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BRIEF CONTENTS Part 1: Introduction to Operations Management 1 1.
Operations Management
3
2.
Operations Performance
36
3.
Operations Strategy
70
Part 2: Structural Issues
107
4.
Facilities 109
5.
Capacity 135
6.
Process Design and Technology
164
7.
The Supply Network
201
Part 3: Infrastructural Issues
231
8.
Planning and Control
233
9.
Inventory Management
264
10. Lean Operations
293
11. Quality Management
321
12. People in Operations Management
362
13. Risk, Resilience and Recovery
396
14. Operations Improvement
424
15. Innovation in Operations Management
457
Part 4: The Future of Operations Management 489 16. Emerging Challenges in Operations
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CONTENTS Tables and Figures
xvi
Internationalization theories Vernon’s product cycle theory Dunning’s eclectic theory Stage theories
Preface xviii Letter to the Student
xx
Letter to the Lecturer
xxi
Case Study Grid
THE INTERNATIONALIZATION OF SERVICES 23
xxiii
Separated services Demander-located services Provider-located services Peripatetic services
Tour of the Online Resource Centre xxvi About the Author
xxvii
Guided Tour of the Book
xxviii
21 21 21 22
24 25 25 25
xxx
CHALLENGES OF OPERATING INTERNATIONALLY 27
Publisher’s Acknowledgements xxxi
BENEFITS FROM OPERATING INTERNATIONALLY 28
Author’s Acknowledgements
Part 1: Introduction to Operations Management
2. Operations Performance 36 INTRODUCTION 37
1
1. Operations Management 3 INTRODUCTION 4 THE TRANSFORMATION MODEL
6
DIFFERENT TYPES OF OPERATIONS
7
SERVICE OPERATIONS
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THE CHANGING NATURE OF OPERATIONS MANAGEMENT
Moving beyond the factory The increased importance of the supply network The growing importance of services THE INTERNATIONAL CONTEXT FOR OPERATIONS MANAGEMENT
Technological Political Sociocultural Economic
PERFORMANCE OBJECTIVES
38
PERFORMANCE MEASUREMENT
42
PERFORMANCE MEASURES
44
Economy Efficiency Effectiveness
44 45 47
DEVELOPMENTS IN PERFORMANCE MEASUREMENT 48
13
13
PERFORMANCE MEASUREMENT SYSTEMS 49
14
PERFORMANCE STANDARDS
The organization’s past performance The organization’s own targets Competitors’ performance Best practice Market requirements
14 17
17 18 20 20
51
51 52 52 53 53
BENCHMARKING 54 THE TRIPLE BOTTOM LINE
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Contents LOCATION AND OPERATIONS PERFORMANCE 61
3. Operations Strategy
70
INTRODUCTION 72 THE NATURE OF STRATEGY
Organizational-level strategy Business-level strategy Functional-level strategy
72
73 73 74
OPERATIONS MANAGEMENT AND STRATEGY 75 OPERATIONS STRATEGY
77
OPERATIONS STRATEGY – PROCESS 80
Top-down Bottom-up Market-led Operations-led
80 81 82 82
OPERATIONS STRATEGY – CONTENT 83
Structure Infrastructure
83 84
INTERNATIONAL OPERATIONS STRATEGIES 86
Market access strategy Resource-seeking strategy THE INTERNATIONALIZATION OF OPERATIONS MANAGEMENT AND THE TRANSFORMATION MODEL
Inputs The process Outputs ENTERING FOREIGN MARKETS
Direct export Joint venture Establish a sales subsidiary Establish a production facility INTERNATIONAL OPERATIONS AND BUSINESS STRATEGY
Global sourcing Location Network effects Competition
86 87
Part 2: Structural Issues
107
4. Facilities 109 INTRODUCTION 110 LOCATION DECISIONS
Weighted scoring Centre of gravity THE SCALE AND SCOPE OF OPERATIONS FACILITIES
110
113 114 119
THE STRATEGIC ROLE AND PURPOSE OF OPERATIONS FACILITIES 121
The primary strategic reason for the facility The level of competence on-site THE CONFIGURATION OF OPERATIONS FACILITIES
Approaches to configuring international operations Generic international configurations Configuring of international facilities
122 122 124
124 125 127
5. Capacity 135 INTRODUCTION 136
88
THE MEANING OF CAPACITY
137
89 89 91
THE MEASUREMENT OF CAPACITY
139
FORECASTING DEMAND
141
CAPACITY TIMING DECISIONS
143
92
Capacity leads demand Capacity matches demand Capacity lags demand
92 93 94 94 97
98 98 98 99
143 144 144
CAPACITY INCREMENTS
146
CAPACITY MANAGEMENT
148
Level capacity Chase demand Demand management MANAGING CAPACITY IN CUSTOMER SERVICE OPERATIONS
Yield management
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148 150 152 153
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Queuing theory
154
THE DYNAMICS OF CAPACITY MANAGEMENT 157
6. Process Design and Technology 164 INTRODUCTION 166 DIFFERENT PROCESS TECHNOLOGIES 167
Material-processing technologies Customer-processing technologies Information-processing technologies
167 170 172
DECISION-MAKING ABOUT TECHNOLOGY 174 THE CRUCIAL ROLE OF ICT
Localized exploitation Internal integration Business process redesign Business network redesign Business scope redefinition
178
178 178 178 179 179
TECHNOLOGY ADOPTION STRATEGIES 179 TECHNOLOGY TRANSFER
180
PROCESS CHOICE
183
Project Jobbing Batch Mass Continuous Professional services Mass services Service shop
183 184 184 184 184 185 185 185
THE LAYOUT OF PROCESS EQUIPMENT 187
Fixed position layout Process layout Product layout Group (or cellular) layout
188 189 190 190
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THROUGHPUT 191 QUEUING SYSTEMS
Single line, single server Single line, multiple servers Multiple lines, multiple servers The psychology of queuing
7. The Supply Network
192
192 192 192 192
201
INTRODUCTION 202 THE IMPORTANCE OF PURCHASING 204 SUPPLY NETWORKS
204
THE CONFIGURATION OF THE SUPPLY NETWORK
206
THE COORDINATION OF THE SUPPLY NETWORK
209
COLLABORATIVE PLANNING, FORECASTING AND REPLENISHMENT (CPFR)
212
The SCOR model
213
THE OUTSOURCING DECISION
213
GLOBAL SOURCING
217
RELATIONSHIPS WITH SUPPLIERS
221
SINGLE VERSUS MULTI-SOURCING 223
Part 3: Infrastructural Issues 231 8. Planning and Control
233
INTRODUCTION 234 THE PRINCIPLES OF PLANNING AND CONTROL THE ACTIVITIES OF PLANNING AND CONTROL
Strategic operations planning Aggregate planning Master production scheduling Activity scheduling Expediting
235 238
238 239 240 240 246
MEETING CUSTOMER DEMAND
249
P:D RATIOS
252
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Contents PLANNING AND CONTROL PHILOSOPHIES 253
Supply-push Demand-pull
253 254
COMPUTER-BASED PLANNING AND CONTROL
255
OPTIMIZED PRODUCTION TECHNOLOGY (OPT)
256
9. Inventory Management 264 INTRODUCTION 265 TYPES OF INVENTORY
265
THE ROLE OF INVENTORY
266
TYPES OF DEMAND
270
MANAGING INDEPENDENT DEMAND INVENTORY
270
The order quantity decision The order timing decision INVENTORY LEVEL ANALYSIS
270 272 275
MANAGING DEPENDENT DEMAND INVENTORY 278 THE CUSTOMER SERVICE ANALOGY 285
10. Lean Operations
293
INTRODUCTION 294 LEAN PRINCIPLES
295
SYNCHRONIZATION 296 LEAN AS A PLANNING AND CONTROL SYSTEM
Line balancing Kanban
297
297 299
LEAN AS AN INVENTORY CONTROL SYSTEM 301 WASTE ELIMINATION
304
CONTINUOUS IMPROVEMENT
305
THE INVOLVEMENT OF ALL EMPLOYEES 305 LEAN TECHNIQUES AND PRACTICES 309
Smooth flow Focus on set-ups Standardized procedures
309 310 311
Simplicity in equipment and layout Total quality Product design Lean supply Total people involvement Total productive maintenance LEAN IN SERVICES
311 312 312 312 313 313 314
LEAN AS A BEST PRACTICE MODEL 315
11. Quality Management
321
INTRODUCTION 322 THE EVOLUTION OF QUALITY IDEAS 323
W. Edwards Deming Joseph Juran Armand Feigenbaum Philip Crosby Genichi Taguchi Kaoru Ishikawa Quality inspection Quality control Quality assurance Total quality management (TQM) Quality in service operations DEFINING QUALITY
The specification: ‘What can I expect when I buy the product?’ Conformance to specification: ‘Will it do what I expect?’ Reliability: ‘Will it continue to do what I expect?’ Delivery: ‘When can I have it?’ Price: ‘How much do I have to pay?’ THE QUALITY GAPS MODEL
Gap 1: the gap between customers’ expectations and management’s perceptions of customers’ expectations
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331 332 332 332 332 333
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Gap 2: the gap between management’s perception of customers’ expectations and the product specification Gap 3: the gap between the specification and the customers’ experience of the product Gap 4: the gap between the customers’ experience and the external communications to customers Gap 5: the gap between the customers’ expectations and the customers’ experiences MEASURING QUALITY
Operations measures Financial measures Customer measures
GROUP WORKING
333
CULTURAL CONTEXT
334
334
Organizational culture National culture
379
381 381 384 384
385 387
OTHER NATIONAL CONTEXTUAL FACTORS 390
334
13. Risk, Resilience and Recovery 396
336
INTRODUCTION 397
336 336 340
RISK 399
STATISTICAL QUALITY CONTROL 340
Acceptance sampling Statistical process control charts
Virtual teams Factors affecting team effectiveness Workforce diversity
xiii
340 341
THE ISO 9000 SERIES QUALITY MANAGEMENT SYSTEM
345
ISO 9000 AND TQM
348
QUALITY AWARDS
349
SIX SIGMA
351
GLOBAL DIFFERENCES IN QUALITY MANAGEMENT 353
12. People in Operations Management 362
Internal failures External failures Detecting failure Analysing failure Failure patterns Measuring failure Learning from failures
400 401 403 405 407 407 409
RESILIENCE 410
Improved process design Redundancy Fail-safing Maintenance of equipment Total productive maintenance (TPM)
410 410 411 411 413
RECOVERY 414 SERVICE RECOVERY
417
INTRODUCTION 363 JOB DESIGN
364
Scientific management Behavioural approaches
364 369
REWARD AND REMUNERATION
374
Levels of pay Performance-related pay Managing employee performance
374 375 377
14. Operations Improvement 424 INTRODUCTION 425 THE PERFORMANCE GAP
The scale and scope of the performance gap Setting priorities for performance improvement
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426 427
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Contents APPROACHES TO PERFORMANCE IMPROVEMENT 430
Radical change Continuous performance improvement Radical and incremental improvement compared
430 432 433
THE PROCESS PERSPECTIVE ON IMPROVEMENT 435
Business process re-engineering (BPR) 436 BUSINESS PROCESS REDESIGN
Identify and document existing processes Identify processes for improvement Evaluate process design alternatives Process redesign tools
437
437 438 439 441
PROCESS IMPROVEMENT TOOLS
445
Scatter diagrams Pareto diagrams Cause and effect diagrams Why-why analysis
445 446 446 447
OPERATIONS IMPROVEMENT THROUGH ORGANIZATIONAL LEARNING 447
Knowledge management
448
15. Innovation in Operations Management 457 INTRODUCTION 458 INNOVATION 459 NEW PRODUCT DEVELOPMENT
460
TYPES OF NEW PRODUCTS
464
Incremental products Next-generation products Breakthrough products
464 464 464
SOURCES OF NEW PRODUCT IDEAS 465
Market-pull Technology-push
465 466
THE NEW PRODUCT DEVELOPMENT PROCESS 468
Idea generation Idea selection Preliminary design Prototype Testing Final design
468 468 469 469 469 469
PROCESS INNOVATION
471
New service development
471
THE IMPACT OF TECHNOLOGICAL INNOVATION ON PRODUCTS AND PROCESSES 472
The fluid phase The transitional phase The specific phase
473 473 473
NEW PRODUCT DESIGN PRACTICES 477 TOOLS AND TECHNIQUES FOR NEW PRODUCT DESIGN
Design for manufacture (DFM) Quality function deployment (QFD) Taguchi methods Complexity reduction Value engineering and value analysis (VE/VA)
478
478 478 479 479 480
NEW PRODUCT DEVELOPMENT IN INTERNATIONAL ORGANIZATIONS 480
R&D-related factors Non-R&D factors
481 481
Part 4: The Future of Operations Management 489 16. Emerging Challenges in Operations 490 INTRODUCTION 491 THE INTERNATIONALIZATION OF OPERATIONS MANAGEMENT
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495
Low-cost labour Population changes Risks of discontinuity Environmentalism Social responsibility OPERATIONS MANAGEMENT AND DIGITAL TECHNOLOGIES
Unit of analysis Goal Domain of OM Dominant OM activity OM tools
495 496 497 497 498
Primary measure of performance Competitive imperative Performance improvement Relationship between performance objectives Competition
xv
503 504 505 505 505
501
502 503 503 503 503
Glossary 512 Author Index
521
Subject Index
523
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CHAPTER 1
OPERATIONS MANAGEMENT LEARNING OBJECTIVES On completion of this chapter, you should be able to: • explain what is meant by the term operations management; • understand some of the basic concepts of operations management; • distinguish between different types of operations; • appreciate the growing importance of service operations; and • understand the impact of globalization on the practices of operations management.
RUNNING
CASE STUDY
H&M: A GLOBAL FASHION COMPANY
From its humble beginnings in 1947 as a single shop in Sweden, H&M is now one of the biggest names in the retail fashion industry. H&M employs over 130,000 people, both in Sweden and in its nearly 4,000 stores, which are in over 60 countries, right the way across the globe, including most countries in Europe, as well as many in the Middle East, Africa, Asia and the Americas. It plans to open further stores (it has a target of increasing the number of stores by 10–15 per cent each year), as well as expanding its online sales operations by rolling out its digital presence to an increasing number of countries. H&M’s digital ambition means setting up not only a dedicated website to serve each new country,
but also the physical systems that can ensure goods ordered on it will be delivered to customers in that country. The most visible part of H&M’s operations is its stores. The company says it wants these to provide an ‘inviting, inspiring and exciting experience’ to shoppers. While every store is unique, any is immediately recognizable as H&M from its signage, window displays and internal layouts. All stores seek to place the clothes centre stage through the use of internal displays that aim to provide styling tips and inspiration. H&M’s online stores try to emulate this experience in the virtual world, while providing additional accessibility for customers who can’t easily get
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to H&M physical stores, and enhanced levels of service by enabling customers to view and order a much wider range of merchandise (and in many more sizes) than would be possible in any physical store. However, the stores are only the end point of a much longer supply process. This starts with design. All of H&M’s garments are designed in Stockholm by its in-house team of clothing designers, patternmakers and print designers. They aim to provide something for men, women, teenagers and children, whatever their taste or style. In contrast to the design process, H&M does not produce any of its garments in-house. Rather, it draws on a network of over 1,900 factories owned by as many as 900 independent suppliers, which are based in countries such as China, Turkey, Bangladesh, Cambodia and India. H&M views its suppliers as long-term strategic partners who manufacture its products, including being responsible for sourcing the necessary
fabrics (mainly cotton) and the other components needed. H&M’s logistics and distribution operation must then ensure that the right goods end up in the right quantity as required by each store. Factory shipments are transported, mostly by sea and rail, to H&M’s logistics centres, which are strategically located in the geographic vicinity of its stores in each region. Stores do not hold backup stocks, and so must replenish as required from the distribution centres. In 2013, H&M launched its Garment Collecting Initiative, which enables customers to hand in clothes that they no longer want for reuse or recycling. This is aimed at creating a closed loop in textiles, so that nothing ever goes to waste. The first H&M garments containing materials from the Garment Collecting Initiative were launched in 2014 – denim garments that contained 20 per cent recycled cotton. Source: www.hm.com (accessed 8 September 2016).
POINTS TO PONDER AS YOU READ THIS CHAPTER: »» Notice the different types of operations occurring throughout H&M’s business (e.g. design, production, logistics and distribution, retail). Some of these are manufacturing operations, and some are service operations. Each uses different types of resources to produce different kinds of outputs. »» Notice how H&M’s shops rely on a complex interconnected global supply network to ensure that goods are available to customers. »» Think about what led H&M to operate on such a vast global scale and about the challenges posed in managing all of these operations, both individually and collectively.
Operations management is concerned with the management of the resources and processes required by an organization to produce goods or services for customers. The operations function is that part of the organization that has the responsibility for operations management.
INTRODUCTION
Operations management is crucial to the lives of all of us. That is because operations management is responsible for the creation and delivery of all the products and services that we need for our daily lives, including all the food that we eat, the clothes that we wear, the transport we use, the health services that we receive, and so on. All of these were brought to you courtesy of operations management. Unless you live as a self-sufficient hermit in an isolated cave, there is unlikely to be any aspect of your life that is not entirely dependent upon operations management. That is because nearly every physical product or intangible service that you consume or use is created and delivered by some kind of business organization. And the operations function is the part of that organization that is responsible for producing the goods and services it supplies to its customers. All organizations have operations functions, although they often go under other names. These often reflect the specific activities that they carry out, for example catering, distribution or nursing. There is a misconception that
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operations management is only concerned with manufacturing activities. Although many of the concepts on which the academic study of operations management is based do have their origins in the manufacturing industries, many are equally applicable to services. Conversely, recent advances in the study of service operations have yielded valuable insights into the management of manufacturing operations. The distinction between manufacturing and services is in many respects artificial and increasingly irrelevant because most products have some element of service accompanying them. For example, when you buy a new computer (an entirely physical product), you assume that you are also buying access to aftersales services, such as operating guidance, software updates and repairs. Equally, many services have a tangible product as an integral part of what is delivered to the customer. For example, as a passenger on an airline (an entirely intangible service), your flight, especially if it is long-haul, is usually accompanied by the provision of on-board food and drink (an entirely physical product).
Internationalization is the process of expanding business operations across international boundaries. At first, this might only involve exporting or importing goods and/or services. But it might go on to involve the establishment of production facilities in other countries, as well as facilities to support sales, research and development, and other activities in foreign countries.
