carlsen Custom 364–5 and innovation 333 of product/service development 272–3 Tesco 210–11 case study data overview 420 and Ocado 416–21 operations 419 value proposition 419 Texas Instruments 137, 138 TGI Friday 352 tight alignment 322–3 time value of money in process technology 205–6 timing strategies in capacity change 127–30 Tokyo Disneyland 380–1 top down perspective on operations strategy 11, 12, 13 Toshiba 284 Total Information System (TIS) 30, 31 Total Productive Maintenance (TPM) 94 total quality management (TQM) 84–9 criticisms of 86–7 defined 84 elements of 84–6 costs 85 customers 84 designing-in quality 86 employees 85 organisation 85 supporting improvement 86 lessons learned 87 in operations strategy 88–9 common threads 104, 106–10 improvement fashion, avoiding 109–10 positioning 107 senior management in 105 as strategic decisions 108 Toyota Motor Corporation coordinating strategies in 276 lean production in 93 product development in 284 tracking operations performance 316–22 balanced scorecard approach 319–20 process objectives 318 project objectives 317–18 Red Queen effect 319 trade-offs in operations performance 65–71 and corporate social responsibility 70–1 defined 65 effectiveness, improving 69 and efficient frontier 67–8 importance of 66 real or imagined 66–7 trainer central operations functions 302 transaction costs in vertical integration 156–7 translation logic of market positioning 15 transport costs of capacity location 139 trial and error control 315–16 triple bottom line accounting 47 434 Index trust in partnerships 161–2 Turner, Fred 344, 349, 351 VW 61–2 operations strategy over time 62–4 UK Online Grocery market 416–17 uncertain demand and capacity strategy 117 uneven demand for product/service development 268–9 Unilever 293 unit rate contracts 158 user participation in strategy implementation 305–6 UtilityPartners® 390, 391, 392, 393, 395 Waitrose 417 Walsh, Willie 45 Warrens, Sally 391, 392–3 waste elimination in lean operations 92 Watson, Thomas 397 Weimer, Ralph 348 Weiss, Laura 398, 407–8 Wendy’s 350 Wheelwright, Stephen 191, 241–2 Whittaker, Rebecca 105 Whole Foods Market 122–3 Wicks, Jim 275 Wifrom 392 Wilkner, Andrew 391–2, 394 Williams, Jeffrey 284, 285 Williams, Jim 345 Williams, Tim 357 Williamson, O 156 willingness mode of user participation 306 Wingspan 403 Woodcock, Chris 326 working capital 52 value net 148 value proposition Van Valen, Leigh 319 variety focus 75, 76 variety in process technology strategy 184–5 vertical integration 152–7 balance of 155 direction of 154 do/buy analysis 155–6 extent of 154 outsourcing 155 and performance objectives 154 transaction cost economics in 156–7 vicious cycle of under resourcing development capacity 269 volume flexibility 51 volume focus 75, 76 volume in process technology strategy 184–5 voucher processing in retail banking 192, 193, 232–3 vulnerability of process technology 186, 210–12 Xchanging 105 Xerox Corporation benchmarking in 225 organisational learning in 331 Zambrano, Lorenzo 121 Zanussi 182 Ziba Design 400 ... on operations strategy: top down, bottom up, market requirements and operations resources Top down Operations strategy should interpret higher-level strategy Operations resources Operations strategy. .. Why is operations excellence fundamental to strategic success? ●● What is strategy? ●● What is operations strategy? ●● how should operations strategy reflect overall strategy? ●● how can operations. .. of operations strategy 27 Figure 1.10 The operations strategy matrix 30 Figure 1.11 Operations strategy matrix for Seven-Eleven Japan 32 Figure 1.12 The stages of the process of operations strategy