Operations management is the most exciting of the business disciplines. Marketing is concerned with identifying and creating customer needs. Finance is concerned with ensuring that the organization has the necessary financial resources to conduct its business. Similarly, human resource management is concerned with ensuring that the organization has the necessary human resources it needs. Operations management is concerned with the management of the resources and processes required by an organization to produce goods or services for customers. The operations function can best be thought of as the ‘doing’ part of the organization. It is where the action is. Operations management is critical to the success or failure of an organization. Any organization exists to deliver a service of some kind and/or to make a product. If its operations management fails, then the organization will fail. The operations function is responsible for the majority of the organization’s costs, assets and people, typically accounting for 60–70 per cent of each (Hill, 2005). Operations management is important because of its direct impact on costs. No organization can be successful unless its operations are managed cost-effectively. However, operations management is also important because of its impact on non-cost factors such as the quality, availability, timeliness and reliability of the goods and services provided by the organization. All customers judge the value of what they receive by some combination of these factors. No organization will be successful for long unless it provides goods and services in a way that satisfies its customers by providing them with the value they seek. The context in which operations management is practised has been changing in recent years. Until comparatively recently, most production processes in most organizations were organized and took place within national boundaries. Although manufacturers may have imported the raw materials they needed, most produced goods primarily, if not exclusively, for local consumption. Similarly, it was rare to find any service that was not produced and consumed locally. It was unusual to find production processes that crossed national boundaries. This has been changing for some time as the forces of globalization have led to the internationalization of operations. For many organizations, the last decade has seen an acceleration of the trend towards the fragmentation of production processes. Today, many operations processes cross international boundaries in ways that were not previously possible. For example, the cup of coffee that you Copyrighted material – 9781137525789
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A newly industrialized economy (NIE), sometimes also termed a newly industrialized country (NIC), is a country that has undergone a considerable level of industrialization in the recent past, switching its primary economic activity from agriculture to manufacturing, and possibly services. NIEs are not quite yet at the status of the industrialized nations of the West, but are more advanced than the countries of the Third World.
buy from your local Starbucks coffee outlet may depend on operations taking place in as many as 19 different countries. The coffee beans may come from plantations in countries as diverse as Kenya, Saudi Arabia, Indonesia and Colombia. The beans would have then been sent to one of the company’s roasting, manufacturing and packaging plants in the US. The paper for the cups and napkins could have been produced from forests in Sweden. The sugar could have come from Brazil. The milk could have come from Australia. All the required final products would then have to have been transported to your local Starbucks, one of 22,000 outlets worldwide in over 60 countries. Neither is Starbucks exceptional. Improvements in transport systems have made the movement of materials much easier and cheaper. New centres of manufacturing have emerged in newly industrialized economies (NIEs), such as China, India, Brazil and Mexico, that offer resources, particularly labour, at a fraction of the cost available in traditional manufacturing locations. Workers, especially those with the most sought-after expertise, can move between countries with much greater speed and ease than was the case in the past. Today’s financial systems and markets enable virtually unlimited amounts of capital to be transferred across the world instantaneously. And, perhaps most importantly, unlimited quantities of information, including new ideas and innovations, can be communicated and shared almost instantaneously across the world thanks to the Internet. These factors have all become increasingly important not only to manufacturing, but also in many services, and particularly in information- and knowledge-based contexts.
THE TRANSFORMATION MODEL The transformation process is the system by which inputs of resources (e.g. people, equipment, materials, energy, information) are converted into outputs of goods and services.
Any operation can be depicted as a transformation process that converts inputs into outputs of goods and services (see Figure 1.1).
For the inputs, it is useful to distinguish between: »» The primary inputs that are themselves transformed to become part of the output of the operation. These are sometimes referred to as ‘transformed resources’ (Slack et al., 2013). Primary inputs can be materials and/or information and/or customers. »» The resources necessary to carry out the transformation, but which do not themselves form part of the output. These are sometimes referred to as ‘transforming resources’ (Slack et al., 2013). Inputs Primary inputs: • Materials • Information • Customers Resources: • Facilities • Consumables • People
The transformation process
Outputs • Goods • Services
Figure 1.1 The input-output transformation model for operations Source: adapted from Operations Management, 7th edition, by Nigel Slack, Alistair Brandon-Jones and Robert Johnston, Pearson Education Limited. © Nigel Slack, Stuart Chambers, Christine Harland, Alan Harrison, Robert Johnston 1995, 1998. © Nigel Slack, Stuart Chambers, Robert Johnston 2001, 2004, 2007, 2010. © Nigel Slack, Alistair Brandon-Jones, Robert Johnston 2013.
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These can typically be classified as: »» Facilities: These are the resources that are necessary to undertake the operation, but which are not used up in the operation. Typically, these include the land, buildings, equipment and vehicles used by the organization to perform the operation. These resources are usually intended to be used over several years. Consequently, they are normally designated as fixed assets by accountants, and their value appears in the fixed assets column of the balance sheet. »» Consumables: These are the resources that are used up as part of the operation. Examples include the energy necessary to power buildings, plant and machinery, and the materials necessary to maintain, repair and operate them (often referred to as MRO supplies). »» People: The human resources necessary to undertake the operation. These will usually include the staff of the organization. However, employees of other organizations might also be involved in the transformation process, for example those belonging to the suppliers or subcontractors of the organization undertaking the operation.
The transformation model sees operations management as those activities that are concerned with how these resources are managed in order to produce the required outputs of goods and services.
DIFFERENT TYPES OF OPERATIONS
Operations can be classified into three different types depending upon which type of primary input is principally being transformed in the operation: »» Material-processing operations are those in which materials are transformed either from one form to another, and/or from one place to another. Manufacturing operations in which raw materials and components are transformed into finished products fall into this category (e.g. manufacturing a car or producing a garment). Other material-processing operations include mining, and the transport, storage and distribution of goods in warehousing and retailing operations. »» Information-processing operations are those in which information is transformed from one form to another and/or from one place to another. There are many examples of information processing, including accountancy, banking, financial services, telecommunications and research of all kinds. Nowadays, it is difficult to think of information-processing operations that do not involve the use of computers. »» Customer-processing operations, in which the customer is transformed by the operation. There are many examples of this type of operation, including medical services (e.g. hospitals) in which sick people are, hopefully, made well, education, where people are transformed by gaining additional knowledge or skills, and entertainment, where people are transformed by the emotional benefit gained from the event.
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For example, a restaurant processes both materials (food) and customers; a book publisher processes both information (the text for the book) and materials (the paper, ink, etc.); and an airline processes customers (passengers) and materials (their baggage).
CASE STUDY
TOYOTA: THE WORLD’S NUMBER ONE
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With global sales now at 10 million vehicles per annum and climbing, Toyota finds itself as the world’s leading auto manufacturer. US giant General Motors, which had previously held this title for 74 years, was dethroned in 2006, and the Japanese automaker has not looked back since. In a financial climate in which most of the top automakers have experienced declines both in sales and profits, Toyota stands out for its burgeoning financial returns, which are not restricted to the established US market, following investment in China’s developing market. Environmental and technological advancement, in the form of its part-electric, part-petrol hybrid models, also creates healthy demand. Toyota’s Lexus subsidiary also taps into the US luxury market, propelled in 2016 through its RX crossover model, which exceeded sales forecasts. Despite the fact that it dates back to 1937, Toyota rose from relative obscurity in the 1950s through Taiichi Ohno’s development of the Toyota Production System (TPS). Based on Japanese principles such as jidoka (referring to human automation), muda (elimination of waste) and kaizen (continuous improvement), TPS enables greater cohesion within the manufacturing process, particularly with regard to team- and management-based tasks. In an industry that is
so dependent on intricate supplier collaboration, it has been claimed that TPS helps to achieve this end, insofar as it minimizes defects. The eradication of such design flaws also allows newly created products to reach the customer in a shorter time than can be achieved by other companies, and with a greater level of quality control. This approach to production has been researched and emulated by a number of international carmakers and is now considered the industry gold standard, while also finding traction within other sectors. Now articulated as ‘lean’ production, numerous service environments have also incorporated this approach. One such surprising application of TPS methodology can be found within the field of healthcare, in which the traditional focus upon meeting objectives is replaced with the prioritization of processes. Each role within the organization is defined in terms of key competencies, and, as these are met, patient needs are satisfied with greater consistency. TPS has been regarded as the secret to Toyota’s success, implementing increased flexibility and productivity while eradicating many of the production errors that plague other car manufacturers. As a result, the company does not need to resort to competitor-minded discounts in order to satisfy a customer base that is happy to pay for quality. As Toyota continues to outperform its rivals for a fourth consecutive year, it now contemplates consolidating its position through business partnerships with manufacturers such as Daihatsu and Suzuki. And yet, at the heart of this increasingly outward-looking company remain the streamlining qualities facilitated through the TPS, which acts as an integral foundation for such growth. Sources: Magee, D. (2007) How Toyota Became #1, 1 December, available at: www.ft.com/content/ c2cd0f74-9c76-11dc-bcd8-0000779fd2ac (accessed 3 October 2016).
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Toussaint, J., Conway, P.H. and Shortell, S. (2016) The Toyota Production System: What Does It Mean, and What Does It Mean for Health Care?, 6 April, available at: http://healthaffairs.org/blog/2016/04/06/ the-toyota-production-system-what-doesit-mean-and-what-does-it-mean-for-healthcare/ (accessed 3 October 2016). Toyota Press Room (2016) Toyota Motor Sales Posts January 2016 Results, 2 February, available at:
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http://corporatenews.pressroom. toyota.com/releases/toyota+lexus+scion+ january+2016+sales+ release.htm (accessed 3 October 2016). Treanor, S. (2014) Toyota Retains Number One Slot in Global Care Sales, 23 January, available at: www.bbc.co.uk/news/business-25860234 (accessed 3 October 2016).
QUESTIONS 1. What type of operations are most important to Toyota? 2. To what extent does Toyota’s success depend on its operations?
SERVICE OPERATIONS Services are the intangible outputs from an operation.
Operations can be classified more simply in terms of their outputs, as either goods or services. The factors that distinguish them are: »» Tangibility: Goods are physical products that can be touched, seen, tasted or smelled. As physical entities, goods can be stored and transported. The ownership of goods can be transferred from the supplier to the customer. Services, on the other hand, are intangible, and therefore unlikely to possess any of these properties. »» Simultaneity: Services are distinguishable from goods in that their production and consumption usually takes place simultaneously. As such, it is usually not possible to store a service that has just been produced for consumption at some time in the future. Normally, customers have to be present to receive the service when it is produced. On the other hand, goods can usually be stored ready for future consumption by a customer. »» Customer contact: Because of their intangibility and simultaneity, services normally require some degree of contact with the customer, although the degree of that contact can vary. Similarly, some services are much more labour-intensive than others, and might involve the customer coming into contact with large numbers of employees of the service delivery organization, such as in a visit to a hospital or staying in a hotel. »» Quality: Because of the nature of the output of a service operation, it is much more difficult to define and measure the quality of a service. The quality of a product can be defined and measured in terms of its functionality (i.e. its fitness for the purpose for which it is intended). The quality of a service, on the other hand, can often only be judged by its recipient. Service quality is dependent on the perception of a customer. Such perceptions may vary between one customer and another, and between the customer and the service deliverer. As such, service quality often depends upon the psychological state of a customer at the time of consumption. Indeed, some services are intended to change a customer’s psychological state. Copyrighted material – 9781137525789
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It is possible to think of examples that equate to the extremes of pure goods (coal mining) and pure services (psychotherapy). However, a closer consideration of the outputs of most operations reveals that it is rare to find such extremes. Usually, there are elements of service in most goods-producing operations. For example, even extractors of commodity goods such as coal or oil typically provide their customers with information about their chemical composition or offer technical advice on their use. Similarly, even producers of a highly customized service such as management consultancy will usually produce some tangible output, such as a written report of some kind. It is usually more helpful to think of the outputs of operations as being located somewhere on a continuum between pure services and pure goods (see Figure 1.2). The front office is the area of an operation in which contact with customers normally takes place. The back office is the area of an operation in which there is normally no contact with customers.
Many service operations are different from those in manufacturing, in that they usually require the operation to have some degree of contact with the customer. Organizations that treat their customers in the same way that they treat the inanimate objects that are materials are neither likely to retain existing customers nor attract new ones.
The study of service operations has led to the development of some useful concepts in addition to those that have emerged from the study of manufacturing. One such concept is that of the difference between the front office and the back office. The area in which contact with customers occurs is termed the front office. This primarily involves customer-processing operations. The area where there is normally no contact with customers is termed the back office. This may involve information- and/or material-processing operations (see Figure 1.3).
The transforming resources required in the front office are likely to be significantly different than those needed in the back office. In particular, operations in the front Coal mining Automobile manufacture Takeaway food Restaurant Dentist Management consultancy Psychotherapy Pure goods
Pure services
Figure 1.2 The goods-services continuum Source: inspired by information in Slack et al. (2013).
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Customers
Front Office
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Customers
Back Office
Figure 1.3 Front office/back office operations Source: adapted from Operations Management, 6th edition, by Nigel Slack, Stuart Chambers, and Robert Johnston, Pearson Education Limited. © Nigel Slack, Stuart Chambers, Christine Harland, Alan Harrison, Robert Johnston 1995, 1998. © Nigel Slack, Stuart Chambers, and Robert Johnston 2001, 2004, 2007, 2010.
office need to revolve around the customer. The people that work in the front office are likely to require quite different skills than those in the back office. Front office staff need high levels of interpersonal skills if they are to interact successfully with customers. The physical resources used in the front office, buildings, machinery and equipment may also need to be quite different from those in the back office. Indeed, the front and back offices may well be physically located in quite different places. However, the relationship and interaction between front and back office operations is often a key part of the management of operations.
WHEN THINGS GO WRONG
CASE STUDY
HONG KONG DISNEYLAND: THINGS CAN ONLY GET BETTER
GRAPHEAST
Hong Kong Disneyland’s final construction on the reclaimed land of Lantau Island in 2005 marked the culmination of a $1.8 billion joint partnership with the Hong Kong government. Targeting not only the flourishing wealth found among China’s citizens, the park also attracted a significant number of visitors from surrounding South East Asia. To this end, designers wished to incorporate elements of Chinese tradition and culture through the use of feng shui in its stylistic
composition. Reportedly, such design choices even dictated the rotation of the front gate by 12 degrees, which a feng shui specialist assured would lead to greater prosperity in the park’s future. Clearly, park management were leaving nothing to chance. However, after opening its gates in September 2005, it became clear that there were some significant problems in its operations. Despite the fact that, at 30,000 visitors, the park had the lowest capacity of all Disneyland parks, this was revealed to be an unmanageable number when 29,000 locals converged on Hong Kong Disneyland on the day prior to its grand opening. Unfortunately, these prospective visitors fell victim to the irony of 45-minute waits for fast food and ride queues of up to two hours, a fact not wasted on local media, who were quick to comment on the park’s chaotic management. The day after, on the park’s official opening, a seemingly manageable 16,000 visitors gained entry, with approximately one-third comprising of mainland Chinese park-goers, and it was this group that locals blamed for, among other things, smoking in non-designated areas,
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queue-jumping, public urination and spitting. Park staff also bore the brunt of customer blame on the basis that such visitors should not have been admitted entry, and, even on the opening day itself, it was reported that staff were discourteous and unhelpful. For Hong Kong Disneyland, the problems did not end on its opening day, as approximately 50 rides experienced technical difficulties, leading to the employment of safety protection systems. As a result of such shutdowns, there were six instances of visitor sickness and minor injuries sustained. In addition, worker complaints included commuting, rota and management communication problems. Marking perhaps the nadir of the park’s woes, during Chinese New Year, in February 2006, a ticketing malfunction led to entrance having to be refused to new visitors who had valid tickets, because the park was already full to capacity. As a consequence of the over-ticketing fiasco, some prospective park-goers stormed their way in, and the sight of a child being passed over spiked gates to his open-armed parents who waited inside the park provided local television with a poignant visual example of the park’s inadequate planning. Since then, further complaints have been made regarding the park’s lack of size, attractions and competent staff. Disney enthusiasts also make unfavourable comparisons between Hong Kong’s 22 major attractions, compared with Tokyo’s 45, and Paris and Florida’s 44 and 65, respectively. This considered, Hong Kong bears the highest cost per ride of all its equivalent parks. As previously alluded to, tensions between Hong Kong locals and mainland Chinese visitors can quickly escalate, and such visitors lamented the park’s lack of Mandarin instruction, which is the dominant language of China. This problem arises from the fact that Cantonese is the language of southern China, including Hong Kong, but it is unintelligible to a purely Mandarin speaker, which remains the language of the Chinese government. One implication of this linguistic impasse was found in the live shows, in which the characters spoke no Mandarin and the props and voiceovers on all but one of the rides were in English. The resort’s management acknowledged such developmental difficulties, vowing that such problems remained common to all new ventures and that improvements could be made. At the peak of the park’s problems in 2006, even the Hong Kong government was forced to
call on Disneyland to make improvements both to entry procedures and ticketing. Since this intervention, park pricing, opening times and ticket policy have been altered in order to spread admittance throughout the week and ease the strain that is placed on the park infrastructure. Date-specific tickets are now used to ease congestion during busy periods, and particularly Chinese holidays. Better staff training now ensures that Cantonese, English and Mandarin can be spoken and, along with multilingual guide maps, these help to ensure that customer satisfaction is achieved across the broad range of visitor nationalities. A new induction programme, aimed at quickly introducing mainland tourists who are unfamiliar with the Disney brand, has also been introduced. Clearly, without the previous childhood exposure to such characters, a visit to the park would represent an extremely disorientating, and perhaps even alienating, experience, so Disney has worked to minimize this possibility, and, in doing so, maximize brand exposure. To this end, the park has developed a pre-show movie that can be shown to its visitors when they initially get to the park. Upon entry, visitors are taken to an area for approximately 15 minutes, where they are regaled with the cornucopia of Disney characters and their associated attractions. This allows Chinese tourists to learn about Disney’s history while rendering Hong Kong Disneyland as increasingly attractive to Chinese travel agents. Finally, in 2012, the park turned its first profit, following six years of continual losses. Attraction investment has facilitated consistent visitor figures, and the park finds itself in the prestigious group of the world’s top 15 most visited theme parks. And yet, significant threats are posed by a struggling Chinese economy and the rival Disneyland Shanghai park, which is three times its size. However, as Hong Kong Disneyland has shown, the Shanghai park must continue to closely monitor the 10,000 employees who worked on its opening day in order to make continual improvements to customer experience. Sources: Boland, R. (2016) What Is the Difference between Mandarin and Cantonese?, 30 March, available at: http://gohongkong.about.com/ od/travelplanner/f/languages_mandarin_ cantonese.htm (accessed 3 October 2016).
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Bradsher, K. (2006) At Hong Kong Disneyland, The Year of the Dog Starts with a Growl, 4 February, available at: www.nytimes.com/2006/02/04/ world/asia/at-hong-kong-disneyland-theyear-of-the-dog-starts-with-a-growl.html (accessed 3 October 2016).
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Holson, L.M. (2005) The Feng Shui Kingdom, 25 April, available at: www.nytimes. com/2005/04/25/business/worldbusiness/ the-feng-shui-kingdom.html?_r=1 (accessed 3 October 2016).
QUESTIONS 1. What were the main problems experienced by Hong Kong Disneyland in its ‘front office’ operations? 2. What seem to be the main causes of these problems? 3. What more could have been done to overcome these problems?
TAKING IT
Much of the academic discipline of operations management is underpinned by the ideas of ‘systems theory ’, also often referred to as ‘systems thinking’. Investigate the ideas of systems theory and systems thinking to gain a better understanding of what they mean when applied to the management of business operations. In particular, note the difference between an open and closed system. Consider the extent to which operations systems in organizations are open or closed, and what this means for their management.
FURTHER
THE CHANGING NATURE OF OPERATIONS MANAGEMENT
In recent years, the way both academics and practitioners think about the subject of operations management has been changing. This has been reflected in the content of operations management as an academic discipline. The most notable of these are:
Moving beyond the factory A supply network is the set of interconnected relationships between all the parties that supply inputs to, and receive outputs from, an operation (including the suppliers’ suppliers and their suppliers, etc., and the customers’ customers and their customers, etc.).
The roots of operations management lie in manufacturing, and for many years the subject focused almost exclusively on what went on within the confines of the factory. This had the benefit of enabling the development of very specific and detailed expertise about the production of physical goods. In particular, it enabled very many mathematically based tools and techniques to be developed that could help in vitally important factory tasks such as production planning and scheduling (see Chapter 8), inventory control (see Chapter 9) and quality control (see Chapter 11). However, restricting operations management to the consideration of factorybased activities alone is limiting because the performance of operations is affected by what goes on outside of the factory as much as by what goes on within it. Most operations take place within a supply network, which comprises all the suppliers to the operation (and all their suppliers and their suppliers) and the Copyrighted material – 9781137525789
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customers of the operation (and all their customers and their customers). The performance of an organization’s operations and the extent to which it can satisfy customers depends significantly on the performance of suppliers and others in its supply network (see Chapter 7). Thus, supply network relations are increasingly recognized as being vitally important in operations management.
Within the organization, interactions with the other functional areas of business also have a significant impact on the performance of operations. For example, if the marketing department’s advertising campaign raises customer expectations in ways that make it difficult for the operations department to meet, there will be an increased likelihood of customer dissatisfaction. Similarly, the operations function cannot operate effectively unless the finance department is able to arrange adequate funding and the human resource management department is able to attract and retain workers with the right skills and attitude (see Chapter 12). As will be discussed in Chapter 3, functional-level strategies (for operations, marketing, finance, human resource management, etc.) need to be consistent with one another and with the organization’s business strategy if they are to contribute to achieving a competitive advantage. In the past (and perhaps too often today), many organizations considered the prime role of operations as being concerned with cost-cutting and efficiency gains in order to achieve the lowest possible operating costs. Viewing operations in this way severely constrains its strategic role. As not all organizations compete on the basis of price alone, operations can only be used strategically as a competitive weapon if its performance objectives are aligned with those of the organization’s business strategy. These may well require operations to meet customer requirements in other aspects of performance (e.g. quality, flexibility, dependability and speed), and not just cost alone (see Chapter 2).
The increased importance of the supply network
Offshoring involves moving certain operations to another country. This could be done either by relocating the affected operations to the organization’s own facilities in another country, or by outsourcing the operations to a foreign supplier. The motivation for this is often, but not exclusively, cost saving.
For many years, there has been a trend for organizations to obtain a greater proportion of their inputs from external suppliers, buying them externally rather than producing them internally. In particular, many organizations have been making greater use of suppliers based in other countries, as they can often offer lower prices. Such international sourcing means that more organizations become part of international supply networks. The greater use of offshoring in the sourcing of suppliers typically causes the physical lengthening of the supply chain and increases its vulnerability to disruption. The management of international supply is both more important and more complex than when purchasing from local suppliers. It is difficult to envisage any reduction in the internationalization of supply networks, so this aspect of operations management seems set to remain important for some time to come.
The growing importance of services
It is invariably the case that as a country develops economically, the proportion of its national economic output arising from services increases. Similarly, the proportion of its citizens in paid employment in service industries also tends to increase. Thus, the service sectors of most national economies have continued to grow in importance. Even China, where GDP has rocketed in recent years on the back of its hosting of offshored manufacturing operations from the West, has Copyrighted material – 9781137525789
Copyrighted material – 9781137525789 Operations management Gross domestic product (GDP) is a measure of the size of a country’s economy. It is defined as the market value of all final goods and services produced within the country.
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now reached the point where the growth in its service industries is outstripping that of its manufacturing industries. In most countries today, services normally account for the majority of the value of a country’s output, its gross domestic product (GDP), as illustrated in Table 1.1.
As services have grown in importance in most of the world’s major economies, service operations management has emerged as an increasingly important field of study. It would be odd indeed if operations management as a subject were to ignore this vitally important sector of most national economies. It would do a grave disservice to those working in the service economy and sideline the subject of operations management (and those who teach it) within the business school curriculum. Operations management academics have therefore been giving service operations much more attention in recent years. They have done this in two ways. First, by seeking to apply concepts and techniques developed in manufacturing contexts to service environments. Examples of this include the application of lean thinking (see Chapter 10) to services such as hospitals and statistical quality control techniques (see Chapter 11) to monitor performance in sectors such as hospitality and air travel through the use of customer feedback questionnaires. Second, by developing new concepts and techniques that take account of the specific characteristics of service operations. Examples of this include the quality gaps model, described in Chapter 11, and queue management techniques, discussed in Chapter 8. Both of these trends seem set to continue as services grow in economic importance. Therefore, it is likely that greater consideration will continue to be given to service issues within the operations Agriculture
Production
Services
Brazil
5
26
69
China
10
45
45
1
31
68
Egypt
11
39
50
India
18
26
56
Indonesia
15
46
39
1
26
73
Malaysia
10
41
49
Nigeria
22
24
54
South Africa
3
28
69
Turkey
9
27
64
United Kingdom
1
20
79
United States
1
21
78
Germany
Japan
Table 1.1 Percentage GDP (2012) by sector for selected countries Source: The World Bank: World Development Indicators: Table 4.2 Structure of output, available at: http://wdi.worldbank.org/table/4.2 (accessed 26 February 2015). To view the terms of use, please visit www.worldbank.org/terms-of-use-datasets
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management discipline for some time to come. Some important associated developments in service operations management include:
The internationalization of service operations Mass customization is the use of a single process to produce a wide variety of products (or services). It aims to realize unit cost reductions through economies of scope in the same way that mass manufacturing aims to achieve economies of scale. Economies of scale are reductions in unit cost of output due to increasing production volumes. Unit cost savings are achieved by spreading the fixed costs of production over an increased volume and from the increased efficiency available from the division of labour and from using large-scale machinery. Servitization is the process through which manufacturers provide an accompanying service or services for their traditional product offering in order to add additional value for their customers when they are using that product.
In the past, most services had a high degree of simultaneity (i.e. their outputs were consumed at the point of production). This made them difficult, if not impossible, to trade between countries, as providers needed to be physically present at the point of consumption. However, Internet technologies are now changing this, reducing or removing the need for service provider and consumer to be in physical contact. For example, some medical diagnosis and even treatment can now be conducted via telemedicine techniques. Similarly, many tangible aspects of services can be digitized (e.g. the written word, music, moving images), making it possible to deliver them electronically from a distance. This is prompting two trends. First, operations that were previously thought of as front office, such as the provision of most aspects of personal financial banking services, because of the requirement for both customer and service provider to be in the same location at the same time, can now be transferred to the back office. It is the information that travels rather than the people. Second, there is now a reduced need for front office and back office operations to be co-located. This means that there are ongoing opportunities to locate back office operations in other areas, often in offshore locations, where there is an abundance of either low-cost or high-skilled workers.
Mass customization in services
The use of digital technologies has opened the way to mass customization in ways that were not previously possible, making it possible to tailor products and services to individual customer requirements, while at the same time lowering costs due to economies of scale in production. A good example of this is recorded music. When this had to be transmitted via a physical device such as a CD, then the list of tracks included was predetermined by the supplier. Only the mass production of identical products could enable each CD to be produced at a low enough cost for it to be offered at an affordable price to customers. Now that music can be digitally downloaded from Internet sites or heard via online streaming services, customers can select whatever pieces of music they want, in effect creating their own customized CDs. Furthermore, they can do so at as low or perhaps a lower price per track than would have been on the CD.
Servitization to differentiate products
Despite moving their manufacturing operations to lower labour cost offshore locations, many suppliers of physical goods still find it difficult to achieve satisfactory levels of profits in highly competitive markets. More and more are therefore looking to use the provision of accompanying services as the means of differentiating their offerings from competitors and customizing their offering to meet specific customer needs. An example of such servitization is provided by aero engine maker Rolls-Royce. They offer customers a ‘power by the hour’ package of aero engine performance for an aircraft that takes care of all of the necessary support, including maintenance, rather than merely selling engines and providing a separate maintenance service. This means that their customers, the airlines, in effect, only pay for their engines when they are working. Copyrighted material – 9781137525789
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THE INTERNATIONAL CONTEXT FOR OPERATIONS MANAGEMENT Globalization refers to the increasing integration of economic activity around the world, evidenced in the growth in international trade and the increasing interdependence of national economies. An increase in cross-border social, cultural and technological exchange is also a feature of globalization. A multinational enterprise (MNE), or sometimes also termed a multinational company (MNC), is a business organisation that has operations in a number of different countries. A less developed country (LDC) is one whose economy is underdeveloped, relying mostly on agriculture (and possibly extractive industries), and whose population has a low standard of living.
It is generally accepted that over the last 30 years or so, a number of powerful factors have combined to produce the phenomenon that has become known as globalization. This has led to the increasing integration of economic activity around the world, evidenced in the growth in international trade and the increasing interdependence of national economies. Many commentators also emphasize the increase in cross-border social, cultural and technological exchange as essential concomitant elements of globalization. Globalization has proved to be a contentious issue. Its critics point to the dominance of Westernized free-market economics, the growing power and influence of multinational enterprises (MNEs), and the detrimental impact on less developed countries (LDCs) and the natural environment. This book will studiously avoid considering the rights and wrongs of globalization. There are many other forums in which to do so. Our concern is rather to understand the phenomenon and its resultant impact on the internationalization of operations management. The factors driving globalization can be classified under four broad headings: technological, political, sociocultural and economic. These are now discussed in turn below.
Technological
The digital technology revolution, driven by ever-increasing processing power of computers and the near ubiquitous presence of the Internet, continues apparently unabated. Many analysts argue that these information and communication technologies (ICTs) and their supporting infrastructure of cables and satellites have created a new techno-economic paradigm that is underpinning a fifth Kondratiev long wave1 of economic growth (Dicken, 2015). There can be no doubting the growing importance of the Internet for businesses and individuals. In advanced economies, all but the smallest firms make at least some use of the Internet in their businesses. In the retail sector, use of the Internet is now mature, with, for example, nearly 70 per cent of Swedes, 65 per cent of British and 57 per cent of Americans undertaking some of their shopping online in 2015, according to Digital Strategy Consulting (2015). The Internet now has over 3 billion users, and 40 per cent of the world’s population have an Internet connection (Internet Live Stats, 2015). However, Internet penetration rates vary widely. Extreme examples are the case of Eritrea, where less than 1 per cent of the population have Internet access, and Qatar, where 97 per cent have Internet access. One of the main benefits of the Internet is that it facilitates cheap and easy direct personal contact, irrespective of distance. Whether we have yet come to a point where the Internet has led to the death of distance (as predicted by Cairncross, 1997) is probably questionable. But the Internet’s ability to reduce the effects of distance can be significant. The use of email, instant messaging (Facebook, Twitter, WhatsApp, etc.) and other forms of digital communications enables individuals and organizations to communicate with one another almost anywhere on the planet. Almost limitless quantities of data can be transferred within seconds. Low-cost video conferencing services such as Skype and FaceTime can enhance, Copyrighted material – 9781137525789
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B2B (i.e. business to business) refers to a transaction that takes place between one business organi zation and another. B2C (i.e. business to consumer) refers to a transaction that takes place between a business organization and an individual consumer (i.e. individual citizens). Disintermediation is the removal of one or more intermediaries (such as a distributor, wholesaler, broker or agent) in a supply chain (known colloquially as ‘cutting out the middleman’). This is a common feature of e-commerce, especially B2C e-commerce.
if not completely replace, the more impersonal aspects of communicating via the written word on a computer, tablet or smartphone screen.
Within a few short years, online trading between businesses (B2B) and between businesses and consumers (B2C) has become commonplace. Traditional business supply chains have been disrupted, with both disintermediation and re-intermediation in evidence. In some cases, suppliers have chosen to bypass the traditional distributors of their industry and trade directly with customers (e.g. Amazon, Dell). In other cases, new intermediaries have emerged and reconfigured supply (e.g. Travelocity for travel and Amazon for shopping). If products can be digitized (e.g. music, movies, the written word), they can be delivered directly to consumers via the Internet, thereby removing the need for the traditional distribution channels. The Internet can facilitate access to new customers at a fraction of the cost of more traditional means. For example, online banking makes it possible to offer customers the ability to undertake almost all traditional transactions without the need for traditional banking halls.
The Internet is also being used by organizations in their dealings with suppliers. For example, the use of online auctions can enable companies to attract bids from many more potential suppliers than would be economically viable using more traditional means. For many years, large organizations have usually conducted much of their business with their suppliers through electronic data interchange (EDI) systems, improving information flows between the companies, allowing them, for example, to enable exact order requirements and for stock positions to be updated instantaneously. Now the Internet has dramatically reduced the cost involved in operating EDI, enabling companies of any size to make use of its benefits. Global positioning satellites have enabled the exact location of goods in transit to be tracked. ICTs are also used by organizations to enable workers in different locations to work together effectively. This has been particularly pronounced in the separation of front and back office operations in some service organizations. In all cases, the impact of technology is to shrink distance, reducing the importance of proximity between supplier and customer. It is also worth noting the impact that improvements in technology in the latter half of the twentieth century have had on the speed and cost of transportation of both goods and people. Advances in air travel mean that virtually any part of the inhabited world can be reached from any other in less than a day. Improvements in transport infrastructures on both land and sea, and in transportation systems (particularly the near universal adoption of containers), have led to dramatic reductions in the total time taken to transport goods. Taken together with the impact of Internet-based ICTs, the world can truly be said to have shrunk.
Political
For almost half a century after the Second World War, the world was essentially divided into three groupings. The industrialized countries of the ‘West’ (North America, Western Europe and Japan) manufactured most of the world’s goods and accounted for most international trade. The USA was the most dominant political and economic force as the European powers and Japan recovered from the devastation of war. Second, the ‘communist bloc’ of the Soviet Union and Eastern Europe sought to create its own economic system quite separate from that of the capitalist West. The rest of the world outside of these two groupings Copyrighted material – 9781137525789
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Re-intermediation is the reintroduction of an intermediary in a supply chain. The growth of e-commerce has prompted the emergence of new kinds of intermediary in many industries. Electronic data interchange (EDI) is the computer-tocomputer exchange of structured information via a telecommunication link. EDI has been used by business since the 1970s and there are agreed international standards covering its use. It is still used by many MNEs to automate their purchase of goods and services.
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was the ‘Third World’. This comprised the mostly poor and underdeveloped countries that were often the sources of the world’s raw materials and food. Many countries were emerging from colonialism during this period and some became battlegrounds (usually metaphorically, but sometimes literally) between the competing interest of the West and communism.
An increasingly important political development since the Second World War has been the emergence of international agencies to promote international trade and development, such as the WTO, the IMF, the AIIB and the World Bank. Most countries belong to such agencies. The World Trade Organization (WTO) negotiates agreements between governments that govern the rules of trade between nations. It has promoted trade liberalization by brokering deals that have progressively lowered trade barriers and tariffs between countries. The International Monetary Fund (IMF) promotes international monetary cooperation and provides temporary financial assistance to countries in financial difficulty. The Asian Infrastructure Investment Bank (AIIB), initiated by China in 2009, supports the building of infrastructure in the Asia-Pacific region. The World Bank provides low-cost finance to developing countries for education, health and infrastructure projects. Although the economic development of many Third World countries has been disappointing, some have advanced significantly and are now considered as newly industrialized economies (NIEs). O’Neill (2001) coined the acronym BRICs for what he saw as the strongest NIEs, namely Brazil, Russia, India and China. The intervening years have seen somewhat mixed performances from the economies of these countries. Most notably, China has become the world’s second largest economy (after the US). It is the world’s largest manufacturing economy, and the largest trading nation, being the largest exporter and second largest importer of goods (IMF, 2014). As such, it should perhaps not now be considered as an emerging economy at all. As well as adding South Africa to the list of BRICs, O’Neill went on to invent the further acronym MINT for the next group of countries, Mexico, Indonesia, Nigeria and Turkey, assessed as significant NIEs (Magalhaes, 2013). The emergence of countries such as these is characteristic of the changing economic order in the rapidly globalizing world. As well as cooperating globally to promote increased international trade, countries have also done so regionally to create formal trading groups. The first of these was the European Union (EU). Originally formed by six countries in 1957 as the European Common Market, the EU now encompasses 28 countries. While there is the prospect of others joining in the future, the UK announced its intention to quit the organization in 2016. Free trade is a central tenet of the EU. ASEAN (the Association of Southeast Asian Nations) comprises 10 South East Asian countries who have pledged to create the ASEAN Economic Community as a free trade zone. A similar free trade agreement, the North American Free Trade Agreement (NAFTA) was set up between the US, Canada and Mexico in 1994. Further moves to promote free (or at least freer) trade between groups of countries have been given currency by the Trans-Pacific Partnership Agreement (TPPA), to which 12 Pacific countries are signatories, and the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU. The creation of free trade blocs such as these can particularly impact decisions about where companies choose to locate their production and service delivery facilities. Locations within a country that can offer tariff-free access to all of the countries Copyrighted material – 9781137525789
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within its trading block are usually seen as highly attractive for firms seeking to access and penetrate those markets.
Sociocultural
The last two decades have seen an increase in the movement of people around the world. More open borders and cheaper travel costs have contributed to the numbers migrating, both legally and illegally, to seek work and improved economic circumstances, or to escape war and persecution. More people travel greater distances to take holidays. Many young people now often undertake extended periods of travel, sometimes including short periods of work, typically before going to university or taking a permanent job. Many students now choose to study in universities outside of their homelands. Satellite television and the Internet make it possible to learn about life in other countries very quickly. People all over the world now aspire to access the same products and services that might previously only have been available in the more advanced economies. This has fuelled the trend for global products that have the same level of quality wherever in the world they are produced and consumed. The world may not yet be a global village, but many people now feel themselves to be citizens of the world as much as citizens of their country of origin or current residence.
Economic
Until the financial crisis of 2008, the period since the end of the Second World War had seen the most sustained period of economic growth in modern history. Despite the economic difficulties suffered by many countries in the aftermath of 2008, in many ways it was the financial stability and mostly continuous growth experienced in the preceding several decades that have underpinned the forces of globalization. While the US and the countries of Western Europe were the driving economies for much of that time, the emergence of new manufacturing centres in the NIEs of South East Asia (e.g. South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Thailand, the Philippines, Indonesia), Latin America (e.g. Brazil, Mexico) and particularly China has provided a major stimulus to the world economy. As previously discussed, the growth in the international trade in services has become a notable feature of the world economy in recent years, far outstripping the growth in manufactured goods (WTO, 2014). Advances in technology have enabled more services to be traded internationally, especially in financial services and ICT. Of the developing countries, India has been particularly successful in benefiting from this trend.
Finally, in discussing the economic drivers of globalization, the role of MNEs should be noted. These are among the world’s largest businesses and they operate in countries outside of their homeland. They include familiar names such as Exxon Mobil and Royal Dutch Shell (oil companies), General Motors and Toyota (carmakers) and Apple and Samsung (electronics manufacturers). Indeed, their activities often span the globe and their products can be found in virtually every country. The financial value of the activities of such businesses can exceed that of many nation states. The decisions taken by their executives can have a greater impact than that of many government ministers. Unlike governments, their decisions are taken not in pursuit of national interest, but rather in pursuit of growth and profits for their shareholders. Their decisions, about where to Copyrighted material – 9781137525789
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locate their operations and where to source their suppliers, can have significant impacts on the economies of the countries involved. In most countries, MNEs can take advantage of the freedoms afforded by banking and financial systems that operate electronically on a 24-hour basis to transfer funds unhindered from government restrictions. Thus, many MNEs are powerful economic forces in their own right that often act independent of national governments.
Internationalization theories
In the face of the forces of globalization discussed above, more and more organizations have been internationalizing their business operations. Although some businesses have always operated internationally, these have generally been small in number but very large in size, as typified by large multinational enterprises (MNEs). A number of theories explaining this internationalization process have been promulgated, including:
Vernon’s product cycle theory
Vernon (1966) offered an analysis of the internationalization process. The essence of this theory is that production increasingly moves away from the place of origin over time in a series of identifiable phases. Vernon identified five such phases based on the product lifecycle model: »» Phase 1 – Introduction: All export markets are served from production in the home country. »» Phase 2 – Growth: Production facilities set up in high-income markets to serve local markets. Low-income markets in less developed countries (LDCs) continue to be served from production in the home country. »» Phase 3 – Maturity: The newer lower-cost facilities in the high-income markets export to LDCs, displacing exports from the home country. »» Phase 4 – Saturation: The newer lower-cost facilities in the high-income markets export to the home country. »» Phase 5 – Decline: Newer lower-cost production facilities set up in LDCs, which export back to the home country.
Vernon’s theory was based on his analysis of the overseas investments of US corporations and his prediction of likely future events. A frequently cited example of a product that followed the theories of pattern of invention, growth and production is that of the personal computer and the US, where the PC was invented and first manufactured. However, modern critics argue that his theory does not explain more recent patterns of internationalization. They maintain that his model is too simplistic in today’s much more complex world.
Dunning’s eclectic theory
Dunning (1976) argued that a firm will engage in international production at a particular location when all of the following three conditions are present: »» Ownership-specific advantages: The firm must have access to assets not possessed by competing firms. Such assets might be tangible (e.g. raw materials, plant and machinery, skilled labour) or intangible (technological Copyrighted material – 9781137525789
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INTRODUCTION TO OPERATIONS MANAGEMENT
or marketing know-how, patents, brand names, management expertise). Large firms tend to be better placed to internationalize as they usually have access to greater amounts of finance at lower cost. »» Location-specific factors: There must be factors at the foreign location that make it more advantageous for the firm to locate its operations there rather than at home. These factors might include access to markets, the availability of resources, lower production costs, favourable political conditions and cultural/linguistic affinities. The importance of each will vary depending on the type of activity taking place. »» Internalization: The firm must internalize the use of its ownership-specific advantages at the location, exploiting them itself, rather than selling them or leasing them to other firms.
Dunning’s theory is sometimes known as OLI, in reference to the three factors. Although some critics argue that it is more a list of factors rather than a theory, it offers a useful framework to examine specific cases of internationalization of operations.
Stage theories
Various authors have argued that firms internationalize in a series of incremental sequential stages. A number of different models describe the various stages that have been put forward.
The best known of these is the Uppsala model (Johanson and WiederscheimPaul, 1975), which identifies four stages: »» Stage 1: No regular export activity. »» Stage 2: Export to foreign countries via local sales agents. »» Stage 3: Establishment of a wholly or part-owned subsidiary company in order to sell directly to the foreign country. »» Stage 4: Establishment of production facilities in the foreign country.
Ohmae (1994) adds two further stages beyond the Uppsala model. Ohmae’s stage 4 (his stage 1 equates to Uppsala’s stage 2, as he omits Uppsala’s stage 1) is complete insiderization. At this stage, the firm becomes an ‘insider’ in the markets it services, with all the resources necessary for that, including R&D, production and marketing. This requires the diffusion of organizational activities to different locations around the world, to meet the needs of each of the different markets. The fact that various functional activities have become replicated around the world is likely to lead to tensions within the organization, with national managers attempting to meet the specific requirements of local markets clashing with those at headquarters trying to coordinate and control disparate efforts around the globe. Ohmae’s stage 5 is true globalization. This requires all members of the organization to make a mental adjustment and adopt a truly global mindset. This is one where the loyalty of each employee is to the firm as a global entity, not to the headquarters or the country where they work, and the focus is on meeting the needs of customers irrespective of where they are located in the world. Overcoming of the problems caused by the dispersion of operations and Copyrighted material – 9781137525789
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functional activities around the world leads to a new role for senior managers at corporate head office. Their role becomes one of guarding corporate identity. As such, they will focus their efforts on controlling branding and ensuring that corporate policies can meet the needs of all stakeholders across the globe. Thus, Ohmae’s stage model has the following stages: »» Stage 1: Export via agents. »» Stage 2: Establishment of a sales subsidiary in the foreign country. »» Stage 3: Establishment of production in the foreign country. »» Stage 4: Complete insiderization. »» Stage 5: True globalization.
Stage model theories of internationalization have been criticized in a number of ways. First, they are based on analyses of how a relatively small number of companies have behaved in the past. They do not adequately describe how all companies have internationalized. Some empirical studies have shown that some companies have followed a number of different paths to the establishment of foreign production facilities, skipping one or more of the stages (e.g. Turnbull 1987; Clark et al., 1997). Indeed, some companies can be ‘born global’ (Rennie, 1993), operating in international markets on a substantial scale from their earliest days. Furthermore, some companies have behaved differently when entering different overseas markets. Second, the models do not mean that all companies must or will follow these stages in the future. The stage models do not necessarily represent best practice, and organizational strategists may well be able to devise other ways to internationalize. Finally, all stage model theories seem to assume that internationalization is market-led, with organizations entering particular countries to meet an identified market need in that country. However, as will be discussed in Chapter 3, strategy can also be operationsled. Establishing operations in one foreign market may be part of a process of building knowledge and expertise that can subsequently be used, not only to expand further into that market, but also as a springboard for entry into other markets. Lessons learnt from experiences in one market can be used to inform and shape actions in others.
THE INTERNATIONALIZATION OF SERVICES
Most of the theories about internationalization discussed above are implicitly, if not explicitly, based only on a consideration of manufacturing organizations. This may have been understandable up until recently, as there have been few instances of service-based organizations operating internationally. However, services have become increasingly important and now represent the overwhelming majority of economic activity in industrialized countries. Also, it is fairly easy to think of examples of service providers that do operate internationally (e.g. the banking and financial services, media, telecommunications, business services industries). So, are we to simply assume that service organizations internationalize in exactly the same way as manufacturers? Or, should services be considered as a special case? One of the most important distinctions made between services and manufacturing is that of customer contact. Manufacturing does not usually require any direct customer contact. However, back office services do not require direct customer Copyrighted material – 9781137525789
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Outsourcing is one of the terms used to describe the process of obtaining inputs of goods or services from sources outside of the organization.
contact either. A great deal of the internationalization of services in recent years has taken place in back office services. The offshoring of back office service operations has often been driven by a desire to move labour-intensive support services to low labour cost locations. India has especially become a favoured destination for the offshoring of back office services. Some companies have chosen to set up their own back office operations in foreign countries. Others have outsourced these operations to locally owned external providers. Back office operations can be viewed as another form of manufacturing, and so in many respects it seems quite legitimate to consider their internationalization as being akin to that of manufacturing operations.
Front office operations, however, appear to be different, as these require some degree of customer contact. So where and how that contact takes place is a key element in these operations. The facilitation of contact between service provider and service user may necessitate one or other of them to move. The service provider may need to move to meet the service user. The service user may need to move to meet the service provider. Front office services can be categorized on the basis of a 2x2 matrix formed by considering these movements (see Figure 1.4).
Separated services
These are services where there is no need for face-to-face physical contact between service provider and user. Contact in these services is typically technology-mediated in some way, as is the case for telephone and Internet services. Technological advances have seen an increase in cross-border separated services. Telephone call centres are an obvious example. Reductions in the cost of telecommunications have fuelled the vast increase in the offshoring of call centres, especially to India and other low labour cost countries with an abundance of well-educated English speakers. The widespread availability of the Internet has made it possible for businesses and consumers alike to conduct most commercial transactions online. Increasing bandwidth is making Provider
Does not move
Does not move
Moves
Separated services (e.g. telephone call centre)
Demander-located services (e.g. management consultancy)
Provider-located services (e.g. medical services, hotels)
Peripatetic services (e.g. trade shows, conferences)
User
Moves
Figure 1.4 Customer contact service location matrix Source: inspired by ideas in B890 International enterprise (1995-2002) The Open University.
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it possible to deliver many services online via the Internet for the first time. This is especially so for entertainment. It is now possible to download music, videos and movies from the Internet. Internet technology is advancing rapidly and the possibilities seem unlimited. Technologically speaking, the location of an online service provider has become irrelevant. This is opening up new approaches to the internationalization of any service that can be digitized, and our understanding of the internationalization process seems certain to be challenged.
Demander-located services
Some face-to-face services need to be provided at the user’s location, with the provider needing to move to deliver the service. Management consultancy is one example of such a demander-located service. Some industrial services such as the repair and commissioning of equipment also fall into this category. The internationalization of this type of service requires the provider to have the capability of delivering the service in the user’s country. This clearly has implications for the skills required by the service delivery personnel, the provision of any necessary equipment they require, the cost of delivery, and so on.
Provider-located services
The provision of some face-to-face services requires the user to move to the provider’s location. This is often the case where the service needs specialist equipment or staff, as is often the case for medical services. Some services are provided specifically for users who are themselves travelling, whether for business or pleasure (e.g. in the hotel and hospitality industries). Sometimes the user travels to the provider’s home country to receive the service, as is the case for some specialist medical treatments. However, more normally, this category of service requires the provider to establish service provision locations to suit the user. This clearly has implications for internationalization.
Peripatetic services
Although they are more unusual, there are services where the provider and the user both move in order to facilitate the service encounter. Trade shows, conferences and some live entertainments fall into this category. The encounter needs to take place at a location suitable for the event, so both service providers and users need to have the ability to access such venues.
Internationalization normally creates a conflict between the pressure to standardize provision globally in order to maximize economies of scale and scope, and the pressure to customize in order to meet the different requirement of customers in each locality. Services have traditionally been seen as being more difficult to globalize because of the imperative to tailor the service offering to meet different local needs. This is particularly true for front office services where the requirement of customer contact makes them fundamentally different to manufacturing. This ought to prompt a somewhat different consideration of the internationalization process for at least some types of services. However, with some exceptions (e.g. Segal-Horn, 2005), the development of theory of the internationalization of services has lagged that for manufacturing.
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INTRODUCTION TO OPERATIONS MANAGEMENT
CASE STUDY
RAJA FASHIONS: A HONG KONG TAILOR COMES TO YOUR TOWN
Hong Kong is rightly famed for its bespoke tailors. Their shops abound in the innumerable shopping malls and streets of the former British colony. They are particularly numerous in the Tsim Sha Tsui area of Kowloon, where anyone of European appearance is invariably harangued by the many hawkers who throng its main streets, extolling the virtues of the particular tailor’s shop they represent. Hong Kong tailors can reputedly produce a bespoke suit in as little as 24 hours, and for a price equivalent to what would typically be paid for an off-the-peg suit in Europe or North America, and a fraction of what might have to be paid for the equivalent bespoke suit in London’s Saville Row. Raja Fashions, run by Raja Daswani, is now Hong Kong’s biggest bespoke tailoring business. Yet, before 1997, the year the colony was handed back to China and became a Special Administrative Region of the People’s Republic, the company was indistinguishable from the hundreds of Hong Kong’s other tailors. Customers for Raja Fashions and the other tailors came from the large European expatriate community, as well as visitors to Hong Kong, who would typically stay for only a couple of days, often while en route to Australia or other parts of South East Asia. However, after the 1997 handover, many Europeans started to leave Hong Kong. To make matters worse, the handover coincided with a financial crisis in the region, resulting in decreased visitor numbers.
So Mr Daswani decided that if the customers would not come to him, he would have to go to them. He had always visited London, but Mr Daswani and his team now regularly visit major cities in 14 countries, including those of North America, Europe, the Gulf region and Australia. Team Daswani set up shop in a hotel suite, thereby avoiding the expense and hassle of having permanent business premises 6,000 miles from home. Customers book an appointment in response to full-page adverts placed in local newspapers or via the Raja Fashions website. He also gets many word-of-mouth recommendations and is often invited by executives of big companies. Mr Daswani also has many celebrity clients (reputedly including Tony Blair, David Beckham and Lashmi Mittal). Raja Fashions always sets up a special room for people who do not want to be seen. Mr Daswani’s strategy of taking his shop to his customers works as follows. First, he meets with a customer to discuss his or her requirements. Many customers bring in a favourite suit to be copied, or point out a style that they like in magazines and advertisements. Second, the team takes detailed measurements and digitally photographs the customer to give extra information about his or her body shape and stance. These are then emailed to Hong Kong, where the suits are made. Third, the customer chooses the fabric. There are over 20,000 to choose from, including cashmeres and silk mohair. The choice affects the price. Prices start from under £250. The customer then receives the suit by post four to six weeks later. For
Photos courtesy of Vishal Daswani, Director, Raja Fashions
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those in more of a hurry, suits can be sent express delivery in two weeks at extra cost. If there are any problems, Raja Fashions has arrangements with local tailors who can make minor changes at no extra charge. Raja Fashions’ business model has proved to be a great success. A skilled tailor can be employed in China for a fraction of the cost of
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the equivalent in the West. Although clothing generally has become more casual in recent years, smart business wear has retained its allure. Mr Daswani feels that he has helped bring bespoke tailoring to a wider audience. He argues, ‘Although people want to look smart, they are more conscious of their budgets than they used to be’. Although professionals such as bankers, brokers, financiers, lawyers and the like still make up the bulk of his clientele, a growing percentage are on more moderate incomes. Sources: Raja Fashions (2016) Raja Fashions, available at: www.raja-fashions.com (accessed 20 April 2016).
QUESTIONS 1. What is the nature of the customer contact operation in Raja Fashions? 2. What are the main challenges faced by the model of operations management evidenced in Raja Fashions?
CHALLENGES OF OPERATING INTERNATIONALLY
Once an organization is involved in international activities, it falls to its operations managers to rise to the challenges posed in managing what can often appear to be disparate activities in far-flung locations. The most significant challenge is perhaps overcoming the dilemma that is inherent in most international operations, namely that of attempting to reconcile the competing demands of managing on both a global and a local scale. On the one hand, hard-won knowledge and expertise gained from past operational experience needs to be exploited on a worldwide basis in order to produce and deliver goods and services as efficiently as possible. This creates a pressure to harmonize operations across the globe, using standardized systems and technologies, for easier coordination and control. On the other hand, there are pressures to respond to the specific circumstances in each location. The quality and quantity of input resources (e.g. labour, raw materials) may vary at each location. Legislation may differ from country to country. There may be significant cultural differences between people (employees, customers, suppliers, etc.) in different countries. Products and services may need to be customized to meet local requirements. This tends to fragment operations. Organizations who successfully manage international operations are able to balance these conflicting pressures. They neither seek to impose standard solutions, irrespective of location, nor permit individual locations to operate entirely independently of one another. Recent advances in ICT are increasingly offering the means to achieve the level of interaction required to facilitate the management of operations across the globe. Copyrighted material – 9781137525789
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Managing international operations is likely to pose considerable challenges in many areas of operational activity, both structural and infrastructural, making managerial decision-making more difficult and complex. Operations managers may be faced with trying to serve differing and possibly unfamiliar markets, with operating systems in different locations, possibly using differing technology with workforces of varying levels of skills, in very different societal contexts. There will inevitably be conflicts of what activities to undertake at what location, and with what priority.
BENEFITS FROM OPERATING INTERNATIONALLY
Organizations with successful international business strategies typically tend not to view the challenge of managing international operations as a problem to be overcome. Rather, they treat their exposure to new and different ways of operating and to the differing demands of customers across the globe as a series of learning opportunities. Organizations that operate in more than one country have many opportunities to learn from their exposure to different international environments. Also, the increased internationalization of business provides organizations with many opportunities for learning from the good operations practice of other organizations they encounter across the world. Successful international organizations actively seek to feed back this new knowledge and diffuse it throughout the organization. They use their learning from their international operations as a source of competitive advantage to drive their business strategy. Multinational organizations are also much better placed to learn than organizations that only undertake arm’s-length international transactions. This is because they are more efficient at transferring knowledge gained about operating in different countries between their subsidiaries. This can be attributed to their use of the same internal evaluation and accounting systems, which also makes them more likely to invest quickly if they see opportunities (Kogut and Zander, 1993). Flaherty (1996) points out that truly global operations (in the sense intended by Ohmae, 1994, as discussed above) rely on a network rather than a hierarchy for coordination. A network is better at promoting joint learning between its members. It can enable them to more easily share the different solutions they may have developed to solving specific problems in their own operating environments. Lessons from these experiences can prove useful to other members faced with similar problems in their own environments. This can be especially helpful if one operation has had to learn to satisfy particularly demanding customers in one part of the world. Organizations that operate internationally are more likely to be directly exposed to the operating practices of others in similar industries, or similar operating practices in different industries. This can offer tremendous opportunities for learning from their best practice. For example, for many years, Western manufacturers have taken the opportunity to learn directly from the worldclass operations of many Japanese companies, particularly with regard to lean manufacturing practices such as JIT (just in time), TQM (total quality Copyrighted material – 9781137525789
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management), kaizen, and so on, which will be discussed in more detail in Chapters 10 and 11. Neither has it been necessary to go to Japan to do this as many Japanese firms have set up manufacturing facilities in many parts of the world. This was particularly so in the UK in the late 1980s and early 1990s, when many Japanese manufacturers set up factories in the UK, primarily to access EU markets. This provided local British firms with an opportunity to benchmark their operations against high-performing Japanese companies who were facing the same operating environment as they were. In their study of UK manufacturing firms during this period, Hanson and Voss (1993) showed the benefit of this approach, finding that high-performing British companies were five times more likely to use benchmarking as an improvement tool than lowperformance companies. The report also showed that the UK companies that won contracts to supply the new arrivals were especially able to benefit from the supplier development programmes set up by various Japanese manufacturers. This demonstrates that international operations can offer benefits to many different parties.
TAKING IT
FURTHER
The globalization and internationalization of business operations have proved to be politically controversial in recent years. Explore why this is so, and determine who is most affected by these phenomena. What are the advantages and disadvantages of the globalization and internationalization of business operations, and for whom?
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INTRODUCTION TO OPERATIONS MANAGEMENT
SUMMARY OF KEY POINTS »» Operations management is concerned with the management of the resources and processes required by an organization to produce goods or services for customers. »» Any operation can be depicted as a transformation process that converts inputs of resources to outputs of goods and services. »» Operations can be classified as material processing, customer processing or information processing, depending upon which type of resource is predominantly being transformed. »» Service operations are distinguished by their intangibility, simultaneity, customer contact and subjective quality. »» Service operations can usually be divided between the front office, which involves customer contact, and the back office, which customers do not normally visit. »» Most operations take place within a supply network, which comprises all the suppliers to the operation (and all their suppliers and their suppliers) and the customers of the operation (and all their customers and their customers). »» Many operations, both in services and manufacturing organizations, have become internationalized in recent years. Most operations now have an international dimension to some extent. »» The internationalization of operations is being driven by powerful forces of globalization. These forces are a combination of political, economic, sociocultural and especially technological factors. »» There are a number of theories concerning the internationalization of organizations, including Vernon’s product cycle theory, Dunning’s eclectic theory and various stage theories (e.g. the Uppsala model and Ohmae’s stage model). None of these offer entirely satisfactory explanations of the internationalization process. »» The internalization process may apply differently to services, especially in customer contact services, compared to manufacturing. »» Operating internationally presents many challenges to operations managers. The most significant of these is probably reconciling conflicting local and global demands. Globally, there is a pressure to maximize efficiency by standardizing operations for easier coordination and control. Locally, there is a pressure to customize operations to meet the specific requirements of each location, which can lead to a fragmentation of operations. Successful international operations management requires that these conflicting pressures be balanced. »» Organizations can benefit from operating internationally if they can share the learning from their own experiences and learn from the practices of other organizations that they come into contact with in other countries.
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TRY IT YOURSELF Suggested answers can be found on www.macmillanihe.com/BarnesOM 1. Use the transformation model (Figure 1.1) to analyse the following types of organization. In each case, list the transformed resources, the transforming resources and the outputs produced. a. Clothing manufacturer b. School c. Dentist d. Accountancy e. Restaurant f. Bank 2. What are the main differences between manufacturing and service operations? 3. Think of five services that you have experienced as a consumer in the last month (e.g. restaurant meal, transportation system, hairdresser, university class, cinema). Describe the degree of tangibility, simultaneity and customer contact you experienced with the service in each case. How did these affect your perception of the quality of the experience? 4. Explain, for the benefit of a friend who is not studying the subject, why operations management is vitally important for any organization. 5. What are the most important forces of globalization? 6. What are the main theories covering the internationalization of organizations? 7. Find a recent example from the business news media of an organization that operates internationally. a. Identify the most significant challenges it faces in its international operations management. b. Identify the main benefits available to it from its international operations. 8. To what extent do you think that the internationalization of services should be treated as a special case from that of manufacturing? 9. Choose one of the major MNEs. Identify the most significant forces of globalization that have impacted on the international operations of the company in the last few years. What has been the organization’s response to those forces? 10. Choose two companies that have internationalized in recent years, one manufacturer and one service provider. Which of the theories of internationalization best describes the way that each underwent internationalization?
CASE EXERCISE
HOTEL MATINA
Hotel Matina is a family-owned boutique hotel located on a Greek holiday island. Although the hotel has only 40 rooms and one suite, managing its operations is a complex business. Some operations involve direct contact with the
hotel’s guests (e.g. reception, swimming pool, bar services), while others take place mostly out of the guests’ sight (e.g. housekeeping, procurement, laundry). However, it is the hotel’s reception and housekeeping departments that are fundamental
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to ensuring that the guests are provided with a reliable and quality overnight experience.
THE HOTEL RECEPTION
Reception is the main contact point for guests throughout their stay at the hotel. It deals with reservations, check-in, customer service and check-out. Hence, its location is at the most important and visible entry and exit point of the hotel. Its physical layout aims to not only convey a warm first impression to the guests, but also to provide enough space to make it convenient and pleasant for guests who are waiting to be served. While background music plays, arriving guests who have checked in online can use the express check-in service. Similarly, guests can speed their departure by utilizing the express check-out service by settling their bill online. Reception aims to provide guests with the personal contact needed to satisfy their requests for information about the hotel and the
surrounding area, and to meet their needs for a range of individual services such as taxi bookings, Internet connections, restaurant bookings, and so on. Given the nature of their encounters with customers, all reception staff are recruited and trained to have good communication and presentation skills. They need to show empathy and demonstrate a desire to serve guests’ needs speedily and pleasantly. The emotional demands on reception staff can be very great, as they need to be always smiling and to speak to customers in a warm and friendly way, irrespective of their own physical, mental and psychological situation. Being at the focal point of the hotel, reception staff also have an important role to play in promoting and selling the hotel’s other services, such as the swimming pool, the bar and the restaurant. The reception also acts as a communication hub for other hotel employees, since it provides information about events taking place at the hotel, vacated rooms that are ready to be cleaned, electrical faults reported by guests that need to be transferred to the maintenance department, and so on.
PHOTODISC
THE BACK OFFICE
The work of reception is supported by a back office, located in the basement of the hotel. This is responsible for collecting and processing a vast amount of customer information at all stages of the guest cycle, from initial contact before arrival, during their stay and after their departure. Unlike those at the reception, back office staff do not need any special knowledge of languages or communication skills. Instead, a great emphasis is placed on their analytical and computer skills. The main activities in the back office encompass: »» Reservations: Take reservations, check information about room rates and inventory availability, accept and/or decline
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reservation, take customer information and details and/or check with marketing database if customer details already exist, confirm reservation with the client. »» Room status and allocation: Upon arrival, guests need to be allocated to a room depending on their reservation requests (e.g. double bed) and the current status of the hotel’s room stock. Checking the status of the hotel’s stock of rooms is a process that involves staff from different departments (e.g. housekeeping, reception, maintenance); its management is crucial since it can significantly affect guest service and satisfaction. For example, they need to avoid any delays in providing guests their required room, while ensure that rooms that are still dirty are not released. »» Billing: All charges that guests incur within the hotel (at the bar, restaurant, room service, etc.) need to be charged on a daily basis to the guest’s folio. This information needs to be timely and accurate in order to avoid any errors (e.g. charging customers for items they have not purchased, and/ or avoiding the loss of any payments). Cooperation and communication with all hotel departments is required. On the day of departure, the department prints the bill, which is passed to reception, so that guests can check it and settle it. »» Night audit: At the end of every day, all information recorded during the day needs to be checked for accuracy and reports generated for the next day’s activities. Specifically, the status of all rooms has to be checked, and arrival and departure reports have to be printed and disseminated to reception and housekeeping. »» Reporting: The back office needs to provide the hotel manager with reports of hotel performance (e.g. level of reservations, occupancy rates and average room rates) whenever requested. »» Guest history: After their departure, guests’ details and any information generated from their activities (e.g. request for a second pillow, a specific newspaper, preference for a particular wine) has to be entered into the hotel’s marketing database. This information is important in establishing relations with guests (e.g. posting birthday and Christmas cards) and for personalizing their future stays. The marketing department is also
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responsible for accumulating and analysing such customer information in order to develop appropriate marketing activities.
HOUSEKEEPING
The work of a housekeeper is physically demanding, repetitive, unskilled and of low status. However, it is vital in ensuring that guests are satisfied with their stay. Moreover, the scale and complexity of maintaining the cleanliness of the hotel should not be underestimated. Apart from cleaning bedrooms, housekeeping staff also need to clean the public areas (reception, lobbies, corridors etc.). The traffic volume in public areas can be quite large, with more than 200 people walking through these areas of the hotel on a typical day, sometimes more than once. All rooms are cleaned via a standardized process. Checklists are provided to staff, so that they know what to clean, in what order, and what to check before finishing the maintenance of each room. The hotel housekeeper makes random checks each day to ensure that rooms have been prepared to the required standard. Housekeeping tasks are very suitable for the application of time and motion studies. This has enabled, for example, the room cleaning trolley used by housekeeping staff to be designed to carry around all necessary cleaning and maintenance materials. Similarly, bedroom furniture is fixed to the walls, thereby preventing its rearrangement by guests, which might slow down floor cleaning. Also, the time needed to clean a bedroom has been accurately calculated (20 minutes on average). This greatly simplifies the task of scheduling the work of housekeeping staff each day, as staffing levels and tasks can be based on the number of guests and reservations. The cleaning of the public areas is divided into a number of tasks with different frequency and timings, devised according to their importance and the risk of their becoming dirty. For example, floors are scheduled to be cleaned at least three times per day (early morning, afternoon and evening), window cleaning is planned for every other day, while surfaces are scheduled for cleaning once a day. Curtains are cleaned once a month to remove wind-blown dust accumulations. Public toilets need regular attention to ensure that they are clean and restocked with toiletries. They are checked at least three times per day. A checklist is displayed prominently in the toilet areas so that guests can see a record of the timing of cleaning and restocking that has taken place.
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INTRODUCTION TO OPERATIONS MANAGEMENT
Overall, the housekeeper keeps a detailed schedule of cleaning activities, ranging from dayto-day cleaning tasks, through regular but less frequent cleaning of particular items, to deep cleaning or ‘seasonal cleaning’. Moreover, the range of different floor surfaces, linen and furniture items in the hotel means that different treatments, detergents and cleaning regimes are required, adding to the complexity of housekeeping activities. The wrong use of a cleaning material and chemical may have a harmful effect on the item, the person using it and the environment. So staff must comply with relevant legislation for the use and storage of such chemicals. Original case courtesy of Marianna Sigala
QUESTIONS 1. List as many of the operations taking place in the hotel as you can. For each of these, identify their inputs, transformation processes and outputs. 2. Classify each of these operations according to the dominant transformed resource (materials, customers, information). 3. Which are front office and which are back office operations? 4. What are the main challenges for those managing the hotel’s operations? 5. What types of skills are required by the staff working in each of the hotel’s operations?
REFERENCES Cairncross, F. (1997) The Death of Distance: How the Communications Revolution Will Change Our Lives, Harvard Business School Press, Harvard, MA. Clark, T., Pugh, D. and Mallory, G. (1997) ‘The process of internationalization in the operating firm’, International Business Review, 6(6): 605–23. Dicken, P. (2015) Global Shift, 7th edn, Sage, London. Digital Strategy Consulting (2015) Global Ecommerce Trends 2015, available at: www.digitalstrategyconsulting.com/intelligence/2015/01/global_ecommerce_ trends_2015_uk_leads_the_way_in_europe_and_north_america.php#more (accessed 23 February 2015). Dunning, J.H. (1976) US Industry in Britain, Gower, Aldershot. Flaherty, M.T. (1996) Global Operations Management, McGraw-Hill, New York. Hanson, P. and Voss, C. (1993) Made in Britain, Dublin: IBM Consulting. Hill, T. (2005) Operations Management, 2nd edn, Palgrave, Basingstoke. IMF (International Monetary Fund) (2014) World Economic Outlook Database, October 2014 Edition, available at: www.imf.org/external/pubs/ft/weo/2014/02/ weodata/index.aspx (accessed 23 February 2015). Internet Live Stats (2015) Internet Live Stats, available at: www.internetlivestats.com/ (accessed 23 February 2015). Johansson, J. and Wiederscheim-Paul, F. (1975) ‘The internationalization of the firm: four Swedish cases’, Journal of Management Studies, October: 305–22. Kogut, B. and Zander, U. (1993) ‘Knowledge of the firm and evolutionary theory of the multinational corporation’, Journal of International Business Studies, 24(4): 625–45. Magalhaes, L. (2013) ‘O’Neill, Man Who Coined “BRICs,” Still Likes BRICs, but Likes MINTs, Too’, Wall Street Journal, 9 December, available at: https://blogs.wsj.com/ moneybeat/2013/12/09/oneill-man-who-coined-brics-still-likes-brics-but-likesmints-too/ (accessed 23 February 2015).
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Ohmae, K. (1994) The Borderless World: Power and Strategy in the Global Marketplace, HarperCollins, London. O’Neill, J. (2001) ‘Building better global economic BRICs’, Global Economics Paper No. 66, Goldman Sachs. Rennie, M.W. (1993) ‘Global competitiveness: born global’, McKinsey Quarterly, 4(4): 45–52. Segal-Horn, S. (2005) ‘Globalization of service industries’, in J. McGee (ed.), The Blackwell Encyclopedia of Management: Strategic Management, Blackwell, Oxford, pp. 147–54. Slack, N., Brandon-Jones, A. and Johnston, R. (2013) Operations Management, 7th edn, Pearson Education, Harlow. Turnbull, P.W. (1987) ‘A challenge to the stages theory of the internationalization process’, in P.J. Rosson and S.D. Reid (eds), Managing Export Entry and Expansion, Praeger, New York, pp. 21–40. Vernon, R. (1966) ‘International investment and international trade in the product cycle’, Quarterly Journal of Economics, 80: 190–207. WTO (World Trade Organization) (2014) International Trade Statistics 2014, available at: www.wto.org/english/res_e/statis_e/its2014_e/its14_toc_e.htm (accessed 23 February 2015).
ADDITIONAL READING
Castells, M. (1996) The Rise of the Networked Society, Blackwell, Oxford. Chase, R., Jacobs, R. and Aquilano, N. (2005) Operations Management for Competitive Advantage, 11th edn, McGraw-Hill, New York. Dunning, J.H. (1993) Multinational Enterprises and the Global Economy, Addison-Wesley, Reading, MA. Friedman, T.L. (2006) The World Is Flat: A Brief History of the Twenty-First Century, Penguin, London. Johnston R., Clark, G. and Shulver, M. (2012) Service Operations Management: Improving Service Delivery, 4th edn, Pearson Education, Harlow. Ohno, T. (1995) Toyota Production System: Beyond Large-Scale Production, Productivity Press, New York. Vandermerwe, S. and Rada, J. (1988) ‘Servitization of business: adding value by adding services’, European Management Journal, 6(4): 314–24.
NOTE
1 Kondratiev theorized in the 1920s that economic growth occurs in ‘waves’ of about 50 years duration, each ushered in by technological advances. The first wave corresponded with the mechanization of the Industrial Revolution (c.1770–1830), the second with the coming of the steam engine and the railways (c.1830–1880), the third with the introduction of electricity (c.1880–1930) and the fourth with mass production systems (c.1930–1980).
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AUTHOR INDEX Page numbers in bold indicate tables and in italic indicate figures. Abernathy, W.J. 472–4, 472
Ghosal, S. 124–5
Maister, D.H. 193–4
Atthirawong, W. 111–13, 112
Goldratt, E. 256, 257
Maslow, A. H. 369, 376
Greasley, A. 437, 439
Mathe, H. 448
Gregory, M. 82, 127, 427
Mayo, E. 369
Bank, J. 331
Meijboom, B. 118, 118
Bartlett, C.A. 124–5
Mills, J.F. 81–2, 83
Belbin, R.M. 382
Hackman, J.R. 369–72, 370
Berry, L.L. 329, 334
Hagel, J. 218
Bessant, J. 459
Hamel, G. 81, 99, 215
Bolstorff, P. 213
Hammer, M. 436
Brown, J.S. 218
Handy, C. 386
Buchanan, D. 379–80
Hanson, P. 29
Nahajima, S. 413–14 Neely, A. 48
Champy, J. 436
Hayes, R.H. 74, 75–6, 80, 82, 98, 137–8, 501–2, 505 Herzberg, F. 369
Norton, D. 49–50
Chiesa, V. 481
Mintzberg, H. 73, 77 Monczka, R.M. 217–18 Morita, M. 307
Nonaka, I. 449, 450
Hill, T. 82, 427
Christensen, C.M. 475–6
Hofstede, G. 353, 387–9
Cooper, C. 324
Houtepen, M. 118, 118
Crosby, P.B. 324, 345
Huczynski, A. 379–80
Oakland, J.S. 328, 345 Ohmae, K. 22–3 Oldham, G. 369–72, 370 O’Neill, J. 19
Dahlsrud, A. 58
Imai, M. 305
Ouchi, W.G. 306
Johansson, J. 22
Parasuraman, A. 333–4
Johnson, G. 73
Perras, C. 448
Johnston, R. 174–6, 348
Platts, K. 82, 427
Dunning, J.H. 21–2
Jokinen, M. 120–1
Poon, S. 173
Jones, D. 294–5
Prahalad, C.K. 81, 99, 215
Elkington, J. 58
Judge, T. 381–4
Ferdows, K. 122–4, 315–16, 315
Kaplan, R. 49–50
Dale, B.G. 324 De Meyer, A. 315–16, 315 Deal, T.E. 386–7 Deming, W.E. 323, 327–8 Dornier, P. 121, 216
Quinn, J.B. 77 Flaherty, M.T. 98–9 Fliedner, G. 212
Kennedy, A.A. 386–7 Ketokivi, M. 120–1
Flynn, B.B. 353, 354 Forrester, J.W. 209, 209
Robbins, S.P. 381–4 Roos, D. 294–5 Rosenbaum, R. 213
Leonard-Barton, D. 447
Friedman, T. 203–4
Rowan, S. 389 Rungtusanatham, M. 354
MacCarthy, B.L. 111–13, 112 Garvin, D. 330
McCelland, D. 376
Saladin, B. 353, 354
Gattorna, J. 223
McGregor, D. 369
Schein, E. 384–5
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author Index
Schmenner, R.W 426
Takeuchi, H. 449, 450
Waters, J.A. 77
Schonberger, R.J. 315
Taylor, F.W. 48, 365, 366
Wheelwright, S.C. 75, 80, 82, 98
Senge, P.M. 307
Tidd, J. 459
Wiederscheim-Paul, F. 22
Shenkar, O. 389
Trent, R.J. 217–18
Womack, J. 294–5
Shi, Y. 127 Shingo, S. 310–11 Shostack, L. 444
Utterback, J. 472–4, 472
Skinner, W. 75, 120
Venkatraman, N. 178–9
Slack, N. 39–40, 77, 80, 425–6, 427, 428
Vernon, R. 21 Vollmann, T.E. 426
Swatman, P. 173
Voss, C. 29, 55
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SUBJECT INDEX Page numbers in bold indicate tables and in italic indicate figures. AMH see automatic materials handling (AMH)
3D printing 168–70 80:20 rule 275–8, 276, 446
animal experimentation 499
ABC analysis 275–8, 276 absenteeism 365, 370, 375, 378 acceptance quality level (AQL) 341 acceptance sampling 325, 326, 340–1
accident and emergency (A&E) service, Hong Kong 247–8 accountability, in teams 384 action-oriented team roles 382 action teams 380
activity sampling 368 additive manufacturing 168–70
AGVs see automated guided vehicles (AGVs) Ahold Delhaize 78 Aichi Steel 302–3 AirAsia 330 airbag safety 224–5, 335–6 airline baggage tracking 506–7 Aldi 78, 146 Amazon 83, 173, 197–8, 250, 251, 502
Asda 146 ASEAN (Association of Southeast Asian Nations) 19
assumptions, cultural 385
activity scheduling 238, 240–6
aggregate planning 152–3, 238, 239
artefacts, cultural 384–5
assembly lines 184, 190, 235, 236, 307
activism 399–400
ageing populations 496
armed conflict 497
Asian Infrastructure Investment Bank (AIIB) 19
active customer-technology interaction 171–2, 171
advice teams 307, 379–80
appraisal costs 337–9, 338, 339
AQL see acceptance quality level (AQL)
access to resources 110–11, 112, 122
Advanced Planner and Optimizer (APO) 255
Apple 81, 400, 466, 504
appropriateness of technology 182, 183
access to markets 86–7, 110–11, 112, 122
Adidas 474–5
APO see Advanced Planner and Optimizer (APO)
Aston Martin 116–17 AudioNova 85 autocratic management style 306, 389 automated factory systems 509–10
awards, quality 349 Ayodhya crisis, India 416–17 B2B (business to business) transactions 18 B2C (business to consumer) transactions 18 back office services 10–11, 11, 16, 23–4, 88, 219 back-shoring 220 backwards loading 243–4 Balanced Active Lifestyle initiative, McDonald’s 484–7 balanced scorecard (BSC) 49–50, 50 Bangladesh 399–400 bar charts 244 barcodes 173, 212, 284–5, 506–7 batch production 184, 185, 186, 187, 189 bathtub curve of failure patterns 407, 407 Bayer 213 behaviouralism 305–7, 364, 369–72, 370, 376 beliefs, cultural 385 benchmarking 54–7, 334, 439
automated guided vehicles (AGVs) 168
benchmarking clubs 56
automated storage and retrieval systems (AS/RSs) 168, 284–5
best practice 53 lean operations as model of 315–16, 315
automatic materials handling (AMH) 168 autonomous maintenance 413 autonomous work groups 307, 372, 380–1 autonomy, in job design 370, 370, 371 availability 332, 408
Benetton 399–400
best practice analysis 213 best practice benchmarking 55, 439 ‘bet your company’ culture 387 Biasio, Lorenzo 85 bill of materials (BOM) 279 birth rates 496 black belts (Six Sigma) 353
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subject Index
Bloomberg News 428–9 Bolland, Marc 260 BOM see bill of materials (BOM) bonus schemes 375, 376 bottlenecks 256–7 bottom-up perspective of operations strategy 81–2 BP 213 BP (British Petroleum) 421–2 BPO see business process outsourcing (BPO) BPR see business process re-engineering (BPR) Braunschweiler, Lukas 85 Brazil 6, 15, 19, 89 breakthrough improvement 430–2, 430 breakthrough products 464–5 BRICs countries (Brazil, Russia, India, China) 19 Brown, Gordon 146 BSC see balanced scorecard (BSC) Bubb, Nick 262 budget airlines 330 budgets 52 bullwhip effect 209–11, 209 business continuity planning 415 Business Excellence models 349 business-level strategy 73–4, 74 business network redesign 179 business objectives 73 business process modelling 213 business process outsourcing (BPO) 76, 89 business process re-engineering (BPR) 178, 432, 436–7 business process redesign 178, 437–45 business process simulation 445 process activity charts 441–3, 442 process mapping 443– 4, 443, 444
service blueprinting 444–5, 444
utilization 139, 140, 144, 145, 156 yield management 153–4
business process simulation 445
capacity cushion 143, 153
business scope redefinition 179
capital-intensive facilities 145
business transformation ICT-enabled 178–9 see also transformation model
capital investment decisions 84, 107, 143–5, 267, 272
CAD see computer-aided design (CAD)
CAPP see computer-aided process planning (CAPP) captive offshoring 217, 217 carbon emissions 497–8
CAE see computer-aided engineering (CAE)
carbon footprint 498
California 77
Carlsberg 102
call centres 24, 91–2, 219–20
cars 3D printing 169–70 airbag safety 224–5, 335–6 assembly lines 184, 190, 235, 236, 307 recalls 41–2, 335–6 see also Japanese manufacturing practices
CAM see computer-aided manufacturing (CAM) systems Canada 19 capabilities, operational 76, 315–16, 315 capacity 136–7 aggregate planning 152–3, 238, 239 capacity management 91, 148–57, 148–9, 239 case studies 135–6, 146–7, 160–2 chase demand strategy 149, 150–2 customer service operations 152, 153–7 definition 137 demand management 149, 152, 239 factors affecting 137–9 forecasting demand 141–2, 212 lead capacity strategy 143–4 level capacity strategy 148–50, 148 master production scheduling 240 measurement 139–40 queuing systems 156–7, 192–4, 193 queuing theory 154–7 rough cut capacity planning 240 scale of increments 146 timing decisions 143–5
cargo bicycles 466–8
Cascade Engineering 62–3 case studies Adidas 474–5 Aston Martin 116–17 Benetton 399–400 BP (British Petroleum) 421–2 capacity 135–6, 146–7, 160–2 Cascade Engineering 62–3 Celine Restaurant 66–9 challenges in operations 490–1, 500–1, 506–7, 509–10 Coca-Cola Hellenic Bottling Company 227–9 Dell 203–4 facilities 109–10, 116–17, 131–3 General Motors 268–9 Gothenburg City Delivery System 466–8 Gulf of Mexico oil spill 421–2 Heineken 102–4 Honda 335–6 Hong Kong accident and emergency (A&E) service 247–8 Hong Kong Disneyland 11–13 Hotel Matina, Greece 31–4
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Toyota 8–9, 41–2, 131–3, 302–3, 308–9 UK Mail 176–7 University Hospital Wales 440–1 UPS (United Parcel Service) 250–1 Walmart 428–9 Whole Foods Market 372–3 see also H&M case study causal analysis 141–2 cause and effect diagrams 446–7, 447 CBM see condition-based maintenance (CBM) Celine Restaurant 66–9
525
collaborative planning, forecasting and replenishment (CPFR) 212–13 collectively based rewards 375–6, 383 collectivism 353, 388, 389 combination mode of knowledge creation 449, 450 commodity goods and services 216 commonality 479–80 communications digital 17–18 service operations 329 virtual teams 381
cellular equipment layout 188, 189, 190–1
competence 329
centralized service facilities 117, 118, 118
competitive advantage core competencies and 215–16 operations strategy and 72, 73, 74–6, 75, 98–9
centre of gravity method 114–15 cerebral team roles 382 Chartered Institute of Public Finance and Accountancy (CIPFA) 56 chase demand strategy 149, 150–2 Chenobyl nuclear plant disaster 401 Cheung Kong Holdings 386 China 6, 14–15, 15, 19, 20, 111 Coca-Cola 93–4 industrial robots 509–10 offshoring to 89, 218 Pret A Manger 95–7 see also Hong Kong Christmas demand 249, 250–1 CIM see computer-integrated manufacturing (CIM) systems City Delivery System, Gothenburg 466–8 click-and-collect purchases 198 climate change 398, 402, 497–8 CNC see computer numerically controlled (CNC) machines Coca-Cola 93–4 Coca-Cola Hellenic Bottling Company 227–9
competition 99, 505
competitive benchmarking 54 competitive imperative 504 competitor performance 52–3 complexity, operations 121 complexity reduction techniques 479–80 components 265–6 computer-aided design (CAD) 167, 477 computer-aided engineering (CAE) 167 computer-aided manufacturing (CAM) systems 168 computer-aided process planning (CAPP) 167 computer-integrated manufacturing (CIM) systems 168 computer numerically controlled (CNC) machines 167 concurrent engineering 477–8 condition-based maintenance (CBM) 412–13 configuration of facilities 110, 124–8 of supply networks 206–9, 207, 208
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subject Index
conflict, in teams 383 conformance 332
transaction 208 transportation 114–15
consumables 7
courtesy 329
continuous improvement 8, 295, 305, 326, 327–8, 339, 379
CPFR see collaborative planning, forecasting and replenishment (CPFR)
continuous performance improvement 432–4, 433, 434
craft workers 364–5
continuous production 184–5, 186, 187, 189 contributor facilities 123, 123, 124 control 235 see also planning and control control charts see statistical process control (SPC) charts control loop model of operations 51, 51 control loops 235–6, 235 core competencies 99, 215–16 corporate operations strategy 81 corporate social responsibility (CSR) 38, 58–60, 59, 60, 61, 498–9 case studies 62–3, 500–1 costs 14, 44 appraisal 337–9, 338, 339 employment 390 external failure 337–9, 338, 339 of holding inventory 267–8, 272 incremental unit cost 503–4 insurance 268, 272 internal failure 337–9, 338, 339 labour 24, 61, 87, 88, 89, 145, 495–6 location decisions and 112, 113 of maintenance 413 performance objective 39, 315, 316, 425 prevention 337–9, 338, 339 of quality 326, 327, 336–9, 338, 339 storage 267–8, 272
credibility 329 criminal activities 402 critical incident technique 405 criticality 216 Crosby, Philip 324, 325 cross-functional teams 380 cultural factors, location and 112 culture definitions 384–5 national 387–9 organizational 385–7 curvilinear regression 141 customer base rationalization 208, 208 customer-based quality measures 340
lean operations 314 in-process checks 404 quality management 328–9 queuing theory 154–7 recovery 417–18 telephone-based 24, 91–2, 219–20 yield management 153–4 customer training 172, 472 customer’s risk 341 cybercrime 398, 402, 497 cycle time 191 cyclical movements in data 141 cyclical review systems 273–4, 274 Daswani, Raja 26–7 DDM see direct digital manufacturing (DDM) dealmaking versus relationships 388–9 decision-making 469–70 decomposition analysis 141 Deepwater Horizon disaster 421–2
customer complaints 404, 405
defective products 304
customer contact 9, 23–4, 24
defects per million opportunities (DPMO) 351–2
customer demand see demand customer failures 402 customer participation 151–2 customer-processing operations 7 customer-processing technologies 170–2, 171
define, measure, analyse, improve and control (DMAIC) methodology 352 degree of automation of technology 175 degree of integration of technology 175
customer requirements 53
delivery times 211, 266
customer satisfaction 39, 40 measures 47, 49, 340
Dell 90, 203–4, 251
customer self-service 152, 171–2, 471–2, 502
demand aggregate planning 152–3, 238, 239 bullwhip effect 209–11, 209 capacity management and 91, 148–57, 148–9, 239 capital investment and 143–5 chase demand strategy 149, 150–2 collaborative planning, forecasting and replenishment (CPFR) 212–13
customer service operations capacity management 152, 153–7 customer participation 151–2 customer-processing technologies 170–2, 171 customer self-service 152, 171–2, 471–2, 502 empowerment of staff 372 inventory analogy 285–6, 314
Delphi studies 142
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Copyrighted material – 9781137525789 subject Index demand management 149, 152, 239 dependent demand inventory 270, 278–85, 279 forecasting 141–2, 212 independent demand inventory 270–4, 271, 273, 274 level capacity strategy 148–50, 148 queuing theory 154–7 yield management 153–4 see also planning and control demand-pull control 254–5, 255 demander-located services 24, 25 Deming Application Prize 323, 349 Deming, W. Edwards 323, 327–8 demographic trends 496–7
implementation problems 431 Internet of things 173 new product development and 477 online trading 18, 173, 197–9, 197, 491, 502 performance improvement and 430–2, 459 performance measurement and 504 planning and control 255 radical change and 430–2 radio frequency identification devices (RFIDs) 173, 284–5 remote delivery of services 93, 117 risk of disruption 398 staff resistance to 431, 432 virtual teams 381 Dillon, Mary 484
dependability 40, 315, 316, 332, 425 dependent demand inventory 270, 278–85, 279 design and build policy 252, 253
direct digital manufacturing (DDM) 168–70 direct exporting 92–3 disaster investigation 405
design capacity 139
disaster recovery planning 415
design for manufacturing (DFM) 312, 478
discontinuities 397–8, 497 discrimination 499
design of experiments (DOE) 479
diseconomies of scale 119, 146
designing technologies 167
Disneyland, Hong Kong 11–13
disintermediation 18
destructive testing 340
dispatch rules 240–2
deterioration and damage of inventory 268, 272
disruptive innovation 475–6 diversity, workforce 384, 393–5
development-oriented organizations 481–2
division of labour 365 DMAIC (define, measure, analyse, improve and control) methodology 352
DFM see design for manufacturing (DFM) Digital Strategy Consulting 16 digital technologies 16, 17–18, 20, 24–5, 172–3, 237, 501–5 business transformation and 178–9 customer selfservice 171–2, 502 e-business 173, 211 e-commerce 18, 173, 197–9, 197, 491, 502 electronic point of sale (EPOS) 212, 284–5
documentation business processes 437–8 explicit knowledge 449 quality manuals 325, 345 specifications 331–2 DOE see design of experiments (DOE) Dow Jones Sustainability Index 60 DPMO see defects per million opportunities (DPMO)
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driverless vehicles 168 ‘drum, buffer, rope’ 256 e-business 173, 211 e-commerce 18, 173, 197–9, 197, 491, 502 earliest due date rule 241, 242 earliest planned start time rule 241 ease of access, service operations 329 eBay 173 eclectic internationalization theory 21–2 econometrics 141 economic context 20–1 economic factors, location and 112 economic growth 17, 19, 20 economic order quantity (EOQ) 270–2, 271 economic risk mitigation 414 economies of scale 16, 25, 90, 119, 121, 146 economies of scope 90, 92, 120, 121 economy measures 44 ECR (efficient consumer response) 314 EDI see electronic data interchange (EDI) ediTRACK software 261–2 effective capacity 139 effectiveness 39 of operations strategy 74–5 of teamworking 381–4 effectiveness measures 47–8, 49 efficiency 14, 39, 48–9, 346 efficiency measures 45–7, 139 Egypt 15 electronic data interchange (EDI) 18 electronic point of sale (EPOS) technology 212, 284–5 emergent strategies 77 employee representatives 59, 391
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subject Index
employees see staff
external benchmarking 54–6
employment costs 390
external failure costs 337– 9, 338, 339
employment legislation 150, 151, 390–1 empowerment of staff 295, 305–7, 313, 372, 379 energy efficiency 498 enterprise resource planning (ERP) 255, 284–5, 284 environmental performance 58, 59–60, 60, 61 environmentalism 497–8 EOQ see economic order quantity (EOQ)
external failures 401–2 external standards 52–3, 439 externalization mode of knowledge creation 449, 450 extreme weather events 398, 402, 497 face-to-face services 24, 25, 91
European Union 19, 390, 496
facilities 7, 110 capital-intensive 145 case studies 109–10, 116–17, 131–3 centre of gravity method 114–15 configuration 110, 124–8 contributor 123, 123, 124 focused operations 90, 120–1 global coordinated operations 126–8 home operations 125–6 international operations strategy 94–5 labour-intensive 145 lead 123, 123, 124 location decisions 110–15, 112, 117–18, 118, 481–2, 495–6 multidomestic operations 126 outpost 123, 123 planning and control 237 regional operations 126 scale and scope 110, 119–21 server 122, 123 services 117–18, 118 source 122, 123 strategic role 121–4, 122–3 weighted scoring method 113–14, 115 see also capacity
exit interviews 404
fail-safing 411
expatriate workers 374–5
failure mode and effects analysis (FMEA) 326, 405, 406
EPOS (electronic point of sale) technology 212, 284–5 EQA see European Quality Award (EQA) equality 499 equipment layout design 187–91, 188, 189, 311–12 in lean operations 311–12 maintenance of 411–14 planning and control 237, 244 see also process technology equipment schedules 244 ergonomics 368–9 Ericson 125 ERP see enterprise resource planning (ERP) errors 401 espoused values 385 ethical issues 61 see also corporate social responsibility (CSR) European Nutrition Task Force (ENTF) 487 European Quality Award (EQA) 349
expediting 238, 246–7 explicit knowledge 448, 449, 450 exponential smoothing techniques 141
failure plans 409 failures 497 analysis techniques 405, 406, 409–10, 410
assessment 402–3, 403 business continuity planning 415 detection 403–4 failure rate 408 learning from 409–10, 410 measures 407–9 mitigation actions 414–15 patterns 407, 407 recovery 396–7, 414–18 resilience 396–7, 410–14 types of 400–2 fault tree analysis 405, 406 feedback, in job design 370, 370, 371 Feigenbaum, Armand 323 femininity 388, 389 financial crisis (2008) 20 financial hedging instruments 414 financial measures of quality 336–9, 338, 339 finished goods inventory 266, 267, 279, 302 first come, first served rule 241 fish bone diagrams 446–7, 447 five Ss of good housekeeping 312 fixed position equipment layout 188–9, 188, 189 flexibility as performance objective 40, 315, 316, 426 of team members 382 flexible manufacturing systems (FMSs) 168 flexible specialization 90 flow charts 443–4, 443, 444 fluid phase of technological innovation 472, 473 FMEA see failure mode and effects analysis (FMEA) FMSs see flexible manufacturing systems (FMSs) focused operations 90, 120–1 Food Group Australia (FGA) 487 Ford Motor Company 213 forecasting demand 141–2, 212
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Copyrighted material – 9781137525789 subject Index foreign markets see internationalization
grades of service 154
formal social interactions 389
green belts (Six Sigma) 353
Disneyland 11–13 Li & Fung 206 Pret A Manger 97 Raja Fashions 26–7
Greece 31–4
forming technologies 167
greenhouse gas emissions 497–8
Formula One 440–1 forward loading 243–4 fossil fuels 497, 498 France 198 free trade agreements 19–20 Fresh & Easy 78–9 front office services 10–11, 11, 16, 24, 24, 92, 219–20 FTSE4Good Index 60
GRI see Global Reporting Initiative (GRI)
hospitals 90, 139 case studies 247–8, 376–7, 440–1
gross domestic product (GDP) 15, 15
Hotel Matina, Greece 31–4 house of quality 478
group equipment layout 188, 189, 190–1
HP Global Business Services 416–17
group working see teamworking
human failures 401
groupthink 383
human resource management see people management
growth needs strength 371
functional-level strategy 14, 74, 74
Gulf of Mexico oil spill 421–2
functional structure 435, 435 Gantt charts 244 gates 469–70 GDP (gross domestic product) 15, 15 General Electric 168 General Motors 268–9, 295 genetic engineering 499 Germany 15, 353, 390 Global Business Excellence programme (GLOBE) 291–2 global configuration 124 global coordinated operations 126–8 global population changes 496–7 global process networks 218 Global Reporting Initiative (GRI) 59–60 global sourcing 98, 217–20, 266
529
H&M case study 3–4 capacity 135–6 challenges in operations 490–1 facilities 109–10 innovation 457–8 inventory management 264–5 lean operations 293–4 operations performance 36–7 operations strategy 70–1 people management 362–3 performance improvement 424–5 planning and control 233–4 process technology 164–5 quality management 321–2 risk, resilience and recovery 396–7 supply networks 201–2
human resources see staff Humler, Herve 359 ICT see information and communication technology (ICT) idea generation 459, 465–6, 465, 468 idea selection 459, 468–9 immigrant workers 496–7 IMV project, Toyota 131–3 in-house offshoring 217, 217 in-process checks 403–4 inadequacies 401 incident reporting 404 incremental improvement 432–4, 433, 434 incremental products 464 incremental unit cost 503–4 independent demand inventory 270–4, 271, 273, 274 India 6, 15, 19 Ayodhya crisis 416–17 call centres 24, 92 McDonald’s 91 offshoring to 24, 88, 89, 92, 218, 495–6
global warming 398, 402, 497–8
hardware of operations 83–4
globalization 17–21, 22–3, 99 see also internationalization
hearing aids 85–6 hedging 414
GMB Union 376–7
Heineken 102–4
good design 460
heterogeneous workforce 384
goods-services continuum 10, 10
home operations 125–6
Gothenburg, Sweden 466–8
Honda 77, 335–6
Industrial Revolution 364–5
Hong Kong accident and emergency (A&E) service 247–8
informal social interactions 389
government 59 location decisions and 112 role culture 386
Homeplus 198–9
individualism 388, 389 Indonesia 15, 19 industrial robots 167, 168, 509–10
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subject Index
information and communication technology (ICT) 16, 17–18, 20, 24–5, 172–3, 237, 501–5 business transformation and 178–9 customer selfservice 171–2, 502 e-business 173, 211 e-commerce 18, 173, 197–9, 197, 491, 502 electronic point of sale (EPOS) 212, 284–5 implementation problems 431 Internet of things 173 new product development and 477 online trading 18, 173, 197–9, 197, 491, 502 performance improvement and 430–2, 459 performance measurement and 504 planning and control 255 radical change and 430–2 radio frequency identification devices (RFIDs) 173, 284–5 remote delivery of services 93, 117 risk of disruption 398 staff resistance to 431, 432 virtual teams 381 information, as resource 237 information-processing operations 7 information-processing technologies 172–3 infrastructural decisions 84, 231 see also innovation; inventory management; lean operations; people management; performance improvement; planning and control; quality management; risk infrastructure, location decisions and 112 innovation 458–60 case studies 457–8, 461–2, 466–8, 474–5, 484–7 disruptive innovation 475–6
as performance objective 40 process innovation 459, 460, 471–4, 472 sustaining innovation 476 technological 459, 472–7, 472 see also new product development (NPD) input-output transformation model see transformation model input resources 6–7, 6, 88, 89 insurance 414 insurance costs 268, 272 integrating technologies 168–9 Intel 124 intellectual property 215 intermediaries 18, 203 disintermediation 18 re-intermediation 18 supported customertechnology interaction 172 internal benchmarking 54 internal failure costs 337–9, 338, 339 internal failures 400–1 internal integration of ICT systems 178 internal standards 51–2, 439 internalization mode of knowledge creation 449, 450 international agencies 19 International Air Transport Association 506 international configuration 125 International Labour Organization 400 International Monetary Fund (IMF) 19 international networks of facilities 126–8 international operations strategy 72, 86–100 case studies 95–7, 102–4 competitive advantage and 98–9 direct exporting 92–3 foreign market entry modes 92–5
foreign production facilities 94–5 joint ventures 93–4 market access strategy 86–7 market-led perspective 86, 97–8 operations-led perspective 87, 98, 99 resource-seeking strategy 86, 87–8 sales subsidiaries 94 International Organization for Standardization (ISO) 345 international trade 17–21 internationalization 492–5 benefits 28–9 challenges 27–8 eclectic theory 21–2 of new product development (NPD) 480–2 of operations 5–6 product cycle theory 21 of R&D 480–2 of services 16, 23–5, 91 stage theories 22–3 of supply networks 14 transformation model and 88–92, 88 see also international operations strategy Internet 16, 17–18, 24–5, 172–3, 237, 502 business scope redefinition 179 customer selfservice 171–2, 502 e-business 173, 211 e-commerce 18, 173, 197–9, 197, 491, 502 new product development and 477 online trading 18, 173, 197–9, 197, 491, 502 planning and control 255 remote delivery of services 93, 117 risk of disruption 398 virtual teams 381 Internet of things 173 intra-organizational processes 438
Copyrighted material – 9781137525789
Copyrighted material – 9781137525789 subject Index inventory management 265 ABC analysis 275–8, 276 case studies 264–5, 268–9, 274–5, 290–2 costs of holding inventory 267–8, 272 cyclical review systems 273–4, 274 dependent demand inventory 270, 278–85, 279 economic order quantity (EOQ) 270–2, 271 enterprise resource planning (ERP) 255, 284–5, 284 independent demand inventory 270–4, 271, 273, 274 lean operations and 268, 296–7, 296, 301–2, 304 materials requirement planning (MRP) 255, 278–84, 279 order point systems 272–4, 273, 274, 279 order quantity decisions 270–2, 271 order timing decisions 270, 272–4, 273, 274 queuing analogy 285–6, 314 reasons for holding inventory 266–7 reorder level systems 273, 273 types of inventory 265–6 inventory replenishment 212 Ishikawa diagrams 446–7, 447 Ishikawa, Kaoru 324 ISO 9000 series quality management system 345–8, 348
quality circles 307, 379–80 rugby scrum approach 477–8 Theory Z 306–7 total quality management (TQM) 49, 76, 81, 295, 305, 312, 324, 325, 326–8, 348, 348, 354, 379 Toyota Production System (TPS) 8, 41, 294, 295, 304, 305, 307, 308–9, 379 see also lean operations Jeary, David 275 jidoka 8 JIT see just in time (JIT) system job design 364–72, 370 activity sampling 368 behaviouralism 364, 369–72, 370 ergonomics 368–9 method study 366–7 predetermined motion time systems (PMTS) 368 scientific management 364–9 time study 367–8 work study 366–8 Job Diagnostic Survey 370 job enlargement 371 job enrichment 371 job order schedules 244 job rotation 371 job specialization 191, 365–6 jobbing processes 184, 185, 186, 187, 189 John Lewis Partnership 199 joint business planning 212 joint ventures 93–4 Juran, Joseph 323
ISO 14000 standard 60
just in time (JIT) system 76, 81, 249, 254, 294, 327
Jaguar 318–20
kaizen 8, 305, 326, 379
Japan 15, 353, 388, 496 Japanese manufacturing practices 8, 28–9, 48, 81, 294–5, 323, 354, 379, 384, 433 just in time (JIT) system 76, 81, 249, 254, 294, 327 kaizen 8, 305, 326, 379
kanban system 254, 299–301, 300 Keller, Fred 62–3 Kit Kat voucher reward 376–7 knowledge management 448–50, 450 Kodak 461–2
531
labour characteristics 112 labour costs 24, 61, 87, 88, 89, 145, 495–6 labour-intensive facilities 145 labour legislation 150, 151, 390–1 labour productivity 48 language difficulties, offshoring 219–20 laying off staff 151, 437 LDCs see less developed countries (LDCs) lead capacity strategy 143–4 lead facilities 123, 123, 124 leadership, team effectiveness and 382–3 lean operations 8, 28–9, 41, 83, 294–5 advantages 316 as best practice model 315–16, 315 case studies 293–4, 302–3, 308–9, 318–20 continuous improvement 8, 295, 305 disadvantages 316 employee involvement and empowerment 295, 305–7, 313 equipment and layout 311–12 five Ss of good housekeeping 312 inventory and 268, 296–7, 296, 301–2, 304 kanban system 254, 299–301, 300 line balancing 297–9 planning and control 297–302, 300 principles 295–307 product design 312 services 314 set-up times 310–11 simplicity 311–12 single minute exchange of dies (SMED) 310–11 smooth flow 309–10 standardized procedures 311 suppliers 312–13
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532
subject Index
lean operations (continued) synchronization 295, 296–302, 296 techniques and practices 309–14 Theory Z 306–7 total productive maintenance (TPM) 313–14 waste elimination 8, 295, 304–5
London Stock Exchange 60
market-qualifying criteria 82
London Underground 160–2
market requirements 53
long-term-oriented societies 388
market surveys 142
longest processing time rule 240 loss reduction 415
marketing ISO 9000 series and 346 requirements 121
lot tolerance percentage of defectives (LTPD) 341
Marks & Spencer 78, 260–3
learning curve effects 138
low-cost labour 24, 61, 87, 88, 89, 145, 495–6
masculinity 353, 388
learning, organizational 54, 76, 447–50, 450
Luxottica 85
Lufthansa 506
learning organizations 307 legal frameworks, location decisions and 112 less developed countries (LDCs) 17, 21, 89 level capacity strategy 148–50, 148 Li & Fung 206 Li Ka Shing 386 Lidl 146 line balancing 297–9 linear regression 141 Linpac 454–5 Little’s Law 191 loading 243–4 local community 59 Local Motors 169–70 localized exploitation of ICT systems 178 localized service facilities 117–18, 118 location centre of gravity method 114–15 competitive advantage and 98 facilities 110–15, 112, 117–18, 118, 481–2, 495–6 operations performance and 61 R&D units 481–2 service operations 24, 25, 117–18, 118 weighted scoring method 113–14, 115 see also offshoring London Olympic Games 160–1
McDonald’s 91, 96, 330, 484–7 machine-diagnostic checks 404 Machine That Changed the World, The 294–5 Macintosh computer 504 Maersk 169 maintenance condition-based maintenance (CBM) 412–13 preventative maintenance 412–13, 414 resilience and 411–14 run to breakdown (RTB) 412–13 total productive maintenance (TPM) 313–14, 413–14 maintenance, repair and operating (MRO) inventory 266, 267, 279 Malaysia 15, 495 Malcolm Baldrige National Quality Award (MBNQA) 349, 353, 357 malicious actions 398, 402, 497 management policies, capacity and 138 manufacturing lead times 211 manufacturing resources planning (MRP2) 283–4, 283 market access strategy 86–7 market focus 120–1 market-led perspective of strategy 82, 86, 97–8 market-pull approach to innovation 465–6, 465
Marriott International 393–5 mass customization 16, 90, 479–80 mass production 184, 185, 186, 187, 189 mass services 185, 186, 187, 189 master black belts (Six Sigma) 353 master production schedules (MPS) 238, 240, 278–9 material-processing operations 7 material-processing technologies 167–9 material schedules 244 materials planning and control 237, 244 see also inventory management materials requirement planning (MRP) 255, 278–84, 279 MBNQA see Malcolm Baldrige National Quality Award (MBNQA) mean time between failures (MTBF) 408 mean time taken to repair (MTTR) 408 measurement of capacity 139–40 control and 236 of failure 407–9 quality 336–40, 338, 339 work 367–8, 375 see also performance measurement MESA 349–51 method study 366–7 Mexico 6, 19, 496 migrant workers 496–7
Copyrighted material – 9781137525789
Copyrighted material – 9781137525789 subject Index minimum slack time rule 241
mura 304
minimum wage legislation 390
Murdoch, Rupert 386
MINT countries (Mexico, Indonesia, Nigeria, Turkey) 19
muri 304 Myanmar 102–4, 495
mission statements 73
NASA 169, 386
mitigation, risk 414–15
national culture 387–9
MNEs see multinational enterprises (MNEs)
natural disasters 402, 415 nearshoring 220
mobile devices 173
Nestlé 125, 290–2
modularity 479–80
network perspective 127–8
Moore’s Law 510 Morrisons 146 motivating potential score (MPS) 370 motivation job design and 369–72, 370 reward and remuneration 374–7, 378, 383, 390, 391 motorbikes 77 Motorola 351 moving average calculations 141 moving technologies 168 MPS see master production schedules (MPS); motivating potential score (MPS) MRO see maintenance, repair and operating (MRO) inventory MRP see materials requirement planning (MRP) MRP2 see manufacturing resources planning (MRP2) MTBF see mean time between failures (MTBF) MTTR see mean time taken to repair (MTTR) muda 8, 304 multi-factor productivity 45 multi-skilled workers 90, 151 multidomestic operations 126 multifunctional teams 477–8 multinational configuration 124–5 multinational enterprises (MNEs) 17, 20–1 multiple regression 141 multiple sourcing 223–4
new product development (NPD) 458, 459, 460–3, 505 breakthrough products 464–5 case studies 461–2, 466–8, 484–7 commonality approach 479–80 complexity reduction techniques 479–80 design for manufacturing (DFM) 312, 478 disruptive innovation 475–6 final design 469 idea generation 459, 465–6, 465, 468 idea selection 459, 468–9 incremental products 464 internationalization 480–2 market-pull approach 465–6, 465 modularity approach 479–80 next-generation products 464 preliminary design 469 process 468–71, 470, 477 prototypes 469, 477 quality function deployment (QFD) 326, 478–9 rugby scrum approach 477–8 standardization 479–80 Taguchi methods 479 technological innovation and 472–7, 472 technology-push approach 466 testing 469 time to market 463, 480 value engineering and value analysis (VE/VA) 480 virtual prototyping 477
533
new service development 471–2 New York Stock Exchange 60 newly industrialized economies (NIEs) 6, 19, 20, 89 News Corporation 386 Next 274–5 next-generation products 464 Nigeria 15, 19 Nike 500–1 North American Free Trade Agreement (NAFTA) 19 ‘not invented here’ syndrome 432 novelty goods and services 216 NPD see new product development (NPD) objectives business 73 performance 38–40, 315, 316, 425, 426, 505 obsolescence, inventory 268, 272 Ocado 198 offshore facilities 122, 123 offshoring 14, 61, 89, 217–20, 495–6 back-shoring 220 benefits 218 call centres 24, 92, 219–20 challenges 218–19 nearshoring 220 service operations 24, 88, 92, 219–20 typology of 217, 217 Ohno, Taiichi 304 oil spill, Gulf of Mexico 421–2 Omni-Channel Retailing 197–9, 197 online-only businesses 502 online trading 18, 173, 197–9, 197, 491, 502 operational capabilities 76, 315–16, 315 operational risk mitigation 414 operations-based approach to quality 330–1 operations complexity 121
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534
subject Index
operations facilities see facilities operations functions 4–5 operations improvement see performance improvement operations-led perspective of strategy 82–3, 87, 98, 99 operations management changing nature of 13–16 definitions and concepts 4–6 operations measures 336 operations performance 37–8 benchmarking 54–7, 334, 439 case studies 36–7, 41–2, 56–7, 62–3, 66–9 corporate social responsibility (CSR) 38, 58–60, 59, 60, 61 environmental performance 58, 59–60, 60, 61 lean as best practice model 315–16, 315 location and 61 objectives 38–40, 315, 316, 425, 426, 505 performance gap 425–6 sandcone model of operations excellence 315–16, 315 social performance 58–9, 59, 61 standards 51–3, 51, 60, 439 trade-offs 40, 61, 315 see also performance improvement; performance measurement operations strategy 72, 77 bottom-up perspective 81–2 case studies 70–1, 78–9, 85–6, 95–7, 102–4 competitive advantage and 72, 73, 74–6, 75, 98–9 content 79, 83–4 direct exporting 92–3 effectiveness 74–5 emergent strategies 77 foreign market entry modes 92–5 foreign production facilities 94–5 infrastructural decisions 84 international 72, 86–100 joint ventures 93–4
market access strategy 86–7 market-led perspective 82, 86, 97–8 nature of strategy 72–4, 74 operations-led perspective 82–3, 87, 98, 99 process 79, 80–3, 80 resource-seeking strategy 86, 87–8 sales subsidiaries 94 strategic role of operations model 75–6, 75 structural decisions 83–4, 107 top-down perspective 80–1 unrealized strategies 77
overbooking 153 overproduction 304 overtime working 150 packaging 454–5 Pareto diagrams 446, 446 Pareto rule 275–8, 276, 446 part-time staff 151 partnership agreements 212–13 partnership supply relationships 221, 222, 223–4, 312 passive customer-technology interaction 170–1, 171 path dependency 76
operations, types of 7–11
pay 374–6, 378, 383, 390, 391
optimized production technology (OPT) 256–7
P:D ratios 252, 253
order point systems 272–4, 273, 274, 279 order quantity decisions 270–2, 271 order timing decisions 270, 272–4, 273, 274 order-winning criteria 82 organizational behaviour theories 305–7 organizational culture 385–7 organizational failures 401 organizational knowledge 448–50, 450 organizational learning 54, 76, 447–50, 450 organizational-level strategy 73, 74 organized labour groups 59, 391 outpost facilities 123, 123 output-based payment schemes 375 outsourced offshoring 217, 217 outsourcing 24, 61, 502 advantages 214 business process outsourcing (BPO) 76, 89 call centres 24, 92 decision-making 213–16 disadvantages 215 typology 217, 217
PDCA see plan-do-actcheck (PDCA) cycle people 7, 236–7, 244 see also staff people management 236–7, 363–4 activity sampling 368 autonomous work groups 307, 372, 380–1 behaviouralism 364, 369–72, 370, 376 case studies 362–3, 372–3, 376–7, 393–5 cultural context 384–9 employment costs 390 employment legislation 150, 151, 390–1 empowerment of staff 295, 305–7, 313, 372, 379 ergonomics 368–9 job design 364–72, 370 job enlargement 371 job enrichment 371 job rotation 371 in lean operations 295, 305–7, 313 method study 366–7 organized labour groups 59, 391 pay 374–6, 378, 383, 390, 391 performance management 377–8, 383
Copyrighted material – 9781137525789
Copyrighted material – 9781137525789 subject Index performance-related pay 375–6, 378 predetermined motion time systems (PMTS) 368 reward and remuneration 374–7, 378, 383, 390, 391 scientific management 364–9, 375 staffing failures 401, 428–9 time study 367–8 work study 366–8 workforce diversity 384, 393–5 workforce scheduling 244–6 workforce skills 390 see also teamworking
process activity charts 441–3, 442 process mapping 443–4, 443, 444 process perspective 435–7, 435 radical change 430–2, 430, 433–4, 434 scale and scope of required improvement 426–7 scatter diagrams 445–6, 445 service blueprinting 444–5, 444 technological innovation and 459, 475–6 why-why analysis 447
people-oriented team roles 382 perceived approach to quality 330–1 performance appraisal 378 performance gap 425–6 performance-importance matrix 427, 428, 439 performance improvement 425 business process reengineering (BPR) 178, 432, 436–7 business process redesign 178, 437–45, 442, 443, 444 business process simulation 445 case studies 424–5, 428–9, 440–1, 454–5 cause and effect diagrams 446–7, 447 continuous 432–4, 433, 434 digital technologies and 430–2, 505 disruptive innovation 475–6 innovation and 459 knowledge management and 448–50, 450 new technology 430–2 new working methods 432 organizational learning and 447–50, 450 Pareto diagrams 446, 446 performance gap 425–6 priority setting 427, 428
performance management, employee 377–8, 383 performance measurement 38, 42–3, 213, 426 balanced scorecard (BSC) 49–50, 50 benchmarking 54–7, 334, 439 case study 66–9 developments in 48–9 digital technologies and 503–4 economy measures 44 effectiveness measures 47–8, 49 efficiency measures 45–7 environmental performance 58, 59–60 incremental unit cost 503–4 productivity measures 45–7, 46 scientific management 48 social performance 58–9 systems 49–50 three Es of 44–8, 44 performance objectives 38–40, 315, 316, 425, 426, 505 performance, operations see operations performance performance-related pay 375–6, 378 performance standards 51–3, 51, 60, 439 performance, team 381–4 peripatetic services 24, 25 person culture 386
535
personality characteristics, of team members 382 Philippines 495 piecework 375 plan-discover-act-learn model 409–10, 410 plan-do-act-check (PDCA) cycle 327–8 planning and control 234–5 activities 238–47, 238 activity scheduling 238, 240–6 aggregate planning 238, 239 case studies 233–4, 247–8, 250–1, 260–3 computer-based 255 control loops 235–6, 235 demand-pull philosophy 254–5, 255 design and build policy 252, 253 enterprise resource planning (ERP) 255, 284–5, 284 expediting 238, 246–7 kanban system 254, 299–301, 300 lean operations 297–302, 300 line balancing 297–9 loading 243–4 manufacturing resources planning (MRP2) 283–4, 283 master production schedules (MPS) 238, 240, 278–9 materials requirement planning (MRP) 255, 278–84, 279 optimized production technology (OPT) 256–7 P:D ratios 252, 253 principles 235–7 produce to order policy 249–52, 253 produce to stock policy 249, 252, 253 resource to order policy 252, 253 routing 242 sequencing 240–2 strategic operations planning 238–9, 238 supply-push philosophy 253–4, 254, 255
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subject Index
‘plants within a plant’ concept 90
process focus 121
platform products 464
process innovation 459, 460, 471–4, 472
PMTS see predetermined motion time systems (PMTS) poka-yoke 307, 411 political context 18–20 political factors, location and 112 population changes 496–7 postponement 249–51 power culture 386 power distance 353, 387, 389 practice benchmarking 54–6 predetermined motion time systems (PMTS) 368 Pret A Manger 78, 95–7 preventative maintenance 412–13, 414 prevention costs 337–9, 338, 339 price and quality 332 price discounting 152, 153, 211 price premiums 463 primary inputs 6 priority setting 427, 428 prisoner’s dilemma 221–2 proactive international sourcing 217 problem-solving teams 307, 379–80 process activity charts 441–3, 442 process batch sizes 257 process culture 387 process design cycle time 191 equipment layouts 187– 91, 188, 189 process types 183–7, 186, 187 queuing systems 192–4, 193 resilience and 410 throughput time 191 work in progress 191 process equipment layout 188, 189–90, 189 process flow charts 443–4, 443, 444
process mapping 443–4, 443, 444 process networks 218 process perspective of performance improvement 435–7, 435 process technology 166 adoption strategies 179– 80, 463 appropriateness of 182, 183 capacity and 137 case studies 164–5, 169–70, 176–7, 509–10 choice decisions 174–6 customer-processing technologies 170–2, 171 degree of automation 175 degree of integration 176 designing technologies 167 failures 401 forming technologies 167 ICT-enabled business transformation 178–9 implementation problems 431 industrial robots 509–10 information-processing technologies 172–3 integrating technologies 168–9 material-processing technologies 167–9 moving technologies 168 optimized production technology (OPT) 256–7 performance improvement and 430–2, 459 radical change and 430–2 robustness of 181, 182 scale of 174–5 staff resistance to 431, 432 technology transfer 180– 2, 182, 183 transferability of 181, 182, 183 process types 183–7, 186, 187 processes
team effectiveness and 383–4 waste in 304 Proctor & Gamble 82, 125, 213 produce to order policy 249–52, 253 produce to stock policy 249, 252, 253 product-based approach to quality 330–1 product cycle theory 21 product design final design 469 in lean operations 312 preliminary design 469 prototypes 469, 477 see also new product development (NPD) product development see new product development (NPD) product equipment layout 188, 189, 190 product focus 121 product innovation see new product development (NPD) product recalls 41–2, 173, 285, 335–6 product/service design failures 400–1 product testing 469 product traceability 285, 405 production teams 380 productivity measures 45–7, 46 professional services 185, 186, 187, 189 profit-sharing 376 project champions 353 project sponsors 353 project teams 380 projects 183, 185, 186, 187, 189 promotional campaigns 152, 211 proprietary goods and services 216 prototypes 469, 477 provider-located services 24, 25 proximity to market 86–7, 110–11, 112, 122
Copyrighted material – 9781137525789
Copyrighted material – 9781137525789 subject Index statistical quality control 326, 340–4, 351
psychology of queuing 192–4 pull control 254–5, 255 purchasing 204 decisions 44 relationships 221–3, 222 see also supply networks push control 253–4, 254, 255
relay race approach 477
quality manuals 325, 345
remote delivery of services 93, 117
quantitative methods, forecasting 141–2
QFD see quality function deployment (QFD)
queuing inventory analogy 285, 314 lean operations 314 psychology of 192–4 systems 156–7, 192–4, 193 theory 154–7
QLF see quality loss function (QLF) QMS see quality management systems (QMS) QR (quick response) 314 qualitative methods, forecasting 142
R&D internationalization 480–2 see also innovation; new product development (NPD)
quality 44, 315, 316 case study 41–2 definitions 329–33 efficiency and 48–9 as performance objective 39, 425
radical change 430–2, 430, 433–4, 434 radical redesign 436–7
quality assurance 324, 325, 326 quality awards 349
radio frequency identification devices (RFIDs) 173, 284–5 Raja Fashions 26–7
quality circles 307, 379–80 quality control 324, 325–6, 325 statistical 326, 340–4, 351 quality function deployment (QFD) 326, 478–9
Rana Plaza disaster, Bangladesh 399–400 random movements in data 141 rationalization, of supply networks 206–9, 207, 208
quality inspection 324–5, 325 quality loss function (QLF) 479 quality management 322–3 acceptance sampling 325, 326, 340–1 case studies 321–2, 335–6, 349–51, 357–60 costs of quality 326, 327, 336–9, 338, 339 defining quality 329–33 evolution of ideas 323–9, 325 global differences 353–4 ISO 9000 series 345–8, 348 quality awards 349 quality gaps model 333–4 quality measures 336–40, 338, 339 services 328–9 Six Sigma 351–3
relationships versus dealmaking 388–9
quality management systems (QMS) 326, 345–8, 348 quality of life, location decisions and 112
raw materials inventory 265–6, 267, 279, 301–2 RBV see resource-based view (RBV) of strategy re-intermediation 18 reactive international sourcing 217 recalls, product 41–2, 173, 285, 335–6 recovery 396–7, 414–18 recruitment 151 redundancy 410–11 regional operations 126 regression techniques 141 regulators 59 regulatory frameworks, location decisions and 112
537
reliability 329, 332, 408
remuneration and reward 374– 7, 378, 383, 390, 391 renewable energies 498 reorder level systems 273, 273 repetitive strain injury (RSI) 366 replanning 239 reporting incident 404 sustainability 59–60 research-oriented organizations 481–2 reshoring 220 resilience 396–7, 410–14 resource-based view (RBV) of strategy 82–3 resource constraints 137 resource inputs 6–7, 6, 88, 89 resource-seeking strategy 86, 87–8 resource to order policy 252, 253 responsiveness 329 reward and remuneration 374– 7, 378, 383, 390, 391 RFIDs (radio frequency identification devices) 173, 284–5 risk 397–8, 399, 497 assessment 402–3, 403 business continuity planning 415 case studies 396–7, 399–400, 416–17, 421–2 customer’s 341 disaster recovery planning 415 failure analysis techniques 405, 406, 409–10, 410 failure detection 403–4 failure measurement 407–9 failure patterns 407, 407 failure rate 408
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subject Index
risk (continued) learning from failures 409–10, 410 mitigation 414–15 recovery 396–7, 414–18 resilience 396–7, 410–14 supplier’s 341 types of 400–2 risk priority numbers (RPNs) 405, 406 Ritz-Carlton hotel 357–60 robots, industrial 167, 168, 509–10 robustness of technology 181, 182 role culture 386 rough cut capacity planning 240 routing 242 RPNs see risk priority numbers (RPNs) RSI see repetitive strain injury (RSI) RTB see run to breakdown (RTB) rugby scrum approach 477–8 run to breakdown (RTB) 412–13 Russia 19, 496 Ryanair 330 S&OP see sales and operations planning (S&OP) sabotage 398 Sainsbury’s 146 St Athan, Wales 116–17 sales and operations planning (S&OP) 239 sales subsidiaries 94 sampling acceptance 325, 326, 340–1 activity 368 sandcone model of operations excellence 315–16, 315 Sara Lee 213 Saunders, Neil 260 scale of capacity increments 146 diseconomies of 119, 146 economies of 16, 25, 90, 119, 121, 146 of facilities 110, 119–21
of performance improvements 426–7 of process technology 174–5 scatter diagrams 445–6, 445 scenario planning 142 scheduling activity 238, 240–6 master production 238, 240, 278–9 workforce 244–6 Schlee, Clive 95–7 scientific management 48, 305–7, 364–9, 375 scope economies of 90, 92, 120, 121 of facilities 110, 119–21 of performance improvements 426–7 SCOR model (supply chain operations reference model) 213, 438 Sears 77 seasonal movements in data 141 SECI model 449, 450 security 329 self-confidence of teams 383 self-managed work teams 307, 372, 380–1, 389 self-service 152, 171–2, 471–2, 502 separated services 24–5, 24
mass 185, 186, 187, 189 new service development 471–2 offshoring 24, 88, 92, 219–20 peripatetic 24, 25 process types 185–7, 186, 187 professional 185, 186, 187, 189 provider-located 24, 25 quality management 328–9 recovery 417–18 remote delivery 93, 117 separated 24–5, 24 service shops 185, 186, 187, 189 see also customer service operations servitization 16 SERVQUAL 334, 340 set-up times 310–11 Shanghai, China 95–7 Shell 213 short-term-oriented societies 388 short-time working 150 shortest processing time rule 240, 242 simplicity, in lean operations 311–12 simultaneous engineering 477–8 single factor productivity 45
sequencing 240–2
single minute exchange of dies (SMED) 310–11
server facilities 122, 123
single sourcing 223, 224
service blueprinting 444–5, 444
Six Sigma 351–3
service shops 185, 186, 187, 189
skill variety, in job design 370, 370, 371
services 9–11, 10, 11, 14–16 customer self-service 152, 171–2, 471–2, 502 demander-located 24, 25 empowerment of staff 372 internationalization 16, 23–5, 91 ISO 9000 series and 347 lean operations 314 location decisions 24, 25, 117–18, 118
skills team members 382 workforce 390 slack time 241 smart technologies 173 SMED see single minute exchange of dies (SMED) smooth flow 309–10 social factors, location and 112 social performance 58–9, 59, 61
Copyrighted material – 9781137525789
Copyrighted material – 9781137525789 subject Index social responsibility 38, 58–60, 59, 60, 61, 498–9 case studies 62–3, 500–1 socialization mode of knowledge creation 449, 450 sociocultural context 20 software of operations 84 Sonova 85–6 source facilities 122, 123 South Africa 15, 19 Southwest Airlines 55, 56–7 spatial containment 414 SPC charts see statistical process control (SPC) charts specialization 90, 91–2, 126, 191, 365–6
social responsibility and 499, 500–1 staffing failures 401, 428–9 as stakeholders 59 temporary 151 transfers 354 turnover 365, 370, 378 whistle-blowing systems 404 workforce diversity 384, 393–5 workforce scheduling 244–6 see also people management; teamworking stage-gates 469–70 stage theories of internationalization 22–3 stakeholders 59
specialized ecosystems 218
standard deviation 342, 351
specific phase of technological innovation 472, 473
standardization 25, 90, 91–2, 126, 479–80
specifications 331–2
standardized procedures, in lean operations 311
speed 39, 425 SQC see statistical quality control (SQC) Stadsleveransen system, Gothenburg 466–8 staff 7, 236–7, 244 absenteeism 365, 370, 375, 378 business process reengineering and 437 capacity management and 150–1 empowerment 295, 305–7, 313, 372, 379 lay-offs 151, 437 in lean operations 295, 305–7, 313 part-time 151 pay 374–6, 378, 383, 390, 391 performance management 377–8, 383 performance-related pay 375–6, 378 resistance to new technology 431, 432 reward and remuneration 374–7, 378, 383, 390, 391
standards performance 51–3, 51, 60, 439 quality 345–8, 348 statistical process control 81 statistical process control (SPC) charts 325, 327, 341–4, 342, 343, 344 statistical quality control (SQC) 326, 340–4, 351 steel factory explosion 302–3 step change 430–2, 430 stock see inventory management storage costs 267–8, 272 strategic operations planning 238–9, 238 strategic role of operations model 75–6, 75 strategic value 216 strategy 72–4, 74 see also operations strategy structural decisions 83–4, 107 see also capacity; facilities; process design; process technology; supply networks subcontracting 151 substitution 415
539
suppliers 44, 59, 89 failures 401–2 lean operations and 312–13 location decisions and 112 relationships with 221–3, 222 social responsibility and 499 tier 1 207, 207 see also supply networks supplier’s risk 341 Supply Chain Council 213 supply chains 203 supply networks 13–14, 61, 202–3, 204–6 bullwhip effect 209–11, 209 business processes 437–8 carbon footprint 498 case studies 201–2, 203–4, 224–5, 227–9 collaborative planning, forecasting and replenishment (CPFR) 212–13 competitive advantage and 98 configuration 206–9, 207, 208 coordination 209–12, 209 direct exporting 93 disintermediation 18 failures 401–2 global sourcing 98, 217–20, 266 inventory and 266 multiple sourcing 223–4 outsourcing decisions 213–16 partnership agreements 212–13 partnership sourcing 221, 222, 223–4, 312 re-intermediation 18 relationships with suppliers 221–3, 222 risk of disruption 398 SCOR model 213, 438 single sourcing 223, 224 social responsibility and 499 see also outsourcing supply-push control 253– 4, 254, 255 supported customer-technology interaction 171, 172
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Copyrighted material – 9781137525789
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subject Index
sustainability indices 60 sustainability reporting 59–60 Sustainability Reporting Framework 59–60 sustainable technologies 498 sustaining innovation 476 Sweden 466–8 synchronization, in lean operations 295, 296–302, 296 systems theory 13 tacit knowledge 448–9, 450 Taguchi, Genichi 324, 479 Taguchi methods 479 Takata 224–5, 335–6 targets 52 task culture 386 task identity, in job design 370, 370, 371 task significance, in job design 370, 370, 371 Tata 81 TBL see triple bottom line (TBL) teamworking 307, 379 action teams 380 advice teams 307, 379–80 cross-functional teams 380 effectiveness 381–4 evaluation and rewards 383 groupthink 383 heterogeneous teams 384 leadership 382–3 multifunctional teams 477–8 national culture and 389 problem-solving teams 307, 379–80 production teams 380 project teams 380 self-managed work teams 307, 372, 380–1, 389 team composition 382 team roles 382 team size 382 virtual teams 381 technological innovation 459, 472–7, 472 technologies
sustainable 498 see also digital technologies; process technology technology laggard strategy 180, 463 technology leadership strategy 179–80, 463 technology-push approach to innovation 466 technology transfer 180– 2, 182, 183 telephone-based customer services 24, 91–2, 219–20 temporal containment 415 temporary staff 151
‘tough-guy macho’ culture 386 Toyoda, Akio 41 Toyoda, Eiji 308–9 Toyota 83, 294–5, 299, 306, 328 case studies 8–9, 41–2, 131–3, 302–3, 308–9 Toyota Production System (TPS) 8, 41, 294, 295, 304, 305, 307, 308–9, 379 TPM see total productive maintenance (TPM) TQM see total quality management (TQM) traceability, product 285, 405
terrorism 398, 402, 415, 497
trade-offs 40, 61, 121, 315, 338–9, 478
Tesco 78–9, 146–7, 198, 314
trade unions 59, 391
testing, product 340, 469
Trader Joe’s 78
Thailand 495
traditional model of purchasing 221, 222
theft, of inventory 268, 272 theory of constraints (TOC) 256 Theory Z 306–7 three Es of performance measurement 44–8, 44 throughput time 191, 252, 253, 256–7 tier 1 suppliers 207, 207 time horizons 388 time sensitivity 388 time series analysis 141 time study 367–8 time to market 463, 480 timing decisions capacity 143–5 inventory management 270, 272–4, 273, 274 TOC see theory of constraints (TOC)
training needs customer 172, 472 staff 378 Trans-Pacific Partnership Agreement (TPPA) 19 transaction costs 208 Transatlantic Trade and Investment Partnership (TTIP) 19 transfer batch sizes 257 transferability of technology 181, 182, 183 transformation model 6–7, 6 inputs 6–7, 6, 88, 89 internationalization and 88–92, 88 outputs 88, 91–2 process 6, 88, 89–91 transformed resources 6
top-down perspective of operations strategy 80–1
transforming resources 6–7, 10–11
Torbay Hospital, Devon 376–7
transitional phase of technological innovation 472, 473
total factor productivity 46 total productive maintenance (TPM) 313–14, 413–14
transnational configuration 125
total quality management (TQM) 49, 76, 81, 295, 305, 312, 324, 325, 326–8, 348, 348, 354, 379
transportation 18 carbon footprint 498
Transport for London (TfL) 160–2
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why-why analysis 447
utilization of capacity 139, 140, 144, 145, 156
Williams, Claire 441
triple bottom line (TBL) 38, 58–60, 59, 60, 62–3
value-added services 502
Wolfson, Simon 275
true globalization 22–3
value-based approach to quality 330–1
costs 114–15 waste 304 trends 141 triage systems 247–8
value analysis (VA) 480
trust supply chain partners 213, 222–3 team effectiveness and 383
value engineering (VE) 480 values, cultural 385 Velove Armadillo bicycles 466–8
Turkey 15, 19, 89
uncertainty avoidance 353, 387–8 Unilever 82 Union of Japanese Scientists and Engineers 349
unrealized strategies 77 Uppsala model 22 UPS (United Parcel Service) 250–1 US 353 usage value of inventory items 275–8, 276 user-based approach to quality 330–1
‘work hard/play hard’ culture 386–7 work in progress 191
work measurement 367–8, 375
violations 401
work sampling 368
virtual prototyping 477
work study 366–8
virtual teams 381
work teams 379 see also teamworking
voice of the customer 478
University Hospital Wales 440–1
work design, team effectiveness and 381–2
Vietnam 495
vision statements 73
United States 15, 19, 388, 496
work centres 240
video conferencing 17–18
vertical loading 371
UK Mail 176–7
Williams Formula One team 440–1
work-in-progress inventory 137, 257, 266, 267, 279 lean operations and 296–7, 296, 302
vertical integration 213–14
types of operations 7–11
541
Wade-Gery, Laura 262 Wales 116–17 Walmart 78, 213, 314, 428–9 waste elimination 8, 295, 304–5 weighted scoring method 113–14, 115 Wesley, John 62 whistle-blowing systems 404 Whole Foods Market 372–3
workforce diversity 384, 393–5 workforce scheduling 244–6 workforce skills 390 working methods, radical change in 432 works councils 390 World Bank 19 World Trade Organization (WTO) 19 yield management 153–4
Copyrighted material – 9781137525789